The Paris Agreement is the leading international treaty on climate change. It was adopted during COP21 in 2015 by 195 different countries. Its primary goal is to maintain the increase in global average temperature below 2° Celsius compared to pre-industrial levels between the years 1850 and 1900, with efforts to limit this rise to 1.5° Celsius.
Nationally Determined Contributions (NDCs)
According to the Intergovernmental Panel on Climate Change (IPCC), to limit global warming to 1.5° Celsius, countries and companies must reduce their greenhouse gasses (GHG) by 43% before 2030, relative to 2019 levels. To achieve these goals, the signatory nations agreed to establish voluntary commitments to the reduction of their emissions, named Nationally Determined Contributions (NDC).
The NDCs are national action plans that outline each country's specific goals for reducing their GHG emissions and adapting to the impacts of climate change. These commitments must be revisited and updated every 5 years, always seeking even more ambitious reduction levels.
Countries can take several actions to address climate change, including regeneration of ecosystems, greater control of deforestation and emissions of economic activities, and transitioning from fossil fuel energy to renewable energy sources.
Article 6 and Strategies to Achieve the NDCs
The Paris Agreement recognizes that different countries have distinct responsibilities, needs, and decarbonization timelines. "Article 6 serves as a tool to support emission reductions, creating mechanisms for countries and companies to negotiate mitigation results among themselves to achieve their goals and help curb global warming," explains André Escada, our Carbon Policy consultant.
He highlights that, according to Article 6, the countries that surpass emission reduction targets can sell the surplus to other countries still working to meet their objectives. According to the International Emissions Trading Association (IETA), 80% of the participating nations of the Paris Agreement intend to use these tools and 24% have already begun exploring pilot projects and/or bilateral agreements.
Escada explains that there are three different mechanisms, foreseen by Article 6, that countries and companies can voluntarily adopt for decarbonization. See the three mechanisms below:
Article 6.2: ITMOs
Article 6.2 facilitates the trading of Internationally Transferred Mitigation Outcomes (ITMOs) between countries. This allows a host country that is on its way to exceeding its NDC to sell its mitigation results for investments, training and technologies. The purchasing country applies the obtained results to close the gap in its emission reduction goals.
The resource is available to all of the signatory nations of the agreement and allows the trading of units created by projects of diverse areas, without restriction of sector, gasses, methods and standards, as long as they comply with the guidelines outlined in Artigo 6. Each country is responsible for designing policies to operationalize these trades, being that the purchase and sale of mitigation results occurs between governments.
Article 6.4: Projects
Another option is the commercialization of Emission Reduction Units (ERUs) certified by the United Nations Framework Convention on Climate Change (UNFCCC). In this model, the host country produces and trades ERUs using projects that follow technical methodologies, similar to the Clean Development Mechanism (CDM) under the Kyoto protocol and the voluntary carbon market that involves the trading of carbon credits. In this case, the UNFCCC functions like a “certifier.”
“In addition to the signatory countries of the Paris Agreement, companies involved in projects like the emission removal, much like Biomas, can also participate in this market,” states Escada. Though this mechanism is normally associated with the voluntary carbon market, it also facilitates financial exchanges between countries and companies, expanding the scope of the voluntary carbon market negotiations, as long as the methods used in the development of the projects are approved by the UNFCCC.
Article 6.8: Non-Market Mechanism
Unlike the aforementioned articles, Article 6.8 does not involve the commercialization of mitigation results. In this case, countries can help other countries reach their NDCs using financial or technical resources.
Ecological Restoration: A Key Strategy For Brazil to Reach Its NDC:
Large scale regeneration of ecosystems contributes to the removal of greenhouse gasses and should be considered an important strategy for Brazil to achieve its NDC. Furthermore, this approach offers multiple ecological benefits, like providing clean water, restoring soil health, and protecting water sources. These beneficial ecosystem services help reduce average local temperatures, increase agricultural productivity, and create income for local communities.
Biomas, a company dedicated to revitalizing Brazilian ecosystems, was established to operate in this new era. We finance our efforts through the commercialization of high quality carbon credit, generated by our restoration projects. Doing this, we can generate value while contributing to climate balance, biodiversity conservation, and social transformation.