Ambition-raising and cost effectiveness under the Paris Agreement

NICA workshop 14 June 2019

Lively discussions among some 40 participants from Finland, Sweden, Norway and Denmark representing various ministries, agencies, research institutions and industries characterised the Nordic Initiative for Cooperative Approaches (NICA) Stakeholder Workshop held at NEFCO’s headquarters in Helsinki, Finland, on 14 June 2019.

Terje Kronen of the Norwegian Ministry of Climate and Environment and Chair of NICA provided the opening remarks and set the scene for the day. Karoliina Anttonen of the Finnish Ministry of the Environment gave a detailed overview of the status of the Article 6 negotiations. The Paris Agreement Rulebook was adopted in COP24 Katowice with the exception of Article 6 rules. The European Commission commented that “no rules would be better than bad rules”. The key challenges are linked to corresponding adjustments and CDM (Clean Development Mechanism) transition, for example. Discussions continued in Bonn in June 2019 and decisions from COP25 are expected to be taken in Chile in December 2019.

From piloting to ambition-raising

Sandra Lindström of the Swedish Energy Agency provided an overview of the considerable past and current Swedish activities linked to market mechanisms. Under the Kyoto Protocol, Sweden has invested SEK 2.3 billion in multilateral cooperation, as well as 91 bilateral programmes and projects in 23 countries.

Under the Paris Agreement, Sweden plans to: (i) raise ambitionsby supporting the development of the instruments; (ii) purchase international emission reduction units to contribute to the Swedish climate target.

Ongoing activities include, for example, involvement in the World Bank’s Transformative Carbon Asset Facility and various virtual pilots in addition to NICA activities. Ms Lindström noted that the baseline setting appears to be challenging for Article 6 activities, and that translating national targets into sectoral or sub-sectoral targets is also challenging but necessary to determine a robust baseline. Many countries are also hesitant to engage in Article 6, and the risk of overselling needs to be addressed.

Hanna-Mari Ahonen of the Finnish Ministry for Foreign Affairs summarised Finland’s 20 years of support for carbon pricing, noting that Finland was the first country to introduce a carbon tax in 1990.

Finland started piloting Kyoto markets via a bilateral CDM/JI Pilot Programme and an investment in the World Bank’s Prototype Carbon Fund (PCF). It continued by scaling up several investments in multilateral funds and bilateral projects. More recently, Finland has been involved in building carbon-pricing readiness and piloting Paris markets including, for example, Partnership for Market Readiness (PMR) and Nordic Partnership Initiative (NPI) as well as NICA activities. Ms Ahonen highlighted that Paris markets can build on 20 years of Kyoto experience, and international collaboration enables small players to contribute beyond their size at a global level.

Finland has been involved in 171 projects/programmes to date, with total emission reductions of 78 MtCO2e expected by 2020 and including notable sustainable development co-benefits. Total investments – largely private sector – amount to USD 73 billion. Ahonen underlined that there are more than 8,000 registered emission reduction projects and programmes with investments exceeding USD 400 billion.

Carbon credits for aviation

As greenhouse gas emissions associated with international aviation are not governed by UNFCCC, the International Civil Aviation Organization (ICAO) established a Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) in 2016. As CORSIA, which is planned to start in 2021, is expected to provide notable demand for carbon credits, Terje Kronen assessed this demand and the role of CORSIA. To preserve environmental integrity and to prevent the double counting of emission reductions, CORSIA should be linked in some way to Paris Agreement accounting.

Current aviation emissions amount to some 800 million tonnes of CO2/a, and could double by 2035 depending on various assumptions. In other words, CORSIA could create demand up to some 280 million tonnes of emission reductions by 2035 – just to compensate the growth of emissions. ICAO’s Technical Advisory Body will provide recommendations on eligible programmes and project types by early 2020.

Solutions beyond Europe

Matti Kahra of the Confederation of Finnish Industries (EK) provided views from the private sector and activities linked to market-based instruments. Kahra noted that EK stands behind the objectives of the Paris Agreement, and is pushing for net-zero emissions in the EU by 2050. Businesses call for a stable and predictable operating environment, and, according to Mr Kahra, it is important to look for the most cost-effective and market-based ways to reduce emissions.

Matti Kahra noted that Finland is one of the world’s leading cleantech innovation countries and has the opportunity to reduce emissions globally. Nordic business federations also strongly believe that Europe should continue to have a leading role in combatting climate change, as well as providing solutions beyond Europe. Business Europe stands behind the EU’s ambition for net-zero greenhouse gas emissions – an ambition which needs to be closely connected to Europe’s agenda on competitiveness and security of supply. Furthermore, Kahra noted that Carbon Markets offer both tangible and wider benefits as they can create space for increased ambition, cost-efficiency and mutual benefit for buyers and sellers as well as allow for greater knowledge-sharing and technical cooperation, for example.

A lively discussion moderated by Kari Hämekoski of NEFCO indicated that there is increasing interest in Article 6 issues. This discussion covered themes such as current fossil fuel subsidies, the role of sinks and land-use in general, double counting issues, possibilities for sectoral and policy crediting and related challenges, and the need for piloting in order to support feasible rules for Article 6. There was also some industry interest in the possibility of piloting these activities, whereas others made comments along the lines of ‘wait and see’.

Kari Hämekoski


  1. Assessing demand and the role of CORSIA, presentation by Terje Kronen, Norwegian Ministry of Climate and Environment
  2. Article 6 –Are we there yet?, presentation by Karoliina Anttonen, Ministry of the Environment, Finland
  3. Swedish Program for International Climate Initiatives, presentation by Sandra Lindström, Swedish Energy Agency
  4. Finland’s experiences in international carbon pricing – Lessons for the Paris era, presentation by Hanna-Mari Ahonen, Ministry for Foreign Affairs, Finland
  5. Private Sector views and activities with Market-based instruments, presentation by Matti Kahra, Confederation of Finnish Industries (EK)

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