Blog: UN Climate change negotiations, Bangkok, September/October 2009
September/October 2009

Day 10 - 8 October

The EU Gamble

The EU’s grand plans for an “integrated and elegant” new agreement incorporating the “best elements” of the Kyoto Protocol and the UNFCCC seem to be lying in ruins. By raising the strategy of bringing the two streams -AWG-KP and the AWG-LCA - together, they merely seem to have sealed the fate of their own proposal and cemented the Kyoto Protocol in place.

The ‘single agreement’ idea was floated on the second day of the first week by the EU negotiators.

Whilst this proposal seems to have the support, implicit or otherwise, of most developed nations, it would seem that behind the scenes it is not just the most vociferous developing countries who oppose it. The most vocal opponents have been our old friends Venezuela and Bolivia, Algeria has joined the chorus on behalf of the African nations. Critically, moreover, China, Brazil and India are, we are told, supportive of this move behind the scenes and indeed have chimed in more than once publicly.

In the final Sub Group on market mechanisms it was painful to observe. The rhetoric against market-based approaches continued and some pretty rough treatment was handed out to the Mexican Facilitator of the Sub Group, who was simply in our view trying to do her job to steer the process to a more consolidated and streamlined text in preparation for Barcelona and Copenhagen. Indeed, we have heard of similar treatment meted out to Chairs and Facilitators in other Contact Groups and even the overall Chair of the AWG-LCA has not been immune to such treatment. Perhaps this is a sign that the negotiations are now entering the end game and the gloves are off?

As we try and read the tea leaves from Bangkok in trying to discern what an outcome in Copenhagen will look like, one can see three possible options:

1. collapse of the AWG-KP and AWG-LCA streams into an integrated, simple, elegant agreement;
2. an extension, new commitments, and amendments to the Kyoto Protocol on one side; and a new agreement under the UNFCCC on the other;
3. a high-level agreement under the UNFCCC, and the collapse of the Kyoto Protocol

Many developing countries fear the third option: being left with no Kyoto Protocol and no new commitments. That is, a high-level commitment from Annex I Parties with no specific requirements.

It would seem now that the EU’s gamble to achieve option 1 has significantly receded as a likely outcome, which leaves us looking at option 2. The political and legal complexities of integrating an extended Kyoto Protocol (excluding the US) with a new agreement are not to be underestimated, as was noted in previous blogs. One of the critical issues would be how you would make a docking station for the US from a new agreement under the UNFCCC into the Kyoto Protocol so they could access market mechanisms, such as the CDM. This is legally doable, but likely to be complex.

One major negotiating Party has postulated that the outcome now points to option 2 but with a set of agreements under the Kyoto Protocol which will never actually be adopted, meaning the Kyoto Protocol will limp on as a kind of living dead.

However, as one steps back from the key discussions around market mechanisms it is important to keep in mind that the market mechanisms issue around CDM and the new mechanisms, and the overall structure, are just a small part of all the different issues that are being discussed here in Bangkok, and that will have to be agreed in Copenhagen, e.g. Technology Transfer, Intellectual Property Rights, Forestry/REDD, Adaptation, Public Financing, but more on that tomorrow.

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Day 9 - 7 October

Getting down to brass tacks: Influencing the drafting

Today was a whirlwind of meetings with key delegations and a clear objective: to highlight key market and finance principles that need to be reflected in the language negotiated around CDM reform and new market mechanisms, to the leading negotiators on these issues.

As member of a small “task force”, drawn from member companies of the Carbon Markets and Investors Association (CMIA), we were seeking to persuade Parties to insert short but critical language into existing non-papers. The objective of the text we are proposing, is to clarify to investors and market participants that existing market mechanisms will continue, and that new mechanisms, such as sectoral crediting and trading, will be structured in a way to enable private sector participation.

Our first meeting was with the Australian delegation, followed by the Chair of the AWG-LCA  sub-group dealing with paragraph 1(b)(v) of the Bali Action Plan(“various approaches”, which deals with these issues), then the New Zealand delegation, the US  delegation, the UNFCCC Secretariat market mechanisms team, and finally the European Commission.

The problem currently, as we see it, is highlighted by two sections in non-paper No. 9.

Firstly, paragraph 55 dealing with the transition from existing mechanisms (e.g. CDM) to new mechanisms (e.g. sectoral crediting) states:

“55. The CMP to this Agreement shall [at its [Xth] session] define modalities and procedures which:

1. Provide for an orderly transition between mechanisms where one mechanism ceases to be applicable due to the application of another mechanism;
2. Ensure units issued from CDM project activities registered before [20xx] shall continue to be issued [until 20xx];
3. …..”

Secondly, in Section C, which deals with New Mechanisms, there are various drafting options designed to create a new market mechanism based upon either sectoral crediting or trading. However, there is absolutely no language in any of these provisions which enables, or even envisages, the participation of non-government or private sector actors. As drafted, all of these proposals would only give rise to government-to-government structures.

This language, and the omission of mention of private sector involvement, raise a number of concerns. As it stands, one reasonable reading of the text could be, that on some arbitrary date, existing mechanisms will be terminated, and the language relating to the new mechanisms provides no reassurance that the private sector may participate in whatever comes to replace the mechanisms that we know. This does not bode well for instilling the market, and investors, with confidence in continuity and safety of investments.

