Carbon markets in motion: how a first-of-its-kind methodology unlocks the next wave of climate finance

For years, climate ambition has been rising faster than climate finance. Everyone knows we need to cut emissions faster, including in emerging markets, where there is the greatest potential for low-cost climate change mitigation. But high capital costs and limited access to investment continue to be a struggle. Carbon markets were supposed to help bridge that gap. Instead, they’ve ended up looking more like a patchwork quilt of voluntary standards and national rules that made it difficult for investors to know what, exactly, they were buying.

The Paris Agreement tried to solve this by creating clearer rules for how countries can cooperate on carbon trading. Article 6.4 is the section that lays out how this system should work, but for years, it existed mostly on paper. Recently, however, a United Nations panel took a step to bring it into the real world, a step that could transform how carbon credits are created and traded. 

The first methodology approved under Article 6.4 focuses on managing methane emissions from landfills. It may not be a flashy starting point, but it’s an important one. Methane traps more than 80 times as much heat as carbon dioxide, so stopping those leaks is one of the fastest ways to slow global warming. With this new methodology, a landfill in Kenya or Indonesia can capture methane that would otherwise escape, measure the avoided emissions using a standardized approach, and produce UN-recognized carbon credits. These credits can then be sold to governments or companies to meet climate goals, with the revenue helping fund further methane reduction.

It’s the first real example of how a Paris-aligned baseline works in practice, and a preview of what future methodologies could look like for renewable energy, industrial decarbonization, or nature-based projects. And by giving official backing to a rulebook that tells project developers how to turn verified emission reductions into tradable credits, the UN has made a technical achievement with far-reaching consequences. 

The decision brings something that carbon markets have desperately needed: clarity. For years, the voluntary carbon market has been shaken by criticisms over inconsistent quality and inflated claims. Many companies simply stopped buying credits because they didn’t trust what they were getting. Article 6.4 is designed to rebuild that trust. It lays out transparent rules, requires careful monitoring, and ensures projects line up with a country’s own climate commitments. When a project says it avoided a ton of emissions, there’s now a UN-backed system to guarantee that number.

 

A methane capture system at Aerial Chiquita Canyon Landfill in California

Incentives to increase ambition are built into the new rules by tightening baselines over time and rewarding higher-value uses of methane. Landfill projects that only flare methane, basically burning it off, will see the number of credits they earn shrink gradually. Projects that use captured methane to produce energy or adopt more advanced technology will earn more. 

Making methane the new methodology’s first practical application also marks a new phase for justice in energy transformation. A non-OECD country like Indonesia can sell the carbon credits from its landfills to buyers in Europe or Japan. As finance flows to where emissions reductions are cheapest and most impactful, abstract promises around reductions become measurable assets with real economic value.

Of course, nothing about this is guaranteed. Article 6.4’s credibility will depend on how consistently its guardrails are enforced. The approval of a methodology does not ensure that investors will flock to the market. Many companies have grown wary of buying carbon credits after years of controversy around low-quality offsets and overstated claims. Building trust will take time. Countries need to build or upgrade their carbon registries, and they need clear systems for preventing double-counting undermined credibility in the past. Companies will have to be more transparent about how they use credits. And negotiators are still under pressure from all sides, some worried the rules are moving too fast, others worried they’re not moving fast enough. 

The politics are complex, as well. While the EU and some developed countries are championing the expansion of carbon pricing, others such as India, Brazil, and China have voiced concerns that it could disadvantage emerging economies or amount to a hidden form of trade protectionism. 

Coral restoration in Fiji

Still, the approval of this first methodology is a meaningful turning point. It’s not a headline-grabbing announcement, but after years of debate and false starts, Article 6.4 finally has an engine. And more methodologies are expected soon, covering everything from industrial emissions to marine habitat rehabilitation. Each one will help determine whether global carbon markets can actually live up to their promise: channeling billions of dollars into the climate solutions that need it most.

For the public, all this might sound distant or abstract, but the implications are very real. Carbon pricing affects how governments regulate, how companies make investment decisions, and even how much consumers pay for goods and travel. A functioning, credible global carbon market could help direct billions of dollars toward clean energy, forest protection, and industrial decarbonization projects, funding that would otherwise be difficult to mobilize. If done right, it could turn climate action into a global economic opportunity.

If the past decade was about setting climate targets, the next one may be about proving that those targets can pay for themselves.

Find out what Abu Dhabi Sustainability Week’s Advisory Committee on Climate and Governance has to say about how carbon markets should be implemented in a new report discussing both the massive potential of a UNFCC-supervised crediting mechanism and why it’s not a panacea.