World Bank: COP29 clarifies rules for cross-border carbon credit trading

COP29 finalised guidelines for cross-border carbon credit trading, aiming to streamline global carbon markets and enhance transparency, while the World Bank highlights that meeting decarbonisation and climate resilience goals will require an estimated $6.3–6.7 trillion in annual global investment by 2030.

Approximately $2.4 trillion of this total must be directed toward emerging markets and developing economies, excluding China, Caliber.Az reports via local media. 

Closing this investment gap will require additional contributions from governments, estimated at $800–900 billion, from the private sector at around $1–1.18 trillion, and from other international or multilateral sources amounting to $490–610 billion. For governments, expanding fiscal space through more effective taxation and strategic public finance management will be essential to meeting broader development and climate objectives.

While carbon pricing mechanisms can generate public revenue, carbon credit markets play a complementary role by mobilising private capital and helping channel public finance more efficiently. These markets have significant potential to attract private investment and direct it toward development projects that either reduce emissions or remove greenhouse gases from the atmosphere.

Such projects include afforestation initiatives and the promotion of clean technologies in low-income countries, for example, the adoption of clean cookstoves. Between the first and third quarters of 2024, an estimated $14 billion was raised globally for the development of new carbon credit projects, with the largest share allocated to nature-based carbon removal initiatives.

The agreement reached on international carbon markets at the 2024 United Nations Climate Change Conference (COP29) in Baku, Azerbaijan, is expected to support broader market participation and could stimulate increased investment flows into low-income countries. The deal clarifies the rules governing cross-border transfers of carbon credits under Article 6 of the Paris Agreement. With this framework now established, attention will shift toward implementation, including strengthening national capacities, developing institutional and regulatory structures, and deploying market infrastructure such as carbon registries.

The formal confirmation of UN-administered carbon markets has also created an alternative pathway for participation, which is particularly important amid heightened scrutiny of the environmental integrity of voluntary carbon markets in recent years.

At COP29, final rules for Articles 6.2 and 6.4 of the Paris Agreement were adopted, providing legal and operational certainty for international carbon credit trading. These include agreed procedures for authorising Internationally Transferred Mitigation Outcomes (ITMOs) and applying corresponding adjustments following the initial transfer of credits.

In addition, key standards for the Paris Agreement Crediting Mechanism (PACM), including methodologies and project types related to carbon removals, were approved. In February 2025, a temporary PACM registry was endorsed, enabling the issuance and tracking of credits until the full system becomes operational.

Looking ahead, the supply of carbon credits is expected to be driven by the transition of approximately 1,500 existing Clean Development Mechanism (CDM) projects into the PACM, alongside more than 1,000 new initiatives. These projects reflect broad geographic diversity, with notably increased participation from sub-Saharan Africa.

By Jeyhun Aghazada