Compare this language with those provisions in the Kyoto Protocol, which led to the creation of the current market mechanisms:

Article 6 (JI) states that “A Party.. may authorise legal entities to participate, under its responsibility, in actions leading to the generation, transfer or acquisition…of emission reduction units.”

Article 12 (CDM) states that “Participation under the clean development mechanism…may involve private and/or public entities…”.

It was critical for a private sector group with experience of investing in the carbon markets to address these oversights with key negotiators. The clearest form of success, for the time being, was that each one of these delegations mentioned the importance of private sector involvement in the subsequent sub-group session on 1(b)(v) - after an hour with us, we were certainly at the forefront of their minds!

Considering that the sub-group Parties that we did not have a chance to speak with, continued their old strains of argument, it becomes more critical - going forward - to ensure we are engaged directly with every key delegation bilaterally.

The interactions of today underline the importance of being “on the ground” and in the thick of it, during this process. It may seem lengthy to some, unimportant to others - but it is a process, and this process will define what is “in” and what is “out” in a post-2012 framework, and the post-2012 carbon market itself. We have the opportunity to address these issues directly with those who are framing the future of the markets in the Low Carbon Economy, and on whom - effectively - its existence depends.

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Day 8 - 6 October

Excitement, the Press and secrecy

As usual, the day began with the traditional BINGO briefing (sadly not the traditional English seaside game, but the morning gathering of Business NGO s). This time the debrief of the prior day’s events included an exchange of views on the vociferous intervention (some felt interruption?) of John Vidal (the Guardian’s Environmental correspondent) into the US  BINGO briefing. Without too much elaboration, the article is entitled Secrecy Prevails at Bangkok Climate Change Talks in the 5/10/09 online edition. Before agreeing to leave he argued valiantly for the rights of the press to report on the briefing. Ironically, as he accuses the NGOs in question of not supporting the press, it was a unique opportunity for business to hear the US delegation speak freely. As the promise of meetings closing before our noses becomes a more likely possibility with each passing day, it could be that all observers are soon locked out of the continuing negotiations. In the event of this occurring, the only means by which we can have an inside look into the discussions behind closed doors is via good relationships with negotiators (and eavesdropping in hallways…)

It is, of course, one of those tricky things: who can argue with the importance of transparency and the rights of wider society to know what is going on through the press medium? On the other hand, it is critical that the business community is given a medium for frank and open discussions with negotiators to ensure that both sides are fully informed. This too, after all, is a form of transparency. Besides, business is seen openly as the ‘enabler’ of the framework, the contingency that will put it into practice. To this end, open, honest, and off-the-record discussions are critically important.

The day then consisted of building on such relationships with a series of meetings with key negotiators and negotiating teams including the Chair of the LCA , the EU  heads of Delegation, the Chinese lead negotiator on market mechanisms, and Peru’s REDD Negotiator. The day finished at an evening seminar for negotiators on key differences and synergies between sectoral and REDD  mechanisms.

Kyoto fights back

For those following this blog yesterday, and who endured a sleepless night of nightmarish scenes of the imminent demise of the KP  - rest easy: the KP is back with a vengeance. Supporters launched a valiant rear-guard action in today’s AWG-LCA  Sub-Group on mitigation under paragraph 1 (b) (v) of the BAP  (various mechanisms).

Under discussion was the Chair’s non-paper 9 (pdf 64KB) (an attempt at consolidating proposals). The paper consists of three key parts:

Part I: Market Based Approaches. Broken down into:

1. General provisions
2. Existing mechanisms ( CDM )
3. New Mechanisms (sectoral crediting and trading)
   • Part II: Other Approaches; and
   • Part III: Other Issues.

Listening to the Parties intervene, this blogger imagines this is what it must have felt like back in the 1970s with exchanges between the old Soviet Block and the “Free World”. Venezuela set the scene with its (now familiar) attack on the use of markets as contravening the principles of the convention, and the illegality of the entirety of Part I B. They, supported by Bolivia, believe that any talk of markets in this contact group is a disrespect to the Convention - in the deepest sense. However, in a moment of madness, they decided that the elegant but uncompromising text (attributed to them) of Part I, was never stated, and should be replaced with a text that no one managed to write down in time. Assisting the consolidation, their 5 minute text will replace the simple:

“1. Parties shall not make use of market-based approaches”.

To be fair, however, they were not quite alone. Other G77  + China members also addressed the problems with market-based approaches, while grudgingly accepting that they are needed to achieve cost effective reductions.

The discussions focused largely on Part I B. In particular, the inclusion of text in square brackets, that seeks to incorporate existing mechanisms from the Kyoto Protocol into the LCA. As discussed in yesterday’s blog, there is a significant concern in some quarters that if the existing market mechanisms under the KP are transposed into the LCA track (and hence any new agreement reached at Copenhagen) this makes it easier for the Kyoto Protocol to be left high and dry. Again Venezuela led the charge with a call to delete all text in the paper addressing existing mechanism, since they are “illegal”. As a consequence, developing country after developing country intervened to support this call for deletion of all such text including the big hitters - Brazil, China and India.

