The recent United Nations Framework Convention on Climate Change (UNFCCC) conference in Bali launched negotiations for a strengthened global deal for climate change. In two separate negotiation tracks on the future of the UNFCCC and the Kyoto Protocol to the UNFCCC, the Bali conference adopted of a number of decisions in the 13th session of the Conference of the Parties to the UNFCCC (COP13) and the 3rd session of meeting of the parties to the Kyoto Protocol to the UNFCC (CMP 3), respectively.

In this e-bulletin we describe some of the key outcomes of Bali and what we see as the implications of these outcomes.

The future of the UNFCCC: the Bali Action Plan Roadmap

The most significant outcome of Bali was the adoption of the Action Plan, which prescribes the process (which begins immediately) to launch formal negotiations aimed at implementation of the UNFCCC beyond 2012. The Action Plan sets out issues on which the parties will, by the end of 2009, need to reach agreement to ensure enough time for ratification of the new agreement before the Kyoto Protocol expires. These include:

  • a long-term global goal for emission reductions, executed at a global level now with the involvement of the US as well as developing countries. The principle of differentiated responsibilities was retained as per the Kyoto Protocol, taking into account the variety of social and economic conditions facing each participant and argued strongly for by developing countries
  • for developed countries, the consideration of quantified emission limitation and reduction objectives
  • for developing countries, the consideration of nationally appropriate mitigation actions in the context of sustainable development. Critically, this is to be supported and enabled by technology, financing and capacity-building
  • importantly, in the context of agricultural activities in developing countries or sensitive locations, positive incentives to reduce emissions from deforestation and forest degradation
  • enhanced action on technology development and transfer to developing countries, and enhanced provision of financial resources to support action on adaptation to climate change. This implies continued support for the flexible development mechanisms of the Kyoto Protocol and continued development of other incentives in this area; and
  • with respect to third party investment, there will be a specific focus on enhancing the provision of financial resources and investment through the mobilisation of public and private sector funding.

The Future of the Kyoto Protocol

In parallel with the UNFCCC negotiations, the Kyoto Protocol parties will continue negotiations on new post-2012 emission reduction targets for developed countries that are signatories to the Kyoto Protocol. For this negotiating track, the Bali conference has agreed a work schedule for 2008 to accelerate progress.

During the Bali conference, the Kyoto Protocol parties also established the Adaptation Fund which is designed to finance specific adaptation projects and programmes in developing countries that are particularly vulnerable to the adverse effects of climate change.

The Adaptation Fund is to be funded by the monetisation of certified emissions reductions. These will be issued by the Executive Board of the Clean Development Mechanism to the trustees of the Adaptation Fund via a 2% levy on all projects. This development and the favourable reporting on the implementation of the Clean Development Mechanism (see Section I of CMP.3 "Further guidance relating the clean development mechanism" for further details) signals the expectation that a liquid market for Certified Emission Reductions will be in place and is a sign that parties to the Kyoto Protocol will continue their commitment to the Clean Development Mechanism.

Impact on EU ETS

Whilst the outcome of the Bali conference will not directly affect the EU ETS post 2012, the EU has signalled in the past that it is willing to reduce its emissions to 30% below 1990 levels by 2020 if other developed countries agree to make a comparable effort beyond their current commitment to reducing emissions by 20% below 1990 levels by 2020.

With either target being adopted by the European Union, it appears inconceivable that the EU ETS will not continue beyond 2012 and we look forward to outline plans for the post-2012 EU ETS by the European Commission in early 2008.

Watch this space!

Whilst the Bali conference set out a number of important signals in relation to the forthcoming negotiations, the real challenge for all parties to the UNFCCC and the Kyoto Protocol is now to translate the "agreement to negotiate" reached in Bali into a binding, comprehensive global agreement on climate change. The intention is that such an agreement will be settled at the 15th session of the UNFCC at the end of 2009 in Denmark.

Despite it not being agreed at Bali, the parties did consider the inclusion of carbon capture and storage projects under the clean development mechanism and will consider this further at the next meeting of parties in Poland in 2008.

For an analysis of the broader context of the international framework of the Action Plan, and an appraisal of the legal issues affecting the key low-carbon technologies, we refer you to chapter one of our work for The London Accord, a full copy of which can be accessed here.