Is the joint NDC submitted by the EU and its member states under Article 4 paras.16-18 of the Paris Agreement a cooperative approach in the sense of Article 6.2 of the Agreement?

Advice:                  

The EU’s Joint NDC does not constitute a cooperative approach within the meaning of Article 6.2, because it is based on an allocation of emissions at the domestic level between Parties acting jointly to achieve a combined emissions target and does not involve the international transfer of mitigation outcomes or offsets.

1. Joint NDC

Article 4 paragraphs 16 to 18 allow Parties to the Paris Agreement to submit a joint nationally determined contribution (NDC). To date, the European Union and its member states are the only parties to the Paris Agreement that have a joint NDC. It was first submitted as an Intended NDC on 6 March 2015, and subsequently became the European Union’s first NDC. On 17 December 2020 it was updated with a new GHG emission reduction commitment of at least 55 per cent by 2030 compared to 1990 levels.^[1]

As a result, the EU member states do not have individual NDCs under the Paris Agreement. They, however, remain responsible for the emission levels allocated to each member state as part of an agreement whose terms have to be notified to the UNFCCC secretariat.^[2] The European Commission has tabled proposals for amending the relevant EU legislation on, in particular, the EU Emission Trading Scheme (EU ETS)^[3] and the Effort-Sharing Regulation^[4] in light of the new target while member states are still negotiating their individual emission levels.

2. Cooperative approaches

Article 6.1 of the Paris Agreement establishes a basis for Parties to implement their NDCs using “voluntary cooperation”:

Parties recognize that some Parties choose to pursue voluntary cooperation in the implementation of their nationally determined contributions to allow for higher ambition in their mitigation and adaptation actions and to promote sustainable development and environmental integrity.

Article 6.2 identifies one type of voluntary cooperation, which is the “use of internationally transferred mitigation” (ITMOs):

Parties shall, where engaging on a voluntary basis in cooperative approaches that involve the use of internationally transferred mitigation outcomes towards nationally determined contributions, promote sustainable development and ensure environmental integrity and transparency, including in governance, and shall apply robust accounting to ensure, inter alia, the avoidance of double counting, consistent with guidance adopted by the Conference of the Parties serving as the meeting of the Parties to this Agreement.

The Guidance on cooperative approaches adopted in Glasgow,[5] in paragraph 1, further determines that ITMOs can also be:

Mitigation outcomes authorized by a participating Party for use for international mitigation purposes other than achievement of an NDC (hereinafter referred to as international mitigation purposes) or authorized for other purposes as determined by the first transferring participating Party (hereinafter referred to as other purposes) (international mitigation purposes and other purposes are hereinafter referred to together as other international mitigation purposes) – such as other carbon offsetting schemes and markets;

Article 6, paragraph 4, emission reductions issued under the mechanism established by Article 6, paragraph 4, when they are authorized for use towards achievement of NDCs and/or authorized for use for other international mitigation purposes.

In addition, the guidance establishes key quality criteria of ITMOs. They must, for example, be real, verified and additional; represent emission reductions and removals when internationally transferred and be measured in metric tonnes of carbon dioxide equivalent. In addition, it sets out further rules on how an offset generated in or by one Party should translate into a “corresponding adjustment” to the NDC or mitigation efforts of another Party.

3. Assessment

The use of ITMOs as part of a cooperative approach seems to be based on the assumption that a participating party has its own mitigation target. As a result, the European Union as a bloc could trade ITMOs with other parties, but the internal trade of emission reduction or removal units between member states would not fall under Article 6. Within the architecture of the Paris Agreement, a joint NDC and the cooperative approaches under Article 6 could be considered as two distinct tools potentially available to states.

The bilateral transfer of ITMOs between Parties is different to the system of trading Assigned Amount Units (AAUs) generated under the Kyoto Protocol.^[6]  This is because, unlike the top-down system of emissions reductions under the Kyoto Protocol (which established an international cap-and-trade system), the Paris Agreement governs global emissions reduction using a ‘bottom-up’ approach of NDCs.

To the extent Parties engage in international emissions trading under the Paris Agreement, it will be to sell and purchase offsets, akin to Joint Implementation and the CDM under the Kyoto Protocol.  As one leading commentator describes it: under the Paris Agreement, Parties will be “discharging and undertaking to reduce emissions by paying for or otherwise facilitating corresponding reductions of net emissions (including removals) by another party.”^[7]

In addition, the allocation of emissions between Member States under the ESR and the ETS (as envisaged in Article 4.16 of the Paris Agreement) does not generate additional mitigation outcomes for use towards the EU’s Joint NDC.  Rather, they are premised on the existence of a cap, and achieving efficient emissions reductions to achieve that cap among participating Parties. 

While the EU ETS has in the past traded international offset credits (such as Certified Emissions Reductions and Emissions Reductions Units, generated under the Kyoto Protocol), the EU has confirmed that these international offsets will not be used for EU ETS compliance after 2020.^[8]  Thus, to the extent any offsetting will be needed to achieve the EU’s Joint NDC, it will not involve ITMOs and thus will not constitute a cooperative approach.

A final, relevant factor is that emissions transfer between EU Member States occurs under EU law, and so, even if offsets were being transferred between Member States, this transfer arguably does not qualify as an international transfer.  Notably, the EU describes the measures implemented to achieve its Joint NDC as “domestic,”^[9] indicating that its ESR and ETS, as well as its offsetting of emissions from land use and land use change, are intended to be “domestic mitigation measures” within the meaning of Article 4.2 of the Paris Agreement.

[1] The EU’s Joint NDC, p.17.

[2] Paris Agreement, Article 17-18.

[3] Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018 amending Directive 2003/87/EC to enhance cost-effective emission reductions and low-carbon investments, and Decision (EU) 2015/1814.

[4] Regulation (EU) 2018/842 of the European Parliament and of the Council of 30 May 2018 on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 contributing to climate action to meet commitments under the Paris Agreement and amending Regulation (EU) No 525/2013.

[5] Decision -/CMA.3 Guidance on cooperative approaches referred to in Article 6, paragraph 2, of the Paris Agreement, Advance unedited version, Annex, available online at https://unfccc.int/sites/default/files/resource/cma3_auv_12a_PA_6.2.pdf.

[6] For more information about AAUs, see https://legalresponse.org/legaladvice/use-of-aaus-post-2020/.

[7] Myles Allen et al (2021) Ensuring that offsets and other internationally transferred mitigation outcomes contribute effectively to limiting global warming, Environmental Research Letters, available at https://iopscience.iop.org/article/10.1088/1748-9326/abfcf9/pdf.

[8] EU’s Joint NDC p 17.  See also https://ec.europa.eu/clima/eu-action/eu-emissions-trading-system-eu-ets/use-international-credits_en, stating that the EU “has a domestic emissions reduction target and does not currently envisage continuing the use of international credits for EU ETS compliance after 2020” (emphasis added).

[9] See e.g., EU’s Joint NDC, at p.6: “The EU and its Member States, acting jointly, are committed to a binding target of a net domestic reduction of at least 55% in greenhouse gas emissions by 2030 compared to 1990”; and at p.17: “The EU’s at least 55% net reduction target by 2030 is to be achieved through domestic measures only…” (emphasis added).