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The interaction of Article 6 and NDCs: accounting challenges

  • Sofía Ordozgoiti
    Research Associate
  • Finn O'Muircheartaigh
    Director Policy & Markets
The first Article 6 credits generated under the Paris Agreement framework are likely to be from project-based schemes, similar to those already available in the Voluntary Carbon Market. However, for the generation of Article 6 credits, their accounting treatments relative to country-level reporting will become increasingly important. Beyond assessing the project activity itself, a credit’s effectiveness will be dependent on the country’s broader NDC, including how well it is defined, how robust it is, and whether and at what pace the targets are achieved.

This paper discusses some of the accounting challenges with measuring national emissions and setting NDCs. It argues these challenges are a barrier to scaling the Article 6 market and that understanding and minimising information risk will be essential to growing the market.

Here are some key takeaways from the report

  • Article 6 credits must be additional to country efforts to meet their Nationally Determined Contributions (NDCs). Assessing Article 6 credits will necessarily mean analysing NDCs.

  • Different approaches to accounting for national emissions and setting climate targets make the process of analysing and comparing NDCs a particular challenge for the Article 6 market. 

  • Understanding and minimising information risk will be key to assessing NDCs and scaling up the Article 6 market.

Contents

  • 01 Context

  • 02 Why are NDCs relevant to Article 6?

  • 03 Challenges of measuring national emissions

  • 04 Challenges of assessing Nationally Determined Contributions

  • 05 Conclusions

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