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The plenary sessions of the AWG-LCA and AWG-DP finally closed in the late afternoon of Friday 7 December 2012, leaving many issues to be put to the COP for resolution.1 With the COP meeting only opening for discussions at 11:30pm on Friday night, COP President Al-Attiyah announced a suspension of talks until Saturday morning.
When the talks were reconvened, the COP President released draft texts for the AWG-KP, AWG-LCA and AWG-DP for discussion. The closing day of the conference had its usual share of excitement with numerous clarifying statements, expressions of concern and an acrimonious procedural objection from Russia that involved the delegate’s name plate being repeatedly slammed on the table. Despite this, with the Qatari hosts playing a robust role, the parties finally achieved a deal of sorts in the shape of “The Doha Climate Gateway”.
Definitions of terms used in this and our previous daily Doha conference reports can be found here.
The Doha Conference: Concluding Weekend
At the opening ceremony of the high-level segment on Day 9 of the conference, UN Secretary General Ban Ki-moon listed five key deliverables for the conference. Broadly, these were:
the adoption of a ratifiable second commitment period of the Kyoto Protocol;
progress on long-term climate finance to mobilize US $100 billion per year by 2020;
fully equipping the GCF and Climate Technology Centre and Network in order to support developing countries’ adaptation and mitigation efforts;
a demonstration that negotiations for a global and legally binding instrument remain on track for signature in 2015; and
closing the gap between the parties’ mitigation pledges and the target of preventing a rise in global temperatures of more than 2˚C.
We discuss the outcomes of the conference below the heads provided by the UN Secretary General.
(1) The adoption of a ratifiable second commitment period of the Kyoto Protocol
Undoubtedly the main success of the conference was the agreement of an amendment to the Kyoto Protocol that formally establishes emissions targets, albeit weak ones, under a second commitment period and means that the CDM survives to fight another day. This second commitment period will run from 1 January 2013 (pending adoption of the relevant instruments by the relevant parties) until 31 December 2020 (i.e. eight years, rather than the shorter five year period argued for by most developing countries).
Canada, Japan, the Russian Federation and New Zealand2 will not be participating in the second commitment period, although this has been known for some time. Whilst the second commitment period will now only cover 14% of global emissions, the Convention requires countries that do not participate to nevertheless take on nationally equivalent measures.
As noted in our earlier reports, one of the most difficult challenges to overcome before a second commitment period could be agreed was the carry-over of surplus AAUs from the first commitment period. It was decided that a party’s AAUs which have not been retired will be carried over into the second commitment period and added to that party’s assigned amount. Procedurally, such “carried over” AAUs will be transferred to a “previous period surplus reserve” in the country’s national registry (“Reserve Account”). AAUs held in the Reserve Account can be used by a country to fulfil their compliance obligations during the second commitment period, but only to the extent that their assigned amount for that commitment period would otherwise be insufficient. AAUs may also be traded between different countries’ Reserve Accounts, however, despite loud opposition from the Russian delegate, it was decided that only Annex I Parties signing up to the second commitment period, and taking on QELROs, will be eligible to transfer or acquire AAUs. In addition, the number of AAUs which may be purchased by an individual party is limited to 2% of its assigned amount for the first commitment period.
Further, the EU, Switzerland, Norway, New Zealand and Japan announced that they will no longer purchase AAUs in order to meet their commitments. These two measures will erode the market for AAUs and improve the environmental integrity of the Kyoto Protocol.
Similar steps were also taken as regards ERUs and CERs held in a party’s national registry that have not been retired or cancelled under the first commitment period. These units can also be carried over (although only up to a maximum of 2.5% of the party’s assigned amount) and transferred or acquired by those Annex I Parties participating in a second commitment period and subject to a QELRO. Parties will only be able to use CERs to fulfil their compliance obligations under the second commitment period upon ratification of the amendment to the Kyoto Protocol.
Non-participants in the second commitment period will therefore be unable to transfer or acquire CERs valid for the second commitment period, although they will be permitted to continue to invest in the CDM as a primary participant. This may prove to further deflate the price of CERs as it will continue to permit investment in supply, whilst removing demand.3
This will effectively bar the Russian Federation, Japan, Canada and New Zealand from transferring or acquiring CERs from 31 December 2012. As New Zealand was quick to point out in a press release, they will, however, still have access to the units for compliance purposes until the end of the first commitment period’s “true-up” period in 2015.
