By Daniel Otunge

At the Glasgow Conference of the Parties (COP26), States Parties reached new agreements for mitigating climate change. One such agreement was on the market mechanisms for reducing emissions of greenhouse gases (GHGs), essentially supporting the transfer of emission reductions between countries while also giving incentives to the private sector to invest in climate-friendly solutions.

In climate change law, emissions means emissions into the earth’s atmosphere of any of the various GHGs, especially carbon dioxide, methane and nitrous oxide that contribute to the greenhouse effect (a situation whereby sunlight enters the earth and some of its heat are not reflected back into the atmosphere due to too much GHGs produced by human activity. The gases act like a greenhouse glass that blocks sunlight from escaping after entering the greenhouse)  thereby leading to climate change. Other GHGs responsible for climate change are hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride.

The States Parties also decided on non-market approaches in the war against climate change such as enabling stronger cooperation between countries on mitigation and adaptation.

COP26: what did countries agree with regard to market mechanisms and non-market approaches under the Paris Agreement?

Countries agreed to the implementing rules for three instruments that help Parties cooperate to meet their intended emission reductions and adaptation aims as captured in their national climate action plans under the Paris Agreement (Nationally Determined Contributions or NDCs).

The first two of these instruments involve cooperation which will result in the transfer of mitigation of emissions between countries- from the country that achieved the reduction to the country that will acquire that reduction. The instruments are designed to enable and incentivize private sector involvement.

Under non-market approaches, countries are enabled to work together to achieve mitigation and adaptation, as well as sustainable development and poverty reduction. Decisions on implementation rules were adopted for all three instruments:

  • Firstly, guidance was adopted for cooperative approaches – where Parties in bilateral arrangements recognize the transfer of emission reductions between them. This enables mitigation programmes like emission trading systems in countries to link to each other.
  • Secondly, rules, modalities and procedures were adopted for the new UNFCCC Mechanism, which credits emission reducing activities. This enables a company in one country to reduce emissions in that country and have those reductions credited so that it can sell them to another company in another country. That second company may use them for complying with its own emission reduction obligations or to help it meet net-zero.
  • Thirdly, Parties adopted a work programme to support non-market approaches being implemented between Parties. The work programme helps different countries and their institutions and stakeholder develop cooperation in a number of areas, such as development of clean energy sources

How do decisions of the States Parties help move the world closer towards the Paris Agreement goal of holding the global average temperature rise to as close as possible to 1.5 degrees Celsius?

Strengthened cooperation enables Parties to be more ambitious in their actions to curb greenhouse gas emissions and to build resilience to climate change.

This could be through making it more cost-efficient for them to meet their NDC, enabling them to consider going further in mitigation than their NDC had intended, or it could be to have extra adaptation action resulting from emission reduction efforts.

In 2016, 196 countries met in Paris to agree on ways to slow greenhouse gas emissions and tackle climate change impacts. The resulting agreement became known as the Paris Agreement. The principal goals of the Paris Agreement are to:

  • Decrease greenhouse gas emissions
  • Prevent global temperatures from rising more than 2°C above pre-industrial levels this century
  • Keep temperatures from rising above 1.5°C above pre-industrial levels.

To achieve these goals, each country was called upon to make their contributions. Thus, each country came up with their voluntary NDCs towards meeting the Paris Agreement principal goals. Most of the other country’s NDCs include a target to reduce CO2 emissions. For example, the UK has committed to reducing economy-wide greenhouse gas emissions by at least 68% by 2030, compared to 1990 levels.

How can the private sector be involved?

Both cooperative approaches and the UNFCCC mechanism incentivize the private sector to implement mitigation activities across the world, in a range of sectors and technologies for example, energy efficiency, transport and reforestation. The 1992 UNFCCC is the framework law on climate change upon which other later international instruments like the Paris Climate Change Agreement seek to implement.

These mitigation activities allow for the development of carbon credits that can be transferred internationally and used in other countries towards meeting the aims of NDCs or other compliance uses.

These instruments, by delivering an investment signal to the private sector, enable countries to achieve scale in mitigation action that in turn may help to contribute to adaptation action.

What does this mean for governments (at various levels) and for the private sector?

 For the private sector, the adoption of the rules enables new mitigation activities to start in particular to implement mitigation projects under the new UNFCCC mechanism.

In addition, many activities that already operated under the clean development mechanism (CDM) of the Kyoto Protocol will be able to move over to the new UNFCCC mechanism by using the rules adopted that provide for this transition.

 What are the next steps to deliver real benefits?

For cooperative approaches, countries that are cooperating already to deliver their NDCs with cooperative approaches will now start to provide the details of those approaches through reports.

The reports will be reviewed and all the details made available on a public interface on the UNFCCC website. The purpose of the reports is to allow for accurate accounting of transfers and to provide transparency as to the way in which countries are cooperating.

For the project mechanisms, the bodies that supervise the clean development mechanism and the new UNFCCC mechanism will each meet early next year (2023), to start to deliver the rules for the new projects and the processes for transitioning existing projects over to the new system under the Paris Climate Agreement.

In relation to cooperation that does not involve carbon credits, a committee will start to meet in mid-2022 to implement the programme of work that Parties agreed in Glasgow.

The author is a Climate Change Law student, Faculty of Law, University of Nairobi.