As countries try to craft the rules of Article 6, countries argue over how they should make them strict. Negotiators from the EU and many developing countries have accused some countries, including Brazil, Saudi Arabia, Australia and India, of pushing for a system of lax rules for counting emission reductions and credits, which would facilitate the achievement of the Paris targets, but could undermine global progress in reducing greenhouse gases in the atmosphere. The mechanism provided for in Article 6(4) effectively replaces the Clean Development Mechanism (CDM) of the Kyoto Protocol. The CDM and other Kyoto emissions trading agreements have long been the subject of controversy and accusations of creating «hot air». In other words, emission reductions that are virtually worthless because they would have happened anyway. They argue that if this is not done, the balance will be tilted in favour of trade under Article 6.2 due to the absence of restrictions and regulations, meaning that the mechanism under Article 6.4 will be weakened. Mace says the wealthiest countries resisted this decision: (The UK`s official climate advisers recommended reaching the country`s net zero target without resorting to international trade, although this option was not decisively ruled out.) Finally, Article 6(9) establishes a `framework` – an ongoing programme of work under the COP – which will `promote` the non-market approaches set out in Article 6(8). Emissions trading under the Kyoto Protocol is based on international oversight. All transfers are tracked using a ledger called the International Transaction Log (ITL). A common accounting standard applies to all countries with emission targets. A Board of Directors must approve the methodology used by CDM projects. Finally, under the Protocol, only international transfers sanctioned by the Protocol are considered legitimate to meet a country`s emission reduction commitments. Market-based approaches are not mentioned in the founding document of the 1992 United Nations Framework Convention on Climate Change (UNFCCC), but were an integral part of the design of the first sub-agreement, the 1997 Kyoto Protocol.
It will be crucial to establish the rules on emissions trading, financing and support to developing countries in 2021. These must ensure that investments are invested in other projects – those that would not have seen the light of day without support – and that the rights of communities dependent on carbon-rich ecosystems are respected. Nature-based solutions, with all their additional benefits for wildlife and local well-being, should play an important role. And all parties to the Paris Agreement must commit to and demonstrate immediate emission reductions, rather than seeing offsetting as an excuse for inaction. Since then, negotiations have continued and, in December 2011, in Durban, the decision to «initiate a process of elaboration of a protocol, other legal instrument or an agreed outcome having the force of res judicata within the framework of the Convention applicable to all Parties», to be adopted by 2015 and to enter into force and implement from 2020. The Commission considers that potential bilateral agreements should focus mainly on creating demand for credit from new market mechanisms and experimenting with the establishment of such new market mechanisms. The Commission is actively participating in the World Bank`s market readiness programme to promote such initiatives. First of all, there is a risk of double counting. If rich countries fund the conservation of blue carbon habitats in Kenya, are these climate benefits included in the Kenyan NDC or in the donor`s NDC? Second, can voluntary market projects contribute to a country`s overall NDC? And if so, how will they retain the flexibility and local control that made them a success? Finally, and perhaps most importantly, the whole idea of carbon trading is dangerous when it becomes an excuse for inaction. Emissions trading must not allow major polluters to avoid the necessary emission reductions. «In practice, it is very difficult to establish a clear relationship between the ability to buy cheap carbon credits and a country`s willingness to engage in more climate action.
In some cases, the opposite can happen, as countries prefer to sell their emission reductions rather than use them to meet their own targets. A menu of similar options is examined for the Regulation under Article 6(4). Again, this includes the ability to create a time-limited exception for credits negotiated outside the scope of a CDN. Several countries hosting a large number of ongoing CDM projects, such as Brazil and India, are keen to facilitate a full transition, while others fear that this could undermine Paris ambitions by achieving already low targets without further efforts to reduce emissions. Before that happens, he suggests that trade could bring investment and expertise to new sectors where a country might not have the technical capacity to monitor emissions. He adds that while the scope of countries` NDCs is limited, it should not be the sole responsibility of the markets to solve the problem. Carbon markets provide the infrastructure needed for emissions trading or «offsetting» – the process by which companies and individuals can be held accountable for their unavoidable emissions by funding certified projects aimed at reducing greenhouse gas emissions in other parts of the world. The World Bank`s 2016 Report on the State and Trends of Carbon Pricing estimates that carbon markets have the potential to reduce global mitigation costs by more than 50% by mid-century.
