Climate change is a global challenge and requires a global solution. Through analysis and dialogue, the Center for Climate and Energy Solutions is working with governments and stakeholders to identify practical and effective options for the post-2012 international climate framework. Read more
THE PATH TO PARIS:
NATIONAL PERSPECTIVES ON
A NEW GLOBAL CLIMATE AGREEMENT
As governments work toward a new global climate agreement this December in Paris, C2ES is convening negotiators from 24 countries in an informal dialogue examining issues and options. Hear participants from China, the European Union, Gambia and New Zealand on their countries’ top priorities, and the co-chairs of the Toward 2015 dialogue on the outlook for a Paris agreement.
April 23, 2015
10:00 a.m. – 12:00 p.m.
White House Conference Room
Baker & McKenzie
815 Connecticut Avenue, NW
Washington, DC 20006
Video of this event:
Special Representative for Climate Change Negotiations, Ministry of Foreign Affairs
Principal Adviser, DG Climate Action
Pa Ousman Jarju
Minister of Environment, Climate Change, Water Resources, Parks and Wildlife
Climate Change Ambassador, Ministry of Foreign Affairs and Trade
Former Minister of Environment, South Africa
Co-Chair, Toward 2015 Dialogue
Former Chief Negotiator, Norway
Co-Chair, Toward 2015 Dialogue
Executive Vice President
Center for Climate and Energy Solutions
C2ES’s Toward 2015 Dialogue also includes negotiators from Australia, Brazil, France, Germany, Grenada, Japan, Mali, Mexico, Norway, Peru, the Russian Federation, Saudi Arabia, Singapore, Switzerland, the United Kingdom, the United States and Venezuela. Further information on the dialogue is available at www.c2es.org/international/toward-2015.
The Center for Climate and Energy Solutions (C2ES) is an independent, nonprofit, nonpartisan organization promoting strong policy and action to address our energy and climate challenges. Learn more at www.C2ES.org.
C2ES expresses its gratitude to the law firm of Baker & McKenzie for its generous hosting of this event.
I recently wrote a piece for China Dialogue about the US announcement of its intended contribution to a new international climate agreement due this December in Paris. Here is that article:
The US pushed strongly for getting climate targets on the table well ahead of this year’s Paris negotiation, arguing that exposing countries’ offerings to a bit of scrutiny would encourage them to “put their best foot forward.” With the formal submission of its intended target, the Obama administration arguably has done just that.
The US contribution is, for the moment, only a declaration of intent. But by coming out early with the strongest target it believes it can muster, the White House has charted an ambitious course at home. And it is upping the pressure on China and other major economies to do the most that they can too.
The end result, hopefully, is a new agreement in Paris that not only pulls all these numbers together, but also holds countries accountable for their promises, and commits them to keep returning to the table in the years ahead to assess and strengthen their efforts.
Statement of Bob Perciasepe
President, Center for Climate and Energy Solutions
March 31, 2015
On the U.S. announcement of its intended contribution to a new international climate agreement due this December in Paris:
“The United States took a vital step today to strengthen climate action both here and abroad.
The U.S. target will drive investment at home in efficiency and clean energy, and leverage those investments to promote stronger action globally. By stepping up early with an ambitious contribution, the U.S. is encouraging other countries to do their fair share, too. If China and the other major economies come through, we have a good shot at a meaningful agreement in Paris.
It’s clear the Paris process is already catalyzing countries to set goals for all to see. But beyond a new set of national targets, the Paris agreement needs mechanisms holding countries accountable for their promises. And it should be built to last, regularly bringing countries back to the table to assess progress and keep strengthening their efforts.”
Contact: Laura Rehrmann, firstname.lastname@example.org or 703-516-0621
About C2ES: The Center for Climate and Energy Solutions (C2ES) is an independent, nonprofit, nonpartisan organization promoting strong policy and action to address the challenges of energy and climate change. Launched in 2011, C2ES is the successor to the Pew Center on Global Climate Change. Learn more at www.c2es.org.
At the 19th session of the UNFCCC Conference of Parties (COP 19) in Warsaw, Poland, countries were invited to submit their “intended nationally determined contributions” (INDCs) to the new climate agreement to be concluded at COP 21 in December 2015 in Paris. Parties were encouraged to submit their INDCs, covering the period beyond 2020, “well in advance” of the Paris conference. Below is a list of all INDCs submitted to the UNFCCC, with links to the parties’ formal submissions.
- A reduction of 37 percent in annual emissions below business as usual levels, as defined in Andorra’s first biennial report to the UNFCCC, by 2030.
- No contribution from international credits. [C2ES Translation]
- Australia will implement an economy-wide target to reduce greenhouse gas emissions by 26 to 28 per cent below 2005 levels by 2030.
- Australia reserves the right to adjust our target and its parameters before it is finalized under a new global agreement should the rules and other underpinning arrangements of the agreement differ in a way that materially impacts the definition of our target.
