COP29 took up carbon trade seriously
The Nepal Weekly 
November 26, 2024At the side-lines of COP29 in Baku, the Swedish Energy Agency and Nepal’s Ministry of Forests and Environment have signed a bilateral cooperation agreement on emissions trading under Article 6 of the Paris Agreement.
The agreement enables the two countries to mobilise much-needed capital that can deliver emission reductions at scale.
Nepal has been an early mover in carbon markets and signed a Memorandum of Understanding (MOU) with Sweden on climate cooperation in 2022. Since then, both Nepal and Sweden have put in place national legal frameworks for article 6 and are ready for next steps to accelerate climate action on the ground.
Article 6 of the Paris Agreement enables countries to cooperate to reach their respective nationally determined contributions. This type of cooperation can offer an additional revenue stream for climate projects that in turn help attract private capital and accelerate technology adoption.
– This cooperation is intended to be of mutual benefit to both Nepal and Sweden, contributing to the implementation of both parties’ climate goals. We plan to provide financing for climate mitigation activities in Nepal that contribute to the energy transition and promote sustainable development, says Caroline Asserup, Acting Director General at the Swedish Energy Agency.
The Bilateral Cooperation Agreement has been negotiated between the Swedish Energy Agency and Nepal’s Ministry of Forests and Environment. The Global Green Growth Institute has supported the development of the agreement. In addition to Nepal, Sweden has signed a bilateral cooperation agreement with Zambia during COP29. Sweden has also previously signed bilateral cooperation agreements with Ghana. Sweden’s first emission reduction project under Article 6 has already been procured in Ghana and more is under way.
Carbon trading is a market- driven system designed to combat global warming by reducing greenhouse gas emissions, particularly carbon dioxide produced through the burning of fossil fuels. Through carbon markets, companies, and individuals can offset their emissions by purchasing carbon credits from entities that actively reduce or eliminate greenhouse gas emissions. The global adoption of clean development mechanisms (CDM) and emission trading systems have risen since the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) paved the way for formal carbon markets in 1997, overcoming several legal hurdles. Apart from the European Union Emissions Trading System (EU ETS), several nations, including Canada, China, Japan, New Zealand, South Korea, Switzerland, and the United States, have either adopted or are in the stages of developing their own domestic or regional emissions trading systems.
Nepal and similar developing countries strive to reduce deforestation and forest degradation to enhance forest carbon stock. In recognition of its emission reduction efforts, Nepal signed a meaningful agreement with the Forest Carbon Partnership Facility (FCPF) in 2021. This achievement positions the country fifth in the Asia-Pacific region and 12th globally. With a substantial 44.74% of its land covered by forest areas, Nepal possesses immense potential for generating revenue through carbon financing. Nepal has embarked on the Emission Reductions Payment Agreement (ERPA) to actively combat carbon dioxide emissions, aiming to achieve a reduction of 9 million tons.
The carbon trade-deal agreement plays an important role in Nepal’s strategic programme on forest landscapes and climate action. This innovative financing agreement serves as a powerful tool to address the underlying causes of deforestation and forest degradation while simultaneously inspiring and mobilizing communities across the country. As part of this initiative, a strong emphasis on improving community-based forest management, granting local communities user rights over national forests, enhancing integrated land use planning, promoting alternative energy sources, and strengthening the capacity for managing protected areas will be done. Together, these measures will contribute to the sustainable management of forests and the mitigation of climate change impacts in Nepal.
Moreover, Nepal had successfully carried out to biogas plants and micro hydropower projects to bundle into ‘products for carbon trade’. As a result, the country had fetched rupees in billions in exchange of carbon deal. More such can be identified as renewable energy technologies are growing in the country and also reducing of fossil fuel burning in transport and industry sectors.
In COP29, which was ended on Saturday, countries agreed a deal on rules for a global market to buy and sell carbon credits that proponents say will mobilise billions of dollars into new projects to help fight global warming.
The agreement, clinched roughly a decade after international talks on forming the market began, hinged on how to ensure credibility in the system so it can reliably lead to reductions in greenhouse gas emissions driving climate change.
To this effect, The COP29 presidency published a draft deal ahead of the agreement that proposed allowing for some countries to issue carbon credits through a separate registry system, without that amounting to a U.N. seal of approval. (By Purna N. Ranjitkar)
