Carbon crediting mechanisms under the United Nations Framework Convention on Climate Change: from the Clean Development Mechanism under the Kyoto Protocol to Article 6.4 of the Paris Agreement

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27th_{July 2018}

Agathe Jean-Alexis

LL.M. European and International Law: Public International Law track Supervisor: Professor Rene Lefeber

Master’s thesis

Carbon crediting mechanisms under the

United Nations Framework Convention on Climate Change:

From the Clean Development Mechanism under the Kyoto Protocol to Article 6.4 of the Paris Agreement

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Abstract

This paper proposes an analysis of carbon-crediting mechanisms under the United Nations Framework Convention on Climate Change, namely the Clean Development Mechanism (CDM) under Article 12 of the Kyoto Protocol and the mechanism to be established under Article 6.4 of the Paris Agreement. Considering the common objectives of these two mechanisms: the mitigation of greenhouse gases (GHG) emissions and the support to sustainable development, the research tends to demonstrate how the mechanism provided for in Article 6.4 of the Paris Agreement builds on the Clean Development Mechanism. The method followed can be described as a normative assessment and comparison of these mechanisms in light of their objectives. Main dysfunctions in the CDM regarding emission reductions and sustainable development are identified in order to evaluate how Article 6.4 of the Paris Agreement addresses these flaws and how it could be implemented in order to function consistently.

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List of abbreviations

CER Certified Emission Reduction CDM Clean Development Mechanism CO2 Carbon dioxide

COP/MOP Conference of the Parties serving as the Meeting of the Parties DNA Designated National Authority

DOE Designated Operational Entity GHG Greenhouse gases

NDC Nationally Determined Contribution PDD Project Design Document

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1. INTRODUCTION

Tackling climate change is one of the greatest challenge of the 21st century. Adverse effects such as increase of natural disasters, disappearance of natural species or sea level rise are already tangible. There are few doubts left that greenhouse gases (GHG) emissions (“emissions”) are mainly responsible for this phenomenon and that a global answer is needed since “emissions anywhere affect people everywhere”.1_{Due to considerations often perceived}

as antagonist, between development and environmental protection, it is a politically sensitive topic among the international community. Achieving agreements to address this issue has not been a road without hurdles. However, under the United Nations Framework Convention on Climate Change (UNFCCC), the international legal regime to tackle climate change has developed, keeps developing and presents some innovative features. The key component to address climate change under this regime is the commitment of State Parties to reduce their emissions of greenhouse gases through emission or mitigation targets. Mitigation targets constitute a certain limit of GHG emissions that a State Party is allowed to generate. They may be achieved domestically but also through the use of international tools and this is the innovation.

The main instance of this new approach is the emergence of crediting mechanisms relying on international carbon market. Emission reductions originating from such mechanisms are credited against a baseline. Credits can then be traded through carbon markets to meet State’s emission reductions commitment.2_{The use of the carbon market functions as an incentive to}

reduce emissions, it creates value in reducing GHG emissions by putting a price on these emissions.3_{Furthermore, it allows State Parties, on a voluntary basis, to meet their mitigation}

target in a cost-effective manner.4_{It is, indeed, the underlying reason behind carbon-market}

based mechanisms, to lower compliance costs by allowing countries to meet their emission targets through reductions achieved abroad.5_{Another advantage of these crediting mechanisms}

1_{‘Sustainable Development Goals Website’}

<https://www.un.org/sustainabledevelopment/sustainable-development-goals/>

2_{Lambert Schneider and others, 'Market Mechanisms in the Paris Agreement – Differences and Commonalities}

with Kyoto Mechanisms Discussion Paper' [2016].

3_{Andrei Marcu, 'Governance of Article 6 of the Paris Agreement and Lessons Learned from the Kyoto}

Protocol' [2017] Paper No.4 Fixing Climate Governance Series.

4_{Charlotte Streck and Jolene Lin, ‘Making Markets Work: A Review of CDM Performance and the Need for}

Reform’ [2008] 19 European Journal of International Law 409.

5_{Barbara Haya, 'Measuring Emissions Against an Alternative Future: Fundamental Flaws in the Structure of the}

Kyoto Protocol’s Clean Development Mechanism' [2009] Energy and Resources Group Working Paper Series University of California, Berkeley.

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is the inclusion and involvement of private actors in climate change actions. Crediting mechanisms tend to foster mitigation actions from States but also from the private sector.

The first experience of UNFCCC-governed crediting mechanisms is the Clean Development Mechanism (CDM) under the Kyoto Protocol. The CDM is established with the double objective to contribute to the mitigation of GHG emissions and to support sustainable development. It allows some State Parties to invest in mitigation projects and programs in developing countries. These mitigation activities produce credits that can be transferred and used by developed States to meet their emission reduction targets.6_{The CDM works as a tool}

to comply with the emission targets set under the Kyoto Protocol and includes support to sustainable development as a condition for the implementation of mitigation activities. A commonly accepted definition of sustainable development can be found in the 1987 Brundtland report as a “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.

The concept of the CDM is innovative and attractive to many different types of actors. However, there are some concerns about its ability to fully meet the objectives it was set up for. Indeed, the outcomes of the CDM in light of its purpose (to allow the mitigation of GHG emissions and to support sustainable development) has been broadly questioned.7_{Despite these}

dysfunctions, the new instrument of reference of the international regime for climate change, the Paris Agreement, provides for a comparable mechanism under Article 6.4. It envisions “a mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development”.8_{In other words, the CDM and the mechanism foreseen by Article 6.4 of the}

Paris Agreement have the same objectives. Therefore, it seems relevant to ask how the latter builds on the experience of the CDM?

To answer this question, this paper will first present the two mechanisms. In a second part, it will tend to assess the flaws in the functioning of the CDM in order to address the challenges for the consistent implementation and functioning of Article 6.4 of the Paris Agreement. It must be recalled that the analysis on the possible implementation of Article 6.4 is speculative since the Conference of the Parties serving as the meeting of the Parties (COP/MOP) still have to decide the rules, modalities and procedures for the implementation of the Paris Agreement.

6_{Schneider and others (n 2).}

7_{Christoph Arens, 'Confrontation or Convergence?' [2016] November-December (4) Carbon Mechanisms}

Review.

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The research method followed is based on a literature review of scholars’ articles, on the relevant legal instruments, including treaties and COP/MOP decisions and can be described as a normative assessment and comparison of these mechanisms in light of their objectives.

