What is the COP?

The ‘Conference of the Parties’ also known as COP, is the foremost and only platform where climate change and green energy policy is collectively decided globally. (1 & 2) First held in Berlin in 1995, COP remains the foremost global climate change conference and has been held annually. 

After 26 meetings of COP held, many important climate change policy pledges and outcomes have been achieved, such as:

  1. The commitment by developed countries at COP15 to mobilise 100 billion USD per year for climate action in developing countries, (3); 
  2. At COP21 we saw the landmark achievement of the Paris Agreement; 
  3. At COP19 The Warsaw International Mechanism for Loss and Damage was established; and the later launch of the Santiago Network for Loss & Damage at COP25 to enhance knowledge, action and provide technical assistance to developing countries relating to loss and damage associated with the impacts of climate change (4). To learn more about COP watch part 1 of our new policy reaction series on this topic!

What are the expected benefits?

 At COP26, delegates were expected to come up with ambitious targets through 2030, known as nationally determined contributions, or NDCs and to agree on common timelines for revision and monitoring of their climate commitments (5 & 6). This would ultimately ensure that we stay well below the dreaded 2oC increase in global temperatures projected by scientists. Other key decisions that were expected from COP26 were: 

1) Increased climate finance to help poorer countries transition and adapt;

2) The phasing out of coal use and reinforcing natural carbon sinks such as forests, and;

3) Implementing a carbon trading system. None of which were easy tasks.

The COP26 negotiations took place over two weeks: one first week of technical negotiations by government officials, followed by high-level Ministerial and Heads of State meetings in the second week, where the final decisions were made. Here are some of the facts: 

  1. For the first time the need to tackle methane was mentioned, with proposed reductions in emissions by 2030, where the US and EU have made a joint pledge to cut global methane emissions by almost a third in the next decade (7);
  2. A partial win achieved with the first ever inclusion of an agreement on coal and fossil fuel use. However, language used mentions a “phase down” or limit rather than the hoped for entire “phase out”, and;
  3. Countries also recognised the need to significantly increase support for developing country counterparts, beyond 100 billion USD per year (8 & 9).

Other major wins achieved at COP26 included:

  1. An unexpected US-China climate deal called the ‘Joint Glasgow Declaration on Enhancing Climate Action in the 2020s’. Under the arrangement, the two countries agreed to engage in respective and joint climate actions within multilateral processes, including the UNFCCC process, to avoid the catastrophic impacts of climate change (10 & 11);
  2. Also achieved were agreements on carbon trading. As promised, a deal was finalised on Article 6 of the 2015 Paris Agreement, finally setting the rules for carbon markets  (12). But not without its moments of stress up until the very last minutes of the conference.

Article 6: what is it, and why the controversy?

Article 6 of the Paris Agreement is one of the least accessible and complex concepts of the global accord. It consists of nine paragraphs providing principles for how countries can “pursue voluntary cooperation” to reach their climate targets. Defining the rules for this Article has constituted a majority of negotiations during the last six COP meetings, as negotiators struggled to agree upon the details of this ‘cooperative approach’ proposal and how to apply them to international carbon markets (13).

Carbon markets are a big deal, both in terms of potential emissions reductions and the cost savings they can generate. The way they work is that they allow countries that struggle to meet their emissions-reduction targets under their national climate plans (NDCs), or want to pursue less expensive emissions cuts, can purchase emissions reductions from other nations. Half of countries’ initial NDCs (constituting 31% of global emissions) include the use of international cooperation through carbon markets. There is however concern over the ability of these new carbon market rules to deliver on their promise, given that prior international carbon market-style arrangements and the UNFCCC Kyoto Protocol’s “flexibility mechanisms have a controversial track record in actually lowering GHG emissions. Moreover, some past CDM projects had adverse social impacts. 

The Article 6 text attempts to clarify how international carbon markets involving governments should function. To help ensure reductions and that these are real, additional, and verifiable, private markets should follow those norms and detailed standards. Article 6 has three operative paragraphs:

  • Article 6.2 provides an accounting framework for international cooperation, such as linking the emissions-trading schemes of two or more countries. It also allows for the international transfer of carbon credits between countries.
  • Article 6.4 establishes a central UN mechanism to trade credits from emissions reductions generated through specific projects (e.g. country A could pay for country B to build a wind farm instead of a coal plant). Emissions are reduced, country B benefits from the clean energy and country A gets credit for the reductions.
  • Article 6.8 establishes a work program for non-market approaches, such as applying taxes to discourage emissions (14). 

