The Paris Rulebook after COP26
09 December 2021
After the conclusion of the Paris Agreement in 2015, parties to the Agreement set a timeline of three years to finalize the implementing guidelines. At the 2018 summit in Katowice, Poland, Parties adopted the Paris Rulebook, at that time also referred to as the Katowice Climate Package or Katowice Rulebook, whose main achievements were the substantiation of the content countries should include in their NDCs; the requirement to provide information on the financing of climate action in developing countries; and, setting out parties’ information and reporting requirements. The Paris Rulebook was however incomplete without an agreement on all of its aspects, including on the rules under Article 6. At COP26 in Glasgow, all of the outstanding issues were resolved, making the Paris Agreement fully operational. The most important changes concerned the three operative parts of article 6 and the common timeframes for NDCs.
Article 6.2 of the Paris Agreement: guidance on cooperative approaches
Article 6 essentially aims to raise climate ambition, by allowing Parties to work towards their Nationally Determined Contributions (NDCs) by cooperating – or trading emission reductions in the form of carbon units – in both market and non-market approaches.
COP26 further substantiated the bilateral cooperative approaches established in Article 6.2, which allow countries to trade emission reductions outside of an existing international framework. As such, existing emission schemes – like the EU Emission Trading Scheme – could be connected to similar systems in other countries and regions. This would facilitate the trade of emission reductions in one country/ region to another which then would count towards the NDCs and climate ambitions of the latter.
In this regard, article 6.2 states that Parties shall, where engaging on a voluntary basis in cooperative approaches that involve the use of internationally transferred mitigation outcomes (ITMOs or carbon units) towards nationally determined contributions, promote sustainable development and ensure environmental integrity and transparency, including in governance, and shall apply robust accounting to ensure, inter alia, the avoidance of double counting, consistent with guidance adopted by the Conference of the Parties serving as the meeting of the Parties to this Agreement.
In other words, engagement in cooperative approaches requires environmental integrity, transparency and robust accounting to avoid double counting.
One of the most important achievements in Glasgow was the adoption of comprehensive accounting rules for the international transfer of emission reductions. These rules were necessary to facilitate bilateral emissions trade even with the presence of varying metrics and targets in Parties’ NDCs (the Oeko-Institut provide a helpful summary of rule changes in this blog). While many countries pledge to reduce greenhouse gas emissions, other countries may make different pledges like invest in renewable energy targets, or afforest hectares of land.
Additionally, countries’ NDCs may have varying timelines; many countries make pledges by one single year, though multi-year pledges also remain common. Another difficulty for bilateral emissions trade is the fact that some countries make pledges to reduce emissions, but only in certain areas of the economy, without including the aggregate of emissions stemming from the entire economy.
How has the Paris Rulebook been adapted to resolve these issues?
Carbon units (ITMOs) must be measured in greenhouse gas emissions - carbon dioxide per tonne - or in other non-greenhouse gas metrics determined by the participating Parties that are consistent with the NDCs of the participating Parties. All carbon units - both quantified in a non-greenhouse gas metric and in carbon dioxide - must be adjusted. These corresponding adjustments should ensure that trade would not lead to a net increase in emissions across participating. Further information can be found in this UN FCC guidance.
Parties within and between NDC implementation periods. These corresponding adjustments differ for countries with a single-year NDC and those with a multi-year NDC.
Parties with a single-year NDC must provide an indicative multi-year emissions trajectory, trajectories or budget for the NDC implementation period that is consistent with implementation and achievement of the NDC, and annually applying corresponding adjustments for the total amount of ITMOs first transferred and used for each year in the NDC implementation period.
Parties with a multi-year NDC must calculate a multi-year emissions trajectory, trajectories or budget for its NDC implementation period that is consistent with the NDC, and annually applying corresponding adjustments for the total amount of ITMOs first transferred and used each year in the NDC implementation period and cumulatively at the end of the NDC implementation period.
Double counting is a risk that could occur if an emission reduction were to be counted twice towards national climate targets.
Essentially: “when two countries engage in the transfer of carbon market units, they must make opposite entries (“corresponding adjustments”), to their reported emissions: the country selling carbon market units makes an addition to its emission level, and the country acquiring such units makes a subtraction. Both countries then compare the adjusted balance with their target level to assess whether they have achieved their target. This approach ensures that only the buyer country can use transferred emission reductions, and thus avoids “double counting””.
In order to avoid double counting, exemptions from these accounting rules were not upheld.
