Practical strategies to avoid overselling

Under the Paris Agreement, states can cooperate to mitigate climate change and purchase or sell emission reductions internationally. A fundamental dif­fer­ence to the previous Kyoto Protocol mechanisms is that all countries have now pledges for climate action. Thus, if transferring countries sell too many emission re­duc­tions, they risk missing their own mitigation targets. A new study commissioned by the Swedish Energy Agency shows strategies that could be used to prevent such «overselling».

The Paris Agreement requires from all signatory states to contribute to mitigation – in con­trast to the Kyoto Protocol, under which only industrialized countries had concrete emission reduction targets. To achieve their targets, states can cooperate with each oth­er: Article 6 creates the basis for market mechanisms so that countries can cooperate to achieve their Nationally Determined Contributions (NDCs).

Risks for transferring countries

A major concern of prospective transferring (i.e. «selling») countries under Article 6 is the risk that par­ti­ci­pa­tion in cooperative approaches could compromise achieving their NDC, due to “overselling” emission reductions. This is not in the interest of acquiring (i.e. «buying») countries ei­ther, since the perception of risk might reduce transferring coun­tries’ willingness to trade and to commit to corresponding adjustments.

Strategies to avoid overselling

With support from the Swedish Energy Agency, an international research team from Car­bon Limits, INFRAS, SEI and Oeko Institute analyzed the risk of overselling under Ar­ti­cle 6 of the Paris Agreement. The study focuses on the risk that transferring countries sell too many emission reductions and consequently miss their own targets, as the re­main­ing reduction measures are too costly. INFRAS project manager Anik Kohli: «The re­port shows strategies on how to mitigate overselling risks and to prepare for their prac­ti­cal implentation».

Webinar from June 29th, 2020

INFRAS and its project partners presented the results of the study in a webinar. The recording of the webinar can be found here (see also slides).

Further information and studies by INFRAS on this topic (selection)

• Article 6 in the Paris Agreement as an ambition mechanism - Options and recommendations (2019)
• Blending climate finance and carbon market mechanisms (2019)
• Development of options and possible structures for the new international market mechanism under Art. 6 of the Paris Agreement (2019)