Blog UN climate change negotiations Bonn June 2010

Day 8: 09 June - The not so beautiful game

We will sorely miss Yvo de Boer, not least for his bold and varied choice of climate change metaphors. At Copenhagen in December, Yvo compared the necessary international agreement to a cake that negotiators must carefully assemble and bake. This Wednesday, his final day as Secretariat to the UNFCCC, he gave us the beautiful game: "we got a yellow card in Copenhagen and the referee’s hand will edge towards the red one if we fail to deliver in Cancun and beyond." He exited to a standing ovation.

Yvo's farewell speech was the main event in Bonn on Wednesday but, like any other day at the UNFCCC negotiations, discussions in the plenaries amongst delegates were riven by deep dividing lines.

Today, in the final SBSTA meeting, the G77 countries could not project a harmonious worldview. Barbados refused to accept the proposed paper on the Scientific, Technological and Socio-economic aspects of mitigating climate change. The LDCs, AOSIS, the EU and others proposed, by way of compromise, to ask the Secretariat for a technical paper setting out options limiting a global increase in temperature to 1.5°C and to 2°C. However an alliance of oil-producing states - Saudi Arabia, Kuwait, Venezuela and Qatar - could not accept this solution unless the technical paper also contained an analysis of pledges, spillover effects and response measures. To make matters more fractious, Bolivia then called for the mooted paper to also analyse the 1°C target. Following much discussion and after suspension of the plenary for two sets of informal consultations, the plenary was finally suspended for the day. Looks like we may be waiting for Yvo's promised cake for a while longer!

Another controversial topic today was land-use accounting rules. Figures released by the UNFCCC today show that if new Land Use and Land Use Change and Forestry (LULUCF) accounting rule proposals are accepted, Annex 1 countries would be able to increase their level of net emissions by 4%-8% on 1990 levels, by 2017. Ambassador Pablo Solon of Bolivia formally submitted Bolivia's analysis of these rules with the UN secretariat, showing how the different Annex 1 countries will benefit from these rules. There is more than one LULUCF accounting proposal under discussion. One plan is for a "forward looking baseline" for Annex 1 Parties. An Annex 1 country would decide how its land-use carbon emission or absorption would be likely to change in future, and then to measure actual performance against that baseline. A further proposal from Russia intends that countries would not have to count emissions due to LULUCF, eg. emissions due to tree felling or conversion to agriculture, against their targets until land-use changes across the entire country resulted in net emissions. We will be watching this space.

In the LCA Chair's briefing to Civil Society on Wednesday, it was indicated that confidence is being rebuilt in the negotiating process and people are still seeking a "comprehensive" outcome from this year's negotiations in Cancun, although this would be an ambitious target. A number of "tricky" questions were raised, including in relation to linkages between the AWG-LCA and AWG-KP. Separately, it seems that negotiations in the AWG-KP at the next will bundle a number of issues together, including mechanisms, carry over of AAUs and targets, in order to try to move forwards. In respect of moving some issues ahead of the pack, opinion remains divided as to the acceptability of this approach.

Day 7: 08 June - Talking about mitigation

NAMAs

We have blogged previously about the issues facing nationally appropriate mitigation actions (NAMAs) in the international negotiations (see our NAMAs cheat sheet). A side event yesterday highlighted a number of familiar issues, including the EU’s strategy that developing countries begin by defining a low carbon development strategy, followed by implementation of a financing strategy and then the definition of concrete NAMAs (i.e. what developing countries will actually do to reduce emissions, such as implementation of buildings efficiency regimes, biofules regimes, broader use of renewables, etc.). The presentation also highlighted the three main currently envisaged kinds of NAMAs:

• Autonomous/self financed actions (such as those that are already being put in place in many developing countries)
• Supported actions (which under the Copenhagen Accord are intended to be subject to international MRV )
• NAMAs financed by the carbon market (as yet the mechanism for this to occur is not clear)

It was then pointed out that though many countries have submitted NAMAs to the back end of the Copenhagen Accord, these are frequently very vague and often do not specify emission reductions or specific technologies. It was therefore very interesting to learn how Colombia is already building its NAMAs implementation.

Thankfully, it was acknowledged that the interaction of NAMAs and carbon markets is essential (not that any further details were provided on this point). Further, funding will be very important to ensure the continuity of NAMA implementation.

In general, some of the key issues that are faced by developing countries are:

• Developing institutional arrangements for NAMA implementation in different Ministries / bringing them together
• Ensuring that all Ministries understand what NAMAs are
• Facing up to the challenge of MRV
• Ensuring that NAMAs are appropriate to a country’s specific needs and not of a very general nature
• Finding the money to do all this

As such Colombia has been adopting a number of approaches:

• Building marginal abatement cost curves to inform its NAMAs
• Taking account of existing low-carbon activities in the country
• Carrying out a cross-sectoral benefits analysis (focusing on the residential, commercial and industrial sectors)
• Looking for finance
• All of which will be followed by the NAMA implementation phase

Some kind of adjudication mechanism will be essential in order to determine whether a nama is a NAMA within the international rules and eligible for finance, though it is not yet clear how a registry will work to implement this and what MRV mechanism will be applied.

