Reports on international cooperation for climate change mitigation
Reports commissioned by the Swedish Energy Agency on international cooperation for climate change mitigation.
The study analyses how governments and carbon market stakeholders can ensure that Article 6 co-operation takes into account impacts on the achievement of NDC targets and NDC implementation plans, promotes sustainable development and enables ambition. The study will include both a broad assessment of updated NDCs as well as three case studies analysing links between Article 6 and NDC implementation in potential host countries.
The study will be released in connection to COP26 in November 2021.
CDM method transformation: updating and transforming CDM methods for use in an Article 6 context
Authors: Axel Michaelowa, Dario Brescia, Nikolaus Wohlgemuth, Hilda Galt, Aglaja Espelage, Lorena Moreno
In the context of carbon markets, methodologies define how to set the crediting baseline, test additionality and quantify emission reductions. They are therefore crucial for ensuring the environmental integrity of the carbon credits issued. The over 250 methodologies approved under the Clean Development Mechanism (CDM) of the Kyoto Protocol constitute the most important body of knowledge in this regard. Therefore, these methodologies are often used as a starting point in pilot activities under Article 6 of the Paris Agreement. Given that the CDM methodologies were developed prior to the adoption of the Paris Agreement, they must be adapted or combined with new approaches, to ensure that the underlying activity promotes an increase of mitigation ambition without jeopardising the host country’s Nationally Determined Contribution (NDC). This report evaluates some selected CDM methodologies and tools and presents possible solutions to make them ’fit-for-Paris’.
Practical strategies to avoid overselling
Authors: Randall Spalding-Fecher, Anik Kohli, Juerg Fuessler, Derik Broekhoff, Lambert Schneider
The Paris Agreement requires Parties to avoid double counting of mitigation outcomes, by applying “corresponding adjustments” (CAs) for any transferred mitigation outcomes. Thus, a major concern of prospective transferring countries under Article 6 is the risk that participation in cooperative approaches could compromise NDC achievement, due to “overselling” of emission reductions. This is not in the interest of acquiring countries either, since the perception of risk might reduce transferring countries’ willingness to trade and to commit to corresponding adjustments. The objective of this report is to present options to address an important overselling risk: selling low-cost mitigation outcomes, which could compromise NDC achievement if remaining mitigation opportunities turn out to be too expensive.
Potential for transformation of CDM activities into Article 6 activities under the Paris Agreement with environmental integrity
Authors: Dario Brescia, Stephan Hoch, Axel Michaelowa, Ruth Kassaye, Yves Keller, Urs Brodmann
The potential transformation of selected activities initiated under the Clean Development Mechanism (CDM) into activities under the new market mechanisms of Article 6 of the Paris Agreement (PA) is a key issue in international climate negotiations. Against this context, this report assesses two activities from the CDM portfolio of the Swedish Energy Agency (SEA) regarding their potential to transform into Article 6 activities. Developing a more in-depth analysis of these activities can generate important lessons for a potential future transformation and help identifying critical elements that must be considered carefully.
Pricing of Verified Emission Reduction Units under Art. 6 – Gaining a Better Understanding of Possible Scenarios
Authors: Jonathan Schwieger and Urs Brodmann (First Climate), Axel Michaelowa (Perspectives Climate Group)
The price level of emission reduction units under Article 6 is highly uncertain and both private and public sector actors currently have limited visibility on how to structure their involvement in these future markets. This study seeks to provide a perspective on the key forces expected to drive carbon prices under Article 6. Building on a targeted literature review and a semi-quantitative analysis of ITMO generation costs and buyer's willingness to pay, selected scenarios are presented to illustrate possible price evolutions.
Article 6 in the Paris Agreement as an ambition mechanism – Options and recommendations
Authors: Juerg Fuessler (INFRAS), Anik Kohli (INFRAS), Randall Spalding-Fecher (Carbon Limits), Derik Broekhoff (SEI)
According to the Paris Agreement (PA), global temperature increase shall be limited to well below 2°C. However, the current Nationally Determined Contributions (NDCs) are not sufficient to reach this goal, so it will be necessary to raise ambition. This report explores how Article 6 of the PA can contribute to such ambition raising.
The report presents actions that individual (host and acquiring) countries can take, and how the ambition level can be raised through the design of Article 6 rules and practices, in particular for reporting and transparency.
Opportunities for mobilizing private climate finance through Article 6
Authors: Dr. Axel Michaelowa (Lead author, Perspectives Climate Group), Dr. Ulf Moslener (Frankfurt School), Szymon Mikolajczyk (Climate Focus), Stephan Hoch (Perspectives Climate Group), Dr. Pieter Pauw (Frankfurt School), Matthias Krey (Perspectives Climate Group), Dr. Karol Kempa (Frankfurt School), Aglaja Espelage (Perspectives Climate Group), Kaja Weldner (Perspectives Climate Group), Carsten Jung (Frankfurt School)
Private sector participation is needed to reach the goals of the Paris Agreement (PA). Thus, instruments and incentives are needed to reorient private finance flows towards low-carbon development and climate resilience. This report explores how Article 6 of the PA can be used to mobilize private climate finance, focusing on three aspects:
- What rules, modalities, procedures and guidelines are needed in the rulebook for Article 6?