However, the EU continues to push for a single text - an “integrated outcome” in Copenhagen, implying that the two streams will at best be merged, and at worst, KP will fall away to make room for an agreement under the Convention inclusive of the US. This remains one of the key sub-texts - how can the US take part in the CDM, if Kyoto ratification is a political impossibility? Australia, Norway, the European Presidency, Mexico, New Zealand, and of course the US are also strongly supportive of keeping the textual references to KP mechanisms in the LCA text, although bracketed for the time being. Again, it appears that this subject has largely polarized the discussions, such that the age-old cracks have re-appeared between Annex I and non-Annex I nations. The outcome? The Chair ruled that the text should remain and the next and final session of the Contact Group before negotiations close in Copenhagen should focus exclusively on new mechanisms such as sectoral crediting and trading.

An interesting thought: one can speculate that it is important to the aforementioned supporters to retain the textual reference to KP mechanisms in the LCA text because it ensures that if the KP track does trip and fall in December, the aspects of the KP that Parties would want to retain are ready and waiting.

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Day 7 - 5 October

Taking Stock

After a day of rest for many negotiators (although by no means not all) there seemed to be a continuing sense of taking stock of progress to date, the road forward and pondering whether Copenhagen really does presage the end game or, in the words of Churchill, the end of the beginning?

In this regard many quoted Yvo De Boer’s words on Saturday when he said:

“Rio was the first step along the way, Kyoto the second and Copenhagen will be another step but Copenhagen will not be about working out the detail needed to operationalise or make an agreement usable. There will be an awful lot of work to do after Copenhagen to implement a deal. Therefore another step will be required after Copenhagen.”

This chimes with feedback we have been getting from recent high-level meetings in New York where it is clear that expectations of what will be achieved at Copenhagen are being actively managed down. It would seem clear that the US will not be able to agree to anything in Copenhagen which has targets as this would be counter-productive domestically in terms of passing domestic cap and trade legislation. The most the US could sign up to at Copenhagen is a high-level agreement or declaration on principles leaving the negotiation of binding targets, if at all, to a later date.

As we move into the second week, there does seem to be a renewed sense of optimism and urgency in some areas to make concrete progress, at least in certain areas:

Is the writing on the wall for the Kyoto Protocol?

Forward movement from the first week can perhaps be summed up as follows:

1. The production of 12 non-papers designed to start the process of reducing the length of the negotiation texts (see discussion of today’s Contact Group on a shared vision for long-term cooperative action below);
2. Progress in the areas of Technology Transfer and Forestry/REDD;
3. What is described as a growing acceptance that the writing is on the wall for the future of the Kyoto Protocol - the negotiations in the various AWG-KP Contact Groups have been described as going in circles with no evident progress - certain commentators ascribe this being the result of an acceptance by many that the Kyoto Protocol is not going to survive Copenhagen.

The Future of the CDM

In light of this new mood surrounding the possible demise of the KP and renewed energy and progress around the AWG-LCA there is much discussion about the future reform and legal basis of the CDM.

A new reality in the negotiation process as this blog reported last week is the emerging support for the CDM by the US. This blogger has spent the day in a number of bilateral discussions with key negotiators around how the CDM could be salvaged from the KP and incorporated into the UNFCCC. This will be critical to the interests of the US in ensuring a legal bridge for it to the CDM. There is talk that there will be an attempt to incorporate a number of lines into the UNFCCC to recognise the CDM and provide a legal basis for such a bridge to the CDM. This may be critical in the face of vociferous arguments raised by Parties such as Egypt and Venezuela that there is no legal basis under the UNFCCC and the mandate of the AWG-LCA to discuss market mechanisms including the CDM.

However a word of caution, certain negotiators fear that this may be too simplistic view of allowing the AWG-KP to die and seeing the solution as the cherry-picking of elements of the AWG-KP in any new agreement. They fear, with some logic (see above) that what emerges from Copenhagen will be at most a high level declaration and thus insufficient to support a new regime, let alone market mechanisms such as the CDM.

Shared vision on long term cooperative action

There was much excitement around AWG-LCA Non-Paper of the Chair to the AWG-LCA Sub-Group on a shared vision for long-term cooperative action. There was speculation whether or not this particular “Non-Paper” might presage one of those critical moments where the shape of negotiations is determined and progress accelerates. Essentially this sub-group could be one of those non-events within the process or the basis for a future framework. The non-paper seemed to be the attempt by the chair to float a balloon to test the water for appetite to an over-arching framework, in effect a blueprint for a Copenhagen declaration covering all elements which would needed as the basis for a continued political discussion.

The Contact Group session was going to be a critical test of this attempt to set the agenda for Copenhagen. Many concepts within the Non-Paper might arguably be going beyond any legal basis provided by the UNFCCC. Would this be the basis for certain parties to shoot down the “balloon”?

As one listened to one intervention after another this blogger got the distinct feeling that this balloon may have already sprung a leak before having lifted off the ground. However, in an open session where Parties are clearly making statements with an eye on domestic consumption, it is hard to tell. This was clearly on the mind of the Chair and the Contact Group will now move to smaller sub groups meeting in closed sessions to facilitate progress on the non-paper. It will be interesting to see what emerges from behind the closed doors at the end of the week.

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Day 6 - 3 October

Start of week 2!

The start of week two was marked by two important discussions (in additional to the NGO  party on Saturday night). The first was on the new “sectoral mechanism” non-paper, which turned out to be a much broader paper on market mechanisms generally, touching on both CDM  reform and REDD  too. The second was a discussion of the new REDD non-paper. Both of these are hugely important for the carbon markets and private sector going forwards.

