Success in Glasgow largely depends on the conclusion of one of the most technical and highly controversial issues
If climate negotiations are compared to a game of diplomatic chess, Article 6 Paris Agreement But for the conclusion of the Paris Agreement Work Program (PAWP) the king to be checkmate and captured will be 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) (COP26). Article 6 of the Paris Agreement introduces provisions for countries to use international carbon markets to facilitate the fulfillment of nationally determined contributions (NDCs). The success of COP26 in Glasgow largely depends on the conclusion of the discussion of carbon markets. Despite several rounds of high-level meetings, it remains one of the most technical and highly controversial unresolved issues of the PAWP.
a sensitive issue
Developing countries, notably India, China and Brazil, made significant gains from the carbon market under the Clean Development Mechanism (CDM) of the Kyoto Protocol. India registered 1,703 projects under CDM which is the second largest in the world. The total carbon credits known as Certified Emission Reductions (CERs) issued for these projects is around US$255 million which corresponds to an overall estimated inflow of about US$2.55 billion into the country at a conservative price of US$10 per CER. Is. So, logically, India has a lot to gain from a thriving carbon market. However, with the ratification of the Paris Agreement, the rules of the game have changed.
Unlike the Kyoto Protocol, now developing countries are also required to have mitigation targets. Developing countries are faced with the dilemma of selling their carbon credits in exchange for attractive foreign investment flows or using these credits to achieve their own mitigation goals. This has made Article 6 a highly sensitive issue that requires a careful balance of interests and expectations.
what should be the debate
For developing countries, the new market mechanism is much more than a tool to achieve the mitigation goals under the NDC. Like its predecessor, it should help promote sustainable development and aid climate change adaptation in developing countries. It should encourage private sector participation and attract foreign investment to support low-carbon development. While more than 50% of countries have conveyed their intention to use market mechanisms to achieve NDC targets, India is not one of them as it aims to rely on domestic mitigation efforts to meet its NDC targets. Is. It is the developed countries that will rely more heavily on market mechanisms to achieve their climate goals as they will be comparatively low-cost alternatives.
Article 6 The three important issues that will be hotly debated in the negotiating rooms are the CDM transition, accounting rules and the share of proceeds in the Adaptation Fund. Let’s examine them one by one.
CDM Transition: CDM projects have gone through due diligence and credits have been released under the supervision of the UNFCCC. Therefore, the Article 6 mechanism should respect previous decisions and allow smooth transition of these projects and credits to not only ensure the viability of these projects but also to inspire confidence among private investors in the UNFCCC decision-making process. needed.
However, some countries have expressed doubts about the environmental integrity of these credits and while there is greater acceptance for transition of projects/activities, the same is not the case for transition of credits. If the decision regarding transition to CDM is not favourable, it could result in potential revenue loss of billions of dollars to India alone. A possible landing zone could be that the new supervisory body to be created under the Paris Agreement could re-examine the validity and rigor of such credits.
Accounting Rules: Article 6.4 The purpose of the mechanism is to encourage the private sector and public entities to undertake mitigation activities for sustainable development. Under this mechanism, a country can purchase emissions reductions from the host country’s public and private entities and use it to meet its NDC targets. However, this does not automatically mean that emissions reductions transferred from a host country are adjusted against its NDC targets. It should be appreciated that these reductions represent additional efforts by the private sector or public entities to reduce greenhouse gas emissions, and indeed enhance global climate ambition. This is also in line with the provision of Article 6.5 of the Paris Agreement, which does not require the host country to make corresponding adjustments for projects outside its NDC.
road ahead
Being a developing country, India does not need to meet economy-wide emission reduction targets at this stage of its development. This means that not all mitigation activities are covered by its NDC. Therefore, it can obtain significant profits from the market mechanism under Article 6.4 by selling the emissions reductions that take place outside of its NDCs. The contention of developed countries, that this would prevent raising the level of ambition, is flawed as such efforts would be in addition to what is actually done in the NDC. Robust accounting will ensure that there is no double counting of emissions reductions.
Share of Income in Adaptation Fund (SOP): Adaptation is a necessity for developing countries. However, it is critically short of funding for mitigation activities. While developing countries insist that the SOP should be applied equally to Articles 6.2 and 6.4, developed countries tend to limit its application to Article 6.4. This Article 6.4 would discourage mechanisms and limit voluntary cooperation to the cooperative approach under Article 6.2 supported by developed countries.
In a way, carbon markets allow developed countries to continue emitting greenhouse gases while developing countries benefit from revenue from the sale of their carbon credits. The focus of the discussion on Article 6 is the equitable distribution of carbon and developmental space. Climate justice demands that developing countries have access to their fair share of the global carbon space. As developing countries are prompted to take on greater mitigation responsibilities, a facilitating carbon market mechanism that respects the principles enshrined in the UNFCCC will go a long way in accelerating their transition to low-carbon development and for all countries. would be a win-win solution.
Ravi S Prasad was Additional Secretary, Ministry of Environment, Forest and Climate Change and Chief Negotiator, Climate Change – India (till February 2021). He is now the Additional Chief Secretary and Agriculture Production Commissioner (Agriculture, Veterinary and Fisheries) to the Government of Assam.
Views expressed are personal
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