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B A S I C COP-12 COP/MOP-2 Side Event 11 November 2006 The Sao Paulo Proposal for an Agreement on Future International Climate Policy B A S I C BASIC Project Building and Supporting Institutional Capacities in Climate Change Initially a 2.5 year project to: – Support implementation of UNFCCC/KP by Brazil, India China and South Africa – Assist developing countries with post 2012 climate negotiations – Link national & international components of climate policy Main funding: European Commission Extra funding from UK DEFRA, Australia plus co-financing/in-kind support from IDS & WRI, China, IDDRI B A S I C Building And Strengthening Institutional Capacities in Climate Change Network of over 20 research & policy institutions, mostly from BASIC countries, working with international experts on wide range of issues: – Task 1: Mitigation, SD & energy, modelling (China Team) – Task 2: Vulnerability & adaptation (India Team) – Task 3: Carbon markets & national institutional issues (S.Africa Team) – Task 4: Future international climate policy & negotiations (Brazil Team) – Task 5: Establishing a DC focused experts network (Full Team) Project activities comprise a mix of policy analysis, briefings, workshops, conferences, mentoring and training B A S I C B A S I C Environment Directorate General of the European Commission MARGAREE Consultants Inc. B A S I C Sao Paulo Proposal Not a consensus BASIC document & not the views of BASIC governments but part of on-going work under BASIC Task 4 which focuses on: – Designing international climate change policy and enhancing negotiations skills (BASIC Brazil Team) – Still under development & further discussion Sao Paulo workshop in August 2006:first discussion of this “package” – more detailed work on-going Papers and presentations from Sao Paulo & other BASIC workshops download from: : http://www.basic-project.net/; B A S I C Summary of Core Proposal Elements Goal for the Regime Medium and Long Term Goals Annex I/B Parties Quantified Commitments Automatic Extension of Annex I/B Commitments Options for Non-Annex I Parties Limits on Cumulative Transfers of CERs and VERs by Non-Annex I Parties Carbon Markets Adaptation Technology Universality & Stability Summary B A S I C Goal for the Regime Create a comprehensive, stable, long-term, universal regime to address climate change Respect principles of equity and common but differentiated responsibilities and respective capabilities Establish stable, long-term regime for technological and structural change Flexibility to cope with changing circumstances B A S I C Medium & Long Term Goals Goals help assess progress toward UNFCCC’ ultimate objective in five year reviews Possible goals – a maximum temperature increase of 2oC by 2100 – a maximum atmospheric concentration of CO2 such as 450 or 550 ppmv by 2050 – greenhouse gas emissions by Annex I Parties at least 15 per cent below their combined 1990 emissions in 2020 – maximum loss of natural ecosystems of X% by [date ] – Others? Parties’ commitments are not directly linked to these goals B A S I C Annex I/B Parties Quantified Commitments 2008-2012: Kyoto commitments and compliance features retained 2013-2018: annual commitments, expanded to cover net LULUCF emissions More flexibility in the form of the annual commitments Automatic 1 year extension of annual commitments of all Annex I/B Parties each year With unrestricted carryover of all compliance units (proposed) annual commitments are equivalent to five year commitment periods Compliance still assessed at five year intervals B A S I C Annex I/B Parties Quantified Commitments Annex I/B Parties negotiate absolute annual emission limits for 2013 through 2018 Then each Party may express its commitment as a combination of: – an absolute emissions limit (tCO2e/year); – emissions intensity limit (tCO2e/unit GDP); – new and additional funding (USD per year) to a maximum of 10% of its commitment (based on international carbon price) All intended to have same stringency over time – intensity coefficient declines by 3% per year – funding rises by annual increase of real GDP B A S I C Automatic Extension of Annex I/B Commitments Post 2018, commitments automatically extended 1 year every year e.g. 2019 commitments agreed in 2013 Commitments for next year (2019) reduced by equivalent of 1% absolute (from 2018) if compliance in past year (2012) easier or less costly Otherwise commitments for next year unchanged from previous year (2018) Annual commitments always known for next 5 years with a range of 0 to 5% reduction for the following 5 years B A S I C Automatic Extension of Annex I/B Commitments Annex I/B commitments for next year (2019) more stringent if either: - Total quantity of compliance units in all registries carried over has increased over