COP 21

Projecting and Accelerating U.S. Greenhouse Gas Reductions

Projecting and Accelerating U.S. Greenhouse Gas Reductions

September 2017

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More than 190 nations representing more than 95 percent of global greenhouse gas emissions offered “nationally determined contributions” (NDCs) to the Paris Agreement reached in December 2015. The NDC submitted by the Obama administration on behalf of the United States is an economy-wide target to reduce net greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025. The Trump administration is now weighing whether to “suspend, revise, or rescind” policies to help meet this goal, and has announced its intent to withdraw from the Paris Agreement. President Trump has also suggested the possibility of “re-entry” under revised terms; one option may be a recalibrated U.S. NDC. Analyses suggest that even with some key climate policies rolled back, U.S. emissions in 2025 could range from 14 percent to 18 percent below 2005 levels. In the absence of additional federal policy, stronger action by states, cities and companies can help reduce emissions further. The brief looks at progress in reducing U.S. emissions, how existing and proposed policies may affect emissions through 2025, and additional steps that can achieve stronger reductions.

Doug Vine
Doug Vine
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The Paris Agreement

Negotiators gather for COP 21 in Paris, December 2015. Image courtesy of the UNFCCC, via Flickr.

The Paris Agreement strengthens the global climate effort by requiring all countries to set climate goals and by establishing new mechanisms to hold countries accountable and to build ambition over time.

The agreement was reached in December 2015 and entered into force 11 months later.  In June 2017, President Trump announced that the United States would withdraw from the agreement.

A Paris Primer
C2ES answers questions on the talks leading to the Paris climate accord, how the agreement works, key legal issues, the agreement’s status, and next steps.

Summary of the Paris Agreement
A closer look at the core elements, including commitments on emissions, adaptation, finance and transparency, and steps to promote carbon trading.

C2ES Statement on Paris
U.S. leadership and a groundswell of support from mayors, governors and CEOs helped deliver the landmark agreement. 

C2ES Statement on U.S. Withdrawal
The decision to withdraw ignores the many U.S. business leaders – and the strong majority of Americans – who want the United States to stay in the Paris Agreement. 

Business Support for Paris
Leading U.S. companies organized by C2ES signed a letter to President Trump and full-page ads in major newspapers urging him to keep the United States in the agreement.

Toward 2015 Dialogue
C2ES brought together top negotiators from two dozen countries for a series of in-depth discussions that forged common ground on key issues for Paris.

COP 21 Initiatives
A sampling of the many initiatives launched at the Paris Climate Conference by companies, city, state and local governments, and other non-state actors.

Additional Resources:

C2ES Policy Briefs:

Video:
Elliot Diringer briefs the Business Roundtable and members of the C2ES Business Environmental Leadership Council on the Paris Agreement

Major companies back Paris Agreement

Media Advisory

November 15, 2016

Contact:

US: Laura Rehrmann, rehrmannl@c2es.org, 703-516-0621

Marrakech: Anthony Mansell, mansella@c2es.org, 202-384-0774 (cell) 

Major companies back Paris Agreement

Hear from companies at livestreamed event today

MARRAKECH – At an event today at COP 22 in Marrakech, the Center for Climate and Energy Solutions (C2ES) will highlight climate action by business, including a recent statement signed by 11 leading corporations in support of the Paris Agreement.

The event, to be held at the U.S. Center at the U.N. Climate Change Conference, will feature remarks by senior representatives of Berkshire Hathaway Energy, Ingersoll Rand, Mars and Microsoft. They are among the more than 150 U.S. firms that have committed to specific climate actions as part of the American Business Act on Climate Pledge.

The event occurs at 4 p.m. Marrakech time (11 a.m. EST) and will be livestreamed. 

C2ES Executive Vice President Elliot Diringer will highlight a statement organized by C2ES and signed by 11 major companies based or with major operations in the United States welcoming the Paris Agreement's entry into force, and pledging to work with governments to implement their contributions.

The statement, released when the threshold for entry into force was reached in October, says the Paris Agreement establishes “an inclusive, pragmatic and, hopefully, durable framework for progressively strengthening efforts globally to address the causes and consequences of climate change.”

The statement was endorsed by Berkshire Hathaway Energy, Calpine, HP Inc., Intel, LafargeHolcim, Microsoft, National Grid, PG&E, Rio Tinto, Schneider Electric, and Shell.

“As businesses concerned about the well-being of our investors, our customers, our communities and our planet, we are committed to working on our own and in partnership with governments to mobilize the technology, investment and innovation needed to transition to a sustainable low-carbon economy,” the statement says.

