The Conversation Continues… OMGE! Convincing a Skeptic on “Automatic Cancellation”

7 December 2019

Welcome back! ECO’s conversation with an OMGE automatic cancellation skeptic was just too [lengthy][complex][exciting] for one day. Mandatory partial cancellation ensures that Article 6 goes beyond zero-sum offsetting (a principle and requirement under Article 6.4 of the Paris Agreement. Mandatory partial cancellation is 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 be used by the buyer to help achieve the target.

So here we go€¦ 

ECO: Hi there OMGE automatic cancellation skeptic. How did that discussion on baselines and additionality go? Let’s continue discussing OMGE automatic cancellation. Shall we?

OMGE automatic cancellation skeptic: Yes, I would love to continue our discussion. Im starting to understand your perspective. But, with this automatic cancellation thing:  it just complicates things.

ECO: It is actually very straightforward. We have already been setting credits aside under the CDM for share of proceeds. The logic is comparable. So, we have the necessary experience on how to set this up. In Katowice, countries were in a position to agree on voluntary cancellation for Article 6.4, so this isn’t something new.

OMGE automatic cancellation skeptic: I understand. But we dont know enough about how this would affect supply and demand for ITMOs, so setting any rate is very dangerous. Why do you want to kill the market?!

ECO: We know enough. Demand is very likely to be fairly inelastic for a while €” meaning, countries and ICAO CORSIA-complying airlines that are the likely buyers of credits are going to need them anyway in the short term to hit their climate targets. And if they don’t need them, they really shouldn’t be using carbon markets to hit these targets. They should be using them to OVERACHIEVE their NDCs.

OMGE automatic cancellation skeptic: Ok, fine€¦ I’m starting to realize that this mandatory cancellation thing is a pretty good idea. Maybe I would be okay with OMGE through mandatory cancellation in the Article 6.4 mechanism; but please, please don’t affect those precious emissions trading systems and bilateral mechanisms which would fall under Article 6.2. OMGE is not called for in 6.2.

ECO: I’m glad you’re starting to understand that mandatory OMGE under Article 6.4 is the most logical approach. You’re really starting to take a more€¦cooperative approach [Hahaha€¦awkward pause]. Let’s at least agree on the need to apply this to Article 6.4, and then consider the other opportunities for applying it to Article 6.2. 

OMGE automatic cancellation skeptic: €¦ Alright, I agree with you. Let’s go with a 50% OMGE automatic cancellation rate. And let’s start looking at how to apply it to Article 6.2 as best we can. 

[After reaching this agreement, OMGE automatic cancellation skeptic and ECO high five! Then over tapas and wine talk about how to phase out the Kyoto mechanisms, ensure there is no double counting, and ensure the protection of human rights through social and environmental safeguards, an independent grievance mechanism, and consultations with potentially affected communities. They solve all Article 6 issues overnight and realize that OMGE was actually a key issue to unblock things and not just a “nice to have.”]

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