- The impacts of [emission reduction] efforts are estimated at 120 MtCO2e avoided emissions and sequestering 163 MtCO2e from 2020 to 2030. Carbon sequestration, through national efforts at reforestation and planting, constitutes the unconditional contribution of the Republic of Benin.
- In order to achieve its goals in GHG mitigation and adaptation to the effects of climate change will need an overall budget of 30 billion USD as a contribution to the government of Benin for the period 2016 to 2030. [C2ES Translation]
- Canada intends to achieve an economy-wide target to reduce our greenhouse gas emissions by 30% below 2005 levels by 2030.
- Reaching this ambitious target will require new policies in additional sectors and coordinated continental action in integrated sectors.
- Canada may also use international mechanisms to achieve the target, subject to robust systems that deliver real and verified emissions reductions.
Based on its national circumstances, development stage, sustainable development strategy and international responsibility, China has nationally determined its actions by 2030 as follows:
- To achieve the peaking of carbon dioxide emissions around 2030 and making best efforts to peak early;
- To lower carbon dioxide emissions per unit of GDP by 60% to 65% from the 2005 level;
- To increase the share of non-fossil fuels in primary energy consumption to around 20%; and
- To increase the forest stock volume by around 4.5 billion cubic meters on the 2005 level.
- See the C2ES Fact Sheet: China's Contribution to the Paris Climate Agreement.
- A reduction of 17 percent below 2000 levels by 2030. This contribution is conditional on the provision of finance equaling US$12.5 billion for mitigation and US$9.1 billion for adaptation. [C2ES Translation]
- With unconditional measures, the Republic of Djibouti agrees to avoid future emissions of 1.8 MtCO2e of GHG reducing its emissions by 40% compared to baseline.
- The implementation of conditional measures will allow a further reduction of 0.9MtCO2e, or 20% of GHG emissions in 2030 compared to the baseline. The conditional mitigation scenario and allow the Republic of Djibouti to maintain its amount of emissions to a level equivalent to that of 2010. [C2ES Translation]
- A reduction of 25 percent below 2010 levels by 2030. This reduction is conditional upon favorable and predictable support, feasible climate finance mechanisms, and corrections to the failures of existing market mechanisms.
- A binding target of an at least 40 percent domestic reduction in greenhouse gas emissions by 2030. compared to 1990 to be fulfilled jointly, as set out in the conclusions by the European Council of October 2014.
- A reduction of 255 MtCO2e, or 64% below business as usual (BAU) emissions by 2030
- In the long term, Ethiopia intends to achieve its vision of becoming carbon-neutral, with the mid-term goal of attaining middle-income status.
- At least 50 percent reduction in emissions from a BAU scenario, excluding the forest biomass sector [C2ES Translation]
- Iceland aims to be part of a collective delivery by European countries to reach a target of 40% reduction of greenhouse gas emissions by 2030 compared to 1990 levels.
- A precise commitment for Iceland within such collective delivery has yet to be determined, and is dependent on an agreement with the European Union and its Member States and possibly other countries.
- In the event that an agreement on collective delivery is not reached, Iceland will determine a national target by other methods and communicate it to the UNFCCC
- Japan’s INDC towards post-2020 GHG emission reductions is at the level of a reduction of 26.0% by fiscal year (FY) 2030 compared to FY 2013 (25.4% reduction compared to FY 2005) (approximately 1.042 billion t-CO2 eq. as 2030 emissions)
- Removals by LULUCF sector are accounted in line with approaches equivalent to those under the Kyoto Protocol.
- The Joint Crediting Mechanism (JCM) is not included as a basis of the bottom-up calculation of Japan’s emission reduction target, but the amount of emission reductions and removals acquired by Japan under the JCM will be appropriately counted as Japan’s reduction.
- Korea plans to reduce its greenhouse gas emissions by 37% from the business-as-usual (BAU, 850.6 MtCO2eq) level by 2030 across all economic sectors.
- Korea will partly use carbon credits from international market mechanisms to achieve its 2030 mitigation target, in accordance with relevant rules and standards.
- Kenya seeks to abate its GHG emissions by 30% by 2030 relative to the BAU scenario of 143 MtCO2eq; and in line with its sustainable development agenda.
- This is also subject to international support in the form of finance, investment, technology development and transfer, and capacity building
- Liechtenstein aims at a reduction of greenhouse gases by 40 % compared to 1990 by 2030.
- The assumptions underlying Liechtenstein’s INDC are based on the possibility to achieve emission reductions abroad which may be accounted towards
- Liechtenstein’s reduction target in 2030.2 However, primary focus will be given on domestic emission reductions.
- The reduction target will be subject to the approval of the Liechtenstein Parliament.
