All posts by COA Students

Posted:
November 29, 2011
Author:
COA Students

Canada’s Idea of a Christmas Present: Backing Out of the Kyoto Protocol

~Graham Reeder

Recent information from CTV (a Canadian news agency) is showing that Canada is planning to formally back out of the Kyoto Protocol. Canada, along with Japan and Russia have been saying for a year that they do not want to make any new commitments to the Kyoto Protocol (KP) after this year, but backing out altogether places Canada in the same position as the US. This is part of a greater strategy from countries in the developed world to undermine the Kyoto Protocol, the only legally binding international document that ensures greenhouse gas reductions on behalf of both developed and developing countries.

The argument that these developed countries are touting is that the Kyoto commitments are only applicable for developed countries that are party to the KP, meaning that they do not include major emitters like China, India, and the US, and that a new treaty is needed that includes both developed and developing countries symmetrically. The truth is that emissions haven’t happened symmetrically: the developed countries that are bound by the Kyoto Protocol and the US are responsible for the vast majority of greenhouse gasses currently in the atmosphere as well as all of the current climate change being experienced. To expect countries like China, India, Brazil, and South Africa to pay for the mistakes of rich countries is a direct contradiction of the principles laid out in the UNFCCC and dooms us to a bottom up approach that effectively locks us into a 2-5 degrees C warmer world.

This latest development is a new low even for Canada. Canadian delegates have routinely blocked progress and lowered ambitions on all fronts at the UNFCCC, beating the US for Fossil of the Year Awards by Climate Action International for four years running, but pulling out of a legally binding protocol at such a crucial point is perhaps the biggest insult to the UN and to the rest of the world any Canadian government has committed. Canada regularly rides on its reputation of being an environmental leader, an international peacekeeper, and an all-round reasonably minded country, a reputation built for the most part by the Liberal Party of Canada in the late 20th century. The Conservatives have taken power in the last 10 years and have steadily undone almost everything that earned Canada that reputation over the past century; this could be the final blow. It is high time for Stephen Harper’s conservatives to step aside at the international level, they have shown that they are unwilling and unable to negotiate in good faith and should run back home before they embarrass Canadian citizens any further.

Posted:
November 27, 2011
Author:
COA Students

(The Lack of) High Hopes for Durban

by Samuli Sinisalo

On Monday the United Nations Framework Convention on Climate Change convenes for two weeks in Durban, South Africa. This is the 17th annual Conference of Parties, where parties come together to fulfill the framework convention. As the negotiations grow ever more technical and complex, it is good to keep in mind that the ultimate goal of the convetion is to stabilize the green house gases in the atmosphere to a level that prevents dangerous anthropogenic interference with the climate system. But personally I am not having my hopes very high for any major breakthroughs to that direction this time. In fact, I would consider even a few very modest steps forward as major success in Durban.

The last comprehensive breakthrough within the UNFCCC context is the Bali Action Plan from 2007. In Bali a two track approach was designed, which would ensure a second commitment period for the Kyoto Protocol and another longer term solution for implementing the framework convention. These two tracks, or ad-hoc working groups, were given a two year mandate and were supposed to conclude their work in Copenhagen 2009. The Copenhagen conference failed to deliver, and the mandate of the working groups was extended to Cancun 2010.

Last year, few weeks before the Cancun negotiations began, the chair of one of the long term cooperative action track released a note by the chair which included the possible outcome for the negotiations. The Bali Action Plan from 2007 included five building blocks, which were shared vision, adaptation, mitigation, tech transfer and finance. The note by the chair in 2010 included four of these, but there was no outcome for mitigation. This to me describes the current state of the negotiations.

Mitigation is a key component of the negotiations. It is the most direct response for limiting the greenhouse gas concentrations in the atmosphere. At the same time it is potentially the most contested area in these negotiations. There are several probable reasons why the chair of the long term cooperative action group left mitigation out from his draft agreement prior to Cancun. Some possible explanations could be the legal form of the future commitments, the continuation of Kyoto Protocol, the role of major emitters and of course the ambition of mitigation targets. But in the end, all these boil down to the lack of political will to commit for binding domestic mitigation targets, in the developed countries. Consequently Cancun also failed to deliver and the mandate of the ad-hoc working groups was extended to Durban.

I do not think there will be a comprehensive outcome from Durban either. The most contested issues, the future of the Kyoto Protocol and the ambition of mitigation targets have not moved forward sufficiently prior to the meeting, and the political pressure has not increased sufficiently.

Personally I have put the bar for success in Durban really low. There are a few results I would like to see.

