To mitigate climate change and help the countries most vulnerable in coping with its effects, the international community adopted a new climate change agreement in Paris in December 2015. Under the agreement, which went into effect on 4 November 2016, the 194 Parties to the United Nations Framework Convention on Climate Change (UNFCCC) committed to limiting global warming to well below 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C.
Under the Paris Agreement, Parties have agreed for the first time that all countries must push forward with legally binding climate change action. All countries are required to draw up national emission reduction targets – called nationally determined contributions (NDCs) – which they must regularly submit to the UNFCCC. The actual targets and the associated levels of ambition are, however, left to the countries to decide. It was also agreed that each new NDC must be more ambitious and exceed its predecessor.
The Parties have a legal obligation to develop their NDCs and implement measures in order to achieve them. There is, however, no legally binding requirement for the NDCs to actually be achieved. The binding nature of NDCs is to be achieved through the use of a global transparency mechanism, with countries’ climate change mitigation efforts being subjected to binding international review. This review process poses a significant risk to Parties’ reputations if they fail to deliver what they pledge in their NDCs. Also, a global stocktake is conducted every five years to verify whether the international community is on the right path to stay below the 2 °C limit and achieve the 1.5 °C target. Thus, by repeatedly shining the spotlight on the climate change mitigation effort, the mechanism raises public awareness and can contribute significantly to ensuring that steps are taken to actually implement NDCs.
The Paris Agreement offers Parties the opportunity to cooperate with one another when implementing their NDCs. The cooperation mechanisms designed to assist this process should not only make it easier to achieve existing reduction targets, but also to raise ambition in future efforts. The cooperation mechanisms enshrined in Article 6 of the Paris Agreement form the legal framework to allow use of market-based climate change mitigation mechanisms.
The Paris Agreement contains a range of principles which apply when Parties intend to use cooperation mechanisms to achieve their NDCs:
The Paris Agreement offers three approaches in the use of international cooperation mechanisms.
First, Parties can cooperate directly with one another (Article 6.2). This makes it possible for emission reduction measures to be implemented in one country and the resulting emission reductions to be transferred to another and counted towards its NDC. This requires a transparent process and accurate accounting of the emission reductions achieved to avoid emission reductions being counted more than once – for instance, in the emissions inventory of the country in which the reduction activities are conducted and also in the country to which the resulting emission reductions are transferred. It also enables national and regional instruments such as the EU Emissions Trading Scheme to be linked to similar schemes to create a common, cross-border carbon market. While international supervision of these cooperation activities is not foreseen, a work programme was agreed to develop guidelines on using this cooperative approach.
A second option involves the use of the newly created mechanism to contribute to the mitigation of greenhouse gases and support sustainable development (Article 6.4). In contrast to direct bilateral cooperation, this mechanism will be supervised by a body designated by the Conference of the Parties. In addition, the Conference of the Parties will adopt rules, modalities and procedures which must be observed when implementing activities under Article 6.4. The aim is to ensure that standardised procedures are followed in the design and implementation of emission reduction activities and when verifying the results achieved.
Another unique aspect of the mechanism is its goal of mobilising the private sector to participate in climate change mitigation by providing suitable incentives. The Paris Agreement will thus offer actors at sub-national level an opportunity to directly use the mechanism established under Article 6.4.
As with the bilateral cooperation approaches provided for under Article 6.2, the emission reductions achieved using this mechanism can be transferred from the country in which they were achieved to another country and counted towards its NDC. Here, the Paris Agreement also requires that the mechanism result in raised ambition. This means that use of the mechanism must lead – as a net global outcome – to an absolute reduction in global greenhouse gas emissions.
As a third option, use of non-market-based approaches is provided for under Article 6.8. As the name suggests, market-based climate change mechanisms play no role at all. Just how these non-market-based approaches are to work will be determined in the coming years with the development of a “framework for non-market-based approaches”.