COP30 and carbon markets in the age of climate pragmatism, w/Jeffrey Dickerson and Petter Aspestrand

[00:00] Noah: This is Let’s Talk Energy, your go-to podcast for smart energy insights. I’m your host, Noah Brener, and each week we bring you an inside look at the dynamics shaping global energy markets through in-depth conversations with our own Rystad Energy experts as well as special guests. In today’s episode, we’re straddling hemispheres to get a perspective on what many are saying could be a historic COP climate gathering in Brazil, and we’re taking a deep dive into one of the most interesting areas of discussion there: carbon markets. COP 30 kicked off in Belém, in Brazil’s Amazon, on November 10. The meeting will see nations update their pledges for emissions reductions amidst a groundswell of so-called climate pragmatism that has seen business leaders and politicians shift their attention from purely aggressive emissions reduction targets to goals like energy security, affordability, and community development. And in case anyone has forgotten, President Trump has again pulled the US out of the Paris Agreement, meaning there is no official delegation from the US federal government, though there will be plenty of other US politicians as well as business leaders in attendance. One important area in the discussion will be how to develop markets for nature-based solutions and other carbon credits. These are things like preserving existing forests or mangrove swamps, as well as planting new ones, which proponents say can limit emissions more quickly and at lower cost than, say, installing carbon capture on individual facilities. Brazil in particular, alongside other countries with tropical forests, is already playing a huge role in these markets. In just a bit, we’ll be joined from Oslo by Peter Asprand, a senior analyst and carbon markets expert with Rystad Energy, to talk through how carbon markets have developed over the past year and how this could further change at COP 30. But first, I want to go to Houston, where Jeff Dickerson, a principal in Rystad Energy’s advisory business, is packing his bags to head to Belém. Jeff, welcome to the program. Jeff: Thank you, Noah, it’s good to be here. Let’s talk energy. Noah: So, as I said, you’re heading down to COP in just a few days. Is this your first one? What do you expect to be doing down there? Jeff: Well, aside from taking in the sights in beautiful Belém, Brazil, which as you may know is located at the mouth of the Amazon, I’ll be participating in some discussion panels, meeting with delegates, and just generally exchanging perspectives on energy and climate. Maybe as a reminder for listeners who may not be familiar: COP stands for Conference of the Parties, and it’s the annual meeting of the 198 countries plus the European Union that have signed and ratified the United Nations Framework Convention on Climate Change, also known as the UNFCCC, which is the main international treaty aimed at addressing climate change. So the COP is the supreme decision-making body of the UNFCCC where parties review progress, negotiate, and adopt decisions that guide global climate action. Listeners may be wondering: why is this COP 30? Why not COP 25? Well, the first meeting was held in 1995, making this the 30th COP, hence COP 30. Each COP is presided over by a different host country, and that host plays an important role in shaping the agenda and priorities for that year’s conference. For COP 30, that’s Brazil. [04:00] Noah: COPs are often known as having a couple of key themes. Countries try to come up with an agenda where they think they can make progress. Where should we be watching at COP 30 in terms of the focus areas set by host country Brazil? Jeff: This year, implementation is the name of the game. The key focus areas for COP 30 in Belém revolve around advancing pragmatic, action-driven climate solutions aligned with the Belém Action Mechanism, a proposed institutional framework designed to accelerate a fast, fair, and financed global transition away from fossil fuels and to operationalize climate-justice priorities. COP 30 seeks a balance between ambition and pragmatism, really aiming to avoid past cycles of unfulfilled, highly ambitious pledges. Instead, it prioritizes credible, measurable delivery and increased funding over symbolic gestures, in order to build trust and rapidly accelerate climate action worldwide. Some of the key themes are: Implementation of existing commitments Scaling climate finance Just transitions Adaptation and resilience Nature-based solutions And these reflect a broader shift from primarily political negotiations to actually operationalizing climate promises with measurable impact in mind. Observers like myself are watching COP 30 closely for real progress on these themes of financing, just transition, operational nationally determined contributions (NDCs), and adaptation and nature-based solutions. All these core themes are really defining this pivotal moment in global climate diplomacy. Noah: Well, you mentioned those NDCs. Countries are due to update them — these are essentially the goals that countries set for themselves when it comes to emissions reduction. If I’m understanding you correctly, this is a COP that’s maybe less about discussing what it is that we should do, and more about how we actually do it. Jeff: Exactly. Noah: One of the major headlines here is the lack of participation by the US federal government. President Trump has obviously pulled the country out of the Paris Accord and is not sending anyone