These «Article 6» rules for carbon markets and other forms of international cooperation are the last pieces of the Paris regime to be resolved after the rest of its «regulation» was approved at the end of 2018. The main international carbon market system that exists today was established under the 1997 United Nations Kyoto Protocol on Climate Change. Under this agreement, developed countries had targets to reduce their greenhouse gas emissions, but developing countries did not. Thus, if a developing country reduces its emissions, for example by building a solar power plant or planting trees, it could sell a «loan» to a developed country that could count this reduction in emissions in its own goal. About 96 countries` climate commitments – about half of all NDCs – relate to the use of carbon pricing initiatives, according to a World Bank report. It is suggested that the cost of complying with current NDCs could be reduced by up to 50%, «in principle. with a completely global and frictionless carbon market.» These three mechanisms, together with the European Union Emissions Trading System (EU ETS) set up by the EU to meet its Kyoto target, constitute the world`s largest environmental market for carbon trading. «There can be no double counting of emission reductions and there can be no hot air production. In this context, we cannot support a transfer of credits or quotas prior to the Kyoto Protocol before 2020, which would undermine what we are trying to achieve with the Paris Agreement. The raison d`être of such systems is that climate change is a global problem and the location of GHG emission reductions is not relevant from a scientific point of view.
This means that a ton of carbon dioxide reduced in a stove project in Kenya has the same ecological value as a ton of carbon dioxide reduced by a wind project in China or a clean energy project in the United States. The difference in these projects lies in the implementation costs. These compromise options could be part of the bargaining in the negotiations – for example, in exchange for stricter rules for the international carbon market, as Costa Rica`s De Leon puts it in Carbon Brief: Next, the first of the three mechanisms is set out in Article 6.2, which allows countries to voluntarily exchange «mitigation outcomes» for the use of their Paris commitments. provided that they promote sustainable development while ensuring the integrity and transparency of the environment. «Transparency» here is a reference to the reporting obligations of all countries under the Paris regime. (This claim is implicitly recognized in the international CDM credit market, where CO2 offsets are currently valued at nearly $0.2/tCO2e.) The project provided technical assistance for capacity building and supported the seven regional pilot projects already in place, as well as the establishment of a national emissions trading scheme. Given the limited number of countries that have confirmed that they will use international credits and the fact that they are currently not allowed to be satisfied in most national and regional carbon markets, it is currently unclear what the demand for these credits will be. There is a certain optimism in the air, tempered by the understanding that most of the problems that were present from the beginning remain unresolved. «The difference between a Paris agreement with good markets and a Paris agreement with bad markets,» he says, «is a system in which we avoid climate disasters, and a system in which we simply hide behind technical details and do not reduce a single ton of CO2.» The future of the Kyoto flexibility mechanisms is also unclear, in particular whether the new mechanism will succeed the CDM and JI or will stand alongside any of these mechanisms.
The Paris Agreement makes no mention of the CDM or OMC, but notes that the new mechanism should build on the experience gained with existing mechanisms. It is also unclear whether units produced under the Kyoto mechanisms will be eligible for compliance after 2020 and, if so, whether they will need to be converted to another type of credit to match loans issued under the new facility. With regard to the accounting system, the CMA could play an active role in facilitating transfers, including through a central registry similar to that of the MLCBI. Alternatively, in a more decentralized system, it may be necessary for parties to keep their own accounts – such as double-entry accounting – and to rely on transparency arrangements for oversight.B s accountability. .