- Marshall Islands commits to a quantified economy-wide target to reduce its emissions of greenhouse gases (GHG) to 32% below 2010 levels by 2025.
- Marshall Islands communicates, as an indicative target, its intention to reduce its emissions of GHGs to 45% below 2010 levels by 2030.
- Mexico is committed to reduce unconditionally 25% of its Greenhouse Gases and Short Lived Climate Pollutants emissions (below BAU) for the year 2030. This commitment implies a reduction of 22% of GHG and a reduction of 51% of Black Carbon.
- This commitment implies a net emissions peak starting from 2026, decoupling GHG emissions from economic growth: emissions intensity per unit of GDP will reduce by around 40% from 2013 to 2030.
- The 25% reduction commitment expressed above could increase up to a 40% in a conditional manner, subject to a global agreement addressing important topics including international carbon price, carbon border adjustments, technical cooperation, access to low-cost financial resources and technology transfer, all at a scale commensurate to the challenge of global climate change.
- Within the same conditions, GHG reductions could increase up to 36%, and Black Carbon reductions to 70% in 2030.
- An unconditional target of a 13 % reduction in GHG emissions by 2030 compared to a business as usual (BAU) scenario.
- Conditionally, Morocco can achieve additional 19 % reduction achievable under certain conditions, which would bring the total GHG reduction to 32 % below BAU emission levels by 2030.
- The conditional target requires an overall investment estimated at USD 45 billion between 2015 and 2030, of which 35 USD billion is conditional upon:
- Access to new sources of finance and enhanced support, compared to that received over the past years, to be mobilized through new climate finance mechanisms, such as the Green Climate Fund;
- The conclusion of a legally-binding agreement under the auspices of the UNFCCC.
- With a view to the adoption of a legally binding agreement in Paris in December 2015, the Principality of Monaco wishes to contribute to the collective effort by adopting an objective 50% reduction in emissions by 2030 compared to the base year 1990.
- The commitment can be viewed as a ten year-target, or two successive five year periods. The interim target is 40 percent below 1990 levels by 2025. [C2ES translation]
- New Zealand commits to reduce GHG emissions to 30% below 2005 levels by 2030.
- New Zealand’s INDC will remain provisional pending confirmation of the approaches to be taken in accounting for the land sector, and confirmation of access to carbon markets. New Zealand will participate actively in discussions on the land sector with our negotiating partners, both in the lead-up to and after COP 21, and will confirm details of the accounting approach we will take prior to or upon ratification of the Paris agreement.
- In order to achieve domestic reductions and to do so at an affordable cost, we have identified a need for cost-effective mitigation technology, and in particular that our continuing investment in agricultural research delivers results that can be commercialized within the time period covered by this contribution.
- Norway is committed to a target of an at least 40 percent reduction of greenhouse gas emissions by 2030 compared to 1990 levels. The emission reduction target will be developed into an emissions budget covering the period 2021-2030.
- Norway intends to fulfil this commitment through a collective delivery with the EU and its Member States.
- In the event that there is no agreement on a collective delivery with the EU, Norway will fulfil the commitment individually. The ambition level will remain the same in this event.
- Limiting anthropogenic greenhouse gases in Russia to 70-75% of 1990 levels by the year 2030 might be a long-term indicator, subject to the maximum possible account of absorbing capacity of forests.
- Reduce emissions 9.8 percent by 2030 compared to 1990 levels.
- Singapore communicates that it intends to reduce its Emissions Intensity by 36% from 2005 levels by 2030, and stabilize its emissions with the aim of peaking around 2030.
- Singapore intends to achieve the mitigation objectives under its INDC through domestic efforts, but will continue to study the potential of international market mechanisms.
- 50 percent by 2030 compared to 1990 levels, corresponding to an average reduction of greenhouse gas emissions by 35 percent over the period 2021-2030.
- By 2025, a reduction of greenhouse gases by 35 percent compared to 1990 levels is anticipated.
- Carbon credits from international mechanisms will partly be used.
- The INDC is subject to approval by Parliament.
- The United States intends to achieve an economy-wide target of reducing its greenhouse gas emissions by 26-28 percent below its 2005 level in 2025 and to make best efforts to reduce its emissions by 28 percent.
- See the C2ES Fact Sheet: Achieving the United States' Intended Nationally Determined Contribution
Leaders at the February 2015 UNFCCC conference in Geneva. Photo courtesy UNFCCC.
The final year of U.N. talks aimed at producing a new global climate agreement kicked off this week in Geneva. As negotiators wrestle with the working draft of the new agreement, it’s clear that all the core issues remain very much in play.
The talks, under the U.N. Framework Convention on Climate Change (UNFCCC), were launched in 2011 in Durban, South Africa, and are to conclude this December in Paris. The aim is a post-2020 agreement “with legal force” and “applicable to all.”