It says the Paris Agreement facilitates stronger private sector action by providing long-term direction, promoting transparency, addressing competitiveness, and facilitating carbon pricing.

“Many companies recognize the costly impacts of climate change, and see investment and growth opportunities in a clean-energy transition,” said C2ES President Bob Perciasepe. “These companies are taking action and are looking to governments to help lead the way.”

Read the full business statement: http://bit.ly/Biz4Climate

EVENT DETAILS:

CHARTING A LOW-CARBON COURSE FOR THE U.S. ECONOMY

Tuesday, November 15, 2016, 4 p.m. – 5 p.m. local time (11 a.m.-Noon EST)?U.S. Center, Blue Zone, Marrakech

Senior officials from major corporations discuss ways business leadership can help achieve climate goals in this live-streamed event co-sponsored with the Edison Electric Institute (EEI).

•    Cathy Woollums, Senior Vice President, Environmental Services and Chief Environmental Counsel, Berkshire Hathaway Energy

•    Nanette Lockwood, Global Director, Policy and Advocacy, Ingersoll Rand

•    Kevin Rabinovitch, Global Sustainability Director, Mars Incorporated

•    Tamara “TJ” DiCaprio, Senior Director of Environmental Sustainability, Microsoft

•    Elliot Diringer, Executive Vice President, C2ES

•    Eric Holdsworth, Senior Director, Climate Programs, EEI

For reporters in Marrakech, C2ES will also host a second side event:

Post-Election: The Outlook for U.S. Climate Policy

November 16, 2016

6 p.m. – 7:30 p.m.

IETA Pavilion, Blue Zone

•    Nathanial Keohane, Vice President, Global Climate, Environmental Defense Fund

•    Josh Klein, Senior Professional Staff, Senate Foreign Relations Committee 

•    Matt Rodriquez, Secretary for Environmental Protection, California

•    Cathy Woollums, Senior Vice President, Environmental Services and Chief Environmental Counsel, Berkshire Hathaway Energy

•    Elliot Diringer, Executive Vice President, C2ES

C2ES Resources

•    UNFCCC Climate Transparency: Lessons Learned

•    Key Issues in Completing the Paris Climate Architecture

•    Linking Non-State Action with the UN Framework Convention on Climate Change

About C2ES: The Center for Climate and Energy Solutions (C2ES) is an independent, nonprofit, nonpartisan organization promoting strong policy and action to address our energy and climate challenges. Learn more at www.c2es.org

UNFCCC Climate Transparency: Lessons Learned

UNFCCC Climate Transparency: Lessons Learned

November 2016

by Jennifer Huang

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The Paris Agreement establishes an “enhanced transparency framework” to build mutual trust and confidence and to promote effective implementation. This framework combines common reporting and review requirements for all parties with “built-in flexibility” for developing countries. The agreement requires that parties, in elaborating the operational details of the transparency framework, build on experience with existing transparency arrangements under the U.N. Framework Convention on Climate Change (UNFCCC). Over the past year, developed and developing countries have shared their experiences with the existing transparency system in a variety of public forums. This brief highlights key lessons learned that can help inform the design of the Paris transparency framework.

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Key Issues in Completing the Paris Climate Architecture

Key Issues in Completing
the Paris Climate Architecture

October 2016

By Jennifer Huang and Anthony Mansell

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The Paris Agreement establishes an international framework to strengthen the global response to climate change. Governments are now negotiating operational aspects of the agreement, including details of the transparency framework; a five-year cycle to review collective progress and update parties’ contributions; and the agreement’s market-related provisions. These implementing decisions are due to be adopted at the first session of the agreement’s governing body, the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement, known as the CMA. With the agreement’s rapid entry into force, CMA 1 will open at COP 22 in Marrakech, Morocco, earlier than anticipated; it likely will be extended beyond COP 22 to allow more time to complete the decisions. This brief outlines the Paris Agreement’s core provisions, major issues still to be decided, and some of the options before parties.

Anthony Mansell
Jennifer Huang
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Paris Climate Agreement Q&A

Paris Climate Agreement Q&A

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More than 190 nations meeting in Paris in December 2015 reached a landmark agreement to strengthen the global climate effort. The Paris Agreement commits countries to undertake “nationally determined contributions” and establishes mechanisms to hold them accountable and to strengthen ambition in the years ahead.

C2ES offers a summary of the key outcomes in Paris and other resources related to the climate talks. Here are answers to some frequently asked questions.

