The 29th Conference of the Parties (COP29) is the annual event acting as the pivotal summit uniting global leaders, organisations, and stakeholders in combating climate change. The specific objectives for this year’s conference are to:

• Enhance Ambition: Strengthening national commitments to climate action.
• Enable Action: Mobilising finance and resources to actualise ambitious climate goals.

This COP will be particularly looking to emphasise the finance gap and the urgent need to enable large-scale investment in climate solutions, all whilst aligning with the overarching goal of keeping global temperature rise below 1.5°C.

However, even before the Azerbaijan summit kicks off there seems to be dearth of discussions around enforcement and the formation of structures of legal compliance. Enforcement mechanisms provide a defined way to monitor progress and address climate target failures, making sure each party contributes fairly and effectively.

While we can expect to hear lots on climate financing, states making funding available for climate finance does not negate those same states being huge carbon emitters. We cannot expect climate financing to have its desired impact unless it is underpinned by robust enforcement.

Legal enforcement is good for business as it creates a stable environment for investments in green technology and renewable energy. Businesses and investors are more likely to fund climate-friendly projects if they have confidence that environmental policies will be upheld and enforced. For instance, if there are legally binding regulations on emissions or financial penalties for polluting, companies are incentivised to adopt cleaner technologies and practices.

Therefore, before COP kicks off, there are a range of considerations to be held alongside the necessary yet imperfect climate financing discussions.

Article 6 and a functioning carbon credit market, does it stand up to scrutiny?

Article 6 of the Paris Agreement deals with carbon markets and emissions trading. It consists of nine paragraphs providing principles for how countries can “pursue voluntary cooperation” to reach their climate targets. The actual trading of emission reductions and removals between states falls under Article 6.2. The formalisation of this market is expected to be a central discussion at Baku.

These high-level principles were intended as a basis for countries to develop detailed rules on how to implement Article 6 in practice. However, they proved contentious, leading to years of delays.

Non-profit Carbon Market Watch has argued governments must fix all the outstanding issues with the market during COP29 to ensure that Article 6 advances, rather than hinders, the climate agenda.

As reported by White & Case, the picture at this stage does not look rosy. Despite having hosted four negotiations and five side events on Article 6 of the Paris Agreement, the Bonn Climate Change Conference fell short of consensus on resolving open issues on the functioning of an international carbon credit market under the Paris Agreement. Countries failed to agree on issues relating to the extent to which emission avoidance can be used to generate carbon credits and how the system should be centralised.

Further to this, even if Article 6 is ironed out, Article 6.2 trades will not be subject to meaningful oversight or enforcement. This is because no independent body oversees the Article 6.2 market and only minimal requirements are in place, meaning the quality of emission reductions or removals transferred will not necessarily be easily measurable or verifiable.

Under Article 6.2, it is largely left to countries’ discretion to self-define “environmental integrity”, social safeguards, and other core criteria for their international carbon offset transfers.

Finally, countries are allowed to classify any and all information regarding their bilateral trades as “confidential”, in which key case data about such transactions and the underlying projects which created the carbon credits would never be made available to the wider public or independent watchdogs. Countries may not actually exploit this transparency loophole, since this would justifiably raise significant concerns, but troublingly, they have the option to be secretive if they wish. This could give countries that do not wish to be scrutinised for trading credits they may know are of poor quality or that fail to uphold human rights free rein to do as they please.

Thus, much like climate financing, while the carbon market is absolutely necessary in practice there is a missing component of meaningful enforcement.

The Paris Agreement more widely

Unfortunately, a lack of enforcement is running theme throughout the Paris Agreement. As MIT’s Climate Portal outlines: “the short answer is that there is no hard enforcement in the Paris Agreement” and instead the focus to date has been on accurate reporting. At best, the main formal consequence for a member failing to meet its targets is a meeting with a global committee of neutral researchers. The committee will work with struggling members to create new plans. In fact, the lack of formal consequences coupled with long deadlines in comparison to the Kyoto Protocol – the previous UN international treaty to fight climate change – which was restricted to a short time period with countries given 4 years (2008-2012) to enact changes, is what made the Paris Agreement so widely signed up to.

If enforcement is lacking what can be expected going forward?

If the status quo of limited enforcement mechanisms continues post COP29, which seems likely, states may see a rise in civil legal strategies to drive governmental behaviour change. It was revealed last year by the UN Environment Programme that the total number of climate litigation court cases have more than doubled since 2017.  A number of these cases have challenged government decisions on projects that do not align with the goals set out in the Paris Agreement.

A recent example of this was the ‘Swiss ladies case’ (KlimaSeniorinnen v Switzerland) brought by roughly 2,000 women over the age of 64, who argued they were more vulnerable to extreme heatwaves caused by a warming planet. The European Court of Human Rights ruled in April this year Switzerland had ‘failed to comply with its duties’ to combat climate change, violating the European Convention on Human Rights. Litigation of this kind may become the new arena to hold businesses, governments and society to account on their net zero promises.

Another proposal to be considered is compensation arrangements for oil and gas companies and states. While oil and gas companies should not be partaking in the extraction and production of fossil fuels to begin with, there is a larger quandary that incentivisation is necessary if we want major players to exit the market. Compensation mechanisms could be utilised to account for lost assets. If we are still missing the regulatory enforcement stick post COP29, perhaps a new carrot needs to be considered.