- Article 6 of the Paris Agreement holds potential to reduce mitigation costs by $320 billion in 2030 and enhance ambition by 9 GtCO2/year through international cooperation. - Modeling shows collaboration between countries could lower costs for all participants while increasing total emissions reductions. - Realizing this potential through mechanisms like carbon trading presents major challenges in ensuring environmental integrity and trust between countries.

1. Article 6, Ambition &
Environmental Integrity
2 October 2019
Paris

2. DRAFT PRESENTATION—DO NOT QUOTE, SUBJECT TO CHANGE
2
Lessons from Modeling of Article 6
Article 6 holds significant
potential to reduce cost and
enhance ambition
 Everyone could be better off
through collaboration
 Mitigation cost could be reduced
by $320 billion in 2030.
 Mitigation could be enhanced by
9 GtCO2/year in 2030
Source: https://www.carbonbrief.org/look-
beyond-emissions-gap-to-see-full-force-of-
climate-pledges-says-unep-report
Enhanced Ambition
42.4 GtCO2e in 2030
Consistent with 2 °C
DRAFT PRESENTATION—COMMENTS WELCOME
https://www.ieta.org/resources/International_WG/Article6/CLPC_A6%20report_no%20crops.pdfSource: IETA /World Bank CPLC / UMD September 2019

3. $0
$50
$100
$150
$200
$250
2020 2070
Shadow Price of CO2
EU-12
EU-15
European Free Trade Association
Europe_Non_EU
Europe_Eastern
Colombia
Canada
South Korea
Taiwan
Brazil
Central Asia
Japan
USA
Australia_NZ
China
Argentina
Russia
Mexico
South America_Northern
Indonesia
Africa_Northern
South Africa
South America_Southern
Central America and Caribbean
India
Middle East
Africa_Western
Southeast Asia
Africa_Southern
Africa_Eastern
South Asia
Pakistan
Global CO2 Shadow Price
What makes cost savings
possible?
EU-15
$209/tonCO2
•Economic efficiency gains
$0/tonCO2DRAFT PRESENTATION—COMMENTS WELCOME
3
2030 2050 2100
I-NDC Range
$0 to
$101/tonCO2
$0 to
$111/tonCO2
$16 to
$209/tonCO2
J-NDC $38/tonCO2 $52/tonCO2 $107/tonCO2
Source: IETA /World Bank CPLC / UMD September 2019

4. DRAFT PRESENTATION—DO NOT QUOTE, SUBJECT TO CHANGE
4
Who increases their ambition?
DRAFT PRESENTATION—COMMENTS WELCOME
Source: IETA /World Bank CPLC / UMD September 2019

5. DRAFT PRESENTATION—DO NOT QUOTE, SUBJECT TO CHANGE
5
How Valuable is Article 6?
 The economic potential available
through Article 6 from extension to
include land use change is significant.
 Utilizing the economic efficiency gains
to enhance ambition offers additional
potential benefits
 Realizing this potential is a
major real-world challenge.
2030 Potential Article 6 Reduction
in Cost
(Billions 2015 USD/year)
Reduction
in Cost
Increased
Ambition
Fossil Fuels
Only
~$250
billion
5 GtCO2
per year
Land Use
Only
~$70
billion
4 GtCO2
per year
Combine
d
~$320
billion
9 GtCO2
per
year
DRAFT PRESENTATION—COMMENTS WELCOME
Source: IETA /World Bank CPLC / UMD September 2019

6.  Net zero goals will require removal strategies
 Over time caps should extend economy-wide
 Some emissions will likely remain – so removals
are key (natural, technological, etc)
 Opportunities for removals are not equal
around the world
 Article 6 transfer system needs to enable
remaining sources with corresponding removals
 Over time, allowances and removals will
become primary trading instruments
6
Vision of Net-zero

7.  Limits on transfers put net-zero at risk and deter investment
 Robust accounting assures environmental integrity with double entry
accounting system for covered sectors under 6.2 and 6.4
 For 6.4 areas not covered by NDCs, safeguard against over-crediting
 conservative baselines
 sectoral benchmarks
 performance reserves / buffers for sinks
 Reviews should be part of regular Art 13 cycle, with Article 6 expertise included
7
Limits, Safeguards and Reviews