Tag: Finance

Markets On Our Mind

While most developed nations remain unwilling to commit to legally binding targets for CP2, discussions about market mechanisms have been (un)surprisingly vivid. The fact that carbon market prices are at a record low and surplus allowances threaten to bring prices near zero hasn’t added much urge to increase ambition.

ECO wonders why the many carbon market industry lobbyists haven’t made it clear yet that markets can only flourish with vigorous demand, which can only be created by binding reduction commitments. Let’s get that right: allowing emissions trading schemes from countries without enough demand to reach their voluntary targets with international offsets won’t help. The recent announcement of the Australian ETS linking up to the EU ETS has stirred worries that the lack of an international accounting framework will create a fragmented market that will undermine the environmental integrity of carbon markets altogether.

My dear negotiators, would you honestly buy the right to pollute with Japanese Yen from an Indian company if you don’t know whether the emissions reductions are calculated in watts, horsepower or feet? ECO presumes not. However, it’s definitely maths time: do the numbers and calculate the emissions reductions you need for your market to work.

Not only that, we also need a common accounting framework (look to your left) that ensures 1 tonne is 1 tonne. We also see the need to develop a UN common framework, with rules for countries that transfer credits and allowances for meeting QELROs, to ensure reductions are additional and not double counting. ECO looks forward to the outcome of the Parties’ calculation exercises to be presented in Doha, so that the environmental integrity and fungibility of carbon credits can be assured. All this, obviously, must be under the condition of strong and binding emission reduction commitments.

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LCDSs: Why Everyone Needs Them

In Cancun, 1.CP/16 paras 45 and 65 respectively stated that developed country Parties “should” develop low-carbon development strategies and plans, and developing countries “were encouraged” to work on such strategies and plans. In Durban, both groups were invited to submit progress towards the formulation of their LCDSs during this year’s workshops. ECO is disappointed that LCDSs were not a strong part of the 1(b)(i) and 1(b)(ii) workshops on Sunday – especially since such plans help fulfil the Convention’s Article 4.1b mandate, respecting “specific national…development priorities, objectives and circumstances”. Although some nations have prepared them or their equivalent, Parties should actually make a strong effort to do this national climate planning, since such plans can cater to the diverse interests, and here is why:

Developed countries: invest in future-proof infrastructure and avoid lock-in

Developed countries need to have achieved near-complete decarbonisation of their economies by 2050. This is not going to happen unless firm foundations are laid now through a vision of the kind of economy, society and environment they are aiming for in the long term, and working backwards to realise this vision. This is not simply a question of technology and infrastructure changes, but also the way to create a just transition for society as the changes are made. This will help reduce social disruptions, especially for those working in sectors that need to be phased down or out. Additionally, detailed decarbonisation pathways studies, such as WWF’s “Blueprint Germany”, have demonstrated that there is very little space to make decisions on development in such countries that is not low-carbon. Investments in old and dirty technology and infrastructure mean lock-in; future replacement of such infrastructure will increase costs considerably – and lock in the costs of climate impacts. While “flexibility” and market mechanisms have their place, they tend to drive away the transformational changes needed in all developed countries’ economies. 

Developing countries: leapfrog to clean and climate-resilient development

Developing countries already undertake considerable national planning, and many are already working on low-carbon and climate resilient development plans. These plans can assist developing countries in making their development truly sustainable, while avoiding lock-in to a carbon intensive development path that will cost more in the future to readjust away from. Therefore, adequate financial and capacity building support should be allocated as soon as possible for the development and achievement of these strategies. ECO notes that the countries that were first off the mark in having the infrastructure for CDM projects were the ones that attracted more investors, and attracted investment earlier. This is another reason to start planning!

OPEC countries: LCDSs can ensure economic diversification

OPEC countries have a special reason for why they should be pushing for LCDSs. Through the formulation of their strategy, they can show how they plan to diversify their economies into low-emission economies and indicate the support required to do so (such as technology transfer). One study indicates that economic diversification is especially difficult (though no less necessary) for fossil fuel-dependent economies. So, having long-term plans (rather than, say, Saudi Arabia’s current 5-year development planning) provides opportunities for developing clear visions of what diversification might be nationally appropriate, and also to better engage other countries and entities in cooperative partnerships.

Doha should produce two decisions on LCDSs.

