Decoding Article 6 of the Paris Agreement - Status of Implementation Presentation title Decoding Article 6 of the Paris Agreement - Status of Implementation 2017 Asia Pacific Climate Week, December 2017 My names if Frank Wolke. I have the pleasure of providing some reflections on the current state of the Article 6 negotiations in UNFCCC I am doing this – not in my formal role as chair of the CDM executive board – but as someone who is follwing the process closely, as Article 6 may indeed at some stage also have bearing on the future of CDM. But p[lease note that I am not representing any official views of standpoints here, but only share my personal reflections and insights. Frank Wolke – Chair of the CDM Executive Board

Background Paris Agreement Decision 1/CP.21 Presentation title Background Paris Agreement Art 6.2−6.3 (Cooperative approaches) Art 6.4−6.7 (A mechanism) Art 6.8−6.9 (Non-market approaches) Decision 1/CP.21 Para 36 (SBSTA to recommend “guidance” for cooperative approaches) Para 38 (SBSTA to recommend “rules, modalities and procedures” for Art 6.4 mechanism) Paras 39−40 (SBSTA to recommend a “draft decision on the work programme”) As you may be aware of, the Paris Agreement sets the framework for international cooperation around addressing climate change. One of the essential aspects is the possibility for international cooperation using market based, and non-market based instruments. In the Paris Agreement, this referred to under Article 6 of the agreement. Essentially, there are three parts of article 6: Cooperative approaches, which allows parties to work together and exchange or transfer emission reductions in the form of ITMOs, or Internationally Transferrable Mitigation Outcomes. A mechanism for mitigation and sustainable development Non-market based approaches, which may be seen as any kind of international cooperation that does not result in international transfer or trade of mitigation outcomes. In Paris, parties were asked to develop guidance for cooperative approaches, rules and modalities for the new mechanism, and a draft decision for a work programme on non-market approaches.

Markets and non-markets in the Paris Agreement Presentation title Aim of the Paris Agreement Holding increase in global temperature to well below 2 degrees C and try to limit to 1.5 degrees C Achieving a balance of emissions and removals Article 6 approaches are tools to support the achievement of these goals Ambition in NDCs NDCs reflecting highest possible ambition Markets should support, not undermine, that ambition Progression of NDCs over time Each new NDC should show progression in the contribution Markets should not discourage progression As I mentioned at the outset, the Article 6 tools are included in the Paris Agreement with the explicit purpose to facilitate the achievement of the Paris Agreement Goals. An important principle for Article 6 is that market – and non-market based approaches should facilitate action and increase ambition and must not undermine ambition or discourage progression. Much of the specifics in the negotiations is about how to ensure that this is also how the elements of Article 6 will work: How do you ensure environmental integrity of emission reduction outcomes How do you avoid double counting? How do you ensure transparency Under what conditions can parties and non-party stakeholders participate? …..just to mention a few examples

Overall timeframe Decision 1/CMA.1 Sessions in 2018 Presentation title Overall timeframe Decision 1/CMA.1 COP to accelerate work and forward the outcomes at the latest to CMA1 - part 3 (Dec 2018) Sessions in 2018 SBSTA 48 (May 2018) Additional session(?) – to be determined (Aug 2018?) SBSTA 49, COP 24 (Dec 2018) Looking forward, the target is to deliver all these outcomes by COP24. Practically speaking, these outcomes are expected to contain all the elements (rules and guidance) needed to operationalize the cooperative approaches, new mechanism and non-market based approaches. In other words, a bit of what the Marrakech Accords were for CDM. In other words, after COP24, stakeholders should be able to start using these tools. In order to meet the COP24 deadline – and not only for Article 6, but for the Paris Agreement overall, - parties will convene two, possibly three, times in 2018, as reflected on this slide.

Article 6 sits in a puzzle with other items Presentation title Article 6 sits in a puzzle with other items information to be reported and its review accounting for the NDC accounting for ITMOs used for NDCs Role of non- markets in implementing NDCs facilitative compliance 6.4 mechanism in the context of NDCs conditional parts of NDCs Global stocktake Article 6, of course, also is not an island to itself, but fits within a wider universe of other elements of the Paris Agreement. In particular, the rules and elements developed under Article 6 have to fit with the accounting rules for NDCs, with conditional parts of NDCs, and with the overall transparency framework of the Paris Agreement, including the Global Stocktake. If these terms are difficult to keep in mind, you really only need to understand that the purpose of this puzzle is to ensure that the accounting for emissions and emission reductions under UNFCCC is consistent and reliable.