What’s the status of the Paris Agreement?

The Paris Agreement formally entered into force on November 4, 2016. Other countries have continued to become parties to the Paris Agreement as they complete their domestic approval procedures.  As of June 2017, 148 parties have ratified the Paris Agreement. Countries are now negotiating more detailed rules to implement the agreement, to be adopted in late 2018.

On June 1, 2017, President Trump announced his intention to withdraw the United States from the agreement. In response, other governments strongly reaffirmed their commitment to the agreement.

What were the main outcomes of the Paris conference?

The Paris conference was the 21st session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC), known as COP 21. The conference concluded a round of negotiations launched in Durban, South Africa, in 2011 with the aim of producing a new legal agreement among national governments to strengthen the global response to climate change. A record 150 heads of state and government attended the opening day of the conference.

The Paris package had three main components: the Paris Agreement, an international treaty setting common goals, commitments and expectations; the intended “nationally determined contributions” (NDCs) submitted by more than 180 countries; and the thousands of contributions offered by companies, states, cities and civil society organizations.

How does the Paris Agreement relate to the UNFCCC?

The UNFCCC, adopted in 1992, is a treaty among governments that provides a foundation for the global climate effort. Enjoying near-universal membership, the convention was ratified by the United States with the advice and consent of the Senate. The convention set a long-term objective (avoiding “dangerous human interference with the climate system”), established principles to guide the global effort, and committed all countries to “mitigate” climate change by reducing or avoiding greenhouse gas emissions. The Paris Agreement defines how countries will implement their UNFCCC commitments after 2020.

What are nationally determined contributions?

In 2013, at COP 19 in Warsaw, parties were encouraged to submit their “intended nationally determined contributions” (INDCs) to the Paris Agreement well in advance of COP 21. These INDCs represent each country’s self-defined mitigation goals for the period beginning in 2020. To date, 190 countries accounting for almost 99 percent of global emissions have submitted INDCs to the UNFCCC secretariat.

Developed countries have offered absolute economy-wide emissions targets (the United States, for instance, has pledged to reduce its emissions 26-28 percent from 2005 levels by 2025).

Developing countries have offered a range of approaches, including absolute economy-wide targets, reductions in emissions intensity (emissions per unit of GDP), reductions from projected “business-as-usual” emissions, and reductions in per-capita emissions. C2ES has produced a summary of countries’ INDCs.

Final NDCs are submitted by each party upon its formal ratification or acceptance of the agreement, and are recorded in a UNFCCC registry.

What obligations do countries have under the agreement to reduce their emissions?

The Paris Agreement establishes a set of binding procedural commitments. Parties commit to “prepare, communicate and maintain” successive NDCs; to “pursue domestic mitigation measures” aimed at achieving their NDCs; and to regularly report on their emissions and on progress in implementing their NDCs. The agreement also sets the expectation that each party’s successive NDC will “represent a progression” beyond its previous one and “reflect its highest possible ambition.”  The achievement by a party of its NDCs is not a legally binding obligation.

Does the agreement meet the goal of limiting warming to 2 degrees Celsius?

In agreements adopted in Copenhagen in 2009 and Cancún in 2010, governments set a goal of keeping global temperature increases below 2 degrees Celsius above pre-industrial levels. The Paris Agreement reaffirms the 2-degree goal, while urging efforts to limit the increase to 1.5 degrees Celsius. The agreement also sets two other long-term mitigation goals: first, a peaking of emissions as soon as possible (recognizing that it will take longer for developing countries); then, a goal of net greenhouse gas neutrality (“a balance between anthropogenic emissions by sources and removals by sinks”) in the second half of the century.

Analyses of the INDCs submitted by countries conclude that, while they move us closer to the 2-

degree goal, they are not ambitious enough to achieve it. An analysis by the Climate Action Tracker, a consortium of research institutions, concluded that the INDCs, if fully implemented, could result in warming of 2.7 degrees Celsius, which would be 0.9 degrees lower than without them.

How will the Paris Agreement get countries to increase their ambition?

The Paris Agreement provides a durable framework guiding the global effort for decades to come. The aim is to create a continuous cycle that keeps the pressure on countries to raise their ambition over time. To promote rising ambition, the agreement establishes two linked processes, each on a five-year cycle. The first process is a “global stocktake” to assess collective progress toward meeting the agreement’s long-term goals. Parties will then submit new NDCs, “informed by the outcomes of the global stocktake.”