The more immediate goal in Geneva is to produce a “draft negotiating text,” which technically must be in circulation at least six months before Paris. But the text emerging from Geneva will be very far from a finished product. The starting point this week was a 39-page collection of parties’ proposals forwarded from COP 20 in December in Lima. By mid-week, the working draft had grown to nearly 90 pages.
The unwieldy text reflects the wide disparities remaining on all the core issues in shaping the Paris agreement.
Countries will soon begin submitting their “intended nationally determined contributions” to the agreement. That these INDCs (focused primarily on constraining greenhouse gas emissions) will be “nationally determined” suggests that the agreement will have a strong “bottom-up” character. Much of what’s at issue is whether and how to blend in “top-down” elements to create a hybrid agreement that delivers both broad participation and stronger ambition.
What role for carbon markets in the 2015 climate agreement?
The following was published in the February 2015 edition of Biores, a publication of the International Centre for Trade and Sustainable Development.
By Anthony Mansell
International Fellow, Center for Climate and Energy Solutions
Will the current UN climate talks do enough to create common standards for international emissions trading in the future or should interested parties look outside the multilateral process?
Around the world governments are increasingly pursuing market-based approaches to reduce their greenhouse gas (GHG) emissions. South Korea’s emissions trading scheme entered force at the start of this year and is currently the world’s second largest carbon market. Many other carbon pricing policies are either in force or in the planning stages, including in emerging markets such as Brazil, China, and Mexico as illustrated in Figure 1.
Parties to the UN Framework Convention on Climate Change (UNFCCC) are due to meet in Paris, France later this year to finalise a new global climate agreement to replace the current Kyoto Protocol and the Copenhagen Accords when these expire at the end of this decade. One important consideration is the degree to which the new agreement can help facilitate the growth and integration of carbon markets. This article examines the existing international emissions trading regime under the Kyoto Protocol; the status of market-related issues in the ongoing UN climate talks; and potential options to encourage market approaches and policy co-ordination outside the UNFCCC.
Figure 1: Emissions Trading Schemes World Map, July 2014
Source: Copyright 2012, International Carbon Action Partnership (ICAP)
The origin of market mechanisms: The Kyoto Protocol
The development of a market for carbon emissions was a significant component of the UNFCCC’s Kyoto Protocol, which is currently in its second commitment period, running from 2012 to 2020. Parties with emissions reduction targets – listed in Annex B of the Protocol – are allocated “assigned amount units” (AAUs) that represent the total emissions permitted to meet these targets. Domestic reduction policies help to bring actual emissions in line with the allocated AAUs. Parties then submit national greenhouse gas inventories annually to the UNFCCC that account for all emissions that occurred within that year.
To give countries greater flexibility to meet emissions targets, which in turn should help to reduce the overall costs of cutting emissions, three methods for transferring units – either emissions or emission reductions – between countries are sanctioned in the Kyoto Protocol. Article 17 provides for International Emissions Trading (IET), meaning that countries that have reduced emissions below their targets and therefore have excess units, can sell their excess allowances to countries whose emissions exceed their targets. Another transfer option is Joint Implementation (JI), which allows Annex B countries to earn emission reduction units (ERUs) through emission reduction or removal projects in other Annex B countries. The Clean Development Mechanism (CDM) allows Annex B countries to earn certified emission reduction (CERs) credits through emissions-reduction projects in developing countries. Finally countries can also earn removal units (RMUs) based on land use, land-use change, and forestry (LULUCF) activities.
Emissions’ trading under the Kyoto Protocol relies on international oversight. All transfers are tracked using a registry called the International Transaction Log (ITL). A common accounting standard applies to all countries with emission targets. An executive board must approve the methodology that CDM projects propose to use. Finally, under the Protocol only the international transfers it sanctions are considered legitimate to fulfil a country’s emissions-cutting obligations.
The Kyoto model provides important infrastructure for an international carbon market. Common accounting procedures ensure that any transfer meets the internationally agreed level of environmental integrity. An AAU allocated to Switzerland represents a tonne of emissions measured using the same standard as an AAU allocated to Norway. Common offset methodologies give a blueprint to replicate projects across the globe. The CDM has been able to issue 1.4 billion credits – each representing a tonne of avoided emissions – and mobilise over US$400 billion in investment using this common rulebook for managing offset projects. Moreover when countries submit their national greenhouse gas inventories, any recorded transfers can be verified by checking the international registry, reducing the potential for a double counting of emissions.
The Kyoto Protocol’s rigidity, however, has undermined broad participation. This goes beyond international trading. For example, there is little flexibility in the types of commitments that countries must meet, namely quantified economy-wide emission reduction targets. Furthermore, as the CDM illustrates, Kyoto uses a binary differentiation between developing countries – that host projects – and developed countries – that finance them. More fundamentally Kyoto establishes binding emissions targets for developed countries and no new commitments for developing countries. Many countries have said that such a bifurcated structure would not be politically acceptable in a future UNFCCC agreement. The post-2020 regime will likely need to reflect a less rigid form of international governance, including at the level of emissions-reduction tools, if it is to garner broad support.
