Unpacking new developments in the carbon markets

illuminem summarizes for you the essential news of the day. Read the full piece on Forbes or enjoy below:

🗞️ Driving the news: A new United Nations decision on Article 6 of the Paris Agreement is expected to boost the credibility and expansion of global carbon markets
• The ruling allows countries and companies to trade carbon credits internationally while ensuring transparency and avoiding double counting
• Despite setbacks in 2023, with the voluntary carbon market shrinking from $1.87 billion to $723 million, the sector is projected to grow to $10–$40 billion by 2030

🔭 The context: The new rules clarify how nations and businesses can use carbon credits to meet their climate targets, offering greater flexibility in trading agreements
• Countries must maintain dedicated registries to track carbon trades, improving oversight
• While some nations, like Switzerland and Thailand, have successfully completed transactions under Article 6, many others are still working through the authorization process

🌍 Why it matters for the planet: The new UN-backed Paris crediting mechanism introduces stricter safeguards to prevent double counting and overestimation of emissions reductions, increasing market integrity
• Previously, only 16% of carbon credits led to real-world emissions reductions, raising credibility concerns
• By refining methodologies and addressing loopholes, the new framework could make carbon markets a more effective tool in global decarbonization

⏭️ What's next: Implementation will be key as 98 countries have designated national authorities to oversee transactions, but capacity-building remains a challenge
• More nations will need to streamline authorization processes to scale up the market
• The coming years will focus on ensuring transparency, credibility, and efficiency to bolster confidence in carbon markets

💬 One quote: “With clearer rules and stronger safeguarding by an international mechanism backed by the United Nations, carbon markets are undoubtedly entering a new phase.” — Simi Thambi, climate economist

📈 One stat: The voluntary carbon market shrank by nearly 60% in 2023, from $1.87 billion to $723 million, due to integrity concerns

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