Subgroup on mitigation (sectoral mechanism)

Following earlier discussions on this issue and a “contentious” table that had been put together by the Facilitator of this subgroup comparing different parties sectoral mechanisms proposals (see below), I had expected today’s session to be a more lively debate about the desirability of market-based approaches, particularly given the strength of some of the views expressed in yesterday’s stocktaking plenaries. When a few of these sentiments did begin to be raised, the US  put in a memorable performance, pointedly directing the parties’ attention to the number of emissions reduction projects that had taken place pursuant to market mechanisms in developing counties and reminding them that the use of such mechanisms is voluntary.

The Facilitator began the session with an overview of the recently unveiled “non-paper 9 (pdf 64KB)”. Though some parties did underline that the Bali Action Plan requires “various approaches”, not just market ones, to enhance mitigation, a line-by line review was not undertaken, putting this off until next week. The paper’s broad-based approach, with references to NAMA  trading, sectoral trading, setoral crediting, improvement of market-based approaches and CDM reform offers some clear beacons of hope for the investor community. Though the text does begin with “Option A”, which provides that “Parties shall not make use of market-based approaches”…. It is clear that negotiation of the text has a long way to go.

Subgroup on REDD

The Facilitator presented a non-paper on REDD, “non-paper 11 (pdf 59KB)”. As with non-paper 9, the discussion did not go line-by-line, and parties were given the opportunity to express general views. Overall, it received a favourable reception. The paper also provides for “market-linked revenues” and for the possible access to and use of markets through the issuance of carbon credits for emissions reductions resulting from reduced deforestation and forest degradation and for conservation and for removals resulting from enhancement of carbon stocks in existing forest. Again, the text is in its early days. Parties raised concerns about cross-overs with other negotiating streams.

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Day 5 - 2 October

End of week one!

Today saw what is being viewed as the end of a “short week one”, with the start of a “long week two” beginning tomorrow, Saturday.

During the afternoon, a stocktaking session was held under each of the LCA and KP streams in order to review the progress made during the last five days and look at what remains to be done. So this entry is being put out in advance of the weekend, by way of a bit of a wrap-up of some of the views expressed at those sessions.

Stocktaking - KP

Progress

Under the KP negotiating track (see Day 1), relatively good progress was reported in respect of “LULUCF issues” and work on “potential consequences”, neither of which have been covered in this blog! In other areas of the KP stream, progress had been less marked.

Just not enough

Both South Africa and AOSIS (but they were not the only ones) reminded the parties of the inadequacies of Annex I parties’ emission reduction targets currently on the table, in the face of scientific evidence. AOSIS and others took the opportunity to reinforce the fact that they remain committed to the Kyoto Protocol staying in effect into and beyond the second commitment period (after 2012), addressing suggestions during the week that other approaches might be adopted. Indeed, references to a “single agreement” were perhaps more restrained than they had been on Day 1.

The EU recognised the progress referred to above, and like New Zealand and other Annex I countries, referenced their own targets. India criticised the conditionality of some targets.

Summing-up

In summing up, the Chair found that though progress was being made, it was not enough, highlighting the need to close the gap between requirements and pledges. Further, he pointed out the reality of the need for offsets to be able to be used for parties to reach targets.

AWG LCA

Progress

Under the LCA negotiating track, quite a lot of progress was reported back to the Chair under different subgroups and contact groups, several of whose activities have been reported on in earlier blog entries. A number of non-papers are now available. Progress with REDD in particular has been attracting some very positive feedback. Responding to comments about the length of the negotiating text, the Chair pointed out that the number of pages was not as important as the number of issues on which progress had been made.

Yes we can!

In moments of light relief, laptops were thrust in front of the cameras and broadcast on the big screens displaying variously the messages, “Yes we can!” and “Yes, if fair and equitable”.

Use of markets

The fact that the KP and LCA tracks are completely separate, if very related, meant that it was not possible to avoid a repeat of some of the ideas expressed in the KP session being addressed again. Venezuela went for the jugular, stating that you cannot re-enact olden day land grabs by modern day air grabs. Statements like these recall some of the discussions earlier in the week questioning the role of markets in environmental protection, one of many contentious issues which will continue to be raised next week.

Next steps

The Chair had encouraged parties to concentrate on central issues. The EU identified eight key areas, being (i) the need to know what “the numbers” are, (ii) the need to build efficient machinery for the lifecycle of NAMAs, (iii) a reporting and accounting system, (iv) tools and instruments for cost efficient climate polices - improving the flexible mechanisms and clear provisions for new market mechanisms, (v) review and compliance systems, (vi) finance and capacity building, (vii) operational provisions and provisions for adaptation and (viii) a long-term goal - operational language for 2050. This seems like a fairly comprehensive list! It can only be hoped that the parties can make substantial progress towards this next week.

Of course, not all parties have the same shopping list yet, so the struggle is about more than just what brand of ingredients to pick, it’s also about what goes into the basket.

Operational focus?

One theme coming out of the US delegation has been that it is helpful to focus on operational aspects of the future agreement in order to find consensus. This was rejected by India, for whom an agreement that focuses on operational outcomes would “fall short”, before the US took to the floor.

US

The US, taking the floor for the first time almost at the end of the afternoon, took some comfort from recent legislative developments in Congress and the capacity of the EPA to regulate. They did call for a focus on the operational elements of an agreement as a way forward, an idea that the Chair seemed receptive to.