Overall it was exciting to learn how seriously NAMAs are being taken forward as a mitigation mechanism, though it is clear how easily some of the potential progress could come grinding to a halt in the absence of further (and rapid) progress in the international negotiations.

Carbon Capture and Storage

Many people were disappointed that the outcome of Copenhagen was not more positive in respect of carbon capture and storage (CCS), particularly in view of the importance that many, including the IEA , place on CCS in the global efforts to combat climate change.

A side event at which DNV took centre stage discussed DNV’s guidelines on CCS transport and storage, which are expected to be reflected in the European Commission’s eagerly awaited CCS guidelines in respect of CCS in the EU . (Outside of the Bonn talks, yesterday the Commission released guidelines to ensure that emissions from CCS will be monitored consistently across Europe in respect of the inclusion of CCS in the EU ETS . Monitoring and reporting guidelines provide a methodology for quantifying emissions from each stage of the CCS chain. The Commission guidelines amend legislation which sets out the monitoring and reporting requirements for all installations under the ETS).

DNV highlighted some of the differences between transportation of natural gas and CO2 transport. These include:

• There is significantly less experience with CO2 transport than natural gas
• The nature of CO2 currently transported in the US in an extensive network of pipelines will be different to that resulting from power stations
• Pipelines in the US are mainly in relatively remote areas
• CO2 will be transported at higher pressures than natural gas and is very heavy (heavier than air)
• Dense CO2 can damage gaskets and seals made out of polymers

DNV has therefore launched guidelines on CO2 pipeline transportation, providing guidance on safe, reliable and cost-efficient design, construction and operation of CO2 pipelines. The second phase of their work will be to close knowledge gaps through further research and development.

The DNV CO2Qualstore guidelines address a number of issues with the storage element of CCS, setting out a transparent basis for deciding how much to reduce risks. They are designed to be a substitute where there are no CCS regulations, which could be very significant in the context of developing countries. They support a number of existing regimes such as the EU’s CCS Directive, OSPAR , etc.

AGF

During the last session we blogged about the creation of the High-Level Advisory Group on Climate Change Financing (or AGF), which is to consider how to ramp up finance to the USD 100 billion referenced in the Copenhagen Accord (see earlier blogs), but which is absolutely and categorically NOT the High Level Panel referenced in the Copenhagen Accord.

8 working groups of the AGF have been established and include:

Public Sources:

• Carbon market public revenues
• Revenue from international transport (levy being discussed)
• Other carbon related sources (carbon taxation)
• Role of multilateral organisations (e.g. Special Drawing Rights)
• International financial transaction tax
• Direct budget contributions

Private Sources:

• Using public finance to leverage private investment/finance
• Carbon markets

At the last session it appeared as if some high-profile delegations were completely unaware of the mission of the AGF and were asking basic questions about its remit. During yesterday’s presentation it became clear that it will be difficult for the AGF to shake off its association with the Copenhagen Accord, with delegations linking it to the Accord and as such questioning the AGF’s legitimacy. Representatives of the AGF were at pains to point out that the AGF was an advisory body and that it does not address political issues. Gordon Brown’s loss of office has been reflected in the membership of the AGF (of which he was previously a member).

Day 6: 07 June - It's report time - MRV and finance

MRV (AWG-LCA)

In a continuation of discussions on measurement, reporting and verification (MRV) of emissions reductions, the Chair posed three questions. These were:

• What subjects or topics should be covered by developed country Parties in their ‘reporting’ within the overall MRV framework?
• How frequently should specific topics or subjects be reported?
• What should be the form or format of reporting?

The EU suggested that a discussion was required about a much broader range of issues (11 in total), including a consideration of the extent to which LULUCF could contribute to targets (see again below), the ability to use market mechanisms to achieve emissions reduction targets, inventories and inventory systems, and a compliance system.

A number of countries, including Spain (EU) and Switzerland requested that the Secretariat compile information on developed country pledges (as has been done in the AWG-KP). The EU also sought that information was gathered on developing country pledges.

China said that the rules on MRV under the Kyoto Protocol should apply to the US, and that there was no need for a new MRV framework or institutions. This seems a step away from the Copenhagen Accord’s acclaimed breakthrough approach to MRV (but is perhaps consistent with the Accord contemplating only domestic MRV of developing country emission reductions, unless they are supported by climate finance).

The US seeks full “national communications” in respect of developed countries every four years with updates on targets every two years. These should contain information on finance, adaptation and capacity building in developing countries. The US also called for reporting by developing countries on mitigation actions (every two years).