Because the Paris Agreement is to apply post-2020, the first formal stocktake under the agreement will not take place until 2023. But under a decision accompanying the agreement, parties will jumpstart the five-year cycle with a “facilitative dialogue” on collective progress in 2018, and the submission by 2020 of NDCs running through 2030.

How will parties be held accountable?

Accountability will be achieved primarily through an “enhanced transparency framework.” All countries are required to submit emissions inventories and the “information necessary to track progress made in implementing and achieving” their NDCs. These reports will be subject to an independent review by technical experts and a “facilitative, multilateral consideration of progress” by fellow governments.

Unlike the current transparency system under the UNFCCC, which sets different requirements for developed and developing countries, the new transparency framework will apply to all countries but provide “built-in flexibility” to accommodate varying national capacities. The aim is for all parties to work toward the same standards of accountability as their capacities strengthen over time.

In addition, the agreement establishes a new mechanism to “facilitate implementation and promote compliance.” This “non-adversarial” committee of experts will seek to help countries falling behind on their commitments get back on track. There are no penalties for noncompliance.

How does the agreement address climate adaptation?

Adaptation—steps to cope with the impacts of climate change—receives much greater emphasis under the Paris Agreement than previously under the UNFCCC. Just as parties will submit mitigation contributions, the agreement requires all parties, “as appropriate,” to plan and implement adaptation efforts and encourages all parties to report on their adaptation efforts and/or needs. The agreement also includes a review of adaptation progress, and the adequacy and effectiveness of adaptation support, in the global stocktake to be undertaken every five years.

What does the Paris outcome do to support the efforts of developing countries?

Developed countries committed under the UNFCCC to support mitigation and adaptation efforts in developing countries. As part of the Copenhagen and Cancún agreements, developed countries committed to mobilize $100 billion a year in public and private finance for developing countries by 2020.

The Paris Agreement reaffirms developed countries’ UNFCCC obligations; the COP decision accompanying the agreement extends the $100 billion-a-year goal through 2025, and calls for a new goal beyond that “from a floor of” $100 billion a year. The agreement also broadens the donor base beyond developed countries by encouraging other countries to provide support “voluntarily.” China, for instance, recently pledged $3 billion to help other developing countries.

Many national governments offered new financial pledges in Paris. Collectively, developed countries pledged $19 billion to help developing countries, including an announcement by Secretary of State John Kerry that, by 2020, the United States will double its support for adaptation efforts to $800 million a year. In another sign that developing countries are now also providing support, Vietnam pledged $1 million to the new Green Climate Fund (GCF). And for the first time, subnational governments also offered pledges, including 1 million euros from the city of Paris for the GCF, and CAD 6 million from Quebec for the UNFCCC Least Developed Countries Fund. As of April 2017, $10.3 billion has been pledged to the Green Climate Fund from 43 governments.

Does the Paris Agreement address carbon markets?

Many countries indicated in their INDCs that they intend to use some form of international emissions trading to implementing their contributions. To ensure the environmental integrity of such transactions, the agreement requires parties to follow accounting practices avoiding the double counting of “internationally transferred mitigation outcomes.” In addition, the agreement establishes a new mechanism contributing to mitigation and supporting sustainable development, which, depending on its design, could generate or certify tradable emission units.

How did the Paris conference engage stakeholders such as states, cities and business?

Although only national governments participate directly in the negotiations, COP 21 provided many opportunities to showcase the contributions of “non-state actors” to the global climate effort. The strong display of commitments by cities, subnational governments and businesses at the New York Climate Summit in September 2014 led to the establishment at COP 20 of the Lima-Paris Action Agenda and the online NAZCA portal, where non-state actors can register their commitments. By the time of Paris, the portal listed nearly 11,000 commitments from 2,250 cities, 22,025 companies, and hundreds of states/regions, investors and civil society organizations. The unprecedented showing of action and support from all levels of society was widely credited as an important factor in Paris’ success. Governments and stakeholder groups are working to strengthen non-state contributions to the UNFCCC.

A C2ES brief outlines recent steps to strengthen the visibility of non-state action in the UNFCCC and options for more closely linking the two.

Is the agreement legally binding?

Yes. The agreement is considered a “treaty” under international law, but only certain provisions are legally binding. The issue of which provisions to make binding was a central concern for many countries, in particular the United States, which wanted an agreement the president could accept without seeking congressional approval. Meeting that test precluded binding emission targets and new binding financial commitments. The agreement, however, includes binding procedural commitments – such as the requirements to maintain successive NDCs and to report on progress in implementing them.

Did Congress have any say over the agreement?

