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Empty targets? How to avoid trading of hot air under the Paris Agreement

Executive summary

A very large number of carbon credits has been created through the three carbon markets of the Kyoto Protocol: the Clean Development Mechanism (CDM), Joint Implementation (JI) and International Emissions Trading (IET). It is unclear what will happen to these mechanisms in the future and whether these old credits will be used under the  Paris Agreement, but the risk of transferring large quantities of credits is there.

The CDM alone could potentially supply four billion extra units. In addition, there are currently around 220 million units available under the JI. However, both systems are dwarfed by the number of Assigned Amount Units (AAUs) from IET which have not been used under the Kyoto Protocol.

While the 2012 Doha amendment, which still has not entered into force, limited the use of AAU surplus for the second commitment period of the Kyoto protocol, it remained silent on their existence post-2020. Several countries have shown willingness to exploit this loophole.

There are still 14.1 billion AAUs available from the Protocol’s first commitment period and, if the second commitment period were to enter into force, this would create an extra surplus of around 1.7 billion. Relying on any unit from the Kyoto protocol would, therefore, put the achievement of the Paris Agreement climate goals at risk.

In addition to this threat from the past, some countries’ Nationally Determined Contributions (NDCs) under the Paris Agreement have low targets which will be easy to overachieve. This means that these countries could potentially create between 18.7 and 28.3 GtCO2e worth of credits – or ‘hot air ’- that they can sell without reducing a single tonne of greenhouse gas emissions.

To prevent that these hot air units be used to meet current and future NDCs, four damage control measures are needed:

1. Only emission reductions that take place after 2020 can be used towards the NDCs
2. Countries that over achieve their targets because they were set below business-as-usual emission levels in the
first place should not be allowed to transfer these hot air credits to other countries that have adopted more stringent targets
3. Countries with hot air in their current NDCs should not be allowed to transfer it to subsequent NDC periods to meet future targets
4. Emissions should not be compensated through the use of excessively old credits, representing emissions which took place a decade or more earlier

Please refer also to “How to keep hot air out of the Paris Agreement – technical proposal

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