AOSIS was not the only country to raise concerns that there should be a robust regime for LULUCF and offsets. Many countries called for the use of standardised formats for national communications (see below in relation to reporting on finance).

Brazil also called for a strong compliance mechanism. It should be remembered that the Kyoto Protocol has one of the most robust international compliance mechanisms at international law (though one that currently requires a second commitment period to be negotiated in order for it to have full effect). The UNFCCC contains no equivalent mechanism. In this regard, the Philippines stated that MRV is meaningless without compliance and Bolivia highlighted that financial penalties or target adjustments are required for non-compliance countries (though did not refer to the current mechanism which prevents credits being sold (markets again!) where a country is non-compliant). Like China, Brazil is keen to continue the separation between the obligations of developed and developing countries in respect of both mitigation and MRV.

Emission Reductions (AWG-KP)

A number of spin-off groups have been established, including in relation to LULUCF. The parties were invited to consider:

• How LULUCF can help bridge the gap between Annex I parties’ targets and what the science requires
• The contribution of LULUCF to meeting parties’ targets
• The limits that should be imposed on this
• What additional information is required for an agreement to be reached

Micronesia highlighted the importance for LULUCF not to reduce levels of ambition of targets. Issues discussed in relation to LULUCF included:

• The impact on targets of using different mechanisms to calculate emissions.
• The difficulties of agreeing a model that does not create arbitrary distributions of credits, particularly in relation to forest management.
• Whether a cap on the use of LULUCF should be envisaged.

Many countries underlined the importance of LULUCF for their targets, including Russia and Australia. Some highlighted the importance of agreeing the rules before the targets were set.

On the side - Guidelines for finance reporting

The WRI has been doing a lot of work on guidelines for reporting information on climate finance. This was discussed yesterday at a WRI side event. In a recent WRI Working Paper, a number of issues are addressed:

• What kind of financial data is reported and how is it collected by the UNFCCC? What are the limitations of existing data collection systems?
• What options exist to improve reporting and what would a reporting system that can satisfy a broad set of user needs look like?
• What are the potential operational questions and implications for review of improved reporting systems?

The key recommendations of the Working Paper are that:

• Parties should make significant operational improvements by adopting a standardised financial reporting format.
• Parties should consider implementing a more robust process to review reported data.
• A revised reporting system will likely require the redesign of existing databases and search engines.
• The introduction of a revised/new reporting system will take time to implement so draft guidelines for reporting financial information should be adopted as soon as possible.

Some of the key issues in this area are that whereas developed countries want assurances that developing counties are implementing emission reduction actions, conversely, developing countries will want to be able to keep track of pledges made by developed countries. At the moment this is very difficult to accomplish. For example, systems cannot tell whether finance is new and additional.

Whilst the focus of the WRI Working Paper has been tracking public financing, it will also be interesting to consider what kind of tracking should be available in relation to private sector finance (which is likely to represent a majority of climate change finance) going forwards. This might be particularly relevant in the case of finance delivered in respect of new market mechanisms. During this session the importance of no “double counting” of offsets and finance has been raised again and again. It will be difficult to manage this without detailed information being made available on the finance behind new mechanisms, but who should such information be made available by and to? Private entities are likely to be wary of large amounts of commercially sensitive information being made available. On the other hand it will be in the interests of all parties to ensure that finance is matched by a return in credits/offests resulting from emissions reductions.

Day 4/5: 05 June - Here come the markets

The carbon markets have taken a bit of a battering in the recent international negotiations, with the Copenhagen Accord providing little solace and a seeming outpouring of anti-markets sentiment in the latter half of 2009. Little progress was made in relation to addressing the question of what market mechanisms would be available to achieve some key goals:

• Allowing industrialised countries to adopt more stringent emissions reduction goals, safe in the knowledge that some of the work can be done “offshore”
• Getting finance flowing to developing countries and low carbon technologies
• Leveraging public finance
• Providing a stable regulatory environment for financing of low carbon investments

A failure to address these matters, though perhaps an easier negotiating strategy in the short term (when so many other controversial issues are up in the air) merely delays the inevitable (unless governments find huge amounts of cash and are minded to start to write blank cheques (unlikely).

So three cheers for the following questions posed by the AWG-LCA Chair in this regard on Saturday, 5 June 2010:

1. How can opportunities to use markets complement public sources of support for mitigation in developing countries and what instruments would be needed to leverage and channel flows of private finance and investment?
2. Is there a need for new market-based mechanisms to provide a framework for activities that are implemented jointly by Parties and, if so, what should be their specific role and should they to some extent generate offset credits?
3. What principles should regulate market-based mechanisms?

These questions - potentially explosive - lead to an interesting discussion of some of these key issues (though we are talking high-level and not details at this stage). Particularly exciting was the support expressed generally for market mechanisms by a number of Central and South American countries. Many parties supported the establishment of a specific group to consider this issue.

