ICC policy paper on market mechanisms for climate action

Business View on Market Mechanisms for Climate Action – Article 6 (1) – (7) of the Paris Agreement

Business strongly supports the use of market-based approaches under the Paris Agreement. After promising experiences with trading of emissions through the CDM and JI under the Kyoto Protocol, we look forward to contribute to this second phase of market mechanisms and emissions trading under the PA.

With only few years left until the first period of NDCs are to be implemented, we urge parties to progress with guidance and to adopt rules, modalities and procedures at CMA1 as provided for Article 6 paragraph 7 of the PA.

Voluntary cooperation and the use of market mechanisms are an integral part of the new international climate change regime established through the Paris Agreement (PA) at the UNFCCC twenty-first session of the Conference of the Parties (COP21). Article 6 of the PA provides the opportunity for countries to cooperate on a voluntary basis when implementing Nationally Determined Contributions (NDCs). Furthermore, it established a new mechanism which shall contribute to the mitigation of greenhouse gases and to sustainable development.

The PA combines a range of national and local policy approaches in a novel form of bottom-up global architecture. Especially through Article 6 the important role of providing incentives for emission reduction activities, including voluntary emission trading and carbon pricing, is recognized. The central pillar of this is the availability of internationally transferred mitigation outcomes and the new Article 6 Mechanism for mitigation and sustainable development.

Business strongly welcomes this continued availability of market-based instruments under the international climate policy framework. In our view it will permit parties and business to identify and enable the most cost-effective options to meet mitigation challenges lying ahead for parties, society and business. Equally, those instruments can help parties to increase their level of ambition. If well designed, they will create new channels for climate finance, lead to technology transfer and capacity building and hence support sustainable development in many areas.