First and foremost, the UNFCCC has to maintain its credibility as the forum in which future climate decisions are held and decisions are made. If stalled continuously and indefinitely, the global political attention will shift and UNFCCC faces the threat of being sidelined and becoming irrelevant. In the future, climate decisions might take place outside the UN framework. Therefore Durban has to deliver.

The most obvious and necessary area to deliver is the finance. In Copenhagen, an agreement on finance was reached. Developed countries promised to mobilize 30bn in fast-track finance by 2012. In Copenhagen, the Conference of the Parties also decided to establish a Green Climate Fund, which would, by 2020, provide 100bn annually. A Transitional Committee was set up in Cancun to design the fund, and that committee is submitting its (contested) report to the Conference of the Parties in Durban. The fund has to become equitable and operational as the result of the Durban conference.

These two are my personal minimun expectations for COP-17 in Durban, and I hope not to be too badly disappointed. This is not to say there could be no positive results from other Bali Action Plan elements, such as tech transfer or adaptation. But I dare not hope for that. And I dare not even dream of second commitment period to the Kyoto Protocol. But I hope I could dream to be positively surprised in Durban..

Posted:
November 26, 2011
Author:
COA Students

“Money doesn’t talk, it swears”

On the promise of the Green Climate Fund

by Nathan Thanki

Under the UNFCCC, expectations that the international community has regarding climate finance are clear. Article 4, paragraph 3 states that developed countries “shall provide new and additional financial resources to meet the agreed full costs incurred by developing country Parties in complying with their obligations,” and that there is a need for “adequacy and predictability” in the flow of these funds. Paragraph 4 elaborates that these commitments include helping developing countries “that are particularly vulnerable to the adverse effects of climate change in meeting costs of adaptation needs.” Paragraph 7 says that the extent to which developing countries address climate change “will depend on the effective implementation by developed country Parties of their commitments related to financial resources,” while paragraph 8 declares that the funds should be for meeting “the specific needs and concerns of developing country Parties arising from the adverse effects of climate change and/or the impact of the implementation of response measures.”

That all seems fairly straightforward then: rich countries should give poor countries (in addition to existing aid) money specifically for both adapting to and mitigating climate change. However, as is always the case where money is involved, it is not so simple. Developed countries say, as they wash their hands of the responsibility of destroying the planet, that they are pouring money into climate financing. Developing countries say that they are seeing none of it, that they are funding many response efforts from their own budgets, that no money is given for badly needed adaptation projects, that most money goes to middle income countries like Brazil not the poorest countries like Zambia, and that the way climate financing is done is inappropriate as it gives too much power to the donor and not the recipient. There will be a few discussions around finance at Durban: reports on the Least Developed Country Fund (LDCF) and Adaptation Fund (AF) as well as from the Global Environment Facility (GEF). But perhaps the most highly controversial discussions will be around the new plan for long-term climate finance, the Green Climate Fund (GCF). So it is worth our time to know a little bit of the nitty-gritty.

 

Origins

The GCF was originally floated as an idea in Copenhagen, but was far overshadowed by the fiasco that was COP15. The figures of 30billion USD annually from 2010-2012 and 100billion USD annually by 2020 were conjured up, seemingly with no basis. As part of the Cancun agreements (1/CP.16 Para 4), it was decided that a Transitional Committee (TC) would meet throughout 2011 and come back to the COP in Durban with a design for the GCF. The TC was given some rough guidelines as to what the Fund structure should look like. The GCF should: be accountable to the COP; have a board of 12 developing country and 12 developed country members; have a trustee (The World Bank will serve as interim for 3 years) which holds the assets separately despite comingling, and which answers to the Board; have a separate secretariat; have 2 windows for mitigation and adaptation. Certain criteria were then laid out for how the TC itself should be structured: 15 developed and 25 developing countries, with consideration for gender balance; supported by various UN agencies, multilateral banks, international financial institutions and the UNFCCC secretariat; open for observers from civil society and the private sector.