1) For developed countries we need an LCA decision mandating:

-          A 2050 decarbonisation goal for near-complete (>95%) decarbonisation

-          Indicative decadal goals for 2030 and 2040 that set out a realistic trajectory for achieving the 2050 goal

-          The policies and measures that the Party shall implement to fulfil its QELRO (you too, US and Canada!)

-          The first report should be submitted with the Annex I National Communications in 2014, subsequent reports paired with subsequent National Communications

2) The decision on voluntary, developing country LCDSs should include:

-          An outline trajectory for the country’s pathway to a low-carbon and climate-resilient economy, linking development and climate goals to achieve sustainability and equity

-          A set of NAMAs that will contribute to this trajectory

-          Address key issues of climate resilience, including food and water security

-          Start to identify needed finance, technology and capacity building

 

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AAU Elephants

Negotiators are truly having a tough time putting the pieces for a second commitment period together. But soon they will face the enormous elephant in the room. A recent UNEP report estimates that up to 13 billion tonnes CO2 of surplus AAUs could be carried over to the next commitment period. This is almost three times the annual emissions of the EU. With the supply of hot air AAUs much higher than current reduction commitments (that are well under the 25-40% below 1990 levels by 2020 actually needed), carry-over would lead to no emission reductions compared to business-as-usual emission projections by 2020. As a matter of fact, CP2 commitments as they stand would likely lead to another surplus. This would be the case even if the large quantity of Russian surplus is excluded. Additionally, carbon credits from the CDM and JI that can be carried over would further lower actual emission reduction levels by 2020 by roughly 6%.

But there is hope! A proposal by the G77, which is technically sound and politically feasible in addressing this enormous loophole, could do the trick. Europe showed in Durban that it can pull its weight internationally by being the driving force behind the agreement for a new climate accord by 2015. This can’t be put at risk by domestic quarrels. The higher carbon price due to restricted carry-over could actually benefit surplus allowance holders, since it would avoid a likely price collapse after 2012.

However, ECO is deeply worried that a low ambition-laden second commitment period might emerge as a compromise. In particular, the differentiation of treatment between two types of hot air seems to be in the making. This could lead to an amendment that allows the European hot air that followed the economic crisis of 2008 to be fully carried over into the second commitment period. In particular, Brazil seems keen to allow such differentiation. ECO wonders why Brazil is so interested in helping further water down the weak European 2020 reduction target through the introduction of such a major loophole.

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Banking on Bunkers

Today, Parties will meet under the LCA Sectoral Approaches spin-off group for the last time before Doha to discuss how to address the fast-growing emissions from international transport. Parties must make sure Doha provides a signal to the International Civil Aviation Organization (ICAO) and the International Maritime Organization (IMO) on how to reconcile the UNFCCC principle of common but differentiated responsibilities and respective capabilities (CBDRRC) of Parties, with the practices and principles of these sectoral bodies, which have a long history of regulating ships and aircraft on the basis of equal treatment of all.

Negotiating positions of many parties have remained frozen in time for the past decade or so – sadly unlike the Arctic. For those who haven’t been hunkered down in bunkers, ECO will explain. At one end of the range there’s the US and Japan, who want the IMO and ICAO to proceed with no input from the UNFCCC. At the other end, a group of developing countries who want the UNFCCC principles to override those of the sectoral bodies, which are independent and autonomous bodies under the UNFCCC, thereby treating these inherently global sectors in the same way as nationally based emission sources. This could mean for example that ships owned or operated by companies based anywhere in the world could easily escape regulation simply by reflagging to another country to avoid compliance.

Singapore has presented a helpful compromise, saying that emissions from international aviation and shipping should be addressed through global measures under ICAO and IMO, while taking into account the principles and provisions of the UNFCCC. This is sensible and appropriate as far as it goes, but even more helpful would be to give an indication of how CBDRRC might be taken into account. It seems risky to leave the interpretation of UNFCCC principles entirely up to other bodies – after all, even seasoned climate negotiators find it tricky! The most promising way to address CBDRRC could be through provisions involving revenues and/or handling of allowances from a global multilateral approach. Differentiation in terms of revenues could allow, for example, support to improve energy efficiency and technology transfer and cooperation within the shipping sector. This can ensure any burden on developing countries is addressed appropriately,  with the use of remaining revenues from developed countries for climate finance through the Green Climate Fund.

