One of the key takeaways of COP 24 relating to this website is that of Article 6 from the Paris Agreement. The twenty-fourth Conference of Parties (COP24) convened in Katowice, Poland in December 2018. Over 22,000 participants, 14,000 government officials, and 7,000 representatives from U.N agencies gathered to create a “rulebook” to implement the Paris Accord. The Paris Accord is set to commence in 2020, but what exactly is Article 6 from the Paris Agreement?
Article 6 aims to allow countries to voluntary cooperate towards nationally disclosed commitments (NDCs) through international market mechanisms. The market mechanisms allow parties (ex. countries) with lower emissions (relative to their own targets) to trade its exceeding allowance to parties who have exceeded their emissions targets. Using supply and demand would further incentivize the lowering of greenhouse gas (GHG) emissions on a global scale. Unfortunately, the COP24 failed to come to an agreement on the rules regarding Article 6. This failure effectively puts the focus on this year’s COP25 in Chile. It will be important to follow COP25 for a successful agreement on Article 6.
The role Article 6 would play in the US renewables market is relatively uncertain. Due to the current political landscape, the US has pulled out of the Paris Agreement. However, how might similar market mechanisms affect the US renewables industry and corporate involvement? The US currently utilizes Renewable Energy Certificates (RECs) to incentivize clean energy generation. A REC is the certificate allocated to renewable projects for each Megawatt hour(MWh) generated. Renewable project owners can sell RECs directly or indirectly to buyers, primarily utilities and corporations. Most states implement renewable portfolio standards (RPS). RPS requires specific proportions of a state’s generation mix to be derived from renewables (Solar, Wind, Hydro, etc), to which utilities must comply with. Corporations also frequently purchase RECs to comply with their own sustainability targets and initiatives. The REC market mechanism increases project owner’s return on investment and has further facilitated a clean energy transition.