2. OVERVIEW OF THE CREDITING MECHANISMS UNDER THE UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE

Crediting mechanisms to tackle climate change have been developed in the context of the UNFCCC. This instrument was adopted at the “Rio Earth Summit” in 1992 with the ultimate aim to stabilize greenhouse gas concentrations “at a level that would prevent dangerous anthropogenic interference with the climate system”.9_{The Convention entered into force in}

1994 and has near-universal membership with 197 Parties (196 States and one regional economic integration organization, the European Union).10

The UNFCCC is guided by the principle of common but differentiated responsibilities enshrined in its Articles 3.1 and 4.1. This principle is explicitly expressed in the Rio Declaration on Environment and Development: “In view of the different contributions to global environmental degradation, States have common but differentiated responsibilities. The developed countries acknowledge the responsibility that they bear in the international pursuit of sustainable development in view of the pressures their societies place on the global environment and of the technologies and financial resources they command.”11_Accordingly,

this principle manifests itself in the form of stronger or more constraining obligations for developed countries and fewer or more flexible ones for developing countries.12

As a framework Convention, the UNFCCC lays out an institutional structure to facilitate the subsequent adoption of more specific obligations, in the form of protocols inter alia.13

Consequently, the current international regime governing climate change encompasses the UNFCCC, but also the Kyoto Protocol and the Paris Agreement. Both provides for carbon-crediting mechanisms.

9_{UN General Assembly, United Nations Framework Convention on Climate Change: resolution / adopted by} the General Assembly, 20 January 1994, A/RES/48/189.

10_{‘UNFCCC Website’}

<https://unfccc.int/process/the-convention/what-is-the-united-nations-framework-convention-on-climate-change>.

11_{UN Conference on Environment and Development, The Rio Declaration on Environment and Development,}

1992.

12_{Christina Voigt and Felipe Ferreira, ‘Differentiation in the Paris Agreement’ (2016) 6 Climate Law 58.} 13_{Jorge E Dupuy, Pierre-Marie ; Viñuales, International Environmental Law (Cambridge, United Kingdom :}

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2.1 Presentation of the Clean Development Mechanism

The CDM can be described as follow: it allows non-Annex I countries to host projects aimed at reducing emissions and at supporting sustainable development. Such projects generate Certified Emission Reductions (CERs) which can be acquired by Annex I countries and ultimately used to contribute to their commitment to reduce GHG emissions under the Kyoto Protocol. The concepts of Annex I and non-Annex I Parties will be further explained in the following sections.

2.1.1 Legal framework

The CDM is established by Article 12 of the Kyoto Protocol. This instrument was adopted in 1997 and entered into force in 2005. It comprises 192 Parties. The detailed rules for the implementation of the Kyoto Protocol were adopted in 2001 at the 7th_{Conference of the Parties}

and are referred to as the “Marrakesh Accords”.

The Kyoto Protocol sets binding emission reduction targets listed in Annex B for Annex I Parties. These targets are established for a certain time, a commitment period. The first commitment period was from 2008 to 2012. A second commitment period started with the adoption of the Doha Amendment to the Kyoto Protocol and runs from 2013 until 2020.14_On

the basis of “voluntary participation”, the emission reduction targets set in the Annex B of the Kyoto Protocol can be partly achieved through the use of the CDM.15

Making a clear distinction between Annex I and non-Annex I Parties, The Kyoto Protocol recognizes the principle of common but differentiated responsibilities, as embodied in the UNFCCC. Annex I Parties represent “developed” countries and are bound by emission reduction targets, while non-Annex I Parties include “developing” Parties and are not bound by any emission reduction commitment.

2.1.2 A mechanism based on the differentiation between Annex I and Non-Annex I Parties

The CDM itself is specifically designed on the distinction between Annex I and non-Annex I parties. This feature has important implications for the functioning or the dysfunction of the

14_{‘UNFCCC Website’ <https://unfccc.int/process/the-kyoto-protocol>.}

15_{UN, ‘Kyoto Protocol To the United Nations Framework Kyoto Protocol To the United Nations Framework’}

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CDM as will be demonstrated in the course of this paper. Annex I Parties currently comprise 39 States and the European Union, they represent industrialized countries. Taking into account the more important share and responsibility that these nations have in the rise of the global temperature, they are, under the Kyoto Protocol, bound by emission reduction targets.

Conversely, non-Annex I Parties represent developing countries and comprises 151 States. Non-Annex I Parties are not bound by any mitigation targets. Under Article 12(a) of the Kyoto Protocol, CDM’s project activities are implemented in the territory of these Parties. In other words, the production of carbon-credits originating from the CDM takes place in these so called developing countries. According to Article 12(b) of the Kyoto Protocol, such credits can then be used by Annex I Parties to meet part of their emission reduction commitments. Hence, the CDM provides an incentive to invest in projects in non-Annex I Parties where the costs of carbon abatement are usually lower. However, since non-Annex I Parties are not bound themselves by mitigation targets, there are concerns regarding their interest in ensuring that CDM projects provide real, effective emission reductions.16

The following image represent the geographical distribution of CDM projects in 2012.17

Source: UNFCCC 2012

Emission reductions achieved through the CDM are credited with CERs.

16_{Streck and Lin (n 4).}

17_{Igor Shishlov and Valentin Bellassen, '10 Lessons From 10 Years of the CDM' [2012] 37 CDC Climat}

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2.1.3 The Certified Emission Reductions system

Under the CDM, projects producing emission reductions generate Certified Emission Reductions.18_{These CERs are carbon credits which can be transferred on international carbon}

markets in order for States with emission reduction targets to comply with their commitments. CERs are expressed in tons of carbon dioxide (CO2), one CER is equal to one ton of CO2. It is the usual unit for carbon market mechanisms even though CERs cover various GHG, CO2, but also methane (CH4), nitrous oxide (N20), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), or nitrogen trifluoride (NF3).19

All projects registered under the CDM should produce CERs. The amount of CERs produced by a project is based on the estimation of the tons of CO2 avoided by a CDM project.20_It

represents the difference between a project’s emissions and the baseline. The baseline being understood as: “the most likely scenario in the absence of the crediting mechanism; the baseline does not mean current or constant emissions but rather how emissions would evolve without the incentives provided by the crediting mechanism.”21_{The issuance of CERs is a complex}

process, involving various actors at different stage of the CDM project cycle, and subject to a number of requirements as will be detailed in the following sections.