AOSIS highlighted the importance of both market-based and non-marked based approaches. The importance of MRV in relation to market mechanisms was also highlighted, along with the traditional refrain that reduction targets must be primarily achieved by domestic means (as opposed simply to buying in offsets from developing countries).

The connection between markets and finance “pledges” was highlighted by the EU and US, and the US highlighted the role of makets in the context of the Copenhagen Accord’s promised “mobilisation” of US$100 billion / annum financing in the Copenhagen Accord. The EU noted that the EU Emissions Trading Scheme will accept credits beyond 2012. The EU and US also pointed to the importance of new market mechanisms that operate at larger scales. However, the details of these proposals and their implementation will require a lot of work before such mechanisms become attractive to private finance.

The Russian delegation, which in some ways seems to have found a new voice in 2010, stressed the importance of the Kyoto Protocol’s mechanisms and that the related units must continue. This ties in with a number of Russia’s objectives, including that it will have a large supply of surplus AAUs from the first Kyoto Protocol commitment period which could be difficult to monetise if an alternative approach was adopted. Further, JI, which has a more precarious future in the absence of an international accounting architecture, could represent an interesting source of revenue and investment for Russia (though until now it has struggled to get off the ground).

Norway called for consistency in relation to discussions on market mechanisms between the AWG-KP and AWG-LCA. This represents another mini challenge to the traditional divide under which CDM and JI are discussed in the AWG-KP and “new” mechanisms are discussed in the AWG-KP. The reality is that this distinction requires to be blurred for an effective, all-encompassing discussion of these matters.

Bolivia, a bastion of anti-market sentiment last year (I remember something about the “colonisation of the atmosphere” but that may not have been Boliva), urged for a careful analysis of market mechanisms and was adamant that markets will not solve the climate change problem. This blogger understands that markets are not a panacea, but if the markets won’t do the work, what will? After so much work and successful investment, should they simply be written off? Our view is that this would be a significant backwards step.

China, repeating a familiar but important refrain, warned that the use of markets could lead to “double counting”. This could mean that each tonne of carbon saved could be used to fulfil developed countries’ financial commitments as well as generate offsets. However, this issue should not necessarily be seen as one that prevents progress with markets, but an interesting “governance” issue that will be essential to be addressed. China, a bastion (and major focus of) the CDM, is not alone in being sceptical about the implementation of new market mechanisms (despite a significant amount of exciting work being done on cap and trade in China, complimenting China’s wide-reaching climate policy). Overcoming this scepticism among leading developing economies will be a major challenge for the implementation of such new mechanisms, which will be dependant on significant host state involvement.

If this all seems encouraging, then let’s wait for some more substantive discussions, Anyone who remembers last year’s difficulties in explaining and addressing these issues (and the multiple proposals on the table) at the later Bonn session last year and again in Bangkok will not expect an easy ride. And please don’t forget about the importance of the continuity of the CDM, which is all we really have in the way of international markets at the moment!

Day 3: 03 June - Show me the numbers!

Concerns over the innumeracy of a number of Parties have been expressed for a long time. This was exacerbated when targets were piled into the back of the Copenhagen Accord. Whilst the Accord references the “scientific view that the increase in global temperature should be below 2 degrees Celsius”, the submitted targets are widely suspected not to add up to a 2 degrees Celsius future.

Whether or not this is actually the case is further complicated by a sense that one Party’s target may not be added up in the same manner as another’s. This leads to the possibility of the duplicitous using a system that is self-serving, a central reason for the requirement for a robust international agreement that measures emissions reductions in a unified manner. A “tonne” has never been a “ton”. But to further muddy the waters, what base year is being referred to, how are “sinks” taken into account, which guidance has been applied in making the relevant calculations….? AOSIS, a die-hard number cruncher, is particularly adept at spotting a mathematical wheeze when it sees one.

Unfortunately for some, the importance of doing the math has not disappeared. Interestingly though, this is an area where there does appear to be movement among the Parties. The traditional domain of discussions around targets has been the AWG-KP. Parties that do not have emission reduction targets have been wary of such discussions infiltrating the AWG-LCA, partly for fear of being given a target (however badly added up) themselves.

It appears however to be increasingly recognised that a bridge requires to be built between the AWG-KP and AWG-LCA in this area. Yesterday (Thursday), Barbados, for AOSIS suggested that the Parties investigate the possibility of a “common space” to discuss this issue (emphasising that discussions should be in relation to the ambition of Annex I (developed country) targets and that, in general, the AWG-KP / AWG-LCA division should be maintained). This proposal appeared to be accepted by Colombia. Earlier in the week, China suggested that targets should be annexed to the AWG-LCA Chair’s text.

