5 Securing an international climate
agreement
29. Established in 1992, the United Nations Framework
Convention on Climate Change (UNFCCC) supports 195 member states
to negotiate the best way to "stabilise greenhouse gas concentrations
in the atmosphere at a level that will prevent dangerous human
interference with the climate system".[113]
This is currently defined as "keeping global average temperatures
below 2°C".[114]
Niclas Svenningsen, from the UNFCCC Secretariat, said that it
"is the one place where we are able to bring together all
the voices of all parties in the world".[115]
Adopted in 1997, the UNFCCC's Kyoto Protocol promoted the use
of a top-down emissions trading system designed to help those
parties, who ratified the Protocol, to comply with their internationally
binding emissions reduction targets.[116]
The first commitment period ran from 2008 to 2012 and covered
55% of global emissions. 37 industrialised countries and the European
Community committed to reduce emissions by five percent against
1990 levels. The second commitment period runs from 2013 to 2020
but so far covers only 12% of global emissions. Parties committed
to reduce their emissions by at least 18 percent below 1990 levels.[117]
30. The Kyoto Protocol's first commitment period
achieved its modest goal of reducing emissions by five percent
and helped to build capacity in those participating countries
which implemented carbon markets and other low-carbon policies.[118]
However, it is unlikely to provide a model for future international
climate agreements. The Protocol has suffered setbacks. Canada
pulled out when it became clear that it would not achieve its
targets. In addition, Japan, New Zealand and Russia, officially
pulled out of the second commitment period. Sir David King was
candid about the Protocol's potential to act as a model for future
agreements:
The reality of the situation is that the Kyoto
proposal was a top-down mechanism attempting to put a global carbon
market in place. That has not reached consensual agreement and
we should not think that we can go back down such a route. In
other words, I do not believe it is even possible to include a
global regulatory process on carbon markets in what is agreed
in Paris.[119]
The UNFCCC Conference of the Parties (COP) 21, to
be held in Paris at the end of 2015, is potentially a very important
milestone in international climate change policy. It is at this
conference that parties will come together to try to reach a new
international climate agreement (the Agreement) to replace Kyoto
when it ends in 2020. The Government was clear that a successful
Agreement would need to keep global average temperatures below
2°C.[120]
31. While some top-down elements of the UNFCCC architecture
will probably continue, the main negotiations will proceed along
a new negotiation track, favoured by the US, which promotes a
more bottom-up approach.[121]
Countries will submit Intended Nationally Determined Contributions
(INDCs) based on what they think they are able to achieve. The
Secretary of State for Energy and Climate change, Edward Davey
MP, told us that these were unlikely to reach the ambition required
to achieve the 2°C target:
When we look at the INDCs that countries have
come forward with how close we are to the level of carbon emission
reductions needed to keep the world below the 2°C increase.
I predict that when we do that analysis and we aggregate the INDCs,
we will be well short of the carbon emissions needed to keep the
world below the 2° C limit, well short. We do need more action.
We need action before 2020, so-called pre-2020 mitigation, and
we need to see more countries coming forward with more ambitious
pledges.[122]
Nevertheless, developments such as the US-China joint
announcement, in November 2014, on climate change where for the
first time both countries made pledges to limit emissions give
cause for optimism that more ambitious pledges from other countries
will be forthcoming in future.[123]
32. A range of businesses and policymakers have argued
that the Agreement could and should facilitate the future development
of carbon pricing policies including emissions trading.[124]
At a joint International Emissions Trading Association (IETA)
and Harvard University event in New York, held one day before
the UN Climate Summit, David Hone said:
With the expected agreement in Paris almost certainly
based on an aggregation of independent national contributions
and approaches, linkage to create an eventual global carbon market
is the only way forward we will have to capture the clear economic
and environmental benefits that carbon pricing offers.[125]
Dirk Forrister added:
With more and more regions bringing in emissions
markets and other initiatives to tackle greenhouse gas emissions,
it is crucial that the Paris agreement establishes a framework
to bring these efforts together and make them count.[126]
33. Professor Stavins described how the UNFCCC negotiations
were actually moving towards a hybrid system which could benefit
carbon markets and future linking:
A diverse set of national negotiating teams seem
to be gravitating toward a hybrid system, with top-down elements
for establishing and reviewing targets, and bottom-up elements
of pledge-and-review tied to national policies and actions. The
growing network of decentralized, direct linkages among cap-and-trade
systems can become an important element of such an international
policy architecture.[127]
There was general support for this approach among
witnesses.[128] The
Parliamentary Under-Secretary of State, said this approach was
"compelling".[129]
Mr Svenningsen described it as the "holy grail".[130]
He went on to explain:
Having the minimum standards top-down is very,
very helpful. But then also to strive for a very high level of
flexibility for each party to first of all decide if they want
to be part of these emissions trading schemes and adhere to these
standards, and to operate the different emissions trading schemes
and tools according to their own preferences.[131]
34. Professor Stavins suggested that linking emissions
trading systems would enable cost effective action to tackle climate
change. The more cost effective it is for countries to meet their