Eventually, the UNFCCC secretariat is in charge of the issuance of CERs through the CDM registry.22_{Issued CERs can then be sold by CDM project’s owners or investors.}23

2.1.4 The functioning of the project cycle and the participants

The CDM is based on projects implemented in the territory of non-Annex I Parties. The functioning of the project cycle can be summarized in six main stages, involving different actors.

The first step is the design of the project activity by the project developers. They must follow an approved methodology in order to demonstrate that the particular project is additional and

18_ibid.

19_{GUIDELINES FOR COMPLETING THE PROJECT DESIGN DOCUMENT (CDM-PDD), AND THE}

PROPOSED NEW BASELINE AND MONITORING METHODOLOGIES (CDM-NM) Version 06.2.

20_{Barbara Haya (n 5).}

21_{Randall Spalding-Fecher and others, 'Environmental integrity and additionality in the new context of the Paris}

Agreement crediting mechanisms Final Report' [2017] Carbon Limits.

23_{Florens Flues and others, 'What determines UN approval of greenhouse gas emission reduction projects in}

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comply with the CDM requirements.24_{A project is deemed additional if it allows for emission}

reductions that would not have happened in the absence of the project. The methodology used to estimate the emission reductions that should be achieved by the implementation of a particular CDM project is proposed by the project developers but must be approved by the CDM Executive Board. At the end of this phase, a Project Design Document (PDD) is submitted to the Executive Board.25_{The second phase is the issuance of the Letter of approval}

by the Designated National Authorities (DNAs) of the country where the project will take place. The DNAs must ensure that the project presented in the PDD contributes to sustainable development. Then, the PDD must be validated by Designated Operational Entity (DOE) who independently assesses the project against the requirements of the CDM. DOEs are designated and accredited by the CDM Executive Board but hired and paid by the project developers.26

After the successful validation of a contemplated CDM activity, the PDD is registered by the Executive Board. This step constitutes the formal acceptance of a CDM project. Once implemented, the CDM project activity must be monitored and verified in order to assert that the alleged emission reductions are effective. The monitoring phase is undertaken by the project’s developers according to the methodology used in the PDD. This operation is subject to verification by another DOE.27_{After verification and on the instruction of the Executive}

Board, CERs are issued by the CDM registry administrator. They are then forwarded to the project’s owners or investors and might be sold and transfer to a buyer.28

24_{‘Decision 3/CMP.1 Modalities and Procedures for a Clean Development Mechanism as Defined in Article 12}

of the Kyoto Protocol’ [2006] Part Two: Action taken by the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol on its first session.

25_{Maria Netto and Kai-Uwe Barani Schmidt, ‘The CDM Project Cycle and the Role of the UNFCCC}

Secretariat’ [2010] Legal Aspects of Carbon Trading: Kyoto, Copenhagen, and beyond.

26_ibid. 27_ibid.

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The following figure summarized the CDM project cyle.

Source: CDC Climat Research (2012)

CDM projects includes among others renewable energy or energy efficiency installations. 2.1.5 The governance of the Clean Development Mechanism

Article 12(4) of the Kyoto Protocol provides that the CDM “shall be subject to the authority and guidance of the Conference of the Parties serving as the meeting of the Parties to this Protocol and be supervised by an executive board”. According to this provision, the governance of the CDM is constituted of two organs: the COP/MOP and the Executive Board of the CDM.

The COP/MOP is an assembly of all the Parties to the Kyoto Protocol. It is the general governing body of this instrument. In the CDM’s decision-making framework, the COP/MOP is the highest hierarchical level.29_{The COP/MOP provides guidance for questions of general}

policy and development of the CDM. The decisions of the COP/MOP are not of a binding nature.30

The actual daily governance and supervision of the CDM is handled by the Executive Board. The Executive Board is composed of ten members and ten alternate members from Parties to

29_{Krey Matthias and Santen Heike, ‘Trying to Catch up with the Executive Board: Regulatory Decision-Making}

and Its Impact on CDM Performance’ [2010] Legal Aspects of Carbon Trading: Kyoto, Copenhagen, and beyond.

30_{Charlotte Streck, ‘The Governance of the Clean Development Mechanism: The Case for Strength and}

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the Kyoto Protocol, elected by the COP/MOP.31_{Members of the Executive Board must be}

independent from their country and from project participants in the exercise of their functions.32

They are subject to a number of requirements defined in Article 5 of Decision 3/CMP1 on the Modalities and procedures for a clean development mechanism as defined in Article 12 of the Kyoto Protocol. These requirements and conditions concern their designation as well as the exercise of their duties. Even though the decisions of the Executive Board are not formally binding, they have been practically accepted as such and have effects on the Parties and on the different entities participating in the CDM.33_{The Executive Board has a determinant role in the}

functioning of the CDM. It is responsible for the approval of baselines and methodologies, for the registration of projects and the issuance of CERs inter alia. It is assisted in this task by different expert panels such as the Methodologies Panel (Meth Panel) or the Accreditation Panel (CDM-AP).

The mechanism foreseen in Article 6.4 of the Paris Agreement presents some similarities but also some differences with the CDM. The proposed analysis of this provision is speculative since the “rules, modalities and procedures” of this instrument should be adopted next December 2018 at the 24th_{Conference of the Parties to the UNFCCC by the COP/MOP to the}

Paris Agreement.

2.2 Presentation of Article 6.4 of the Paris Agreement

Article 6.4 of the Paris Agreement provides for: “a mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development (…) for use by Parties on a voluntary basis”.34_{As the CDM, Article 6.4 of the Paris Agreement is considered as a tool at}

the disposition of the Parties to meet their emission reduction targets under the Paris Agreement.

2.2.1 Legal framework

The Paris Agreement is currently the international instrument of reference to address climate change. It was adopted by the Parties to the UNFCCC in 2015 and entered into force in 2016. To this date, it has been ratified by 176 parties. The Paris Agreement aims at strengthening the

31_{Streck and Lin (n 4).} 32_{Streck (n 30).} 33 ibid.

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global regime and at fostering ambitious actions to tackle climate change. Accordingly, it sets the objective to keep the global temperature rise below 2° Celsius above pre-industrial levels for this century and to pursue efforts to even limit the increase to 1,5°.35_{As mentioned earlier,}

the rules for the actual implementation and functioning of the Paris Agreement still have to be decided by the COP/MOP.

The Paris Agreement also functions on the basis of emission reduction targets: Nationally Determined Contribution (NDC). States Parties should achieve these targets domestically, but they may also use international cooperation through mechanism like the one foreseen in Article 6.4.