- What are the incentives for the private sector to participate in Article 6 activities?
- How can Article 6 activities interact with streams of public climate finance?
The report identifies challenges and policy options, in the negotiations as well as within countries, that can overcome the hurdles and incentivize private finance participation in climate mitigation.
The report was presented during the SB 50 meeting in Bonn, June 2019.
Article 6.4 crediting outside of NDC commitments under the Paris Agreement: issues and options
Randall Spalding-Fecher (Carbon Limits)
A key question related to the rules for the Article 6.4 mechanism under the Paris Agreement is whether the mitigation activities generating emission reductions must be inside the scope of the transferring country’s NDC or not. Many countries do not have economy-wide NDC commitments, with some sectors or gases being excluded, including some countries that have stated their interest in engaging with the international market mechanisms.
Given the limited coverage of NDCs in many countries, the potential for emission reductions through voluntary cooperation on mitigation outside of NDCs is clearly substantial.
This paper examines the benefits and risks of allowing Article 6.4 crediting outside of the scope of NDC commitments, as well as the policy options to mitigate those risks.
Features and implications of NDCs for carbon markets
Andrew Howard (Koru Climate), Thiago Chagas (Climate Focus), Jelmer Hoogzaad (Climate Focus) and Stephan Hoch (Perspectives)
This comprehensive report maps out issues needing to be resolved to operationalize voluntary cooperation under Article 6.2 of the Paris Agreement. It has a particular focus on what may need to be addressed by decisions under the UNFCCC, including in relation to nationally determined contributions (NDCs). Guidance in these areas needs to be adopted by the meeting of the Parties to the Paris Agreement (CMA) at the end of 2018.
The report is structured around the interplay of three key factors:
- NDC features
- Accounting for NDCs and internationally transferred mitigation outcomes (ITMOs)
- Generation of mitigation outcomes
The report concludes by discussing possible directions that may be taken in the CMA guidance and suggesting areas where reaching an early understanding among countries could help unlock the further negotiations.
Environmental integrity and additionality in the new context of the Paris Agreement crediting mechanisms
Randall Spalding-Fecher & Francois Sammut (Carbon Limits), Derik Broekhoff (SEI-US Center) and Jürg Füssler (INFRAS)
The major shift under the Paris Agreement versus the Kyoto Protocol is that all countries have pledges. Article 6 gives the possibility for Parties, on a voluntary basis, to cooperate on mitigation (and adaptation) towards achieving their NDCs.
The report explores two aspects; how environmental integrity could be ensured and what additionality and baselines means in the new context of the Paris agreement for activities undertaken under Article 6.2 and Article 6.4 respectively.
Benchmark levels of ambition from country's INDC (Intended Nationally Determined Contributions)
Dr. Cyril Cassisa and Yasmine Arsalane (Enerdata)
The Swedish Energy Agency commissioned Enerdata to analyse ways to appreciate and benchmark levels of ambition from country's INDC (Intended Nationally Determined Contributions). The project focused on mitigation which is the key action to reduce speed and amplitude of climate change future variations. The report analysis, based on scenarios, provide trends and key findings on emission pathways with their implications on energy sectors for a representative set of emerging and middle income countries and regions.
International Cooperation under the Paris Agreement - Exploring opportunities for Swedish cooperation with developing countries
Jelmer Hoogzaad, Adriaan Korthuis, Sandra Greiner, Morten Pedersen and Emelie Öhlander
The success of the Paris Agreement to achieve its global mitigation ambition will hinge largely on the ability of countries to translate their Nationally Determined Contributions (NDCs) into mitigation action. The report suggests opportunities for Swedish international cooperation on climate action to support the implementation of the Paris Agreement.
Crediting early action: options, opportunities and risks
Lambert Schneider and Hanna-Mari Ahonen
Net Mitigation through the CDM
Christiaan Vrolijk with Gareth Phillips
With negotiations on a new climate regime underway, there is growing demand for increased contribution to climate change mitigation by all Parties, and calls for carbon market mechanisms, including the CDM, to deliver net mitigation beyond offsetting. With a review of the existing mechanisms underway, new approaches being developed under the UN Framework Convention on Climate Change (UNFCCC), and negotiations ongoing on a global climate regime from 2020 onwards, the contribution of the CDM to net mitigation has been the topic of lively – and timely – debate. A variety of options is available for delivering net mitigation via the CDM. This report explores a total of thirteen, assessed against six criteria, such as ease of implementation, wide applicability and transparent and accurate accounting. In this report, we consider 'net mitigation' to mean that part of the reductions achieved by CDM projects are not used for offsetting Annex I emissions.
National policies and the CDM rules: options for the future
The question of how to consider national policies in baseline and additionality determination has been a controversial one since the early days of the CDM. As the climate regime evolves to include additional carbon market mechanisms and support for domestic action, this question becomes both more important and more complex because of the potential for interaction between different mechanisms and policy instruments. At the same time, the slow pace of negotiations on new mechanisms may open up more opportunity to push the boundaries of the CDM. The purpose of this paper is to explore options and provide recommendations on how the CDM rules and practices on national policies could be changed both to increase the transparency and the integrity of the CDM; to explore how national policies may be addressed in new mechanisms; and to address the potential interactions with new carbon market mechanisms and support programmes.