Rulebook eliminates double counting
The Parties to the Paris Agreement have agreed on new market mechanisms for transferring emission reductions from climate change mitigation projects, thus enabling emission reductions from these activities to be traded internationally. To ensure the overall level of ambition is raised, the reductions traded must exceed the Parties’ current nationally determined contributions (NDCs). This is aimed in particular at helping developing countries achieve climate neutrality more quickly. The European Union already decided in 2020 that it would meet its current climate target without purchasing international credits from other Parties.
The key outcome of the negotiations: Emission reductions may only be counted once, either in the purchasing country or the country where the measure is implemented. Double counting is ruled out under the newly agreed provisions, thus making Article 6 of the Paris Agreement fully operational. This will ensure that emissions trading really does lead to better climate action. Furthermore, the rules under Article 6 of the Paris Agreement offer participants in the voluntary carbon market a clear standard for using emission reductions.
For the overall success of the conference a concession to developing countries was necessary which allows the continued use of a restricted number of emission reductions from Clean Development Mechanism projects or from activities already underway. At COP26, Germany expressed its opposition to the use of these pre-2021 units, but accepts the compromise.
To strengthen the integrity of trade in emission reductions, an independent complaints procedure will be set up which can be used by human rights organisations, NGOs and representatives of indigenous peoples in the case of problems or deficiencies in the climate action projects concerned.
State Secretary Jochen Flasbarth commented: "This is a positive outcome that will facilitate better climate action. The rules close loopholes in the context of fulfilling climate commitments, and at the same time create a financing instrument for additional mitigation activities in developing countries. The new standards can also be applied in the voluntary market, and further robust rules will be put in place to this end. All private stakeholders should take on an active role here and only use emission reductions that have been verified as meeting the newly created UN standard."
Article 6.2 of the Paris Agreement regulates the general framework. It includes the stipulation that double counting must be avoided, and sets out which basic requirements must be laid down for the accounting, trade and transfer of emission reductions.
Article 6.4 establishes a UNFCCC-monitored project mechanism which can generate emission reductions that can be counted towards an NDC. The current decision regulates all the details of managing this mechanism, from project application to calculation methodologies and registration. An independent complaints mechanism has also been established.
The register will include details of the activities for which the host country has issued the respective emission reductions (6.4ERs). It also indicates whether these ERs have been accounted for in the balance of the host country and can therefore be used for other NDCs, the aviation offsetting system CORSIA or for greenhouse gas compensation through the voluntary market. Furthermore, the register will show whether the emission reductions of a measure are counted towards the host country’s NDC and consequently may not be used for CORSIA or towards the NDCs of other Parties. In the latter case, the emission reductions should not be used on the voluntary market either.