Article 6.4 must be read and understood in the broader context of Article 6. It is, indeed, part of a cooperative approach “that involve the use of internationally transferred mitigation outcomes towards nationally determined contributions”.36

2.2.2 The Nationally Determined Contribution system

NDCs represent an estimation of the emission reductions that Parties can achieve by implementing mitigation policies and measures.37_{In other words, NDCs can be described as}

the emission reduction targets that State Parties should achieve and as a commitment to undertake mitigation actions. The provision governing NDCs is Article 4 of the Paris Agreement, it sets specific requirements.

All Parties to the Paris Agreement must have a NDC. This is an important difference with the Kyoto Protocol, where only Annex I countries were bond by emission reduction targets. However, the principle of common but differentiated responsibilities still applies for the purpose of NDCs. Indeed, the difference between developed and developing countries in terms of responsibilities and capacities is duly taken into consideration and mentioned several times in Article 4.

Nevertheless, Articles 4.3 and 4.4 clearly stipulate an “ambition” requirement concerning NDCs: “Each Party’s successive NDC will reflect its highest possible ambition”. Ambition is reflected, for instance, in the fact that NDCs cover the entire economy (economy wide cap target) or only sectors of the national economy.38_{According to Article 4.9 of the Paris}

<https://unfccc.int/process-and-meetings/the-paris-agreement/what-is-the-paris-agreement>.

36_{Paris Agreement, Article 6.2.} 37 Spalding-Fecher and others (n 21). 38_ibid.

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Agreement, Parties must prepare and communicate their NDCs to the Secretariat every five years.39

Regarding the legally binding nature of NDCs, the language of Article 4.2 leans towards the negative: “Parties shall pursue domestic mitigation measures, with the aim of achieving the objectives of such contributions”.40_{Therefore, the obligations relating to NDCs in the Paris}

Agreement can be described as obligations of conduct rather than obligations of result. Indeed, Parties are not bound to fully achieve their NDCs, but they are bound to seek to achieve them. As a matter of fact, the whole system sets up by the Paris Agreement heavily relies on an expectation of good faith for the pursuance of the emission reduction commitments of the Parties.41

Article 6.4’s mechanism is envisioned as a tool towards the achievement of NDCs.

2.2.3 A mechanism comparable to the Clean Development Mechanism

The CDM and Article 6.4’s mechanism are not identical, but they are obviously comparable on many points. First, by their purpose: enabling State Parties to comply with their emission reduction targets through contributions to projects outside of their own borders. Moreover, by allowing the use of emission reductions achieved where carbon abatement activities are more affordable, both mechanisms tend to reduce the costs of compliance with the mitigation targets of the Parties. Above all, these mechanisms are comparable by their objectives: mitigating GHG emissions and supporting sustainable development. Their functioning (or foreseen functioning for Article 6.4) based on a project approach and the actors involved are also close. Finally, similarities are observable in their governance structure as well.

Actually, the UNFCCC’s Decision 1/CP.21 adopting the Paris Agreement states that the modalities and procedures of Article 6.4 shall be developed on the basis of “experience learned from mechanism and approaches adopted under the Convention” that is to say on the basis of experience learned from the CDM42_{. Therefore, this paper proposes to present key issues in the}

functioning of the CDM in order to identify how Article 6.4 of the Paris Agreement builds on

<Http://Bigpicture.Unfccc.Int/Content/Transparency/What-Are-Greenhouse-Gas-Inventories.Html>.

40_{Lambert Schneider and others, 'Environmental Integrity under Article 6 of the Paris Agreement Discussion}

Paper' [2017] Umweltbundesamt (German Environment Agency).

41_{Lavanya Rajamani, ‘Ambition and Differentiation in the 2015 Paris Agreement: Interpretative Possibilities}

and Underlying Politics’ [2016] 65 International and Comparative Law Quarterly.

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these flaws and how the mechanism foreseen could be implemented in order to function in a consistent manner.

3. ASSESSMENT OF THE KEY ISSUES IN THE FUNCTIONING OF THE CLEAN DEVELOPMENT MECHANISM

Dysfunctions in the CDM are identifiable with regard to the objectives of sustainable development and reduction of GHG emissions.

3.1 Issue regarding the emission reduction objective: the lack of additionality resulting from the use of the Clean Development Mechanism

Additionality can be described as the fact that “emission reductions would not have happened without the mitigation action in question having been implemented”.43_{Even though}

Article 12(5) of the Kyoto Protocol provides that “Emission reductions resulting from each project activity shall be certified by operational entities (…) on the basis of: (c) reductions in emissions that are additional to any that would occur in the absence of the certified project activity”, there are serious doubts regarding the reality of emission reductions achieved by CDM projects.44_{The lack of additionality resulting from the CDM can be explained by several}

reasons, two will be presented here. First, incoherencies among methodologies to assess potential emission reductionsand lenient baselines have a determinant impact for the reality of emission reductions. Second, different not to say contradictory interests are at stake in the assessment of the additionality of CDM projects.

3.1.1 Incoherencies among the different methodologies and lenient baselines

Additionality is assessed against a baseline which is set according to a certain methodology. Andrew Howard, Thiago Chagas, Jelmer Hoogzaad and Stephan Hoch proposed a clear explanation of what a baseline is in their report “Features and implications of NDCs for carbon

markets”: “A baseline scenario is a counterfactual emission scenario against which emission

reductions are counted. It provides an estimate of what emissions would have been in the

43_{Andrew Howard and others, ‘Features and Implications of NDCs for Carbon Markets Final Report’ [2017].} 44_{Matthias and Heike (n 29).}

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absence of the effort to reduce emissions, based on a certain methodology and set of assumptions”.45

CERs are issued according a baseline. Therefore, the accuracy of this one is determinant. Such baseline is calculated according to a particular methodology. For the purpose of the CDM, different methodologies exist for different type and scale of projects, following a sectoral approach. For instance, methodologies have been developed for CDM activities relating to waste treatment and management, renewable power generation or energy efficiency.46_{The wide}

variety of methodologies to estimate and monitor GHG emission reductions is likely to lead to some incoherencies. It is the case for example, when two different methodologies exist for the accounting of the same CDM activity. Furthermore, to stay efficient, methodologies need to be revised and updated regularly. Since revisions are also left to project developers and subject to the Executive Board approval, continuity, consistency and uniformity are often lacking.47

Incoherencies and inconsistencies in the methodology might result in lenient baseline setting, in other words in an overestimation of the emission reductions achieved through a CDM project. Yet, the risk with lenient baselines is that CERs are issued while the alleged emission reductions does not actually fully exist. If CERs are issued while there are no or less emission reductions than what has been registered, then the mitigation objective sets up under Article 12 of the Kyoto Protocol cannot be met.48

These issues concerning methodology and baseline setting can be explained by flaws in the procedures as such, due to technical uncertainty or approximation for example, but also by the presence of different interests in the assessment of additionality. Indeed, the procedural rules for the setting of methodologies and baselines lead to different interests in the assessment of additionality, not to say to an incentive to set lenient baselines.

