Accounting for Bottom-Up Trading Under the Paris Agreement

Article 6 of the Paris Agreement recognizes that countries may engage in different forms of international cooperation to achieve climate goals, and prescribes broad conditions for such cooperation if it is to count toward achievement of parties’ nationally determined contributions (NDCs). In particular, Article 6.2 calls for robust accounting to ensure no double counting of internationally transferred mitigation outcomes (ITMOs). Parties are presently negotiating more detailed accounting guidance, to be adopted at COP 24 in December 2018. In recent years, a growing number of national and subnational governments have entered into formal arrangements governing the transfer of greenhouse gas credits and allowances. These bottom-up arrangements provide an important substrate for the Article 6 accounting guidance. Ideally, the guidance can both build on existing trading arrangements and facilitate their future growth. This brief examines the interplay between these top-down and bottom-up elements, and offers recommendations to ensure they work in a complementary fashion to achieve the objectives of Article 6.