In a pivotal development for international climate policy, the World Bank has hailed the recent agreement on international carbon markets at COP29 in Baku as a potential game-changer for global climate finance. According to its latest report, the consensus reached on Article 6 of the Paris Agreement could significantly expand countries’ participation in carbon trading and unlock billions in new investment for low-income nations.

The World Bank underscores that for carbon markets to become a robust tool in the global fight against climate change, they must be credible, transparent, and regulated. The agreement achieved in Baku delivers just that—by clarifying the rules for cross-border carbon trading and mandating the development of institutional and regulatory frameworks at the national level. Importantly, it lays the groundwork for the creation of UN-supervised registries and standardized market infrastructure, which will ensure accountability and traceability in emissions reduction efforts.

What are carbon markets—and why do they matter?

At their core, carbon markets are systems for buying and selling carbon emission allowances or credits. These markets function on the principle that one ton of carbon dioxide reduced or sequestered in one part of the world can offset an equivalent emission elsewhere. When governed effectively, carbon markets offer a cost-efficient means to reduce global........

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