the past year (2012) or - The international price of AAUs has not increased by more than inflation during the past year (2012) Enforcement Branch of Compliance Committee makes determination annually before COP/MOP session Same adjustment to commitment of every Annex I/B Party B A S I C Economic Hardship An Annex I/B Party whose real GDP has declined by more than 1% during a year may request that its target be equal to its emissions for that year An Annex I/B Party may request a change in the form or level of its commitment. Needs approval of ¾ of Parties present and voting at next COP/MOP. Financial payments divided between Adaptation and Technology Funds by COP/MOP decision B A S I C Options for Non-Annex I Parties Principles of equity and common but differentiated responsibilities and respective capacities mean NonAnnex I Parties adopt Annex I/B commitments later Annex I/B type commitments not appropriate: limited capacity, rapid economic, social and demographic changes For developing countries CC is part of many other problems Options for Non-Annex I Parties: – Host CDM projects – Quantify emission reductions due to sustainable development policies (SD-PAMs) – Adopt sectoral (excluding LULUCF) or national “no lose” commitment B A S I C Non–Annex I Parties SD-PAMs Create a new annex listing Non-Annex I Parties that agree to quantify and report the emission reductions achieved by their SD actions Methodologies developed by e.g. Consultative Group of Experts; results reported in national communications Actions earn political recognition but do not generate tradable credits (programmatic CDM and “no lose” commitments can be used for that) Participating Parties can use simplified procedures to access Adaptation and Technology Funding Mechanisms By lowering per capita emissions, SD actions defer the date at which a Party reaches its limit on cumulative transfers Secretariat produces compilation & synthesis report on SDPAMs with quantified reductions where possible B A S I C Non–Annex I Parties “No Lose” Commitments A Non-Annex I Party may propose a sectoral (except LULUCF) or national “no lose” commitment Proposal reviewed by CDM Executive Board which makes a recommendation to COP/MOP – Commitment must be more stringent that emissions that would otherwise occur – Methodology for calculating emissions achieved must be suitable (address possible leakage, double-counting) Must be accepted by ¾ of Parties present and voting Party earns Voluntary Emission reductions (VERs, equivalent to CERs) for difference between commitment and actual emissions certified by an accredited DOE Commitment must be maintained until Party becomes an Annex I/B Party B A S I C Limits on Cumulative Transfers of CERs and VERs by Non–Annex I Parties An overall limit on transfers of CERs and VERs by Non-Annex I Parties since 2005 is set Overall limit allocated among Non-Annex I Parties based on responsibility, capability and potential to mitigate; allocation revised every 5 years to reflect changing circumstances Once the cumulative transfers by a non-Annex I Party reach its current limit, it is expected to adopt an Annex I/B emissions commitment If it decides not to, it is deemed to withdraw and loses access to benefits B A S I C Limits on Cumulative Transfers of CERs and VERs by Non–Annex I Parties Limit of 20 billion tCO2e means 16 to 40 years before Non-Annex I Parties adopt commitments Share of each Non-Annex I Party based on its: – Population – Responsibility – emissions per capita since 1990 – Capability – current GDP per capita – Mitigation potential – current emissions per capita Higher cumulative emissions, GDP, current emissions per capita = lower share of the limit Larger population = bigger share of the limit CERs and VERs retained by host government do not count as transfers A Party can reach its limit with no transfers due to increases in per capita emissions, GDP B A S I C Limits on Cumulative Transfers of CERs and VERs by Non–Annex I Parties Ensures Annex I/B Parties undertake significant commitments before Non-Annex I do so Allows Non-Annex I Parties to participate in carbon market and use Adaptation and Technology Funds before adopting commitments Creates incentive for Non-Annex I Parties to adopt SD policies that reduce per capita emissions Equitable distribution of CDM benefits in the long run Recognizes changing circumstances of individual Non-Annex I Parties Gives each Party some control over when it “graduates” to Annex I/B B A S I C Limits on Cumulative Transfers of CERs and VERs by Non–Annex I Parties Limits set and revised by Facilitative Branch of the Compliance Committee using procedure approved by COP/MOP Countries likely to have a limit of zero based on recent data include: Cyprus, Israel, Singapore and wealthier OPEC countries Countries likely to reach their limits