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Perspectives Climate Group: March 2021 Newsletter

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Updates on key projects and latest events

Carbon Markets Mechanisms Working Group Survey

We welcome everyone from experts to beginners to complete this anonymous survey and share your perspectives! We are interested in your views on relevant and appropriate approaches for additionality testing, baseline setting and monitoring for carbon credits in the context of the implementation of the Paris Agreement from 2021 onwards, including crediting under Article 6 of the Paris Agreement, as well as crediting standards serving the voluntary carbon markets! The survey will contribute to a working paper authored by Perspectives Climate Research under the Carbon Market Mechanisms Working Group. The survey will take approximately nine minutes and can be found here https://s.surveyplanet.com/X6YNacr04 .

Axel Michaelowa elected Vice-Chair of the Adaptions Benefits Mechanism Panel

The Executive Committee of the Adaptation Benefits Mechanism (ABM) at its meeting of February 11th elected Axel Michaelowa as Vice-Chair of its Methodologies Panel. This panel which is chaired by Daouda Ben Oumar Ndiaye from the Islamic Development Bank will assess submissions for baseline and monitoring methodologies for activities that want to generate Certified Adaptation Benefits.

Presenting the Low Emissions Development Strategy in Bhutan

We are in the final stages of presenting the Low Emissions Development Strategy (LEDS) for human settlements in Bhutan in the context of a validation workshop of 50 Bhutanese stakeholders. The study has two time horizons – 2030 for short term actions and 2050 for long term ones. For the short term, we have calculated the mitigation potential of actions as well as their costs to show which ones should be prioritized, noting the significance of rooftop solar photovoltaics, replacement of biomass fuels and LPG for cooking and heating by electricity, composting and recycling of municipal solid waste and efficient streetlighting have significant cumulative mitigation potential and manageable mitigation costs.  For the long term, replacement of building material with high embodied emissions as well as full segregation and recycling of waste has the highest potential while digital municipal services, increase of modal shift of non-motorized transport and preservation of open spaces only generate
limited amounts of mitigation.

Matthias Krey continues consultative work on Phase II of the Taskforce on Scaling Voluntary Carbon Markets

Working with over 150 consultative members and 50 taskforce members the Taskforce has developed 20 recommended actions spanning across eight areas of work: Stakeholder engagement, Governance, Legal Principles and Contracts, Credit Level Integrity, Participant Level Integrity, Demand & Supply Engines, Traded volume & market infrastructure and Corresponding adjustments. Matthias will continue to work on Credit Level Integrity, developing content surrounding CCPs and specific attributes. Read more about the Taskforce here www.iif.com/tsvcm .

Final Stages of the State of Palestine's Biennial Update Report

Axel Michaelowa recently presented the draft of the State of Palestine’s chapter on mitigation in the upcoming first Palestinian Biennial Update Report in the formal validation workshop hosted by the Environmental Quality Authority (EQA) of Palestine. The 40 stakeholders present agreed with the list of mitigation actions and the estimate of business as usual greenhouse gas emissions and mitigation potential until 2040.  We stressed that planning few but realistic activities rather than a colourful ‘bouquet of possibilities’ promotes investor confidence. The project was undertaken in a consortium with INTEGRAL Consult, Egypt, and coordinated by Laila Darouich on Perspectives’ side, who engaged very intensively with stakeholders to ensure that all relevant mitigation actions were covered.

 

Recent Webinars

Webinar on Operationalising Article 6.8 and 6.9 of the Paris Agreement

On 8 December, a virtual seminar took place that discussed the operationalisation of Article 6.8 and 6.9 of the Paris Agreement which affirms the importance of non-market approaches (NMAs). The seminar featured presentations by climate negotiators, researchers and practitioners who laid out their view on the Article 6 negotiations and concrete examples for potential NMAs to be discussed in a future NMA forum. Read the full summary here https://www.perspectives.cc/fileadmin/user_upload/UBA_6.8__PCG_2020.pdf .