Finally as regards emissions units, it was agreed that the SBSTA will develop a new market mechanism (“NMM”) under the framework of various approaches (“FVA”) which may produce credits that could, in addition to CERs and ERUs, be used to meet commitments under the Kyoto Protocol. Although most of the detail of this NMM was left to be decided at a later date, key features of the new proposed mechanism were at least agreed. These are that it should (a) recognise mitigation across broad segments of the economy, including sectoral and/or project-based, (b) include the periodic issuance of units based on mitigation below a threshold, (c) return a share of proceeds to cover administrative expenses and assist developing country parties meet the costs of adaptation, and (d) facilitate the effective participation of private and public entities. It is hoped that a decision can be reached in a year’s time in Warsaw at COP19 following the SBSTA report to enable a prompt start for the mechanism.
This decision is significant as it would formally link the Kyoto Protocol’s mitigation mechanism to the Convention, potentially allowing countries that have never ratified the Kyoto Protocol, such as the U.S., to participate in mitigation efforts under the Convention.
The Adaptation Fund will continue to be financed by 2% of the proceeds from CERs issued, plus additional financing will be gained by diverting 2% of the proceeds arising from (a) the first international transfers of AAUs, and (b) the issuance of ERUs when converted from AAUs or Removal Units (“RMUs”). The 2% levy will continue to be inapplicable to CDM projects in least developed country parties.
Improvements to the CDM and JI mechanisms
As regards the CDM, although many changes were recommended and debated, ultimately little was achieved in terms of improving its functionality and effectiveness. A “guidance decision” was adopted with few substantive changes but nevertheless requesting the SBI to conduct a full review of the mechanism in 2013 and recommend changes to the CDM at COP19/CMP9. This review will start on 25 March 2013. The SBSTA will also consider CCS projects, with a view to reporting at COP 22.
The authorisation scope of accredited designated operational entities was also extended to carry out sector-specific verification functions, and their period of accreditation was extended from three to five years. It will also now be possible to establish regional collaboration centres in order to increase the distribution of CDM projects. Plans to establish a “buy-back” stabilization fund for CERs were dropped, as were proposals to reduce the 21 year lifespan of projects to 10 years.
JI received similar treatment with the SBI also tasked to prepare recommendations, including draft revised joint implementation guidelines, for consideration at COP 19/CMP 9. That review should specifically consider the following attributes as “key” to characterising the future operation of the JI, (a) a single unified track for JI projects, (b) closely aligned or unified accreditation procedures between the JI and CDM that take into account differences in the respective modalities and procedures, and (c) an appeals process under the authority of, and accountable to, the CMP against decisions of the JISC.
Little progress was made as regards REDD+, although a work programme will be launched by both the SBI and SBSTA aiming to scale-up and make the provision of finance more effective for market and non-market approaches. For the first time, agreement was reached that forestry projects must take into account non-emissions issues, such as biodiversity and the rights of indigenous people.
(2) Long-term climate finance to mobilize US $100 billion per year by 2020
As we have reported over the past two weeks, this was one of the most hotly debated items in Doha with developing countries complaining bitterly from the outset about the alleged failure of Annex I Parties to put up fast-start finance on time and pressing hard for interim “scale-up” commitments for the period prior to 2020. Ultimately, however, no agreement was reached on this issue. On the connected issue of setting up a mechanism or fund to compensate developing countries for loss and damage associated with climate change, the term “fund” was opposed by the U.S., but agreement was eventually reached on the development of “institutional arrangements such as an international mechanism” at COP 19 in order to deal with loss and damage.
There continues to be broad dissatisfaction with the refusal of developed countries to set out a road map of the route towards their target of US $100 billion by 2020, although this is was not a surprising outcome given the tough economic climate faced by many Annex I Parties. There is unlikely to be meaningful progress in this area now until high-level ministerial talks on the subject take place in 2014.
