International Climate Negotiations Make Significant Progress – Maybe

December 14, 2011

The layered deal struck by the international climate negotiations closing this past weekend in Durban, South Africa, is encouraging. Formally known as the 17th Conference of the Parties (COP17) to the United Nations Framework Convention on Climate Change (UNFCCC) and the seventh Meeting of the Parties (CMP7) to the Kyoto Protocol, the outcome can be viewed as a nonfinal and nonbinding step in the right direction because of the new parameters for negotiation. The significance of Durban may therefore ultimately be gauged by how much it prevented and how much it achieved.

To explain, the last-minute deal struck after two full weeks of talks and two additional all-night overtime sessions realistically avoided a collapse of the overall UNFCCC climate treaty process – something that easily could have happened, the effects of which should not be understated. The major achievement is the establishment of the Durban Platform for Enhanced Action, which sets out to develop a new multilateral framework applicable to all participating countries. A series of other agreements on other significant issues are also noteworthy, including establishment of a second compliance period under the Kyoto Protocol; the establishment of the Green Climate Fund (GCF), which will rely on leveraging private sector capital to source results-based investments in emission-reducing projects; and an agreement that there should be a private sector role in financing efforts to conserve international forests.

Given ongoing global economic health problems and the 2012 presidential election coming up, it is uncertain how Durban will affect the national debate on climate and clean energy policies anytime soon. It is clear, however, that the outcome may have wide-ranging implications. . . . Maybe, of course. Here are the details:

Durban Platform for Enhanced Action: The Durban Platform for Enhanced Action establishes an Ad Hoc Working Group (AWG) aimed at developing a new “protocol, another legal instrument or an agreed outcome with legal force under [the UNFCCC]” that will create a new framework for greenhouse gas reductions applicable to all parties. Negotiations will commence immediately, and any new document is required to be finished and adopted by 2015. Any resulting greenhouse gas reduction commitments would come into effect and be implemented as early as 2020. Agreement on the platform continues a multiyear transition of the UNFCCC process away from the structural deficiencies of the Kyoto Protocol, pitting developing countries (China, India, Brazil among them) against developed nations, and toward a framework that makes sense. This tectonic shift, combined with the fact that the UNFCCC process is still standing and arguably on stronger footing going forward, is why many have already asserted that Durban is potentially historic (insert necessary and appropriate “maybe” caveat here). Any new protocol or outcome with legal force could just act as a coordinating paradigm, organizing or coordinating many distinct emission reduction activities and mechanisms implemented by governments around the world. It may not. The next three years of negotiations will seek to resolve some of those issues.

  • Extension of Kyoto Protocol and CDM Reforms: The parties agreed to set up a contentious second commitment period (CPII) under the existing Kyoto Protocol, which will commence Jan. 1, 2013. The United States did not ratify Kyoto, and Russia, Canada and Japan have already indicated they will withdraw, but 35 other developed countries will likely remain. The CPII will be set at next year’s annual climate meetings as lasting from 2013-2017 or 2013-2020. There are a host of issues to address with a CPII, most notably reforms to the Clean Development Mechanism (CDM), the main emission reduction offsets regime established under Kyoto. A guidance document was adopted in the last minutes of the Durban negotiations that seeks to reform CDM in a number of key respects, including making carbon capture and storage projects eligible to generate Certified Emission Reductions (aka carbon credits) discounted with a 5 percent withholding, establishing a dialogue to reform stakeholder engagement, and consideration of a full replacement approach to carbon credit liability and improving the procedures for programmatic offset activities. Separate from setting the CPII, a decision was adopted by the COP17 to initiate two additional dialogues to devise and develop new emission reduction offset mechanisms to be overseen by the UNFCCC – possibly along the lines of the bottom-up approach of sector-based or bilateral offsets regimes like that developed in Japan.
  • Launch of the Green Climate Fund (GCF) : The parties agreed on a set of governing rules to launch the climate finance fund agreed upon in Cancun last year. The final details of the GCF, as it’s called, will be concluded at next year’s conference, but some of the major structural rule highlights include giving the Fund independent legal status. The Fund will have authority to provide grants and concessional lending and other approved modalities. It will also employ a results-based approach to its investments and observe Fund-specific environmental and social standards. Notably, the GCF will allow private sector actors to participate in GCF investments as financial intermediaries and as developing country project participants, and a private sector facility will be set up to directly and indirectly finance private sector mitigation and adaptation activities at the national, regional and international levels. The GCF was originally designed to mobilize up to $100 billion a year in government-to-government funding by 2020, but such funding is unlikely, meaning the fund may rely heavily on private sector involvement.
  • REDD+ : An international regime to protect international forest lands for carbon sequestration purposes, known as Reducing Emissions from Deforestation and Degradation (REDD+), made probably the most progress of any issue in Durban. Of significance is that the Parties agreed that the private sector has a role to play in helping finance REDD+ and that market-based approaches to financing conservation could be developed (i.e., carbon market investments) – thereby potentially preserving what is known as the “nested-approach” for developing REDD+ projects. Parties and other accredited organizations are invited to make submissions by March 5, 2012, to suggest possible market-based approaches for REDD+. COP17 also adopted a technical report suggesting that developing countries must calculate and measure their forest carbon sequestration baselines (known as forest reference emission levels) using the CO2e emissions metric rather than land acreage. Those reports will be submitted for international review and confirmation in the future. Finally, the achievements on REDD+ safeguards and technical assessments also encourage financing from the designated financial mechanisms of the UNFCCC, which means the Parties are carving out a potential role for countries and private sector participants to take advantage of the climate financing assistance provided by the GCF to fund REDD+ activities.