Bringing markets into the new regime
The Paris climate deal is being negotiated under the UNFCCC’s Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP). Its mandate is to “develop a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties, which is to be completed no later than 2015 in order for it to be adopted at the twenty-first session of the Conference of the Parties (COP) and for it to come into effect and be implemented from 2020.”
By the end of March, parties will begin submitting their intended nationally determined contributions (INDCs), which constitute what a country proposes to do to combat climate change after 2020. At COP20 held in Lima, Peru last December countries agreed to some broad definitions of areas and information to include in the INDCs. Some parties are likely to include the use of markets as part of their INDC as a way to achieve emissions-reductions.
The ADP’s mandate does not address carbon markets. Within the ADP negotiations so far questions relating to carbon markets have arisen primarily in the context of emissions accounting. Many parties believe that, in a regime lacking the top-down architecture of the Kyoto Protocol, minimising the potential for double counting is an imperative if markets are to play a positive role. Responsibility for avoiding double counting could rest on countries that choose to use markets with discretion as to how they do so. Alternatively a common accounting procedure could be agreed internationally to account for market transfers between countries.
Meanwhile, other issues related to the future role of carbon markets are being negotiated outside the ADP, within the UNFCCC’s Subsidiary Body for Scientific and Technological Advice (SBSTA). In this track, parties are seeking agreement on a Framework for Various Approaches (FVA), as a way of co-ordinating market and non-market based mitigation actions that relate to commitments under the Convention. Such a system could facilitate the transfer of units between different countries in the absence of a Kyoto-like architecture, and establish a New Market Mechanism (NMM), as well as Non-Market Approaches (NMA). However, parties have yet to agree on a definition of any of these three concepts, which prevents the discussions from moving forward. A number of countries have also expressed reservations about market mechanisms from an ideological point of view.
At the most recent Lima COP the FVA discussions hit deadlock after negotiators disagreed on whether these talks should continue in SBSTA or be transferred to the ADP. Some parties did not want to continue with the technical discussions since they believed it would pre-judge outcomes under the ADP and the inclusion, or not, of markets in the new climate agreement. The FVA discussions will continue at the June SBSTA session in Bonn, Germany, but prospects for agreement on these issues in Paris are not high.
For carbon markets to continue to grow post-2020 it would be important that the Paris agreement at the very least not disqualify international transfers as a way for parties to implement their nationally determined contributions. An affirmative recognition that parties may employ market mechanisms would provide a positive signal although some parties, including some favouring the use of market mechanisms, do not believe this would be legally required to move forward with market tools. The Paris agreement could consider establishing a process to agree common accounting standards, and other relevant measures, at a later stage. Any such agreement, however, would need to overcome the divergent views on the use of markets.
Looking beyond the UNFCCC
Other forms of policy co-ordination can play an important role in the absence of international consensus. Linking binds together different emissions trading schemes into a common market. In the context of the post-2020 regime, if there is agreement that transferring units to satisfy a country’s emissions-cutting obligations are legitimate – or at the very least do nothing to preclude it – such linkages could occur even in the absence of a specific, international framework such as the FVA.
Some governments have already gone down this route. The EU ETS and Australia’s carbon pricing mechanism entered linking negotiations before the Australian government repealed their policy last July. At the sub-national level, California and Québec held their first joint auction of carbon allowances this past January, completing the process of joining their cap-and-trade programmes together. California is also exploring the possibility of allowing forestry offsets from sub-national provinces in Brazil, Indonesia, and Mexico.
Creating these linked emissions-reduction markets offers several advantages for governments seeking to take action on climate change. A common carbon price between jurisdictions could alleviate some of the economic competitiveness concerns about uneven abatement costs faced by businesses, particularly when the link occurs between key trade partners. A linked market would, in theory, equalise the carbon price faced by firms in each jurisdiction. Some companies may be hesitant for their government to link to a market where the carbon price is higher because of concerns this will raise their individual compliance costs. Nevertheless, a broader pool of allowances and offsets would reduce the aggregate cost of reducing emissions across the entire market, by allowing firms with relatively high abatement costs to import allowances from firms located in another jurisdiction who face lower abatement costs.
A common carbon price between jurisdictions could alleviate some of the economic competitiveness concerns about uneven abatement costs faced by businesses, particularly when the link occurs between key trade partners.
Bilateral linking does require prior co-ordination. For example, the accounting standards used to measure emissions must be consistent, to ensure a tonne is a tonne across the common market. The use of market stabilisation measures, for example setting a minimum and maximum price within a carbon market, must be harmonised to prevent firms from exploiting arbitrage opportunities.
