Memorandum submitted by the Department
for Environment, Food and Rural Affairs
INTRODUCTION
1. The 13th Conference of the Parties to
the UN Framework Convention on Climate Change (COP13) and the
third meeting of the Parties to the Kyoto Protocol (COP/MOP3)
took place in December 2007 in Bali, Indonesia.
The UN framework Convention on Climate Change
decisions
2. Under the Convention all Parties reached
an agreement to start a two year process of negotiations on a
comprehensive and broad climate deal post-2012 (Decision 1.CP/13
on the Bali Action Plan) which would be completed at COP15 in
Copenhagen in 2009. In effect this turned the non-negotiating
"Convention Dialogue" into a formal negotiating "Ad-hoc
Working Group on Long-term Cooperative Action under the Convention"
which includes all countries.
3. Key elements of the negotiation process
will be:
(a) A shared vision for long-term cooperative
action, including a long-term global goal for emission reductions,
to achieve the ultimate objective of the Convention.
(b) Enhanced national/international action
on mitigation of climate change, including, inter alia, consideration
of:
(i) Measurable, reportable and verifiable
nationally appropriate mitigation commitments or actions, including
quantified emission limitation and reduction objectives, by all
developed country Parties, while ensuring the comparability of
efforts among them, taking into account differences in their national
circumstances.
(ii) Nationally appropriate mitigation actions
by developing country Parties in the context of sustainable development,
supported and enabled by technology, financing and capacity-building,
in a measurable, reportable and verifiable manner.
(iii) Policy approaches and positive incentives
on issues relating to reducing emissions from deforestation and
forest degradation in developing countries.
(c) Enhanced action on adaptation.
(d) Enhanced action on technology development
and transfer to support action on mitigation and adaptation.
(e) Enhanced action on the provision of financial
resources and investment to support action on mitigation and adaptation
and technology cooperation.
4. The Bali Action Plan also contains an
indicative timetable for meetings of the Ad Hoc Working Group
on Long-term Cooperative Action under the Convention in 2008.
Indicative session dates are:
— Session 1—March/April 2008.
— Session 2—June 2008, in conjunction
with the 28th session of the subsidiary bodies.
— Session 3—August/September
2008.
— Session 4—December 2008, in
conjunction with the 14th session of the Conference of the Parties.
5. For the first session Parties are asked
to develop the work programme for the AWG. They are invited to
submit their views on this to the UNFCCC secretariat, by 22 February
2008.
6. The Ad Hoc Working Group shall report
to the Conference of the Parties at its fourteenth session on
progress made and take stock of the progress made on the basis
of that report.
7. An important stipulation of the Bali
Action Plan is that the process shall be informed by, inter alia,
the best available scientific information, experience in implementation
of the Convention and its Kyoto Protocol, and processes there
under, outputs from other relevant intergovernmental processes
and insights from the business and research communities and civil
society. This means that there is a relationship with the work
under the Kyoto Protocol, in particular on the Ad Hoc Working
Group on Further Commitments of Annex I Parties under the Kyoto
Protocol, as well as with external processes such as those under
the G8 or the Major Economies Meeting as organised by the US.
8. In addition to the Bali Action Plan,
some other positive decisions were made on technology transfer
and deforestation under the Convention:
— On technology, there was agreement
on an ambitious work programme covering both mitigation and adaptation.
A UNFCCC expert group will examine ways and means of speeding
up technology development and transfer, and its funding.
— On deforestation—which is responsible
for about 20% of global emissions—the agreement in Bali
will pave the way for incentives to reduce these emissions, and
these will cover both wholesale deforestation and more gradual
damage. The agreement will set the rules for projects which can
be piloted to common UN-approved guidelines, so that what is learned
can feed into a future climate framework.
Kyoto Protocol decisions
9. The key decisions under the Kyoto Protocol
were the following:
— In the Ad-hoc Working Group on
Further Commitments for Annex 1 Parties under the Kyoto Protocol
Parties agreed the end-date of 2009 for the negotiations they
had started in Montreal in 2005. Parties also recognised the need
for global emissions to be reduced by at least 50% by 2050 compared
to 1990 levels and for developed countries to reduce their emissions
by 25-40% by 2020.