to the event, though we obviously have others from the US like yourself going down, and other US politicians. We’ve seen Democratic presidential hopeful Gavin Newsom there, certainly taking advantage of the lack of a US federal presence. How do you see this impacting the discussions, and what does the US federal government not being there mean for the negotiations? Jeff: This is a big challenge. There’s a perception — and it’s grounded in history — that the United States is often seen globally as an unreliable partner in UN climate initiatives. This is based on a pattern of high-profile policy reversals, non-ratification of agreements, and withdrawals associated with shifting domestic political priorities and administrations. As you mentioned, you have the executive branch pulling out, but you also have different states, particularly on the opposite side of the political spectrum, sending high-level delegates. This pattern of unreliability dates back decades. Think about the US role in negotiating the Kyoto Protocol in 1995 but then withdrawing in 2001, the US helping shape the Paris Agreement in 2015 and then withdrawing in 2017, rejoining the same day President Biden was inaugurated in 2021, and then withdrawing again after Trump’s inauguration in January of this year. Even the recent rejection of proposed net-zero frameworks at the IMO — the International Maritime Organization — has reinforced that view. The US is seen as both a key leader in this space and one of the more challenging participants. [08:00] Jeff (continued): Interestingly, though, the mood at COP 30 is much less focused on the US. There’s greater optimism around collaboration and self-actualization by member states, which aligns with the implementation theme. There’s widespread acknowledgement that decarbonization pathways are no longer inherently expensive initiatives requiring extensive financial support from so-called “rich nations” to be achieved. As clean-energy costs have continued to decline dramatically, they’re increasingly seen as cost-effective pathways to improve energy access and support economic growth. So the shift in economics has contributed to more focus on independent actions — hence, again, implementation being so critical this year. Noah: You brought up something I wanted to follow up on, which is the IMO. We essentially saw the Trump administration torpedo an agreement that had been hammered out among many nations — now, who knows how it would have played out without those threats from the administration, but essentially saying, “Don’t agree to this; if you vote for it, you could be in line for tariffs, port duties, maybe even travel restrictions.” Is there a worry that we have a US administration that doesn’t want to come to the party but wants to influence what’s happening inside those four walls? Jeff: There’s definitely a negative perception of US actions both in terms of climate and broader trade dynamics, and an acknowledgement that Trump may seek to further erode collective climate action — which he is openly threatening to do. So under Trump, the perception of the US as a climate partner has really degraded from “unreliable,” as I noted earlier, to more “obstructionist.” A key example is his threat to withdraw from the foundational 1992 UN Framework Convention on Climate Change, which would remove the US entirely from the core global climate negotiating system and deeply undermine coordinated action. So far those are only threats — perhaps some political positioning — but the threat itself is viewed very negatively. Trump has pulled the US out of the Paris Agreement but not out of that foundational UNFCCC. Doing that would be an even more drastic step. Noah: Trump’s done a lot of things unilaterally. Is that something he can do? Jeff: The US Senate is required to ratify treaties. Senate involvement in terminating ratified treaties, though, is not mandated or even mentioned in the Constitution. So various historical precedents exist of presidents acting unilaterally: President Carter terminating the mutual defense treaty with Taiwan as part of recognizing the People’s Republic of China. President Bush withdrawing from the 1972 Anti-Ballistic Missile Treaty with Russia despite congressional objections. President Trump himself in 2019 withdrawing from the Intermediate-Range Nuclear Forces Treaty, the Optional Protocol of the Vienna Convention, and even threatening to withdraw from NATO before Congress enacted restrictions in the 2023 National Defense Authorization Act. So yes, there is a real risk that he could pursue this type of action unilaterally, consequences be damned — although no official actions to this effect have materialized as of today. [12:00] Noah: There’s been a lot of time spent and ink spilled on this “climate pragmatism” trend, and it’s something you’ve brought up as a key feature of the COP 30 meeting in Belém. How do you see that emphasis playing out in terms of what actually gets delivered from this two-week conference? Jeff: Climate pragmatism really goes hand in hand with the broader implementation theme of COP 30. We’re talking about a shift away from lofty global climate pledges toward actionable, realistic, and scalable solutions — things that can be done today by governments and businesses, even amid economic and political turmoil. At COP 30 we see this in several ways: Focusing on delivery of past commitments over announcing new pledges Aligning climate goals with broader economic development and resilience strategies Localizing climate action to match realities on the