In partial response to this suggestion, the US underlined that provisions on measurement, reporting and verification (MRV) were essential and that MRV for Annex I countries must be considered alongside consultation and analysis for non-Annex I (developing) countries. The US also emphasized the targets put down before and after Copenhagen, and highlighted the goal of limiting temperature increases to 2°C (another C in maths is potentially on the cards). Later in the day we understand that the US stated that they would oppose any effort to discuss their emission reductions in the context of Annex I emission reductions under the Kyoto Protocol.

So after the money (discussed in earlier blogs), the maths.

Day 2: 02 June - Let’s get going / Show me the money

Getting going

Yesterday (Tuesday) marked the opening of the AWG-LCA and AWG-KP . Several contact groups also convened including on technology transfer, non-Annex I national communications and “other issues” under the AWG-KP.

AWG-KP

The G-77 expressed the traditional concerns about slow progress with negotiations on the scale of developed countries’ (Annex I parties’) emission reductions pledges. This brought back memories of earlier this year when the Russian delegate more or less said that the targets were now on the table, bringing effectively to an end useful negotiations under the AWG-KP.

The EU focused on the environmental integrity of the outcome in Cancún (December 2010) and was not the first delegation recently to suggest that more cross-over between the AWG-KP and AWG-LCA is required.

Australia, for the Umbrella Group and Belarus, stressed the importance of all mitigation commitments in the Accord and working in tandem with the AWG-LCA. This followed an intervention by the African Group stressing the importance of the Kyoto Protocol.

Singapore also stressed the importance of identifying the shortfall of developed country parties’ pledges contained in the Copenhagen Accord.

Much of this constituted familiar ground!

AWG-LCA
As mentioned in yesterday’s blog, one of the hot topics is reactions to the AWG-LCA Chair’s new draft text. Overall the text does not appear to have caused outrage!

The Chair drew attention to the fact that finance has been integrated throughout the document. See more below!

China suggested that emission reduction commitments by developed countries should be referenced in the text and that the requirement that additional funding should not come with strings attached or conditions (is MRV such a condition? We’d assume so! Where does this leave the MRV balancing act set out in the Accord?).

The US stated that its April submission was not reflected in the text. The delegate (as in Bonn in April) highlighted the political guidance and trade-offs made in Copenhagen. The importance (or otherwise) of the Accord and its ramifications will clearly echo throughout 2010, if not beyond. In relation to a legally-binding outcome this should be “symmetrical with the same elements binding on all countries apart from leased developed countries.” Again, where does this leave the differentiated MRV requirements set out in the Accord?

Japan and Norway were also broadly supportive of the political guidance / basis provided by the Accord. Norway did highlight some obvious black holes in the Accord such as market-based mechanisms and shipping and aviation.

So much for round one!

Money troubles

At the heart of the question of climate change and our response to it is money (very large amounts of money indeed). The amounts involved are utterly staggering. The difficulties in mobilising such levels of finance and how it is deployed is perhaps at the heart of the current stalemate and perpetual motion/perpetual inertia machine that is the international climate negotiations (see yesterday’s blog).

The IEA 's World Energy Outlook (WEO) 2009 estimates that to put us on a trajectory to 2 degrees centigrade (the 450 ppm pathway), additional investment of $10.5 trillion is needed globally in the energy sector in the period 2010-2030. In Copenhagen, Governments committed to US$ 30 billion by 2012 and to mobilise US$100 billion a year from 2013 to 2020 from a range of sources including the private sector. In relative terms, this is a drop in the ocean.

We know that Government budgets are tremendously constrained. But capital does exist in the private sector, largely in assets under management, such as pension funds. However, fund managers are very risk averse. They have to be. The future financial security of millions of people in retirement depends upon them being so. So the fundamental question that many people are now starting to grapple with is how can you make climate-friendly investments suitably attractive (read low risk and capable of providing stable income streams long term) so that asset managers will deploy these trillions to combat the causes of climate change? Can the relatively modest amounts proposed in the Copenhagen Accord be used to create the environment within which this could happen?

Back to Bonn - Key questions

Finance and how it will be provided, structured and managed is one of the key issues under discussion here in Bonn. It is at the heart of the LCA discussions. The LCA Chair, Margaret Mukahama-Sangarwe (Zimbabwe) opened discussions by setting out an indicative list of questions:

• How to ensure new, additional, predictable and adequate financing to support enhanced action in developing countries?
• What should be the relationship between the financial mechanism and the proposed institutional arrangements for adaptation, technology, capacity building and mitigation?
• Should the facilitation for enhanced provision of financial support be performed by a finance board or by the proposed bodies for mitigation, adaptation, technology development and transfer and capacity building?
• How would the matching of action and support work?
• Should the proposed registry mechanism be housed under the financial mechanism or should it be a stand alone mechanism? How would it work?
• How to ensure coherence in policy recommendations of the finance board and thematic institutional arrangements related to issues of financing?
• What should the relationship of a new climate fund be with existing institutional arrangements under the financial mechanism?
• How can governance of the financial mechanism be made equitable and balanced?

