For the carbon market mechanism under the Paris Agreement to be truly a success, Parties must ensure environmental integrity and additionality
With countries hard-pressed to make the draft text of the upcoming ‘Paris rulebook’ more comprehensive in the next two days of the Bangkok climate intersession, it is encouraging to see that some crucial topics on carbon markets, as mentioned in Article 6 of the Paris Agreement, are being discussed at the ongoing negotiations.
Elements such as additionality and baselines of the carbon market mechanism under the Paris Agreement have been the highlight of market negotiations on day 4 of the climate intersession. However, the discussions lack clarity on how additionality will be assessed, with crucial issues like environmental integrity not garnering enough attention at the negotiating table.
Defining the terms of additionality and environmental integrity are critical for carbon markets if it is to be one of the effective means of scaling up global emission reductions. The general understanding of additionality is based on the premise that projects under the market mechanism should go beyond business-as-usual when it comes to emission reductions. In yesterday’s discussion, Parties such as Japan and New Zealand expanded the ambit of additionality by also emphasising the need for additional (in the true sense of the word) emission reductions when assessing projects.
During the negotiations on Article 6, priority is being given on outlining guiding principles, recommending postponing the ‘Hows’ of operationalising the mechanism to post-Katowice negotiations. This would mean that there is still scope for CDM-based additionality assessment to slide into the Sustainable Development Mechanism (SDM). In fact, Parties such as Egypt have outrightly supported the CDM version of additionality, buttressing the idea that there is a possibility of such an assessment continuing in the SDM. Given the environmental problems faced under the CDM—uncertainty in overall emission reductions achieved, inclusion of non-additional projects and “clean” fossil fuel efficiency projects—using CDM-based additionality criteria would be environmentally detrimental.
Additionality under the CDM was primarily assessed based on financial criteria rather than environmental, effectively making truly environmentally beneficial projects such as renewable energy, less additional than others. Moreover, including projects from the CDM in the SDM would inevitably mean that many non-additional projects that were allowed in CDM would also be included in the SDM, thus, sabotaging the credibility of the new mechanism. Parties must be prudent and not recreate the mistakes of the past by including CDM projects in the new mechanism. They must ensure that the focus of additionality criteria in the SDM remains primarily on those that are environmental.
While delineating additionality is essential, ensuring environmental integrity of the mechanism is crucial for it to be successful in reducing emissions and incentivising climate action in markets. Unfortunately, the issue of environmental integrity has barely been brought to the limelight in the past few days. The few countries, which actively highlight the importance of environmental integrity, are those represented by the Alliance of Small Island States (AOSIS). Considering that these nations are losing their homes due to the impact of climate change, it is unsurprising that they are actively fighting to ensure that overall emission reductions are created through the market mechanism. However, defining environmental integrity is not enough; a guideline needs to be created on how environmental integrity can be assured through the mechanism—something that is also lacking in the ongoing market negotiations. With two days left, we urge the Parties to draft text that assures true additionality and respects environmental integrity. This is for the sake of their nations’ future.
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