Legal terms related to UNFCCC’s market mechanisms

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Date produced: 08/06/2015

Could you please clarify the legal meaning of the terms “double counting”, “real, permanent, additional and verified” and “net decrease”, in the context of the UNFCCC and its market instruments, particularly the Framework of Various Approaches, New Market Mechanism and Non Market-based Approaches? 

Advice: The UNFCCC aims to stabilize “the greenhouse gas concentration in the atmosphere at a level that would prevent anthropogenic interference with the climate system[1]. In order to reach that goal, developed country parties agreed on binding commitments of “quantified emissions limitation reduction objectives[2], under the Kyoto Protocol. Accordingly, developed nations were given a cap of allowed emissions, in the form of Assigned Amount Units (AAUs), and were committed to regularly report their emissions, so as to show compliance with the principal obligation. In this context, the establishment of standards and methodologies for reporting, verification and monitoring of the emissions is important to ensure the integrity of the data by which the achievement of the goals is accounted and perceived. This ability to deliver the proper environmental outcomes in any specific context is known as “environmental integrity”, and is a paramount aspect of the effectiveness of the climate change regime. Should emissions be accounted under disharmonised parameters or in a misleading manner, mitigation of climate change may be illusory.

Likewise, when tradable units are used to comply with the quantitative targets, requirements and standards must be met to ensure the integrity of such units generated under any market mechanism and offset project and activities. According to the Kyoto Protocol, these must follow approved methodologies and deliver real, measurable and long-term benefits related to the mitigation of climate change”[3]. In other words, any such mechanism/project has to provide “trust and credibility that a tonne is a tonne”[4], or that such offset projects result in real and effective mitigation of climate change.

This is no different in the context of the Framework of Various Approaches and the New Market Mechanism, where environmental integrity also needs to be ensured, as it is clear from Decision 2/CP.17: Emphasizes that various approaches, including opportunities for using markets, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries, must meet standards that deliver real, permanent, additional and verified mitigation outcomes, avoid double counting of effort, and achieve a net decrease and/or avoidance of greenhouse gas emissions”. 

Such terms as “double counting”, “real, permanent, additional and verified” and “net decrease” are not clearly defined in any COP decision, but are further explained in two UNFCCC Technical Papers (attached to this advice) – FCCC/TP/2014/9 http://unfccc.int/resource/docs/2014/tp/09.pdf and FCCC/TP/2014/11 http://unfccc.int/resource/docs/2014/tp/11.pdf and by other non-UNFCCC technical papers.

  1. Double counting: According to Technical Paper FCCC/TP/2014/9, “double counting” is “the counting of a single quantity of mitigation outcomes for more than one mitigation purpose”. It states that “multiple variants of double counting exist, and they can be classified based on when it can occur, as follows:

“(a) When generating mitigation outcomes (double issuance): this involves the creation of multiple mitigation outcomes for a single quantity of mitigation;

(b) When transferring mitigation outcomes (double selling): this involves the transfer of a single quantity of mitigation to multiple recipients;

(c) When using mitigation outcomes (double claiming): this involves the use of a single mitigation outcome (in whatever form that it is recognized) for multiple purposes”.

Moreover, various organizations have sought to define “double counting”. The Mitigation Partnership provided a very straightforward definition: “Double counting occurs when an emission reduction effort is being counted more than once towards the UNFCCC goal of keeping global warming below 2°C”[5].

The Stockholm Environment Institute, in the report “Addressing the risk of double counting emission reductions under the UNFCCC,” (SEI, 2014), developed the following:

‘Double counting occurs when a single GHG emission reduction or removal, achieved through a mechanism issuing units, is counted more than once towards attaining mitigation pledges or financial pledges for the purpose of mitigating climate change.’

At COP18 in Doha, Parties agreed to consider the issue of double counting in the two work programs established under SBSTA, on a framework for various approaches (FVA) and on the new market Mechanisms (NMM). The FVA work program shall address “technical specifications to avoid double counting through the accurate and consistent recording and tracking of mitigation outcomes”.( Decision 1/CP.18 para 46 (d)).