So there you have it, Parties. This would give you something to think about. But don’t take too long; remember this is your last day before COP18 and the ice is melting…

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Mission Not Accomplished!

The 5-year mission of the AWG-LCA is about to end, without going anywhere very boldly, or finding much new life. The frustrated and deeply divided crew of the USS Bali are already packing their bags, and preparing to jump over to the Durban Platform as soon as they dock in Doha in a few months.

The AWG-LCA will leave in its wake some new institutions, actions and achievements on various fronts, which may yet prove their worth. But in one crucial area there remains a gaping hole – sources of financing for the next year and out to 2020. Without adequate scaled up financing, most of what has been achieved by the LCA will be merely an empty shell. Yet with three months to go, there are no firm commitments or assurances of financing after 2012, when the Fast-start Finance period ends.

Having created the Work Programme on Long Term Finance, and mandated it to report directly to the COP in Doha, developed countries in the LCA are now claiming mission accomplished. That is clearly not the case. Right now, there is little confidence that scaling up climate finance will be given the attention it so desperately deserves.

Once the report of the Work Programme is finalised, there will only be a short window in the Doha COP itself to consider its contents and recommendations, decide on the scope of a COP decision and generate and negotiate the actual text. This is a risky strategy, and is unlikely to do justice to the issue or the Work Programme report, especially since some developed countries are keen to shut down any discussion of scaling up finance.

This is why ECO backs the call by developing countries to keep finance on the LCA agenda and work up some draft text here in Bangkok for a decision in Doha. Political decisions are needed that guarantee sources and scaling up of financing. These are a central element of efforts to achieve the objectives of the Convention and ensure it won’t drop off the agenda or be sent to languish in the SBs.

The list of finance issues that need to be addressed in Doha, either by reaching some conclusions or finding a future home, is substantial. The LCA can lay the groundwork now for an adequate outcome at COP18 by getting some clarity on the scope of the issues to be addressed, and creating some draft text. Of course, the final decision will only be decided in Doha, informed in many areas by the report of the Work Programme on LTF. When the COP considers the report of the Work Programme on LTF in Qatar, it can be informed by the deliberations of the LCA, and perhaps then find creative ways to divide up the different issues requiring decisions.

So what issues need decisions in Doha?

1.) Commitments of climate finance from 2013 to 2020, or at the very least for the mid-term period from 2013-2015. There must be at least a doubling of Fast-start Financing levels from 2013, with agreed criteria for new and additional finance

2.) Commitments to the initial capitalisation of the Green Climate Fund, of at least US$10-15 billion over the period 2013-2015

3.) MRV of financial support

4.) Outstanding institutional issues

5.) Clarification of where ongoing discussions about the various elements of long-term finance will take place after Doha – whether in the Standing Committee, as a continuation of the Long-term Finance Work Programme or under the ADP.

ECO sees potential benefits and downsides of different options for continuing the finance discussions beyond COP18, and urges an open discussion among Parties on the issue. And let's not forget that adaptation finance needs a suitable home, too...

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“Feeling” Around for Better Decisions in LCA

 

ECO shares G77’s “strong feelings”. In the 1(b)(i) session this afternoon, the Group’s passion for their proposal on what needs to be agreed in Doha was evident. The Group's strong and eloquent intervention clearly set out an understanding of what is needed from developed countries under the LCA track to help achieve fair ambition pre-2020, building on some of the common frameworks that will help to inform the negotiations that will take place in the ADP on a new, global deal.

Helpfully, the G77 proposed decisions for Doha on the following essential elements of developed country mitigation:

-          Increasing pre-2020 ambition for all developed countries – those in the KP and those still refusing to (re)join – in line with the latest available science

-          Conversion of the 1(b)(i) pledges of non-KP developed nations into tonnes of CO2e, AAUs or a carbon budget, rather than point targets for a particular moment in time

-          Common accounting rules for all developed countries

-          Clarification of how the common accounting rules might alter actual levels of ambition

Though we appreciate the EU, Switzerland and Norway's expressed support for common accounting rules and transparency to allow comparability of efforts by developed countries, these countries should form common cause with the G77 proposal and show greater willingness to seize the opportunities for ambitious and comparable efforts under the LCA. After all, developed country modalities have already been negotiated, so there are clear precedents, developed over years of careful negotiations, to guide the work to a speedy conclusion.

