On the first day of the 29th Conference of Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC), the conference presidency made headlines by endorsing two key standards for the UN-led carbon markets — circumventing debate or discussion by country negotiators. The announcement was presented as a major step toward launching the carbon market. But much remains unresolved, as the discussions that followed in the next few days quickly revealed.
The Supervisory Body (SB), a UN-established entity responsible for setting rules for UN-led carbon markets, was tasked with recommending standards for two important elements of the market framework. One was the standard on methodologies that would be used for calculating emissions reductions from various activities. The other was the standard for carbon removals — on how carbon dioxide removal activities would be taken up in the carbon market. Last year, negotiators rejected the SB’s recommendations for both standards, calling them inadequate and in need of further work. Ahead of COP29, the SB revised its recommendations. But in an unprecedented move, it went beyond recommending the standards and made them operational, calling on negotiators at COP29 to endorse this approach. On Day 1 of the conference, this is what became the headline endorsement of the COP29 presidency.
This approach, as highlighted by Tuvalu on the conference’s opening day, is unprecedented and reflects a break from the usual process of negotiators having the final say. The Coalition for Rainforest Nations, for instance, expressed frustration over the development, noting that “trust has been lost” due to the manner in which this decision was made.
Perhaps the Body intended to avoid another year of rejection, anticipating objections to the developed recommendations from countries.
The market, however, is far from being ready for operation, as some would have you believe. Many important discussions are still needed before the market is fit for implementation. At this COP, some of these substantial matters are up for discussion.
So far, the discussions have carried over from Bonn and have centred around four main areas:
Authorisation — This refers to the formal approval process where emission reduction units (Internationally Transferred Mitigation Outcomes or ITMOs) are authorised by the host country (where the emission reduction activity takes place) for transfer to another country.
Transparency and Reporting Requirements — Cooperation between countries on emission reduction activities has guidelines for reporting back to the UNFCCC on both the activities and the trade in ITMOs. This process is crucial to ensure transparency, tracking, and accountability.
Handling of Inconsistencies — This area addresses inconsistencies, such as errors, underreporting, and misreporting by parties when they submit their initial reports (IRs), annual reports, authorisations, and other information to the UNFCCC.
Registry Functionality — Registries are meant to record emission reduction activities, track emission reduction units issued, and monitor transactions of emission reduction units between countries
On the scope of authorisation, some countries advocate for flexibility, minimal definitions, arguing that authorisation should prioritise clarity while allowing for national discretion. This approach seeks to avoid rigid, overly detailed frameworks that could limit countries’ ability to adapt to their specific needs. In contrast, others call for a standardised, comprehensive system with binding rules that apply universally.
When it comes to the authorisation process itself, countries are divided on whether to streamline or separate approvals. Some suggest consolidating all authorisation related to ITMOs — from project registration to entity participation and ITMO transfers — into a single, unified process. Others believe that separate authorisation for each step is preferable to them.
Transparency is another key issue where countries find themselves at odds. The EU has long argued for standardised reporting formats to ensure transparency. Developing countries, however, have voiced concerns about the administrative burdens these requirements could impose. Many argue for more flexible, simplified reporting processes that would be less resource-intensive and more manageable, particularly for countries with fewer technical or financial resources.
The question of how to handle inconsistencies, such as double-counting or inaccuracies in data, is also being discussed. The EU, AOSIS, and Least Developed Countries (LDCs) insist on clear, enforceable processes to identify and resolve such issues. They argue that failing to address inconsistencies could undermine the integrity of the system and should result in visible consequences — whether that means flagging issues in public reports or restricting the use of inconsistent ITMOs. However, countries like Russia, the LMDCs, and some Arab nations caution against punitive measures, fearing they could disproportionately impact developing countries. They suggest that rather than penalties, technical assistance should be provided to help countries correct mistakes and improve their reporting systems.
Yet another aspect is the role and functions that the registries would perform. Some countries argue that registries must be robust, interoperable, and capable of tracking all ITMO transactions to maintain market integrity and prevent double-counting. Others, however, warn against expanding registry functions too much, fearing that doing so could lead to unnecessary bureaucratic complexity. They stress the importance of keeping registries simple and flexible, to avoid overburdening countries with additional tasks.
The first draft text on Article 6.2, produced on November 14 afternoon for countries to negotiate had 169 paragraphs, with more than 100 options across various elements and close to 500 bracketed texts. Clearly, a lot remains to be agreed upon.
In addition to the discussion on these elements, specifically under Article 6.4, negotiators are also deciding on further directives that they would like to give to the Supervisory Body. Several countries have submitted that the Supervisory Body’s work should be informed by scientific expertise and should convene panels of scientific experts to provide input on the recommendations made by the Supervisory Body. Other important directions could include recommendations for transitioning Clean Development Mechanism (CDM)-based projects to the Article 6.4 market, as well as accelerating the work on establishing the mechanisms registry — the Article 6.4-specific registry to be maintained by the UNFCCC.