Carbon Market Watch

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New research urges accounting fixes for future climate policies

20 May 2014

unfccc_logoNew research shows that a new climate deal must be based on multi-year, not annual, emissions budgets and comprehensively revised accounting rules to ensure the environmental integrity of targets and markets. In particular the reports call for an end to so-called double-counting of emissions cuts sold through offsetting mechanisms whereby the issuing and purchasing country both count a project’s emissions savings towards their targets.    

The focus of the three papers by the Stockholm Environment Institute is the interaction between international carbon markets and mitigation pledges under the UNFCCC and comes ahead of the next round of climate talks in Bonn in June.

Addressing the risk of double counting emission reductions under the UNFCCC

The first paper systematically assesses how double counting can occur and how it could be addressed. If emission reductions are double counted, global greenhouse gas emissions are higher than what they should be given the reduction targets countries have committed to. Countries will seemingly meet their commitments but total emissions will be higher. Double counting of emission reductions also makes mitigation efforts less comparable.

Double counting can occur in many different ways. For example, double claiming occurs if both countries have mitigation pledges, the emission reductions are counted towards achieving targets by both the selling country and the country that buys market units to attain their target. Double counting also occurs if two units are issued for the same emission reduction. Another form of double counting happens if a buyer country counts the market units it buys both towards its mitigation and its climate finance commitments.

Parties have different views on which forms of double counting should be addressed. Some do not see it as necessary to fully prevent double counting. The paper shows that international agreement on principles for accounting and mechanism design is crucial to preventing double counting. Addressing double counting effectively requires international coordination in three areas: accounting of units, design of mechanisms that issue units, and consistent tracking and reporting on units. The paper makes specific recommendations for rules to address double counting up to 2020 and in a post-2020 climate regime.

Single-year mitigation targets: Uncharted territory for emissions trading and unit transfers

The second paper explores the implications of the time frame of countries’ mitigation pledges for the generation and use of tradable emissions units.

Under the Kyoto Protocol countries have adopted multiple-year emissions targets. On the other hand, the pledges that other countries have made under the UNFCCC in Cancun, are single-year targets for the year 2020. Such single-year targets present a host of problems. Because the countries do not define how they will reach their target, their emissions pathways to get there could be dramatically different. This means that cumulative emissions reduction will likely be lower for countries with single year pledges. This holds especially true if countries with single year targets can buy and sell market units.

The level of climate change impacts depends on the cumulative emissions in the atmosphere. It is therefore vital that cumulative emissions reductions can be quantified to ensure the world can stay below devastating levels of climate change. The researchers therefore recommend that a 2015 international climate agreement requires that targets be continuous and multi-year.

Potential for International Offsets to Provide a Net Decrease of GHG Emissions

Parties decided at COP17 in Durban that new market mechanisms could “achieve a net decrease and/or avoidance of greenhouse gas emissions.” The third paper shows how such a net atmospheric benefit could be achieved in practice. It says that achieving a net atmospheric benefit requires: a) offsets that are additional; b) measures that lead to more emissions reductions than credited; and c) accounting of any surplus reductions in a way that they not simply contribute to meeting an existing GHG reduction pledge. Using the CDM as an example, the paper shows that although theoretically possible, achieving substantial net atmospheric benefits through offsetting mechanisms in practice is difficult.

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