Adoption of International Carbon Market Standards and International Law

At the 29th United Nations Climate Change Conference (COP29) in Baku, Azerbaijan, significant progress was made in establishing international carbon market standards:

At the 29th United Nations Climate Change Conference (COP29) in Baku, Azerbaijan, significant progress was made in establishing international carbon market standards:

Adoption of Article 6.4 Framework

On November 11, 2024, nearly 200 nations agreed on new United Nations standards for international carbon markets under Article 6.4 of the Paris Agreement. This framework enables countries to trade carbon credits to meet their climate targets, marking a pivotal step toward a UN-backed global carbon market.

Key Components of the Framework

The adopted framework includes:

• Standard on Methodology Requirements: Outlines criteria for developing and assessing projects under the Paris Agreement Crediting Mechanism.
• Standard for Activities Involving Removals: Establishes requirements for projects that remove greenhouse gases from the atmosphere.

These standards aim to ensure environmental integrity, promote sustainable development, and prevent double counting of emission reductions.

Implications for Global Carbon Markets

The establishment of these standards is expected to:

• Facilitate International Cooperation: By providing a clear framework, countries can collaborate more effectively in reducing greenhouse gas emissions.
• Enhance Market Integrity: Standardized methodologies and verification processes aim to build trust among participants and prevent issues like double counting.
• Unlock Climate Finance: A robust carbon market could mobilize significant investments for emissions-reduction projects, particularly in developing countries.

Next Steps

While the adoption of these standards is a significant milestone, further work is required to:

• Develop Credit Registries: Establish systems to track and manage carbon credits.
• Implement Measurement, Reporting, and Verification (MRV) Processes: Ensure accurate accounting of emissions reductions.

1. Legal Basis and Alignment with International Law

The adoption of these standards stems from Article 6 of the Paris Agreement, which provides mechanisms for voluntary cooperation among states to achieve nationally determined contributions (NDCs).

• Legal Foundation: Article 6.4 establishes a centralized mechanism for carbon credit trading to support sustainable development and reduce emissions globally. The standards aim to ensure environmental integrity and transparency, reflecting principles enshrined in international environmental law, such as:
• Binding Nature: Although Article 6 mechanisms are operationalized under the Paris Agreement, which lacks enforcement through traditional binding sanctions, the adopted standards create a quasi-regulatory framework binding upon participating states and actors.

2. Sovereignty Implications

The framework raises questions about state sovereignty, particularly in terms of:

• Transfer of Emission Reductions: States retain sovereignty over their emission reductions but must adhere to standards that prevent "double counting" (claiming the same reduction by two parties). This could limit unilateral policy discretion.
• Market Participation: States opting into the carbon market are subject to internationally agreed standards, reducing their policy autonomy in defining and validating national mitigation measures.

However, the voluntary nature of the mechanism preserves states' rights to opt in or out, balancing sovereignty concerns.

3. Environmental Integrity and Non-Compliance Mechanisms

Ensuring environmental integrity is central to the new standards, requiring robust monitoring, reporting, and verification (MRV) processes. However, challenges arise in:

• Non-Compliance: Unlike the Kyoto Protocol, which had compliance mechanisms, the Paris Agreement relies on soft law instruments and peer pressure to ensure compliance. The lack of a binding enforcement mechanism may weaken accountability.
• Private Sector Accountability: With private entities playing a significant role in generating and trading credits, states bear indirect responsibility for ensuring adherence to international standards under the principle of due diligence.

4. Equity and Justice Considerations

The adoption of standards has equity implications, particularly for developing countries:

• Capacity Building: Developing countries might face challenges in meeting stringent MRV requirements, raising questions about equitable access to carbon markets.
• Benefit Distribution: Ensuring that the financial benefits of carbon trading reach vulnerable communities aligns with international principles of equity but remains difficult to operationalize.

5. Challenges to Implementation

Despite their alignment with international law principles, the standards face several challenges:

• Legal Ambiguities: Terms like "additionality" (ensuring that credited projects achieve real, additional emissions reductions) lack a universal definition, potentially leading to disputes.
• Lack of Enforcement: Without binding enforcement mechanisms, reliance on state cooperation and good faith raises concerns about the system’s robustness.

6. Broader Implications for International Law

The adoption of international carbon market standards contributes to the evolving body of global environmental law, characterized by:

• Hybrid Governance: Involving states, international organizations, and private actors.
• Norm Development: Establishing norms and standards that may influence future treaty negotiations and customary international law.
• Fragmentation: Overlapping mechanisms under Article 6.4 and other voluntary carbon markets could create regulatory fragmentation, necessitating harmonization efforts.

Conclusion

The adoption of International Carbon Market Standards under COP29 reflects a significant step in operationalizing the Paris Agreement’s cooperative mechanisms. While the framework aligns with international environmental law principles and advances global climate governance, its effectiveness will depend on addressing implementation challenges, ensuring equitable access, and strengthening compliance mechanisms to balance sovereignty, accountability, and justice.

Author: Klaudia Szabelka, MA LLM

PhD Candidate in International Law

School of Law

University of Glasgow