Download IISD Second Annual Forum of Developing Country Investment

IISD
Second Annual Forum of
Developing Country Investment
Negotiators: 2-4 Nov 2008
Climate Change and International
Investment Agreements
Riekie Wandrag
Climate Change / Global Warming
• United Nations Framework Convention on
Climate Change 1992
• Kyoto Protocol (into force Feb 2005)
– Obligations on Industrialised Countries to
reduce greenhouse gas emissions as per
agreed targets between 2008 - 2012 (Annex 1
countries)
– No reduction targets for Developing (nonAnnex 1) countries
Kyoto Protocol: CDM
• Provides for “trade-off” in emission reductions
•
(emissions trading)
Article 12: Clean Development Mechanisms
– Allows developed country to outsource obligations to
reduce emissions to developing country
CDM is a tool for leveraging foreign investment for
sustainable development into developing countries
CLEAN DEVELOPMENT MECHANISMS (CDM)
• REQUIREMENTS:
– Located in Non-Annex 1 Developing Country (acceded
to Kyoto Protocol)
– CDM must lead to long term emissions reduction
– Must assist in achieving sustainable development
– Must lead to technology transfer
– Additionality (CDM aspect not part of business-asusual of project)
Result in tradable CER’s (Certified Emissions Reductions
or Carbon Credits)
Investment in Climate Change
• Climate Change investment opportunities
creates opportunities for sustainable
development
• Examples of Climate Change Investments:
CDM’s
Clean energy projects (wind, solar
energy)
Timberland / reforestation
Implications for Investment
Agreements
• General: careful drafting!
– Definitions of Investment / Investor
– Policy space / Public Welfare exceptions
– Expropriation?
– Dispute Resolution / arbitration clauses
– Choice of law
Further implications for Developing
countries re CDM’s
• Ratify & implement Kyoto Protocol
• National Legislation & Policy formulation
• Clear regulatory frameworks required on:
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–
–
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Environmental Law
Energy Law
Investment Law / regulation
Sustainable Development Policy
• Establishment of DNA
• Regional harmonisation of policies?
DESIGNATED NATIONAL
AUTHORITY (DNA)
• To host CDM projects, country must set up
Designated National Authority (DNA)
• DNA must certify that CDM contributes to
sustainable development in order to
achieve carbon credits i t o Kyoto Protocol
• Country can determine own criteria for
sustainable development
SOUTH AFRICAN EXAMPLE
• SUSTAINABLE DEVELOPMENT:
• 4 Main Criteria
– Economic development
– Social development
– Environmental compliance
– General Project Acceptability (equality of
distribution of project benefits)
Other implications
• Need for capacity building / training
• Current efforts in Africa:
– Nairobi Framework to expand beneffits of
CDM in Africa
– Established 2007 by UNDP, UNEP, WB, AFDB
& UNFCCC
– CDM Capacity building project in Ethiopia,
Kenya, Mauritius, Mozambique, Tanzania &
Zambia.