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COP25: Nations under pressure to finalize UN carbon trading rules


Two-week climate summit kicks off Monday

Countries working on rules for global carbon market

Nations set to step up ambition in 2020

  • Author
  • Alessandro Vitelli
  • Editor
  • James Burgess
  • Commodity
  • Energy Coal Electric Power LNG Natural Gas Oil Metals Petrochemicals Shipping
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  • Climate Change
  • Topic
  • Energy Transition

More than 190 nations will meet for the next two weeks in Madrid to put the finishing touch to implementing the Paris Agreement, and in so doing will bring a new generation carbon market to life.

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COP25 -- the 25th Conference of the Parties to the UN Framework Convention on Climate Change -- should complete the task of implementing the 2015 Paris treaty that sets the course of climate action for the period after 2020, when the Kyoto Protocol expires.

The meeting comes at a time when climate change has never been higher up the political agenda in many countries, boosted both by youth-led popular protests and by reports from UN agencies warning on the growing concentration of carbon dioxide in the atmosphere.

Countries are preparing to present updated climate pledges -- known as nationally determined contributions (NDCs) -- to next year's summit, but pressure is growing on them to begin showing ambition sooner. Coincidentally, the means to combat climate change are becoming more readily available, according to experienced observers.

"Technology continues to create opportunities that we were not aware of before," Andrew Steer, CEO of the World Resources Institute, said at a briefing last week. "The price of renewables is lower than ever, and importantly, there has been a recognition that the so-called 'hard to abate' sectors [such as steel and cement] are actually not quite so hard as we thought."

The Paris Agreement differs substantially from its predecessor, the Kyoto Protocol, in that there is no longer any division between developed and developing countries. All nations are equal participants, equally bound to take action according to their ability. This means that each country is required to submit NDCs towards the ultimate aim, which is to reach net zero emissions by the second half of the century.


The main work of the conference will be to agree on a set of rules to govern international carbon trading. Article 6 of the Paris Agreement lays the groundwork for two key elements.

Firstly, under Article 6.2, countries may cooperate on activities to reduce emissions that result in the transfer of so-called "mitigation outcomes." Negotiators will try to reach agreement on issues of governance, as well as more concrete questions such as the administration and regulation of international trading.

Article 6.4 concerns a new mechanism that will replace the Kyoto Protocol's Clean Development Mechanism (CDM), a system that funneled billions of dollars of investment into clean technology in developing countries, in exchange for carbon credits.

Much of this new Article 6.4 mechanism is likely to be borrowed from the CDM, which amassed an immense amount of intellectual property -- methodologies to measure emissions cuts and approve projects, as well as a system to administer the marketplace in carbon credits.

"Clear rules for Article 6 will also allow the private sector to develop ways to engage with [governments] and assist them in achieving their NDCs," International Emissions Trading Association international policy director Stefano De Clara said. "Article 6 guidance must therefore be adopted at COP25, in order to avoid delaying this process any further."

Much of the so-called Paris Rulebook was written at last year's summit in Poland, only for a small group of countries to block agreement on the entire text. Specifically, they opposed proposals on how many projects and project types registered under the Kyoto Protocol could be "grandfathered" into the new mechanism and on measures to prevent double-counting of emissions reductions.

"The decisions we take at COP25 must prevent the double-counting of emissions reductions," said Europe's climate commissioner, Miguel Arias Canete. "To achieve this, the rules must account comprehensively for all uses of international carbon markets."

Nations will also discuss how to boost finance to assist developing countries to adapt to the impacts of climate change. To date, around 28 countries have pledged $9.7 billion in financial assistance, but more is needed, according to Yamide Dagnet, Senior Associate, International Climate Action at the WRI.

"We need more to contribute, and some to even double their contributions," Dagnet said last week. "COP25 gives them an opportunity to announce new pledges."

Next year's COP, which will take place in Glasgow, will see nations present their upgraded NDCs in time for the official start of the Paris Agreement.

"Next year is a critical test for what countries are prepared to do, to put the world on a trajectory to reach the goals of the Paris agreement," said David Waskow, a World Resources Institute expert on international climate initiatives. "This year's COP can be seen as a steppingstone towards what has to happen next year. We need more countries to tell us they will be updating their NDCs next year."

-- Alessandro Vitelli,

-- Edited by James Burgess,