Carbon Forward 2018: Switzerland lines up first Paris-era carbon trades

This news piece was originally published in Carbon Pulse and was written by Ben Garside.

Switzerland will start buying its first international credits next year to help meet its emission goal under the Paris Agreement, marking one of the first trades under the pact, an official said Thursday at the Carbon Forward 2018 conference in London.

The European nation is one of a handful of countries intending to use foreign credits under the yet-to-be-defined Article 6 of the 2015 UN climate pact. "We will start procurements next year. We expect to need about 50 million tonnes over 2021-2030, at a rate of around 5 million a year," said Mischa Classen, whose agency Klik has been tasked this year by Switzerland to lead its work on buying international units. He said the government is currently in talks with several nations with the intention of Switzerland ultimately buying so-called Internationally Transferred Mitigation Outcomes (ITMOs) – the tradable units under Paris. He said the ownership of the emission reductions would depend on a mutual agreement between the countries, and would require the transfer of the units and applying corresponding adjustments to their respective emissions inventories. The units should go beyond those emission-curbing activities foreseen in the host country's nationally determined contribution (NDC), Classen added "The Swiss population will not be happy to see money going towards something that would have been happening anyway," he told the Carbon Forward 2018 conference in London. "We are looking at new projects or stranded projects that are not operating anymore," he added, referring, for example, to CDM-registered facilities that may have been mothballed in the past decade due to low carbon prices.

The mountainous land-locked non-EU nation has long used foreign units under the Paris' predecessor Kyoto Protocol to help meet its climate targets as it has few remaining cheap abatement options given its virtually fossil-free power sector, which is dominated by hydro and nuclear. In preparation for meeting its Paris goals, Switzerland earmarked around $20 million to fund its Article 6 pilot activities via its Climate Cent Foundation. It issued a call for tenders last year, for which it received 17 applications, with four under consideration.

FIRST PROJECTS:

Meanwhile, Swiss-headquartered firm South Pole is part of an initiative to develop five pilot emission reduction projects designed to be used under Article 6, said Jeff Swartz, the company's director of climate policy and carbon markets.

Swartz told the conference that the initiative was being backed by two governments and one multilateral development bank, without identifying them specifically.

"The activities would be the world's first Article 6 pilots and are all focused on renewable energy," he said, adding the resulting emission reductions are intended to be the world's first ITMOs.

The initiative consists of three solar power projects in South America, a wind power project in North Africa, and a solar cooling project in South East Asia.

FACTFILE:

• Countries are due to finalise Article 6 rules as part of the wider Paris Agreement rulebook at December's UN climate negotiations in Katowice, Poland. These rules would govern how countries could account for international transfers, create a new market mechanism, and decide whether the UN's older Kyoto market mechanisms – the CDM and JI – can continue in some form past 2020.
• Switzerland's Paris pledge involves using international carbon credits to meet nearly half its 2030 emission reduction goal of a 50% cut beneath 1990 levels by 2030. With 1990 emissions of 53.3 Mt, the government expects an average of 10% of Swiss emissions to be offset abroad over 2021-2030, translating into overall demand of around 54 mln credits.
• The government's search for bilateral partners for Article 6 pilot activities comes alongside its funding of multilateral initiatives such as the World Bank-led Transformative Carbon Asset Facility (TCAF) and Pilot Auction Facility (PAF).

More information can be found in Carbon Pulse's International and International

Mechanisms dossiers:

• The International dossier provides an overview of international climate policy relating to carbon pricing, including a detailed breakdown of the Paris Agreement and concise summaries of all its INDCs, global themes in carbon markets, internal carbon pricing, international climate initiatives and climate finance.

• The International Mechanisms dossier provides an overview of the international emissions trading mechanisms created under the Kyoto Protocol: the Clean Development Mechanisms, Joint Implementation and International Emissions Trading. It also examines other mechanisms including REDD, NAMAs, and those currently being developed outside the UNFCCC such as the Pilot Auction Facility and the Nitric Acid Action Group.