Decoding Article 6 of the Paris Agreement—Version II

• Publisher: Asian Development Bank
• Year: 2020
• ISBN:
  9789292626204
• Topic: Negocios y empresa
• Subtopic: Sostenibilidad en los negocios

Article 6 of the Paris Agreement enables countries to utilize market and nonmarket approaches to achieve their nationally determined contributions. Yet, international negotiations on Article 6 are complex and ongoing. The Parties of the Paris Agreement have made progress on many issues, but contentious matters on political and technical aspects remain unresolved. This publication presents the latest developments in negotiations, discusses the key outcomes, and highlights the remaining unresolved issues leading up to the 26th United Nations Climate Change Conference of the Parties in Glasgow.

1. Introduction

1.1 Overview of the Paris Agreement

The Paris Agreement¹ was adopted at the 21st session of the Conference of the Parties (COP21) in 2015 in Paris. It represents a new and important step in the evolution of the climate change policy agreements which includes the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol as other important landmarks.

The ultimate objective of the UNFCCC is to achieve stabilization of greenhouse gas (GHG) concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. In the UNFCCC, all Parties will cooperate in this objective. Developed countries are to adopt national policies, take measures, and provide new and additional financial resources.

The 1997 Kyoto Protocol² spells out a concrete way forward. The Kyoto Protocol includes legally binding targets or commitments to reduce or limit GHG emissions and more stringent reporting and review requirements for developed countries (called Annex 1 countries). There were no obligations on developing countries. It is important to note that in the case of the Kyoto Protocol, all obligations by Annex 1 countries were expressed in the same way, through a budget with a reference level 1990 emissions by that Party.

For the first commitment period of the Kyoto Protocol, the objective was –5% (in 2008–2012) to 1990 level; in reality, about –20% was achieved. The objective for the second commitment period was –18%, for the period 2013–2020. However, the conditions for the entry into force of the second commitment period were met in the Fall of 2020. The Kyoto Protocol also included provisions for flexibility mechanisms through emissions trading, the Clean Development Mechanism (CDM), and joint implementation.

The Paris Agreement is an agreement whereby all Parties take on some commitment expressed through their nationally determined contribution (NDC). There is no compliance and enforcement, but the Paris Agreement incorporates a significant amount of transparency, with flexibility for developing countries. It introduces a number of new concepts and builds on the experience of the UNFCCC and the Kyoto Protocol, by providing the flexibility of international cooperation, including market approaches.

The Paris Agreement has global objectives and Party contributions to the global objectives expressed through the NDCs. It aims to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2°C above pre-industrial levels and to pursue efforts to limit the increase even further to 1.5°C.

The Paris Agreement also provides a common framework for Parties to take ambitious efforts to combat climate change and adapt to its effects, with enhanced support to developing countries and requiring all Parties to put forward their best efforts through NDCs and to strengthen these efforts over time. The commitment included in the NDC as well as the way it is expressed is “nationally determined.”

The goal of the Paris Agreement is to strengthen the ability of countries to deal with the impacts of climate change. To reach these ambitious goals, appropriate financial flows, a new technology framework, and an enhanced capacity-building framework will be put in place, supporting action by developing countries and the most vulnerable countries, in line with their own national objectives. The Paris Agreement provides for enhanced transparency of action and support through a more robust transparency framework. It also introduces a global stocktake every 5 years to assess the collective progress toward achieving the purpose of the agreement and to inform further actions by the Parties.

The Paris Agreement incorporates the following articles:

(i)Article 2 defines the objective,

(ii)Articles 3 and 4 define the nationally determined contributions,

(iii)Article 5 addresses sinks and reservoirs of GHGs,

(iv)Article 6 is about voluntary international cooperation,

(v)Article 7 addresses adaptation to climate change,

(vi)Article 8 focuses on the issues of loss and damage,

(vii)Article 9 is on financial resources,

(viii)Article 10 deals with technology development and transfer,

(ix)Article 11 and 12 discuss capacity building,

(x)Article 13 establishes a new transparency framework,

(xi)Article 14 establishes the new global stocktake, and

(xii)Article 15 establishes a compliance mechanism.

1.2 Scope of Article 6

Article 6 of the Paris Agreement (see Box 1) addresses international voluntary cooperation and was, to a large degree, a surprise in Paris at COP21. It is often called the “market article” while in reality it is very much about international cooperation, and includes the special case where the cooperation includes the transfer of mitigation outcomes that will be used for meeting the NDC in a Party other than where the mitigation outcome took place. The fact that it addresses the treatment of mitigation outcomes transferred internationally allows for the creation of carbon markets by those Parties that wish to avail themselves of that opportunity by setting up such markets. It must be noted that there is no direct reference to markets in the Article 6 text.

Box 1: Article 6 of the Paris Agreement

1. Parties recognize that some Parties choose to pursue voluntary cooperation in the implementation of their nationally determined contributions to allow for higher ambition in their mitigation and adaptation actions, and to promote sustainable development and environmental integrity.

2. Parties shall, where engaging on a voluntary basis in cooperative approaches that involve the use of internationally transferred mitigation outcomes toward nationally determined contributions, promote sustainable development and ensure environmental integrity and transparency, including in governance, and shall apply robust accounting to ensure, inter alia, the avoidance of double counting, consistent with guidance adopted by the Conference of the Parties serving as the meeting of the Parties to this Agreement.

3. The use of internationally transferred mitigation outcomes to achieve nationally determined contributions under this Agreement shall be voluntary and authorized by participating Parties.

