Readers of this newsletter have no doubt already read or heard about the UN Climate Conference which concluded two days later than scheduled, early on Sunday, December 13, 2014. Rather than repeat, we wish to call to your attention a few key take-aways from this 20th Conference of the Parties (COP).
- This COP was designed to establish a framework for a new global agreement (something less than a treaty) to succeed the Kyoto Protocol. Some would say the Lima COP met that expectation, but there are still very many issues to be negotiated and resolved by the Paris COP in December 2015.
- The US – China agreement (discussed below) became the model for one of the key agreements reached. Each country is expected to set forth what it can do to help the globe stay within the 2°C increase which is the scientific consensus for the maximum tolerable increase in global temperatures to maintain the current climate conditions (Intended Nationally Determined Contributions). The goals become a bottom-up approach augmented by public perception. It leaves the decision on "how much" and "how to" to each country.
- A draft negotiating text for the expected 2015 agreement was finalized, but the negations are just beginning.
- Many were disappointed that the avoided deforestation topic (REDD+) did not proceed further, after strong commitments from the Warsaw COP. A key issue remains in how to involve private capital in this effort, a topic covered by a side event which Dentons sponsored (see below).
- A new financing device, the Green Climate Fund, received substantial commitments from several developed countries, totaling over US$10 billion. This GCF is a tool for the financing of developing countries for clean energy and climate protection measures using resources of developed countries. The split of countries into Annex I and “other” countries is receding but moving into debates on financing of development projects. The terms and governance for this GCF are in early stage.
In this context, Dentons sponsored two “side events” in the delegate space with the International Emission Trading Association. Jeffrey Fort (Chicago) and Susan Wood (Houston) presented.
Cambodia carbon credits
The use and need for REDD+ projects was featured in many discussions and side events at this COP. The Oddar Meanchey (Cambodia) project has earned not only REDD and CCSB recognitions (including double gold validation), it captured the attention of The American Lawyer, a magazine focused on the global legal business. As noted in our last newsletter, Dentons was honored as “Citizen of the Year” for its pro bono work for the Forestry Administration of Cambodia.
This project provides several instructions on the measures needed to take a bottom up project, which the national government then captured and focused onto a single province, and create a tool for bringing those credits to verification and to a private CSR market, as well as to government buyers. Begun several years ago, it is an exemplar of initiatives and collaboration among private and public sectors.
Offset for taxes and fees
Offsets are not simply for cap-and-trade systems. Offsets are growing in variety and utility for emissions reductions. They are also increasingly being used (or considered) by national and sub-national governments who are implementing a range of market mechanisms to tackle climate and reach greenhouse gas targets. This session featured speakers covering six jurisdictions who are using or preparing to use carbon offsets under non cap-and-trade programs worldwide: three Canadian provinces, South Africa, Mexico and the Ukraine. The outlook from this panel would suggest that the certainty of carbon pricing with a sensibly set fee or tax had many benefits, including taking advantage of non-regulated activities to produce more cost-effective reductions than simply an added cost on covered sectors. These “hybrid” market approaches to reducing emissions and nurturing market links and entrepreneurs may become more common in the near term.