After switching locations twice, the 25th Conference of the Parties (COP25) will take place in Madrid, Spain. However Chile will still preside over the two-week talks which, in our view, is significant because it allows the voice of vulnerable regions to be heard. Some 25,000 delegates will work to tie up open items from COP24 (2018). The toughest and most important issue will be agreeing how Article 6 on international carbon markets will work. Failure could mean less effort on reducing emissions from certain countries; success could enhance it.

Most of the operational guidelines (i.e. the rulebook) for the Paris Agreement was agreed last year. However, Article 6 was left outstanding. Article 6 essentially covers voluntary cooperation in implementing climate pledges (NDCs) with a view that cooperation allows for higher ambition. It can be broken down into three main parts:

  • Cooperative approaches (Article 6.2) - to be achieved through (essentially what is) a carbon credit system, known as ITMOs (internationally transferred mitigation outcomes).
  • The mechanism (Article 6.4) - “A mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development”.
  • Non-market approaches (Article 6.8) - which refers to mitigation outcomes (i.e. emissions reduction strategies) that do not result directly in a carbon credit but are generally considered to be good for enhancing carbon/energy efficiency etc.

Common timeframes of NDCs should be determined but we think a range of options on the duration will remain to allow flexibility. It was agreed last year that NDCs implemented from 2031 onwards should apply “common timeframes” – referring to the period NDCs should cover – however, the actual period of duration was not agreed. We think common timeframes will be a major point of contention at COP25 because it has strong repercussions for ambition levels.

Reporting formats - Given the importance of transparency, there is a lot of debate over exactly how certain information should be disclosed and displayed.

Contrasting momentum: The science is clearer and the devastating impacts of climate change continue across every region in the world. The silver lining is that public awareness has been growing and may raise the pressure to act, however bold and ambitious policies are sparse because of economic and geopolitical events. The divergence is apparent in Russia’s formal ratification of the Paris Agreement in October, barely a month before the US formally sent notification of its withdrawal.

The importance of 2020: COP25 marks the beginning of the final year for pre-2020 action. A stocktake in Madrid will most likely show that implementation of action has been inadequate and falls well short of the trajectory for 2°C, let alone 1.5°C. As some countries and businesses begin to aim for 1.5°C, in our view, if COP25 completes all outstanding rulebook items, then that would allow the focus to return to enhanced pledges, longer-term (mid-century) strategies, and bolder policies.

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