Why in the News?

At the COP29 climate summit in Baku, Azerbaijan, the adoption of Article 6.4 of the Paris Agreement has paved the way for global carbon trading under UN supervision.
- This new development allows UN member countries to trade carbon credits globally.

What is Article 6.4?

Article 6.4 of the Paris Agreement establishes a global carbon market to facilitate carbon credit trading between countries.
- It is part of Article 6, which outlines mechanisms for international cooperation in achieving net-zero emissions.
Objective: Enable countries to offset their emissions by investing in emission reduction projects in other countries.

It establishes a global carbon market overseen by a UNFCCC Supervisory Body.
- This body would develop rules, monitors credit issuance, and ensures compliance with international standards.
It allows countries to generate and trade Emission Reduction Credits (ERCs), which represent reductions in CO₂ or equivalent greenhouse gases.
- Credits are earned from approved climate projects and can be traded globally.
Through subsections like Article 6.2, countries can use ITMOs (Internationally Transferred Mitigation Outcomes) to meet their NDCs, which are tradeable units representing emissions reductions.

Cost-Effective Climate Action: By enabling global carbon markets, Article 6.4 could save an estimated $250 billion annually in implementing climate plans, providing a cost-efficient path to emission reductions.
Support for NDCs: The mechanism helps countries meet their NDC targets under the Paris Agreement, allowing more flexibility and incentivizing investments in green projects worldwide.
Economic Growth and Climate Mitigation: Carbon markets foster investments in clean energy, create jobs in climate-focused sectors, and link economic growth with climate action.
Encourages Sustainable Development: Article 6.4 incentivizes sustainable projects in developing countries, promoting green technology transfer and supporting local economies.

- Energy Efficiency Improvements: Reducing energy consumption (e.g., efficient lighting, better insulation).
- Renewable Energy: Replacing fossil fuels with solar, wind, or hydroelectric power.

- Reforestation and Afforestation: Increasing forest cover to absorb CO₂.
- Soil Carbon Sequestration: Storing carbon in soil through agricultural practices.

- Geological Storage: Storing CO₂ in deep underground formations.
- Biochar Production: Locking carbon in biochar, enhancing soil fertility.

- Direct Air Capture: Capturing CO₂ from the air and storing it underground or using it industrially.
- Ocean-Based Solutions: Enhancing ocean CO₂ absorption, such as through algae cultivation.

Carbon Offsetting Criticisms: Critics argue that offsetting doesn’t reduce global emissions but shifts responsibility, allowing countries to continue emitting while claiming neutrality.
Carbon Accounting Challenges: Unreliable carbon accounting can lead to “phantom credits,” where emissions reductions are overstated or inaccurately recorded, failing to match actual reductions.
Greenwashing Risks: Some countries and companies may use carbon credits as a form of greenwashing, claiming carbon neutrality while continuing to pollute.
Equity and Climate Justice Concerns: Developing nations, which contribute less to global emissions, are the most vulnerable to climate impacts.
Potential for Reversal Risks: Projects that store carbon in natural reservoirs risk releasing it back into the atmosphere. Some standards allow projects to end monitoring if reversal risk is considered “negligible,” which remains undefined and problematic.

[2011] Regarding “carbon credits”, which one of the following statements is not correct?

(a) The carbon credit system was ratified in conjunction with the Kyoto Protocol.

(b) Carbon credits are awarded to countries or groups that have reduced greenhouse gases below their emission quota.

(d) Carbon credits are traded at a price fixed from time to time by the United Nations Environment Programme.