Policy framework has been drafted on a unilateral basis for a Party to declare its preferred approach towards implementing a cooperative approach under Article 6.2. The policy framework is intended to provide the minimum legal foundation required to give Parties (including private sector entities) the necessary certainty regarding their rights and obligations as participants to the cooperative approach, including the ability to enforce cross-border contractual arrangements. The policy framework is intended to facilitate negotiations and subsequent agreement between two or more Parties, and the policy framework does not in itself create an effective and binding cooperative approach between Parties. The policy framework is accompanied by several schedules to the policy framework, which play an integral role in setting out the specific requirements. It is intended that these schedules contain the detailed and technical information related to, among other things, environmental integrity, sustainability requirements, approved sectors and activities, and approved standards and methodologies, for the purposes of implementing a cooperative approach. The development of schedules will also benefit from inputs from various technical experts and consultations in platforms such as the climate market club, alongside the final article 6.2 guidance.
The Paris Agreement provides a framework for all countries - both developed and developing - to voluntarily adopt individual targets, elaborated in their nationally determined contributions (NDCs). This effectively introduces commitments on the country in the sectors covered by their NDCs. Consequently, there is a need for countries to ensure that mitigation outcomes (MOs) and their international transfer are accompanied by robust accounting. Beyond international climate markets under Article 6, the International Civil Aviation Organization (ICAO) decided to establish a global market-based mechanism, in the form of the carbon offsetting and reduction scheme for international aviation (CORSIA), to help achieve ICAO’s global goal of carbon-neutral growth. This note seeks to identify processes for the generation and transfer of carbon assets in post-2020 international climate markets and to suggest standard terminology in the carbon asset development cycle across key independent standards. The note builds on existing practices among different independent standards to streamline and harmonize process flows and ensure that country governments have greater clarity on the process for engaging in climate markets. This note reflects inputs from the informal working group on carbon assets, pilot transactions under different initiatives, as well as knowledge produced in relevant platforms.
Unlike the Kyoto protocol’s clean development mechanism (CDM), Article 6.2 of the Paris Agreement is designed to allow for international cooperation in carbon markets through decentralized governance. Under this article, bilateral or plurilateral cooperation between participating parties can be established through a mutually agreed policy and governance framework and reflected in the agreement between the parties involved. This decentralized architecture requires considerably higher levels of engagement and oversight from participating parties. The context for setting institutions and approval procedures at the domestic level is fundamentally rooted in the country’s national climate strategy and their nationally determined contribution (NDC). A host country will need to establish a detailed Article 6 strategy that guides, but is not limited to, how its participation in Article 6 will help the country achieve its target. This paper forms the starting point, focusing on the institutional requirements to establish the policy and regulatory process that defines and supports the implementation of the potential activity cycle for Article 6.2 activities and transactions; identifies functions required at the national level from the host country’s perspective; and discusses different options to allocate these functions to existing or new institutions. The Article 6.2 activity cycle can build on project cycles under the Kyoto protocol, with an added requirement for the authorization and transfer of mitigation outcomes (MOs). While the entire process can be developed domestically, host countries can also choose to use international crediting programs to register projects and issue units. However, the host country will still be responsible for the Article 6.2 process of authorizing and transferring ITMOs, as well as applying corresponding adjustments. The type of arrangement that a country chooses to adopt affects the type of institutional arrangement and functions of the different bodies involved.
The World Bank developed two jurisdictional assessment tools under the Mitigation Action Assessment Protocol (MAAP) – the Domestic Carbon Pricing Instruments (MAAP-CPI) and the International Transfer Readiness (MAAP-ITR) in 2020.
Putting a price on carbon, either through a domestic carbon pricing instrument or international carbon markets, will play an important role in driving innovation across sectors and facilitating an orderly transition towards low carbon by addressing market failures. While the current bottom-up development of carbon pricing and international carbon markets promote innovation, the diversity of approaches reduces transparency between climate actions and increases the complexity of market integration. This in turn reduces visibility over existing and future carbon prices, as well as acts as a barrier to making finance flow to support climate actions. In this context, the World Bank has been exploring an approach for the consolidation of carbon pricing information. A consolidated price would then be benchmarked as a “spread” against a global target price corridor that is consistent with the Paris Agreement. The objective of this webinar is to present the proposed consolidation methodology that the World Bank has developed and to discuss how it can be refined and leveraged to support multiple purposes.
The purpose of this meeting was to review the state of play in Article 6 discussion and explore ongoing efforts to pilot and promote readiness for markets under the Paris Agreement in the Asia-Pacific region.
Future climate markets will differ substantially from those we have today; how will they look after 2020? How can cooperation in climate markets be designed to help countries with their climate plans? The changing landscape of climate markets under the Paris Agreement resulted in a big push for innovative solutions and provide opportunities to leverage emerging technologies to support the post-2020 architecture for markets. This session will bring together different technology and climate experts to explore how innovative technology applications could support the long-term vision to develop broad, deep and liquid climate markets.
The World Bank has developed the Climate Warehouse, a metadata layer that uses blockchain technology to connect heterogeneous carbon registries and improve transparency in global carbon markets. This report details the scope, design and outcomes of simulation II of the Climate Warehouse, which tested an operational prototype with more than 40 carbon market stakeholders, including country registries, independent standard registries and multilateral organizations.