ICC sets out business case for deal on emissions trading at COP26
ICC Secretary General John W.H. Denton AO has called on climate ministers to finally conclude a robust and workable rulebook to operationalise Article 6 of the Paris Climate Accord on international carbon markets., ahead of COP26 discussions next month.
A crucial component of the Paris Agreement, Article 6 has the potential to significantly raise climate ambition and action, and lower costs, through greater private sector engagement and more widespread finance, technology and expertise to catalyse climate action.
Despite countries getting close to an agreement on the majority of rules for the Paris Agreement during negotiations of 2018 and 2019, there is, to date, no “rulebook” for Article 6.
In an open letter to climate ministers ahead of the latest round of negotiations, Mr Denton states: “Agreement on a robust and workable rulebook to operationalise Article 6 of the Agreement is, to be sure, a first order priority for the private sector throughout our network—both for environmental and economic reasons”.
Writing on behalf of the global business community and in ICC’s capacity as the business focal point to the United Nations Framework Convention on Climate Change, Mr Denton highlights the negative impact of fragmented domestic carbon pricing regimes on business operations and risks – particularly those of smaller businesses – and underscores concern that current domestic climate policies are insufficient to limit global temperature increases to 1.5 degrees Celsius by 2050. Calling for cooperative approaches to rapidly accelerate the pace of decarbonisation of the global economy Mr Denton said:
“As you may be aware, recent independent research has shown that implementation of the Article 6 has the potential to reduce the total cost of implementing national climate commitments by more than half—a total of USD$250 billion per year in 2030. Given the fiscal toll of the coronavirus pandemic, we believe that this is too significant a dividend for any government to leave on the table in Glasgow next month.”
Mr Denton also noted the imperative to establish a cohesive multilateral approach to carbon pricing which he says from a real economy perspective is vital to avoid the unintended consequences of unilateral climate policy measures —which could place a significant drag on a post-pandemic recovery by triggering climate-related trade frictions.
Official negotiations on this critical issue will resume at upcoming sessions in Glasgow in November—originally planned to take place in 2020— where countries will be aiming for a successful agreement. While finalisation of the Article 6 rules is still pending, governments and other organisations have already committed around US $345 million to develop and implement Article 6 pilots in different jurisdictions.