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What are new mechanisms?

Market mechanisms in the climate change negotiations

From Bali to Copenhagen

At the COP13 to the United Nations Framework Convention on Climate Change (UNFCCC) held in Bali, Indonesia in 2007, an ad hoc working group (AWG) was established to discuss enhanced national/international action on mitigation of climate change beyond 2012, including, inter alia, nationally appropriate mitigation commitments or actions by developed countries and the Nationally Appropriate Mitigation Actions (NAMAs) by developing countries. As an outcome of the AWG, a decision was made to take note of the Copenhagen Accord at the COP15held in Copenhagen, Denmark in 2009.

A Start for considering the establishment of new mechanisms

The Cancun Agreements adopted at the COP16 held in Cancun, Mexico in 2010 stipulated that "(The Conference of the Parties) Decides to consider the establishment, at the seventeenth session of the Conference of the Parties, of one or more market-based mechanisms to enhance the cost-effectiveness of, and to promote, mitigation actions".

[Reference: Decision 1/CP.16 The Cancun Agreements: Outcome of the work of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention]
  • D. Various approaches, including opportunities for using markets, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries
  • 80. Decides to consider the establishment, at the seventeenth session of the Conference of the Parties, of one or more market-based mechanisms to enhance the cost-effectiveness of, and to promote, mitigation actions, taking into account the following:
  • a. Ensuring voluntary participation of Parties, supported by the promotion of fair and equitable access for all Parties;
  • b. Complementing other means of support for nationally appropriate mitigation actions by developing country Parties;
  • c. Stimulating mitigation across broad segments of the economy;
  • d. Safeguarding environmental integrity;
  • e. Ensuring a net decrease and/or avoidance of global greenhouse gas emissions;
  • f. Assisting developed country Parties to meet part of their mitigation targets, while ensuring that the use of such a mechanism or mechanisms is supplemental to domestic mitigation efforts;
  • g. Ensuring good governance and robust market functioning and regulation;

(extracts from FCCC/CP/2010/7/Add.1)

Framework for Various Approaches: FVA

At the COP17 held in Durban, South Africa in December 2011, a series of decisions were made including those for a path towards future frameworks, implementation of the second commitment period of the Kyoto Protocol, mobilization of the Green Climate Fund and implementation of the Cancun Agreements. In the decision text of COP17 regarding the new mechanisms, "Outcome of the work of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA)" stipulated the following:

  • Emphasizes that various approaches, including opportunities for using markets, must meet standards that deliver real, permanent, additional and verified mitigation outcomes, avoid double counting of effort, and achieve a net decrease and/or avoidance of greenhouse gas (GHG) emissions.
[Reference: Decision 2/CP.17 Outcome of the work of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention]
  • E. Various approaches, including opportunities for using markets, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries
  • 79. Emphasizes that various approaches, including opportunities for using markets, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries, must meet standards that deliver real, permanent, additional and verified mitigation outcomes, avoid double counting of effort, and achieve a net decrease and/or avoidance of greenhouse gas emissions;
  • 80. Requests the Ad Hoc Working Group on Long-term Cooperative Action under the Convention to conduct a work programme to consider a framework for such approaches, with a view to recommending a decision to the Conference of the Parties at its eighteenth session;
  • 81. Invites Parties and admitted observer organizations to submit to the secretariat, by 5 March 2012, their views on the matters referred to in paragraphs 79 and 80 above, including their experiences, positive and negative, with existing approaches and mechanisms as well as lessons learned;
  • 82. Requests the Ad Hoc Working Group on Long-term Cooperative Action under the Convention to conduct one or more workshops with Parties, experts and other stakeholders, including an in-session workshop at its session to be held in conjunction with the thirty sixth sessions of the subsidiary bodies, to consider the submissions referred to in paragraph 81 above and to discuss the matters referred to in paragraphs 79 and 80 above;
  • 83. Defines a new market-based mechanism, operating under the guidance and authority of the Conference of the Parties, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries, which is guided by decision 1/CP.16, paragraph 80, and which, subject to conditions to be elaborated, may assist developed countries to meet part of their mitigation targets or commitments under the Convention;
  • 84. Requests the Ad Hoc Working Group on Long-term Cooperative Action under the Convention to conduct a work programme to elaborate modalities and procedures for the mechanism referred to in paragraph 83 above, with a view to recommending a decision to the Conference of the Parties at its eighteenth session;
  • 85. Invites Parties and admitted observer organizations to submit to the secretariat, by 5 March 2012, their views on the matters referred to in paragraphs 83 and 84 above, including their experiences, positive and negative, with existing approaches and mechanisms as well as lessons learned;
  • 86. Requests the Ad Hoc Working Group on Long-term Cooperative Action under the Convention to conduct one or more workshops with Parties, experts and other stakeholders, including an in-session workshop at its session to be held in conjunction with the thirty sixth sessions of the subsidiary bodies, to consider the submissions referred to in paragraph 85 above and to discuss the matters referred to in paragraphs 83 and 84 above;