Webinar on the global landscape of Article 6 Pilots

On February 16, Axel Michaelowa presented on the global landscape of Article 6 pilots in a virtual workshop on Article 6 and the Joint Crediting Mechanism (JCM) hosted by the Japanese Institute of Global Environmental Strategies (IGES). The workshop attracted over 400 participants, most of which came from the Japanese private sector. These private sector actors were eager to understand the relevance of Article 6 action for Japanese companies and to understand the links between the JCM and Article 6.

Virtual Workshop on bulk procurement of greenhouse gas mitigation technologies

On February 17, Axel Michaelowa together with Benito Müller from Oxford University presented a policy brief, co-authored with Anne Kathrin Weber, on bulk procurement of greenhouse gas mitigation technologies at a virtual workshop held by the European Capacity Building Initiative. This could become a potential non-market approach under Article 6.8 of the Paris Agreement. Over 40 climate negotiators from around the world participated actively and stated that it is crucial to develop such approaches to fill the concept of Article 6.8 with life. You can find the full study here https://www.perspectives.cc/fileadmin/user_upload/Michaelowa_et_al._2019_-_Theory_and_international_experience_on_VCMs__1_.pdf . 

Webinar of Export Credit Agencies under the Paris Agreement

On the 10th of March 2021, Perspectives Climate Research hosted a webinar on “Benchmarking Paris Alignment methodologies for Export Credit Agencies (ECAs)” bringing together PA alignment methodology developers such as E3G, SBTi and other relevant NGOs working on sustainable finance and fossil fuel phase-out of financial institutions. The aim of the first webinar of a series of three is to present and discuss the results from benchmarking existing PA alignment methodologies in the context of ECAs. In the next steps, the methodology will be tested on Germany´s mandatary ECA, Euler Hermes, to ensure its real-world applicability. In the long run, the aim of assessing ECAs for their Paris alignment will help to improve the transparency of these institutions and drive reform towards decarbonising financial flows provided as officially supported export credits.
Recent Publications

Article 6 piloting: state of play and stakeholder experiences
Perspectives Climate Group and Climate Focus recently published an updated overview of the global landscape of next-generation carbon markets in support of the Paris Agreement. The 3rd edition of a series of studies started in 2019 summarises the state of play of real-world Art.6 piloting and introduces a new conceptual approach that allows the capturing of the diverse Art.6 piloting landscape by differentiating between enabling initiatives and pilot activities that aim at generating internationally transferred mitigation outcomes and adaptation benefits. The study shows that Art.6 pilots have progressed in their development, albeit slower than in previous years. Most pilot activities remain in the preparatory phase as they have not yet signed commercial agreements or generated mitigation outcomes. Unsurprisingly, host countries adopt a cautious attitude toward Art.6 piloting while buyer countries are the driving force behind projects’ conceptualisation and development. This attitude can be
explained by the fact that host countries take their NDC targets seriously as Art.6 cooperation impacts national targets more strongly than the CDM and the effort required for developing Art.6 policy frameworks ahead of agreed UNFCCC Art.6 rules. Having a closer look at Art.6 piloting efforts generates relevant experience that can help the international community to finalise this important element of the Paris Agreement rulebook. Read the full study here https://www.perspectives.cc/fileadmin/user_upload/PCG_CF_Article_6_Piloting_Dec_2020.pdf .

Negotiating cooperation under Article 6 of the Paris Agreement
Agreement on the specific rules for the two market approaches and the non-market approaches defined in Article 6 of the Paris Agreement is still outstanding. Negotiations failed to result in agreement twice in a row, and the COVID-19 pandemic has led to the postponement of further negotiations from 2020 to November 2021. As a result, Article 6 negotiations cannot be finalised before countries revise their first Nationally Determined Contributions (NDCs) and begin implementation. The last round of negotiations at the UN Climate Change Conference in December 2019 made some progress, and retained three different texts as a basis for future negotiations on Article 6, while a clean text on nonmarket approaches under Article 6.8 was developed. There was an agreement, to a large extent, on the accounting of internationally transferred mitigation outcomes (ITMOs) through ‘corresponding adjustments’ (CAs) to national emissions balance and reporting (Article 6.2); review of cooperative approaches
(Article 6.2); the governance of the Article 6.4 mechanism; and procedures for the transition of Clean Development Mechanism (CDM) activities and methodologies (but not credits) under Article 6.4. Read the full study here https://www.perspectives.cc/fileadmin/user_upload/Article_6_2020_PCG.pdf .