Under U.S. law, a president may under certain circumstances approve U.S. participation in an international agreement without submitting it to Congress. Important considerations include whether the new agreement is implementing a prior agreement such as the UNFCCC that was ratified with the advice and consent of the Senate, and whether it is consistent with, and can be implemented on the basis of, existing U.S. law. Because the agreement does not include binding emission targets, or binding financial commitments beyond those contained in the UNFCCC, and can be implemented on the basis of existing law, President Obama chose to approve it by executive action.

A C2ES legal analysis examines issues surrounding U.S. acceptance of the Paris Agreement.

Can the president withdraw the United States from the agreement?

Under U.S. law, U.S. participation in an international agreement can be terminated by a president, acting on executive authority, or by an act of Congress, regardless of how the United States joined the agreement. The Paris Agreement specifies that a party may not withdraw from the agreement within the first three years following its entry into force.

On June 1, 2017, President Trump announced that the United States would be withdrawing from the agreement, but also indicated a willingness to renegotiate the agreement or negotiate a new one. Other countries, reaffirming their strong support for the Paris Agreement, said they are not open to a new negotiation.

Can a party adjust its nationally determined contribution?

The Paris Agreement says that a party “may at any time adjust its existing nationally determined contribution with a view to enhancing its level of ambition.” While this does not appear to legally preclude a party from reducing the ambition of its NDC, such a step would be seen by most countries as deviating from the spirit of the Paris Agreement. An adjustment of the U.S. NDC could be seen as a way to ‘renegotiate’ the agreement.

What happens next?

As other countries continue to complete domestic procedures to formally accept the Paris Agreement, all parties are also expected to continue moving forward with the domestic policies needed to implement their nationally determined contributions. At the same time, governments are negotiating the details of how the Paris Agreement will be implemented – for instance, accounting rules and accountability procedures. These decisions are likely to be finalized in late 2018.

COP 22, which took place in Marrakech, Morocco, in November 2016, marked the first meeting of the Paris Agreement’s governing body, known as the CMA. This initial session of the CMA is currently suspended to allow parties more time to complete the decisions needed to fully implement the agreement. The next major UNFCCC conference is COP 23, which will take place in Bonn, Germany, in November 2017.

Achieving the United States' Intended Nationally Determined Contribution

Achieving the United States' Intended Nationally Determined Contribution

Last updated: November 2016

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More than 180 nations representing more than 95 percent of global greenhouse gas emissions offered “intended nationally determined contributions” (INDCs) to the Paris Agreement reached in December 2015. The United States’ INDC is an economy-wide target to reduce net greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025. Available analyses suggest that the United States could reduce emissions by more than 22 percent with policies either already in place or soon anticipated. Options for achieving further reductions to meet the 2025 target may include additional policies, technological advances, and stronger action by cities and companies. Concerted efforts across multiple fronts could reasonably produce the reductions needed to meet the goal. Specifically, this paper looks at the progress that has been achieved since 2005, the effect existing and proposed policies will have by 2025 as well plausible steps to fill the gap.

Doug Vine
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What's ahead for carbon markets after COP 21

The following was published in the February 2016 edition of Biores, a publication of the International Centre for Trade and Sustainable Development.

By Anthony Mansell, International Fellow, Center for Climate and Energy Solutions (C2ES)

The new climate deal includes several provisions relevant to market-based emissions reductions efforts. 

At a UN conference in Paris, France in December countries agreed to a new framework for international cooperation on climate change. The “Paris Agreement” ties together nationally determined contributions (NDCs) with international rules and procedures to ensure transparency and promote rising ambition. Paris also provided a future for international market mechanisms as a tool for countries to fulfil their NDCs.

Many NDCs submitted as part of the Paris process demonstrate an enthusiasm for market approaches. Sixty-five governments say they will use international markets and another 24 will consider using them in the future. Many groups such as the Carbon Pricing Leadership Coalition (CPLC) urged support in Paris for the use of market mechanisms and a ministerial declaration issued by 18 governments at the close of the conference was designed to send “a clear signal to the global carbon market…that there is an important role for markets in the post-2020 period.”

The Paris Agreement includes provisions that can advance carbon markets in two ways: by ensuring there is no double counting when countries engage in emissions trading, and by establishing a new mechanism to facilitate trading. In both areas, however, the text provides only broad parameters and important details remain to be decided. This article addresses the current state of carbon markets, their history in international climate agreements, and relevant provisions of the Paris deal – including issues still to be negotiated before it comes into effect.

