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INSIDE VIEW

Putting Bonn into perspective

24 April, 2009

The Bonn negotiations raised more questions than they answered, but they have given valuable clues on how the run-up to the Copenhagen climate talks may play out, says Andrei Marcu

The Bonn talks on 29 March-8 April may have marked the first negotiating meeting in the UN Framework Convention on Climate Change (UNFCCC) calendar for this year, but the process has already spawned more meetings as parties grapple with the mountain of work to clear before the culmination of the two-year negotiating process in December. Two additional sessions were deemed necessary for this year, and were added to what is already a crowded agenda.

A few questions come to mind after having spent two weeks in negotiations and a few days reviewing the results of the meeting: Have we made progress? Is a deal possible in Copenhagen? What issues for December’s meeting need to be flagged at this point so businesses can get ahead of the curve? What issues should worry business?

At this stage, it seems that senior negotiators think that an agreement to move the agenda forward is possible in Copenhagen. It is still unclear what shape the deal will take as the main actor, the US, has not shown its hand (beyond gestures of goodwill), and it is not clear how far its domestic agenda will allow it to go in December.

So we must believe that there will be an agreement and forward movement in December, even if the ultimate conclusion may have to wait for a “resumed COP session” in 2010. Or maybe the agreement will be broad and general enough such that it will require subsequent meetings to finalise the details – a bit like the 2001 Marrakesh Accords, which (largely) concluded the details of the 1997 Kyoto Protocol.

Also, while there was nothing unusual or unexpected about how the negotiators behaved at this point, the buzz from bilateral meetings seems a lot more positive than what is seen in public.

The lack of progress on improvements to existing mechanisms and the shape of new ones should not be confused with a lack of interest. Bonn in April 2009 was just not the place and the time for these issues

This was a wait-and-see session, as well as a session for tantalising questions, with Parties (countries) unwilling or unable to put positions forward in any significant way. Progress was made, though, on some topics – for example, in beginning to elaborate the approaches developing countries would take under ‘nationally appropriate mitigation actions’ (NAMA) and reducing emissions from deforestation and degradation (REDD).

What was interesting to see is the somewhat unlikely atmosphere of alignment in the “wait and see game” between some industrialised countries and some advanced developing countries. It is likely to be temporary, as the dynamic of the meetings will change in the second part of the year as Copenhagen nears. Also, we saw a very consistent position among these major developing economies on topics of real political importance, such as developed country commitments and new and additional financial support – the key to a new deal.

However, overall, we also saw some difficulty for the G77 bloc of developing countries to arrive at common positions – on major issues, such as developed country commitments, where they could not agree. True, the G77 represents a broad spectrum of interests, and G77 solidarity is being tested, but everyone believes that, in the end, it will hold. The flip side is also true, with many large developed countries, at this late stage, only putting on the table positions on the level of effort they are prepared to make in terms of controlling their emissions that are less than convincing, or pushing their announcements to June.

There was significant difference between the discussions in the Ad Hoc Working Group on the Kyoto Protocol (AWG-KP) and the working group on Long-term Cooperative Action (AWG-LCA), the broader body designed to include countries that have not ratified Kyoto, principally the US. The working papers prepared for the two sessions received very different receptions – the one for AWG-KP was generally well received, even if it did not progress a lot during the sessions and the debate. The one for the AWG-LCA, a comprehensive paper, received what can best be described as a cold reception from the G77, many of whom were unhappy as they perceived that many of the ideas in their submissions were either ignored or only selectively included; silence from the developed countries did not help.

The wait-and-see strategy made progress difficult on some issues important to the business community. Under AWG-KP, the G77 did not want to discuss any issues, aside from targets, that would require amendments to the Protocol or that would take time and shift attention from negotiating changes in Annex B to the Protocol (which relates to new emissions limits for developed countries). Consequently, topics such as improvements to existing mechanisms, such as the Clean Development Mechanism (CDM), and the shape and place of new ones, such as for land use and forestry or the inclusion of new gases, received little, if any, negotiating time and little progress was made. This should not be confused with a lack of interest. Bonn in April 2009 was just not the place and the time for these issues.

But a trend is beginning to emerge, of a progression in the market mechanisms, the tools that business will have available to meet its very stringent future obligations. What we see is a movement from project-based mechanisms, such as the CDM, to a more “programmatic” CDM (whereby carbon credits are awarded for programmes that reduce emissions), and then likely towards approaches based on entire industry sectors, where the risk of failing to deliver reductions could be moved to countries.

However, in the final AWG-KP chair’s text, sectoral CDM vanished. What is left are sectoral “no-lose targets”, an EU-supported approach whereby no penalties are imposed for missing targets, and the multi-project sectoral benchmark approach to additionality (where projects must beat a sector-wide benchmark to show they are additional to business-as-usual). This latter approach, initially dubbed as an enhancer to environmental integrity, is an approach that the International Emissions Trading Association has supported since the Buenos Aires talks in 1998.

Targets and trading of new emissions units could emerge. Proposals to link markets in developed countries with voluntary or sectoral emissions trading schemes in developing countries have survived, and this could indicate that the post-2012 period will be more about trading and less about project-based mechanisms, which have faced criticism for their complexity, costs and sometimes alleged dubious environmental integrity.

“Waiting for Obama” seems to be a theme in the UNFCCC negotiations, as much as it is in defining Canadian climate change policy

One question that also emerged tangentially is whether these tools will fall under the Kyoto Protocol or under the Framework Convention on Climate Change, the 1992 parent agreement. This is an issue that was raised a few times, and could generate interesting questions if the two tracks continue to co-exist. It sometimes feels as if Parties are reluctant to move new mechanisms into the orbit of the CDM and the CDM Executive Board. It is unclear as to whether this is because of doubts that the new team at the UNFCCC Secretariat and the CDM Executive Board can reform fast enough to convince stakeholders that they can meet all of their promises, or if it is simply because of a desire to go to new mechanisms outside the Kyoto Protocol.

Developed countries want the two tracks merged, but there does not seem to be the will to do so at the next meeting, in Bonn in June. Maybe we will see some movement after the US has played its first hand. “Waiting for Obama” seems to be a theme in the UNFCCC negotiations, as much as it is in defining Canadian climate change policy.

On a number of other topics important to investors, there is little clarity. On technology transfer to developing countries, and on the related issues around intellectual property rights, developing countries are pushing hard but it is unclear if the positions we will see at the end will be related to the current rhetoric.

Ultimately, finance will, of course, play a critical role. The amount of money ploughed into economic stimulus packages globally and the relatively small amounts involved to tackle climate change, has not escaped the attention of the negotiators. There will not be a deal without a financial package – but what the financial package will need in terms of commitments from “advanced” developing countries is still unclear.

We are entering a new world of NAMAs and REDD and sectoral trading, a world where the EU and its trading scheme will not be the only game in town and neither will the CDM, but where market mechanisms are being promoted by many as part of the solution – despite the wider questioning of markets in general.

What we need to ensure is that the new instruments are up to the stringent reduction goals that some are putting forward, that the lack of trust in the current session gets replaced with a new and more optimistic and productive spirit. If we do not achieve that, it will be difficult to bring this diversity of views and interests to a common agreed conclusion in Copenhagen.

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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