(extracts from FCCC/CP/2011/9/Add.1)

Units from market-based mechanisms such as the JCM, came to be reported in the Biennial Reports submitted by developed countries

At the COP18 held in Doha, Qatar in 2012, it was decided to conduct a work programme which was to address issues including avoidance of double counting to elaborate a framework to implement the various approaches which included market mechanisms such as the Joint Crediting Mechanism (JCM). In addition, utilization of market mechanisms such as the JCM was decided to be included in the common reporting format for the biennial reports which were to be submitted by developed countries based on the Cancun Agreements.

[Reference: Decision 1/CP.18 Agreed outcome pursuant to the Bali Action Plan]
  • D. Various approaches, including opportunities for using markets, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries
  • 41. Acknowledges that Parties, individually or jointly, may develop and implement various approaches, including opportunities for using markets and non-markets, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries;
  • 42. Re-emphasizes that, as set out in decision 2/CP.17, paragraph 79, all such approaches must meet standards that deliver real, permanent, additional and verified mitigation outcomes, avoid double counting of effort and achieve a net decrease and/or avoidance of greenhouse gas emissions;
  • 43. Affirms that the use of such approaches facilitates an increase in mitigation ambition, particularly by developed countries;
  • 44. Requests the Subsidiary Body for Scientific and Technological Advice to conduct a work programme to elaborate a framework for such approaches, drawing on the work of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention on this matter, including the relevant workshop reports and technical paper, and experience of existing mechanisms, with a view to recommending a draft decision to the Conference of the Parties for adoption at its nineteenth session;
  • 45. Considers that any such framework will be developed under the authority and guidance of the Conference of the Parties;
  • 46. Decides that the work programme referred to in paragraph 44 above shall address the following elements, inter alia:
    • (a) The purposes of the framework;
    • (b) The scope of approaches to be included under the framework;
    • (c) A set of criteria and procedures to ensure the environmental integrity of approaches in accordance with decision 2/CP.17, paragraph 79;
    • (d) Technical specifications to avoid double counting through the accurate and consistent recording and tracking of mitigation outcomes;
    • (e) The institutional arrangements for the framework;

(extracts from FCCC/CP/2012/8/Add.1)

Invitation of submission of Intended Nationally Determined Contributions (INDCs) by all Parties

At the COP19 held in Warsaw, Poland in 2013, Parties were invited by the COP to initiate domestic preparation for INDCs and an early submission of INDCs well before COP21. It was also decided to request the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP) to identify the information to be provided by the Parties in their INDCs by COP20.

At the COP20 held in Lima, Peru in 2014, "Lima Call for Climate Action" was adopted under which information to be provided by Parties in their INDCs* was agreed. Based on this, Japan submitted its INDC to the UNFCCC secretariat on 17 July 2015.

