Environment

The developed world hopes to invest in emissions reduction in Global South via markets for carbon credits

·         Market is that the method the developed world hopes itll be able to invest in emission reduction within the countries of world South and find credits in its carbon balance sheet.

·         The Paris Agreement includes “market mechanism” because the tool to create this happen.

·         The kyoto Protocol, the primary accord under the United Nations Framework Convention on climate change that came into force 2005, had established Clean Development Mechanism (CDM) for this carbon purchase.

·         The Paris Agreement includes provision for 2 sorts of market instruments— Internationally Transferred Mitigation Outcomes (ITMO) under Article 6.2 and sustainable Development Mechanism (SDM) under Article 6.4.

·         Internationally Transferred Mitigation Outcomes (ITMO) under ITMO, the aim is to determine bilateral or mini-multilateral markets—similar to the EU Emissions mercantilism System.

·         It is additionally regarding securing overall mitigation in international emissions. Internationally transferred mitigation outcomes (ITMOs) use a carbon dioxide equivalent [CO2e] metric for a new set of market provisions or alternative greenhouse gas (GHG) mitigation outcomes that ar outlined under Article 6 of the Paris Agreement.

·         Under Article 6.2, ITMOs differ from previous offset schemes, as they count toward countries’ nationwide Determined Contributions (NDCs), support overall mitigation in international emissions (for Article 6.4) and involve a lot of substantial government participation than under the Clean Development Mechanism of the kyoto Protocol.

·         Although the Paris Agreement rulebook isnt absolutely finalized, enough has been agreed for a few countries to begin participating and designing for ITMO transactions.

What is in Article 6.2 of the Paris Agreement?        

·         Article 6 of the Paris Agreement makes provisions for voluntary international cooperation between parties to attain NDC targets.

·         Sub-section 6.2 calls for transparency and also the avoidance of double count once 2 parties have interaction within the international transfer of emission reductions well-known within the Agreement as Mitigation Outcomes.

·         This sub-section implies that 2 parties will enter into an agreement whereby one party reduces carbon emissions and transfers those reductions to the opposite party that counts it towards its NDC targets.

·         It is assumed that the receiving party can give financial compensation to the transferring party.

How does Article 6.2 help a country achieve its NDC commitment?

·         Transferred mitigation outcomes contribute to the NDC targets of the party that purchases the ITMO.

·         The selling party must make a corresponding adjustment which means that it has to “un-count” these mitigation outcomes from the emission reductions that contribute to its NDC targets Sustainable Development Mechanism (SDM) Under SDM, the aim was to create a new international carbon market for the trade of emissions cuts, created by the public or private sector anywhere in the world, shaped on the previous CDM.

·         Preventing double-counting is tougher under the Paris Agreement than under the kyoto Protocol.

·         This is as a result of, unlike kyoto Protocol, all countries have taken on national targets (NDCS) under the Paris Agreement.

·         Article vi of the Paris Agreement established the sustainable Development Mechanism (SDM) as a new carbon market instrument for the amount when 2020.

·         Its purpose is inter alia to exchange the existing mechanisms under the kyoto Protocol, the CDM and JI with a more effective climate tool.

·         The chapeau of Article six sets out the purpose of the article together with the SDM, specifically that its provisions are established to promote: i) higher ambition ii) sustainable development and iii) environmental integrity.

·         The SDM can function during a radically modified world, wherever all Parties have commitments to contribute to the common objectives of limiting global warming to 1.5 degrees, de-carbonization by the half of this century, and also the sustainable Development Goals arranged  move into the United Nations 2030 Agenda.

·         Notably, under the Paris Agreement, all Parties can host SDM projects on a voluntary basis.

·         When elaborating the principles, modalities and procedures for this new mechanism, the experience with existing mechanisms, particularly the CDM ar of utmost importance.

·         The Paris Agreement specifically invites Parties to create on the expertise gained thus far from the kyoto mechanisms.

·         However, the SDM should not be a copy-paste exercise from the CDM.

·         Rather, the SDM ought to be a replacement instrument that draws lessons from each the successes and mistakes of the CDM.