International cooperation can double emissions savings under the Paris Agreement, new report finds

WASHINGTON, D.C., 18 May – International cooperation under Article 6 of the Paris Agreement could more than double the volume of carbon reductions that nations can make towards their national targets, according to an updated report by the International Emissions Trading Association and the University of Maryland.

A capstone report produced with the help of new and updated research shows that countries that employ Article 6 mechanisms to cooperatively meet their targets could always benefit, regardless of how many countries participate in cooperative mitigation. The degree of benefit and the role of each country (buyer or seller) will depend on what cooperative mitigation “club” the country is part of.

Emissions trading works by setting a market-based price on emissions reductions. Those countries that cannot economically make reductions at home may buy reductions from other countries that have already reached their targets.

By first exploiting reductions that can be made at a lower cost, the whole world benefits from the start. And as the cost of making reductions increases, international cooperation helps direct investment to the right place to make the next least-expensive reductions.

“Our research confirms a classic economic principle: that whenever the marginal cost of producing an outcome differs across countries, opportunities exist for cooperation to achieve the same outcome with net gains for all parties,” said Jae Edmonds, Professor of Public Policy at the University of Maryland and Chief Scientist at Pacific Northwest National Laboratory.

Research concluded that international transactions could surpass $100 billion a year by 2030 if countries choose to cooperate in trading under Article 6 of the Paris Agreement.

“This report provides solid evidence on the economic potential of Article 6. It is now time for countries to implement these mechanisms and harness its benefits” said Dirk Forrister, President and CEO of the International Emissions Trading Association.

Article 6 creates a mechanism for countries to generate emission reductions that can either be counted towards their own domestic targets, known as Nationally Determined Contributions (NDCs), or can be sold to other countries to put towards their own NDCs.

More than 190 countries have signed up to the Paris Agreement, and the vast majority of them have also submitted NDCs to the UN Framework Convention on Climate Change. These NDCs will be studied at this year’s Conference of Parties in December, where delegates will carry out a thorough review of progress to date under what is called a Global Stocktake.

The report is available to read at the IETA website.