— A decision was also reached on the
governance of the Adaptation Fund, which will support developing
countries to adapt to the climate change that is already inevitable.
This is funded by a 2% levy on the Clean Development Mechanism
(CDM).
— Parties agreed the scope of the review
of the Kyoto Protocol which will take place at COP/MOP4 in
Poznan (Poland) in December 2008.
— On carbon markets, it was
agreed to abolish registration fees and levies on Clean Development
Mechanism projects in the least developed countries, and to approve
the use of non-renewable biomass CDM which means that projects
such as encouraging small cooking stoves will now be possible
through the CDM. Changes were also agreed to improve the way the
CDM and its Board functions.
The Environmental Audit Committee invited comments
on specific questions. The UK Government's response is given below.
QUESTIONS
1. Is the Kyoto Protocol still a relevant
and effective mechanism? How successful was the Bali conference?
Does the roadmap contain all that is needed to lead to a post-Kyoto
agreement that adequately addresses the climate change challenge?
Will the roadmap focus on implementation issues or will it come
to an agreement on a stabilisation level? How do we ensure that
no key parties are left out of the process?
10. The Bali Conference was very successful
as all Parties to the Convention agreed under the Decision on
the Bali Action Plan to engage in negotiations on a post-2012
framework. This decision will make it possible to develop a broad
and comprehensive framework post-2012. Broad, as it would cover
all Parties, including those that have not ratified the Kyoto
Protocol, and comprehensive, as no topics have been excluded from
the negotiations and therefore in principle the door is open to
an accord that covers all essential issues, including a long term
goal, deforestation and international maritime transport and aviation.
The Kyoto Protocol will remain a crucial part of this framework.
First and foremost, many features of its ground breaking architecture
will form the basis for the development of the post-2012 agreement.
No less important, the level of mitigation actions to be taken
in the second commitment period (the length of which is yet to
be negotiated) by Annex I Parties who have ratified the Protocol
will continue to be determined through the work of the Ad Hoc
Working Group on Further Commitments for Annex I parties to the
Kyoto Protocol. The outcome of this negotiation will form part
of the overall outcome on the mitigation section of the Bali Action
Plan.
11. The principal focus of the Bali Action
Plan is the negotiation of a post-2012 agreement and for that
reason it does not deal directly with implementation. One of the
issues that will need to be addressed in the next two years is
that of a shared vision, including a long term goal for emission
reductions. The UK and EU have repeatedly said that a long-term
goal should be to limit global average temperature increase to
no more than 2 degree centigrade above pre-industrial levels which
is associated with cutting global emissions by at least 50% from
1990 levels by 2050. All developed countries should aim to reduce
their emissions by 60-80% by 2050.
12. The conclusions adopted by the Ad Hoc
Working Group on Further Commitments of Annex I Parties under
the Kyoto Protocol noted the usefulness of the ranges referred
to in the contribution of Working Group III to the Fourth Assessment
Report (AR4) of the Intergovernmental Panel on Climate Change
(IPCC) and that this report indicates that global emissions of
greenhouse gases (GHGs) need to peak in the next 10-15 years and
be reduced to very low levels, well below half of levels in 2000
by the middle of the 21st century, in order to stabilize their
concentrations in the atmosphere at the lowest levels assessed
by the IPCC to date in its scenarios. The footnote of the Bali
Action Plan decision refers to the same information and is therefore
likely to form the basis for negotiations on a long term goal.
13. The negotiations on the implementation
of the current obligations of Parties under the Convention and
the Kyoto Protocol will continue and take place in parallel to
the future action discussions at the meetings of the Subsidiary
Bodies in May/June and December.
2. What needs to be done between now and
Poznan?
14. As explained in the introduction, there
will be four sessions on the Bali Action Plan this year. The specific
work programme will have to be agreed at its first session.
