This article was originally published by Resource Works as part of a series of five articles, Beyond Borders: The Global Emissions Challenge.
By Jerome Gessaroli, November 15, 2024
Previous articles discussed the challenges developing nations face in transitioning away from coal-based electricity. They also highlighted the need for more cooperative methods to complement the present climate framework, which requires nations to focus on internal projects to meet their national climate targets. The global nature of climate change requires international cooperation to achieve greater GHG reductions–yet the focus on national reductions provides no incentive for countries to pursue international initiatives.
Fortunately, a section of the Paris Climate Agreement allows countries to collaborate on emission reduction efforts and share the resulting outcomes. Each country can apply its share of the emission credits toward meeting its own climate targets. Negotiators recognized that emissions could be reduced more cost-effectively if countries pursued mitigation projects beyond their national borders. This section, known as Article 6, is designed specifically to support international cooperation in lowering GHG emissions. By supporting countries in pursuing cost-effective initiatives, Article 6 can deliver faster and more affordable results than relying solely on their own independent efforts. Article 6, however, remains underutilized. Developing the necessary methodologies and guidelines has taken time, it is complex, and some are ideologically opposed to it. Certain progressive viewpoints are skeptical of such collaborative efforts, arguing they could allow developed nations to offload their responsibilities onto developing countries.
Here is how it would work. If Country A co-invested in an emissions reduction project in Country B, each could benefit from the resulting reductions. Both countries would negotiate their share of the emission credits. The two countries could then apply the emission savings towards meeting their respective climate targets (their NDCs). This approach creates a win-win situation. Developed countries can invest in more cost-effective projects abroad, achieving greater emissions reductions. Meanwhile, developing countries receive much-needed investment and technology transfer, accelerating their transition to low-carbon economies. Sharing the emissions credits provides a clear incentive for cooperation.
Moreover, this approach aligns with market-based principles, specifically efficient resource allocation and comparative advantage. Since many industrialized nations have already put in place the most cost-effective measures to cut GHG emissions, further reductions in these countries will become increasingly expensive. Developing nations, on the other hand, offer comparative advantages in untapped lower-cost projects to reduce emissions. However, they lack the financial resources or technology to undertake them all. For example, a study by the Macdonald-Laurier Institute found that completing methane reduction projects in developing countries, where the benefits to costs are more favourable, could double the emissions reductions compared to completing similar projects in Canada. This reinforces how international cooperation can improve economic efficiency and positively impact global climate action.
By allowing countries to cooperate and invest where reductions can be achieved most efficiently, we can bridge the resource gap faced by developing countries. In addition to direct investments, developed countries can provide non-monetary assistance such as sharing advanced green technologies, technical expertise, and implementing capacity-building programs. This includes knowledge transfer, best practices, and training, all of which are crucial for long-term sustainability.
According to a study by the International Emissions Trading Association and the University of Maryland, countries could lower emission costs by $100 – $250 billion (US) per year by 2030, or reduce emissions a further 50 percent at no additional cost. By leveraging Article 6 and appropriate market principles, the international community can foster a more collaborative approach to tackling climate change. This framework not only incentivizes developed nations to work with developing nations but also ensures that global efforts to reduce GHG emissions are more effective and equitable.
Implementing this approach requires careful planning and robust procedures. Proper accounting is necessary to ensure emissions are not double counted by each country. Transparency is crucial to address potential conflicts of interest, and countries must agree on methods for measuring emissions. This change in mindset–from focusing solely on domestic projects to taking a more global perspective will be essential.
It is clear that our current approach is insufficient to the task at hand. By creating incentives consistent with cost-effective policies, and thinking of global rather than domestic emissions, we can revitalize climate action. This approach recognizes the interconnected nature of our world and the shared responsibility we all bear in addressing the climate crisis. It offers a realistic path forward–one that is not only more effective but also consistent with the framework already in place.
Jerome Gessaroli is a senior fellow with the Macdonald Laurier Institute. He writes on economic and environmental matters, from a market-based principles perspective. To read the previous article of his five-part series for Resource Works, click here.
