After more than two weeks of talks at the UN climate conference in Madrid, countries failed to agree on rules under Article 6 of the Paris Agreement that would govern international carbon markets post-2020.
"It frustrating that the Article 6 rulebook was not achieved despite it being the key focus of the conference. The list of unresolved issues that will be carried over to COP26 is almost the same as it was at COP24 – deferring an agreement on critical rules for international carbon trading by two years," says Jeff Swartz, Director Climate Policy & Carbon Markets, South Pole.
Article 6, a critical piece of the Paris Agreement, provides guidance for how countries can trade emissions reductions internationally to achieve their national climate pledges (NDCs), either through cooperative approaches or under a new UNFCCC-administered carbon market mechanism.
According to the International Emissions Trading Association (IETA), Article 6 has the potential to reduce the total cost of implementing NDCs by more than half, equating to savings of $250 billion a year in 2030. These savings could double the amount of possible emissions reductions at the same cost.
“While negotiators grapple with decoding the practicalities of how Article 6 should be governed and designed, the private sector must absolutely forge ahead," says Renat Heuberger, CEO, South Pole. “Nothing changes for ambitious companies who aspire to operate in a net-zero world. The failure of COP25 just shows that, if anything, businesses must continue to act, reduce and compensate for emissions when many governments are not.“
South Pole's response to the challenges facing Article 6 negotiators is to show how these policy concepts could be applied in a real world policy setting. This is why the global climate solutions provider is working on developing two Article 6 pilots. Through this work on Article 6, South Pole believes that capturing the perspectives of the private sector, including investors, operators and project developers, is vital to designing the operational framework that will help achieve the targets of the Paris Agreement.
These learnings can help inform the framework design and implementation ahead of the next round of climate talks, which are set to be held in Glasgow, Scotland, in November 2020.These learnings can help inform the framework design and implementation ahead of the next round of climate talks, which are set to be held in Glasgow, Scotland, in November 2020.