Business NGOs

Business NGOs in both sessions highlighted the importance of private funds to be mobilised, the fact that businesses are expected to continue to operate regardless of any agreement and that going beyond the CDM is important. They also noted that crediting and trading mechanisms require the participation of the private sector.

Thoughts

So what does “week 1” bring to the carbon markets? Well, it doesn’t seem to have been a disaster, but progress hasn’t been as rapid as could have been hoped either. One negotiator reflected that during a former career in the private sector, some of the discussions would have seemed glacially slow, whereas now the negotiator leaves similar sessions thinking that the parties have had a useful exchange of views… But it is fair to say that little has been provided in the way of additional market certainty as yet. On the up-side it is positive to be engaged in discussions about CDM reform and new sectoral mechanisms. Let’s see what “week two” brings.

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Day 4 - 1 October

October!?! That’s really not long until December…

Norwegian / Mexican financing side event

Overview

The continents realigned themselves over lunch today when Norway and Mexico teamed up to explain their separate but complimentary proposals on climate change financing.

Mexico

A bottom-up (geographically) approach was taken and Mexico began by outlining its proposal for the establishment of a World Climate Change Fund (or Green Fund), designed to achieve greater mitigation commitments from all Parties without affecting economic growth or development policies.

It is expected that all countries that wish to benefit from the fund (both developed and developing) participate and contribute to it, with the exception of Least Developed Countries, which could benefit without contributing. Contributions would be determined by way of a negotiated formula based on responsibility (polluter pays), equity (partly on per capita emissions), efficiency (emissions per unit of GDP ) and economic capacity.

Eligible countries would have access to the fund for projects that generate concrete results and that contribute to climate change mitigation/adaptation. Mitigation actions would have to be independently verified. It is foreseen that developed countries would contribute two thirds of the fund’s total resources, and the remainder would be contributed by developing countries, which could therefore double their investment in mitigation by participating in the fund. More details are available on the internet.

Show me the money

So where could the money come from to fund any Green Fund or alternative mechanism for mitigation and adaptation in developing countries? It is anticipated it would come from public finance. As to possible sources of such finance, let’s move north.

Norway

The Norwegian delegation and their consultants, the Center for Clean Air Policy, set out their proposal for the generation of funds by way of auctioning “GAAUs” (generic assigned amount units), emissions units that would be allocated for auctioning under a Copenhagen Agreement. It is estimated that at a price of €40/tonne in 2016, auctioning 1 per cent of AAUs would raise €3.75 billion (without the inclusion of the US ).

GAAUs could be purchased by governments, however, the marketability of GAAUs could be improved by their being able to be used for compliance under domestic emissions trading schemes. Though this blogger wonders what the European Commission would make of this idea! It is hoped that a dynamic trading market for GAAUs would eventually develop.

More details of the Norwegian proposal is available here. Combined with Norway’s sectoral proposal, there’s no shortage of market-based innovation coming out of the Norwegian delegation.

Either way

It should be noted that either the Mexican Green Fund or Norwegian GAAU auctioning model could exist independently.

In the garden cafe

Discussions continue in the UN  building’s garden cafe and behind the scenes among NGO s and the negotiators along the usual lines… Will, when and how would the LCA  and KP  texts be merged (a merger is not a foregone conclusion)? How can the LCA text be shortened? How will fundamental discussions about the use of markets, expressed openly yesterday, be managed? At what point will key decisions be handed over to political leaders? How will that be done (thinking back to the Welcoming Ceremony’s demands for a text that sets out clear political choices)? Will negotiations spill over into next year?

Contact Group on Annex I Parties’ emission reductions

Debate rumbled on this afternoon over, among other issues, what level parties’ targets should be set at (this blogger has heard a lot about Japan’s new target this week…). Japan emphasised that flexibility over base years might be a way of providing flexibility to parties (the implication being that they would then be able to take on new commitments). Other parties were keen to stick with the “traditional” 1990 base year, a year for which inventories have been reported and verified.

Contact Group on enhanced action on mitigation and its associated means of implementation

During this session parties had a wide-ranging discussion about implementing mitigation in a discussion during which parties set out their interpretations of their respective obligations under the UNFCCC and the Kyoto Protocol. The US highlighted the importance of different countries being able to choose different mitigation actions but underlined the importance of reporting. The Chair asked for more clarity on what President Obama refers to as parties “standing behind” an agreement. Australia ran through their proposal for schedules which can respect different circumstances and respective capabilities of parties, a proposal which seemed to receive support from the EU .

India set the cat among the pigeons at the end of a series of submissions by Annex I countries by stating its view that the proposals on the table were totally in conflict with the Bali Action Plan and UNFCCC and erase the distinction between Annex I and non-Annex I countries by seeking to apply mitigation commitments to non-Annex I countries. The Chair summed up, requesting that the framework of the UNFCCC does not become a cage, implying that the parties should not rely on its provisions to prevent them being able to reach an agreement at Copenhagen.

Comment: Jonathan Ball, Norton Rose Group

Kirk opposes push to ease patent protections in climate talks

Yesterday, US  trade representative Ronald Kirk waded in to the debate around freeing up proprietary technologies required for mitigating climate change, coming out firmly against any proposal for easing patent protection in relation to these technologies. As readers will know, the issue of speeding technology transfer particularly to developing countries is being hotly debated in the run up to Copenhagen. This IP  blogger seriously doubts whether a proposal that requires the diminution of patent rights (including opportunities to obtain them in the first place) being proposed by some in the developing world is ever going to be something that the developed world governments (and the privately funded innovators in their electorates) would be willing to agree to, certainly not until the effects of climate change are more keenly felt.