 

The Design Process

The TC met this March in Mexico, and immediately formed 4 work-streams: scope, principles, cross cutting issues; governance; operational modalities; monitoring and evaluating. They also established a Technical Support Unit (TSU)—basically a group of finance and UN experts—to help the TC. By the second meeting in Tokyo, there were clear problems. Of the 5 chairs and co-chairs, developed countries had a 3/5 majority. Developing countries also complained of a lack of funding to assist them in attending TC meetings, and a conflict of interest in having the World Bank as trustee and in the TSU. Parties failed to make progress and by the fourth meeting in Cape Town this October, pretty much everything was still up for discussion. In governance, developed countries (led by the US) argued that the relationship of the COP to the GCF was advisory rather than supervisory, which developing countries strongly rejected. In the COP, developing countries are far more numerous, and so they want to make sure that decisions regarding their climate financing can be overseen by the whole world. In terms of structure, many developed countries (and developing countries with forests) want a separate funding window for REDD (reducing emissions from deforestation and degradation) and for the private sector, while G77 nations want windows for technology and capacity building instead. The role of the private sector is itself highly contested. Developed countries talk of a need to leverage private finance (by basically guaranteeing to bail out investors if they make reckless investments), but developing countries (mostly) maintain that funds should be public, and in the form of grants (NOT loans) that use direct access. Regarding the environmental safeguards which would ensure that funds go to projects that do not do more harm than good to people or planet, the US and Brazil oppose setting any, while developing countries like India want standards to apply to the private sector too. Many developing countries oppose calls (most loudly coming from the UK) that funds should be given in exchange for ‘verified results’, pointing out the obvious fact that a successful project cannot be implemented without funds.

 

Outcome

At the end of all that bickering, what was the outcome? A non-consensus paper <http://unfccc.int/resource/docs/2011/cop17/eng/06.pdf>. The US and Saudi Arabia blocked consensus, meaning that the TC report to the COP will likely be re-opened for negotiating in Durban. The small gains made by developing countries may be held to ransom as part of a ‘take-it-or-leave-it’ Durban package. Developed countries will probably push hard to ensure that developing countries should also donate to the fund, just as they are pushing hard for developing countries to sign on to a legally binding treaty for reducing emissions. Both amount to a blatant disregard of the Convention principles of polluter pays and common but differentiated responsibilities.

 

Our Demands

So if that is what to expect, then what should we demand? Throughout the TC meetings, civil society has been loudly and clearly calling for the following: at least 50% of funds should be for closing the adaptation gap; the Board should have non-voting members from civil society and affected communities; the GCF should be cautious when engaging the private sector so as not to risk public finance; funds must be available through direct access, grants should be used over loans, and in cases where loans are used they should not add to unsustainable debt; there should be no ‘gap’ in finance between 2012 and 2020; funds should be used for ambitious projects (for example, a mitigation project that reduces the most emissions); the GCF should have explicit legal personality, so that it does not rely on the World Bank; the amount of 100b USD is at best a conservative ballpark figure—many other studies have suggested that the amounts needed for developing countries to adequately adapt to and mitigate climate change are several times higher. The list of demands is long and includes reiterations of even basic principles such as transparency and strong safeguards, which really is depressing: it shows how much is still at risk.

 

Money matters

Ironically, as we go in to Durban the GCF looks the most likely issue to have an agreed outcome. If developed countries are to really do nothing to tackle climate chance, and instead renege on their Kyoto commitments, then they need a diversion. A large pot of money (or rather, the promise of such a pot—so far there is only $12b) would provide a good one. The promise of money, especially when that money is needed for developing countries’ survival, is a great negotiating tool for developed countries. I think of it more as a coercion tool. The US is holding out on the GCF so it can use it as part of a package later. For this reason, expect the issue of climate finance to be everywhere present at Durban.

 

 

 

Posted:
November 24, 2011
Author:
COA Students

Carbon Markets

by Joe Perullo

Lately, the phrase Carbon Markets is what comes to me when I hear the word “controversial.”  Much of the literature I have read on them mentions how the markets are “a horrible distraction from real emission mitigation strategies” and how they “redefine the problem to fit the assumptions of neoliberal economics.”  I wouldn’t say I disagree with these statements, but at the moment I can’t brush the idea of carbon markets aside without a better understanding of their ability to evolve from where they are now into effective mitigation mechanisms… or maybe I can.

How do Carbon Markets work?

Say a country wants to reduce its carbon emissions by 80% by 2050.  First, it would need to put a cap on emissions, where a company that would emit over the legal amount would be punished (most likely through a fine or tax increase).  This cap would become tighter and tighter: 10% fewer emissions this year, 30% next, etc.  Initially, the national government would auction off (or sometimes give away!) a set amount of permits to emit.  Companies that would have trouble reducing the required amount of emissions can bid for these allowances.  Companies that can emit lower than the cap (through improvements in energy efficiency, say) can turn that gap between how much they emit and how much they are allowed to emit into permits called carbon credits.  These credits can be sold to companies that can’t reduce their emissions as effectively.  One carbon credit is worth a ton of carbon, so a company that “must” produce one ton of carbon over the legal limit can buy a credit to make up for it. This is cap and trade, and isn’t limited to companies within the same country.

