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INSIDE VIEW

State of play

15 July, 2009

Ahead of August’s meeting, Andrei Marcu reflects on last month’s UN negotiations and worries that things are not progressing fast enough

The June session of the UN Framework Convention on Climate Change (UNFCCC) negotiations was a hard two-week period at the end of which the key question that needed to be asked was – what did I know after that I did not know before?

Commenting a few weeks later has the added benefit of seeing this through the outcome of other important events: the US House of Representatives vote on Waxman-Markey, the G8 and the Major Economies Forum (MEF). It also provides the opportunity to look forward and start thinking about the informal UNFCCC session in August – yet another week in Bonn, that much maligned place that some are learning to appreciate after countless meetings over the years.

One conclusion is that the process has become increasingly complex, almost to the point of being unmanageable, and there is no indication that it will get simpler. There was no conclusion on whether the two tracks negotiating a post-2012 deal, the group for parties to the Kyoto Protocol (AWG-KP) and a group for parties to the convention (AWG-LCA), which includes the US, will merge before Copenhagen or will continue on their separate ways in Copenhagen.

The process has become very complex, as witnessed by the increasing preparation and coordination time that various groups needed in Bonn, and this will not change in future sessions. Have we reached a point where the discussions need to be elevated, in order to ensure, first and foremost, that a political agreement can be reached in Copenhagen? It looks increasingly difficult that closure will be reached in the next six months on the dazzling array of issues that are in the 200-plus pages of LCA text – and that does not include the complexity of the LCA/KP parallel negotiations, which makes progress even more complex.

Therefore, for the average observer, the question is obvious – is everyone happy to just do the paperwork, legalities and procedures, which are a necessity, but that do not represent success, while still “waiting for Obama and the US”/MEF/G8/UN Secretary’s general meeting to progress? It was disheartening to many who put in long hours in Bonn that the principals of the US delegation were in Beijing with their Chinese counterparts. Experienced, veteran negotiators say that this is normal at this stage of such a process, and we hope they are right.

There was little progress on substantive matters at this session and therefore the reporting of the outcome will by necessity have to focus on the procedural ballet, and an attempt to read tea leaves.

The AWG-LCA chairman did not ask for permission from the Parties (countries) to circulate the text by 6 June, as required under UNFCCC rules to make it an “official entry” for the Copenhagen agenda in December. We can only speculate if that agreement could have been reached or not. But individual countries took it upon themselves to circulate the chairman’s text and other versions by the deadline.

The LCA text almost quadrupled and all new amendments were collected through a dedicated e-mail that collected all proposals and put them together – Parties did not even discuss the proposals but just sent e-mails. In both tracks, everyone wanted to ensure that their amendment is in the text, and in a correct way. No one is sure how events will unfold in Copenhagen and as such all items were put under both the LCA and KP headings. This is a way to ensure that nothing can be kept off the table in Copenhagen on a procedural basis. However, every option is included, many are bracketed, and consequently it is difficult to tell what will carry weight going forward.

For the LCA, the structure of the text stayed the same, in line with the Bali Action Plan, which is guiding the negotiations. Though several structural proposals were made, including those that suggest ways to move away from the developed/developing world dichotomy, it is interesting, and at the same time somewhat frustrating, that the text added during the last session does not include attribution – it is therefore almost impossible to know who introduced what amendment, and only the UNFCCC secretariat has access to that information.

NAMAs have a critical role to play as they will be the innovative window through which many ideas will come

The LCA text contains a substantial number of references to Kyoto mechanisms and fungibility between markets under the LCA and KP – the new mechanisms of nationally appropriate mitigation activities (NAMAs) and reducing emissions from deforestation and degradation (REDD), likely to fall under LCA, and the “old” ones, the Clean Development Mechanism (CDM) and Joint Implementation. The section of market mechanisms under the LCA contains many of the CDM improvement amendments also contained in the Kyoto text as outlined below. Some parties put this in the LCA text to make sure it is there in case this is where the discussion will take place, yet others may see it as an attempt to force a de facto merger of the KP and LCA streams. Procedures, yes, but also proxies for real negotiations.