Furthermore, the Doha declaration on the TRIPS  Agreement under which the WTO  has agreed to compulsory licensing of patents in circumstances of urgent public health needs was hugely contentious in negotiation, and remains so. Seeking to push through a Doha type declaration in relation to mitigating climate change would be equally contentious and time consuming: time that we may not have.

Having said that, everyone can see that a balanced position is urgently required to get technologies out there in the short term but while still incentivising innovation. Less contentious routes may be via state organised patent pools and other technology platforms, with mechanisms for FRAND  licensing, drawing parallels with the handling of patent rights in the context of international standards.

Jonathan is an intellectual property lawyer and partner in the dispute resolution department in London.

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Day 3 - 30 September

Subgroup on mitigation (NAMAs)

Bit of a spat

Meetings of the Subgroups on paragraphs 1(b)(i) and (ii) of the Bali Action Plan (both of which relate to mitigation) had been delayed slightly following a bit of a bust-up on Monday afternoon (which seems like a week ago) regarding how to take account of proposals on principles and frameworks for climate change mitigation actions by all parties. The US, Japan, Australia, EU, and others wanted another Subgroup to be formed which would deal with common mitigation elements. Others objected on the grounds that this concept was inconsistent with developing countries’ obligations under the UNFCCC. Informal consultations ensued.

NAMAs

The Subgroups got going today. The first of the two Subgroups to meet was on paragraphs 1(b)(ii) of the Bali Action Plan which relates to Nationally Appropriate Mitigation Actions (NAMAs). NAMAs are hoped to underpin developing countries’ mitigation response to climate change. There was no direct engagement on the negotiating text. The parties are still considering how NAMAs should be structured, including how they “get into the system”, the idea of using a registry to record actions and match them to support by developed countries and also monitoring, reporting and verification (MRV) procedures.

Contact group on development and transfer of technology

On your marks?

Parties continued to outline their general views and positions, avoiding detailed comments on drafting. Work on a consolidated text is due to be completed by tomorrow.

Scaling up?

Everyone agrees that dramatically scaling up the implementation of low-carbon technologies will be essential. There are two schools of thought on how this could be done. The first is that a very specific framework or mechanism is required which deals with technology transfer. The second is that technology transfer should not rely on one mechanism but a series of different mechanisms, such as NAMAs (see above) and carbon trading. Both Norway and Uganda (on behalf of LDCs) pointed to the need to get the support of the private sector in order to attract investment.

Development plans?

With respect to the call for developing countries to adopt low carbon development plans and strategies (or a variety thereon) in order to help roll out low carbon technologies, the Philippines (slightly tongue in cheek but making a serious point), was keen to learn more about such panaceas - had they already been put in place by developed counties? Had they worked? What technologies had been used to implement them? How successful had they been? (some red faces in the auditorium) How much had it cost? Whilst the EU may have had some responses to these questions (this blogger can think of more than one or two low carbon strategies that have been implemented by DG ENV and various Member States over the years), the point was well made.

Subgroup on mitigation (sectoral mechanism)

Those who have been generous enough to follow this blog since “Day O” below recall that Norton Rose has been following the development of a new sectoral mechanism which it is hoped would help to massively scale up investment in emissions reductions in developing countries. We have raised concerns about the current proposals and their ability to attract private investment (see below).

This afternoon provided the opportunity for negotiators to “engage” on what turned out, as expected, to be a contentious issue. Following August’s Bonn Talks, a useful table had been put together comparing the parties’ proposals.

It didn’t take long for parties to see red. Some called for a fundamental discussion about whether or not we should use markets at all before going any further with the discussion. This blogger suggests that it is difficult to have such a discussion without knowing the in and out of the proposals on the table!

This session was notable for the US delegation’s outspoken support of the CDM (subject to certain caveats).

It is to be hoped that more time can be found in the negotiation timetable to make headway on this issue.

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Day 2 - 29 September

Contact group on other issues (mechanisms)

A single agreement?

Today started with a bang! Yesterday the EU was clear that the negotiations should lead to a single agreement. This prompted a number of discussions, both in and out of Contact Groups. This morning it was announced that Tuvalu had formulated the following question:

“If the Kyoto Protocol is incorporated within a new legally binding agreement, how would the existing decisions, rules and modalities for the operation of the Kyoto Protocol have legal continuity in a new agreement, when such decisions have been made by the COP/MOP, an entity that would no longer exist, and parties to that new agreement may be different?”

In the corridors

Delegates have been chatting about this is the corridors. The view among some seems to be that a lot of the existing architecture could and would be transferred to a new single agreement. It can be hoped that this process would transfer some of the important aspects of the current negotiations, for example in relation to reform of the CDM, into any new agreement.

Comment

It occurs to us that it should not be beyond the wit of smart international lawyers to create a mechanism whereby the COP can by incorporation adopt decisions of the COP/MOP. After all the CoP is the “decision making” body to the UNFCCC under which the Kyoto Protocol has been enacted. One of the strengths and weaknesses of public international law by comparison to domestic law is it relatively malleability and here that could be a strength.

