Practical strategies to avoid overselling

Final Report May 2020

A fundamental difference in the context of Article 6 mechanisms compared to the Kyoto Protocol mechanisms is that, under the Paris Agreement, all countries have mitigation pledges – unlike the Kyoto Protocol where only the industrialized countries had quantified emission reduction commitments. The Paris Agreement requires Parties to avoid double counting of mitigation outcomes, by applying “corresponding adjustments” (CAs) for any transferred mitigation outcomes to their reported emissions or other indicators used to track nationally determined contribution (NDC) progress. A major concern of prospective transferring countries under Article 6 is the risk that participation in cooperative approaches could compromise achieving their NDC, due to “overselling” emission reductions. This is not in the interest of acquiring countries either, since the perception of risk might reduce transferring countries’ willingness to trade and to commit to corresponding adjustments. The objective of this report is to present options to address an important overselling risk: selling low-cost mitigation outcomes (MOs), which could compromise NDC achievement if remaining mitigation opportunities turn out to be too expensive (selling “low-hanging fruit”).

The report first explains the nature and types of overselling risks, but then focuses on the risk of selling “low-hanging fruit”. Next, the scope and methodology of this analysis are presented. The report then turns to how countries might prioritize different mitigation interventions for NDC implementation in the short and long terms, since this will determine how and where the country can engage with Article 6 cooperation while minimizing the risk of overselling. The analysis presents three broad groups of strategies that could reduce the overselling risks related to transferring low-cost emission reductions.