Article 6 of the Paris Accord
Article 6 of the Paris Accord deals with international carbon trading which is allowed for on a voluntary basis. Article 6 calls for Parties to the Paris Accord to cooperate on a voluntary basis on the implementation of their nationally determined commitments (NDCs). Cooperative approaches are defined under Article 6.1 of the Paris Accord. Under Article 6.2 and Article 6.3 of the Paris Accord, it is specified that it will be possible to undertake international transfers of mitigation outcomes (ITMOs). Articles 6.2 – 6.7 then defines a mechanism to support mitigation and sustainable development which operate under the authority of the COP. These mitigation outcomes can then be used to fulfill the ambition of another Party. Article 6.8 and 6.9 of the Paris Accord then defines a framework for non-market approaches that will aim to help Parties meet their obligations under the Paris Accord. The concept of ‘additionality’ whereby projects need to show that they will not take place under a business as usual approach is also present under Article 6 of the Paris Accord. This suggests that there will be similarities between international carbon trading under the Kyoto Protocol and international carbon trading under the Paris Accord.
One major difference is that under the CDM of the Kyoto Protocol there were developing countries (with no caps) and developed countries (with caps). Under the Paris Accord, all signatories have Nationally Determined Commitments (NDCs) meaning that the reduction in GHG emissions under the cap of one country results in the increase in GHG emissions in the cap of another country. There is therefore no net overall decrease in GHG emissions as a result of the transfer of mitigation outcomes for one country to another.
The means by which market or non-market approaches can and will be undertaken under Article 6 and how cooperative approaches, ITMOs and the new sustainable development mechanism of the Paris Accord will work all remains to be defined. Originally, ITMOs were not envisaged as some kind of international carbon credit unit. However, emerging thinking may well lead to the use of ITMOs as the new form of carbon credit under the new and emerging international carbon market that should start from 2020 onwards.
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