We would certainly welcome the views of others on this point.

The apparent desire to scale up CDM and introduce new mechanisms under a new single agreement, may give rise to concerns about how volumes of different credits will be managed, for example, what credits will be able to be used by operators after 2012?

CDM reform

The “single agreement” question was not one that was allowed to hold up discussions on reform of the CDM. The intention of the session was to “clean up” the negotiating text in order to facilitate future negotiations. Some progress was made in establishing the parties’ position in relation to “standardised multi-project baselines” and “positive lists” in advance of more detailed negotiations. Some concerns were expressed about the need to keep options open at this stage and also to preserve the environmental integrity of the CDM.

Standardised multi-project baselines beef up access to the CDM through the establishment of baselines based on criteria established at a regional, national or international, rather than project-by-project level. This could encourage the expansion and scaling up of the CDM and get it to new sectors and regions.

Comment

Improvements to the CDM are likely to be welcomed by project developers, financiers, and those seeking to roll out relevant emissions reduction technologies. The same is true of positive lists of technologies and projects types which could, in the future, “automatically” qualify under the CDM.

Subgroup on sectoral approaches

The Facilitator of this Subgroup sought to establish broad agreement on high-level framework aspects of the revised negotiating text as they relate to “cooperative sectoral approaches and sector-specific actions”. He took a firm line with parties not prepared to fully engage with his proposed consolidated text. A number of parties sought to ensure that the agricultural sector will be specifically taken into account going forwards.

Shipping and aviation?

One area of discussion of particular note for shipping and aviation clients was whether such global sectoral approaches should address emissions that cannot be attributed to any particular economy, including shipping and aviation. An amendment to this affect was tabled by the EU, which believes that by 2050 two thirds of global emissions may come from the aviation sector.

The approach to such “non attributable” emissions attracted some controversy. Some parties argued that the boundaries of sectors should respect national frontiers and that the International Maritime Organisation (IMO) and International Civil Aviation Organization (ICAO) were the proper entities to address this issue. A number of potential ways forward were suggested, including the possibility that representatives from the IMO or ICAO be invited for a Q&A session, through to the COP requiring the IMO and ICAO to implement a legally binding regime.

Comment

The regulation of shipping and aviation emissions is a contentious area which raises opportunities and challenges depending on the sector of the economy in which a business operates and the proposed policy options adopted. With the inclusion of the aviation sector in the EU ETS from 2012 the European Commission seems unlikely move away from its stated determination to regulate shipping emissions should the IMO approach fail.

Subgroup on REDD

For many countries, REDD is likely to be a central part of their climate change mitigation actions going forwards. The current text sets out a framework for the implementation of a “REDD-plus mechanism”. The issue of defining exactly what REDD means was left to be determined in the future, despite the protestations of some parties. Instead, the focus was on whether there were principles or elements missing from the text.

One theme that recurred in the REDD discussion was whether REDD should be treated as integral to or separately from broader Nationally Appropriate Mitigation Actions (NAMAs). It was generally agreed that there is a great deal of cross-over, apart from in very specific areas such as monitoring, reporting and verification (MRV), between REDD and NAMAs generally.

Comment

Discussions remain to some extent in their early stages. As large amounts of private finance are understood to be needed in order to contribute to the costs of adapting to and mitigating climate change, it would be helpful for positive statements to be made to the effect that financing for a REDD mechanism may come from market-linked mechanisms.

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Day 1 - 28 September

Welcoming ceremony

The Bangkok Talks began with a Welcoming Ceremony (and a bit of a queue by the time the stragglers arrived).

Capacity is limited and observers (including Norton Rose Group) are being threatened with a limited number of badges to control the number of people allowed access to public sessions. Given the crush at this afternoon’s Contact Groups (and absence of power sockets for laptops) - we can see why. This is likely to become more of a problem as we move towards Copenhagen.

A number of distinguished officials from Thailand and Denmark, including the Thai Prime Minister, and high-level representatives from the UN  made speeches. There seemed to be confusion as to what message to send out. All agreed that time was running out and decisive action was required. But had last week’s triathlon of meetings in the US  been positive? The consensus seemed to be yes, but the G20  meeting did not deliver on climate finance - fast track finance is needed to kick start mitigation and capacity building.

One message was stark and equivocal - there is no plan B. And a recent Alliance of Small Island States (AOSIS) summit had served as a reminder that many nations are already fighting for survival.

Opening of the AWG-KP

After the formalities, the Chair of the AWG-KP  (the Kyoto Protocol negotiating stream at which the US only has observer status), John Ashe began the proceedings by announcing the ratification of the Kyoto Protocol by Turkey, Kazakhstan, Zimbabwe, bringing the number of states that have ratified to 189.

The EU  highlighted the fact that most Annex I (industrialised) countries have targets on the table and that this provides a useful basis for negotiations, but that these targets are insufficient and not in line with what the 17 gigatons of reductions by 2020 science says is needed to avoid dangerous climate change. Interestingly the EU was very clear that a single agreement should be the outcome of the negotiations. It went to on congratulate Japan on its recently announced target of 25 per cent reductions in emissions by 2020 compared to 1990 levels, something which was mentioned throughout the day and during Sunday’s seminar with the Australian delegation.

