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Markets look to COP25 in Madrid for clarity on global emissions trading


Negotiators to conclude 3 years of talks on Article 6

Savings estimated at $250 billion/year from emissions trading

5 bil mt/year of CO2 equivalent could be saved at no extra cost: IETA

  • Author
  • Frank Watson
  • Editor
  • James Burgess
  • Commodity
  • Energy Coal Electric Power Natural Gas Oil
  • Topic
  • Energy Transition

Representatives from almost 200 countries are set to gather in Madrid for the UN's annual climate summit in December amid hopes that three years of talks can be finalized on setting the rules for an international carbon market.

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At stake is Article 6 of the Paris Agreement which sets out the scope of a global emissions trading system that could halve the cost of the global effort to phase down greenhouse gas emissions as well as boost government ambition on climate targets.

"Article 6 is vital to the success of the Paris Agreement," International Emissions Trading Association CEO Dirk Forrister said in a statement Thursday.

"The ambition set out in the agreement absolutely requires the participation of the private sector, and Article 6 is the key to that participation," he said.

The crucial goal at this year's summit is to conclude more than three years of talks over the details of Article 6, IETA said. COP25 -- the 25th Conference of Parties to the UN Framework Convention on Climate Change -- will be held in Madrid from December 2-13, after Chile pulled out of hosting the talks.

Nations and companies have expressed an intention to harness the power of markets to help meet each country's Nationally Determined Contribution -- the voluntary emissions reduction pledges made under the 2015 Paris deal.


A global emissions market would allow governments to trade emissions reductions, driving global carbon abatement at lowest cost.

By using the global carbon market, governments could slash the cost of achieving emissions reductions by 50%, saving $250 billion per year by 2030, according to a joint report in September by IETA and the Carbon Pricing Leadership Coalition -- a government, business and civil society group.

If governments decided to spend those cost savings on enhanced climate ambition, Article 6 could facilitate addition emissions reductions of 5 billion mt/year in 2030, the report found. That is equivalent to more than Europe's entire annual output of greenhouse gases.

Including land use, the savings rise to $320 billion/year and the emissions reductions could increase to 9 billion mt/year, it said.

Speaking at an event in London Thursday, IETA's international policy director Stefano De Clara said the Article 6 negotiations in Madrid would be "all about compromises."

"We need to see as much clarity as possible on key features of Article 6," he said. "COP25 should define a structured work plan."

The rulebook on Article 6 should give clarity on the metric, form and scope of internationally traded emissions reductions and how they relate to each country's emissions pledge, said De Clara.


Under the Paris Agreement, 195 countries pledged to control greenhouse gas emissions to limit global warming to well below 2 degrees Celsius from pre-industrial levels by 2100 and to aim for no more than 1.5 degrees C.

The deal gathers together and formalizes a wide range of measures put forward by governments to reduce emissions, including direct regulation, market-based measures, increased support for research and development of low-carbon technologies, and actions at the corporate, city, regional, national and international level.

The global pact is likely to promote growth in demand for clean energy, sustainable transport, low-carbon industrial goods and processes and energy efficient buildings.

It is also expected to curb demand for high-carbon energy, liquid fossil fuels for transportation, emissions-intensive manufacturing and products, and energy intensive agriculture.


US President Donald Trump November 4 formally started the process of the country's withdrawal from the Paris Agreement, as expected following a pledge he made in 2017, and this is set to take effect a year later on November 4, 2020 -- a day after the US presidential election.

Some observers have noted the potential for the US's withdrawal to slow down progress on achieving the Paris Agreement goals by providing cover for other countries to hold back on ramping up their own climate ambitions in a globally coordinated effort.

However, IETA says the Paris deal will survive, noting an ongoing commitment by other countries and a "wealth of action happening in states and cities across the US to shift to a low-carbon economy."

-- Frank Watson,

-- Edited by James Burgess,