Parties attending COP29 in Baku have agreed strong standards for a centralised carbon market under the UN.
Simon Stiell, UN Climate Change Executive Secretary, said, “There’s more work to do, but this is a good start – the product of over 10 years of work within the process. When operational, these carbon markets will help countries implement their climate plans faster and cheaper, driving down emissions.”
While acknowledging that the world is a long way from halving emissions this decade, he said ‘wins on carbon markets at COP29’ will help us get back in that race.
“There is more work to do on Article 6, and the process allows for all perspectives to continue to be heard,” he said. “And there is a huge amount of work to do at the COP more broadly, to ensure it delivers the strongest of outcomes. We must ensure that developing countries benefit from new flows of finance.”
Article 6 of the Paris Agreement is the first true global carbon market that will set a standardised and unified framework for carbon accounting and carbon credit qualities. Carbon pricing exists in three key forms: as a penalty, subsidy, or valuation of a carbon sink.
Having a one-size-fits-all carbon pricing mechanism is not only not possible, but heterogeneity in carbon markets is in fact needed, if they are to reach their promised potential, according to Oxford Institute of Energy Studies research.
“The heterogeneity and the complexity of carbon pricing markets should be embraced as the delivery of emission reduction and removals occur in highly varied types of supply chains. This goes against the apparent desire for simplification that is not practical nor relevant for the problem set,” it notes.
Climate crisis and economic impacts
The IEA predicts $2trn will be invested in clean energy and infrastructure this year alone.
“And that’s remarkable, but it’s only a fraction of the global economy. And the vast majority of it concentrates in just a few big markets,” added Stiell.
“Enabling every country to take strong climate action is 100% in all countries’ interests, even the largest and wealthiest. Why? Because the climate crisis is fast becoming an economy-killer.”
“Unless all countries can slash emissions deeply, every country and every household will be hammered even harder than they currently are. We will be living in a permanent inflationary nightmare.”
He urged countries to learn the lessons from the pandemic, when billions suffered because we didn’t take the collective action fast enough when supply chains were smashed.
“Let’s not make that mistake again. Climate finance is global inflation insurance,” he said.