15. The Ad Hoc Working Group on Further
Commitments of Annex I parties under the Kyoto Protocol will meet
in conjunction with the AWG on the Bali Action Plan. In Bali the
AWG agreed a timetable for the remainder of its work programme,
as well as an end-date of 2009.
2a. Emissions from international aviation
and shipping were not included in the Bali roadmap. Why did this
happen and what can be done to address these emissions?
16. Consideration of aviation and shipping
is included in the Bali Road Map. The EU sees the inclusion of
aviation and shipping as a key element of a future framework and
argued extremely hard for this in Bali. As a result, in the face
of strong opposition from all other Parties except Norway, the
final text now includes references in Paragraph 1 (b) (iv) that
ensure that emissions from aviation and maritime transport can
be included.
EMISSION REDUCTION
FRAMEWORKS
3. How can "common but differentiated
responsibilities" be decided in such a way that ensures the
engagement of all parties? How can equity concerns regarding the
allocation of mitigation targets and historical responsibility
for climate change emissions be reconciled?
17. Under Article 4 of the Convention all
Parties already have commitments under the Convention in respect
to the mitigation of greenhouse gas emissions which reflect the
principles of common but differentiated responsibilities. The
commitments for developed country Parties are further worked out
under the Convention's Kyoto Protocol while those of the developing
country Parties are specified in Article 4.1 of the Convention
and relate, for example, to the formulation and implementation
of national and regional programmes containing measures to mitigate
climate change. In addition, as developing country Parties always
correctly point out, they reduce greenhouse gases emissions in
their countries by participating in the Clean Development Mechanism
(CDM).
18. It is clear however that the actions
that all Parties are currently taking are not sufficient to avoid
dangerous climate change, and more engagement is required from
both developed and developing countries. Some simple mathematics
demonstrates this clearly. For example, the world currently emits
around 27 billion tonnes of energy related CO2 per
annum. In 1990, the figure was around 20 billion tonnes. According
to the IEA's World Energy Outlook 2007, without new action, by
2030 annual global emissions may rise to about 42 billion tonnes,
55% of which will be emitted by developing countries, 36% by OECD
countries, and 8% by transition economies. To stabilise atmospheric
concentrations at somewhere between 450ppm and 550ppm, EU analysis
and the Stern Review suggest global emissions should be less than
50% of 1990 levels by 2050. Given the current emissions projections,
it is clear that neither developed or developing countries acting
alone can achieve the large reductions thought to be necessary.
Much greater efforts are needed by all parties, taking account
of historical responsibility for the problem and equitable principles
such as capability to act and requirements for economic growth
in developing countries.
19. One of the great successes of the Bali
conference was securing global engagement in a negotiating process
going forward that focuses on the types and levels of mitigation
efforts that Parties can make as well as finance, technology and
capacity-building that is necessary to support these increased
efforts by developing countries in particular.
20. Paragraph 1 (b) (ii) of the Bali Action
Plan (see above), which is particularly focussed on the enhanced
contributions that will be made by developing countries, outlines
these pre-conditions: that action must be seen in the context
of sustainable development, and must be supported by technology,
and must be enabled by financing and capacity building.
21. However, more needs to be done to continue
to build on this global consensus for more action and detailing
these financial, technological and capacity building requirements.
This requires a deep understanding of the science and economics,
of which the IPCC and the Stern Review are two major contributors
to date. More research to improve the evidence on the costs and
benefits of action on climate change in emerging economies will
also be crucial in the coming months and years as we move towards
a post-2012 regime.
4. How might an agreement be reached with
emerging economies to ensure that their emissions trajectories
move into line with the need to reduce global emissions? How might
developing countries' need to expand their economies be reconciled
with controls on emissions?
22. As explained under question 3 the key
to reaching an agreement is to move forward on the conditions
set under the Bali Action Plan, particularly those of technology
and finance. The biggest emitters within the group of developing
countries have made clear that they recognise their responsibilities
and that they are committed to taking further action, provided
these conditions are met and provided, developed country parties
demonstrate their credibility by living up also to their current
commitments on emissions reductions, finance and support for technology
and adaptation.