There will be more transparency requirements on seller countries for carbon units that are transferred, to ensure seller countries account for all carbon market units they transfer, without any exemptions.
Accounting exemptions were rejected for countries whose NDCs do not include the whole economy but rather a part of it, so emission reductions in a certain part of the economy that is not included in the NDCs cannot be counted.
There can be no transfer of carbon units from one NDC period to another - this should prevent Parties from emitting substantial amounts of greenhouse gas with the promise to transfer this pollution over the next few years.
Article 6.4 of the Paris Agreement
Article 6.4 establishes a voluntary mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development. The difference with bilateral cooperation is that the system under Article 6.4 relies on the supervision of the Conference of the Parties and thus constitutes an existing international framework of emissions trade. As is the case under bilateral cooperation, Article 6.4 also allows the emission reductions achieved by one Party to count towards the NDCs of another Party with the transfer of carbon units to the latter.
The purpose of this mechanism is namely to (a) promote the mitigation of greenhouse gas emissions while fostering sustainable development; (b) incentivize and facilitate participation in the mitigation of greenhouse gas emissions by public and private entities authorized by a Party; (c) contribute to the reduction of emission levels in the host Party, which will benefit from mitigation activities resulting in emission reductions that can also be used by another Party to fulfil its nationally determined contribution; and (d) deliver an overall mitigation in global emissions.
At COP26, the text of Article 6.4 has been further clarified with the following definitions.
- An “Article 6, paragraph 4, activity” is an activity that meets the requirements of Article1 6, paragraphs 4‒6, these rules, modalities and procedures, and any further relevant decisions of the Conference of the Parties.
- An “Article 6, paragraph 4, emission reduction” (A6.4ER) is issued for mitigation achieved pursuant to Article 6, paragraphs 4‒6, these rules, modalities and procedures, and any further relevant decisions of the CMA. It is measured in carbon dioxide equivalent and is equal to 1 tonne of carbon dioxide equivalent calculated in accordance with the methodologies and metrics assessed by the Intergovernmental Panel on Climate Change and adopted by the CMA or in other metrics adopted by the CMA pursuant to these rules, modalities and procedures.
- The role of the Conference of the Parties has been clarified.
- The rules of procedure for the Supervisory Body have been established, which supervises the mechanism under the authority and guidance of the Conference of the Parties (CMA).
Article 6.8 of the Paris Agreement: non-market approaches
Article 6.8 establishes non-market approaches to implement Parties’ nationally determined contributions. This system provides more options than solely the trade in emission reduction, which is central to the market-based approaches described above. As such, non-market approaches allow Parties to also invest in finance, technology transfer and capacity building to reach the goals of the Paris Agreement.
Article 6.8 aims to: (a) promote mitigation and adaptation ambition; (b) enhance public and private sector participation in the implementation of nationally determined contributions; and (c) enable opportunities for coordination across instruments and relevant institutional arrangements.
The now completed Article 6.8 thus provides a basis for:
- Voluntary collective actions that are not reliant on market-based approaches and that do not include transactions or quid pro quo operations;
- Integrated, innovative and transformational actions that have significant potential to deliver higher mitigation and adaptation ambitions;
- The work programme aims to identify measures to facilitate non-market approaches and enhance linkages and create synergies.
Article 4.10 of the Paris Agreement: common time frames for nationally determined contributions
Common time frames for NDCs have been agreed. Parties are encouraged to submit five-year NDCs every five years. Parties should communicate their pledges in 2025 for the 2030-2035 time period, and in 2030 Parties should communicate their pledges for the 2035-2040 time frame and so forth every five years thereafter.
Article 13 of the Paris Agreement: enhanced transparency framework
Article 13.1 establishes an enhanced transparency framework for action and support, with built-in flexibility which takes into account Parties' different capacities and builds upon collective experience. Transparency is essentially key to build mutual trust and confidence that every Party engages in the collective goal of net zero. Under the enhanced transparency framework, Parties are required to report their NDCs, emissions and climate financing.
At COP26 negotiations revolved around the content of Parties’ emission reports and how to indicate the usage of flexibility. An agreement was reached on the following aspects.
- Common reporting tables.
- Common tabular formats.
- Outlines for the biennial transparency report.
- A training programme for technical experts participating in the technical expert review of biennial transparency reports.
COP26 lastly resulted in an adoption of the modalities and procedures for the operation and use of a public registry referred to in Article 4.12 of the Paris Agreement, and in Article 7.12 of the Paris Agreement.
Authors: Gauthier Van Thuyne and Ayana Dootalieva.