The Chair is to be congratulated for this approach, under which clear questions frame and facilitate the discussions. And she was expert and elegant in her management of the discussion. Typical of how she managed the proceedings was her response to one intervention where she made clear that she did not want to hear polarised positions, but wanted to hear constructive suggestions on how to bridge key differences.

But are they the right questions?

But we should also ask if these are the right questions and indeed if they are being addressed to the right audience. Surely one of the key questions is how do you create the right policy and regulatory framework to ensure the re-deployment of US$ trillions under management to climate mitigation or clean energy? Related to this is how do you spend the (by comparison relatively paltry) US$30 billion fast start and US$100 billion a year to create this lower risk environment for such investment? Those who should have been in the room to answer these questions are the fund managers who make these investment decisions. But these questions were not posed and as far as this blogger knows these fund managers were not in the room.

Instead there were arguments over who should control this money, new institutions and inevitable bureaucracies these would entail, green funds and which MDB should control this, thematic windows (ask me later!) and MRV rules to monitor how the money is spent. The US and EU at least mentioned the role and representation of the private sector in this process. Bolivia did not seem to agree, said markets could not be relied upon and seemed to envisage finance would all be administered through the UN. Venezuela added helpfully that it was not about the amount of money but about governance.

Many Parties pointed out the need for coordination to avoid chaotic and indiscriminate deployment of public funds by individual countries. From what we are hearing on the ground this may be a case of closing the stable door after the horse has bolted, at least in regard to fast start funds.

One cannot help wondering if many of these discussions amount to building castles in the air. There is an existing world of finance. It has the funds. It will be an incredibly difficult uphill battle to mobilise these to tackle the causes of climate change. But the key people who can help to define the questions and answers needed to create the framework to mobilise these funds are those who control them. It seems unlikely that the creation of new institutions and resultant barriers to accessing such funds will achieve the end goal.

Carbon Expo Side Event

Norton Rose hosted a side event at Carbon Expo on this very issue, which included a presentation by Murray Ward of GtripleC (860KB pdf).

Day 1: 01 June - The King is Dead, Long Live the Queen

Here we are again…

Here we are again, at the Maritim Hotel, Bonn Germany. Another SBSTA, the 32nd SBSTA to be precise. You only have to read the Facebook postings of many international climate change negotiators to observe with what disdain the Maritim Hotel is held amongst this community. Yet here they are again.

For this blogger, as amongst many, there is a feeling of horrible deja vue sitting here in the mock bedoin tent in the hotel lobby. This international climate change process seems to have achieved the scientific impossibility of creating at the same time a perpetual motion machine dedicated to perpetual inertia. How is this so? Despite the chaos and fallout in Copenhagen with the World watching, the machinery of international climate negotiations continues to turn, setting dates for meetings and moving hundreds, if not thousands of negotiators around the globe to meetings where there is not clear objective or end game. Many negotiators and observers we have spoken to here are unclear as to the purpose, agenda or objective of this two week session.

One official commented that during this first week people were trying to find their feet after the chaos of Copenhagen. He went on to comment that it would be an achievement if there was agreement on which texts should be the basis of negotiations. Yet again more emphasis and brain cells seem to be directed towards sorting out process rather than substance.

The negotiations are still divided along two tracks, the KP and the LCA. As many of us who have followed this process closely since Bali have observed. It was this split which created many of the tensions which led to failure in Copenhagen. Yet there does not seem to be any obvious recognition of this or sign that this might be remedied anytime soon.

However there are substantive issues under discussion. For example CDM standardised baselines have been sent to informals. Views are split on the significance of this. Some believe that something sent from CMP to SBSTA is a very disappointing sign that the issue has effectively been parked. But one official closely associated with this process disagreed and felt that there was real momentum building from various quarters to do something on standardised baselines.

However, this has to be seen against the same old “cold war” politics with the same weary tit for tat arguments between Saudi Arabia and Brazil over CDM. Saudi objected to the inclusion of Reforestation under CDM, Brazil responded by threatening to object to CCS in CDM (retrospectively) - for anyone who attended CoP 14 in Poznan, Bonn, Bangkok, Barcelona and finally CoP 15 in Copenhagen this will be all too depressingly familiar. Although the Saudis demonstrated that they have their priorities clear when they argued that there should be no business intervention due to time constraints - they were concerned about time overruns impacting upon delegates, ability to watch the world cup.......

But after all the logistical issues in Copenhagen and the negative impact upon the ability of many stakeholders to input into the process, the UNFCCC Secretariat have responded by establishing a new unit to manage stakeholder interactions, called Organisation and Stakeholder Development (OSD) under Conor Barry. It has a mandate to manage across the board engagement with stakeholders. Presumably this includes business and is intended to lead to a more systematic engagement with the private sector who will be required to fund much of the transition to a low carbon economy.

