Co-benefits Under the Market Mechanisms of the Paris Agreement

Abstract

Sustainable development (SD) co-benefits have increasingly become relevant in the discussions about the performance of international carbon market mechanisms. Actually, the Clean Development Mechanism (CDM) of the Kyoto Protocol always had the formal objective to promote SD. However, the principle of sovereignty has prevented mandatory rules to ensure the actual accrual of SD co-benefits. After increasingly strident media and NGO criticisms about CDM projects actually leading to negative impacts on SD, the UNFCCC CDM regulators provided a voluntary tool for SD benefit assessment. However, only a very small share of CDM activities has actually used this tool. The main drivers for ensuring SD benefits nowadays are the heightened political sensitivity about the linkages between climate and sustainable development since the adoption of the Agenda 2030 as well as differentiation of demand for international credits, with a number of buyers having prohibited the import of credits with perceived low SD contributions. For the new market mechanisms under Article 6 of the Paris Agreement (PA), the rules currently under negotiations foresee a continuation of the voluntary approach to SD contributions. It remains to be seen whether buyer power enforces a ‘de facto’ SD benefit regulation.