Overview of the debate and relevance of SD-benefits
In Article 6of the Paris Agreement the avenues of debating a centrally governed market mechanism and a bottom-up framework are reflected and continued by establishing the SDM and CA. Regarding their enhancement of sustainable development the Paris Agreement (UNFCCC 2015f) states for:
• Cooperative Approaches (Article 6.2), that “Parties shall, where engaging on a voluntary basis
in cooperative approaches that involve the use of internationally transferred mitigation out- comes towards nationally determined contributions, promote sustainable development and ensure environmental integrity and transparency, including in governance, and shall apply ro- bust accounting to ensure, inter alia, the avoidance of double counting, consistent with guid- ance adopted by the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement.”
34
• Sustainable Development Mechanism (Article 6.4), that contributes “to the mitigation of
greenhouse gas emissions and supports sustainable development (…). It (…) shall aim to promote the mitigation of greenhouse gas emissions while fostering sustainable develop-
ment (…)”.
Regarding the relevance of SD-benefits in the debate on market approaches, the mere existence and name of the SDM, building on the current CDM (see section 2.1), provides at least an indication that the sustainable development aspect of mitigation activities could play a relevant role in the future. The timeline for elaborating on the provisions for CA and SDM however remains vague; what is clear so far is that the SBSTA shall develop rules and procedures for adoption by the first meeting of the Parties to the Paris Agreement.
Relevant positions of major stakeholders
Overall, the authors of this report expect no major changes of Party positions regarding the role of SD- benefits or sustainable development for a central mechanism or a bottomup framework. During the ADP meeting in October 2015, a group of interested Parties (EU, Brazil, Panama, Peru, Colombia, Japan, New Zealand, Canada, USA, Switzerland, Norway, Kenya, Togo, Cote’d’Ivore, Singapore, Bolivia, Sene- gal, RSA, Australia, Republic of Korea) submitted a proposal (Mitigation Group 2015) for structuring and clarifying the discussions on an SDM under the ADP; a weak reference to sustainable development is made, i.e. that sustainable development criteria of a host country shall be reflected in drafting the article on the SDM. This is also backed by expert judgements (Interviews No. 7, 8, 9, 11). A joint sub- mission by Brazil and the EU (Brazil 2015) to COP 21 suggested the establishment of the CA and the SDM; the submission text is to a large extent equalling the later Article 6 in the Paris Agreement. The literature so far does not reflect on the SD-benefits of market provisions under the Paris Agreement to a larger extent. Many comments on the Paris Agreement underscore the need to further spell out the individual elements of the Article 6, in order to better judge on the impacts (such as New Climate Insti- tute 2015). Carbon market representatives generally welcome the adoption of the Article 6, and some also see a good foundation for robust environmental integrity of markets (for instance IETA 2015b). Environmental NGOs are more cautious in this regard; Carbon Market Watch (2015e) however under- stands the provisions for SD as strong indication for the future market mechanisms to aim beyond GHG reductions.
Barriers and Drivers for enhancing SD-benefits
As for barriers that prevent achievement of SD-benefits under future UNFCCC market mechanisms, there are several elements that can be identified as potential barriers:
• Lack of a strong mandate for inclusion of SD-benefits under future market mechanisms, and the
• Lack of clarity regarding scope and modalities of market mechanisms at UNFCCC level: The fact that the debate on the modalities and procedures for the NMM & FVA has been stalling has also prevented a detailed debate on SD-benefits. The debate on the SDM and CA is yet to start. The new momentum for a market mechanisms under the UNFCCC after the COP 21 may also benefit the SD-benefits debate.
• Question of sovereignty regarding the definition and assessment of sustainable devel- opment: Sovereignty rights of countries may lead to a fragmented approach where each coun-
try defines its national requirements to consider SD-benefits (such as under the CDM); this includes both advanced and poor approaches.
35
• Lack of incentives for determining the effects of SD-benefits, including the lacking interest
of buyers in fostering SD-benefits under a compliance market. On the other hand buyers could also become a mayor driver for SD-benefits if transparency is enhanced.13
• Added complexity of SD-benefit assessments and respective transaction costs. This involves the trade-off between achievement of substantial emissions reductions through an accessible mechanism and stringent assessments and measuring of SD-benefits.
Regarding drivers that can potentially foster the relevance of SD-benefits in the debate for a future centralized market mechanism as well as bottom-up initiatives under the UNFCCC, the discussion and process on the CDM SD Tool under a reformed CDM is well suited to inform other relevant UNFCCC market mechanism debates. The CDM SD Tool hereby represents the most sophisticated debate on SD- benefits of market based mechanisms under the UNFCCC (see also 3.1 below), although it is a voluntary tool and can be regarded as a “paper tiger”.
Apart from that, the debate on the UN Sustainable Development Goals (see 3.7) can also create momen- tum for enhancing the role of SD-benefits – mainly because they represent some sort of consensus at UN level regarding the scope and priorities for sustainable development. Regarding a more harmonized and strong international approach for SD-benefits inclusion, sustainable development criteria could be defined by funding agencies that support market based activities.14 Such eligibility criteria could be
complemets to sustainable development provisions put forward by host countries (see discussion on NAMAs under 3.3). Moreover, putting forward specific SD-benefit positive or negative lists for activities under future mechanisms would allow to address SD-benefits in early project stages.15
13 See also interviews No. 1, 2, 13, 14. 14 See interviews No. 3 and 7. 15 Interview No. 11.
36
2 Debate and role of SD-benefits under existing mechanisms and ini-
tiatives
The subsequent chapter analyses various positions and the debate on strengthening SD-benefits under selected existing mechanisms and initiatives, namely the CDM, voluntary carbon market standards, NAMAs, REDD+, the GCF, the PMR and the UN SDGs. Hereby an overview on the debate on SD-benefits, respective institutional aspects, the general relevance of SD-benefits under the mechanism, key stake- holders as well as drivers and barriers for SD-benefits is provided.