Japan elaborated on this in one of the afternoon’s Contact Groups, emphasising that this pledge was not unconditional and is premised on a fair and effective framework being agreed, targets being adopted by developed economies, and developing countries with large emissions profiles reducing their emissions pursuant to the principle of common but differentiated responsibilities.

Opening of the AWG-LCA

The Chair of the AWG-LCA  (the negotiating stream which does include the US), Michael Zammit Cutajar, opened the proceedings. He quickly turned to the Secretariat to run the delegates and observers through the relatively complex web of documentation that is available on the UNFCCC website. This was very useful (but took a little time…).

A key hope for the LCA track expressed by a number of negotiatiors is that greater clarity will be achieved with regard to a sctoral mechanism. This is likely to be addessed on Wednesday afternoon.

One of the key messages at the Welcoming Ceremony was that the negotiating texts were not yet clear and did not map out political choices. There are still some several hundred pages of options and proposals. This was also raised by the EU delegation. The Chair pointed out that what really needs to be done is to resolve some of the key negotiating points behind the text, which will cause lots of the text to fall away. It can only be hoped that this is achieved quickly.

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Day 0 - 27 September

International Climate Change Architecture Seminar

Norton Rose Group to speak

The Bangkok Talks started early for the Norton Rose Group team, with a presentation to many of the key Government negotiators from around the world, scheduled to be made at the Australian delegation’s International Climate Change Architecture Seminar at the Queen Sirikit National Convention Centre. Norton Rose Group was one of a handful of private sector organisations invited and able to attend this event. This builds on our relationships with the Australian Department of Climate Change (DCC) and fits well with our pending merger with Deacons in Australia.

Early optimism

The seminar started on an optimistic note which largely set the tone for the afternoon. A central theme was convergence, and a member of one delegation reflected early on that there seems to be a growing will among political leaders for convergence and a commitment to direct negotiators to find solutions.

Five themes

Elizabeth Peak of the Australian delegation went over five areas of convergence in the negotiations:

1. The idea that actions must be tailored to individual circumstances.
2. The idea that a flexible approach is needed that works for all countries and that works domestically and internationally.
3. The principles of common but differentiated responsibilities and respective capacities being respected, eg developed nations must continue to take the lead with developing countries encouraged to take action suitable to their circumstances.
4. The importance of transparency in recording efforts (through registers, annexes or appendices to an implementing agreement).
5. The need for the agreement to be evolutionary and to be able take account of new information - a clear reference to the next IPCC report due in 2014.

Clearly, references to flexibility don’t go down well with all countries - especially those facing urgent adaptation needs …

Private sector?

It was great to be asked to respond to Catherine Leining’s (New Zealand) presentation on the New Zealand “Nama Crediting” (see glossary link) proposal, a mechanism by which emissions credits can be generated as a result of emission mitigation actions taken by developing counties …

… despite the sensation of being the lone voice of the private sector in the room (and not, by this point, having slept for 30 hours). I raised a number of “private sector” issues with proposals for sectoral mechanisms in general. These include:

1. The importance that any sectoral mechanism isn’t anathema to the private sector if the private sector are going to invest in it.
2. The need to ensure continuity of the existing flexible mechanisms and protect existing private sector investments.
3. The need to allow for “direct crediting” for credits to investors and for investors to be able to get security over credits.
4. The need to avoid investors having to take the risk of a whole sector achieving a certain target before getting a return on their investments
5. The importance of any credits being fully fungible with other credits in issuance

My suggestion was to organise some lengthy and detailed workshops with all participants to work the proposals through from cradle to grave based on some concrete investment case studies. Though the idea had resonance, some showed trepidation at the idea of being stuck in a room full of lawyers an bankers for days (of course, project developers, country representatives and industry experts would also be required…)

Artur Runge-Metzger, the unit head for climate strategy, international negotiation and monitoring of EU action in the European Commission’s Directorate-General for the Environment, suggested that we might see a short enabling clause on sectoral mechanisms (with details to be worked out at a later date). Without addressing the issues above this could prove problematic for attracting private investment.

World Bank

Warren Evans of the World Bank showed an excellent slide on “the mixer”, identifying that there is no single policy or mechanism that will deliver the required solutions - we need a variety of financial sources and policies working together.

He also pointed to some very exciting examples of how public funds have helped to leverage very significant amounts of private funds to create low carbon investment.

Too much to mention

Other great presentations were made on adaptation, long-term carbon planning and reducing emissions from deforestation and degradation (REDD). On the latter, it is clear that the Australian government has done a lot of work on the potential use of market mechanisms for REDD, and is likely to be able to take a lead on this internationally should the opportunity present itself. They presented in an interesting and symbolic partnership with Indonesia.

Comment

It is clear that events like this show we are moving into the card game as we approach Copenhagen in December. Negotiators recognise they need to get their thinking straight on market mechanisms, both for the reform of the existing mechanisms and new mechanisms.

The lack of engagement and cross-over between the private sector and negotiators on critical issues and the design of the sectoral mechanism is worrying.

Norton Rose Group will be attending all negotiations between now and December and will be engaging with clients and trade associations to ensure the private sector voice is where possible heard.

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Introduction

Welcome to our blog covering the series of UNFCCC meetings taking place throughout the year, designed to culminate in an ambitious and effective international response to climate change, to be agreed at the United Nations Climate Change Conference (COP 15) in Copenhagen, 7-18 December 2009.

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