3.1.2 Different types of interests at stake in the assessment of additionality

First of all, the structure of the Kyoto Protocol itself, based on the difference between Parties with emission reduction targets and Parties without, contributes to the existence of different interests in the assessment of the additionality of CDM projects. Indeed, non-Annex I countries

45_{Howard and others (n 43).} 46_{Matthias and Heike (n 29).} 47_ibid.

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have no direct interest to ensure that a project is additional.49_{Conversely, host countries and}

project proponents would even have a financial incentive to set lenient baseline: the more emission reductions they allege, the more CERs they can issue and the more investments they get for a CDM project.50_{This last remark is closely related to the fact that methodologies,}

baselines and monitoring are provided by the projects developers. According to the CDM procedures, the information they provide are subject to an independent control by Designated Operational Entities (DOEs). Indeed, Article 12(7) of the Kyoto Protocol provides for “independent auditing and verification of project activities”. However, DOEs are paid and selected by projects developers which raises serious doubts regarding the independence and impartiality of their certification.51

Again, these potential conflicts of interests affect the accuracy of emission reductions produced by projects and prevent the CDM to meet its mitigation objective.

The capability of the CDM to meet the objective of sustainable development in non-Annex-I countries has also been largely questioned.

3.2 Issue regarding the objective of sustainable development: an assessment that fully rests on the host country

In the CDM system, the guarantee that a project contributes to sustainable development fully rests on the host country. Developing countries are generally attached to the principle of sovereignty, taking into account national circumstances, for the determination of what constitutes sustainable development.52_{However, this approach has led to controversies on the}

ability of the CDM to deliver on this objective. Indeed, negative effects of CDM projects on local communities and violation of human rights have been reported.53_{The lack of global}

guidelines to assess sustainable development benefits, the risk of conflict of interests and the absence of monitoring and verification contribute to this dysfunction.

49_{Schneider and others (n 40).} 50_{Barbara Haya (n 5).}

51_{Shishlov and Bellassen (n 17).}

52_{'Pulling Together, Public and private finance for climate change mitigation' [2017] May-August (2) Carbon}

Mechanisms Review.

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3.2.1 The lack of global guidelines and criteria to assess sustainable development benefits

The assessment of sustainable development benefits resulting from CDM projects relies on the host country. This operation is undertaken by the DNAs during the phase of approval of a project. Most of the time, it seems that this evaluation is extremely lenient. The threshold to meet the sustainable development requirement is low in most of the host countries. In some of them, such as Peru, Ecuador, or Honduras among others, meeting this condition is only based on the official PDD and on compliance with local regulations.54_{If some countries have}

developed criteria for the evaluation of sustainable development benefits resulting from CDM projects, most of them have not.55_{Even though the imposition of global standards is often}

perceived by developing countries as some kind of interference with their development pathways, it would be desirable to require DNAs to assess the potential sustainable benefits of CDM projects against general guidelines and criteria for the purpose of this mechanism.56

An attempt to palliate this gap has been undertaken by the Executive Board in 2012 with the development of the CDM sustainable development (SD) tool. The SD Tool is an instrument at the disposition of project developers to report, at any time, on the sustainable development benefits of their projects and activities. However, this instrument is quite weak and unsatisfying. First, the use of this instrument is not mandatory and only allows for the voluntary declaration of sustainable development benefits. In other words, it only permits to report on positive impacts of a CDM project but not on negative ones. Furthermore, it does not include criteria to identify and assess sustainability benefits, nor guarantees to reduce the risks of negative impacts of CDM activities or more stringent requirements regarding the consultation of local stakeholders.57

The absence of a common international benchmark to assess sustainable development benefits definitely leads to a lack of transparency in the potential achievement of this objective.

In addition, the inability of the CDM to deliver on the objective of sustainable development can also be explained by the risks of conflict of interests.

54_{Streck and Lin (n 4).} 55_{Schneider and others (n 2).}

56_{Andrei Marcu, 'Carbon Market Provisions in the Paris Agreement (Article 6)' [2016] 128 CEPS Special}

Report.

57_{Karen Holm Olsen and others, 'Learning from CDM SD tool experience for Article 64 of the Paris Agreement'}

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3.2.2 The risk of conflicts of interests in the assessment of sustainable development benefits

As for the objective of mitigation of GHG emissions, the risks of conflict of interests in the assessment of sustainable development benefits are likely to prevent the effective achievement of this objective by the CDM.

Sustainable development is based on three pillars: environmental, economic and social. Applying this to the CDM, it can be assumed that the environmental dimension is, in principle, fulfilled by the mitigation objective. Consequently, assessing sustainable development benefits of CDM projects would be to evaluate the social and economic effects of such projects on affected stakeholders. What can be reasonably expected is, for instance, improvement of basic living and health conditions, increase level of education, technology transfer or protection of human rights.58_{Such developments require a real consultation of the people who might be}

affected by projects and particularly of local and indigenous communities. Stakeholders consultations actually constitute a mandatory step of the projects’ design. However, it appears from the outcomes and controversies surrounding some CDM projects (large hydro projects particularly) that these consultations are conducted more as a formal requirement than as a determinant condition for the implementation of foreseen CDM projects.59

This lack of stringency can be explained by divergent interests among the affected stakeholders. Again, information relating to sustainable development impacts are provided by projects developers. As explained earlier, they have a financial incentive in the implementation of CDM projects. However, interests of project developers do not necessarily match with interests of local or indigenous communities. 60

Furthermore, the control exercised by the DNAs on the consistency of a PDD with the sustainability criteria is, most of time, weak. The absence of monitoring and verification procedures makes a real evaluation of the existence or absence of sustainability benefits resulting from CDM activities almost impossible.

58_{Shishlov and Bellassen (n 17).} 59_ibid.

