Refine
Year of Publication
Document Type
- Working Paper (24)
- Report (22)
- Peer-Reviewed Article (18)
- Contribution to Periodical (17)
- Part of a Book (2)
REDD crediting vs. REDD funds : how avoided deforestation under the UNFCCC should be financed
(2010)
The objective of this report is to use historical analysis to identify conditions that determine when offsets add value to compliance schemes while upholding environmental integrity. The indicators of success include: increased acceptance of introducing compliance schemes; raising ambition in subsequent compliance periods; the possibility to drive emission reductions outside the compliance sectors; promoting investments in sustainable development; and avoiding perverse incentives that undermine the stringency of the compliance scheme or compliance actors’ efforts in reducing their own emissions. Through undertaking in-depth case study analyzes on the effects of offsets in the European Union, Alberta, Australia, Colombia and Japan, the report identifies common conditions that explain why offsets were successful (or not) in achieving individual indicators. The report further identifies two common conditions that can help explain when offsets achieve all five indicators of success. The first is that policymakers need to be willing to design the compliance scheme to set and maintain a strong compliance price signal that justifies the need for incorporating cost containment measures, such as offsets, to avert negative political and economic ramifications. Relatedly, the second condition requires institutions, processes and infrastructure that govern both the compliance scheme and offsets to be well developed so that they can ensure offsets uphold the principles of environmental integrity, achieve sustainable development benefits, and act as a reliable cost containment measure to high compliance prices. The findings also highlight how difficult it is to achieve both conditions, as both domestic and international political economy factors determine whether policymakers and voters are willing to introduce and maintain compliance schemes that deliver effective action on climate.
This report develops an evaluation framework that policymakers can use to identify whether offsets can add value and uphold environmental integrity of a compliance scheme. It uses a scoring framework on factors to: (1) identify which sectors have hard-to-abate emissions that can justify demanding offsets as cost-containment measures for ambitious climate policies; and (2) identify mitigation activities that are otherwise inaccessible, fosters sustainable development, and the extent to which it enables transformative sectoral action to be eligible to supply offsets. This evaluation framework identifies the optimal conditions that make factors successful in either having sectors demand offsets, or specific mitigation activities supply offsets. Sectoral emissions that are hard-to-abate are those that are technically unavoidable due to a lack and maturity of technologies, and therefore should be allowed to have cost-containment measures - such as offsets - to avoid adverse economic ramifications such as carbon leakage. Mitigation activities that can supply offsets are those that are currently inaccessible to local actor’s due to lack of access to technology, finance or capabilities. Allowing these mitigation activities to be eligible to supply offsets allows to pilot such activities and realize mitigation outcomes outside the original scope of the compliance scheme. This report has chosen selected sectors and mitigation activities to illustrate how this framework can be applied at the global level. It recognizes that country-specific factors can change the assessment of whether the offset approach will add value and uphold environmental integrity to proposed compliance schemes of a country. The report further proposes practical steps policymakers can do to undertake an evaluation at the national level.
Article 6 of the Paris Agreement establishes mechanisms for Parties to "pursue voluntary cooperation in the implementation of their nationally determined contributions to allow for higher ambition in their mitigation and adaptation actions [...]" (Article 6.1). I. e. the mechanisms are explicitly designed to foster higher ambition. However, without additional guidance and rules, the economic incentives of carbon markets may work against increasing host country ambition. For example, setting ambitious NDC targets may directly reduce the amount of mitigation outcomes that go beyond the NDC target and that a host country can transfer abroad. The report presents four options on how the risks can be ad-dressed and ambition can be increased: (1) Strengthening reporting, transparency and comparability; (2) Reconciling the design of the Article 6.4 mechanism with ambition raising of host countries; (3) Supporting the host country to raise ambition through the Article 6.4 mechanism; (4) Fostering the acquiring country to raise ambition through the Article 6.4 mechanism. These options are assessed and recommendations are provided on how they could be implemented.
Article 6.4 of the Paris Agreement explicitly acknowledges the need to incentivize and facilitate the participation of private entities in the mitigation of greenhouse gas emissions. Under the Clean Development Mechanism (CDM), private sector actors had already the opportunity to participate in a new and fast-growing market. However, they faced numerous challenging investment barriers. The study provides an overview on key factors and barriers determining private sector participation in Article 6 mechanisms. It distinguishes between the three topics demand side factors, rules and standards for market mechanisms, and supply side factors and provides for each of them options to mitigate or overcome barriers.