Carbon market context

Carbon pricing is currently in place in 38 jurisdictions, according to the World Bank, encompassing both carbon taxes and emissions trading schemes (ETS). A number of additional policies are scheduled to enter force between now and 2020 including carbon taxes planned for Chile and South Africa. Ontario will develop an ETS similar to neighbouring Québec and US states Washington and Oregon are considering the same. In terms of scale, the most significant will be a new national ETS in 2017 across China, the world’s largest greenhouse gas (GHG) emitter.

Not all carbon market programmes seek to trade internationally; some focus solely on domestic emission reductions. Nevertheless, bottom-up linkages are already occurring. For example, California and Québec have linked their cap-and-trade programs, making carbon allowances and offsets fungible between programs. There are also ongoing discussions in California about using sector-based offsets that reduce deforestation – known as REDD+ – from Acre, Brazil and Chiapas, Mexico. The EU Emissions Trading System (EU ETS) and Swiss ETS have agreed a link, pending ratification by each.

In addition, the International Civil Aviation Organisation (ICAO) is to decide by the end of this year on the design of a global market-based mechanism (MBM) to reduce emissions from aviation. The MBM would come into force in 2020, around the same time the Paris Agreement aims to be in place.

History of international market mechanisms

Market-based approaches are not referred to in the founding 1992 UN Framework Convention on Climate Change (UNFCCC) document, but were integral to the design of its first sub-agreement, the 1997 Kyoto Protocol.

Under Kyoto, participating developed countries have binding emission limits – “quantified emission limitation and reduction commitments” – inscribed in Annex B of the agreement. They are allocated “assigned amount units” (AAUs) in line with those targets and, to enable least-cost emission reduction, are permitted to trade AAUs and other certified emission units.

Kyoto established three methods for transferring units – either emission allowances or emission reductions – between countries. International Emissions Trading (IET) allows countries that have reduced emissions below their targets to sell excess allowances to countries whose emissions exceed their targets. Joint Implementation (JI) allows Annex B countries to earn emission reduction units (ERUs) through emission reduction or removal projects in other Annex B countries. The Clean Development Mechanism (CDM) allows Annex B countries to earn certified emission reduction (CERs) credits through emissions-reduction projects in developing countries.

Emissions trading under the Kyoto Protocol relies on international oversight. All transfers are tracked using a registry called the International Transaction Log (ITL). A common accounting standard applies to all countries with emission targets. An executive board must approve the methodology CDM projects propose using. Finally, under the Protocol, only the international transfers it sanctions are considered legitimate to fulfil a country’s emissions-cutting obligations.

The Kyoto model provides important infrastructure for an international carbon market. Common accounting procedures ensure that any transfer meets an internationally agreed level of environmental integrity. An AAU allocated to Switzerland represents a metric tonne of emissions measured using the same standard as an AAU allocated to Norway. Common offset methodologies give a blueprint to replicate in projects across the globe. The CDM has been able to issue 1.4 billion credits – each representing a metric tonne of avoided emissions – and mobilise over US$400 billion in investment using this international rulebook for managing offset projects. Moreover, when countries submit their national GHG inventories, any recorded transfers can be verified by checking the international registry thereby reducing the potential for emissions double counting.

The Kyoto Protocol's market mechanisms have, however, lately encountered shrinking participation. One reason has been a reliance on the EU ETS as a source of demand, where low economic growth and restrictions placed on the types of credits has created a generous oversupply of CDM credits.

The Paris Agreement and carbon markets

The Paris Agreement establishes a fundamentally different framework from Kyoto. Rather than binding emission limits, which readily lend themselves to market approaches, the new climate regime requires all parties to undertake nationally determined contributions of their own choosing. As of writing, 187 countries had put forward NDCs, presenting various 2020-2030 target reduction dates.  These contributions are not legally binding and come in many forms, ranging from absolute economy-wide targets to peaking years, carbon intensity reductions, and so on. A new transparency system will apply to all parties, but will be less prescriptive than the accounting of AAUs that underpinned the Kyoto Protocol.

Fitting market approaches into this new landscape poses a different set of challenges. In a literal sense, the Paris Agreement is silent on markets, in that the term does not feature in the text. This is not unusual, the Kyoto Protocol also did not include the term. Instead, the new agreement houses markets under Article 6, geared towards addressing “voluntary cooperation” between parties in achieving their NDCs.

Article 6 recognises that parties may choose to pursue voluntary cooperation in implementing their NDCs. If these “cooperative approaches” involve the use of “internationally transferred mitigation outcomes,” or ITMOs, robust accounting shall be used to avoid double counting. The use of ITMOs are voluntary and authorised by participating parties.

