Although Article 6.7 states that the annual COP should adopt “rules, modalities and procedures” for the carbon market under Article 6.4, there is disagreement on the extent of national control over its operation compared to the UN regulatory body that approves each individual project or methodology. If there is no agreement by the end of COP25, the issue will be forwarded to COP26 in Glasgow in December 2020, so the UK will have to push diplomatically to get it through. At the only public meeting of last week`s meeting, board members expressed disagreement over the extent of their powers. They act individually and do not represent their governments. The lack of agreement on how to solve this problem reflects the technical challenges it poses, rather than political disagreements over the appropriate solution, says former co-chair Kizzier. The three distinct mechanisms – referred to in Articles 6.2, 6.4 and 6.8 – have all become part of the Paris Agreement in recognition of the different interests and priorities between the parties to the Agreement. These differences remain and will have to be replaced again if the Regulation referred to in Article 6 is to be approved. This reduction means that problems and red lines can be exchanged again as negotiators work towards an agreement on the settlement of Article 6. There could also be attempts to link these talks to other political priorities at the COP, making things even more complicated. This underscores a reason for disagreement over Article 6(4), namely that cdm hosts did not have their own Kyoto emission reduction targets, meaning that it was impossible to “double” savings to achieve more than one target. There are strong differences of opinion on how the OMGE should be guaranteed in practice.

Decisions of the CDM Executive Board may be blocked if at least three members of the Board object. If no agreement is reached at this meeting, the matter will be deferred to a meeting from 1 to 14 December. If the CDM continued to function after 2020 without a political decision, “not only are we sacrificing leverage to improve the CDM, but we are also losing an important incentive to reach agreement on [carbon markets],” she said. The precise approach to avoid the use of emission reductions by more than one country is an area where there is significant disagreement. It is closely related to the idea of double counting under Article 6.2, which raises questions about what is considered “within” or “outside” the scope of a country`s NDC, as some liabilities cover only part of the economy. There is therefore disagreement as to whether – and if so, how – the many mitigation methods, projects and emission credits of the Kyoto era should be included in the Article 6(4) market. “It`s hard to imagine how countries will agree on the right options and the right accounting rules [and] methodologies if we don`t even reach an agreement to eliminate those that are patently incompatible. I mean, it`s not even climate ambition, in many cases it`s common sense.

The postponement of Cop26 due to the coronavirus pandemic has compounded uncertainty and created a two-year gap before the next chance to reach an agreement. At the COP25 International Climate Summit in Madrid in December 2019, climate negotiators will again try to finalise the Article 6 “settlement” governing voluntary international cooperation on climate change, including carbon markets. To fully understand the task they face and the key areas of the remaining disagreements, the first port of call is the text of Article 6 of the Paris Agreement itself, which is presented in annotated form in the following graph. While this debate may seem rather dry, choosing a specific accounting approach has the potential to determine whether or not a country has met its climate goals. This adds a touch of political excitement to the otherwise technical accounting negotiations. As countries likely to be buyers in the carbon market, Mace says they are primarily concerned about costs: “They don`t want to have to pay more to achieve their goals – although they will always save money by accessing international loans rather than the cost of domestic mitigation.” The recent draft rules of Article 6.4 cover a narrower menu of options, with two, five or “X per cent” of the revenue allocated to the adjustment and a fixed amount of “X” charged to the administration. It should be noted, however, that the term “double counting” does not appear in Article 6(4). Instead, it has a provision “considered key” by Brazil, according to a report on the emergence of the Article 6 text published in 2018 by the European Capacity Building Initiative (ECBI). This could make it more difficult to achieve long-term goals, Pollitt says, if it means the technologies needed to achieve net-zero emissions have not been developed.

Countries like Brazil and India want to continue trading credits from projects registered with the Kyoto regime in the new global carbon market. This is hampered by resistance from Europe and climate-vulnerable countries, which are warning of flooding the market with low-value credit and undermining the Paris targets. However, many richer countries are unwilling to accept this, leading to a stalemate. The battle lines are similar to those for and against “automatic cancellation” to reach the OMGE – with one side advocating a mechanism that the other side says will actively discourage trade. This supports the idea discussed at COP21 but not included in the Paris text that emission reductions should go “beyond the host country`s NDC” in accordance with Article 6.4. Some argue that the use of strict reference values would ensure the `OMGE`, the net mitigation benefit required by Article 6(4). However, Forrister says there is “value” in the infrastructure developed under the CDM to manage its emission reduction projects, including the registration and verification cycle. Similarly, Forrister asserts that “many CDM methods have been progressively improved” and could be transferred in the future or used as the basis for the methods of Article 6.4. While insisting that Brazil is “absolutely opposed to double counting when it comes to carbon credits,” he also argued that it should not be necessary for a country that hosts offset schemes to make appropriate adjustments to reflect the sale of loans. Reaching a Paris agreement that satisfies everyone meant leaving some degree of “constructive ambiguity” in the text. This in turn meant that there was room for a number of interpretations in the wording of the rules.

Second, the first of the three mechanisms is set out in Article 6(2), which allows countries to voluntarily exchange “mitigation outcomes” for use in their Paris commitments, provided they promote sustainable development while ensuring environmental integrity and transparency. “Transparency” here is a reference to the reporting obligations of all countries under the Paris regime. The mechanism stimulates sustainable development and emission reductions, while giving developed countries flexibility in achieving their emission reduction targets. The OECD-IEA report presents five alternative accounting approaches currently being considered for continued trade between countries with one- or more-year targets. An oft-cited example is the collapse of the Soviet Union, which led to an economic slowdown that left ex-Soviet countries rich in loans largely meaningless. This phenomenon, dubbed “hot air,” has been touted as another potential problem for the Paris regime. First, the OMGE principle set out in Article 6(4) has the potential to go beyond compensation and the `zero-sum game` set by the Kyoto markets (see below). The result would be the purchase and sale of carbon credits, which would lead directly to a reduction in emissions. At Cop26, discussions will resume on establishing new rules for a global carbon market, known as Article 6 of the Paris Agreement. .