ground in each country Transparently achieving incremental progress So COP 30 is about taking realistic steps forward, with leaders pushing to operationalize and finance existing commitments in specific and measurable ways. Brazil, as host, is a good example. Brazil’s presidency has made strengthening multilateral cooperation, linking economic growth to climate progress, and implementing existing NDCs central priorities. This is a departure from previous COPs that were more focused on negotiating new targets. Nations are working on scaling renewable energy capacity, tracking the redirection of fossil-fuel investments, and improving adaptation financing mechanisms. In keeping with the pragmatism theme, there’s an emphasis on concrete, measurable, and achievable steps: deployment of proven technologies, practical transition plans, and detailed sector-by-sector emissions-reduction strategies. These are all great data points to inform progress — and definitely information we at Rystad Energy will be following closely. Noah: What does a successful outcome in Belém look like? If we look at the trajectory of previous COPs, they’ve involved increasing definition around ambition: what do we intend to do, what do we need to do, how does that translate into objectives, goals, and strategies? But COP 30 aims to turn those ambitions into reality. Jeff: Exactly. With delegations representing roughly 194 of the 198 countries plus the EU, success is really about confidently transitioning from plans to action. We’ll be watching a few key performance indicators to gauge success: Mapping out achievable commitments via robust NDCs. Operationalizing climate promises via adoption of the Belém Action Mechanism. Strengthening global cooperation on adaptation and nature-based solutions. Scaling action through new climate funds, such as the 25-billion-dollar Tropical Forest Forever Facility and the Baku-to-Belém roadmap, which aims to mobilize about 1.3 trillion dollars in annual public and private climate finance by 2035 — Baku being where COP 29 was located. Enabling transparent progress through concrete indicators and accountability frameworks. Tripling climate finance support for developing countries from 100 billion to 300 billion dollars per year by 2030. If we watch all of those, there will be different levels of success attributed to each one by different member countries, and we’ll be tracking that. Noah: We’ll see how things go. Some of those are very sticky issues, especially finance. The developing world has been asking the developed world, the OECD countries in particular, to put their money where their mouth is for many years now. We’ve seen some steps toward that, but I’ll be really interested to see how the dynamic in Belém allows some of these initiatives to move forward. Jeff, thank you so much for joining us and unpacking all of these dynamics and frameworks surrounding the discussions. Have a safe trip to Belém. Jeff: Thank you, Noah. [16:00] Noah: I think that’s a perfect segue into how this newfound climate pragmatism could play out in perhaps one of the most pragmatic approaches to emissions reduction that will be discussed at the conference, and that’s carbon markets. Regulated markets for carbon offsets have been one of the trickiest aspects of the Paris Agreement to implement. And though we saw a breakthrough last year at the COP 29 meeting in Baku, much work remains to develop a system that both oil executives and environmentalists say is needed to direct capital into nature-rich but cash-poor countries. Peter, welcome to the program. Peter: Great to be with you, Noah. Thank you. Noah: You’re Rystad Energy’s leading expert on carbon markets, which were a huge focus at COP 29 and are once again in the spotlight in Belém. Let’s take a quick step back and start with the basics: what are carbon markets in the first place, and why are they important for decarbonization? Peter: Carbon markets are really a market-based approach to decarbonization. On the other side, you have “command-and-control” policies; market-based approaches are what we usually refer to when we talk about carbon markets. I like to separate carbon markets into two distinct segments. On one hand, we have the voluntary carbon market, in which you have carbon projects that either reduce, avoid, or remove CO₂. One ton of CO₂ removed, avoided, or reduced equals one carbon credit. Corporations can buy and sell those however they want, usually in relation to their net-zero commitments. On the other hand, you have compliance markets. These are essentially where jurisdictions and governments force sectors or companies to emit only a certain amount of CO₂ within a given year. Those are the two main ways to think about carbon markets. They’ve gained a lot of popularity in recent years. For compliance markets, roughly 28% of global emissions are now covered by some sort of carbon pricing system — either a carbon tax or a carbon market. It’s becoming increasingly popular because it’s very technology-agnostic: governments don’t have to pick winners. They just set a carbon price and then let the market decide which solutions are most effective. In the voluntary carbon market, we’re seeing growing interest because corporations want to reach their targets in a cost-effective and time-efficient way — and that’s where carbon credit markets come in. [20:00] Noah: I mentioned COP 29 as pivotal for carbon markets. Give us a quick rundown of what was actually decided there. Peter: We’ve been trying to establish a carbon-market mechanism under the Paris