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3.2.3 The absence of monitoring and verification procedures for the sustainable development objective

Even though Article 12(7) of the Kyoto Protocol provides for “independent auditing and verification of project activities”, this provision does not apply in practice to the objective of sustainable development of the CDM. Indeed, if the Executive Board is responsible for approval, validation and verification of CDM projects, the focus is mainly placed on the GHG mitigation objective rather than on the sustainable development one.61_{The CDM procedures}

only provides for an assessment of sustainable benefits before the actual implementation of a project, at the stage of the approbation by DNAs. Moreover, this ex-ante assessment is conducted by project developers. Hence its independent character is highly questionable. The CDM Sustainable Development Tool conceived by the Executive Board does not provide for monitoring, reporting or independent verification of the alleged sustainability benefits of CDM projects neither.62_{Considering such lack, it is difficult to hold project developers}

accountable for potential negative impacts resulting from CDM activities.

The analyze of the dysfunctions of the CDM lead to an overarching issue: the governance of the mechanism.

3.3 An overarching issue for the functioning of the Clean Development Mechanism: governance

Governance is constituted by the decision-making process and the exercise of authority within a determined context. A sound governance is determinant for the adequate functioning of any mechanism, but even more in the case of one relying on a complex market involving different types of actors (States and private participants). There have been important deficiencies in the governance of the CDM, and particularly in the practice of the Executive Board. These deficiencies have important consequences for the efficient functioning of the CDM. Two main issues will be discussed in this regard: the lack of predictability of the Executive Board’s decisions and the overall lack of transparency and accountability in its decision-making process.

61_{Karen Holm Olsen and others (n 57).} 62_ibid.

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3.3.1 The lack of predictability in the Executive Board’s decisions

Criticisms arise from stakeholders concerning uncertainty, unpredictability and inconsistency regarding the approval and revision of CDM methodologies, project registration and CERs issuance by the Executive Board.63_{Since the CDM relies on investments, often made}

by private legal entities, as provided in Article 12(9) of the Kyoto Protocol, it is not a negligible detail. Indeed, it creates a negative or at least risky investment context. If a CDM project is not registered or, CERs not issued after the implementation of a project, then there are no incentives to participate and to invest in such project. Uncertainties in the process of registration and CERs issuance cannot only be imputed to the CDM Executive Board. However, it is difficult to say the same for the unpredictability or inconsistencies of its decisions. Different and contradictory decisions for the approval of methodologies or the registration of same types of CDM project activities are instances of such inconsistencies in the practice of the Executive Board. In this regard, private investors involved in CDM projects have been alleging breaches of due process and violations of legitimate expectations of profits by the Executive Board.64

Although this organ is not bound by its previous decisions, a higher level of predictability and consistency in the decision-making process are important features to guarantee an operational functioning of this mechanism.65

Furthermore, when decisions of an organ directly impact actors, and particularly private ones, minimum principles related to procedural fairness are expected in the decision-making process, predictability but also transparency and accountability.66

3.3.2 An overall lack of transparency and accountability in the decision-making process

Charlotte Streck and Lin Jolene analyzed the governance undertaken by the CDM Executive Board as: “administrative action: rule making, administrative adjudication between competing interests, and other forms of regulatory decision-making and management” and “subsidiary law-making and adjudication” when interpreting the Kyoto Protocol and the COP/MOP decisions.67

63_{Jacob D. Werksman, 'Defending the Legitimate Expectations of Private Investors under the Climate Change}

Regime: In Search of a Legal Theory for Redress' [2008] 39 Georgetown Journal of International Law.

64_ibid.

65_{Matthias and Heike (n 29).} 66_{Streck and Lin (n 4).} 67_ibid.

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Such exercise of authority has important implications in the context of the CDM, especially because it affects private entities, such as project developers and investors. If State Parties have a voice in the CDM decision-making process through the COP for instance, private actors involved in the CDM have not. The nature and the effects of the decisions of the CDM Executive Board on private legal entities raised questions relating to the responsibility and accountability of this organ as well as to the existence and enforcement of rights of private actors against such body. In other words, some of the issues arising from the practice of the Executive Board are the potential challenge and review of its decisions by affected actors that are not Parties to the Kyoto Protocol. These questions require to identify and characterize the nature of the Board’s decisions.68_{Some authors analysed the Board’s decisions as international}

administrative decisions which could be equated to national administrative decisions and thus subject to review by a (national) court.69_{Such approach tends to justify the possibility for}

private entities to engage in legal proceedings against an international body like the CDM Executive Board in case of violations of their rights to due process or to the protection of legitimate expectations for instance. As a matter of fact, the CDM’s framework does not provide for a process of internal review of the Board’s decisions at the benefit of the private entities involved.70

Transparency in the decision-making could already slightly compensate for this lack of procedural rights but, meetings of the Executive Board tend to be, more and more, closed to interested stakeholders, leaving little space for dialogue between the different stakeholders.71

There is obviously an issue regarding procedural fairness in the practice of the CDM Executive Board. The impossibility of an internal review of the Board’s decisions at the request of private stakeholders directly combined with a lack of transparency in the decision-making process leads to an absence of accountability of this organ for the decisions taken. Such a situation is likely to affect the integrity, legitimacy and credibility of the CDM while a governance structure based on fair procedures is a primary condition to ensure the confidence of the actors involved in the CDM and the optimal functioning of this mechanism.72

Due to different flaws in its structure and functioning, the CDM encountered difficulties to meet its objectives of emission reductions and support to sustainable development.

68_{Jacob D. Werksman (n 63).}

69_{C. Streck, J. Lin or E. Meijer for instance.} 70_{Jacob D. Werksman (n 63).}

71_ibid. 72_ibid.

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Nevertheless, a comparable mechanism is envisioned in Article 6.4 of the Paris Agreement. In light of this previous experience, it can be asked: how the mechanism foreseen in Article 6.4 is different and how it could be implemented in a consistent manner with the objectives it sets?

4. POSSIBLE IMPLEMENTATION OF ARTICLE 6.4 OF THE PARIS AGREEMENT IN LIGHT OF THE DISFUNCTIONS OF THE CLEAN DEVELOPMENT MECHANISM

According to Article 6.7 of the Paris Agreement, “The Conference of the Parties serving as the meeting of the Parties to this Agreement shall adopt rules, modalities and procedures for the mechanism referred to in paragraph 4 of this Article” at Katowice (Poland) in December 2018.

The ultimate purpose and objectives of the mechanism to be established under Article 6.4 are comparable with the CDM, as well as its foreseen functioning. However, as it builds on this experience, some differences appeared and challenges for an implementation and a functioning consistent with the objectives of sustainable development and global mitigation of GHG remain.

