Averaging or multi-year accounting? Environmental integrity implications for using international carbon markets in the context of single-year targets
Under the Paris Agreement, most countries have communicated Nationally Determined Contributions (NDCs) with mitigation targets for a single year. Single-year targets present considerable challenges when countries use international carbon markets to achieve their NDCs. This paper assesses the environmental integrity implications of the two options that countries with single-year targets can use to account for internationally transferred mitigation outcomes (ITMOs) under Article 6 of the Paris Agreement: averaging and multi-year approaches. To assess the implications of these options, the paper considers a variety of scenarios for how two countries might engage with Article 6 and assesses how the choice of the accounting approach may affect aggregated emissions from the two countries. The paper finds that aggregated emissions could increase, decrease or remain unaffected, depending on: which of the two accounting approaches is chosen by the transferring and the acquiring country; whether the generation or use of ITMOs decreases, increases, or keeps constant over time; whether the countries’ emissions in the target year are representative for the countries’ emissions trend; and what course of action countries take in the case of a possible over- or under-achievement of their NDC targets.