Agreement since it was signed in 2015, and we haven’t really been able to do it — until last year. It’s been a very politically contentious process. There are many different parties with different interests in how the market is shaped and how it should be used. But finally, last year, we essentially agreed on the framework under which the market should function — what’s usually referred to as “Article 6” of the Paris Agreement. We agreed on the overarching standards that should define the projects eligible to be traded in the market. In addition to standards, we also established the infrastructure necessary to trade credits and properly account for them in countries’ climate reporting. We’re not there yet — there’s still a way to go. We have the overarching standards, but now we need to define specifics around quality metrics like permanence (how long the CO₂ is stored), additionality (does the project need the carbon-credit revenue to be financially viable), and so on. The cliché “the devil is in the details” is actually very true here. There are many details to iron out, and again, it’s a very political process. Countries have different interests and priorities when it comes to these standards. Noah: How have markets and countries responded since COP 29? What’s happened in the year leading up to these discussions in Belém? Peter: There’s been a lot happening, both for corporations and for countries. Starting with countries, we’ve looked at the new NDCs submitted ahead of COP 30, and what we’ve seen is that over 80% of the new nationally determined contributions — essentially countries’ climate-strategy plans — now incorporate Article 6 in some way. That’s already a big deal: either they want to use credits to meet their targets, or they want to generate credits to receive climate finance they might not otherwise get. On the corporate side, we’re seeing a lot of activity around project developers. They recognize that this could become a very lucrative market. Many are already active in the voluntary carbon market and are now looking to Article 6 as another potential outlet. They’re asking: what will the new standards look like, and how can we position ourselves to sell credits into that market as well? [24:00] Noah: What are experts like you looking for out of COP 30? What needs to happen to further enable this trading framework that was set up last year — and what do you actually think will happen, given the political realities? Peter: The focus for COP 30 is implementation, just as it is for other topics. We need to figure out how this market is going to look in practice. So we’re paying a lot of attention to the details of the standards that will underpin the market. We’re watching the different priorities across countries, and how those get reconciled into workable rules. Implementation is really the headline for Article 6 at COP 30. Noah: US companies — particularly tech giants like Meta, Google, and Microsoft — have been some of the largest buyers of voluntary credits. If they’re going to keep to their decarbonization goals while growing these massive AI operations, credits are going to have to play a major role. Does the lack of a US federal presence at COP matter for these discussions? And how does the setting — Brazil, a major generator of carbon credits — influence the dynamics? Peter: In terms of the tech giants, they’ll remain active in the voluntary carbon market regardless of the US federal government’s position on the Paris Agreement. Their involvement is driven primarily by their net-zero targets, not by federal policy. On the other hand, the US is also a huge source of carbon-credit generation in the voluntary market. You have a lot of technology-based credits originating from standards or registries such as the American Carbon Registry and the Climate Action Reserve. These project developers would ideally like to participate in Article 6 markets as well. But with the United States currently outside the Paris Agreement, they will have a difficult time building the necessary administrative infrastructure to participate. This is where it gets technical: to participate in Article 6 markets, the UN requires that the host country of a project ensures credits aren’t counted twice. This is done via a “corresponding adjustment,” a UN mechanism that the US hasn’t really prepared for, since it isn’t planning to participate. So the implication is that US-hosted projects will have a hard time accessing this regulated Article 6 market. It’s pretty consequential — if you’re not at the party, you don’t get to be part of this market. They can still operate in the voluntary market, but they’d effectively be walled off from this new regulated segment. On your second question, about Brazil: hosting COP 30 there is an important signal for nature-based projects. Brazil is a major source of nature-based and forestry-related credits, so we’ll likely see a strong focus on those. Nature-based credits have had a bad reputation in recent years because they’ve been challenged on their ability to accurately quantify emissions reductions and on other quality metrics like leakage. But I think they’re making a bit of a comeback. There’s a realization that we need nature-based solutions — even if, say, a direct air capture project has stronger scores on permanence. Nature-based projects can score very highly on biodiversity, support for local communities, and broader sustainable-development co-benefits. So it’s about a portfolio approach, not an either-or, and I think that’s going to become a big part of the