Mitigation Update: Market Mechanisms Analyzed
Kibae Park/Sipa Press
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The Marrakech Climate Change Conference was host to numerous events, resources and platforms aiming to advance mitigation efforts by developing and developed countries alike, with one particular tool, market mechanisms, surfacing in a number of events and publications.

One resource launched at the Conference, and designed for a “post-Paris Agreement” world, is the NDC Helpdesk developed by the NDC Support Cluster.

The World Bank’s Partnership for Market Readiness (PMR), which supports the preparation and implementation of carbon pricing instruments, such as carbon taxes or emissions trading systems (ETS), released two publications: ‘Emissions Trading Registries: Guidance on Regulation, Development and Administration,’ and ‘Emissions Trading in Practice: A Handbook on Design and Implementation.’

28 November 2016: The Paris Agreement’s new paradigm of nearly universal commitments to mitigate emissions featured widely on the agenda as Parties gathered in Marrakech, Morocco, for the latest round of climate talks.

As Parties worked toward the “rulebook” for, among other things, the mitigation components of nationally determined contributions (NDCs) to the Agreement, the Marrakech Climate Change Conference was host to numerous events, resources and platforms aiming to advance mitigation efforts by developing and developed countries alike.

During negotiations in Marrakech, the Ad Hoc Working Group on the Paris Agreement (APA) discussed the further guidance needed in relation to the mitigation section of decision 1/CP.21 (Paris outcome), including the features of NDCs, information to facilitate their clarity, transparency and understanding, and accounting for them. Some Parties stressed the need to reflect differentiation in the operational guidance, with one Party suggesting guidance must recognize that Parties have “a common path but different starting points and paces.” Developing countries underscored that flexibility is necessary to account for varying capacities. The APA agreed to continue work in this area, deciding to invite Party submissions on this item based on questions identified in Marrakech, with a compilation of the submissions expected by APA 1-3 (May 2017). A roundtable for Parties will also be convened in conjunction with APA 1-3 based on the submissions. [IISD RS Coverage of the Marrakech Climate Change Conference]

As developing countries sought assurances in the negotiations that the resources and technical assistance necessary to fulfill their NDC potential are forthcoming, one resource launched at the Conference, the NDC Helpdesk, is designed to provide such assistance in the “post-Paris Agreement” world. The Helpdesk is an initiatives of the NDC Support Cluster, which is led by the German Federal Environment Ministry’s (BMUB) International Climate Initiative (IKI) and includes the Climate Development and Knowledge Network (CDKN), the Energy Research Centre of the Netherlands (ECN), the German International Cooperation Agency (GIZ), the Low Emissions Development Strategies Global Partnership (LEDS GP), the NewClimate Institute, SouthSouthNorth, the UN Development Programme (UNDP) and the World Resources Institute (WRI).

As developing countries seek to implement the mitigation aspects of their NDCs, the Helpdesk established by the Cluster can provide support in the areas of measurement, reporting and verification (MRV) and data, sector approaches, institutional and political frameworks, and financing. [International Partnership on Mitigation and MRV Press Release] [NDC Helpdesk Webpage]

In terms of financing developing countries’ mitigation actions, one particular tool, that of market mechanisms, surfaced in a number of events and publications, as well as the negotiations themselves in Marrakech.

This market-based avenue for securing funding for developing countries was highlighted in a report released by the World Bank’s Carbon Initiative for Development (Ci-Dev), which provides results-based payments in least developed countries (LDCs) for reduced emissions. The report recommends ways to manage the delivery risks and opportunities for emissions reductions post-2020. The authors tackle, for instance, the question of how to transition a Clean Development Mechanism (CDM) portfolio under the Paris Agreement. [The Impact of INDCs, NAMAs and LEDs on Ci-Dev Operations and Programs] [Ci-Dev Website]

These sources of technical assistance and information are important in building developing countries’ capacity to implement mitigation measures. For example, results-based payments can be garnered through REDD+, but to participate, countries must be able to provide a forest reference emission level (FREL), such as that provided by Indonesia on 4 January 2016, able to withstand the scrutiny of a technical assessment, such as that reported on Indonesia’s FREL on 15 November. [Report on the Technical Assessment of the Proposed FREL of Indonesia Submitted in 2016]

However, when it comes to market mechanisms, all countries are in need of capacity building to ensure markets are well-designed and effective, and deliver overall mitigation and maintain environmental integrity. The World Bank’s Partnership for Market Readiness (PMR), which supports the preparation and implementation of carbon pricing instruments, such as carbon taxes or emissions trading systems (ETS), released two publications: ‘Emissions Trading Registries: Guidance on Regulation, Development and Administration,’ and ‘Emissions Trading in Practice: A Handbook on Design and Implementation.’ After describing various design options for registries, which issue, record and track carbon units, the first paper gives the ins and outs of developing the legal and institutional frameworks, registry administration and information technology (IT) systems. It also uses REDD+ as an example for registry requirements for emerging market mechanisms and results-based climate finance programmes.

The latter publication provides a ten-step process for creating a well-designed ETS, which, according to the authors, can mobilize the private sector, draw investment and foster international cooperation. The Handbook emphasizes the rationale for an ETS as an effective, credible and transparent tool for achieving emissions reductions. [PMR Website] [Emissions Trading Registries: Guidance on Regulation, Development and Administration] [Emissions Trading in Practice: A Handbook on Design and Implementation]

In the negotiations, the Subsidiary Body for Scientific and Technological Advice (SBSTA) addressed Article 6 of the Paris Agreement, which includes provisions for cooperative approaches that involve internationally transferred mitigation outcomes (ITMOs), a mechanism to contribute to the mitigation of greenhouse gas (GHG) emissions and support sustainable development, as well as non-market approaches.

Parties discussed plans for creating: the guidance necessary for cooperative approaches; the rules, modalities and procedures for the mechanism; and the work programme for the non-market approaches framework. The SBSTA agreed to invite Party submissions on the elements to be addressed, including their operationalization, in each of these three areas, as well as overarching issues and relationships among the three parts of Article 6 and other relevant aspects of the Agreement. Parties will also hold, in conjunction with SBSTA 46 (May 2016), a roundtable based on Parties’ submissions.

The International Civil Aviation Organization (ICAO), whose sector is not covered by the Paris Agreement, has opted to use a global market-based measure (GMBM) to achieve emissions reductions. Air transport has traditionally proved a difficult area to reduce emissions, relying heavily on energy efficiency improvements, as alternative fuels remain elusive. Though the Solar Impulse has completed the first aerial circumnavigation of the world powered entirely by the sun, and the Solar Impulse Foundation launched the World Alliance for Clean Technologies on 11 November, emission-free travel for passenger aircraft is still a long way off. Thus, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) will offset emissions growth from international travel after 2020, as described by a paper published by the Emirates Diplomatic Academy (EDA). The EDA Insight, titled ‘Tackling CO2 Emissions from International Aviation: Challenges and Opportunities Generated by the Market Mechanism ‘CORSIA’,’ notes that the eligibility criteria for offsets have not yet been established and opposes allowing voluntary market offsets to be eligible for the scheme. The paper notes that this will help prevent civil society and media backlash against offsets of doubtful quality, while preventing a significant reduction in offset prices that could result from flooding the market with offsets from voluntary programmes. [Climate Action Programme Press Release] [EDA Press Release] [Tackling CO2 Emissions from International Aviation: Challenges and Opportunities Generated by the Market Mechanism ‘CORSIA’]

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