(3) Equipping the GCF and Climate Technology Centre and Network in order to support developing countries’ adaptation and mitigation efforts
The COP formally approved Songdao, Republic of Korea, as the GCF’s host nation, and announced that the GCF will be accountable to, and developed under the guidance of, the COP. Hand-in-hand with this decision came a request for the Standing Committee and the Board of the GCF to develop arrangements for how this should function.
The Climate Technology Centre and Network (“CTCN”) was also more fully formed, with the United Nations Environment Programme (“UNEP”) selected as the host of the Climate Technology Centre for the next five years and the Advisory Board of the CTCN established. UNEP was tasked first and foremost with assisting the CTCN to formally begin work, including appointing a director of the Climate Technology Centre.
The Technology Executive Committee (“TEC”) was requested to continue its consultations with stakeholders under (and outside) the Convention, with a view to reporting at COP 19. A joint report on progress will also be produced by the TEC and CTCN.
(4) Demonstrating that negotiations for a global and legally binding instrument remain on track for signature in 2015
This minimum objective was achieved but, frankly, little else: negotiations towards a 2015 agreement remain at an embryonic stage. With the AWG-KP and AWG-LCA work steams complete, the three broad negotiating tracks have narrowed to one, the AWG-DP. This will assist to focus negotiations towards a global and legally binding instrument. In order to avoid dilution of such negotiations resulting from the inclusion of some overflow from the closure of the AWG-LCA, the AWG-DP has itself split into two further work streams, one to forge an agreement in 2015, and another to assess potential methods to increase ambition before 2020, and an outline work plan was agreed. The current plans are for the AWG-DP workstreams to meet twice each year until 2015.
Connie Hedegaard, the European Union’s Commissioner for Climate Action, labelled the Doha Climate Gateway a “modest but essential step forward”, but with the key question of the precise legal nature of the “protocol, another legal instrument or an agreed outcome with legal force” still unresolved, it may be just as well that UN Secretary Ban Ki-moon has announced his intention to convene a meeting of world leaders in 2014 to discuss climate change.
(5) Closing the gap between the parties’ mitigation pledges and the target of preventing a rise in global temperatures of more than 2˚C
An overriding theme of recent conferences has been continued compaints by developing nations and NGOs of the lack of ambition, and with no expectations going into Doha, this conference was no exception. The EU stood ready to honour its commitment of a 30% reduction compared to 1990 levels if this was matched by other parties, but with Australia offering a target of merely 0.5%, the EU’s commitment remained at 20% and there was no significant movement by Annex I Parties on their existing reduction commitments.
All the conference was able to agree was that there should be a re-examination of emission reduction pledges by all parties in 2014, including the QELROs that have been set by the 37 parties signing up to the second commitment period. No movement in levels of ambition should be expected in the meantime and parties’ positions in 2014 are likely to be intimately linked to the progress made in seeking to agree the detail of the NMM.
Opinions on the level of success achieved in Doha are mixed. If one measures success against Ban Ki-moon’s five objectives, not even that modest list was achieved. An agreement on the Kyoto Protocol’s second commitment period is undoubtedly a significant success, albeit demand under the second commitment period will remain weak. Whilst there is no road map towards the US $100 billion target to be raised per year by 2020, some parties continue to pledge large sums towards climate finance and steps were taken to make these donations more transparent. Equally, the GCF and CTCN are able to move forwards, albeit slowly, with hosts decided upon and management in place or soon to be in place. As to whether the AWG-DP is on track to reach a binding agreement in 2015, the most that can really be said is that the parties have agreed to keep talking: the negotiations are “on track” in only this most basic sense. As to closing the gap between mitigation pledges and scientific needs, by common consensus this is indisputably the area in which least was achieved.
Fred Boltz, senior vice president for international policy at Conservation International, spoke for many developing countries and NGOs when he said that “Nobody expected a major breakthrough… but there has been virtually no meaningful progress.” Others will however see the successful conclusion of a second commitment period as an important success that means market mechanisms will remain at the heart of future discussions.
1. Some sources identify as many as 53 outstanding issues.
2. Although New Zealand will take on a QELRO in the second commitment period.
3. CER prices are widely report to have already dropped 88% over 2012.
Client Alert 2012-278