[Reference: Decision 1/CP.19 Further advancing the Durban Platform]
  • 2. Decides, in the context of its determination to adopt a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties at its twenty-first session (December 2015) and for it to come into effect and be implemented from 2020:
    • (a) To request the Ad Hoc Working Group on the Durban Platform for Enhanced Action to further elaborate, beginning at its first session in 2014, elements for a draft negotiating text, taking into consideration its work, including, inter alia, on mitigation, adaptation, finance, technology development and transfer, capacity-building and transparency of action and support;
    • (b) To invite all Parties to initiate or intensify domestic preparations for their intended nationally determined contributions, without prejudice to the legal nature of the contributions, in the context of adopting a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties towards achieving the objective of the Convention as set out in its Article 2 and to communicate them well in advance of the twenty-first session of the Conference of the Parties (by the first quarter of 2015 by those Parties ready to do so) in a manner that facilitates the clarity, transparency and understanding of the intended contributions, without prejudice to the legal nature of the contributions;
    • (c) To request the Ad Hoc Working Group on the Durban Platform for Enhanced Action to identify, by the twentieth session of the Conference of the Parties, the information that Parties will provide when putting forward their contributions, without prejudice to the legal nature of the contributions, referred to in paragraph 2(b) above;
    • (d) To urge and request developed country Parties, the operating entities of the financial mechanism and any other organizations in a position to do so to provide support for the related activities referred to in paragraphs 2(b) and 2(c) above as early as possible in 2014;
[Reference: Decision 1/CP.20 Lima Call for Climate Action]
  • Annex
    Elements for a draft negotiating text
  • M. Procedural and institutional provisions
    Institutional arrangements
  • 92. The governing body shall establish, building on the work conducted under the SBSTA regarding the framework for various approaches, means for cooperative arrangements to be defined and accounted for under the agreement, that strengthen and create synergies between mechanisms under the Convention and its related legal instruments and mechanisms established or to be established, jointly or individually, by Parties, and avoid the double counting of efforts, including:
    • -The Financial Mechanism;
    • -The Technology Mechanism;
    • -The flexibility mechanisms established by Articles 6 and 12 of the Kyoto Protocol;
    • -The new market-based mechanism defined in decision 2/CP.17, paragraph 83;
    • -Alternative policy approaches, such as joint mitigation and adaptation;
    • -A REDD-plus mechanism / The Warsaw Framework for REDD-plus;
    • -A mechanism for climate resilience and sustainable development;
    • -A joint mitigation and adaptation mechanism for the integral and sustainable management of forests;
    • -Subnational, national and regional emissions trading schemes.

(extracts from FCCC/CP/2014/10/Add.1)

* Regarding up-front information, reference threshold (base year), period, scope, cover percentage may be included.

Use of market mechanisms beyond 2020

At the COP21 held in Paris, France in 2015, the Paris Agreement, a new international framework for GHG emission reduction beyond 2020, was adopted. In paragraph 2-3 of Article 6 (cooperative approach), it was decided that emission reduction and removal realized overseas may be used for the achievement of each countries’ emission reduction targets on the premise of authorization by participating Parties. As such, the use of market mechanisms including the JCM was included in the agreement. It was also decided to develop the guidance for robust accounting including for avoidance of double counting which would be adopted by the Conference of the Parties serving as the meeting of the Parties to this Agreement (CMA).

Also, Japan took part in the ministerial declaration on carbon market which was initiated by New Zealand and aimed for sending a message to the world on the importance of market mechanisms beyond 2020.

At the COP21 Summit Meeting, Mr. Abe, Prime Minister of Japan, gave a speech featuring Japan's new set of contribution: Actions for Cool Earth (ACE) 2.0 (support to developing countries, innovation). In his speech, Prime Minister Abe mentioned that "Many of the advanced low-carbon technologies do not generally promise investment-return to developing countries. Japan will, while lowering burdens of those countries, promote diffusion of advanced low carbon technologies particularly through implementation of the JCM."

Also, the third JCM Partner Countries' High-level Meeting was held with an attendance of 16 JCM partner countries. The meeting welcomed the progress made on the JCM and announced further cooperation on the JCM.