4. A mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development is hereby established under the authority and guidance of the Conference of the Parties serving as the meeting of the Parties to this Agreement for use by Parties on a voluntary basis. It shall be supervised by a body designated by the Conference of the Parties serving as the meeting of the Parties to this Agreement, and shall aim:

(a) to promote the mitigation of greenhouse gas emissions while fostering sustainable development;

(b) to incentivize and facilitate participation in the mitigation of greenhouse gas emissions by public and private entities authorized by a Party;

(c) to contribute to the reduction of emission levels in the host Party, which will benefit from mitigation activities resulting in emission reductions that can also be used by another Party to fulfil its nationally determined contribution; and

(d) to deliver an overall mitigation in global emissions.

5. Emission reductions resulting from the mechanism referred to in paragraph 4 of this Article shall not be used to demonstrate achievement of the host Party’s nationally determined contribution if used by another Party to demonstrate achievement of its nationally determined contribution.

6. The Conference of the Parties serving as the meeting of the Parties to this Agreement shall ensure that a share of the proceeds from activities under the mechanism referred to in paragraph 4 of this Article is used to cover administrative expenses as well as to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation.

7. The Conference of the Parties serving as the meeting of the Parties to this Agreement shall adopt rules, modalities and procedures for the mechanism referred to in paragraph 4 of this Article at its first session.

8. Parties recognize the importance of integrated, holistic and balanced nonmarket approaches (NMAs) being available to Parties to assist in the implementation of their nationally determined contributions, in the context of sustainable development and poverty eradication, in a coordinated and effective manner, including through, inter alia, mitigation, adaptation, finance, technology transfer and capacity-building,as appropriate. These approaches shall aim to:

(a) promote mitigation and adaptation ambition,

(b) enhance public and private sector participation in the implementation of nationally determined contributions, and

(c) enable opportunities for coordination across instruments and relevant institutional arrangements.

9. A framework for NMAs to sustainable development is hereby defined to promote the NMAs referred to in paragraph 8 of this Article.

Source: UNFCCC. The Paris Agreement. https://unfccc.int/files/essential_background/convention/application/pdf/english_paris_agreement.pdf.

Article 6 is seen by most negotiators and stakeholders as comprised of four modules or components:³

(i)Paragraph 6.1.

This paragraph is about the general concept that Parties may cooperate, on a voluntary basis, in the implementation of their NDCs. Article 6 is designed to cover existing types of cooperation, and those that are yet to emerge. This cooperation does not need approval by a body under the Paris Agreement. Rather, it is to be noted, acknowledged, and recognized. This is important as it reinforces the decentralized and bottom–up nature and ethos of the Paris Agreement governance. Other important language in this paragraph is that around “ambition.” The reference to “allow for higher ambition” is also important in the formulation of this paragraph. Some Paris Agreement drafts on these issues (cooperation, transfers, markets, etc.) referred to the need to “enhance mitigation ambition.”

The use of the word “enhance” was disputed by many Parties that wanted to make sure that cooperative approaches could be used to achieve what was in their intended NDCs at the time. They felt that the use of the word “enhance” could be interpreted as the need to increase the level of ambition in their current NDC before they could make use of cooperative approaches. “Allow” has a “facilitative” connotation, while “enhance” would seem to require an active act of increasing the level of ambition.

(ii)Transfers of mitigation outcomes (paragraphs 6.2–6.3).

Paragraphs 6.2–6.3 cover the concept that when Parties engage in Cooperative Approaches that involve mitigation outcomes being transferred internationally and used toward the NDC of another Party than where the mitigation outcome was produced, they need to respect the guidance on accounting and avoidance of double counting decided by the COP serving as the meeting of the Parties to the Paris Agreement (CMA). Further, any international transfer of mitigation outcomes will also need to respect two other requirements: “Parties shall […] promote sustainable development and ensure environmental integrity and transparency, including in governance.”

These paragraphs are not about markets per se, but they create a framework on how to account for transfers between Parties and what conditions need to be met. Important is that these internationally transferred mitigation outcomes (ITMOs) can be a result of any mitigation approaches (e.g., mechanism, procedure, or protocol). Thus, there is no requirement that these approaches operate under the authority of the COP. Essentially it is whatever the Parties involved will agree.

These paragraphs do not impose any limitation on as to what constitutes an ITMO. This broad scope is supported by the “institutional memory” of the Paris Agreement negotiations. Should limitations be introduced, they will essentially be an additional “boundary” or limitation which Parties to the Paris Agreement agree in the operationalization of Article 6, but currently have no “hook” in the current text.

(iii)Mechanism to contribute to mitigation and support sustainable development (paragraphs 6.4–6.7).

Paragraphs 6.4-6.7 establish a mechanism to produce mitigation outcomes and support sustainable development. It operates under the authority of the COP. This mechanism will produce mitigation outcomes that can then be used to achieve the NDC target of another Party. An issue still under debate is whether the scope of these paragraphs is limited to a CDM-like mechanism, or if it is much broader in scope.

Opening for a broader scope seems to receive support from the historical evolution of the text, from the submissions on Article 6 to the Subsidiary Body for Scientific and Technological Advice (SBSTA), as well as from positions expressed in formal and informal discussions.

(iv)Framework for nonmarket approaches (paragraphs 6.8 and 6.9).

The establishment of a framework for NMAs will aim to result in a variety of NMAs being implemented, a form of governance of the framework, and a work program of the framework. What to be covered under this part of Article 6 is still largely unknown, but some focus is starting to emerge. One area seems to be coordination of different nonmarket cooperation approaches.

Alternative ideas that have surfaced suggest that Articles 6.8 and 6.9 should be complementary to other provisions in the Paris Agreement, including those in Articles 6.2 to 6.7. The aim would be to ensure the sustainability of mitigation approaches, as well as to address issues of global...