The 18th Conference of the Parties (“COP”) to the United Nations Framework Convention on Climate Change (the “Convention”) opened in the vast new conference centre in Doha, Qatar, yesterday to the words “the draft documents before you are not final, but they are familiar.” Another year, another city (albeit one with the world’s highest per capita greenhouse gas emissions): arguably, these words might have been used to open any number of the recent COPs, but will 2012 be different?
The Conference officially runs until Friday, 7 December 2012, but in reality, and based on past experience of this annual event, it is likely that high-level ministerial negotiations will continue throughout much of the weekend of 8/9 December 2012. Any key agreements are likely only to be reached in those concluding hours.
So vast have these conferences become, so complex and controversial the issues and so numerous the interlocking work streams that the opening day is typically – and unsurprisingly - long on energy sapping set-piece opening statements and short on surprises. Yesterday was no exception.
In the coming days we will provide short daily updates on the key developments in Doha. For today’s purposes, given the traditionally slow start we will focus on describing the key issues due to be debated and, hopefully in some cases, resolved, over the coming two weeks.
The Copenhagen Conference (COP 15) in 2009 was so burdened by the weight of expectation that it effectively collapsed, leaving the parties without a binding agreement to take forward and only a loose statement of political intent to show for their efforts. This is, however, a grim and arguably disparaging view of the Copenhagen Conference, which did at least successfully establish the Green Climate Fund (“GCF”), reform aspects of the clean development mechanism (“CDM”), and achieve agreement on the Copenhagen Accord.
Whilst having no binding effect, the Accord adopted a “pledge and review” method, inviting Convention Annex 1 countries to commit to their own, self-imposed limits on emissions, and encouraging non-Annex 1 countries to implement their own mitigation actions. In doing so, it provided a basis such that the following Cancun Conference in 2010 (COP 16) was able to give those emissions limits (now termed “quantified emission limitation or reduction objectives” (“QELROs”)) some legal weight. Despite the announcement that Japan, Canada, Russia, and now New Zealand, would not sign up to a second commitment period under the Kyoto Protocol, the Cancun Conference did help to inject some faith that a new international agreement to commence in 2020 could potentially be achieved.
The Durban Conference in 2011 (COP 17) again failed to reach a binding agreement. Instead, the parties established the “Ad Hoc Working Group on the Durban Platform for Enhanced Action” (“AWG-DP”), a new group formed under the auspices of the Convention, tasked with developing either “a protocol, another legal instrument or an agreed outcome with legal force under the Convention.” This Working Group is due to complete its work by 2015, with a view to the resulting “legal instrument” entering force in 2020. Important decisions were also taken as to the funding of the GCF, further promoting REDD+ activities, and potentially ensuring the long-term survival of the CDM through an “in principle” agreement to begin a second Kyoto Protocol Commitment Period on 1 January 2013.
This Conference opens of course just days after devastating Superstorm Sandy wreaked its havoc, with many trumpeting that event as a “wake up call,” and particularly hoping that it may focus the minds of the US delegation.
The Doha Conference: Day One
In addition to statements by the President of the Conference and the chairs of key working groups, opening addresses were made yesterday by representatives for the usual diverse range of constituents: the G-77/China, the Arab Group, the African Group, the BASIC nations (Brazil, South Africa, India and China), a Group of Mountainous Landlocked Developing Countries, the Coalition for Rainforest Nations, Women and Gender and Youth, to name but a few. Naturally, all of these groups have their own differing agenda. However, whilst the focus and emphasis varies from group to group and there are always exceptions, overall there appears to be broad consensus as to the key issues for determination at the Doha Conference. These include: (1) the agreement of the key terms necessary to see the adoption of a second Kyoto Protocol Commitment Period commencing from 1 January 2013: arguably the single most important deliverable for this Conference, (2) tangible progress towards implementation – one of the “buzz” words for this Conference – of the Durban Platform via the AWG-DP on the road towards enactment of a new international agreement by 2015, (3) further development of the structure of the GCF and, in particular, the role of private sector finance, and (4) the future of the cap-and-trade markets and development of new “market mechanisms”.
Second Kyoto Commitment Period
With the number of countries continuing to participate in the Kyoto Protocol dropping to the point where now less than 15% of the world’s emissions are covered by its terms, its effectiveness is increasingly questioned. The parties will need to determine a number of key issues in Doha.
