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How to operationalize accounting under Article 6 market mechanisms of the Paris Agreement


Müller, Benito; Michaelowa, Axel (2019). How to operationalize accounting under Article 6 market mechanisms of the Paris Agreement. Climate Policy, 19(7):812-819.

Abstract

The role of market mechanisms was far from certain in the lead up to the 2015 Paris Climate Conference. The use of ‘constructive ambiguity’ led to Article 6 of the Paris Agreement, with Article 6.2 specifying a mechanism with limited international oversight, and Article 6.4 establishing a ‘Sustainable Development Mechanism’ (SDM) subject to detailed rules. Clear operationalization of these mechanisms remains a challenge, especially regarding the critical accounting issue that could not be resolved at the 2018 Katowice Climate Conference (COP24) – how to apply corresponding adjustments, especially regarding sectors not covered by targets under nationally-determined contributions (NDCs). By using fictitious examples, we explain two possible approaches to using Internationally Transferred Mitigation Outcomes (ITMOs) under Article 6.2 for achieving NDCs: a ‘target-based’ one where the acquiring Party adds the ITMO amount to the target level of its NDC; and a ‘tally-based’ one where the acquiring Party removes the ITMO amount from the final tally of its NDC. We discuss how these approaches influence the way to make corresponding adjustments and to avoid ‘double counting’. The first one leads to ‘target/budget-based accounting’, the second one to ‘emission-based accounting’. For mitigation outside the scope of the host Party's NDC, we propose using a tally-based interpretation of ITMO use, as opposed to the target-based variety used in the 1997 Kyoto Protocol, and stress the need for additionality testing. This interpretation allows for mandatory corresponding adjustments for all ITMO usage, while the host Party NDC level remains unchanged. A buffer registry is created for corresponding non-NDC adjustments of the selling party.

Abstract

The role of market mechanisms was far from certain in the lead up to the 2015 Paris Climate Conference. The use of ‘constructive ambiguity’ led to Article 6 of the Paris Agreement, with Article 6.2 specifying a mechanism with limited international oversight, and Article 6.4 establishing a ‘Sustainable Development Mechanism’ (SDM) subject to detailed rules. Clear operationalization of these mechanisms remains a challenge, especially regarding the critical accounting issue that could not be resolved at the 2018 Katowice Climate Conference (COP24) – how to apply corresponding adjustments, especially regarding sectors not covered by targets under nationally-determined contributions (NDCs). By using fictitious examples, we explain two possible approaches to using Internationally Transferred Mitigation Outcomes (ITMOs) under Article 6.2 for achieving NDCs: a ‘target-based’ one where the acquiring Party adds the ITMO amount to the target level of its NDC; and a ‘tally-based’ one where the acquiring Party removes the ITMO amount from the final tally of its NDC. We discuss how these approaches influence the way to make corresponding adjustments and to avoid ‘double counting’. The first one leads to ‘target/budget-based accounting’, the second one to ‘emission-based accounting’. For mitigation outside the scope of the host Party's NDC, we propose using a tally-based interpretation of ITMO use, as opposed to the target-based variety used in the 1997 Kyoto Protocol, and stress the need for additionality testing. This interpretation allows for mandatory corresponding adjustments for all ITMO usage, while the host Party NDC level remains unchanged. A buffer registry is created for corresponding non-NDC adjustments of the selling party.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:06 Faculty of Arts > Institute of Political Science
Dewey Decimal Classification:320 Political science
Scopus Subject Areas:Physical Sciences > Global and Planetary Change
Physical Sciences > Environmental Science (miscellaneous)
Physical Sciences > Atmospheric Science
Physical Sciences > Management, Monitoring, Policy and Law
Uncontrolled Keywords:Atmospheric Science, General Environmental Science UNFCCC, Paris Agreement, market mechanisms, environmental integrity, accounting
Language:English
Date:9 August 2019
Deposited On:14 Oct 2019 14:46
Last Modified:29 Jul 2020 11:28
Publisher:Taylor & Francis
ISSN:1469-3062
OA Status:Green
Publisher DOI:https://doi.org/10.1080/14693062.2019.1599803

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