The EU and Australia, as parties to UNFCCC, had the benefit of being under the Kyoto architecture where many of these technical questions were already agreed internationally. California and Québec are both members of the Western Climate Initiative (WCI), established in 2007 to facilitate a regional carbon market between US states and Canadian provinces. Agreeing common approaches during the design phase of these market programmes has made bilateral connections easier to pull off.
The potential risk of these bilateral arrangements is if governments agree linkages without putting in place sufficiently stringent accounting or technical standards. In the absence of international guidance on the kinds of transfers that are acceptable, and a common accounting framework, the responsibility to ensure environmental integrity rests with the jurisdictions that link. Governments that link bilaterally or in a club would need to agree to stringent accounting rules, registry systems, among other aspects, and those wishing to join the scheme would need to meet these standards.
Moving forward with carbon trading
The most effective solution to co-ordinate market policies is a set of agreed international rules and mechanisms. The Kyoto architecture provides a common unit, common approaches, and common accounting that offer some certainty to carbon market investors. Ultimately, however, that system is tied to a view of differentiation and requires a level of international governance that does not engender broad participation.
A new UNFCCC regime could develop rules in line with these political realities. Whether this occurs under a FVA, or a new set of deliberations in the ADP, developing common multilateral standards for markets will require international consensus. However, anti-market sentiment could harm prospects for agreeing to meaningful, robust rules. In the meantime, there are approaches outside of the UNFCCC that can advance market linkage from the bottom-up, without waiting for top-down direction. So long as the new international climate regime does not prohibit the transfer of market units, interested governments could establish talks on common approaches, and lay the groundwork for bilateral or plurilateral linking. While this may not have the unifying effect of a global standard, or a common carbon price, it could allow those who wish to co-ordinate their market policies to do so unencumbered by the need for international consensus.
South Korea’s Emissions Trading System
On January 1, 2015, South Korea launched an emissions trading system that covers roughly two-thirds of the country’s emissions. Emissions trading is a key policy toward meeting South Korea’s target of reducing greenhouse gas emissions 30 percent below business as usual levels by 2020.
The South Korean carbon market is the world’s second largest, behind the European Union Emissions Trading Scheme (EU ETS). It is also the second nationwide emissions trading program in Asia, following the launch of Kazakhstan’s ETS in 2013.
Background and Details
The original legislation creating the Emissions Trading Scheme (ETS) was adopted almost unanimously on May 2, 2012. The program was originally scheduled to enter force on January 1, 2013, but the government delayed the start to give companies more time to prepare. Trading officially commenced on the Korea Exchange (KRX) on January 12, 2015.
The program is split into three phases: 2015-2017, 2018-2021, and 2022-2026. More than 500 companies are included in the program, from the power, steel, petrochemical, electronic, cement, automobile, buildings, and waste sectors. In addition, five airlines will participate to cover their domestic aviation emissions.
In the first phase, from 2015 to 2017, a total of 1.64 billion allowances will be allocated. The number of allowances individual companies will be allocated is based on their emissions between 2011 and 2013. There will also be additional allowances available for new or expanded facilities. At the beginning of the program, 100 percent of allowances are allocated to companies, but this will be reduced to 90 percent by 2021. The other allowances will be auctioned by the government. International offsets are currently not available to companies to meet their obligations.
The precursor to the ETS in Korea was the Target Management Scheme (TMS), a greenhouse gas management program with 470 participating companies. As with the ETS, individual companies were required to reduce their emissions to target levels. However, the TMS did not allow trading between companies, and the penalties for not complying are not as severe as under the ETS. Features of the TMS have been incorporated into the new system, such as the governance structure and the collection of greenhouse gas inventories.
Progress on a multifaceted global challenge like climate change doesn’t happen in one flash of bright light. This can lead to the impression that little is being accomplished, especially when stories highlight areas of disagreement.
Nothing can be further from the truth. In reality, progress is more like the brightening sky before dawn. We saw positive steps in 2014, and they’ll help lay the groundwork for significant climate action in 2015 in the United States and around the world.
In the U.S., we will see the EPA Clean Power Plan finalized and states taking up the challenge to develop innovative policies to reduce harmful carbon dioxide emissions from power plants. Allowing governors to do what they do best, innovating at the state level, will be a key achievement of 2015.
Internationally, more countries than ever before will be putting forward new targets for reducing greenhouse gas emissions ahead of talks in December in Paris to hammer out a climate pact to replace the Kyoto Protocol.
In the New Year, we will be building on solid progress made in 2014 by governments, businesses, and individuals. Here are 10 examples:
Image courtesy UNFCCC, Flickr. Trimmed to fit this space.
OUTCOMES OF THE U.N. CLIMATE CHANGE CONFERENCE IN LIMA
20th Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 20)
December 1-12, 2014
In a preview of a tough year ahead, governments meeting at the U.N. Climate Change Conference in Lima, Peru, went 30 hours over deadline to hammer out a modest set of procedural steps, and made no real progress on the larger issues looming as they work toward a new global climate agreement next year in Paris.