The analysis of the possible implementation of Article 6.4 of the Paris Agreement will follow and respond to the issues identified in the functioning of the CDM. It will first go through the main challenges to meet the objectives of mitigation of GHG and sustainable development. Finally, it will address the overarching question of the governance of the foreseen mechanism.

4.1 Environmental integrity: cornerstone of the new mitigation regime

The concept of environmental integrity is mentioned several times in Article 6 and aims at ensuring that “the use of international transfers does not result in higher global greenhouse gas emissions than if the NDC targets had been achieved only through domestic mitigation action, without international transfers”.73_{Although this principle is present in the Kyoto Protocol, it}

can be described as the cornerstone of the mitigation regime of the Paris Agreement and clearly seeks to avoid the failure of the CDM to deliver on additionality.74_{It is also linked to the}

objective of Article 6.4 to “deliver an overall mitigation in global emissions”. Environmental integrity for the purpose of Article 6.4 mechanism relies on various factors including: ambitious

73_{Schneider and others (n 40).} 74_{Marcu (n 3).}

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mitigation targets, the quality of the units transferred or the robustness of the accounting. The scope of NDCs also have implications in this regard.

4.1.1 Fundamental prerequisites: ambitious mitigation targets and quality of units

Ensuring environmental integrity and achieving an “overall mitigation in global emissions” in the context of Article 6.4’s mechanism implies that Parties have ambitious mitigation targets and that credit units resulting from its use are of high quality. Units for the purpose of Article 6.4 still have to be determined by the COP/MOP. Broadly, they should represent tons of CO2 avoided by the implementation of a project. Ambitious mitigation targets and the quality of units could guarantee the accuracy and reality of global emission reductions resulting from the use of Article 6.4.75

In the context of the Paris Agreement, mitigation targets are constituted by NDCs. An important feature of this new regime is that all Parties have a NDC, in other words all Parties have made emission reduction pledges, which was not the case under the Kyoto Protocol. To really achieve emission reductions, it is fundamental that NDCs are ambitious. Ambitious means that NDCs are below “business as usual” emissions. What is ambitious is the estimation of the emission reductions that can be achieved by implementing policies and measures. If NDCs are not demanding, then progresses in mitigation are unlikely.76

The ambitious character of mitigation targets has a considerable impact for global GHG emissions as it sets the level of reductions to be reached. On the other hand, the ambitious nature of NDCs relates to the quality of the carbon-crediting units. Indeed, it fosters the incentive to ensure that units transferred are of high quality in order to meet mitigation commitments.

The facts that all Parties to the Paris Agreement have a NDC and, moreover, that such NDC should be ambitious constitute an attempt to address one main flaw of the CDM, namely the fact that, because non-Annex I countries had no mitigation commitment, they had no incentive to ensure the reality of the emission reductions resulting from the implementation of CDM projects and consequently the accuracy of CERs. Ensuring the quality of units means ensuring that emission reductions are additional, thus not overestimated.77_{Conversely, under the Paris}

Agreement, all Parties have interest in the quality of units generated by Article 6.4’s

75_{Schneider and others (n 40).} 76 ibid.

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mechanism, since transfer of units that would not represent real emission abatements are likely to compromise compliance with NDCs.78

Another condition to ensure environmental integrity in the context of Article 6.4 is the robust accounting of mitigation outcomes.

4.1.2 The robust accounting requirement

The robust accounting requirement is mentioned in Article 6.2 of the Paris Agreement “to ensure, inter alia, the avoidance of double counting”. This provision addresses one dysfunction of the CDM: the double counting of emission reductions resulting from the use of the mechanism. A definition of double counting can be deduced from Article 6.5 of the Paris Agreement as the use of emission reductions resulting from one mitigation action by more than one Parties. When the accounting is not rigorous, the risk is that, eventually, the use of carbon crediting mechanisms results in a global increase of GHG emissions. Article 6.4 of the Paris Agreement is thus surrounded by provisions which aim at ensuring a thorough, reliable, accounting of emission reductions.

Although an accounting framework exists under the Kyoto Protocol, the one provided for in Article 13 of the Paris Agreement is more complex and address various situations where efforts towards the achievement of NDCs must be tracked. Indeed, the robust accounting requirement is, closely related to the transparency framework of Article 13. A robust accounting structure implies that all the units transferred can be tracked and recorded in a transparent manner in order to constantly assess and update progresses towards mitigation targets.79_Therefore,

transparent information concerning mitigation actions undertaken by the Parties and results are necessary to track real GHG abatements and guarantee environmental integrity. Robust accounting must apply at different stage, before the implementation of NDCs, during the implementation and after the implementation.80_{Requirements relating to accounting of GHG}

reductions particularly apply, for the purpose of Article 6.4’s mechanism to baselines in order to prevent the overestimation of emission reductions and consequently issuance of credits that are likely to be inaccurate. Robust accounting also demands formal requirements relating to communication of information, reporting by the Parties and national inventories. National

79_{Randall Spalding-Fecher, 'Article 6.4 crediting outside of NDC commitments under the Paris Agreement :}

issues and options Policy Briefing' [2017] Carbon Limits.

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inventories are reports of the Parties on their GHG emissions and on the actions taken towards their mitigation pledges. In order to achieve environmental integrity such inventories must be steady, transparent, accurate and consistent.81

Yet, the practical implementation of robust accounting for the purpose of Article 6.4’s mechanism still has to be developed by the COP/MOP and by the body that will practically supervise its functioning. Thus, if formally the accounting framework of the Paris Agreement appears to be more stringent than the one under the Kyoto Protocol, it is not possible to evaluate yet if this will also be the case in practice.

The scope of NDCs for the use of Article 6.4’s mechanism also deserves attention with regard to environmental integrity.

4.1.3 Different views on the scope of Nationally Determined Contributions with regard to the use of Article 6.4’s mechanism

Another question that stays unresolved and has consequences for environmental integrity is the scope of NDCs for the utilization of Article 6.4’s mechanism. In other words, the question is: does the use of Article 6.4’s mechanism fall inside or outside NDCs?82_{Or should Article}

6.4’s mechanism be used to meet conditional or unconditional NDCs?83_{The scope of NDCs}

encompasses the different sectors and greenhouse gases covered under such mitigation target.84

Even though all Parties do not have “economy-wide absolute emission reductions targets”, it should progressively be the case.85_{Therefore, the question of the utilization of Article 6.4’s}

mechanism towards reductions from sources covered or not covered by NDCs is not fundamental.