There is little doubt that NAMAs and REDD will be in, but the vision of what they are, and how they will work, can be very different depending on who you talk to. NAMAs have a critical role to play as they will be the innovative window through which many ideas will come – policies, standards, city action plans, maybe sectoral activities, and everything else. This promises to be exciting. The concerns that need to be addressed for developing countries are: a) that they do not become a way for mandatory commitments to creep in, and means of implementations, and b) how they will be financed. Will some of them be measurable, reportable and verifiable, and benefit from carbon finance?

REDD is popular with almost everyone, even if some asked that a definition be put in to ensure that everyone is on the same page. Will REDD be credited, funded by the private sector and with credits fungible with the rest of the global carbon market? The private sector is rushing into it, in anticipation of rapid adoption, while many negotiators see this, at least in the preparatory phase while the infrastructure is put in place, as essentially a government-to-government matter. As with carbon capture and storage (CCS), there is some fear of flooding the market with REDD credits, depressing prices and damaging the chances of other “worthy” technologies coming in. There seems to also be some competition between REDD and CCS, but hopefully logic will prevail and those favouring CCS and REDD will see that they have a common cause.

That common cause has to be certainty, clear and objective process and transparency, as the negotiating process is currently considering excluding certain sectors, technologies and gases. There does not seem be any common denominator, except that if credited, both CCS and REDD will depress prices. This seems ideological: we cannot continue to eliminate abatement opportunities without criteria and a transparent logic. The inconvenient alternative is that every time the market discovers a cheap abatement opportunity we eliminate it – this is not how markets operate best. The challenge will be enormous and we need to continue to harness all the entrepreneurial instincts to make it over the goal line. There is nothing worse – for any market – than changing the rules in the middle of a game.

We cannot continue to eliminate abatement opportunities without criteria and a transparent logic

Sectoral crediting and trading are another critical component, and they may carry much promise but also some of the same concerns listed above. Sectoral crediting and trading could be game changers. They are seen by some as being the end of the offsets and CDM as we know them. In reality, project-by-project offsets were always a stopgap measure and the two can be fully complementary as sectoral approaches will likely only become operational under specific circumstances. If done right, the private sector can continue to be a central actor; however, there can be no doubt that CDM will continue, but hopefully more effectively and efficiently.

Under the AWG-KP, the discussion was focused on the “numbers” – the level of emissions cuts developed countries would commit to – and land-use issues, as they are seen as being closely related to numbers. Everything else was put on the backburner.

In the case of the AWG-KP, the output consists of the three “non-papers”: one on “Other issues” issued by the chairman, which include pretty much everything else outside the “numbers”; a paper by the UNFCCC secretariat trying to make sense of the commitments Annex I countries announced that used different base years and premises (this ended up being more difficult than expected and showed how complex the bottom-up approach could be); and a third one, by the chairman, providing alternatives on how the list of countries accepting caps can be amended, as well as specific proposals on country-specific targets.

It is indicative of how much suspicion was in the air that the chairman did not ask for a mandate, nor was given one, to circulate any text as per the requirements of the Kyoto Protocol, to make it official for Copenhagen. This was again done by individual countries, as in the case of the LCA. But the absence of it here is even more critical as the whole purpose of the AWG-KP track is to agree a new legal text and Parties didn’t even agree to that formality. What the chairman was provided was a mandate to prepare text to facilitate the next Bonn session in August, which will also look at the mechanisms to achieve the targets.

Finally, as expected, parallel discussions on extending the CDM to CCS and new HFC plants did not go anywhere, except to the Copenhagen session. Attempts to broker an agreement on new HFC did not even make it in the conclusions, with the EU determined to have an outcome in Copenhagen, we assume on “new” facilities – also referenced in the G8 declaration.

Going back to where we started, we did what we had to do and undertook the steps that ritually need to be taken. Like Napoleonic armies, Parties manoeuvred and counter-manoeuvred, staged marches and counter-marches, but did not really engage with each other. This is fascinating, and can be even seen as elegant and not something that mere mortals are expected to appreciate, but the time will come when we run out of time and the taxpayers and citizens will require engagement. Will the real games begin in August?

Andrei Marcu is senior advisor, climate & emissions trading Canada at Bennett Jones, a Canadian law firm. Between 1999 and 2008, he was the president of the International Emissions Trading Association and serves on the Board of IETA and as chair of the Climate Change Committee of the Canadian Chamber of Commerce. He attended the Bonn meetings as a negotiator for Panama. E-mail: marcua@bennettjones.com

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