In adopting the Lima Call for Climate Action, parties to the U.N. Framework Convention on Climate Change (UNFCCC) agreed on loose arrangements for bringing forward their “intended nationally determined contributions” to the Paris agreement. They also forwarded the “elements for a draft negotiating text” that is to be produced by May. But the “elements” paper – a compendium of all the issues and options put forward by parties – explicitly disclaims any “convergence” and leaves the door open to further proposals next year.
The meeting – known formally as the 20th Session of the Conference of the Parties to the UNFCCC, or COP 20 – completed the third of a four-year round of negotiations to conclude in Paris. It began with a sense of momentum, following nearly $10 billion in pledges to the new Green Climate Fund and the joint announcement by the United States and China of their post-2020 emission targets. However, the meeting quickly bogged down, and parties put aside the “elements” document to haggle over the more immediate issues of how their intended contributions to the Paris agreement are to be submitted to and weighed by the UNFCCC.
Though these matters were largely procedural, the fight over them brought to the fore the perennial and increasingly contentious issue of differentiation among developed and developing countries. Many developing countries insisted on maintaining the stark differentiation of the past, but developed countries refused. In the end, the Lima decision largely sidestepped the issue, which is certain to be a central challenge in reaching an agreement in Paris.
In other areas, parties conducted a “multilateral assessment” of emission-cutting efforts by developed countries; debated how to continue scaling up finance to developing countries; failed again to make progress on new market-based approaches; and continued to struggle over aid to developing countries for “loss and damage” resulting from climate change.
Following is a summary of key outcomes:
Ad Hoc Working Group on the Durban Platform
In 2011, COP 17 established the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP), with the mandate of negotiating by COP 21 a post-2020 agreement in the form of “a protocol, another legal instrument or an agreed outcome with legal force under Convention applicable to all Parties.”
A decision last year, at COP 19 in Warsaw, invited parties to submit their “intended nationally determined contributions” (INDCs) to the new agreement “well in advance” of the Paris conference (“by the first quarter of 2015 by those Parties ready to do so”) in a manner that “facilitates the clarity, transparency, and understanding” of the intended contributions. Parties deferred to Lima the question of what information they will provide when putting forward their contributions.
The Warsaw decision appeared to suggest the very broad contours of the Paris agreement – a hybrid structure combining bottom-up and top-down elements. While parties’ individual contributions would be nationally determined, they would be accompanied by a “rules-based regime” to, for instance, promote transparency and accountability.
In Lima, the ADP had two documents before it: a paper identifying potential “elements for a draft negotiating text” of the Paris agreement, and a decision laying out the process for presenting and considering parties’ INDCs over the coming year.
The “elements” paper essentially contains the raw materials for the Paris agreement, covering such issues as mitigation, adaptation, finance, technology transfer, transparency, the legal nature of parties’ commitments, the use of market mechanisms, and procedures to periodically update commitments. It grew to 39 pages as parties made sure all of their proposals were reflected.
The major issue on the “elements” paper was its status heading into next year. Many parties did not want it to be the exclusive basis for developing the draft negotiating text (which, under the rules of the Convention, would need to be circulated by May in order for the Paris agreement to be adopted as a protocol). As a result, the paper includes a footnote stating that the elements “reflect work in progress,” and that they “neither indicate convergence…[nor] preclude new proposals from emerging” next year.
Far more contentious was the decision on steps leading to Paris. Major issues, many of which remained in play until the final 1 a.m. deal, included:
Scope of INDCs – Developed countries wanted “nationally determined commitments” to focus only on mitigation, while many developing countries pushed to include adaptation and finance too. The compromise does not explicitly define the scope of INDCs. In linking INDCs to the Convention’s ultimate objective (stabilizing greenhouse gas concentrations to avoid dangerous anthropogenic interference with the climate system), the decision sets an expectation of mitigation contributions from all. It also invites parties to “consider including an adaptation component” as well.
Upfront information – To help clarify and assess parties’ contributions, the decision identifies certain information that parties might provide, as appropriate, including “quantifiable information” on an INDC’s timeframe, scope and coverage, and the assumptions and methodologies used in estimating and accounting for emissions. It also asks parties to say how their contributions are “fair and ambitious.” However, language saying that “all Parties shall” provide upfront information was replaced by “may” in the final text, making it voluntary.
Ex ante consideration – Many parties pushed for different types of processes to scrutinize one another’s intended contributions pre-Paris; major developing countries tried to block them. The final decision dropped a mid-year “dialogue” on the INDCs, but added direction to the UNFCCC secretariat to prepare a synthesis report by November on the “aggregate effect” of the INDCs – in other words, how they compare to the reductions needed to limit warming to 2°C.