In a short analysis, it further explores three of the identified options:
- Improving the design and support of national systems and capacities is an important pre-requisite for the private sector to be able to generate and sell ITMOs
- The up-scaling of mitigation activities e. g. through (sub-) sector level crediting, and policy crediting helps private sector actors to benefit from economies of scale
- Exploring the potential of digitization of measuring, reporting and verification (MRV), e. g. the use of sensors, internet of things, artificial intelligence and blockchain to make the project cycle more efficient and reduce transaction costs.
Overall, the report stresses the importance of host country readiness to provide the private sector with a robust and trusted environment that allows for the adoption of Article 6 mechanisms.
Based on a description of the starting position and the aim of the research project "Further development of a concept for monitoring and reporting of the International Climate Initiative (ICI)", this final report summarises the results generated in this endeavour. It also describes the key activities which were conducted to work out the results. In two years time, the project aimed to develop a scientifically sound and at the same time practical monitoring and reporting concept which should deliver information about the impacts of the ICI. It started from an initial analysis of the current ICI approach and of the monitoring and reporting approaches applied in other climate finance instruments.
Although it is not part of what has been called the "ambition mechanism" or "ratchet mechanism", Article 6 of the Paris Agreement also has an explicit requirement to promote ambition. Article 6 specifically highlights that some Parties choose to pursue voluntary cooperation in the implementation of their nationally determined contributions to allow for higher ambition in their mitigation and adaptation actions. Despite the common purpose, the two elements have to date been discussed mostly in isolation, both in the negotiations as well as in the wider literature. This JIKO Policy Paper sets out to change this by exploring the relationship between Article 6 and the Global Stocktake.
This Policy Brief outlines the "identity crisis" in which voluntary carbon standards find themselves after the adoption of the Paris Agreement. It describes how the new international legal framework threatens to undermine the legitimation and credibility of voluntary carbon standards and discusses first ideas how the arising challenges could be dealt with.
The Paris Agreement combines collective goals with individual countries' contributions. This hybrid approach does not guarantee that the individual contributions add up to what is required to meet the collective goals. The Paris Agreement therefore established the Global Stocktake. Its task is to "assess collective progress" towards achieving the long-term goals of the agreement as of 2023 and every five years thereafter. Corresponding to this role, this report addresses three questions: What should an effective Global Stocktake look like? What information and data are needed? Is it possible to execute an effective Global Stocktake within the mandate of the Paris Agreement?
This JIKO Policy Paper explores how Parties using Article 6 can increase their mitigation ambition. Building on a broad definition of ambition raising which puts the intensification of climate change mitigation targets and actions by Parties at its centre, eight different ambition raising options are identified. The analysis shows that these options are associated with different technical, institutional and political challenges, calling for a combination of different ambition raising options.
Using results-based finance for climate action : existing initiatives and the role of the CDM
(2014)
Results-based finance is receiving increasing attention, being considered as a potential key funding mode in climate finance. The Clean Development Mechanism has been cited to potentially contribute to this goal. Against this background, the policy brief outlines the rationale of the concept and analyses six climate change mitigation initiatives that build on the results-based finance approach. The analysis puts a special focus on the role of the CDM.
Offsetting enables countries and companies to meet part of their climate change mitigation obligations by using mitigation outcomes generated elsewhere - in lieu of own emission reductions. This report explores the future role of offset approaches and how they could be successfully integrated into a post-2020 climate regime by focusing both the supply and demand side. For this purpose, the report develops a conceptual approach that derives a normative vision of what should be considered a successful offset use in a top-down manner to then link this vision to specific factors on the ground in sectors and jurisdictions where offsets will be generated and used. It explores how these factors influence the successful operationalisation of the offset approach and how they can inform its design. In addition, the report also explores six conceptual design aspects to providing recommendations on how to take these factors into account during the design of the offset approach. Based on these findings, the authors derive overarching policy recommendations on the integration of offsets into carbon pricing schemes.
How can existing national climate policy instruments contribute to ETS development? : Final report
(2019)
Before introducing an emissions trading system, jurisdictions have to consider the ex-isting energy and climate policy framework. This report seeks to analyse and evaluate non-ETS climate policy instruments, such as carbon taxes or green certificate trading schemes, regarding their suitability to serve as a basis for establishing emission trading systems. There is a general assessment of prototypical policy instruments. Besides, the report contains insights from case studies in India and Mexico. The report is meant to inform ETS development by showing how existing policy instruments could contribute to this process and by illustrating how non-ETS policy instruments could coexist with an emissions trading system, allowing for an effective policy mix.
