World Bank: COP29 carbon deal could unlock billions for developing nations

The World Bank’s latest report, “State and Trends of Carbon Pricing 2025,” emphasises that the agreement reached at the 2024 UN Climate Change Conference (COP29) in Baku regarding international carbon markets could significantly expand global participation and attract larger investment flows into low-income countries.

The report, cited by local media, underscores that COP29 marked a pivotal step forward with the finalisation of rules under Article 6 of the Paris Agreement, which facilitates international cooperation to reduce greenhouse gas emissions, per Caliber.Az.

Specifically, detailed provisions were adopted for both Article 6.2, which concerns cooperative approaches, and Article 6.4, which outlines the framework for a UN-supervised carbon crediting mechanism. These developments have established a more transparent and predictable structure for global carbon markets.

According to the report, “The agreement clarified the rules for cross-border transfers of carbon credits. With its adoption, the focus is now shifting to implementation, which will demand that countries strengthen their institutional and regulatory frameworks — from establishing legal systems to building carbon market infrastructure such as emissions unit registries.”

The World Bank also notes that the recognition of carbon markets operated under the United Nations provides an alternative avenue for participating in international emissions trading. This is particularly relevant amid growing scepticism over the reliability of voluntary carbon markets.

Under Article 6.2, an agreement was reached on several technical components, creating greater legal clarity for the transfer of carbon units between countries. Procedures and requirements were adopted for the authorisation of Internationally Transferred Mitigation Outcomes (ITMOs), allowing one country to officially transfer emissions reduction results to another.

Article 6.4, focused on the creation of a UN-governed carbon crediting mechanism (PACM), saw the adoption of two foundational standards: one for emissions measurement methodologies and another for emissions removal.

The report also indicates that key contentious issues were resolved, including the authorisation process and registry guidelines for tracking emissions reduction units. This enables PACM’s Supervisory Body and the Methodology Expert Group to concentrate on finalising the remaining regulations and tools needed to fully operationalise the mechanism.

The report notes that six key methodologies are currently under review, with the first set expected in the second half of 2025. An important milestone came in February, when the PACM Supervisory Body approved the operational procedure for a temporary registry built on the technical platform of the Clean Development Mechanism (CDM) registry. This interim system will support the issuance and tracking of emissions reduction units under Article 6.4 (referred to as A6.4ERs) until a permanent registry is launched.

User access to the system will begin once the UN Framework Convention on Climate Change (UNFCCC) Secretariat issues further technical instructions.

By Tamilla Hasanova