One of the key questions for the private sector, which is expected to do a great deal of the grunt work in relation to unlocking the funds needed to adapt to and mitigate climate change, has been the shape of post-2012 mechanisms for confronting this issue. A number of proposals have been on the table around new, sectoral mechanisms and improvements to the CDM. Others are focusing on the role of institutional investors. With a few exceptions resulting from text agreed at Copenhagen, little headway has been made.

But discussions in the fringes and sidebars around carbon accounting point to the difficulties of getting agreement to progress in a consensus driven process. Who gets the benefit of emissions reductions achieved through these new mechanisms? The host country, those countries or investors funding the investment required? How do you account for this? Of course carbon market aficionados might argue we already have an international system of carbon accounting up to the job, i.e. AAUs and national registries. But key players such as the US object to this system and want a new system of MRV and carbon accounting. Yet if a tonne is a tonne is a tonne and you want to avoid double counting where do you end up if not an AAU like system of accounting where you account for each tonne of reductions and ensure it is recorded in a secure system of accounting? Perhaps some Orwellian renaming is required.

A Change of Management - The King is Dead Long Live the Queen!

Of course one exciting development here has been the pending transition from Yvo de Boer to Christiana Figueres as Executive Secretary of the UNFCCC. Many insiders have welcomed Christiana to this post and hopes are high that she has the necessary energy, commitment, expertise and political acumen to drive this process forward. Widely regarded by many in the carbon markets as a friend and advocate of the market-based approach her appointment has also been widely welcomed by business observers here. However, she made clear at the closing Carbon Expo plenary in Cologne that the private sector could not take her support for granted and would need to show it could deliver. She went onto underline the need for all participants in the carbon markets to play a part. Other key messages included (in summary) that:

• The current situation is analogous to that prior to entry into force of the Kyoto Protocol
• The private sector cannot wait for others to solve the problem
• Markets have to take some responsibility for performance and governance
• DOEs (which validate and verify CDM projects) have become the new bottleneck and need to step up
• Programmatic CDM is essential to moving forwards and must be pushed forwards
• The private sector has undermined trust and needs to hold itself to the highest standards
• The private sector needs to develop oversight mechanisms, otherwise someone will do so on its behalf
• We can't aspire to more advanced mechanisms without improved regulation. We are in an world of increasing market oversight
• Please don't forget plain vanilla CDM - not all developing countries can embrace NAMAs right away

Whilst many will agree with many or all of these statements, it should not be forgotten that large amounts of long-term public finance simply have not been made available to combat climate change to date (and this is unlikely to change). Money will not move even to well-governed markets automatically, but must be incentivised to do so. Investment in developing countries poses a number of legal, practical and financial hurdles, including in relation to security over investment returns, foreign exchange risk, political risk, absence of data, policy vacuums and social and economic realities. The UN negotiating process (pursuant to which many business NGOs have been excluded "from the room") is not currently conducive to allowing the private sector to enter into meaningful dialogues with policy makers in relation to market mechanisms (or in indeed improved governance). This barrier must be broken.

Bonn talks opening press conference, UNFCCC Executive Secretary Yvo de Boer

UNFCCC Executive Secretary Yvo de Boer set out the stall for June's talks (for the last time before Christiana Figueres takes the helm).

Yvo de Boer said that the Copenhagen meeting may have postponed an outcome for at least a year, but it did not postpone the impacts of climate change. “The deadline to agree an effective international response to climate change at Copenhagen was set because governments, when launching negotiations in Bali in 2007, recognised the scientific warning on climate for what it was: a siren call to act now, or face the worst," he added.

“Climate negotiations over the next two weeks will be on track if they keep focused on a common way forward towards a concrete and realistic goal at the UN Climate Change Conference in Cancún at the end of this year. There is a growing consensus on what that the goal for Cancún can be - namely, a full, operational architecture to implement effective, collective climate action.”

This 2 weeks must show the world that the process going somewhere.

“I encourage governments to now develop greater clarity on the future of the Kyoto Protocol, since this issue cannot be left unattended until Cancún,” Yvo de Boer said.

De Boer highlighted 3 priority issues:

1. Getting money promised moving to fast track action.
2. Ramping up the implementation package in good time.
3. Political leadership to answer political questions.

Mr. De Boer called on industrialized countries to fulfil the financial pledges they made at Copenhagen, whereby developed countries promised to deploy USD 30 billion from now to 2012 in short-term finance to kick start climate action in developing countries. “Cancún can deliver if promises of help are kept and if promises to compromise are honoured in the negotiations,” he said.

