The Conference of the Parties to the United Nations Framework Convention on Climate Change
Past Event
2024-12-06
COP29 Climate Negotiation Outcomes Series (Part II): Negotiations Fail to Address Phasing Out Fossil Fuels, Efficacy of Carbon Market Mechanisms in Doubt
Proceed to Part I
Integrity, Transparency, and Human Rights Safeguards May Pose Challenges to the Carbon Market Mechanism
At the 2024 United Nations Climate Change Conference (COP29), one of the most closely watched agenda items was the adoption of a global carbon market mechanism, specifically Articles 6.2 and 6.4 of the Paris Agreement. Within the carbon market mechanism, seller countries can reduce carbon emissions through methods such as improving energy efficiency, developing renewable energy, and reforestation. They can then sell "carbon credits" on both national and international carbon markets, which can be counted towards national carbon reduction targets and also help developing countries raise funds for carbon reduction projects. The primary buyers, typically developed countries, can offset their own carbon emissions by purchasing these credits.
Article 6.2 of the Paris Agreement addresses bilateral carbon trading between countries, known as International Transferable Mitigation Outcomes (ITMO). COP29 established voluntary standard guidelines for these transactions and prohibited trading countries from altering carbon credit authorisations after transactions, to enhance the credibility of carbon trading. A "dual-layer registry system" was also established, which includes the trading countries’ registries and an international registry to track and audit carbon credits, addressing disparities in carbon trading technical capabilities among countries and providing optional services for countries lacking a registry system. However, even with these systems and standards in place, the bilateral trading framework still shows weaknesses, particularly in disclosing carbon credit information, where inconsistencies may exist among countries. The mechanism emphasises cooperative approach, requiring parties to correct inconsistencies and mark problematic carbon trades until the corrections are verified. However, a lack of penalties for deliberate fraud could impact the credibility of carbon trading.
Regarding the "Paris Agreement Crediting Mechanism" (PACM) under Article 6.4, COP29 established a unified system managed by a United Nations supervisory body, defining the international carbon trading mechanism as a centralised carbon market. This includes the authorisation process for PACM carbon credits, methodological standards, and carbon removal standards. However, this does not resolve long-term issues related to the quality, timing, and monitoring of carbon credits, and the supervisory body of PACM must further clarify these standards.
Despite some viewing the adoption of the carbon market mechanism as a breakthrough in achieving climate goals, many scholars and members of civil society remain sceptical about the carbon market's effectiveness in reducing emissions, its integrity and transparency, and the implementation of human rights safeguards. They anticipate that the carbon market mechanism will continue to face challenges after its implementation next year. Environmental and youth groups have criticised the weakening of disclosure requirements for carbon trading, and women's groups have expressed regret that carbon trading does not consider the needs for a just transition, gender equality, and public participation. Additionally, some countries are concerned that the carbon credits may not come from new projects but existing ones, potentially involving fraudulent activities; moreover, the ecological damage and human rights violations caused by generating carbon credits continue to raise concerns about the integrity of carbon trading.
In fact, recent years have seen repeated issues with voluntary carbon trading in the private market, including fraud, permanence, and additionality, even leading to incidents of indigenous land dispossession and human rights violations during energy development and reforestation projects, which have raised concerns about the risks of greenwashing and loopholes in carbon trading. CarbonCare InnoLab will hold a session on December 11 titled "Decoding COP29: Financing a Just Transition for Hong Kong" [registration link], looking forward to the prospects after the adoption of the carbon market mechanism at COP29, and discussing the potential risks of greenwashing and integrity related to carbon credits.
Climate Mitigation Fails to Address Fossil Fuel Phase-Out, Rendering It Ineffective
The Mitigation Work Programme (MWP), established at COP26, aims to promote national progress towards the Paris Agreement's 2030 carbon reduction targets. However, this year's MWP negotiations continued to expose deep-seated contradictions between developed and developing countries, particularly with financing issues becoming a major sticking point.
Developed countries and Small Island Developing States (SIDS) argue that climate mitigation efforts must demonstrate ambitions to achieve targets and be linked to the Global Stocktake (GST) negotiations. This includes phasing out fossil fuels and their subsidies, and implementing action plans to triple renewable energy capacity and double energy efficiency. In contrast, emerging developing countries and oil-producing countries are resistant to the GST leading climate mitigation efforts, viewing them as top-down impositions of mitigation responsibilities without sufficient financial and capacity-building support, and as threats to national climate commitments. Ultimately, due to a lack of consensus, the MWP remained merely a dialogue platform rather than a mechanism to drive transformative action, and it no longer includes language about phasing out fossil fuels.
Despite the lack of substantial progress on fossil fuel phase-out, even regressing, the resolution still calls for more inclusive and transparent dialogues, such as improving regional and gender balance, expanding participation from developing countries, and establishing digital platforms to foster cooperation among governments, the financial sector, and other stakeholders, which can be seen as a step towards mobilising resources. However, with only five years left until the 2030 target deadline and much time consumed in procedural discussions without narrowing the differences, the effectiveness of the MWP negotiations has been greatly diminished. Without reform, the MWP risks being disregarded by countries and failing to meet the urgent goals of the Paris Agreement.
Climate Adaptation Negotiations Under the Shadow of Funding Shortfall
The Global Goal on Adaptation (GGA), formulated under Article 7 of the Paris Agreement, has been the most significant climate adaptation negotiation since the agreement was adopted in 2015. However, progress in these negotiations has been very slow, with the GGA only formally recognized last year at COP28 as the "UAE Global Climate Resilience Framework." This year's COP29 negotiations mainly covered the GGA and National Adaptation Plans (NAPs). However, with ongoing tense negotiations over financing, progress was limited, and contentious issues were deferred to next year's COP30, slowing down the pace of climate adaptation efforts.
At COP29, discussions focused on advancing the GGA framework and defining climate adaptation indicators. Debates at the negotiation table primarily revolved around the "Means of Implementation" (MoI) indicators, especially the establishment of financial indicators and the introduction of the so-called "transformative adaptation" concept. MoI refers to the resources, technology, and capacity building needed to implement the Paris Agreement, while "transformative adaptation," inspired by reports from the Intergovernmental Panel on Climate Change (IPCC), suggests that climate adaptation should no longer be about incremental approach but should systematically address climate change and tackle longstanding social inequalities.
Developing countries believe that MoI indicators must track financial and technical support. However, developed countries are reluctant to commit to specific financial indicators and argue that MoI indicators should not dominate the GGA framework, but emphasise the need for a "transformative adaptation" approach. Many developing countries worry that linking financing with performance or innovation could become a barrier to accessing adaptation funds. Ultimately, the term MoI indicators was changed to "enabling factors for the implementation," covering financial resources, governance levels, transparency, and anti-corruption. However, developing countries feel that the new terminology dilutes the responsibility of developed countries for adaptation financing.
The conference decided to limit the number of global adaptation indicators to 100 through a selection and synthesis process, allowing adjustments based on specific circumstances and emphasizing inclusivity, prioritizing indicators that track vulnerable groups and specific ecosystems. Additionally, the "Baku Adaptation Road Map" was adopted, making the GGA a permanent agenda item for future COPs, facilitating high-level dialogues on climate adaptation. The conference also decided to integrate the GGA framework review into the second Global Stocktake (GST) in 2028. Discussions on NAPs also took place at COP29, but due to disagreements over the scope of NAPs, the level of support needed, and implementation mechanisms, substantive decisions were postponed to next year's COP30 and scheduled for mid-year discussions in Bonn in June.
Proceed to Part III