23. The UK and EU believe that a critical
part of the discussions to come will be with regard to new specific
proposals for mitigation action that combine all these elements
in a way that recognises the range of capabilities within the
group of the developing countries, and puts in place sufficient
incentives for different sets of countries to take action. Parties
will need to consider whether reform of existing instruments and
new instruments might also be required. Support in the areas of
finance and technology will also require the engagement of a wider
set of participants than to date, including International Financial
Institutions such as the World Bank and Regional Development Banks,
and the private sector. More evidence will be required to inform
the design of this supportive framework to ensure it achieves
a balance of action from developed and developing countries that
is equitable and hence acceptable to all.
24. The UK is already beginning to make
important contributions in these directions. For example, in the
2007 Budget the then Chancellor Gordon Brown announced a new international
window of the Environmental Transformation Fund which will total
£800 million over 2008-11. We aim to use this fund, in partnership
with other donors to develop a multi-lateral fund administered
by the World Bank, that will support developing countries own
efforts to respond to climate change and create investment frameworks
for attracting carbon finance etc and at the same time catalysing
the changes that are necessary within the international institutional
framework sufficient to meet the climate investment challenge.
ADAPTATION AND
TECHNOLOGY
5. Is there adequate support for developing
countries to adapt to climate change? Should there be binding
targets for funding and how could these be decided? How will funding
for climate change mitigation or adaptation interact with existing
aid budgets? Will such funding contribute to wider sustainable
development goals?
25. It is widely acknowledged that the current
level of financial support to assist developing countries adapt
to climate change is inadequate, although estimates vary widely.
Under the Bali Action Plan (paragraph 1(e)), there will be discussions
by the parties on the necessary financial and technical support
for capacity building in the assessment of costs of adaptation
in developing counties, and in particular the most vulnerable
ones, to aid in their determination of financial needs.
26. The Bali Action Plan (paragraph 1(e))
recognises the importance of enhancing the provision of financial
resources to support action on adaptation both from private and
public-sector sources. The Bali Action Plan work programme in
2008 will cover discussions between Parties on how to improve
access to adequate, predictable and sustainable financial resources,
the provision of new and additional resources, including official
and concessional funding for developing countries.
27. Incentives to implement adaptation actions
on the basis of sustainable development policies through the provision
of financial resources and investment to support adaptation technology
cooperation, is a key aspect of responding to climate change,
and how to enhance this effort will feature in discussions in
the Bali Action Plan.
6. Is there effective international coordination
on technology R&D?
28. International coordination of technology
R&D is undertaken in a number of ways. For example, through
the work of the International Energy Agency and its implementing
agreements, the EU R&D Framework Programmes and EU-China Partnership
and the EU-India Initiative, as well as a large number of multilateral
and bilateral R&D agreements.
29. The Stern Review acknowledged the need
for greater R&D collaboration and this will be a key feature
of negotiations on the Bali Action Plan.
30. We should also acknowledge the major
role that the private sector plays in the development and deployment
of technology. It is important that all countries work to create
national and international investment frameworks to attract private
sector investment and channel financing away from high carbon
towards low carbon technology options.
31. The challenge now is how to build an
international framework which supports the adoption of pathways
that can enable existing technologies, particularly for improving
energy efficiency, to deliver their full potential and for development
and deployment of new technologies to be accelerated. Technology
related agreements and mechanisms will therefore need to be differentiated
for:
— Deployment—where technologies
are well known and already cost-effective but other barriers may
exist to their deployment.
— Deployment—where technologies
are well known but currently more expensive than high carbon alternatives
and therefore need incremental cost support to drive down their
costs.
— Demonstration—where technologies
are unproven at commercial scale and therefore demonstration support
is necessary.
— R&D—where new technologies
need developing and associated skills improved.
6a. How might technology transfer to developed
countries be improved?
(It is assumed that this question relates to
developing countries, not to developed countries).
32. Under the UN Framework Convention on
Climate Change, a technology transfer framework already exists.
Following the Bali conference, there will be a focus on developing
a strengthened technology transfer framework as a key building
block of a post-21012 agreement.