  1. Real, permanent, additional and verified: Technical Paper FCCC/TP/2014/9 provides a definition for each of these terms:

“(a) “Real” means that mitigation outcomes are actual and authentic, meaning that a credible reference level is set, emissions are not displaced beyond the boundaries of an approach (a concept known as “leakage”) and inaccuracies arising from fraud or error are addressed;

(b) “Permanent” means that a mitigation outcome is irreversible or, if reversible, that measures exist to compensate for a reversal if one occurs. Reductions in emissions by sources are inherently irreversible and are therefore permanent. However, removals of emissions by sinks are reversible – in that they sequester greenhouse gases and risk releasing them in the future – and thus require measures to address possible reversals;

(c) “Additional” means that a mitigation outcome attributed to an approach must be greater than what would have occurred in the absence of the approach. This assessment requires consideration of a hypothetical counterfactual scenario that, by definition, is not known at the time that a determination of additionality is made. Therefore, in practice most determinations of additionality do not consider individual mitigation outcomes but rather activities that may generate mitigation outcomes;

(d) “Verified” means that mitigation outcomes are confirmed by independent competent assessment. The intention behind verification is to ensure that mitigation outcomes meet certain criteria, and there is a general convergence among approaches that this is best accomplished through an assessment by an accredited expert, as opposed to self-assessment or assessment only by a regulatory agency”.

It should be noted that particularly the term “additionality” was already defined in the Kyoto Protocol, Article 6, para. 1:  

“For the purpose of meeting its commitments under Article 3, any Party included in Annex I may transfer to, or acquire from, any other such Party emission reduction units resulting from projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks of greenhouse gases in any sector of the economy, provided that:

(a) Any such project has the approval of the Parties involved;

(b) Any such project provides a reduction in emissions by sources, or an enhancement of removals by sinks, that is additional to any that would otherwise occur”; (Kyoto Protocol,)

  1. Net decrease: Regarding the “achieve a net decrease and/or avoidance of greenhouse gas emissions”, Technical Paper FCCC/TP/2014/11 was specifically tasked to clarify the meaning of such expression:

“In general terms, a net decrease and/or avoidance of global GHG emissions refers to the number of credits from an activity used to offset other emissions being lower than the actual emission reductions or avoidance resulting from the activity. In this context, “net” refers to the actual emission reductions/avoidance minus the portion used as offsets.”

Additionally, it is worth noting a submission from the Environmental Integrity Group, which prepared a draft text for a COP decision in Paris addressing “net decrease” in the following terms:

 “2. Decides that cooperative arrangements with internationally transferable mitigation outcomes must lead to a net decrease and/or net avoidance of global greenhouse gas emissions, by ensuring that:

a) the greenhouse gas emissions abatement is shared between the host Party and the acquiring Party;

b) more greenhouse gas emissions abatement is achieved than the addition of the emission reductions resulting from the cooperative arrangement accounted by the host Party towards its contribution/commitment and the internationally transferred mitigation outcome accounted by the acquiring Party towards its contribution/commitment, while ensuring that there is no double counting according to paragraph [1a above]”.

[1] 1992 UNFCCC Convention, Article 2

[2] Kyoto Protocol, Article 3

[3] Kyoto Protocol, Article 12(3)(b)

[4] Eva Filzmoser, New Market Mechanisms & Framework for Various Approaches:

Luxury or Necessity? Carbon Market Watch – http://carbonmarketwatch.org/wp-content/uploads/2012/11/Presentation_CMW_at_CEPS_COP18_NMM_FVA_luxury-or_Necessity_27112012.pdf

[5] “Double Counting: how can we fix the loopholes?” 2013. Available at: http://mitigationpartnership.net/sites/default/files/u1300/Summer_School_2013/05_double_counting_presentation_-_neta_meidav.pdf