Differentiation – Major developing countries pushed for explicit differentiation between Annex I (developed) and non-Annex I (developing) countries throughout the decision, which developed countries flatly rejected. The compromise echoes language from the recent US-China joint announcement, simply restating the UNFCCC principle of “common but differentiated responsibilities and respective capabilities,” with a slight addition: “in light of different national circumstances.”
Finance – Differentiation was also an issue in the decision’s call for increased finance for developing countries. Rather than assuming the entire onus themselves, developed countries pushed for language saying that other parties “in a position to do so” should also contribute. The final text simply “recognizes complementary support” from other parties.
Loss and damage – COP 19 launched a separate process to consider steps to help especially vulnerable developing countries cope with “loss and damage” – climate impacts that cannot be avoided even with strong mitigation and adaptation efforts. In Lima, those countries tried but failed to add loss and damage to the list of issues the Paris agreement must address. The final decision merely notes the separate process already underway. On the decision’s adoption, Tuvalu, speaking for the least developed countries group, noted for the record its interpretation that this reference indicates an intention by parties to address the issue in the Paris agreement. (See more on loss and damage below.)
COP 20 featured the first-ever “multilateral assessment” of mitigation efforts by developed countries, part of a new set of transparency procedures established under the 2010 Cancún Agreements. Seventeen developed country parties, including the United States, the European Union, several EU member states, and New Zealand, provided brief presentations to the Subsidiary Body on Implementation (SBI) on progress toward achieving their 2020 emission pledges, and fielded questions from other parties.
The SBI session was one in a sequence of steps in the new international assessment and review (IAR) process for developed countries. The parties being assessed had earlier submitted biennial reports on their implementation efforts, which had undergone expert review, and participated in online Q&A with other parties. The process results in a party “record” including any expert review reports, a compilation of the online and in-session Q&A, a summary report from the SBI, and any additional comments from the party concerned.
Other developed countries will be assessed over the coming year. Under a parallel process called international consultations and analysis (ICA), developing countries are now submitting their biennial reports, which will undergo technical analysis next year, followed by a “facilitative sharing of views” among parties in 2016.
Apart from figuring in the ADP debate, climate finance issues were addressed on several other fronts at COP 20.
Leading up to Lima, pledges toward the initial capitalization of the Green Climate Fund (GCF) established under the Cancún Agreements had approached the informal goal of $10 billion. Additional pledges during the conference surpassed that goal, including pledges by Australia, which had earlier said it would not contribute, and by three developing countries: Colombia, Mexico and Peru.
Meanwhile, China, saying that the GCF should be funded by developed countries, announced the launch of a separate South-South fund. China pledged to double the $44 million in climate finance it has provided since 2011, and invited other developing countries to contribute. It provided few details on how the new fund will be managed.
The COP received the first biennial assessment of its Standing Committee on Finance, which estimated that flows from developed to developing countries totaled between $40 billion and $175 billion a year between 2010 and 2012, including $35 billion to $50 billion a year in public finance. (Developed countries committed in Cancún to mobilize $100 billion a year in public and private finance by 2020.) The wide range in the committee’s estimate of total flows reflects both the lack of an agreed definition of climate finance and the difficulty in tracking, in particular, private flows.
In a debate over scaling up climate finance, developed countries resisted calls by developing countries for interim targets toward the $100 billion a year to be mobilized by 2020. The COP instead urged developed countries to “enhance the available quantitative and qualitative elements of a pathway, placing greater emphasis on transparency and predictability of financial flows.”
Framework for Various Approaches/New Market Mechanism
Since COP 18 in Doha, efforts toward establishing a new market mechanism under the UNFCCC have been subsumed under a broader work program on a Framework for Various Approaches, which also takes in non-market approaches.
For the second year in a row, the discussions remained bogged down in the Subsidiary Body on Scientific and Technological Advice (SBSTA) and never reached the COP. China and Brazil argued that the issues should instead be taken up under the ADP, but other parties objected. The issues will be before SBSTA again next year.
Loss and Damage
At COP 19, parties established the Warsaw International Mechanism for Loss and Damage to consider steps to address loss and damage suffered by especially vulnerable countries, and agreed to revisit the mechanism and its structure at COP 22, a year after the Paris conference.
In Lima, the COP decided on the composition of the mechanism’s executive committee and adopted an initial two-year work plan outlining a detailed set of activities to better understand unavoidable climate impacts and to identify and promote risk management strategies and other responses.
The ADP will hold its next session February 8-13, 2015, and will meet again during the annual meetings of the UNFCCC Subsidiary Bodies set for June 3-14, 2015, in Bonn.
COP 21 will be held from November 30 to December 11, 2015, in Paris. The COP is considering an offer by Morocco to host COP 22 on November 7-18, 2016, with a final decision due at COP 21.