commitments the more ambitious they are likely to be. Linking
emissions trading systems, he argued, was one of the best ways
to increase cost effective emission reductions.[132]
As a minimum, Mr Hone argued, the Agreement should "provide
some tools to allow longer term linkage and growth of carbon markets
to take place and ideally to catalyse that type of activity and
see it accelerate".[133]
Professor Stavins said that if there was an Agreement then "it
is very feasible to get some language into the agreement that
facilitates linkage and does not obstruct it".[134]
He argued that provisions for linking only needed to be "very
brief" and "nothing more than a paragraph that would
make it clear that such activities are within the framework".[135]
The detail can then be worked out in subsequent meetings.[136]
The Government said it expected the Agreement to be clear about
the use of market mechanisms.[137]
35. Even though the role of the UNFCCC in facilitating
carbon markets and linking is likely to be limited under the bottom-up
or hybrid approach, there are still a number of critical things
it could do to facilitate progress towards a global carbon market.[138]
These include allowing parties to meet their INDCs by transferring
parts of their contributions to other parties and financing emissions
reduction activities in other countries.[139]
It could also play a critical role in providing basic standards
including monitoring, reporting and verification, so that allowances
are bought and sold in a transparent way and there is no prospect
of double counting.[140]
The UNFCCC's Framework for Various Approaches (FVA) could be key.[141]
Mr Svenningsen said that the FVA was understood to be:
A set of rules and guidelines, an umbrella, that
would allow linking of Emissions Trading Schemes and the use of
different kinds of market-based tools that result in the transfer
of offsets across borders, to be recognised under UNFCCC.[142]
The FVA could help facilitate the linking of emissions
trading systems because it would provide the criteria needed to
verify reductions between systems.[143]
36. We heard that there were some fundamental things
that the Agreement should avoid. The Agreement should not include,
for example, a requirement that parties could only meet their
INDCs through domestic action. This would inhibit the future linking
of emissions trading systems.[144]
Some countries would be keen to see this included.[145]
The Secretary of State was confident that it was highly unlikely
that it would be included in the final text of the Agreement.[146]
37. In the past the UK, alongside the EU, has played
a key role in international climate negotiations.[147]
In its September 2014 report, Paris 2015: Securing our prosperity
through a global climate change agreement, the Government
outlined its vision of a successful agreement which included promoting
the use of carbon markets.[148]
The Parliamentary Under-Secretary of State, said "carbon
pricing is considered absolutely key to delivering on success".[149]
In a similar vein the Secretary of State said "the key for
carbon markets is that […] they are seen as a way of enabling
people to meet their emissions reductions targets".[150]
38. The Government's focus in Paris at the end
of 2015 will rightly be on securing a global climate agreement
which will keep global average temperatures below 2°C. Carbon
markets and emissions trading systems can play an important role
in helping countries achieve their commitments in an efficient
and cost effective way. We recommend, therefore, that the Government
ensure the Agreement promotes use of carbon markets and facilitates
the future linking of emission trading systems. It should also
ensure that provisions which will preclude the future development
of carbon markets are actively avoided.
113 LTS 013 (UNFCCC) Back
114
As above Back
115
Q127 (Mr Svenningsen) Back
116
As above Back
117
World Bank Group, State and trends of carbon pricing (2014), Washington
DC, p14, UNFCCC, 'Kyoto Protocol,' accessed on 10 February 2015 Back
118
Q127 (Mr Svenningsen) Back
119
Q118 (Sir David) Back
120
Q117 (Sir David), Q201 (Ms Rudd) Back
121
Q120 (Sir David) Back
122
Oral evidence taken on 7 January 2015, HC (2014-15) 667, Q10 (Mr
Davey) Back
123
"U.S.-China Joint Announcement on Climate Change",
The White House press release, 11 November 2014 Back
124
Q138 (Mr Svenningsen), Q174 (Mr Hone), Q188 (Mr Meadows), LTS
009 (EDF Energy) Back
125
"IETA brings policy makers, business together in support
of carbon pricing", IETA press release, 22 September
2014 Back
126
"IETA brings policy makers, business together in support
of carbon pricing", IETA press release, 22 September
2014 Back
127
LTS 001 (Robert N Stavins) Back
128
Q11 (Mr Forrister), Q190 (Mr Meadows) Back
129
Q208 (Ms Rudd) Back
130
Q139 (Mr Svenningsen) Back
131
Q139 (Mr Svenningsen) Back
132
Q77 (Professor Stavins), LTS 016 (IETA) Back
133
Q19 (Mr Forrister), Q174 (Mr Hone) Back
134
Q86 (Professor Stavins) Back
135
Q83 (Professor Stavins) Back
136
Q59 (Mr Austin), Qq83-84 (Professor Stavins), Oral evidence taken
on 7 January 2015, HC (2014-15) 667, Qq39-41 (Mr Betts, Mr Lyon) Back
137
Q204 (Mr Lyon) Back
138
Q52 (Mr Austin), Qq119-122 (Sir David) Back
139
Q80 (Professor Stavins), Qq175-176 (Mr Hone) Back
140
Q16-20 (Mr Forrister), Qq72-91 (Professor Stavins), Q144 (Mr Svenningsen),
Oral evidence taken on 7 January 2015, HC (2014-15) 667, Qq39
(Mr Davey) Back
141
Q134 (Mr Forrister), LTS 013 (UNFCCC), LTS 016 (IETA) Back
142
Q!31 (Mr Svenningsen) Back
143
Qq135-137 (Mr Svenningsen) Back
144
Q78 (Professor Stavins), Q177 (Mr Hone), Q210 (Rudd), Oral evidence
taken on 7 January 2015, HC (2014-15) 667, Q43 (Mr Davey, Mr Betts) Back
145
Q78 (Professor Stavins) Back
146
Oral evidence taken on 7 January 2015, HC (2014-15) 667, Q44 (Mr
Davey) Back
147
Q110 (Sir David) Back
148
HM Government, Paris 2015: Securing our prosperity through a global climate change agreement
(September 2014), p50 Back
149
Qq203-207 (Ms Rudd), LTS 005 (DECC), LTS 015 (City of London Corporation) Back
150
Oral evidence taken on 7 January 2015, HC (2014-15) 667, Q39 (Mr
Davey) Back
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