Opinion | COP31’s Carbon Markets Must Turn Climate Finance Pledges Into Real Investment

The world’s climate negotiators have moved on from Belém, but questions over who pays for climate action, and how, are sharpening as attention turns to COP31 in Antalya this November. At COP30, 195 parties adopted the Belém Package, taking note of the Baku-to-Belém Roadmap to 1.3T, which seeks to scale climate finance to at least $1.3 trillion annually by 2035. This sits alongside the New Collective Quantified Goal agreed in Baku, under which developed countries will take the lead in mobilising at least $300 billion annually for developing countries by 2035.

Turning these commitments into tangible investment will require more than public funding. Carbon finance is emerging in several forms, including results-based payments for verified emissions reductions, pre-purchase agreements that bring future revenues forward, and international carbon transfers. New financial structures are also exploring how anticipated carbon revenues could help absorb investment risks. Yet questions over which flows qualify as climate finance, and whether they deliver additional resources, remain unresolved.

Carbon Finance As An Incentive For Policy Reform

Uzbekistan offers an example of how carbon finance can reward policy reform. In June 2024, it received $7.5 million from the World Bank’s Transformative Carbon Asset Facility for 500,000 independently verified tonnes of emissions reductions linked to energy-price reform. This form of policy crediting rewards verified results from wider government policies rather than individual projects.

While it may not finance reform at its outset, it can strengthen incentives to sustain politically difficult changes and support the systems needed to measure emissions reductions. The approach is gaining traction: in June 2026, the World Bank approved up to $50 million for a similar programme in the Kyrgyz Republic.

Carbon finance can also address investment barriers before projects generate credits. Pre-purchase agreements provide upfront capital against anticipated future carbon revenues, while innovative financial structures can use carbon assets to mitigate other risks.

A 2022 proposal by Columbia University researchers, the World Economic Forum and the World Bank’s Invest for Climate programme explored using a share of future carbon credits to help capitalise an exchange-rate coverage facility. Such a mechanism could protect clean-energy projects borrowing in foreign currencies from depreciation risks, potentially unlocking investment in markets where currency volatility remains a major constraint.

COP30 Leaves The Focus On Implementation

The politics of implementation were evident at Belém. The Brazilian presidency had framed COP30 as the “implementation COP”, but divisions over finance, trade measures and mitigation pathways delayed agreement.

On carbon markets, parties largely avoided reopening existing rules, agreeing not to significantly change decisions on Article 6 and directing nearly $30 million to the Paris Agreement Crediting Mechanism from the Kyoto Protocol-era Clean Development Mechanism.

Formal Article 6 renegotiation is not expected before the 2028 global stocktake, placing the emphasis firmly on implementation, transparency and market integrity.

International carbon transfers nevertheless present difficult choices for developing countries. Under the Paris Agreement, Article 6.2 enables country-led cooperation, while Article 6.4 establishes a UN-supervised crediting mechanism.

When authorised reductions are transferred internationally, corresponding adjustments prevent both countries from counting the same emissions reduction towards their climate targets.

Countries selling mitigation outcomes, however, must weigh immediate revenue against the cost of meeting future domestic targets. The World Bank identifies this as an opportunity cost: transferring lower-cost reductions today may leave more expensive mitigation options for tomorrow.

Rwanda distinguishes between domestic commitments and conditional measures requiring international support. India screens eligible activities for participation in Article 6 markets, while Kenya has introduced a corresponding-adjustment fee to generate additional resources from international transfers. Each approach reflects a different attempt to balance investment opportunities with national climate priorities.

Ensuring Communities Benefit From Carbon Finance

The credibility of carbon finance will also depend on who benefits. In Mozambique, the Forest Carbon Partnership Facility allocates 70% of results-based payments to local communities involved in sustainable land use. In Mexico, Respira’s five-year offtake agreement with the Conhuás forest project combines a guaranteed floor price with profit-sharing for landowners. Meanwhile, Ghana’s Article 6 cooperation with Switzerland directs carbon revenues towards climate-smart rice farming and cleaner cooking technologies.

These benefits cannot substitute for the environmental integrity of carbon credits, but they can determine whether carbon markets deliver meaningful development outcomes alongside emissions reductions. As COP31 takes place in Antalya from 9 to 20 November 2026, with Turkey holding the presidency and Australia leading negotiations, the challenge will be to turn the Baku-to-Belém financial ambition into credible investment pathways.

The test for COP31 is not simply how much finance is announced, but how much reaches developing countries, reduces emissions and supports communities without compromising their future climate commitments. Carbon markets can contribute to that effort, but only if their promises translate into measurable, equitable and lasting outcomes.

(Views expressed are personal)