soon based on CDM projects in the pipeline include South Korea (2 years) and Chile (12 years) Other DCs can use CDM/VERs for another 20-100 years tCERs and lCERs also count toward the limit B A S I C Carbon Markets Clean Development Mechanism continues with minor changes – current CDM levy could provide €325million up to 2012 – 2% levy extended to VERs 2% levy on Joint Implementation and to International Emissions Trading transfers out of the issuing registry for Technology Fund Failure to ratify by 30 Sept 2012 stops issuance and transfer of all units 31 Dec 2012 to encourage entry into force on 1 Jan 2013 B A S I C Compliance Compliance system retained Compliance of Annex I/B targets assessed every five year Penalty remains the same: 30% of excess emissions deducted from AAUs in the year after noncompliance determined Payment of financial component must be received in full before compliance deadline Adaptation Proposals Inclusion increases chances of agreement A new Adaptation Committee of Experts (ACE) to provide coherence/guidance A pilot phase of “adaptation activities implemented cooperatively” in 2008 A “pilot phase” shifts emphasis from – Inaction/workshops and – Funding stand alone projects – towards learning-based policy approach that promotes implementation of programmatic action Adaptation Proposals All Parties revise design parameters and standards for infrastructure and equipment to address climate change, energy efficiency and water efficiency Develop an insurance or risk management mechanism to address the impacts of extreme weather events by 2010 Develop vulnerability & adaptation tools & methods to target vulnerable human populations and natural ecosystems Focus financial support by the Adaptation Fund on assisting the most vulnerable human populations and natural ecosystems Increased funding goes to AF from share of the proceeds from CDM, JI and ET & from Annex I/B financial commitments B A S I C Technology Transfer Proposal distinguishes between existing & new technologies; Most existing technologies are proprietary so transfer will occur on commercial terms Work with qualified institutions to improve access to information on available technologies Any Party can complain to the Facilitative Branch that another Party is restricting technology transfer B A S I C Technology Research and Development New Technology Funding Mechanism resourced by JI/ET levy, & funds from Annex I/B Parties’ financial commitments Funding provided to Non-Annex I Parties to: – Participate in international research projects to develop technologies to reduce emissions of to adapt to climate change – Buy down the cost of mitigation or adaptation technologies to enhance their diffusion Technology Funding Mechanism to recommend to COP/MOP how best to use any intellectual property rights acquired B A S I C Universality and Stability Memoranda of Understanding (MOUs) could also be agreed to extend scope of regime by including agreements covering: – aviation and marine – global industries e.g. aluminium Non-Parties – Proposal allows national or sub-national governments of non-Parties to agree a MOU which could ensure they are making comparable efforts & do not benefit from staying out (as the Montreal Protocol does) – USA could approve MOU easier than treaty ratification Trade restrictions could be imposed on countries that are not Parties and do not have an MOU by ¾ vote of the COP/MOP B A S I C Legal Form of the Agreement Propose amendment of Kyoto Protocol and COP/MOP decisions – Advantage – retains existing institutional structures – Disadvantages – Non-Parties are observers during the negotiations and need to ratify the Protocol to be part of the new agreement New Protocol to the Convention also possible. Opposite advantages and disadvantages. Also raises numerous transition issues Mix of Convention and Kyoto Protocol actions also possible but more complex B A S I C Summary Elements that may appeal to Annex I/B Parties Future commitments by Non-Annex I Parties Flexibility in the form of their emissions limitation commitments Predictable emissions limitation commitments for the next decade Relief for economic hardship Flexible participation through an MOU Likelihood of a stable, long-term, universal regime B A S I C Summary Elements that may appeal to Non-Annex I Parties Likelihood of a stable, long-term, universal regime reducing avoidable climate risks Equity - Annex I Parties continue to take the lead in combating climate change Equity: Enhanced geographical benefits for LDCs/SIDs as more CDM goes to them Equity: Emissions limitation commitments by Non-Annex I Parties depend on stringency of Annex I commitments Additional options for participation by Non-Annex I Parties Enhanced approach to adaptation assistance Financial support for technology research and development