The decisive question to be resolved though, is the relation between a conditional or an unconditional NDC and Article 6.4’s mechanism. An unconditional NDC can be defined as mitigation actions that Parties commit to implement domestically without international support, while a conditional NDC would encompass abatements made through international cooperation and the use of a mechanism such as the one provided for in Article 6.4.86_{Parties to the Paris}

81_{Schneider and others (n 40).} 82_{Howard and others (n 43).}

83_{Spalding-Fecher and others (n 21).} 84_{Spalding-Fecher (n 79).}

85_{Paris Agreement, Article 4.4.} 86_{Howard and others (n 43).}

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Agreement seem to have different views on this issue.87_{However, in the context of higher}

ambitions in emission reductions and taking into account the concern for additionality, it would be desirable that Article 6.4’s mechanism be only used to meet conditional NDCs.88

The requirements arising from the concept of environmental integrity tend to address the absence of additionality in the CDM and certainly constitute progress as such. Nevertheless, the decision of the COP/MOP to the Paris Agreement on the rules, modalities and procedures for the implementation and functioning of Article 6.4 as well as its governance structure will be determinant for the mechanism’s ability to meet the objective of global mitigation of GHG emissions.

The second objective put forward by Article 6.4, supporting sustainable development, also demands further guidance from the COP/MOP for its implementation.

4.2 Moving towards a demanding consideration of the sustainable development objective

Sustainable development in the context of the Paris Agreement and particularly in Article 6.4 formally occupies a determinant place. Indeed, under the Paris Agreement, climate actions are closely linked to sustainable development. For instance, the Preamble refers to “the intrinsic relationship that climate change actions, responses and impacts have with equitable access to sustainable development and eradication of poverty”. Article 2 also emphasizes the overall objective to “strengthen the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty”. Article 6 itself refers to this concept several times and sets it as one of the objective of the mechanism to be established. Formally the objectives of mitigation of GHG emissions and sustainable development seem to be more balanced under the Paris Agreement than under the Kyoto Protocol.89_{However, challenges}

remain for an implementation of Article 6.4 consistent with this objective. The development of a common understanding of sustainable development for the purpose of Article 6.4’s mechanism as well as ex-post consistency verification would represent a significant advance in this regard.

87_{Spalding-Fecher and others (n 21).} 88 Howard and others (n 43).

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4.2.1 Developing a common understanding of sustainable development for the purpose of Article 6.4’s mechanism

At the moment there are very little, not to say any indications on how the objective of sustainable development will be implemented in the context of Article 6.4’s mechanism. Guidance on this question will certainly be discussed at the COP24 and will, hopefully, build on the CDM experience, in order to ensure the environmentally sound performance of the new mechanism.

Indeed, taking into account the deficiencies in the functioning of the CDM with regard to this objective, the development of a common understanding of sustainable development and mandatory guidelines and criteria, for the purpose of Article 6.4 would definitely be a step forward.90_{A common framework to assess the potential sustainability benefits of activities}

under Article 6.4 could prevent some of the flaws in the CDM procedure, such as the lack of serious of the evaluation undertaken by projects developers and DNAs. It could also offset weak stakeholders’ consultation by providing guarantees, through the application of these criteria, against environmental, social and economic damages. Moreover, under Article 6.4, all Parties can host mitigation activities in their territory. This new feature is likely to encourage the development of a common evaluative framework and dispel reluctance of developing countries, since it would apply equally to all States.91_{It has been suggested by some stakeholders to relate}

this assessment to the Sustainable Development Goals.92_{It is a welcome proposition and would}

allow for consistency in the evaluation of sustainable development benefits arising from Article 6.4’s activities. The Sustainable Development Goals have been developed in the context of the United Nations and apply to all States even though not legally binding. They should be implemented domestically over the next 15 years and cover sectors such as hunger and food security, health, education, gender equality, energy or again biodiversity.93_{Considering the}

consensual and universal approach of the Sustainable Development Goals, they could constitute a serious base for the assessment of sustainability benefits in the context of Article 6.4’s mechanism.

90_{CMR (n 52).} 91_{Marcu (n 56).}

92_{UN General Assembly, Transforming our world : the 2030 Agenda for Sustainable Development, 21 October}

2015, A/RES/70/1 <https://www.Un.Org/Sustainabledevelopment/Sustainable-Development-Goals/#>.

93_{‘Sustainable Development Goals’}

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A common benchmark would also facilitate ex-post consistency verification.

4.2.2 Developing of ex-post consistency verification of sustainability benefits

Procedure for ex-post consistency verification of sustainability benefits arising from mitigation activities under Article 6.4 have to be developed for a consistent implementation of this provision. The lack of monitoring and enforcement of the sustainable development objective under the CDM certainly contributed to its uncertain outcomes.

Therefore, it is necessary to develop mandatory monitoring and verification procedures by an independent third-party of the alleged sustainability benefits resulting from the implementation of Article 6.4’s activities. Verification allows to evaluate the consistency between the benefits alleged at the project’s design stage and after its actual implementation.94

As such, it allows for the accountability of actors involved in the activities taking place under the particular mechanism and foster compliance with the general objective. Monitoring could take place through mandatory reporting tools, developed at an international level, according to the ex-ante benchmarks.95_{In this regard, the governing body of Article 6.4’s mechanism should}

develop a set of indicators, based on the requirements of the Sustainable Development Goals for example, that would serve to report on the impacts of the implemented project activities. Such reports could then undergo third-party verification by actors mandated by the governing body. In order to effectively ensure the independence of the verification, such third-party should be designated and finance by the governing institution(s) of Article 6.4’s mechanism and not by the project developers.

In addition, still with regards to ex-post assessment and verification of the objective of sustainable development of project activities implemented under Article 6.4, it has been suggested to establish an internal mechanism to address potential complaints from local stakeholders. It is a proposition that deserves attention since it could counterbalance weak stakeholder’s consultation and provide a forum for the expression of local actors affected by project activities.96

94_{Shishlov and Bellassen (n 17).} 95 Schneider and others (n 2). 96_{Holm Olsen and others (n 57).}

Carbon crediting mechanisms under the United Nations Framework Convention on Climate Change: from the Clean Development Mechanism under the Kyoto Protocol to Article 6.4 of the Paris Agreement

Carbon crediting mechanisms under the

United Nations Framework Convention on Climate Change:

Abstract

Table of contents

List of abbreviations