conversation at COP 30. [28:00] Noah: We’ve talked a bit about US companies and voluntary markets. More generally, give me a snapshot of what the carbon-credit market looks like right now, and then let’s talk about where it might be headed after these Article 6 discussions. Peter: Broadly, we have three overlapping pieces: the voluntary carbon market, compliance markets, and Article 6. There’s a lot of fragmentation. In compliance markets you have jurisdictional systems — Brazil, China, India, Japan, the EU, and many others — each with their own design choices. The voluntary carbon market is global, with standards developed by voluntary initiatives. What we’re spending a lot of time on now — and what a lot of people in the carbon community are talking about — is the convergence between these markets. We’ve seen a flurry of new compliance markets pop up in the last couple of years, especially in Asia-Pacific and South America. Governments see carbon markets as a flexible decarbonization tool, and in some cases they are also responding to things like the EU’s Carbon Border Adjustment Mechanism. Many of these compliance markets allow carbon credits to be used for compliance. Some restrict that to domestic credits; others allow credits from international projects that are also active in the voluntary market. The point is that different jurisdictions have their own way of defining high-quality credits, and the voluntary market has its own approaches, but we’re seeing convergence in standards. I think that convergence will continue. This is where Article 6 and COP come in. COP can be a forum for stakeholders to agree on a common standard, then go back home and implement laws and regulations that enforce that standard domestically. For a carbon-credit developer, that means you generate a credit that’s a fungible, tradable commodity and can be used in multiple markets. That, in turn, gives you access to a much larger pool of finance when you’re trying to get a climate-mitigation project off the ground. Noah: Can Article 6 live up to the promise? Where does this leave us in terms of regulated Article 6 markets versus voluntary markets — does Article 6 really matter? Peter: You can go back to the Kyoto Protocol and the Clean Development Mechanism (CDM), which was the precursor to Article 6. There was a serious attempt to create a flexible carbon market and a new way of allocating climate finance. But for many people, the CDM failed to deliver real results: a lot of projects didn’t withstand scrutiny in terms of quality and actual emissions reductions. Article 6 is our chance to come back with new technologies and new strategies to ensure that the foundation of the market — project and credit quality — is as sound as possible. That will be incredibly important. [32:00] Peter (continued): At the same time, we can’t let the perfect be the enemy of the good. We’re not going to have carbon credits that all score equally well on every quality metric: permanence, additionality, quantification, sustainable-development co-benefits, and so on. The right approach is a portfolio approach — mixing different credit types to build a robust contribution to emissions reduction. We absolutely need to be better than we were under the CDM, but we also can’t expect perfection, especially given the tight timeline we’re under. If we want to meet climate targets by 2050, we need to act now and keep improving the methodologies and technologies as we go. Another area where we need work is carbon accounting. It’s not the flashiest topic, but it’s hugely important, especially if you’re going to trade emissions reductions across borders and between companies. How you account for those reductions really matters. We’re seeing a lot of initiatives here — coalitions of private-sector companies, and jurisdictions like the EU setting up regulations in this space. So there’s a lot of positive movement, and Article 6 will have an important role to play. Just look at the EU: at the time of this conversation, we’ve just had news that the EU has officially approved the idea of allowing member states to meet up to 5% of their 1990-level emissions with Article 6 credits. They’ve explicitly said they’ll rely on Article 6 methodologies and standards. That’s hugely important — a genuine U-turn from their previous stance, where they moved away from using CDM credits once many were shown not to deliver as promised. Now we see both companies and countries betting heavily on Article 6. So in a sense, we just have to make it work. Noah: We’ll certainly be watching to see whether COP 30 and all the negotiations around it can build on the momentum from COP 29, and what that ultimately means for Article 6 credits and carbon markets in general. Thank you, Peter, for a fascinating conversation. Peter: Thank you, Noah. Noah (recap): Let’s recap. COP 30 is a pivotal meeting to understand how the push for climate pragmatism and the accelerating shift toward a more multipolar world will impact both emissions and the global energy system. Carbon markets saw a historic breakthrough at COP 29, but have struggled to develop in the year since. Buyers and sellers will look to COP 30 discussions for further clarity — whether in carbon markets or in other areas of focus such as climate finance and funding for adaptation to a warming world. An intense focus on implementation at COP 30 means we’re more likely to see progress on existing initiatives than announcements of entirely new but perhaps more aspirational accords. 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