Article 6 Stocktaking and Lessons Learned Ahead of COP26
By Asgeir Barlaup
Author (far left) with colleagues at the COP25 in Madrid, 2019.
The ongoing pandemic highlights the need for international cooperation to tackle global issues. Article 6 of the Paris Agreement includes tools to encourage countries to meet their climate commitments and increase ambition through international cooperation such as market-based approaches. Such approaches have the potential to lower the cost of global climate action[i], incentivizing countries to ‘ratchet up’ their individual pledges and build momentum for other countries to do the same. Despite prolonged efforts to broker an agreement and increasing global demands to act on the abundance of scientific evidence that cautions against the impact of climate change, Article 6 of the Paris Agreement was not finalized during the last iteration of international climate talks in Madrid. In a last-minute turn of events, 31 countries announced their opposition to the final Article 6 draft text by uniting behind the San Jose Principles for High Ambition and Integrity in International Carbon Markets. These developments risk undermining the Paris Agreement by shifting global cooperation to regional climate clubs and by differentiating the account rules governing international carbon markets. In light of these setbacks and the ongoing pandemic, it is worth reflecting on the present state of the Article 6 negotiations and which steps can be taken to advance a successful COP-26 outcome.
Pandemic impact
The pandemic has had a mixed impact on international response to climate change. It has led to the largest dip in global greenhouse gas emissions ever recorded; however, it has also postponed COP-26 in Glasgow to 2021. The positive aspects of this delay are that it gives countries more time to submit new pledges and isolates the talks from the immediate aftermath of the next U.S presidential election. Additionally, social-distancing policies will likely reduce the number of participants visiting the conference. This could be a welcomed change if it reduces the logistical responsibilities of the host country, leads to more virtual participation, and diverts public attention to smaller events like the Regional Climate Weeks.
As for policy, the pandemic has initiated timely discussions on the efficacy of ‘green’ economic recovery packages. However, it has also stifled the political will to propose new aggressive carbon pricing policies as they are seen as anathema to economic growth. Existing carbon pricing systems are also at risk because of the reduction in economic activity[ii]. These policies, and their potential expansion through Article 6 of the Paris Agreement, are currently on hold until COP-26 in 2021. It is ironic that a pandemic, which illustrates the need for international cooperation, can hinder similarly important international cooperation on climate change.
Lessons for COP-26
This heightens the stakes ahead of the Glasgow talks, where Article 6 once again will be high on the agenda. At the onset, the UK government is well positioned due to its large and experienced diplomatic core, as well its relatively progressive climate track record at home[iii]. To avoid another delay, it is useful to reflect on the lessons learned from previous attempts at reaching an agreement:
1. Article 6 is complex and resolving it will require sustained engagement and political deal making by the Presidency.
During COP-25, parties made steady progress on a number of thorny issues related to Article 6, despite falling short of reaching agreement on all issues. The breakdown of the high-level negotiations that followed the relative success of the technical week clearly indicate that any definitive solution to Article 6 will have to take place at the political level.
The UK government should prioritize informal consultations aimed at overcoming fundamental disagreements between parties like the EU and Brazil. This will avoid the funneling effect that occurred at COP-25 by which all parties – even those not intending to cooperate under Article 6 - use these provisions as leverage to address outstanding grievances. At present, the next intersessional meeting (SB52) during which parties were scheduled to discuss Article 6 has been delayed to October 2020, with additional delays likely to follow. Informal talks should take place to keep the process moving forward. The UK government will have to take ownership of the process to ensure a successful Article 6 outcome in Glasgow.
2. Many critical issues still remain unresolved and particular caution is warranted when negotiating Article 6.4.
Currently, there exists a large degree of uncertainty in how the Article 6.2 and 6.4 market- mechanisms will be operationalized, as indicated by the ambiguous language in the Paris Agreement. A key challenge is “(...)using Article 6 as an opportunity to learn from [the Kyoto mechanisms] by improving the nature of activities and projects that it supports”. Agreeing on exactly what constitutes lessons learned from the Kyoto era is at the core of the ongoing Article 6 negotiations.
Article 6.2 and 6.4 of the Paris Agreement, annotated. Adopted from Paris Agreement 2017, p. 7; UNFCCC 2019.
Cooperation under Article 6.2 includes accounting provisions and ways for countries to cooperate on a ‘voluntary basis’[iv]. Remaining crunch issues under this article 6.2 include how to avoid two countries claiming ownership of the same mitigation action, or 'double counting’.
Article 6.4 identifies a mechanism similar to the CDM under the Kyoto Protocol and gives rise to issues such as the whether ‘old’ carbon credits should be transferred into the new 6.4 mechanism[v]. These discussions have often led parties to relitigate the merits of the old regime instead of suggesting new, creative solutions. This exacerbates the process of finding a compromise that is acceptable to all parties.
A pragmatic solution needs to ensure robust accounting rules that avoid repeating the shortcomings that troubled the Kyoto mechanisms whilst also give countries the tools to accelerate cooperation and investments in new projects.
3. China remains ambivalent on Article 6 for now but could have a significant impact if prompted by the right set of circumstances.
China, the world’s largest emitter of greenhouse gasses, has not submitted any direct guidance on Article 6 to the relevant UN subsidiary bodies. Despite the country’s significant involvement with the flexible mechanisms of the Kyoto Protocol, China seems rather unconcerned with the design of the new flexible mechanisms under the Paris Agreement. Against the backdrop of continuous delays to the roll-out of China’s national carbon pricing system and the recent flurry of coal plant approvals, the country does not appear particularly interested in deeper international engagement on climate change, let alone under Article 6.
Why has China put this critical issue on the back-burner? Part of the answer could be that the country considers cooperation under Article 6 contingent on securing climate finance from developed countries. If this is the case, it seems unrealistic to expect China to break with the official G77 line any time soon. If, however, the country was to take an active stance – prompted by new commitments from a Biden administration or productive discussions taking place during the upcoming EU-China summit - it could break down entrenched positions and give the Article 6 negotiations a new dynamic.
The COP-26 discussions pertaining to Article 6 will be highly consequential by determining the effectiveness of international cooperation under the Paris Agreement in the decades ahead. Through sustained political deal-making, particular attention to Article 6.4 and by seizing potential opportunities to engage China, the process can move forward.
Asgeir is an incoming doctoral candidate at KU Leuven where he will be researching carbon pricing governance. He graduated from the Fletcher School in May, 2020.
[i] The efficacy of global market-based climate policies is amplified by the fact that climate change is a problem of the commons and because the cost of abatement varies across countries and jurisdictions.
[ii] Similarly to what happened with the EU ETS allowance price after the 2007-2008 financial crisis.
[iii] The UK government has passed a law committing the country to net-zero emissions by 2050. It is also worth noting that Paul Watkinson, former chief climate negotiator for France and head of the UN subsidiary body tasked with overseeing the Article 6 negotiations is a dual French-British national.
[iv] Article 6.2 engagements cover a broad range of cooperation reflecting the heterogeneity of individual country pledges which exist under the Paris Agreement. Such cooperation may include performance standards, technology transfer or cap-and-trade.
[v] Other, high-profile “legacy issues” include guidelines for determining additionality of project activities.