This paper analyses the risks to environmental integrity associated to the transfers of mitigation outcomes in the context of Art. 6 of the Paris Agreement and provides an overview on approaches and tools that could be used for addressing them. The analysis shows that some of the environmental integrity risks can be dealt with at the technical level. This relates, inter alia, to the risks of mitigation outcomes being unreal or non-permanent as well as to carbon leakage and rebound effects. Here, robust MRV provisions should be established. Other risks will be difficult to address without touching the new and open structure of the Paris Agreement. This applies, for example, to risks associated to the diverse nature of NDCs, and requires further investigation.
On the one hand, a large number of companies have committed to achieve net zero emissions and many of them foresee to offset some remaining emissions with carbon credits, suggesting a surge of future demand. Yet, the supply side of the voluntary carbon market is struggling to align its business model with the new legal architecture of the Paris Agreement. This article juxtaposes these two perspectives. It provides an overview of the plans of 482 major companies with some form of neutrality/net zero pledge and traces the struggle on the supply side of the voluntary carbon market to come up with a viable business model that ensures environmental integrity and contributes to achieving the objectives of the Paris Agreement. Our analysis finds that if carbon credits are used to offset remaining emissions against neutrality objectives, these credits need to be accounted against the host countries' Nationally Determined Contributions (NDCs) to ensure environmental integrity. Yet, operationalizing this approach is challenging and will require innovative solutions and political support.
Key policy insights:
There is a growing mismatch between the faith placed in carbon credits by private sector companies and the continued quest for a common position of the main suppliers of the voluntary carbon market.
The voluntary carbon market has not yet found a way to align itself with the new legal architecture of the Paris Agreement in a credible and legitimate way.
Public policy support at the national and international level will be needed to operationalize a robust approach for the market’s future activities.
Africa and in particular African Least Developed Countries have to a large extent been neglected by the Clean Development Mechanism (CDM). This article reviews the mechanism's performance in the region and highlights current developments. The analysis is based on a quantitative breakdown of data provided by the United Nations Environment Programme and Technical University of Denmark (UNEP/DTU) CDM Pipeline and was complemented by interviews with selected investors. The findings indicate that despite the various support measures for underrepresented regions, the overall share of African CDM activities continues to be low. The significant rise in the share of Programmes of Activities of recent years cannot make up for the continuing low numbers of African stand-alone projects. Further, the collapse of the compliance market has proved fatal in terms of timing: ongoing efforts to support the development of a genuine African carbon market were suffocated by the lack of demand for Certified Emission Reductions at a moment when capacity building had started to bear fruit. Consequently, instead of being a mitigation tool with significant scale, the future role of the CDM in Africa might be limited to the voluntary market, while at the same time serving as a tool to foster sustainable development, with mitigation benefits.
The Paris Agreement adopted in December 2015 provides the basis for future international cooperation on the field of climate change mitigation. While truly global in reach, the agreement will however result in an increasingly complex new climate regime: Instead of using a uniform formula, Parties are allowed to autonomously define their NDCs (nationally determined contributions), resulting in a large diversity of contributions. This poses significant challenges for emissions accounting and the transfer of emission units.
This Policy Paper explores how these challenges can be addressed by analysing different types of NDCs and assessing their compatibility with the export and use of emission units. On that basis, the authors develop opt-in provisions for Parties willing to participate in unit transfers under the new climate regime and illustrate how potential risks to environmental integrity can be addressed.
With the adoption of Article 6 of the Paris Agreement, former debates about generating carbon credits on the basis of national policies have resurged. National policies have not been eligible as project activities under the Kyoto Protocol's flexible mechanisms. The Paris Agreement opens the possibility for such policy crediting but also provides an entirely new context: Universal participation, ambitious long-term targets and nationally defined contributions (NDCs) that are to be made more ambitious over time. As this paper shows, these changes in the framework conditions add an additional layer of complexity to policy-based cooperation.
The paper explores the potential for policy-based cooperation by first briefly presenting the regulatory basis provided by the Paris Agreement before outlining a prototype for policy-based cooperation and its key challenges.
This report explores the future role of the voluntary carbon market and its potential to contribute to raising the ambition of climate policy. For this purpose, desk research was complemented by interviews with voluntary carbon market representatives. The report finds that the current roles of the voluntary market are set to change fundamentally due to the Paris Agreement. For the future of the voluntary market as an investor, three roles were identified, each of which is associated with specific challenges: The market may maintain its current role of buyer of carbon neutrality credits, it may become a supporter of NDC implementation, or it may become a driver of ambition. With regard to the future role of private certification standards, the Paris Agreement may hold the possibility of using such standards in the context of compliance activities. Overall, the findings indicate that the voluntary market has some potential to contribute to ambition raising. Whether this potential will actually be unlocked depends on how the concept of ambition raising will be operationalized under the Paris Agreement and to what degree it can be integrated into the voluntary market's activities and business models.