[Reference: Decision 1/CP.21 Adoption of the Paris Agreement]
  • Annex
    Article 6
  • 1. Parties recognize 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 and to promote sustainable development and environmental integrity.
  • 2. Parties shall, where engaging on a voluntary basis in cooperative approaches that involve the use of internationally transferred mitigation outcomes towards nationally determined contributions, promote sustainable development and ensure environmental integrity and transparency, including in governance, and shall apply robust accounting to ensure, inter alia, the avoidance of double counting, consistent with guidance adopted by the Conference of the Parties serving as the meeting of the Parties to this Agreement.
  • 3. The use of internationally transferred mitigation outcomes to achieve nationally determined contributions under this Agreement shall be voluntary and authorized by participating Parties.
  • 4. A mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development is hereby established under the authority and guidance of the Conference of the Parties serving as the meeting of the Parties to this Agreement for use by Parties on a voluntary basis. It shall be supervised by a body designated by the Conference of the Parties serving as the meeting of the Parties to this Agreement, and shall aim:
    • (a) To promote the mitigation of greenhouse gas emissions while fostering sustainable development;
    • (b) To incentivize and facilitate participation in the mitigation of greenhouse gas emissions by public and private entities authorized by a Party;
    • (c) To contribute to the reduction of emission levels in the host Party, which will benefit from mitigation activities resulting in emission reductions that can also be used by another Party to fulfil its nationally determined contribution; and
    • (d) To deliver an overall mitigation in global emissions.
  • 5. Emission reductions resulting from the mechanism referred to in paragraph 4 of this Article shall not be used to demonstrate achievement of the host Party's nationally determined contribution if used by another Party to demonstrate achievement of its nationally determined contribution.
  • 6. The Conference of the Parties serving as the meeting of the Parties to this Agreement shall ensure that a share of the proceeds from activities under the mechanism referred to in paragraph 4 of this Article is used to cover administrative expenses as well as to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation.
  • 7. The Conference of the Parties serving as the meeting of the Parties to this Agreement shall adopt rules, modalities and procedures for the mechanism referred to in paragraph 4 of this Article at its first session.
  • 8. Parties recognize the importance of integrated, holistic and balanced non-market approaches being available to Parties to assist in the implementation of their nationally determined contributions, in the context of sustainable development and poverty eradication, in a coordinated and effective manner, including through, inter alia, mitigation, adaptation, finance, technology transfer and capacity-building, as appropriate. These approaches shall aim to:
    • (a) Promote mitigation and adaptation ambition;
    • (b) Enhance public and private sector participation in the implementation of nationally determined contributions; and
    • (c) Enable opportunities for coordination across instruments and relevant institutional arrangements.
  • 9. A framework for non-market approaches to sustainable development is hereby defined to promote the non-market approaches referred to in paragraph 8 of this Article.

(extracts from FCCC/CP/2015/10/Add.1)

The signing of the Paris Agreement

A high level signing ceremony for the Paris Agreement was held on 22 Apr. 2016 at the United Nations Headquarters in New York hosted by the United Nations Secretary General. Ambassador extraordinary and plenipotentiary/Permanent Representative of the Japanese government to the United Nations, Mr. Yoshikawa signed the agreement on behalf of the Government of Japan.

*AWG: Ad hoc Working Group

*AWG-LCA: Ad hoc Working Group on Long-term Cooperative Action under the Convention

*COP: Conference of the Parties to the United Nations Framework Convention on Climate Change

*CMA: The Conference of the Parties serving as the meeting of the Parties to the Paris Agreement

*FVA: framework for various approaches

*GHG: greenhouse gas

*INDC: intended nationally determined contributions

*JCM: Joint Crediting Mechanism

*NAMA: Nationally Appropriate Mitigation Actions

Relevant documents of the climate change negotiations

Bali Roadmap

COP13 reports (UNFCCC)

Copenhagen Accord

COP15 reports (UNFCCC)

Cancun Agreements

COP16 reports (UNFCCC)

COP17 decisions

COP17 reports (UNFCCC)

COP18 decisions

COP18 reports (UNFCCC)

COP19 decisions

COP19 reports (UNFCCC)

Lima Call for Climate Action

COP20 reports (UNFCCC)

Paris Agreement

COP21 reports (UNFCCC)

Market mechanisms

Market and non-market mechanisms (UNFCCC)

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