33. From Bali, the UN Expert Group on Technology
Transfer (EGTT) now has an ambitious work programme covering a
wide range of issues but including enhancing the existing technology
framework.
34. The UN is also considering the role
of new financing mechanisms and tools for scaling up the development
and transfer of technologies. It is also intended to elaborate
a strategic programme to scale up the level of investment for
technology transfer.
35. The carbon market can play a certain
role too in facilitating transfer of cleaner technologies. It
is also important that developing countries develop national strategies
and plans that establish the policies and measures that are necessary
to attract investment (both public and private) into technologies
for low carbon and climate resilient development. Countries that
are working towards this will be likely to attract increased levels
of public and private finance, including carbon finance.
6b. How does technology transfer interact
with international trade rules?
36. The main interaction between technology
transfer and international trade rules takes place under the World
Trade Organisation (WTO) TRIPS (trade-related aspects of intellectual
property rights) Agreement. The agreement sets out the minimum
standards of intellectual property protection WTO members must
provide.
37. According to Article 7 of the TRIPS
Agreement, "the protection and enforcement of intellectual
property rights should contribute to the promotion of technological
innovation and to the transfer and dissemination of technology,
to the mutual advantage of producers and users of technological
knowledge and in a manner conducive to social and economic welfare,
and to a balance of rights and obligations". In addition
under Article 66.2, developed country Members are obliged to provide
incentives to enterprises and institutions in their territories
for the purposes of promoting and encouraging technology transfer
to least-developed country Members in order to enable them to
create a sound and viable technological base.
6c. How effectively do Government technology
programmes, such as the Energy Technologies Institute, lead to
technology development and transfer to developing countries? How
effective are UK Government measures to assist developing countries
to reduce emissions?
38. The Energy Technologies Institute (ETI)
has only recently been established and is a public/private partnership,
backed by companies including BP, Caterpillar, EDF Energy, E.ON,
Rolls-Royce and Shell. Its mission is to accelerate the development,
demonstration and eventual commercial deployment of a focused
portfolio of energy technologies, which will increase energy efficiency,
reduce greenhouse gas emissions and help achieve energy and climate
change goals.
39. The objectives of the Institute are
to:
— accelerate the deployment of new
low-carbon energy technologies, including the efficient production
and use of energy, in support of the UK's energy and climate change
goals;
— provide a strategic focus in the
UK for low carbon energy R&D;
— increase the level of funding in
the UK for low carbon energy R&D;
— promote international technology
collaboration;
— increase UK R&D capacity; and
— promote people, skills and knowledge
sharing.
40. Industry funding contribution, along
with Government, provides the Institute with a potential budget
of over £600 million over a lifetime of a minimum of 10 years.
Additional private sector partners are being identified to match
the Government's commitment of £550 million over the next
decade.
41. The UK is working to promote technology
and investment cooperation through a range of initiatives, including:
supporting the World Bank-led Clean Energy Investment Framework
for accelerating and scaling up public, private and carbon finance
for investment in low carbon energy and adaptation; EU-China initiative
to demonstrate near zero emissions from coal in China; the Renewable
Energy and Energy Efficiency Partnership; the UK-Brazil-Southern
Africa Taskforce on Biofuels and the IEA technology platforms
and initiatives amongst others.
7. Is the Asia-Pacific partnership a complement
or a rival to the Kyoto Protocol? How is it likely to develop
and what is it likely to achieve?
42. The Asia Pacific Partnership (APP) on
Clean Development and Climate is made up of seven countries: Australia,
US, China, India, Japan and South Korea and Canada (joined on
15 October 2007). The Partnership aims to "develop, deploy
and transfer cleaner, more efficient technologies and to meet
the national pollution reduction, energy security and climate
change concerns" of the Partners. The US has previously emphasised
that it sees the APP as an action-orientated "informal"
process designed to complement, not compete with, the UNFCCC.
