The Paris Agreement offers Parties the opportunity to cooperate with one another when implementing their nationally determined contributions (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 and to promote sustainable development. 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, Parties have agreed to adhere to Article 6.2 guidance when 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. In addition, use of the mechanism should lead to an overall net reduction in global greenhouse gas emissions (contribution to overall mitigation).
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 with the development of a “framework for non-market-based approaches”.
To ensure that the Paris Agreement can be implemented as planned post-2020, a detailed rulebook is needed that operationalises the Agreement’s provisions. With the adoption of the “Katowice Climate Package”, a comprehensive rulebook was agreed at the Climate Change Conference in Katowice, Poland, in December 2018. Parties were not, however, able to agree on implementation rules for Article 6, nor were they able to find solutions to key issues at the climate change conference held in Madrid at the end of 2019.
A major point of contention remains the issue of accounting for emission reductions transferred under Article 6.4. Robust accounting rules are a vital prerequisite to ensure that emission reductions cannot be counted more than once (double counting) and that the environmental integrity of the Paris Agreement is upheld. Another sticking point involves the question of how certificates generated under the Kyoto Protocol should be dealt with and whether countries may use them under the Paris Agreement. No agreement was reached on the introduction of fees which would be used to support adaptation measures, as was the case under the Clean Development Mechanism (CDM). Given these and other points of contention, the Parties postponed the decision on Article 6 until the climate change conference in Glasgow.
Significant progress was, however, made in Madrid with regard to technical issues. On the positive side, it should be further noted that on the final day of the conference a group of countries led by Costa Rica and Switzerland launched the “San José Declaration”, setting out quality standards for the integrity of Article 6 transactions and quickly receiving backing from 31 countries. It remains to be seen whether the principles agreed in the Declaration shape the negotiations on the Article 6 rulebook and can help overcome the political differences that abound. For the future role of the market mechanisms, the current negotiations will be decisive and, will also largely decide how Parties can cooperate in implementing their nationally determined contributions (NDCs).