OMGE! Convincing a Skeptic on “automatic cancellation” (Part 1 of 2)

6 December 2019

Congratulations! You actually decided to read the first sentence of this ECO article, after seeing such an “eye-glazing” Article 6 concept. 

To make sure that Article 6 goes beyond zero sum offsetting, ECO believes that the only real way to achieve this principle (and requirement under Article 6.4 of the Paris Agreement) is through “automatic cancellation.” What you may ask? It’s a process where buyers (like a country or an airline for compliance under the ICAO CORSIA) buy some mitigation outcomes and a certain percentage of that purchase has to be set aside for the benefit of the atmosphere. What’s left would then be used by the buyer to help achieve the target. But not everyone agrees on this approach. What follows is the first half of a conversation that ECO had with an “OMGE automatic cancellation skeptic.”


ECO: So, I hear you don’t like OMGE being achieved through automatic cancellation. Why don’t you want it? 

OMGE automatic cancellation skeptic: “Well, first off, I think that OMGE through automatic cancellation is a tax on mitigation.”

ECO: No, that’s rather misleading: it’s really a subsidy to developing countries to develop projects that generate mitigation outcomes. Sure, the buyer pays a little bit more for the ITMO, but research shows that if the cancellation rate is 50% or below (and ideally 50% from ECO’s perspective), the sellers, who are likely to be developing countries, will be better off, and so will the planet. If designed correctly, it can even increase the share of proceeds being raised for adaptation.

OMGE automatic cancellation skeptic: But the new International Emissions Trading Association (IETA) report says that Article 6 trading rules could save up to $250 billion/yr. for climate action, and 5 billion tonnes a year in 2030.

ECO: Buried in page 15 of the “Further Research” section of the paper it says: “This paper explored a scenario that assumes that cost savings from international carbon trading were reinvested back into enhanced ambition.” But there are no clear assurances this will be the case. This is why ECO is so adamant about ensuring OMGE through automatic cancellation; we should be squeezing out every bit of mitigation as possible.

OMGE automatic cancellation skeptic: But a 50%-10% rate of cancellation won’t matter if you allow Article 6.4 units to be double counted and you allow some Kyoto mechanism credits into the system.

ECO: Of course. The point of OMGE through mandatory cancellation is NOT to fix these bigger issues. Pre-2020 credits being used to meet NDCs would be worse. So would bad rules that allow double counting. And so would silly unambitious rules governing baselines and the establishment of additionality for baseline and credit mechanisms. Again, this really seems like developed countries trying to pay less for use of markets towards meeting their NDCs.

OMGE automatic cancellation skeptic: Listen. I have to go to an informal informal. Or an informal? Or an Article 6 “get together”…? Whatever. Could we please finish this tomorrow? 

ECO: Sure, see you then. 


Will the OMGE mandatory cancellation skeptic come together with ECO in the spirit of achieving the Paris Agreement? Stay tuned for tomorrow’s ECO for the exciting conclusion of this discussion. 

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