Although COP28 in Dubai saw more supporters getting behind carbon markets, there was little in the way of structural developments, leaving market participants feeling somewhat lacklustre. The same cannot be said for COP29 in Baku, particularly for carbon and nature markets in the UK. The first week of the 2024 United Nations Climate Change Conference saw progress towards the implementation of Article 6.4 as well as two significant announcements by the UK Government – an update to the UK’s Nationally Determined Contribution (NDC) and a policy paper on principles for voluntary carbon and nature market integrity.
The hosts, Azerbaijan, achieved an early win with negotiators reaching a decision on the first day of COP29 to adopt text that approved two standards previously proposed by the Article 6.4 Supervisory Body, one related to the rules for project methodologies and the other related to carbon removal activities. There are still details to be ironed out, however the project-based Article 6.4 mechanism has advanced to the point of use, with a statement from Supervisory Body chair Maria AlJishi indicating that the market “could be seeing the first issuances of 6.4 credits very soon”. Article 6.2 and 6.4 draft texts were circulated later in the week, with plenty still to be discussed by negotiators during the second week of the conference.
Prime Minister Keir Starmer also played a prominent role in the first week of COP29 as one of the only major leaders to make an appearance in Baku. An updated UK NDC was announced, with a target of 81% emissions reduction by 2035 vs 1990 levels, in line with Climate Change Committee recommendations (versus previous advice of 78% reduction). Chancellor Rachel Reeves also called out Sustainable Finance as a priority growth opportunity as part of her Mansion House speech on 14th November. The next day, on Friday 15th November, the UK delegation hosted a session presenting the UK Government’s policy paper on principles for voluntary carbon and nature market (VCNM) integrity.
As part of the paper, the Government states that they see “a clear and appropriate role for the responsible use of high-integrity carbon and nature credits by companies and other organisations that wish to do so as part of their climate and nature strategies”.
These principles, the implicit endorsement of the Integrity Council for Voluntary Carbon Markets and the Voluntary Carbon Markets Integrity Initiative, and the suggestion that VCNMs may in time be subject to regulatory oversight all strongly indicate the Government’s intentions and support for these markets (and the organisations that want to make use of them), at a time when carbon markets have been subject to heightened uncertainty.
Other activity during the first half of the Climate Change Conference included the announcement of Brazil’s updated NDC, the imminent issuance of up to 18 million jurisdictional Brazilian REDD+ carbon credits (which could in time have important implications in the CORSIA markets), and the launch of a template for Article 6 Letters of Authorisation by the World Bank’s insurance arm. The market now waits to see the developments of COP29 week two.
