Article 6.4 of the Paris Agreement, which facilitates carbon trading, was adopted on the first day of the ongoing climate conference in Baku, Azerbaijan, reflecting a recent trend of showcasing successes, early on in the conference. Last year, at the COP28 in Dubai, the Loss and Damage Fund was launched, amid applause, on the first day as well.

COP29 President Mukhtar Babayev, in his opening speech, mentioned the importance of a carbon market that “could reduce the cost of implementing Nationally Determined Contributions (NDCs) by $250 billion a year,” as he introduced the draft decision on Article 6.4, which was adopted.

“This is a critical step towards concluding Article 6 negotiations,” said Yalchin Rafiyev, COP29 Lead Negotiator. Article 6 was introduced in the Paris Agreement but it is not yet operational. It sets how countries can reach their climate targets affordably through international cooperation. It has three major components, two of which, including Article 6.4, are market mechanisms that support carbon trading.

However, the hasty adoption of the Article 6.4 draft at the opening plenary has received criticism. Tuvalu, a country in the west-central Pacific Ocean, has expressed concern that the decision without prior consultations by the governing bodies does not reflect the Paris Agreement’s consensus-driven process.

Experts following the progress on Article 6 also see its quick adoption as a compromise on transparency and other fronts.

“Kicking off COP29 with a backdoor deal on Article 6.4 sets a poor precedent for transparency and proper governance,” said Isa Mulder, an expert on the global carbon market at Carbon Market Watch (CMW), an independent not-for-profit watchdog. She added that adopting these rules on highly sensitive and contentious issues during the plenary on the first day of the conference reduces the crucial time for countries and observers to examine and debate the issues, undermining trust in the United Nations Framework Convention on Climate Change’s (UNFCCC) decision-making process.

Trishant Dev, a Programme Officer for climate change at the New Delhi-based think tank Centre for Science and Environment (CSE), said, “The recommendations were important enough to be discussed by the Parties and some have already expressed displeasure at this move.”

A backdoor achievement

Article 6.4 is a centralised carbon crediting mechanism, in which a UN body, the Article 6.4 Supervisory Body, is supposed to oversee the whole process. The mechanism, also known as the Paris Agreement Crediting Mechanism, identifies and promotes emission reduction opportunities, attracts funding for implementation and facilitates cooperation among countries and groups around these activities. The mechanism can also be a source of climate finance for developing nations.

The 12-member Article 6.4 Supervisory Body is preparing the standards or criteria for Article 6 to be operational. Two standards — one for calculating carbon emission reductions and another for carbon removal activities — were expected to receive approval from parties/countries at COP29.

However, things went differently as the Supervisory Body bypassed the Parties and directly adopted the standards before the start of COP29, in a process that is being criticised for lack of consensus.

The Conference of Parties serving as the Meeting of the Parties to the Paris Agreement, or CMA, a governing body under the UNFCCC, established to oversee the implementation and progress of the Paris Agreement, had requested the Article 6.4 Supervisory Body, in 2021, to make recommendations on these two standards or guidelines that will govern how carbon crediting is done under the mechanism. The Supervisory Body had prepared the recommendation documents and sent them twice, in 2022 and 2023, to the Parties, that rejected the recommendations each time.

Then in October 2024, the Supervisory Body upgraded the status of these documents from “recommendations” to “standards.” Instead of re-sending the recommendations to the Parties for adoption into standards, the Supervisory Body adopted them directly, changing the process itself. Though the documents still need Party endorsement, they have, in effect, already been adopted before COP29.

Beatriz Granziera, a Senior Policy Advisor at Nature Conservancy (NC), a global environmental non-profit, explained to Mongabay India, before the start of COP29, that countries still needed to endorse the Supervisory Body’s approach or reach a consensus to reject it.

“If these texts can be adopted in this way, where do we draw the line?” Mulder asked.  “Can the Supervisory Body adopt any kind of rule, even when these explicitly require approval by countries and then have countries rubber stamp the decisions without real and inclusive discussion?”

While the Article 6 Rule Book – which contains guidelines for implementing international carbon markets and cooperation mechanisms under the Paris Agreement – was adopted at the climate conference in Glasgow in 2021, several elements need to be agreed upon before operationalising the carbon markets. Granziera said that the lack of progress on this has not significantly impacted the implementation of Article 6.2, another of the Article 6 mechanisms, at least in the short term. Article 6.2 allows countries to trade emission reduction or removal through bilateral or multilateral agreements. Numerous such agreements have been signed, and more countries have started to participate as buyers and sellers.

However, when compared to Article 6.2, she said, the failure to build consensus among Parties had a much greater impact on Article 6.4 which was stalled because additional frameworks had yet to be approved.

With Article 6.4, and specifically the two standards under consideration, being adopted on the first day of COP29, one significant barrier to operationalising it has been passed, indicate experts that Mongabay India spoke to.

However, Parties at COP29 still need to agree on authorisation, transparency, reporting rules, the interaction of different registries, and other key issues, to ensure Article 6.4 is completely operationalised.

Among the issues for agreement, there needs to be consensus on whether authorisation for transfer of carbon credits can be amended or revoked by the host country after the first transfer or at any point later. Developing countries have been arguing to keep the right to revoke the approval at any point, but other negotiators said that it can create uncertainty in the market.

Another point for consensus is that countries need to conclude negotiations on the Agreed Electronic Format tables, which provide a standardised way for governments to report on Article 6 transactions. Clear reporting rules will ensure transparency and accountability.

Countries also need to agree on how different host country registries and the UN-managed international registry, will interact. The international registry was designed for countries with limited capacity to set up their own registries.

Dev from CSE said that the task ahead at the COP29 is to address outstanding issues and provide additional guidance for the Article 6.4 Supervisory Body without making rushed decisions that could dilute essential guidelines while chasing headlines.

Banner image: Session on advancing integrity in carbon markets. Image by UNclimatechange via Flickr (CC BY-NC-SA 2.0).

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Aditi Tandon Senior Production Editor

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