One component of the Paris Agreement on climate change that has remained somewhat of a black hole is Article 6, which outlines countries cooperating with one another on their own volition to help achieve emissions-reduction targets. What makes the article so challenging for countries to agree upon is that it brings global business into the equation through international carbon markets, emissions trading and setting a global price on carbon. (Read an explainer on carbon markets here.)
Last year at the U.N. Climate Change Conference in Poland (COP 24), countries agreed on a set of guiding principles for how to turn their commitments to the Agreement into reality, a document known as the Paris Rulebook. But it was left incomplete; countries couldn’t agree on guidelines for Article 6 and a global carbon market.
Finishing the Rulebook for Article 6 has become a major focus of 2019’s COP 25 in Madrid, superseding previous hopes for the conference to be the ‘Blue COP’ making significant political headway for oceans. As director of climate policy and carbon pricing for South Pole, a climate solutions provider and advisor headquartered in Zurich, Jeff Swartz is rarely surpassed in his knowledge on carbon markets and Article 6, which he helped negotiate into life in the first place. Here, midway through COP 25, he gives some insights into the past and present of this topic.
This interview has been edited for content and clarity.
You were crucial to getting carbon markets into the Paris Agreement on climate change in 2015. Why did you think this was so important to include?
We can’t have an international climate treaty that does not recognize ecosystem services, encourage countries to put a price on carbon and work together on carbon pricing.
So 2015 was a pivotal year for not only the planet but also for carbon pricing. We didn’t know at the time of the COP in Paris if there would be a role for carbon pricing. I’m very happy that we achieved that in the form of Article 6 of the Paris Agreement.
But it’s been four years since Paris, and we’re late. We need to make sure that here in Madrid, we have a critical and robust Rulebook related to Article 6. It’s the missing piece of the Paris Agreement. It’s also the missing piece for accounting, and it’s the missing piece for transparency. This COP has to yield a Rulebook on Article 6 in order for countries to enhance their action on carbon pricing.
Do you think it will?
Behind the scenes here at the COP, there are a lot of compromises being made. There are a lot of different countries coming with different perspectives to try and deliver an Article 6 Rulebook that benefits everybody, that benefits the most vulnerable, that benefits the countries that have the most history in carbon markets, but also benefits the countries that really need a greater amount of climate finance than they’ve ever received under the UNFCCC before. I hope those compromises can result can meaningful climate action.
What progress has been made on international cooperation on carbon markets since then?
In the four years since Paris, we’ve seen more empirical evidence that putting a price on carbon will help countries decarbonize their emissions faster than if they haven’t. We have also seen the IPCC telling us we have to act now, and we have to act faster.
There have been a number of countries that have advanced their carbon pricing systems. For example, in Europe, we’ve reformed the European Union (E.U.) emissions trading system. The state of California, the biggest state by population and revenue in the U.S., has advanced its carbon pricing system; and China, the world’s biggest emitter, has put together the policy architecture to create a nationwide price on carbon. So together, you’re looking at the three biggest parts of the world in terms of emissions all putting a price on carbon.
What challenges are hindering further progress?
Acting on carbon pricing is tough. It requires policymakers to make difficult choices related to energy subsidies, to addressing winners and losers in economies, and also to create systems related to carbon pricing that are just and allow the workforce to benefit. We can’t put in place a carbon price without making sure that civil society benefits from such a program. It cannot benefit just certain parts of the economy, and we’ve seen that in places like France and in Chile, where this COP should have been.
We need to make sure that the most vulnerable in society are benefitting from this economic transition. If we fail to do that nationally or internationally, we will fail to achieve climate action for all.
The Article 6 Rulebook has much to do with accountability and reporting on carbon markets. Why is this important?
If we don’t have transparent reporting systems, and if we don’t have a robust accounting framework for carbon pricing, we’re creating a system of loopholes. We’re creating a system where people don’t understand what’s happening and where there’s potential to game the system. Everybody should be calling on government and leaders in this space at COP 25 in Madrid to have a transparency framework that affects Article 6 of the Paris Agreement.
Transparency and carbon pricing have to come together. If we don’t have that, we create opportunities for nefarious actors to get involved in this space, and it could allow all the hard work that all of us are doing to promote carbon pricing to crumble.
How would a rulebook on carbon markets affect the landscapes of California, your home state, which are increasingly marked by wildfires and other effects of climate change?
California has always been a pioneer in environmentalism. In 2014, California made a link between its carbon market and the province of Quebec in Canada. There are national carbon pricing links in other parts of the world, but this was the first time that sub-national jurisdictions made a link on carbon pricing. Article 6 is about transboundary cooperation on carbon pricing. And ultimately, that affects what happens between California and Quebec, or any other jurisdiction with which California wants to cooperate. A rulebook will give clarity to policymakers in Sacramento on how they can continue to pioneer carbon pricing leadership with other parts of the world.
If California doesn’t have a rulebook, it will have to continue leading on its own two feet, which it has always done. Politically, at home in California, we want to see that the UNFCCC and international community supports California’s efforts to put a price on carbon and to cooperate with other countries.
How do carbon markets relate to nature-based solutions, another main topic of this COP?
Twenty percent of the pollution we create every year on this planet comes from agriculture or land use. We need to address that emissions sector by putting in place a system that provides an incentive for people to have enough financial resources to stop cutting down trees and profiting from land-use as we’ve done over the 20th century.
That’s what I mean when I talk about the most vulnerable and all aspects of civil society benefiting from carbon pricing. If you put a price on carbon in the energy sector or in the industrial sector, the revenue from the sale of carbon credits or taxing those sectors through a carbon tax shouldn’t necessarily go back to those sectors. It should go back into nature. We need to make sure nature-based solutions stand to benefit and our ecosystems stand to benefit from these new economic instruments.
What I’m trying to say is this: If we put in place robust carbon-pricing systems at the national or international level through Article 6, we have to make sure that land-use, agriculture and ecosystems benefit from those systems.