The same article also establishes a mechanism to contribute to GHG mitigation and support sustainable development. The new mechanism will be under the authority of meeting of parties to the Paris Agreement. It has four listed aims including to promote greenhouse gas mitigation while fostering sustainable development; incentivise and facilitate participation by public and private entities who are authorised by a party; contribute to reduction of emissions level in host country, which can also be used by another party to fulfil its NDC; and deliver an overall reduction in global emissions. In addition, emission reductions occurring from the new mechanism must not be double counted. A share of proceeds will be used to cover administrative expenses and assist developing countries to meet the costs of adaptation, which is similar to the share of proceeds under the CDM, a portion of which was channelled to the Adaptation Fund. Article 6.8 and 6.9 contain a framework for promoting “integrated, holistic and balanced non-market approaches.”  

So what comes next? When the CDM, JI, and IET were established under the Kyoto Protocols, the details were not finalised until the Marrakech Accords four years later. Similarly, the COP21 outcome sets a work plan for negotiators to deliberate and decide how the Paris system will work, to be addressed in upcoming UNFCCC meetings.

Cooperative approaches accounting

The existing UNFCCC accounting system is bifurcated between developed and developing economies. Under the Convention, GHG inventories are required each year for industrialised countries, while these are included in national communications submitted every four years for developing nations.

The Paris Agreement establishes an “enhanced transparency framework for action and support,” with built-in flexibility to take into account national capacities. Under this framework each party must submit a national greenhouse gas inventory. An accompanying decision elaborates that all countries – except least developed countries and small island developing states – shall provide these inventories at least biennially.

On markets the Subsidiary Body for Scientific and Technologic Advice (SBSTA) will develop and recommend guidance on how to apply “robust accounting” for cooperative approaches, for adoption at the first session of governing body of the Paris Agreement, known as the CMA . Countries will need to be “consistent” with this guidance, but not necessarily follow it strictly. How to determine if a country’s accounting is consistent is not clarified in the Paris agreement, though it will likely be reviewed as part of the new transparency system.

Pending decisions will provide greater clarity on a number of issues. On ITMOs, it will be useful to define the scope of what can be considered a “mitigation outcome” transferred between countries. Under Kyoto, AAUs serve as a unit of account for transferring obligations, but also define the scope of accepted international transfers. In other words, only transfers involving AAUs are accepted when submitting national GHG accounts. Parties will also need to consider whether other forms of co-operation – such as Japan’s Joint Crediting Mechanism (JCM), which is similar to the CDM, or the bilateral linking of two ETSs –would be considered ITMOs. Transfers involving one or more countries without absolute economy-wide targets could complicate the methodology needed to avoid double counting.

On the accounting system, the CMA could take an active role in facilitating transfers, including through a central registry similar to the ITL. Alternatively, in a more decentralised system, it may require that parties maintain their own accounting – such as double-entry bookkeeping – and rely on the transparency arrangements to provide oversight. The provision referencing ITMOs also requires parties to “promote sustainable development and ensure environmental integrity.” The SBSTA guidelines will need to define these terms and how countries will meet them when undertaking transfers.

Paris “mechanism”

Another accompanying COP decision recommends that the CMA adopt “rules, modalities, and procedures” for the new mechanism at its first session. The parameters for these are: voluntary participation authorised by each party involved; real, measurable, and long-term benefits related to the mitigation of climate change; specific scope of activities; reductions in emissions that are additional to any that would otherwise occur; verification and certification of emission reductions resulting from mitigation activities by designated operational entities; experience gained with and lessons learned from existing mechanisms and approach adopted under the Convention.

This leaves much to be hammered out by governments. A key area to address will be the type of system. The new mechanism may continue to credit at a project level. A Brazilian proposal in Paris envisioned a mechanism similar in scale to the CDM, referred to as an “enhanced CDM,” or “CDM+.” Conversely, in prior discussions for a “new market mechanism” (NMM), both the EU and the Environmental Integrity Group negotiating group have proposed a scaled-up or sector-based crediting mechanism.

The future of the Kyoto flexibility mechanisms is also unclear, in particular whether the new mechanism will succeed the CDM and JI, or will sit alongside either of these. The Paris Agreement does not mention the CDM or JI, but notes that the new mechanism should draw on the experience gained from existing mechanisms. Similarly, it is unclear whether units generated under the Kyoto mechanisms will be eligible for compliance after 2020 and if so, whether they will need to be converted to an alternative credit type to conform with credits issues under the new mechanism.

