Implications of COP28 for Future Carbon Markets

COP28 in Dubai, UAE, will focus on the operationalization of a global carbon market, particularly Article 6, which enables countries to cooperate to achieve emission reduction targets. Article 6.2 allows bilateral agreements between nations, facilitating the cross-border trading of credits. Several countries like Japan, Singapore, and Switzerland are actively involved in these agreements. Article 6.4 will replace the clean development mechanism and require approval from the host country and a supervisory board before generating and trading credits. However, challenges remain, including methodological guidance, liability for reversals, transformative activities, baseline contraction factors, and the transition of CDM credits. Negotiations on Article 6.4 are ongoing, and the voluntary carbon market awaits its outcomes, as it could significantly impact project viability, demand, and supply.