Markets negotiations under the Paris Agreement

This paper provides a technical analysis of two specific unresolved issues in the negotiations of rules for Article 6 of the Paris Agreement: (i) accounting methods for single- and multi-year NDCs under Article 6.2 and (ii) the implications of a potential transition of activities and units from the Kyoto Protocol mechanisms to the Article 6.4 mechanism. The paper first describes the accounting methods under consideration in Article 6.2 discussions and highlights that different methods can have different implications for environmental integrity, particularly if used by Parties with single-year NDCs. The paper then presents different options of transition of activities and units from the Clean Development Mechanism to the Article 6.4 mechanism. The analysis highlights that a potential full transition of activities could inhibit or delay new investments in mitigation activities, and that the supply of units could be several times larger than demand in 2020, leading to a significant carry-over.