Here is the controversial part… Without the right rules in place, Article 6 has the potential to actually increase global emissions. For instance, countries have expressed concern about double-counting for several years now: the Paris COP decision specified that double-counting in Article 6 must be avoided on the basis of a “corresponding adjustment”. A corresponding adjustment means that when one country sells emissions reductions to another, it must adjust its own emissions figures accordingly. In other words, it must increase its level of emissions reductions in its NDC to make up for the fact that it sold some emissions reductions to another country (14).

And while the Paris Agreement is clearly trying to address this risk, the extent to which double-counting is actually avoided depends on how accounting rules are operationalized. In the aftermath of the COP26, it has been said that even if the new rules largely reduce the risk of double counting, they are not completely airtight. For example it still doesn’t cover for “voluntary” credits purchased by private companies, which do not have to go through the Article 6 system and hence are not accounted for. This means that largely unregulated private schemes can still allow double counting. If such credits were to be issued, it could lead to greenwashing for private companies to make offsetting claims from these “non-authorised” units. Another issue on the table was whether countries could use credits generated under the Kyoto Protocol prior to 2020, which remain unused given a lack of demand. Yet, negotiators agreed on making these credits from the Kyoto Protocol’s Joint Implementation mechanism not eligible under Article 6 (15).

After 26 years of COP, several important wins have been achieved and some of the controversies around carbon markets stemming from Article 6 have been overcome. Namely: 

  1. A double track system was established- where bilateral trades will not be subject to the carbon tax, and 5% of proceeds from offsets will be collected to go toward an adaptation fund for developing countries. At the same time, 2% of the offset credits will be cancelled.
  2. A cut-off date of 2013 has been introduced for carrying forward any credits created since then. 
  3. Double counting under Article 6 will not be permitted anymore, as the country that generates the credit will decide whether to sell to other nations or to count them towards their own climate targets.

Looking ahead, the timeline for full implementation of the rules still leaves a few years of flawed methodologies and unclarity on the new rules. Nevertheless, great progress has been achieved at the last COP and the world is holding high expectations for the new carbon markets solutions.

Edited By Beatriz Ildefonso

References

  1.   United Nations Climate Change, Conference of the Parties (COP), 2021
  2.   Lisa Friedman, The New York Times, What Is COP26? And Other Questions About the Big U.N. Climate Summit, Nov 15, 2021
  3. OECD, Statement by the OECD Secretary-General on future levels of climate finance, Developed countries likely to reach USD 100 billion goal in 2023 Oct, 2021.
  4. IISD SDG Knowledge Hub, UNFCCC Launches Website to Mobilize Santiago Network on Loss and Damage, June 2020
  5. UN News Global perspective Human stories, COP26 – what we know so far, and why it matters: Your UN News guide, 29 October 2021
  6. The Current, What is COP26? How global climate negotiations work, what’s expected from Glasgow summit, Shelley Inglis/University of Dayton November 1st, 2021 
  7.   The Guardian, US and EU pledge 30% cut in methane emissions to limit global heating, Sept 2021.
  8. BBC News, COP26: What was agreed at the Glasgow climate conference?, Nov 2021
  9. The Conference of the Parties, Glasgow Climate Pact, Nov 2021.
  10. U.S Dept. of State, U.S.-China Joint Glasgow Declaration on Enhancing Climate Action in the 2020s, Nov 2021.
  11. 11.  BBC News, COP26: China and US agree to boost climate cooperation, Nov 2021
  1. Reuters, COP26 U.N. climate summit reaches carbon markets deal, Jake Spring and Kate Abnett, Nov 2021.
  2. IISD, The Paris Agreement’s New Article 6 Rules, Dec 2021
  3. WRI, What you need to know about article 6 Paris Agreement, Dec 2021
  4. Carbon Market Watch, FAQ Deciphering Article 6 of the Paris Agreement, Dec 2021