What international business can expect from COP30 on carbon markets

In Baku, Azerbaijan on 24 November 2024, following nearly two weeks of intense negotiations, the United Nations Climate Change Conference (COP29) ended with a $300 billion a year package for climate financing towards emerging and developing member states by 2035.

The package was lauded but described as being "well below" the expected required $1.3 trillion - and will be a focus of attention at the COP30 climate summit from 6-21 November in Belém, Brazil. As a result, the COP30 presidency has been tasked with becoming the canvas for a "Baku to Belém" framework to make the ambition of increased climate financing a reality.

In parallel, COP 29's landmark article 6 agreement has created significant interest among nations to set up a global system of high-quality carbon credits that meet global standards on measuring, reporting and verification.

The expectation for a $1.3 trillion agreement remains deeply connected with progress on article 6- aligned agreements and is likely to be a critical element of negotiations at COP30. And, in the months leading into COP30, the role of article 6 and climate financing has continued to become clearer. 

Belém build-up 

Article 6 projects have gained momentum through bilateral and multilateral deals with nature-solution-rich countries such as Ghana, Indonesia, Cambodia, which have already put in bilateral agreements with countries like Singapore and Switzerland. The initiation of country-to-country trading on article 6 aligned credits and benefit sharing models is expected to further accelerate at COP30, with clear signals on the role for credits in nationally determined contributions.

Meanwhile,, ongoing consultations on corporate net-zero standards through the Science Based Targets Initiative (SBTi) and emission accounting with the Greenhouse Gas Protocol have indicated seismic changes in emissions transparency, scopes of accounting and coverage of emissions.

The success of article 6 has complimented ongoing thinking at the SBTi around integrating carbon credits within net-zero strategies through various "beyond value chain" tools such as environmentally attributed commodities. While the standard is still under consultation and pilot testing, the use of credits as a compatible measure in reducing emissions is clear for a 2040 timeline. Additionally, the European Union's updated 2040 net-zero target has paved the way for using carbon credits in alignment with article 6.

A high-profile report published by the COP30 circle of finance ministers in September has also detailed plans for delivering a Baku-to-Belém roadmap through five central recommendations. Carbon markets and emissions trading featured in two of them. 

The International Court of Justice landmark advisory opinion in July also confirmed the responsibilities of states to prevent harm from anthropogenic climate change. Specifically, the opinion addressed the binding nature of multilateral agreements and the obligation to reduce harm. 

Osborne Clarke comment

What do these developments mean? Legal risk around claims on sustainability are likely to increase and the market is looking for authenticity and verifiability; however, carbon credits are a key mechanism for various nations to achieve their nationally determined contributions.

Companies that are well positioned to incorporate high-quality credits into their corporate strategy are most likely to fit into reporting expectations and achieving decarbonisation at pace with regulatory changes.

The COP30 discussions on the $1.3 trillion agreement will likely permeate into article 6 projects through increased transparency and credibility on claims made against emission reductions.

At Osborne Clarke, the carbon markets and nature capital team leads with deep sector knowledge and regulatory expertise around the carbon credit market with a focus on real and credible impact on decarbonisation. Get in touch with our experts to understand how COP30 and article 6 developments impact your company.