Insomuch as it has the potential to advance discussions on technological
development in key sectors, the APP should be able to positively
contribute to the UNFCCC process, although there is little evidence
so far that the partnership will itself result in substantial
emissions reductions. It is certainly clear that, because of its
narrow focus on seven countries, the APP simply doesn't have the
capacity to rival the UNFCCC process in developing a future climate
change framework involving all countries.
43. In practice, Congress has not yet agreed
to US funding for the APP so it is unclear how it will develop
in the future. The focus has largely moved onto the Major Economies
(ME) meeting convened by the US, which met in September 2007 and
again at the end of January 2008. The Major Economies builds on
the approach taken by the APP. President Bush emphasised the need
to advance negotiations under the United Nations Framework Convention
on Climate Change at the first meeting, making it clear that the
ME would support the UNFCCC process. The UK agrees that the Major
Economies meetings can play an important role in supporting negotiations
under the Bali Action Plan by focusing on certain key areas that
can feed into the process, such as financing and technology development.
The recent second ME meeting went well, with commitments to make
progress on areas the UK supports such as a long term goal, technology
and sectoral approaches and finance. Discussions about how the
ME will be progressed in practice are ongoing.
Mechanisms
44. The UK Government believes a global
carbon market is an essential element of the future framework,
engaging public and crucially private finance in mitigation effort.
Our vision is to build a global carbon market based on a series
of linked trading schemes engaging private sector in mitigation.
For this to occur we need to see strengthening of existing, and
the evolution of, new carbon market mechanisms. We need to build
on experience with the EU ETS, and work with others on the development
of robust trading schemes. We also need to provide for a transition
from crediting to trading approaches in key sectors internationally,
providing options and incentives for broader participation. This
means the future framework should deliver improvement to the Clean
Development Mechanism, upscaling investment, and moving away from
a project by project approach to assessment of emissions reductions
towards a more comprehensive approach. We also need to explore
new instruments which could include options and incentives for
participation in trading and crediting in new mechanism based
on national sectoral targets. We recognise that the market cannot
deliver everything and will need complementary and supportive
policy frameworks to be successful.
8. How might mechanisms to tackle emissions
from deforestation be developed?
45. It may be possible to tackle emissions
from deforestation by building on the basis provided by the decisions
reached by the UNFCCC Conference of Parties in Bali and by using
the Forest Carbon Partnership Facility established by the World
Bank to gain experience by pilot schemes.
46. The Bali decisions on deforestation:
— provide rules for pilot projects
to incentivise reduced emissions from deforestation in developing
countries; and
— agree to include deforestation in
the agreement to be reached in 2009 on future action by developing
and developed countries to achieve the deep cuts in global emission
needed to tackle climate change.
47. The pilots will need to build capacity
for developing countries to plan policies for emissions reduction
and build the institutional capacity to monitor emissions relative
to an agreed reference level. During the Bali conference the World
Bank launched the Forest Carbon Partnership Facility which will
support capacity building in these areas and also test out how
best to incentivise emission reductions. A 2009 agreement could
either provide incentives from the carbon market or from bilateral
or multilateral funds. As discussed in the Stern Review, the carbon
market may be the most likely source given the magnitude of funding
required, but since reduced deforestation will introduce new credits
into the carbon market this would require sound monitoring and
an understanding of the relationship between supply and demand,
so as not to undermine the carbon price. The accounting rules
will need to assign long term responsibility for forest carbon
stocks so that emission reductions are not subsequently undermined.
8a. How can we ensure that such mechanisms
contribute to wider sustainable development aims?
48. By linking decisions on deforestation
under the UNFCCC to relevant provisions of other international
treaties and agreements, including the United Nations Forum on
Forests, the United Nations Convention to Combat Desertification
and the Convention on Biodiversity, so that the mechanisms developed
under the UNFCCC take these agreements into account. The Bali
decision on reducing emissions from deforestation makes this linkage
via the rules in the indicative guidance for pilot projects. More
generally, policies to support avoided deforestation generate
significant co-benefits, for example, for communities dependent
on forests and for biodiversity. Forest resources are among the
primary assets of the poor and creating a revenue stream that
allows them to conserve the forests and diversify their livelihoods
will help improve their income and well-being and support broader
sustainable development.
