Climate pact adopted to implement the Paris Agreement
197 countries came together at the 26th UN Climate Change Conference to accelerate transnational exchange and increase international climate protection efforts. The result: the adoption of the Glasgow Climate Pact, which now contains all necessary guidelines for implementing the Paris Agreement. With this milestone, COP26 has formally achieved its most important goal.
Week one of the negotiations was shaped by various pledges with which the participating parties committed to climate protection at different levels. These include pledges to halt deforestation worldwide by 2030 and to substantially reduce global methane emissions. For the first time, measures to phase out coal and end fossil fuel financing were also agreed upon.
Joachim Sell, Head of Natural Climate Solutions, who observed COP26 on behalf of First Climate, also highlights announced commitments that in his view are remarkable. The financial industry, for instance, announced that it would mobilize and deploy a total of up to 130 billion USD in private capital to support the achievement of Net Zero targets over the next 30 years. Regarding the automotive sector, all new car sales are to become net-zero by 2040 and in core markets by 2035. “Achieving the goal of reducing fossil fuels in the mobility sector will make an important contribution to global climate protection. Based on our cooperation with companies in this sector, we believe that this goal can be reached even earlier than currently projected,” says Joachim Sell.
Clear guidelines for Nationally Determined Contributions
Another important outcome of the COP26 negotiations is the collective resolution on a common timeframe for Nationally Determined Contributions (NDCs). All parties agreed to submit new or updated NDCs every five years for a period of ten years, i.e. an NDC in 2025 with an end date of 2035, and one in 2030 for 2040. In addition to this, countries are encouraged to review their 2030 targets next year and update them if necessary. In total, more than 150 countries submitted new NDCs, representing about 80% of global emissions, and 82 countries worldwide now have a Net Zero target.
Further pledges on climate finance
When it comes to climate financing, the industrialized nations agreed on increasing their support for developing countries in the fight against climate change by at least doubling their financial resources to 40 billion USD by 2025. The industrialized nations now want to reach the goal of providing 100 billion USD every year as of 2023, instead of 2020, i.e., with a delay of three years. With the Glasgow Breakthrough Agenda, countries and companies are to accelerate the development and deployment of green technologies and sustainable solutions in this decade, while reducing costs at the same time. Developing countries should then gain access to the innovations and resources needed for the transition to Net Zero.
Finalizing the Paris Rulebook
Arguably, the key achievement of COP26 is the completion of the Paris Rulebook, which will be used as a basis to implement the Paris Agreement as of now. For example, there was a breakthrough in the negotiations on Article 6 of the Paris Agreement, which sets out rules for international cooperation on climate protection, both at the state level (Article 6.2) and in the context of private-sector cooperation (Article 6.4). It contains clear guidelines on how emission reduction certificates or carbon removals can be traded in the future and how double counting can be reliably avoided.
The focus was primarily on Article 6.4, which is to replace the CDM standard as a mechanism in the future and will thus also influence the voluntary carbon markets. The host countries will be more involved in the approval and implementation of climate protection projects under the new mechanism. In future, they will have to make corresponding adjustments for A6.4ERs, i.e. for emission reduction certificates under Article 6.4. This means that the host country deducts the amount of transferred emission reductions from its emissions balance, while the receiving country or corporation adds them to its balance in order to avoid double counting. Initially, what was controversial was the amount of the levies on certificates from climate protection projects – so-called Share of Proceeds (SoP) – to the Adaptation Fund, which is to co-finance adaptation measures to climate protection in vulnerable countries. For measures covered by Article 6.4, a SoP has been agreed on at least 5% of the achieved emission reductions. 2% of the credits will be deducted and cancelled to ensure the Overall Mitigation in Global Emissions (OMGE).
COP26 – What’s next?
“It is remarkable that the requirements, methodology and procedures under Article 6.4 are very similar to current carbon standards such as CDM or VCS, except for the greater involvement of host countries,” says Joachim Sell. In his opinion, the implementation of emission reduction projects for the voluntary carbon market will therefore not change significantly. “It can be assumed that there will be greater openness to methods and technologies with regard to the implementation of climate protection projects and increasing investments in project types that have been underrepresented so far, such as carbon sink projects in agriculture.” The expert points out, that the impact of the new Article 6.4 on the voluntary carbon markets cannot be fully estimated yet, especially when it comes to corresponding adjustments and the transfer of emission reduction or removal certificates in the private sector. In the weeks and months ahead, much will still have to be specified and formulated by the parties involved – especially regarding certification standards.
Joachim Sell is pleased with the outcomes of the conference:
“COP26 was one of the most successful in recent years, generating substantial achievements and long-awaited guidelines. Overall, a suitable framework was created to drive forward the development of carbon markets. Participating countries now have the necessary tools to start the implementation of the Paris Agreement. However, this will require the highest level of commitment from all stakeholders.”
Joachim Sell, Head of Natural Climate Solutions at First Climate