As for the Brollie Groupers, who either think that the promise of 1(b)(i) has been exhausted, or that seem to advocate “transparency” through a smoke screen of self-determined rules for reporting and accounting – remember that developed country leadership you signed up to in the Convention? Postponing your duty to increase your ambition until the new deal will kill any chance of staying below 1.5/2°C – and probably a whole lot else as well. Refusing to play by the rules gives an impression of acting like spoiled children who have taken more than their fair share of the sweets and are now trying to hide the wrappers.

And just like any good parent would, we have “strong feelings” about that kind of behaviour.

A Tenuous Linkage

ECO cautiously welcomes the announcement made this week by Australia and the EU that they have entered into negotiations to link their carbon trading schemes by 2018. If implemented with ambition, this could be a positive step toward greater international cooperation in carbon pollution reductions.

However, ECO wants to respectfully remind delegates that if two dogs play together they will catch each other’s fleas. In the case of linking carbon markets together, weak ambition may be contagious. If neither emissions cap meets the targets that science suggests, then linking is only a gimmick.

Europe is already and will continue to face deficiencies in the EU ETS. Unless policymakers move to restore scarcity to the oversupplied European carbon market, they risk weakening incentives for zero-carbon development not only in Europe but also in the countries to which they link. Australia’s economy is the size of Spain’s, and could be overwhelmed by a flood of cheap European emission allowances, undermining climate action there. We note that this linkage is marginally better than allowing a flood of even cheaper CDM credits into the Australian scheme, which was a distinct possibility before changes were made in order to link with Europe, but, as feared, is likely to undermine climate action on both sides.

Full linking with the Australian scheme after 2018 also presents potential dangers for the EU. Since Australia’s 2020 climate targets remain considerably weaker than Europe’s, an insufficiently robust Australian cap could see a reverse flow of cheap Australian credits into the European market exacerbating the existing oversupply. Also, there is a danger that Australian land-based credits could enter the European scheme by the backdoor.

ECO urges the EU to act quickly and decisively to make structural adjustments to the EU ETS by permanently removing surplus emission allowances to fix the glaring problem of oversupply.

Australia regrettably had to do away with its intention to install a carbon floor price, which provided an important safety net to ensure a minimum level of investment in domestic pollution-saving activities. Removing this safety net means that other policies become even more important. ECO urges Australia to commit to extend and increase the Renewable Energy Target to at least 40 per cent.

Finally, ECO can’t help wondering…surely the EU did not forget to make joining the second commitment period of the Kyoto Protocol a pre-condition for bilateral negotiations between the EU and Australia to proceed?

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Decision 1/CP.18: Close the Ambition Gap!!

What do the Beijing and Manila floods, US drought and hurricanes, and record low Arctic summer sea ice cover tell us? That climate impacts are a reality and, particularly with respect to sea ice, are happening faster than we thought. Report after report also tells us that current mitigation pledges are insufficient. It is clear that a work programme on increasing ambition in the short term must be adopted in Doha, so that emissions remain within a trajectory compatible with a 2°C/1.5°C limit.  We need a Doha COP decision on closing that gap!! (Of course, that is not the only decision we need from Doha – others being the adoption of the Kyoto second commitment period amendment, a timetable and milestones for the 2015 deal negotiations and so on – ECO’s point is simply that near-term ambition is critical: do something!)

In the interest of ensuring Parties have time to take in the sights of Doha, ECO has graciously done some of the work for you – with this list you could even forward draft decision text from Bangkok! The COP decision on closing the gap must include: 

-  Strong and early action on short-lived climate forcers – particularly Black Carbon. Doesn’t Black Carbon sound scary – well it is, and getting rid of it has major benefits. A recent UNEP report concluded that ambitious actions to cut Black Carbon and Tropospheric Ozone could reduce global warming by about 0.5°C by 2050 and even 0.7°C in the Arctic, with additional benefits related to health and food security. Parties should agree text that requests appropriate fora for these emissions to take urgent action.

-  HFCs – This is a process laden with abbreviations – so why don’t we get rid of one and accelerate the phase out of HFCs?? Parties should request that the Montreal Protocol agree to phase out production and consumption of these gases as a matter of urgency at MOP25, while all Annex I Parties should also commit to an immediate ban on the use of HFC-23 offsets for compliance with Kyoto Protocol targets. Alternative technologies to HFCs should be made accessible to developing countries in a cost-effective manner. Up to 1.3 GtCO2e could be saved annually by 2020, and we’d all be one abbreviation lighter.

