U.N. RULES FOR CARBON TRADING BETWEEN NATIONS APPROVED AT COP29

TAG: GS-2: IR & GS-3: ECOLOGY AND ENVIRONMENT

CONTEXT:  At the COP29 climate talks in Baku, Azerbaijan November 2024, a landmark decision was made allowing wealthy countries to purchase carbon credits (offsets) from developing nations.

    • This decision is part of the U.N.’s Article 6 framework, which has been under negotiation for years, and was approved after extended talks, with diplomats applauding the outcome.

EXPLANATION:

Carbon Credit Mechanism:

    • Carbon credits represent a quantifiable reduction in greenhouse gas emissions, which can then be bought, sold, or traded.
    • For a carbon market to function effectively and genuinely contribute to emissions reductions, the credibility of its carbon credits is paramount.
    • However, if these credits lack integrity, meaning they do not accurately reflect real, additional emissions reductions, the carbon market risks becoming a tool for greenwashing.

India’s Initiatives:

    • India updated its NDCs in 2023 to underline, among other things, the establishment of a domestic carbon market as a part of its climate strategy.
    • The Energy Conservation (Amendment) Act of 2022 provided a statutory mandate for such a Carbon Credit Trading Scheme (CCTS).
    • Through this, India aims to align its climate commitments under the Paris Agreement with broader economic goals.
    • Yet, for the market to truly support these objectives, it must be meticulously designed to ensure credibility, efficiency, and fairness.
    • From global experiences, India must incorporate pivotal lessons in its carbon market framework for long-term success.

Article 6 of the Paris Agreement:

    • Article 6 allows for cross-border carbon trading, where countries can trade emissions reductions.
    • It has garnered support from both wealthy nations (for meeting emissions targets) and developing countries (for financial support through carbon credits).

Potential Concerns:

    • Critics worry that poorly regulated carbon trading systems could lead to “greenwashing,” where countries might falsely claim emissions reductions without real action.
    • Concerns exist that countries could manipulate emissions targets to benefit from carbon credits, undermining global efforts to reduce greenhouse gas emissions.

Current Status of Carbon Trades:

    • More than 90 deals and over 140 pilot projects have been signed, but only one trade has occurred between countries: Switzerland buying credits linked to electric buses in Bangkok.
    • Switzerland, Vanuatu, Ghana, Singapore, Japan, and Norway are also involved in carbon credit deals.

The Role of U.N.-Administered Markets:

    • In addition to the country-to-country deals, the U.N. has set up a separate, regulated carbon credit marketplace.
    • This will allow both states and companies to participate, providing a more structured and transparent approach to carbon credit trading.

Source:

https://www.thehindu.com/sci-tech/energy-and-environment/un-rules-for-carbon-trading-between-nations-approved-at-cop29-climate-talks/article68903483.ece

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