On December 15, 2018, climate negotiators in Katowice, Poland reached agreement on a “Paris Rulebook” (“Rulebook”) which will implement the Paris Agreement (“Agreement”).  Reactions to the ambitiousness of the Rulebook have been mixed.  Although negotiators found some common ground on specific reporting and transparency rules, they could not reach consensus on implementing more ambitious voluntary market mechanisms, including the linking of global carbon markets.

This is the first of a two-part series discussing the results of the COP 24 summit.  Part Two will address unresolved issues for climate negotiations in 2019 and future years.  

Agreements on Reporting and Transparency Provisions

Negotiators found common ground on guidelines implementing several reporting and transparency provisions of the Agreement.

First, Article 4.2 of the Agreement requires countries party to the Agreement to publish Intended Nationally Determined Contributions (“INDCs”)—voluntary pledges to reduce greenhouse gas emissions—and pursue domestic policies to achieve those INDCs.  The Rulebook requires those countries to provide information on how those INDCs were calculated, including “quantifiable information” on reference points and base years, timing and scope, and “[h]ow the Party considers that its [INDC] is fair and ambitious in light of its national circumstances.”  As will be discussed in the next part of this series, this transparency provision is part of the global effort to accelerate countries toward more ambitious emission reduction targets in the coming years.

Second, Article 9.1 of the Agreement requires developed countries to provide climate financing to developing countries to assist with their mitigation and adaptation obligations.  The Rulebook softens this requirement by allowing countries to report their financial support from a broad range of sources, including grants, concessional loans, non-concessional loans, equity, guarantees, insurance, and “other” financial instruments from both public and private sources.  In the coming years, this leniency is likely to incentivize countries to enact policies designed to attract or “mobilize” more private capital for renewable energy or climate-friendly projects.

Third, Article 13.7 of the Agreement requires each country to “regularly” publish a national inventory of greenhouse gas emissions, any updates on progress in achieving its INDCs, and data about climate change impacts and adaptation.  The Rulebook establishes a detailed and comprehensive set of rules governing these reporting requirements and requires parties to release their reports biennially.  Reporting requirements generally cover seven gases (CO2, methane, nitrous oxide, HFCs, PFCs, SF6, and NF3) and span multiple sectors (e.g., energy, transportation, industrial processes and product use, agriculture, land use change, forestry, and waste).  These reporting requirements are likely to trickle down into country-level policies affecting businesses in these sectors.

Impasse on Article 6 Voluntary Market Mechanisms and Linking of Carbon Markets

Negotiators were unable to reach an agreement on guidelines implementing Article 6 of the Agreement, which allows for “internationally transferred mitigation outcomes,” thereby opening the door to linking of carbon markets through voluntary market mechanisms.  In theory, these market-based mechanisms would provide more creative and flexible pathways to deeper reductions in global carbon emissions by linking emissions trading systems around the world (e.g., carbon trading) and by instituting emission credit systems similar to the Clean Development Mechanism (“CDM”) under the Kyoto Protocol.  Although much progress has been made since implementation of the CDM, implementation of Article 6 has been fraught with contention, in part due to concerns that developed nations will continue to emit and rely upon reductions achieved by developing nations to satisfy their own INDCs.

During negotiations, participating countries could not agree on basic accounting rules to prevent the “double counting” of emission reductions prohibited by Article 6.2 (for example, reductions counted once by the country generating them and again by the country buying the offset).  Drafts of this section show that parties at least considered including a “corresponding adjustment” to their emissions inventories to reflect the market-based trade.  Parties were also unable to agree on how to implement the Agreement’s goal of “overall mitigation in global emissions” in Article 6.4(d), which aspires to create a net reduction in emissions through voluntary mechanisms, rather than merely offsetting existing emissions.  Further negotiations on implementing Article 6 have been postponed to COP 25, which will be held in Chile in mid-November 2019.