-  Removal of fossil fuel subsidies: There is no better example of the idiom “killing two birds with one stone” than phasing out fossil fuel subsidies – which can contribute to both reducing emissions and act as a source of climate finance (with no disrespect for our friends at the CBD – we are, of course, referring to metaphorical birds).  Subsidy removal in Annex I countries should be prioritized both for its mitigation and financial gap filling potential. Plans for carefully supporting removal of subsidies in developing countries should be developed in the near term. A COP18 decision must establish the enabling conditions to achieve fossil fuel subsidy removal, including a timeline for phase out, identification of ways for some developing countries to pursue fossil fuel subsidy phase-out as a supported NAMA, and requirements to include fossil fuel subsidies existence and plans for removal as part of the National Communications and/or Biennial Reporting.

-  Develop low carbon development strategies as per the Cancun Agreements:  Establishing emission pathways consistent with the 1.5/2°C limit requires the steady transformation of economies away from a high carbon economic growth model – there is no reason not to start planning today!

These are but a few of the many options out there to reduce emissions in addition to developed countries raising their pollution reduction ambition.  It is clear that the COP decision should also mandate a technical paper to assess the overall level of ambition implied by mitigation commitments and long term low carbon development strategies, and identify any subsequent gap between this collective ambition and a trajectory consistent with a high probability of keeping warming below 1.5°C. We need to keep abreast of the size of the gap and ensure it is closed immediately.

But what about targets and actions? you may cry. How can that not be in your list, ECO? The answer is simple. KP Annex I Parties, including Australia and New Zealand, must move to the upper end of their ranges, enshrine these in an amendment to Annex B, along with removing false emission reductions by minimising carried over AAUs and improving CDM and JI rules. Non-KP Annex I Parties such as the USA must also increase their 2020 pledges so that the combined effort with the KP moves into the 25-40% range. Countries (we’re looking at you: Qatar, Argentina, Nigeria, Iran, Venezuela, Saudi Arabia, Malaysia, Thailand) that have not yet pledged NAMAs must do so in Doha, while developing countries that are in a position to do so should further strengthen existing pledges/NAMAs.

To enable developing countries to increase their mitigation actions, public finance from 2013-15 must be at least double the amount of the Fast Start Finance. All this needs to be done in Doha and so would be superfluous to include in a COP decision on closing the gap. In today’s roundtable on raising near-term ambition in the ADP, ECO is anxiously awaiting constructive proposals, concrete commitments and draft text for an ambition COP decision in Doha. The climate crisis demands nothing less.

CAN's Priorities for Bangkok Discussions

The Climate Action Network (CAN) - a global network of over 700 NGOs from more than 90 countries working to promote action to limit climate change to ecologically sustainable levels - is attending the UNFCCC Intersessional Meeting being held in Bangkok from 30 August to 5 September 2012.

CAN believes the following three priority areas need to be discussed in Bangkok:

-       Set expectations for concrete outcomes at COP18 in Doha, especially in terms of agreeing a second commitment period under the Kyoto Protocol

-       Establishing a workplan with key milestones for the Durban Platform negotiation track, especially in relation to increasing level of short-term mitigation ambition

-       Identify elements that need to be finalized or moved under the long-term cooperation action (LCA) track so that it would close in Doha

Media are advised that non-governmental organisations who are members of CAN are available for interviews and on and off the record briefings, backgrounds and updates on the following climate change issues discussed in the negotiations:

Shared vision and overall political picture
Mitigation and low-carbon development
Equitable effort sharing
Adaptation to the impacts of climate change
Financial support
Technological support
Legal structure
REDD and forests
Aviation and Maritime fuels
Agriculture
Public participation

The CAN team in Bangkok also includes experts from the following regions:

Arab region, Australia, Canada, Central Asia, China, Europe, India, Japan, Latin America, South Africa, South East Asia, United States, West and East Africa.

To be put in touch with the relevant person, please contact CAN Director:

Wael Hmaidan
local phone: +66 (0) 8 9210 4796
email: whmaidan@climatenetwork.org
website: www.climatenetwork.org
Facebook: http://www.facebook.com/CANInternational?ref=hl

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