Corresponding Adjustment in The Paris Agreement: Preventing Double Counting

The Paris Agreement is a global agreement that aims to curb the rate of climate change by limiting the increase in the Earths average temperature to below 2°C, and striving for a maximum limit of 1.5°C above pre-industrial levels. One of the mechanisms encouraged in this agreement is the use of carbon markets as a tool to encourage emission reductions in a more efficient and economical way. However, in its implementation, there is a major challenge related to double counting, where the same carbon credit can be claimed by more than one party, both countries and companies. Double counting can reduce the effectiveness of climate change mitigation efforts because it gives the illusion of greater emission reductions than actually occur.

To address this issue, the Paris Agreement through Article 6 introduced the Corresponding Adjustment (CA) mechanism, which aims to ensure that each carbon credit is only counted once in the global emissions reporting system. As mentioned in Article 6.5 of the Paris Agreement, emission reductions resulting from mechanisms to contribute to the mitigation of greenhouse gas emissions of other Parties shall not be used to demonstrate achievement of a Host Partys nationally determined contribution if such achievement has already been used by another Party to demonstrate achievement of its nationally determined contribution (United Nations, 2015). By implementing CA, the country selling carbon credits must adjust its emissions inventory, so that there is no double claim between the selling and buying countries.

Corresponding Adjustment (CA)

Corresponding Adjustment (CA) is an accounting mechanism in Article 6 of the Paris Agreement, which ensures that each unit of emission reduction (in the form of Internationally Transferred Mitigation Outcomes/ITMOs) is not double counted by the two countries involved in the transaction. Parties shall conduct CAs when transferring ITMOs for national emissions and removals covered by their NDCs, to account for these transfers and ensure avoidance of double counting (Greiner et al., 2019). In other words, if a country sells or transfers ITMOs, it must adjust its emissions inventory report, while the buyer country can add the reductions to its calculations. This ensures that each emission reduction is only counted once to achieve the global NDC goal of reducing greenhouse gas emissions.

What Makes ITMOs Different from Carbon Credits?

(Source: HAMERKOP)

The main difference between carbon credits and Internationally Transferred Mitigation Outcomes (ITMOs) is that carbon credits are units generated by different types of projects that can be purchased by private entities or governments to offset their emissions. Meanwhile, ITMOs are part of a mechanism created under the Paris Agreement that allows countries to trade verified emission reductions with each other, so that some parties can meet their national emission reduction commitments (NDCs) and others gain the economic benefit of having achieved emission reductions beyond their national targets. ITMOs are used internationally and are a form of cooperation between countries to achieve global climate goals (de Oliveira & Parra, 2023).

Article 6 of the Paris Agreement

Article 6.1 encourages countries to cooperate in implementing climate change mitigation efforts. This collaboration aims to achieve a level of emission reduction that they cannot achieve independently. By working together, countries can strengthen the effectiveness of their climate policies and actions.

As part of such cooperation, Article 6.2 allows countries to trade ITMOs, both bilaterally and multilaterally. This mechanism provides flexibility in meeting mitigation targets by allowing countries to buy or sell emission credits. Thus, credit trading can be an instrument that supports the achievement of emission reduction goals more efficiently.

Furthermore, Article 6.4, which replaces the Clean Development Mechanism (CDM), stipulates that traded ITMOs must be approved by theUnited Nations Supervisory Body as well as the selling country. This aims to create clear standards in the measurement and production of credits, thus ensuring transparency and accountability in the trading system. With a uniform approach, trading is expected to be more credible and reliable.

Implementation of Corresponding Adjustment

When a country sells emission units to another country, it must adjust its emissions target by reducing the number of units transferred. This ensures that claimed emission reductions are not double counted. Thus, the integrity of the selling countrys NDC is maintained and in line with its climate commitments.

On the other hand, the buying country is obliged to add the acquired emission units to its own NDC target. This process ensures that emission reductions are only accounted for once in the global emissions accounting. In this way, the integrity of the international accounting system is maintained and aligned with the climate commitments of the buying country.

(Source: Federal Office for the Environment of Swiss)

An exemplary country in implementing this CA is Switzerland and Peru, which in 2020 signed a bilateral agreement under the framework of Article 6 of the Paris Agreement. This agreement will form the basis for increased investment by Switzerland in Perus climate action. The agreement benefits both parties, with Peru benefiting from accelerated low-carbon development with environmental and social benefits, and enabling Switzerland to better implement its emissions reduction ambitions. The agreement also creates a core governing the avoidance of double counting on ITMOs.

In addition to Switzerland and Peru, Ghana is one of the countries that has a corresponding adjustment mechanism to support Ghanas role in the international carbon market. Ghana allows buyer countries to purchase Mitigation Outcomes (MOs) on the Ghana Carbon Registry (GCR) which will then be labeled CA on the GRC. This MO purchase is allowed in Ghana not only to help fulfill the buyer countrys NDC target, but also for international airlines through CORSIA. Buyers will then be charged an additional fee for CA purchases, which Ghana will channel to the Mitigation Ambition Fund (MAF) to finance the implementation of mitigation activities in Ghana.

(Sumber: Ghana Carbon Market Network)