The 29th United Nations Climate Change Conference (COP29), due in Baku, Azerbaijan on November 11-22, aims to facilitate “high-level” negotiations around carbon trading, and its global potential.
According to the Azerbaijani government, carbon trading “is the second major expected deliverable of COP29.”
“Current turnover in the carbon markets is about 2.2 to 2.5 billion dollars. If operationalized, as desired, this figure can be increased multiple times, providing additional contributions to global climate finance,” Azerbaijan Foreign Ministry said.
At a climate conference held in Bonn, Germany in June, national delegations reconvened formal negotiations on carbon markets and Article 6 of the Paris Agreement for the first time since the failed talks at COP28, which was held in Dubai in late 2023.
“Tangible progress has been made during the Bonn session,” the Ministry added.
The challenges
Countries at the 28th UN Climate Change Conference failed to adopt key texts laid out under the Paris Agreement, though an agreement on non-market mechanisms was passed in December 2023. This has been seen as a major setback to international carbon trading.
Parties did not reach a consensus on either Article 6.2 or Article 6.4, for a variety of technical reasons, with many countries clashing on carbon removals and issues of transparency and climate ambition over the final text.
Many in the voluntary carbon market were disappointed that the lack of a deal would delay market-based and private-sector involvement.
However, those on the opposing side insisted that there were not enough safeguards and regulations in the texts to ensure a functioning and transparent market.
In Rwanda, the carbon trading framework was launched at COP28, but little to no activities have been witnessed.
However, the nascent market is increasingly attracting investments, thanks in large part to the recently announced regulations.
“We have an opportunity to expedite the operationalization of a crediting mechanism that will set a high bar on environmental integrity, and safeguards, among others,” said Joel Shyaka, who is a manager at CO2 Africa project.
This project is currently undergoing pilot phases between private landowners, despite the bottleneck of no existing policy that governs the sector due to how new these projects are on the continent and in Rwanda.
Reacting to the audit process, he said, “So that auditing consists of seeing the tree species, the amount of carbon from a specific tree, let’s say, per year, the soil quality, etc, then there is an exact amount of carbon that could be put in that specific forest.”
According to Shyaka, the current market is faced with major challenges including a lack of expertise in the field.
“We are stepping in to ensure that local communities are trained about conservation and the incentives that could come with it, and going with a people-centric approach is an advantage for us as a country.”
“In our case, we give a considerable percentage of the income to the landowners before we take out our costs as a way to improve the price of the credit in the first place and to give them an income so they can continue to conserve, and maintain and develop their land, and their community, but also to continue socio-economically develop.”
“It is more like pulling together all the bits and pieces. The piece that’s missing is really having a common set of standards that were applied in the country. Other countries have such mechanisms and reporting requirements. We don’t want to be in the gray market where we’re selling these things abroad and not properly measuring the benefits or verifying it in the country.,” Shyaka reiterated.
At COP29, Shyaka highlighted that industry players and government institutions will deliberate how to ensure an equitable share of the market and fair returns to the communities that are using their resources.
He insisted on the need to convene the public and private sectors to be able to join efforts and build on the nascent knowledge and resources available.
What are the requirements?
Investors have been encouraged to operate within national policies, laws, and strategies as part of the requirements.
Also required is the need to indicate how the project shall contribute to the Nationally Determined Contributions (NDCs), which are emission reductions at the national level, as well as ownership of the property involved in the project, community development agreements or agreements with property owners and other relevant entities.
Rwanda has also prohibited double counting to ensure transparency and fairness in the carbon sector.
Juliet Kabera, Director General of Rwanda Environment Management Authority (REMA) said that the government is committed to sustainability, enhancing previous initiatives and creating new opportunities for innovation in carbon market mechanisms.
“By aligning with Article 6 of the Paris Agreement, we will strengthen our capacity to meet our NDCs and foster global cooperation in tackling climate change,” she added.