Decoding Article 6 and Climate Finance Outcomes at COP29

There were disappointments amid the headlines as the gavel came down on the United Nations Climate Change Conference, COP29, in Baku, Azerbaijan. COP29 did achieve some notable outcomes, particularly on Article 6 of the Paris Agreement, which lays out how countries can trade carbon credits to achieve their climate targets. Meanwhile, climate finance — 2024’s overarching theme — sparked intense debate over its sources and definitions. A headline figure was agreed upon, but developing nations were left seeking greater clarity and stronger commitments.

Subrata Chakrabarty, Associate Program Director of the Climate, Economics and Finance Program at WRI India, was in Baku following the negotiations closely. Subrata decodes key takeaways on Article 6 and Climate Finance in conversation with Shalini Singh. The following is an edited transcript of their conversation.

Shalini: The first day of COP29 saw a significant, yet unconventional, development. What key action was taken regarding Article 6 on Day 1 of COP29?

Subrata: The Supervisory Body, which looks after the implementation of a new carbon market mechanism (Article 6.4), adopted two key standards — one on methodology requirements for calculating emissions reductions and another on activities involving carbon removals. Traditionally, these standards would have been submitted to the COP as recommendations for further review and endorsement. However, negotiations on Article 6 have been going on for nine years, and to expedite matters, the Supervisory Body went a step further by not only revising its recommendations, following earlier rejections, but also operationalizing these standards. It also requested that the COP endorse this approach while leaving room for additional guidance.

Shalini: As climate finance was the central theme this year at COP29, could you tell us about the new finance goals and the associated issues around it?

Subrata: The New Collective Quantified Goal (NCQG) will replace the current $100 billion annual target after 2025. It is a sensitive topic of negotiation between developed and developing countries. Before COP29, there were extensive discussions between 2022 and 2024 to shape the NCQG, including 11 technical expert dialogues, two high-level ministerial sessions, and three formal negotiations.

Three crucial issues dominated the debates around climate finance – the quantum of finance, the contributor base, and the source and quality of finance. On the quantum, developing countries demanded that the NCQG align with their assessed needs, while developed countries were reluctant to commit without clarity on the contributor base. Developed countries argued that economically advanced developing nations, such as China and the petrostates in the Gulf region should also contribute.

The source and quality of finance were particularly contentious. Developing countries, especially the least developed countries and small island states, insisted that the financial flow under NCQG be primarily in the form of grants rather than concessional loans as they are unable to shoulder the additional debt burden to combat climate change.

Shalini: So, what were the final outcomes on climate finance at COP29 and what are the implications for India?

Subrata: The negotiations on climate finance were intense and contentious, with significant gaps between the demands of developing countries and the final outcomes. The developing countries rejected the initial figure of $250 billion. Negotiating blocks like the Alliance of Small Island States (AOSIS) and Least Developing Countries (LDCs) walked out of the negotiations.

The headline of $1.3 trillion on the quantum calls on contributions from all actors — not just developed nations — and includes $300 billion annually by 2035 specifically for developing countries. Developed nations are expected to lead in mobilizing this amount, with finance sourced from public, private, bilateral and multilateral flows.

However, key demands from developing countries remain unmet. Notably, there was no clear definition of climate finance, which was a longstanding demand to ensure transparency and accountability. Sub-goals for critical areas like adaptation and loss and damage were left undefined. For India, adaptation funding was a top priority, but it remained unresolved. The "Baku to Belem" roadmap to mobilize the additional $1.3 trillion is to be developed by COP30.

In summary, COP29 delivered a long-term quantum for climate finance, but it fell short of the financial needs voiced by developing countries.

Shalini: Back to Article 6, the issue of operationalizing the carbon markets has been at a standstill since COP26 at Glasgow. We finally have some outcomes. Can you briefly describe some of the decisions that were agreed upon?

Subrata: For years, the operationalization of Article 6 has been bogged down by technical disagreements. At COP29, we finally saw progress on several key issues. One of the biggest sticking points has been the process of authorizing emission reductions that one country can transfer to another (called Internationally Transferred Mitigating Outcomes (ITMOs)). Two questions were at the heart of this debate: one was about changing, revising or revoking the authorization, and the second was regarding the timing of the authorization. The decision at COP29 provides countries with the flexibility to change the authorization. However, these changes will not apply retroactively to ITMOs that have already changed hands unless all involved parties explicitly agree. This strikes a balance between flexibility for countries and stability in the system. In terms of timing, the authorization could happen anytime between the date of issuance of the credits and before the transfer of Article 6.4 emission reductions in or out of the mechanism registry. This adds clarity while giving countries room to adapt based on their circumstances.

The second issue with Article 6 is interoperability between registries, i.e. between the international registry, mechanism registry and the host country registries, wherever applicable. At COP29, countries agreed to establish mechanisms that enable data sharing and visibility across these registries. This will allow the tracking and transfer of authorized Article 6.4 emission reductions as ITMOs while minimizing errors and preventing duplication.

The decision adopted at COP29 also clarifies that the first time a country authorizes the international transfer of its mitigation outcome, it will trigger an accounting mechanism to avoid double counting (called the “corresponding adjustment”). This clarification enhances transparency and accountability within the carbon market framework.

Additionally, parties adopted a process to identify, notify and correct inconsistencies between the Article 6 database and the information reported annually. This step will ensure greater accuracy, transparency and trust in the system while improving its long-term functionality

Shalini: Before we end, could you help demystify and set the record straight about India calling out the COP29 presidency?

Subrata: During the final plenary of COP29, the spirit of consensus-based decision-making was undermined. India had formally requested the opportunity to speak before the NCQG decision was adopted. Despite notifying the COP29 presidency and the UNFCCC secretariat, the adoption was rushed through without offering India the floor to make its statement. India condemned this as a “stage-managed” process, expressing deep disappointment with the inadequacy of the NCQG target and the process by which it was adopted. Nigeria and Bolivia echoed India’s objections.

Overall, COP29 in Baku marked progress but left critical challenges unresolved. For India and other vulnerable countries, the outcomes highlight a stark reality: the path to equitable climate action remains steep and will need greater commitment from global leaders. As the world looks toward COP30 in Belém, Brazil, it is critical that the frameworks established in Baku translate into tangible outcomes.

Read more about Article 6 here.

With inputs and coordination by Steffi Olickal and Shreyas Joshi.