It is difficult to discern what success, or perhaps more realistically progress, looks like for this two week meeting. Several seasoned observers commented that it was clear that the process was in a holding pattern pending movement elsewhere, such as in Washington DC and Beijing.

However, on a more upbeat note several markets negotiators were more optimistic and pointed to the LCA negotiations where key elements of the Copenhagen Accord are being incorporated into the LCA draft negotiating text and key issues were being grouped into thematic informals to simplify negotiating texts and prepare them for real progress towards Cancun.

Meanwhile discussions continued on such serious issues as secondary badges for observers still on the agenda. Some people have been given secondary badges, although technically they have not been issued.

Various rumours circulated about logistics for CoP 16 in Cancun. One rumour is that registration is to be 6 kilometres away from the COP with the entrance to the venue being via shuttle bus on a daily basis. A reaction to the logistical overreaction to the chaos of Copenhagen?

The King is dead, long live the Queen

Introduction

The twelfth session of the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP 12) and the tenth session of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA 10) will be held from Tuesday 1 June to Friday 11 June 2010 in Bonn, Germany.

The thirty-second sessions of the UNFCCC Convention subsidiary bodies will be held at the same location from Monday 31 May to Wednesday 9 June 2010.

The overview schedule is available here: Overview schedule (167.25KB pdf)

Norton Rose will be attending the negotiations. We will be reporting back on interesting developments over the course of the next two weeks.

What to look out for

This session is the first opportunity for the Parties to formally revisit the Copenhagen negotiations of December 2009 in detail. The earlier session held in April of this year (see Blog: UN climate change negotiations, Bonn, April 2010 (AWG-KP 11 / AWG LCA 9)) was largely of an administrative nature.

Parties will in part be discussing the AWG-LCA Chair’s negotiating text (which has a slimmed-down look for 2010 and which is available at http://unfccc.int/documentation/documents/advanced_search/items/3594.php?rec=j&priref=600005797#beg). Avid fans of the negotiations will realise that the text has strong hints of the controversial Copenhagen Accord. However, to what extent has this truly been “integrated” into the text or does Accord-style wording serve as an “alternative path” which is mapped out in the text as a further or different option? Tuesday’s opening plenary should give a good flavour of initial reactions.

Those with air miles on their minds will be keen to find out more about where the two additional pre-Cancun (November/December 2010) negotiations will be held. Bangkok appears to have been written off, with suggestions seeming to favour Geneva and Beijing.

AWG-LCA documents

The following documents have been prepared for the session and are available at http://unfccc.int/kyoto_protocol/items/4577.php:

• FCCC/KP/AWG/2010/4 Provisional agenda and annotations. Note by the Executive Secretary
• FCCC/KP/AWG/2010/5 Scenario note on the twelfth session. Note by the Chair
• FCCC/KP/AWG/2010/6 Documentation to facilitate negotiations among Parties. Note by the Chair
• FCCC/KP/AWG/2010/6/Add.1 Documentation to facilitate negotiations among Parties. Note by the Chair. Addendum. Proposed amendments to the Kyoto Protocol pursuant to its Article 3, paragraph 9
• FCCC/KP/AWG/2010/6/Add.2 Documentation to facilitate negotiations among Parties. Note by the Chair. Addendum. Land use, land-use change and forestry
• FCCC/KP/AWG/2010/6/Add.3 Documentation to facilitate negotiations among Parties. Note by the Chair. Addendum. Emissions trading and the project based mechanisms
• FCCC/KP/AWG/2010/6/Add.4 Documentation to facilitate negotiations among Parties. Note by the Chair. Addendum. Greenhouse gases, sectors and source categories; common metrics to calculate the carbon dioxide equivalence of anthropogenic emissions by sources and removals by sinks; and other methodological issues
• FCCC/KP/AWG/2010/6/Add.5 Documentation to facilitate negotiations among Parties. Note by the Chair. Addendum. Consideration of information on potential environmental, economic and social consequences, including spillover effects, of tools, policies, measures and methodologies available to Annex I Parties
• FCCC/KP/AWG/2010/INF.1 Compilation of pledges for emission reductions and related assumptions provided by Parties to date and the associated emission reductions. Note by the secretariat
• FCCC/TP/2010/2 Issues relating to the transformation of pledges for emission reductions into quantified emission limitation and reduction objectives. Technical paper

AWG-KP documents

The following documents have been prepared for the session and are available at http://unfccc.int/kyoto_protocol/items/4577.php:

• FCCC/KP/AWG/2010/1 Provisional agenda and annotations. Note by the Executive Secretary
• FCCC/KP/AWG/2010/2 Scenario note on the eleventh session. Note by the Chair
• FCCC/KP/AWG/2010/MISC.1 Views on the need for additional meeting time for the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol and the Ad Hoc Working Group on Long-term Cooperative Action under the Convention, and on organization of work of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention. Submissions from Parties