After over two weeks of deliberations, which were extended into the weekend, the UNFCCC Conference of the Parties (COP25) concluded on Sunday with no real outcomes on key decisions expected to be finalized this year. Specifically, consensus on Paris Agreement Article 6 implementation and international carbon markets and trading in mitigation outcomes, have been kicked to subsequent meetings and next year’s negotiations in Glasgow.
Article 6 details the “use of market based policy” in the Paris Agreement, in which financial trading instruments incentivize countries to increase their climate ambition and seek out more efficient global mitigation outcomes. For more detail on what Article 6 is, check out our article from last week.
As the most controversial aspect of the agreement – with massive and diverse economic implications for each nation and significant unanswered questions – Article 6 was a focal point of COP25 both inside and outside of the negotiating rooms. From transparency to double counting, to carry-over credits, we left COP25 with just as many unanswered questions as we had two weeks ago.
Let’s break it down:
Attempts to separate “ambition” from Article 6 fell short
From the outset of this year’s COP, Chilean and UN leaders emphasized that each country’s Nationally Determined Contributions (NDC) need to be strengthened to reflect the scientific consensus on climate impacts at and past 1.5C of warming. Currently, a majority of polluting nations’ NDCs are between “insufficient” and “critically insufficient” to adhere to the 1.5C limit as agreed on in Paris, which includes major economic powers such as the US, China, India, Brazil, and Saudi Arabia.
By separating Article 6 negotiations from more generalized discussions on ambition, negotiators hoped to proceed with enhancing NDCs among nations even if Article 6 negotiations stalled. By Saturday, unimpressive draft texts on ambition prompted significant backlash from major swaths of countries and organizations. In response, the final text included the following:
“[The Conference of Parties] re-emphasizes with serious concern the urgent need to address the significant gap between the aggregate effect of Parties’ mitigation efforts in terms of global annual emissions of greenhouse gases by 2020 and aggregate emission pathways consistent with holding the increase in global average temperature to well below 2 degrees above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 degrees above pre-industrial levels.”
Despite best efforts, discussions on ambition are still deeply entangled in Article 6 negotiations and entrenched within the economic interests of major polluting countries. As long as these targets lag behind, Paragraph 7 of the Paris Agreement text, which establishes review and ratchet mechanisms of the Paris Agreement, will serve a vital role in making progress on enhanced country ambitions next year.
Article 6 discussions move along on paper, but lack consensus
Going into COP25, Article 6 was ripe for development with hundreds of text brackets unresolved. Negotiations on these text brackets moved slowly through the official weeks, but were whittled down to just three brackets (one in 6.2, 6.4, and 6.8 respectively) by the morning of Sunday, December 15th.
However, don’t be fooled by the numbers. Major consensus is still lacking on the text, as a majority of resolved text remains ambiguous, non-committal, or otherwise insufficient for proper functioning in the next decade. In addition, at the insistence of Brazil and with support from others, future discussions will include all previous draft texts prepared at COP25, meaning that many issues that seemed resolved by session’s end are likely to be reopened in the future.
As expected leading into COP25, three major issues took center stage in Article 6 negotiations:
1. Talks on double counting impeded by Brazil
For the second COP in a row, Brazil acted as a major obstacle in finalizing text on double counting, remaining entrenched in the position that countries selling offset projects overseas should not be required to make a corresponding adjustment to their own NDCs. While Brazil’s representatives at COP25 were uncoordinated around the details of this position, Carbon Brief cites veteran Brazil negotiator José Domingos Gonzalez Miguez as the best source to cut through the noise:
“An NDC was made up of a set of government policies and programmes, rather than – as understood by others – a particular target to cut CO₂. In this case, any private sector activity resulting in Article 6.4 carbon reductions was guaranteed to be additional to the NDC – since it was, by definition, not part of the government’s own policies and programmes – and, therefore, the NDC itself should not need adjusting.”
This runs directly in conflict to most other parties, who focus NDCs and Article 6 discussions on aggregate global CO₂ emissions. Without properly accounting for offsets, NDCs could technically be met even if CO₂ emissions continue to rise.
Final text coming out of Madrid appears to force Brazil’s compliance with avoiding double-counting; with an “opt-out” period and loose bracketed text to satisfy Brazil’s position, however, we can expect this can of worms to be reopened and negotiated further in the coming year.
2. Carry-over of Kyoto carbon units remains entrenched in national interests
As with double-counting, major questions remain on what emissions reductions units from Kyoto can be used in the coming decade. Notably, China, India, and Brazil have generated billions of offset credits that have been largely proven as illegitimate reductions. As expected, countries that stand to benefit the most are negotiating for these credits to be usable within Article 6 and NDCs.
This has major implications for climate ambition. According to Climate Analytics, “If China, Brazil, and Australia use their respective carry-over emissions instruments from the previous decade towards their NDCs, global ambition would be reduced by 25%.” These offsets are essentially worthless hot air, currently valued at about 25 cents per metric ton of CO₂ on the open market, and would significantly impede future ambition by supplying countries with fake instruments to achieve their climate targets.
Final text out of Madrid indicates that “certified emissions reductions” (CERs) are allowed under the Paris Agreement, but only if they are re-registered with updated methodology by 2023. In addition, only credits produced after a certain vintage date would be eligible, but this date has not yet been determined. To appease Brazil, all ineligible CERs under this plan are placed in a reserve to leave open the possibility of using them in future years. Expect the discussion on carry-over Kyoto instruments to continue through 2020.
3. Funding adaptation with market proceeds remains non-binding
Several negotiating blocks, including the African Group and “G77 + China”, indicated that securing funding for adaptation via Article 6 mechanisms was a top priority. However, many developed countries see the effort as a “transaction tax” that would limit market activity.
Resulting text coming out of Madrid was unable to codify and require such funding avenues, rather stating that parties are “strongly encouraged to commit to contribute resources to adaptation, primarily through contributions to the Adaptation Fund, and to contribute commensurate with the rate delivered under the mechanism established by Article 6, paragraph 4, to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation.” In essence, the issue has not fully been resolved.
What’s next?
A key player in Madrid was a group of unlikely allies who authored the San Jose Principles, which could serve as a guiding light for future article 6 negotiations. Countries predominantly from Latin America and Europe used their voice to counter efforts by others who intended to lower the bar of ambition at COP25. The principles outlined called for an outright ban of any carbon credit that predates the effective date of the Paris Agreement, transparency around NDC accounting, and added support for countries most vulnerable to climate impacts. We can anticipate that these good actors will play a larger role leading into the Glasgow negotiations by growing their ranks and expanding the good will needed to make Article 6 discussions constructive as the Paris Agreement kicks in next year.
Before then, there is widespread opportunity for progress by the world’s largest polluters, such as the G7 Summit in June, the EU-China summit in September, the US presidential election in November and the G20 Summit in Saudia Arabia immediately following COP26 in Glasgow. The political developments of key global voices, such as the US, China, India, Brazil, and Australia, among others, could be the difference between a successful COP26 and another slow, entrenched, unsuccessful negotiation.
In the meantime, Climate XChange will continue to push forward action across US states that have committed to lead in the absence of federal ambition. Subnational and national governments are not waiting for UN negotiations, and are rather setting up their own market mechanisms both here and abroad. Regardless of how presidential elections go in November, the US will be limited to “observer” status at COP26, as they will no longer be a participant in the Paris Agreement and cannot engage in formal negotiations. In the face of national and international disappointment, progress at the subnational level will have to be a focal point of environmental progress.
