The United Nations announced last month the approval of the first carbon credits under a global market aimed at reducing emissions, a mechanism that has faced scrutiny over greenwashing concerns.
The UN-run market, established under the Paris climate accord, allows companies and countries to offset their excess emissions by financing projects that cut greenhouse gases in other nations (see graphic).
Critics fear that if set up poorly, such schemes can undermine the world’s efforts to curb global warming by allowing countries or companies to greenwash – or overstate – their emissions reductions.
The first credits issued under the new carbon market involve a project in Myanmar that distributes efficient wood-burning cookstoves that reduce harmful household air pollution and ease pressure on local forests, the UN’s climate agency said.
Implemented in partnership with a South Korean company, the project will generate credits that will count towards the climate targets of South Korea and Myanmar.
The UN climate agency said the credited emissions reductions would be 40 per cent lower than under a previous scheme as more conservative calculations would be applied under the new Paris Agreement Crediting Mechanism (PACM).
“Our focus is on building confidence in this market from the outset, and this first issuance shows that the system is working as intended,” Jacqui Ruesga, vice-chair of the UN body supervising the PACM, said in a statement.
More than 2 billion people around the world cook using open fires or inefficient stoves fuelled by kerosene, coal or biomass such as wood, crop waste or dung, according to the World Health Organization. The resulting air pollution kills millions of people each year.
The stoves in the Myanmar project burn woody biomass more efficiently, meaning they need less fuel and spew far less smoke inside the home.
But at current rates, only 78 per cent of the population is expected to have access to clean cooking by 2030, the WHO said.
“Clean cooking protects health, saves forests, cuts emissions and helps empower women and girls, who are typically hardest hit by household air pollution,” UN climate chief Simon Stiell said.
“The opportunities presented by this UN carbon market across all regions are vast, particularly now that strong environmental safeguards, robust standards, and a clear system for redress are in place to ensure integrity, inclusiveness and efficiency,” he said.
The 2015 Paris Agreement, which commits the world to limiting warming to well below 2 degrees Celsius and ideally at 1.5 degrees, also envisaged that countries could take part in cross-border trade of carbon reductions.
New rules were agreed at the UN’s Cop29 climate summit in Azerbaijan in 2024, for the carbon market mechanism.
At the time, Greenpeace said the agreement left loopholes that would allow fossil fuel companies to continue polluting.
But other environmentalists said that, while not perfect, it provided some clarity that was absent from global efforts to regulate carbon credits.
Why is there a need for stricter regulations on carbon credits?
One big problem for carbon markets is the quality of the credits being traded. For a credit to be good, it must represent a real and permanent reduction in pollution. However, some credits are not high-quality.
There are nearly 1 billion old credits that nobody has used. Many of these come from old projects that did not actually help the environment as much as they claimed. If the market is full of these “low-quality” credits, people will stop trusting the system. It also means that companies might claim they are helping the planet when they really are not.
To fix this, governance bodies such as the Integrity Council for the Voluntary Carbon Market (ICVCM) are creating strict new rules called “core carbon principles”. These rules help countries and buyers find and use only high-integrity credits that truly protect the environment.