Perspectives promotes high-integrity in German voluntary carbon markets

Perspectives and FutureCamp supported the German ‘Development and Climate Alliance’ in guidelines on how to avoid double-counting in post-2020 voluntary carbon markets. The (German) guidelines (https://allianz-entwicklung-klima.de/wp-content/uploads/2021/02/leitfaden2021-vermeidung-von-doppelzaehlung-freiwilliger-markt.pdf)  explain the links between expected rules for market-based cooperation under Article 6 of the Paris Agreement and the voluntary carbon market. The avoidance of double counting of the same mitigation outcomes towards several targets is important to ensure the environmental integrity of mitigation strategies. Until an Article 6 rulebooks is agreed in international negotiations, regulatory loopholes will also remain for the voluntary market. With the guidelines, the Alliance offers an orientation in the context of these prevailing regulatory uncertainties, to support different market actors in making effective contributions to climate protection and sustainable development
with the instrument of voluntary compensation. The guideline offers clear recommendations to exclude double counting of emission reductions also in the case of voluntary offsetting. To this end, options are shown with the help of which the currently existing regulatory gaps can be bridged and reputational damage from voluntary compensation can be avoided.

Analysis of COVID-19 impacts and links between recovery policies and international carbon markets in developing countries
International carbon markets, especially baseline and credit systems, are an important component of international climate policy and enshrined in Article 6 of the Paris Agreement. Our team analyses the effects of the COVID-19 pandemic and its corresponding containment, emergency response and recovery policies on key economic sectors in developing countries. Building on these insights, the team assesses the impacts of COVID-19 and corresponding policies on crediting policies, considering baseline setting and stringency of nationally determined contributions (NDCs) of developing countries. Read the full study here https://www.perspectives.cc/fileadmin/user_upload/Michaelowa_et_al__2020__COVID-19_CIS_WP_106.pdf .

Urban components under Article 6 of the Paris Agreement

The study, co-authored by ICLEI and Prof. Dr Maike Sippel from the HTWG Konstanz, was based on an analysis of challenges and success factors of the urban project under the Kyoto mechanisms. Combining this analysis with their respective diverse backgrounds developing and analysing (market-based) finance for urban mitigation projects, Perspectives developed a framework approach that is compatible with the evolving Article 6 principles. Simultaneously putting urban structures and the landscape of actors at the centre of considerations by providing sufficient flexibility to address the diverse conditions in urban areas. Read the full study here https://www.perspectives.cc/fileadmin/user_upload/Urban_components_under_Article_6_of_the_Paris_Agreement_PCG_2021-01-14.pdf .

Setting Crediting Baselines under Article 6 of the Pairs Agreement

Perspectives Climate Research and the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety chair the Carbon Market Mechanisms Working Group (CMM-WG). The CMM-WG focuses on technical aspects of programmatic and upscaled crediting mechanisms in Article 6 of the Paris Agreement as well as results-based climate finance. The working group aims to facilitate a continuous dialogue on technical issues among key carbon market stakeholders.

This month, Perspectives published a paper on ‘Setting crediting baselines under Article 6 of the Paris Agreement’  

Setting crediting baselines under Article 6 of the Paris Agreement, which was developed against the background of ongoing discussions with technical experts, including from consultancies, academia, governments, and multilateral institutions engaged in Article 6 negotiations and piloting activities under the umbrella of the CMM-WG. In 2021, the CMM-WG will continue to host workshops on the topic on developing Article 6 methodologies for baseline-setting, additionality testing and monitoring in line with Paris Agreement principles.