Firstly, whether the Second Commitment Period lasts for five or eight years, ending on either 31 December 2017 or 2020. If there is to be no break between the end of the Kyoto Protocol and the new international agreement which is targeted for 2020, it should logically run until that time.
Secondly, the Ad Hoc Working Group on Further Commitments for Annex 1 Parties under the Kyoto Protocol (AWG-KP) is expected to deliver its report on the transition from the commitments given at the Copenhagen Accord to the more legally binding QELROs under the Kyoto Protocol. It will be important that the new targets are definitive and have a clear legal status.
It will also be essential to resolve the uncertainty surrounding the carry-over of assigned amount units in a manner that maintains environmental integrity and preserves their role as an incentive to overachieve.
If any real progress is to be made by the AWG-DP over the next two weeks it will be vital for developed nations to lead the way. Without the world’s largest emitters, such as the United States, China, Canada, India and Brazil participating in a meaningful way, little can be achieved in the long term.
Whilst China is still not willing to commit to absolute reductions in carbon dioxide emissions, it has recently acknowledged that having unconstrained emissions is not acceptable. It is very unclear what approach that the U.S. will take in this conference. Reports yesterday quoted Jonathan Pershing, the U.S. climate treaty negotiator, as stating that the U.S. is unlikely to “modify the commitment we’ve made of cutting emissions by 17% by 2020”. However, there is optimism among some that having secured a second term in office Barak Obama may now target a new international deal on climate change as part of his “legacy”.
Probably the most that can realistically be hoped for at Doha on this topic is the agreement of a concrete work plan for the AWG-DP containing specific milestones to be achieved in 2013.
Green Climate Fund
The GCF was conceived at the Copenhagen Conference, with the objective of providing developing countries “fast-start” access to finance of US $30 billion by 2012 and up to US $100 billion per year by 2020 to help them adapt to a low carbon economy and reduce their emissions. However, the Conference has opened to a heated debate as to whether the initial “fast start finance” that was promised has actually been provided, with a recent study by the International Institute for Environment and Development claiming that commitments between 2010 and 2012 have thus far only reached US $ 23.6 billion, rather short of the US $ 30 billion promised. Others contend that significantly more than $ 30 billion has been delivered, whilst debate rages as to how much of the finance that has been provided is truly “additional” over and above that which would have been provided anyway.
The market will hope for measures to increase the transparency of the GCF funding regime in order to restore confidence in the GCF and bring less developed countries, who may have lost faith in the pledges of the Annex 1 countries, back to the table. As current levels of available public funding diminish, it is clear that decisions to encourage private investment are also essential.
Songdo in the Republic of Korea seems certain to be approved as the host city for the headquarters of the GCF, which will be headed by Ajay Mathur until a permanent executive director can be appointed in 2013.
Two key outcomes required at Doha are increased access to and confidence in the existing CDM market. Market participants will also be watching out for tangible progress on the development of new market mechanisms that will work alongside and in continuity with existing mechanisms as part of the work towards a new international agreement from 2020.
One measure to assist this is the materiality concept established at Durban, which allows the issuance of carbon credits despite a lack of certain information which might otherwise change a decision of the Executive Board of the CDM. The Executive Board of the CDM are expected to report on the effectiveness of these measures in Doha.
Another aspect which will continue to be discussed is the CDM appeals process, an aspect somewhat overlooked at the Durban Conference. With the significance of private finance recognised as a key source of funds for the GCF, clarity in this process will be essential to maintain the engagement and confidence of private sector investors.
The future of the Joint Implementation Mechanism (“JI”) will also fall to be decided. It had been hoped that a decision would be made at the Durban Conference with respect to the carry-over of assigned amount units into the Second Commitment Period, and the associated consequences, however, in the event, no decision was made and this will also need to be addressed in Doha.
Market participants will obviously be hoping for measures to expand the demand sources for CERs to relieve the current shortage in demand for CDM and JI project credits and increased levels of emissions reduction ambition to further stimulate demand.
The Doha conference got off to a business-like and uneventful start yesterday. To the extent one can read anything into these opening stages, the mood appears to be neither unduly pessimistic, nor unrealistically optimistic, with the Conference in effect facing up to the enormity of the challenge facing it and taking a collective deep and purposeful breath ahead of what everyone knows will be a gruelling and critical 2 weeks.