COP29 reaches deal on carbon credit rules, but critics brand it a ‘false solution’

“This will be a game-changing tool to direct resources to the developing world,” said the COP29 president, Mukhtar Babayev, on Monday, 11 October in Baku, Azerbaijan.

The president of the conference was hailing the consensus reached by the parties on standards and rules for the creation of carbon credits.

The move was made in line with Article 6.4 of the Paris Agreement, which speaks of “a mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development”.

Article 6 establishes a framework for a global carbon credit market, allowing for the transfer of greenhouse gas emission reductions or removals between countries. This mechanism is designed to facilitate international cooperation in achieving Nationally Determined Contributions  — or national climate plans — and is overseen by a supervisory body appointed by the Conference of the Parties (COP).

Put differently, the development was a step toward the creation of an international carbon market that operates under the supervision of the United Nations and is geared toward reducing emissions and helping countries grow in a way that recognises and acts on the reality of human-induced climate change.

Read more: More than ever, COP29 in Baku needs to deliver on climate promises

Carbon markets, while touted as a potential enabler of climate action in parts of the developing world, are considered by some as a “false solution” to the human-induced climate crisis.

The finalisation of standards for carbon credits is seen as a crucial step toward operationalising Article 6.4, unlocking billions of dollars in climate finance desperately needed and long sought by representatives of developing nations at conferences. By standardising and regulating carbon credits, this framework aims to make climate financing more predictable and accessible, especially for developing nations that often lack the resources to implement large-scale green projects.

At COP27 in Egypt, African countries launched the Africa Carbon Markets Initiative (ACMI) to support the growth of voluntary carbon markets on the continent. Its specific objective was to expand African voluntary carbon markets to produce 300 million carbon credits annually by 2030, and 1.5 billion credits annually by 2050, to unlock $6-billion in revenue by 2030 and more than $120-billion by 2050. It also aimed to support 30 million jobs by 2030 and more than 110 million jobs by 2050.

‘Not charity’

Many African and developing nations view carbon markets as a mechanism to facilitate financial flows from developed countries, which they argue have historically failed to meet their climate finance obligations. This also aligns with the principle of Common but Differentiated Responsibilities and Respective Capabilities, which recognises that wealthy nations, as primary historical emitters of planet-warming gases, have a greater duty to support the Global South in tackling climate impacts.

Speaking at the World Leaders Summit on Tuesday, António Guterres, the secretary-general of the United Nations, said, “Climate finance is not charity, it’s an investment. Climate action is not optional, it’s imperative. Both are indispensable to a liveable world for all humanity and a prosperous future for every nation on Earth.”

Also delivering a speech at the World Leaders Summit, Charles Michel, the president of the European Council, said the council believed that “carbon pricing is a powerful lever”.

The adoption of the rules is a development that the South African government has sought. Ahead of his departure to Baku on Sunday, the minister of forestry, fisheries and the environment, Dr Dion George, said that South Africa would negotiate for “transparent and robust mechanisms under Article 6”.

Opportunities for SA

Some of the potential for carbon markets to fund South Africa’s low-emission development and just energy transition were outlined last week at Green Building Council South Africa’s Sustainability Conference. André de Ruyter, a senior visiting fellow at Yale University and former Eskom CEO, suggested three interventions to fund a just energy transition in South Africa including two directly related to carbon markets.

South Africa should “energise the voluntary carbon market” and act to “increase the access to European Union Emissions Trading System (EU ETS) to non-EU credits”, explained De Ruyter.

“Now there are two types of carbon market. The one is the compliance carbon market; the best one is the European Union’s emissions trading scheme. It’s a very large market. It’s about €800-billion per annum. So that’s an enormous market. By comparison, the voluntary carbon market, which really revolves at the moment around forestry, preservation, prevention of destruction of mangroves, swamps, etc … is less than a billion dollars per annum.”

Read more: The great carbon market racket — a drive for the commodification of nature where local communities lose out

He continued, “Another ask that I would put forward at the forthcoming COP is to say, let’s reform the voluntary carbon market to enable those transfers of wealth to take place by means of the carbon credits.”

De Ruyter added that there was a strong “moral argument” for African countries to get access to the €800-billion EU carbon market.

“As you put up trade barriers for our imports, allow us access to your carbon markets to allow us to get money to fund for the decarbonisation that you insist and you force us to undertake by means of your trade policy.

“The bottom line here is: let’s not pretend that we can ask for charity. This is not a charitable game. Let’s go out there with market-based solutions that are hard-nosed, sensible, compelling and that allow us to leverage the real appetite in the Global North to buy low-cost carbon mitigation opportunities.

“It costs about €12 to take one tonne of CO2 from the atmosphere in the developing world. In Europe, that equivalent tonne will cost you €400 to remove. So there’s an arbitrage. There’s a competitive advantage that we have in the developing world. How do we turn that into real cash flows that will allow us to start driving the just energy transition?”

Read more: There’s more than meets the eye in the climate fight, and facts count

Mandy Rambharos, the chief executive officer of Verra, the world’s most widely used voluntary carbon market standard, told Daily Maverick, “There is a huge potential for the voluntary carbon market. Projects in South Africa already use Verra credits or Verra methodologies and this can absolutely be extended. We don’t need to be limited and I think that is something as South Africans we really need to take advantage of.

“We just need to ensure that the regulations in South Africa allow for that, that we make market conditions available for companies to use that. There is an active carbon market community in South Africa and this needs to grow, it needs to scale.

“We can take advantage of the revenue that is out there and from a voluntary carbon market perspective we have a requirement for projects to demonstrate sustainable development benefits. So benefits are all around.”

‘Neocolonial schemes’

While proponents of Article 6.4 and those who view carbon markets as a mechanism to enable climate action argue that it creates a pathway for the Global South to benefit from climate finance and sustainable development, many activists are sceptical. Some view carbon markets as a false solution that distracts from the systemic change needed to tackle human-induced climate change at its roots.

Lise Masson of Friends of the Earth International said in a statement, “The gavelling through of carbon markets on the first day of COP29 is unacceptable and undermines the credibility of the whole process.

“Further, it is opening the floodgates for a global carbon market that will have devastating impacts on communities in the Global South, on indigenous peoples, and on small peasant farmers first and foremost. Carbon markets are not climate finance, and we cannot accept these neocolonial schemes to be propped as a success of COP29 in lieu of paying the climate debt owed to the Global South.”

Similarly, Coraina de la Plaza, the global coordinator of the Hands Off Mother Earth! Alliance, said: “COP29 has had a very bad start and sets an appalling precedent from a procedural point of view, but above all, it has taken yet another step on the road to climate disaster by backing false solutions and the interest of a few to the detriment of the planet and peoples.

“As the last decades have shown, carbon markets are not only a false solution to the climate crisis but also perpetuate the extractive colonial model of development and human rights violations.”

Rachel Rose Jackson, the director of climate research and policy at Corporate Accountability said, “Carbon markets are not climate finance. They are a get-out-of-jail-free card for the world’s big polluters and Global North governments and they condemn people and the planet. For this COP to claim victory, it must reject these false solutions that have been found to be essentially junk time and time again.” DM