Countries attending the COP29 climate summit finalized an agreement on Saturday to establish a global carbon credit market to channel billions of dollars into projects to combat global warming.

The agreement was reached after almost a decade of negotiations aimed at ensuring market credibility to effectively reduce greenhouse gas emissions. Under this system, credits are generated by projects such as reforestation or renewable energy initiatives, with each credit representing one ton of reduced emissions. Nations and businesses can purchase these credits to meet climate goals.

After reaching a deal at the start of the two-week conference to launch a centralized U.N. trading system as early as next year, negotiators spent much of their time in Azerbaijan trying to hammer out details of a separate bilateral system allowing countries to trade directly.

Details to be worked out included how a ledger to track credits would be structured, as well as how much information countries should share about their deals and what should happen when projects go wrong.

Among the loudest voices was the European Union, which called for stricter UN oversight and greater transparency on trade between nations, while the United States sought more autonomy in agreements. concluded.

The COP29 presidency had released a draft agreement ahead of the deal that proposed allowing some countries to issue carbon credits through a separate registry system, without this amounting to a UN seal of approval.

The final text was a compromise after the EU secured registry services for countries that cannot afford to establish their own registries for issuing and tracking credits, while the US assured that a transaction merely recorded on such a register shall not be considered as UN Credit Approval.

“It’s still a viable international trading system… even if some would say it has no teeth.”

While strengthening a global market for carbon credits was at the center of discussions in Baku, bilateral trade began in January when Switzerland purchased credits from Thailand and dozens of other countries have already concluded agreements to transfer credits.

But these agreements remain limited, and striking the right balance on a clear set of rules to ensure integrity and transparency without limiting countries’ ability to participate should result in a resumption of the flow of agreements.

IETA, a business group that supports the expansion of carbon credit trading, said a U.N.-backed market could be worth $250 billion a year by 2030 and help offset $5 billion. additional tonnes of carbon emissions per year.

With the contribution of agencies.