8b. Will such mechanisms deal with the need
to ensure the protection of indigenous people, land use rights
and governance?
49. Yes, through recognising (in the Bali
decision on reduced emissions from deforestation) that the needs
of local and indigenous communities need to be taken into account
when action is taken to reduce emissions from deforestation and
forest degradation, and through the rules and safeguards being
developed for pilots under the Charter of the World Bank's Forest
Carbon Partnership Facility (FCPF). Civil society, including representatives
from indigenous people's groups will have observer status for
the decision making body of the FCPF.
50. The FCPF should build on existing underpinning
work to bring forest carbon to market effectively in the long
run. This includes initiatives such as Forest Law Enforcement
and Governance (FLEG) and the EU Forest Law Enforcement, Governance
and Trade Action Plan (FLEGT) which DFID supports. These initiatives
can provide insights on legal clarity, tenure, stakeholder participation,
verification and monitoring for designing and implementing a REDD
mechanism.
8c. How might forest degradation be dealt
with?
51. By including emissions from forest degradation
with deforestation emissions, so that both are taken into account.
The Bali agreement already does this. The Intergovernmental Panel
on Climate Change has developed methodologies that allow monitoring
of the effects of forest degradation on total forest carbon stocks.
8d. Are additional mechanisms required to
enable the creation of carbon sinks?
52. Yes, as part of the broader consideration
of land-use, land use change and forestry issues under the UNFCCC
and the Kyoto Protocol. We have already agreed that sustainable
forest management and enhancement of forest carbon stocks needs
to be taken into account when addressing deforestation under the
Bali Action Plan.
9. Are the Clean Development and Joint Implementation
Mechanisms functioning effectively? How might they be improved?
How might they better be used in relation to forestry or other
land use emission reduction projects? Should CDM and JI projects
play a greater role in sustainable development more widely? To
what extent should credits such as those from the CDM and JI be
permitted to be used in emissions trading schemes, or contribute
to emissions reduction targets?
53. The Government supports continuing improvement
in the Clean Development Mechanism (CDM) and Joint Implementation
(JI). At the COP/MOP1 in Montreal, the UK led the EU in seeking
strengthening of the CDM and there have been significant signs
of progress in the past two years, both in terms of projects coming
through and the way in which the Executive Board is overseeing
things. There are over 900 registered CDM projects and a further
1900 in the pipeline (January 2008). It is true that there have
been criticisms of projects and the processes involved and there
is always room for improvement. Nevertheless the Government believes
the mechanism is essentially sound. We will continue to work within
existing international rules to ensure that the Board is effective
and its support structures are strengthened and improved so that
it focuses on delivery of projects and associated emission reductions
that are robust and environmentally sound.
54. We recognise that the Clean Development
Mechanism can be improved and will be looking to agree international
rules that deliver more robust and comprehensive approaches to
emissions reduction assessment. This could occur perhaps through
greater use of benchmarking, which though there are significant
challenges to its implementation, may provide an alternative to
the difficult process of project by project assessment of additionality.
We recognise how the mechanism might better deliver emissions
reductions at least cost and better address the development priorities
of developing countries; this may require more focused carbon
incentives, engaging both government, and public and private finance
in emission reduction efforts, through greater use of policy,
sector and programme approaches to CDM.
55. Joint Implementation is a newer mechanism,
not having benefited from the same early start as the CDM, but
good progress has been made since the Supervisory Committee was
established two years ago at COP/MOP1. The Government welcomes
the first determinations on projects. Projects can only deliver
credits from 2008, so we will have to wait to see more of how
this mechanism functions in practice.
56. We also need to consider how we can
build experience with trading, the CDM and JI and the ongoing
improvements we are making to their operation, to provide us with
a suitable set of mechanisms for the international framework post-2012.
