In-depth Q&A: How ‘Article 6’ carbon markets could ‘make or break’ the Paris Agreement

This is a re-post from Carbon Brief

A little-known and highly technical section of the Paris Agreement could “make or break” the regime – and its aim of avoiding dangerous climate change.

These “Article 6” rules, for carbon markets and other forms of international cooperation, are the last piece of the Paris regime to be resolved, after the rest of its “rulebook” was agreed in late 2018.

To its proponents, Article 6 offers a path to significantly raising climate ambition or lowering costs, while engaging the private sector and spreading finance, technology and expertise into new areas.

To its critics, it risks fatally undermining the ambition of the Paris Agreement at a time when there is clear evidence of the need to go further and faster to avoid the worst effects of climate change.

If the Article 6 rulebook is to be agreed, a set of interlocking, overlapping and conflicting national priorities – a veritable “four-dimensional spaghetti” of red lines – will have to be traded off at the December COP25 UN climate talks in Madrid, or, failing that, at COP26 in Glasgow in 2020.

This is a classic example of the horse-trading that characterises international negotiations. But the stakes are high ahead of the crunch 2020 talks, where countries are due to raise their currently inadequate ambition towards the 1.5C and “well-below 2C” twin goals of the Paris Agreement.

In this in-depth Q&A, Carbon Brief breaks down the Article 6 text, explaining the key points of contention and how they might be resolved.

What is Article 6 of the Paris Agreement?

On 1 January 2020, a new international climate regime will take effect under the 2015 Paris Agreement, according to detailed rules agreed at the COP24 climate summit in December 2018.

But one piece of that regime is unresolved, having proved so contentious that countries have been unable to agree the rules governing its use. This is Article 6 of the Paris Agreement, covering a single side of A4 and containing just nine densely worded paragraphs (6.1 through 6.9).

This short text contains three separate mechanisms for “voluntary cooperation” towards climate goals: two based on markets and a third based on “non-market approaches”. The text outlines requirements for those taking part, but leaves the details – the Article 6 “rulebook” – undecided.

In simple terms, the first mechanism would allow a country that has beaten its Paris climate pledge to sell any overachievement to a nation that has fallen short against its own goals. This overachievement could be in terms of emissions cuts, but might also cover other types of target. For example, some countries have set goals for renewable energy capacity or forest expansion.

The second mechanism would create a new international carbon market, governed by a UN body, for the trading of emissions reductions created anywhere in the world by the public or private sector. Carbon credits could, for example, be generated by a new renewable power plant, an emissions-saving factory upgrade or the restoration of an area of forest.

(It remains undecided whether to include projects reducing emissions from deforestation and forest degradation, known as “REDD”, within the Article 6 scheme.)

This new market is sometimes referred to as the “Sustainable Development Mechanism” (SDM). It would replace the Clean Development Mechanism (CDM), which operated under the predecessor to the Paris Agreement, known as the Kyoto Protocol, which gave developed countries legally-binding emissions targets that applied from the start of 2008 until 2012.

(Targets for a second commitment period, running until the end of 2020, were adopted in the “Doha Amendment”, but this has yet to enter force. EU states have pledged to meet it anyway.)

The final Article 6 mechanism for “non-market approaches” is less well defined, but would provide a formal framework for climate cooperation between countries, where no trade is involved, such as development aid.

This could include similar activities to those under the other mechanisms – support for a new windfarm, for example – but without any buying and selling of the resulting CO2 savings.

The three separate mechanisms – under Article 6.2, 6.4 and 6.8 – all became part of the Paris deal in recognition of the different interests and priorities among parties to the agreement. These differences remain and must be traded off once again, if the Article 6 rulebook is to be agreed.

In order to finalise the rulebook, negotiators must navigate a thicket of impenetrable jargon, a series of technical accounting challenges and bear-traps of “constructive ambiguity” in the text, that hide often incompatible visions of how Article 6 should work and what it was created for in the first place.

The negotiations are also embedded in the decades-long political context of the UN climate talks, subject to all its usual battlegrounds over ambition, finance, support for vulnerable nations and the extent to which climate action should be nationally versus internationally determined.

The challenge this represents is clear from the fact that Article 6 was the only part of the Paris rulebook that could not be agreed at COP24 in December 2018.

Whereas draft negotiating texts for each other part of the rulebook were progressively whittled down during that two-week meeting, the sections on Article 6 remained stuck, with 132 unresolved sections of text contained in “square brackets”, shown in the chart below in red.

 Number of square brackets, indicating areas of disagreement, in successive drafts of the Paris Agreement “rulebook”, broken down by the relevant article of the deal. Apart from Article 6 carbon markets, shown in red, all sections reached zero brackets and were agreed by the end of COP24 on 15 December 2018. Source: Carbon Brief analysis of negotiating texts published by the UN climate body UNFCCC. Chart by Carbon Brief using Highcharts.

The chart also shows how the draft Article 6 texts appear to have gone backwards, after talks in Bonn in June 2019 (rightmost column in the chart). As things stand, the draft rulebook texts on Article 6.2Article 6.4 and Article 6.8 cover 41 pages, containing 672 square brackets.

The increased number of unresolved areas in the text after the Bonn meeting reflects a retrenchment, with many countries and negotiating blocs at the talks retreating to their starting positions having previously given way in a spirit of compromise at COP24.

This retrenchment means that issues and red lines can once again be traded off against each other as negotiators work towards agreement across the Article 6 rulebook. There could also be attempts to tie these talks to other political priorities at the COP, further complicating matters.

Kelley Kizzier, now associate vice president for international climate at US NGO the Environmental Defense Fund (EDF), was co-chair of the Article 6 negotiations at COP24. She tells Carbon Brief:

“The reason we got as far as we did in Katowice is that people were expecting a deal. Those compromises were made in the context of a deal, so when a deal doesn’t materialise, of course, people back off from their compromises.”

Despite this setback, Kizzier says that “the heart of a deal on Article 6 is still there on the table”. She adds: “There are some crux issues that still need to be resolved, but once those are agreed the text could come together very quickly.”

What exactly does Article 6 say?

At the international climate summit at COP25 in Madrid, in December 2019, climate negotiators will try once again to finalise the Article 6 “rulebook”, which will govern voluntary international cooperation on climate change, including carbon markets.

To truly understand the task they face and the key areas of remaining disagreement, the first port of call is the text of Article 6 of the Paris Agreement itself, shown in annotated form in the graphic, below.

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Posted by Guest Author on Thursday, 12 December, 2019

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