Toward a Credible Global Carbon Market: Korea–UNFCCC Partnership for GVCM
According to a press release by UNFCCC and the Ministry of Economy and Finance (MOEF) of the Republic of Korea, the MOEF and the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat co-hosted the “Republic of Korea–UNFCCC Asia Needs-Based Finance Investment Forum” from November 28 to 29, 2024. Held in Seoul, the event brought together 126 participants, including government officials from 11 Asian developing countries, major international financial and climate organizations, multilateral development banks, and representatives from the private sector. Participating institutions included the Green Climate Fund (GCF), Global Environment Facility (GEF), Adaptation Fund (AF), Global Green Growth Institute (GGGI), and the Asian Forest Cooperation Organization (AFoCO).
A key outcome of the forum was the signing of a Statement of Intent (SOI) between MOEF and the UNFCCC Secretariat to jointly develop a Global Voluntary Carbon Mechanism (GVCM) aligned with Article 6 of the Paris Agreement. This mechanism is envisioned as a credible and inclusive model for the international carbon market, aiming to address the financing and emissions reduction needs of developing countries.
The SOI outlines five priority areas for cooperation:
- Developing a robust carbon pricing mechanism in alignment with national policies
- Facilitating international carbon credit trading under the framework of Article 6
- Enhancing the capacity of developing countries to participate in global carbon markets
- Mobilizing private sector investment to scale up climate action
- Establishing a carbon market infrastructure that prioritizes the needs of developing nations
The two parties agreed to conclude a Memorandum of Understanding (MOU) by February 2025 to define specific joint initiatives that will support the development and implementation of the GVCM.
In parallel discussions, multilateral development banks and climate funds presented various strategies to support climate-related investment in Asia’s developing countries. Areas of focus included marine ecosystem conservation, the development of electric mobility (e-mobility), and the transformation of agricultural systems to adapt to climate change.
Both MOEF and the UNFCCC Secretariat recognized the importance of institutionalizing the Climate Change Response Investment Forum as a recurring platform for dialogue and cooperation. MOEF also emphasized its commitment to advancing the GVCM initiative swiftly, while strengthening partnerships between Korean companies, developing country governments, and multilateral climate finance institutions.
Pathways for the Global Voluntary Carbon Mechanism (GVCM)
Definition and Trends of the Voluntary Carbon Market (VCM)
The Voluntary Carbon Market (VCM) refers to a decentralized market where private entities voluntarily trade carbon credits that represent verified reductions or removals of greenhouse gas (GHG) emissions. This market is increasingly recognized as a critical tool for mobilizing climate finance and achieving emission reduction goals.
Recent developments highlight growing international efforts to enhance the integrity and effectiveness of VCMs. The United States issued a “Voluntary Carbon Markets Joint Policy Statement and Principles,” while the G7 adopted the “Principles of High Integrity Carbon Markets.” Additionally, the 2023 APEC Finance Ministers’ Meeting acknowledged the complementary role that voluntary carbon markets can play alongside other climate mitigation efforts.
Challenges in the VCM
Despite growing global interest, the voluntary carbon market continues to face several key challenges. One major issue is the lack of credibility and integrity, largely due to the absence of unified international standards to ensure consistency and transparency. In addition, current funding models are inadequate, often placing the financial burden and associated risks on private companies. Another critical concern is the limited participation from developing countries, as most carbon credit projects are still driven by companies based in Europe or the United States.
Korea’s Strategic Advantages
Korea is well-positioned to play a leadership role in the global carbon market. Its carbon-intensive manufacturing sector indicates a strong potential demand for carbon credits. As the first country in Asia to launch an Emission Trading System (ETS) in 2015, Korea has significant institutional experience. Moreover, its cutting-edge climate technologies—such as hydrogen (H₂) and carbon capture, utilization, and storage (CCUS)—can generate high-quality carbon credits.
Future Direction for the GVCM
Looking ahead, Korea seeks to leverage its strengths and maximize the benefits of the voluntary carbon market through a multi-faceted approach. First, Korea aims to enhance the credibility of carbon credits by actively collaborating with the UNFCCC to help establish robust international standards. Second, to ensure market integrity, Korea plans to work closely with multilateral development banks in the design and implementation of international emissions reduction projects. Lastly, Korea intends to promote private sector investment in developing countries by supporting co-financed projects, thereby helping to close the climate finance gap and mitigate financial risks for private actors.
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