The bigger picture around Article 6 discussions Presentation title The bigger picture around Article 6 discussions A practical implementation challenge for NDCs. Many Parties need help to achieve their NDC: Technical support (e.g. to understand their own greenhouse gas emissions profile to identify areas ready for Art. 6) Financial support (e.g. to implement conditional parts of their NDC) Parties are working through an interlinked work programme that has to deliver all at the same time Multiple interconnected discussions at UNFCCC that have to deliver all together (e.g. Article 4, 13, 15) An overall dynamic of political balance Balancing of progress across all bodies (APA, SBSTA, SBI) You may ask why so many parties are paying a lot of attention to this part of the negotiations. And indeed they do. Article 6 was one of the most intense negotiation items at COP23. The reason is simple: many countries need help to implement their NFDCs, and the Article 6 tools offers in principle a set of very important tools to facilitate international cooperation, and to use international transfer of emission reduction outcomes as part of that support. This also includes the financial aspect of climate action. In addition to the need for all the elements moving forward in sync with each other – because Article 6 touches on many other issues or articles of the Paris Agreement – Article 6 overall also has to move forward in sync with the negotiations on other articles, in particular Article 4 (NDC), Article 13 (Transparency), and Article 15 (facilitate compliance). To make things even more interesting, these discussions are taking place across several different bodies under UNFCCC.

Progress up to SB46 SBSTA 44‒46 (May 2017) Presentation title Progress up to SB46 SBSTA 44‒46 (May 2017) Focused on establishing common understanding Convergence and divergence in views Submissions from Parties (prior to SBSTA 45, 46) Roundtables (in conjunction with SBSTA 46) Informal information note by co-facilitators, listing of possible elements in the “guidance” (Art 6.2), “rules, modalities and procedures” (Art 6.4) and “decision on the work programme” (SBSTA 46) If you look back at 2017, it has actually been a very good year for Article 6 negotiations. The first session took place in Bonn in May (SB 46). This session focused on establishing a common understanding the issues that needs to be agreed, as well as identifying convefring and diverging views. This was achieved through submissions and in-session roundtables.

Outcomes of COP23 SBSTA47 (Nov 2017) Presentation title Outcomes of COP23 SBSTA47 (Nov 2017) Active roundtable-discussion among Parties (4-5 November) resulted in a set of (overnight) informal documents for Art 6.2, 6.4 and 6.8 Potential structures and elements identified by issuing three iterations of informal notes Final hours agreement for significant intersessional work – an informal document containing the draft elements based on prior submissions and the third iteration (expected to be published in mid-March 2018) At COP 23 (SBSTA 47) these discussions continued, and during two weeks, three iterations of informal notes were generated and negotiated to seek to narrow down the elements identified into an informal document that contains the draft elements of what may become the basis for a decision at COP24. This is to be published by mid-March 2018.

Progress report Presentation title An important aspect of work is that the three topics under Article 6 are seen as a package. It means that all of them have to progress in sync with each other. As you can see on this slide we have so far been successful in maintaining even (and good) progress across the three items.

Key aspects of COP23 outcomes Presentation title Key aspects of COP23 outcomes Parties have gone beyond political to technical options resulting in clarification of divergence of views especially in the areas of: Approaches to accounting for cooperative approaches Transition of CDM into Article 6.4 mechanism Work programme activities under the framework Cooperative approaches face challenges in capturing structure of guidance in text, as compared to the mechanism and the framework. Good momentum established for further work in 2018, towards a decision at COP24. If you reflect on the actual progress made, it is really quite positive: Parties have moved from political discussions to identifying technical options for how things can work practically. This is a huge and essential step. It also reflects a certain amount of trust generated for the process and for the co-chairs (Hugh Sealy, Grenada, and Kelley Kizzler, Ireland) Some interesting aspects “ are perhaps also that some of the areas where parties have diverging views refer to: Approaches to accounting for cooperative approaches Transition of CDM into Article 6.4 mechanism Work programme activities under the framework It can also be noted that a key area for attention is about how to capture the structure of guidance in text, as compared to the mechanism and the framework. But in summary – there seems to be good momentum now for achieving a decision by COP24.

Presentation title Thank you!