Business calls for robust Article 6 rules to be agreed at COP25Jen Austin, Policy Director for the We Mean Business coalition
On the final day of negotiations at COP25 in Madrid, companies are increasing their call for a strong and meaningful agreement on Article 6 as an important part of an ambitious outcome from this year’s conference.
Article 6 allows for “cooperation in the implementation” of Nationally Determined Contributions (NDCs) “to allow for higher ambition.” It is a critical piece of the Paris Agreement, and one that has significant potential to boost investment in solutions and increase the efficiency and economic benefits of the transition.
In order to do so, the negotiations must produce clear rules and reliable environmental safeguards, ensuring the environmental integrity of carbon credits and making certain that no reductions are double counted. Companies need to know they can trust what they are buying and selling. Anything less would be a risk to their reputation and value.
“Although a robust Article 6 agreement has great potential to incentivize parties to take faster and additional mitigation action, while supporting sustainable development and increased climate finance, it is imperative to ensure the environmental integrity of the global mechanism,” Jeff Turner, VP Sustainability at Royal DSM, said.
“If not, it can have wide-ranging implications with potential to undermine the Paris Agreement. The key is to ensure robust accounting rules and mechanisms,” he added.
Carlos Sallé Alonso, Director of Energy Policies and Climate Change at Spanish power utility Iberdrola, said that reaching an agreement would help businesses reduce their emissions more effectively.
“The Article 6 outcome at COP25 should provide robust guidelines to ensure environmental integrity, create a strong C02 price signal, and encourage ambition in the NDC revision process during 2020. This robust outcome will definitely contribute to help business to drive deep decarbonization pathways,” he said.
Meanwhile, corporate use of an internal price on carbon is becoming the new normal for major multinationals. In 2017 almost 1,400 companies were factoring an internal carbon price into their business plans, representing an eight-fold leap over four years, according to CDP data.
This rapidly growing group of companies know that putting a price on carbon can help drive decarbonization and increase accountability and competitiveness.
Negotiators have spent much of the year focused on Article 6, as the rest of the world has spent much of the year calling for increased climate ambition from policy makers. The two go hand in hand – clear pricing signals and policies that shift global financial flows away from polluting investments and toward zero-carbon solutions will provide a powerful impetus for accelerating business action on climate change.
A strong agreement on Article 6 must come as part of an overall commitment to increased climate action. The signal from governments coming out of COP25 and into 2020 needs to be a clear commitment to increasing ambition and accelerating the transition to a zero-carbon economy.
In addition to strong rules of the road – business is looking for governments to commit to achieving a just transition to a net-zero carbon economy by 2050 at the latest. They must strengthen their NDCs and 2030 targets in line with a 1.5ºC trajectory, and lay out national policies, plans and laws to drive the achievement of these targets.
Together these will boost investment in solutions, help drive green growth in the real economy and empower countries to deliver on their national climate targets faster and more effectively.