Negotiators may also decide to transfer project methodologies over from the CDM to apply to the new mechanism, discard some of these existing approaches, or move away from project level crediting altogether as noted above. They may also consider other methodologies used outside the UNFCCC. Finally, the Paris Agreement frames sustainable development on a par with GHG mitigation, so parties may require measured sustainable development outcomes to be eligible for crediting.

Parties will need to decide on governance arrangements for the new mechanism. The CDM is managed by an Executive Board of ten government officials, comprising one member from each of the five UN regional groups, two other members from parties included in Annex I, two other members from non-Annex I parties, and one representative of the small island developing states. Similarly, JI has a supervisory committee (JISC) to oversee the verification of projects. The new mechanism could incorporate governance from either of these existing platforms.Guidance on rules and procedures will also need to be clarified. The CDM and JI have existing procedures for developing projects that are ultimately credited. Countries could transfer these rules to the new mechanism or adopt new procedures.

Given the breadth of views across governments on the role of market mechanisms, reaching conclusions on these issues will be challenging. The slow progress since 2011 in the UNFCCC toward a “framework for various approaches” (FVA) and NMM demonstrated the difficulties in gaining consensus on the subject. Nevertheless the importance afforded to international markets by many countries in their NDCs implies there is a strong impetus to find a workable system for international transfers.

Efforts beyond UNFCCC

It is possible that initiatives undertaken outside the UNFCCC will inform efforts within. The Carbon Market Platform established under the G7, for example, is a strategic political dialogue that can complement the UNFCCC in developing guidance on accounting for international transfers. The system that ICAO builds could seek consistency with the Paris Agreement. For example, it would be beneficial if credits used for compliance in the UNFCCC and ICAO are fungible, to prevent project developers choosing between separate customers. It remains to be decided what types of international credits will be used for compliance in the ICAO MBM, but this should take into account the emergence of the new mechanism. In addition, the accounting system used by ICAO should at least be consistent with that used under the Paris system, insofar as this would avoid the double counting of units used for compliance in both ICAO and the UNFCCC.

Unfinished business

Paris reaffirmed carbon markets as an instrument for meeting climate goals. Outside of the agreement itself, groups such as the CPLC are building strong momentum for market approaches as a key component to meeting the mitigation targets set by NDCs. COP21 did not, however, finalise a new system of international carbon markets or cooperative approaches. Accounting for ITMOs and other forms of voluntary cooperation require elaboration and guidance. The role of the new mechanism remains to be negotiated. And if these talks become stalled, as was the case for the FVA/NMM deliberations, interested countries may pursue bottom-up linkages elsewhere rather than continue to search for solutions within the UN climate talks. The pace and extent of progress under the UNFCCC will determine how central a role multilateral platforms will play on these issues in the future and the prospects of a truly global carbon market.

How the Paris Agreement will bring transparency to climate action

COP 21 in Paris (Image Courtesy UNFCCC Via Flickr).

A central issue in the Paris climate talks was strengthening “transparency” requirements to hold countries accountable for their commitments. This means closer scrutiny of steps taken by developing countries, in particular, and many are understandably nervous.

But in presentations in the sidelines of the negotiations, two developing countries – Singapore and Chile – said their early experiences with the existing transparency system were less onerous than they’d feared. Their key message: You learn by doing.

The existing transparency system, established in 2010 in Cancún, consists of two parallel processes: one for developed countries, and a less stringent one for developing countries. Under both processes, countries submit biennial reports describing the steps they’re taking to meet their emission goals. These reports are then considered by technical experts and by other parties.

The Paris Agreement calls for replacing these processes with a single system requiring all countries to work toward the same standards of transparency and accountability.

Although the agreement promises support to help developing countries build the capacity to meet these standards, many worry the new requirements will be burdensome. Others are wary of being judged harshly, particularly when they have had little experience closely tracking their emissions or undergoing international review.

So far under the current system, 16 developing countries have submitted biennial reports describing the efforts they are taking to limit or reduce their greenhouse gas emissions. 

Paris Climate Conference - COP 21

In a landmark agreement that charts a fundamentally new course in the two-decade-old global climate effort, governments meeting in Paris adopted a pragmatic deal that holds countries accountable and builds ambition over time.

The Paris Agreement

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C2ES Events in Paris

December 3
Press Briefing with Bob Perciasepe and Elliot Diringer.
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December 4
The American Business Act on Climate Pledge
Leaders from the White House, C2ES and American corporations discuss how U.S. businesses are leading the way in climate action and investment.
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