Carbon markets in the Paris Agreement: what’s next on the negotiation agenda?

The Paris Climate Conference agreed on strong provisions for markets, alongside provisions for non-market approaches. Next on the agenda is figuring out how these pieces work and fit together, how to improve and transition from the Kyoto Protocol’s measures -the Clean Development Mechanism (CDM) and Joint Implementation (JI), and how to integrate robust safeguards to guarantee social and environmental integrity while promoting sustainable development. In the run up to the next Climate Conference in Marrakech in November, Parties and observers are invited to submit their views on the provisions. This is a crucial opportunity to frame future negotiations.

Article 6 puzzle pieceof the Paris Agreement provides a framework for cooperation between Parties for the implementation of the new climate treaty; the article includes cooperative and non-market approaches as well as a new Sustainable Development Mechanism (SDM).

Discussions on the rules, modalities and procedures were high on the agenda of the UN intersessional climate talks in May. This first round of negotiations was used by Parties to discuss what issues they felt were important to address and how to move forward, highlighting elements such as double counting, governance, additionality and lessons to be learned from the Clean Development Mechanism (CDM). Sadly, human rights safeguards and ideas on how to measure and promote sustainable development are not yet at the top of most Parties’ agendas.

Based on the climate pledges submitted by countries before the Paris conference, there will not be much demand for market mechanisms in the near future. The levels certainly by no means compare to the heyday of demand created when CDM and JI credits became eligible to use under the EU’s cap and trade system (EU ETS). The major emitters – China, the US, and the EU – have all said they will not use international credits to meet their pledges under the Paris Agreement. In addition, most countries that expressed an interest in markets were interested in selling rather than buying. How aspirant countries intend to account for sold credits when it comes to their own pledges needs more clarification. It will also be important to ensure that being able to sell does not become a perverse incentive to not be ambitious.

International aviation and shipping are two sectors that are not included in most national pledges, but which could be an external source of demand. This, however, depends on the results of the ongoing negotiations on how to address emissions from aviation at the UN aviation body ICAO as well as the talks at the International Maritime Organisation (IMO).

Call for submissions to the Subsidiary Body for Scientific and Technical Advice (SBSTA)

It took 15 hours of discussions in Bonn to decide to invite Parties and observer organisations to submit their views on the rules, modalities and procedures for Art. 6. Due date:  30 September 2016.

There are no guiding questions, so as to not prejudge what can be submitted. This is a crucial opportunity to place key issues on the negotiation agenda and to underline the need for sufficient safeguards, human rights protections as well as environmental integrity in the future market regime.

Discussions will resume at the next climate conference in Marrakesh, taking into account the submissions and going from there.  Carbon Market Watch is in the process of preparing our submission now and would like to hear from you on your views. Please contact us at info@carbonmarketwatch.org to let us know what you think.

Sufficient safeguards are key

The importance of strong social and environmental safeguards and how they need to be integrated with sustainable development and transparent governance is illustrated with many problematic examples from the Clean Development Mechanism. Just recently, the Barro Blanco hydroelectric dam in Panama, a CDM project, was “test flooded”, forcing indigenous peoples leave their land and homes. The locals have never given consent for the project, nor were they notified prior to the test flooding. Barro Blanco highlights the need for better stakeholder consultation and human rights safeguards in future climate projects.

by Aki Kachi & Juliane Voigt