This will inevitably involve a certain amount of continuity, as
we seek to improve the mechanisms we already have, and maintain
investment in the future and a certain amount of change, as we
develop new instruments designed to engaging and directing new
and higher levels of investment It will certainly be necessary
to scale up the level of our response to climate change including
through the mechanisms: carbon markets clearly have the potential
to help deliver substantial reductions, but to realise this may
mean moving in some cases away from a purely project approach,
to more programmatic and sectoral approaches. In considering the
future, we will need to ensure that all Parties can be engaged
appropriately, from the larger emitters through to the Least Developed
Countries.
57. CDM projects that cover land-use, land-use
change and forestry (LULUCF) are currently restricted to afforestation
and reforestation (A/R) project activities. To date there is only
one A/R project registered by the CDM executive Board. This is
due to many reasons, the main one being demand—CDM A/R projects
are currently excluded from the EU Emissions Trading Scheme (EU
ETS). The EU Commission have indicated that they will only consider
new credits for inclusion that are capable of meeting the current
standards of monitoring, recording and verification, but that
forestry and land use projects do not currently meet these standards.
These projects are also expensive and time consuming to set up
and this was reflected by Developing Countries Parties' submissions
to the UNFCCC ahead of COP/MOP3 in Bali. In Bali, Parties agreed
to raise the threshold for small scale A/R projects (which have
reduced administration fees) from 8 ktCO2e to 16ktCO2e
per year. The UK position is that credits from A/R require a robust
monitoring system, an understanding of the potential impact on
the EU ETS allowance price, and assurance that non-permanent credits
would not damage the environmental integrity of the scheme, before
they can be included in the EU ETS. It is not currently possible
to credit projects that seek to avoid deforestation as this is
not provided for within the scope of the Kyoto Protocol. The UK
recognises the importance of addressing this issue and is working
through the international climate negotiations for an agreement
on reducing emissions from deforestation for post-2012. In reviewing
our approach to the mechanisms we will need to consider how best
to address the LULUCF sector to ensure that appropriate consideration
can be given to projects that result in real, measurable and additional
emission reductions.
58. The project mechanisms explicitly provide
flexibility for countries in meeting their commitments under the
Kyoto Protocol, as does emissions trading. As such it makes sense
to allow use of credits not only by countries at national level
but also in emissions trading schemes, as has been provided for
under the EU Scheme. The current framework rightly recognises
though that this flexibility should be supplemental to domestic
action to mitigate climate change. The Government supports this
principle of supplementarity. The Government also believes that
developed countries should continue to take the lead in reducing
emissions post-2012 and that arrangements for use of mechanisms
should appropriately reflect this.
10. What action is the Government taking
to prepare for and accelerate the linking of the EU Emissions
Trading Scheme with other trading schemes? Is a new institutional
or regulatory framework required to enable their development and
coordination? How might schemes be linked where they have different
emission caps? Might the EU ETS be undermined by linking with
other schemes?
59. The Government has been working with
other governments at national, regional and state level to communicate
the lessons learned from design and implementation of the EU ETS
and the key considerations for designing linkable trading schemes.
The UK Government is a founding member of the International Carbon
Action Partnership, which is a grouping of 23 national and state
level governments committed to collaborating to develop emissions
trading schemes that are compatible, scaleable and linkable. Progressive
linking of trading schemes will provide the basis for moving towards
our aim of a global carbon market.
60. On 1 January 2008 the Norwegian Emissions
Trading Scheme joined the EU ETS. There are currently no other
mandatory greenhouse gas emissions trading schemes operating,
but the UK along with other Member States and the European Commission
are actively considering the measures necessary for inclusion
in the revised EU ETS Directive. We welcome the interest in emissions
trading that is shown by other countries who are setting up voluntary
trading schemes which we hope will develop into mandatory schemes.
There is growing interest in cap and trade in the US, as evidenced
initially by the voluntary Chicago Climate Exchange, but now more
valuably by the development of Regional Greenhouse Gas Initiative
(RGGI—starting in 2009), the California-based Western states
initiative, and other linked state-level schemes. Australia and
New Zealand are also now developing mandatory emissions trading.
However, we would only link with mandatory cap and trade schemes
in other developed countries. Before any arrangements are made
to link with other schemes the impact of linking will be assessed.
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