Also, the tightening of the cap will make the carbon credits more and more valuable (and expensive), giving more incentive for companies to reduce their emissions.

Offsets

If a company chooses, instead of making itself use less carbon, it can invest in carbon reduction actions in another country.  This grants the company carbon credits equal to the amount it reduces abroad.  Economically this is flawed, since the offset credits appear out of thin air, saturating the market: when companies receive these offset credits, this increases the amount of credits that are out there—inflating and devaluing them.  Since they are all still equal to one ton of carbon, this effectively allows more carbon to be emitted and counters the efforts of the tightening cap.

What are the Carbon Markets?

There are several different carbon markets out there, but only two are mechanisms under the Kyoto Protocol, known as “flexibility mechanisms,” and they are both offsets. They are the Clean Development Mechanism (CDM) and Joint Implementation (JI). Simply, the CDM is the mechanism used for offsetting where the flow of investment moves from developed countries to developing countries, and JI is offsetting from developed countries to other developed countries. JI makes up only 1% of the physical volume of global carbon trading and .5% of the financial value (of $30B), so much more attention is given to the CDM, which makes up 29% and 17%, respectively.

The CDM is defined in Article 12 of the Protocol, and has two intentions: (1) to assist non-industrialized countries in sustainable development and (2) to assist industrialized countries in achieving compliance with their quantified emission limitation and reduction commitments. Under the guidance of the COP, the CDM is supervised by the CDM Executive Board (CDM EB)—a highly flawed and horribly understaffed operation.  Since developed countries can use the CDM to ease their emission commitments and developing countries can use it to get money to flow from north to south, the CDM ED is under great pressure to approve foreign mitigation investments, even if they do very little to help the country or reduce global emissions. On top of that there is a risk of fraud where projects earn more carbon credits than they deserve.

Furthermore, although the CDM awards emission reductions, it does not penalize emission increases.  This can create perverse incentives for firms to raise their emissions in the short-term, with the aim of getting credits for reducing emissions in the long-term.

The most “economic” way to mitigate?

No mechanism that stalls real mitigation action is economically, or for that matter socially and environmentally, sustainable in the long run.

To the neoclassical economist with a heart for environmentalists, carbon markets are a gift from god (perhaps with the exception of offsets); it truly does provide the least amount of economic harm.  Under the principle of comparative advantage, companies who are better at reducing their emissions will be doing nearly all the reductions, since they can earn more selling credits and investing than buying credits and not.  Those that aren’t so good at reducing their emissions will reduce as little as possible, since it is cheaper for them to buy credits.  In this dichotomy both types of businesses can work under the cap with the least amount of harm to their profits.

Despite the attractiveness of carbon markets on paper, they are in no way a solution to the problem of climate change.  The fact is that they only work if there is a truly enforced cap on emissions.  The only emissions cap that exists under the UNFCCC is the Kyoto Protocol, but countries have not respected its authority—emitting more than what it allows—and if (or perhaps when…) a second commitment period of the protocol is not agreed upon, there will no longer be a legally binding cap for the UN member states.  Countries could of course set their own national caps, but the market would inevitably be far less effective, since investors may be scared in the volatility of their own governments to keep the legal cap in place.  Also, it is possible that the markets would only work if a vast majority of economies had a cap. A rebound effect could occur where the countries that do emit less subsidize the ones that don’t:  Since some countries aren’t using as many resources, there are more out there to use. A higher supply and lower demand makes these resources cheaper, allowing countries without caps to use more. This results in a net reduction in emissions of 0… in theory of course.

Furthermore, the market approach is without a doubt a distraction from employing real mitigation policies.  The climate is not something we can let the markets take care of.  Only a purely profit-seeking entity or a neoliberal economist would say otherwise. But do we need to trash the idea entirely? Is it not possible to effectively have both real mitigation policies eased with carbon markets?  If we don’t have carbon markets, we must then be sure that we can create the political will for real carbon enforcement.  This is a gamble no doubt, but if we rely on markets to pick up the work, how will we confidently have reduced global emissions?  Right now I am on the fence.  I know carbon markets themselves are not the answer, but I am cynical of the ability for all member countries of the UN to reach agreement, especially when the U.S., who’s own national politics are stagnant and unprogressive, has such leverage over the negotiations.

I hope the next few weeks in Durban will help me jump off that fence. Perhaps it is wrong to say that carbon markets are our last hope.  All too often do we forget how unpredictable politics really are.  As a professor of mine once said referring to national caps: “If Australia can do it so can we.” Still in need of a better understanding of the whole process, I can only hope this is the case…

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