The United Nations has opened a global carbon market that could steer billions of dollars to projects aimed at reducing or capturing greenhouse gas emissions and spur a new era in addressing climate change.
The U.N. carbon market lets nations pay for climate-related projects outside their borders and receive credit toward meeting their own emissions goals under the Paris climate agreement aimed at limiting global emissions.
The market is the only exchange in the world that is open exclusively to nations and that follows standards developed by an international body. It could tap into huge funding sources, as many nations don’t participate in the global voluntary carbon market where corporate polluters can pay for climate projects to offset their own emissions.
“This is a big milestone for the Paris agreement … and for international carbon markets,” said Axel Michaelowa, senior founding partner at Germany-based Perspectives, which consults on carbon markets worldwide. The U.N. carbon market, approved a year ago at the U.N. climate conference in Azerbaijan, “is now ready for business” and awaiting applications for funding.
The carbon market is open to the 195 parties to the Paris agreement, which include 194 nations and the European Union. The U.S. will be excluded from the market when President Donald Trump’s withdrawal from the Paris agreement takes effect in January.
At the 2025 annual U.N. climate conference — COP30, which starts Monday in Brazil — a U.N. group writing rules for the new market will present a report and hold discussions about further steps for refining market rules.
The new market effectively replaces an earlier U.N. carbon market that expired in 2020 after years of deterioration driven by skepticism about its effectiveness.
The carbon market opened after the U.N. group on Oct. 30 approved the first set of standards for projects to be eligible to raise money through selling carbon credits. The rules focus on capturing methane, a potent greenhouse gas that is 80 times more powerful than carbon dioxide over the short term but much less prevalent in the atmosphere.
Project developers now can submit proposals for methane-capture or abatement efforts. Once approved by the U.N., the developers can raise money from countries in exchange for carbon credits, which countries can apply to their climate plans written under the Paris Agreement.
The U.N. is aiming to develop rigorous standards for certifying that climate projects in the market are both effective at addressing climate change and would not have been completed on their own, without market funding.
The global voluntary carbon market in comparison has faced growing skepticism in recent years after reports showed that some market-funded projects provide little or no boost to climate projects.
The European Union said Wednesday it would use the U.N. carbon credits to help achieve its goal of cutting greenhouse gas emissions by 2040 to 90 percent below the level in 1990. The credits can account for up to 5 percent of the EU emissions reduction.
The rules for methane capture are simply a first step.
The U.N. group that wrote the methane-capture rules is working on standards for about 10 other methods of reducing or capturing greenhouse gas emissions. They include rules for projects that develop renewable energy sources, improve energy efficiency, or replace polluting cookstoves, Michaelowa said.
Martin Hession, chair of the U.N. group writing the standards, said the methane rules are “only the first of many” that will be developed to address climate change.
“We’re showing how carbon markets aligned to the Paris Agreement can deliver real-world solutions — and there’s plenty more to come,” Hession said in a statement.
‘Beyond business as usual’
The United Nations hopes to set higher standards than those in the voluntary carbon market, the global marketplace in which corporations donate money to climate-related projects in exchange for carbon credits that help meet sustainability goals or please shareholders.
The U.N. market is already influencing the voluntary market, Michaelowa said.
A Swiss nonprofit called Gold Standard is one of the largest groups that sets independent standards to validate the effectiveness of projects raising money on the voluntary carbon market. The group has published a plan to align its standards with the U.N. market rules.
At least one other nonprofit that sets standards for voluntary carbon market projects is looking at potentially aligning with the U.N. protocols.
“I’m hoping for a race to the top,” Michaelowa said.
In addition to the standards for capturing methane, the U.N. group also recently adopted an investment analysis tool aimed at ensuring that projects need the funding of the U.N. market.
The tool requires project developers to show that their activities would not be viable without revenue from selling carbon credits through the market, a concept known as additionality.
“This ensures that credits are only issued for actions that go beyond business as usual,” the U.N.’s climate change group said in a statement.
The analysis tool aims to make the new market more credible than the prior UN system that nations used to buy carbon credits, the Kyoto Protocol Clean Development Mechanism, which started in 2006. It was seen as significantly flawed.
Under the Kyoto system, Michaelowa said, many projects were approved that were commercially viable even without the carbon market funding. “That led to the downfall of the mechanism,” he said.
There are more than 80 methane-capture projects worldwide that were funded by the Kyoto Protocol system and likely will seek to transition to the U.N. market, said Fitri Wulandari, global credits analyst at Veyt, a Norway-based carbon markets analysis firm.
The new market “builds on two decades of lessons learned, now backed by a clear rulebook and stronger integrity safeguards,” Wulandari said. The safeguards include a mechanism that more accurately counts greenhouse gas removals.
The rules for methane also have a provision aimed at phasing down the number of carbon credits for methane-capture projects.
Because nations that buy methane credits largely have commitments to hit net-zero emissions in a few decades, they eventually will need to cut their own emissions instead of buying carbon credits, Michaelowa said.
“You don’t want to have carbon credits for emission reductions forever because in 20 or 30 years, the world needs to be reaching net-zero carbon emissions,” Michaelowa said.
The rules also prioritize converting methane emissions to energy use over projects that burn methane emissions to eliminate them by letting conversion projects sell carbon credits for longer.
That approach “could encourage innovation” by pushing developers to pursue new technologies for methane capture or abatement such as advanced monitoring or leak-detection systems, Wulandari said.
Even with its higher standards, the U.N. market faces criticism from experts who doubt the overall effectiveness of offset-based carbon markets at addressing climate change.
Climate projects are allowed to sell carbon credit based on the assumption that they provide more benefit than what would have happened if they didn’t exist, said Robert Stavins, a Harvard University professor of energy and economic development. Stavins called the assumption “an unobserved and fundamentally unobservable hypothetical.”
Stavins also said that developers seeking carbon market funding have “every incentive to misrepresent” a project and its effectiveness at addressing climate change.
“A project developer always has an incentive to propose what would be most profitable,” Stavins said.
