• APPENDIX
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The Path to a Post-2012 Regime

The process to arrive at an international climate agreement for the period after 2012 has been long and arduous. As our understanding of the urgency of early action to avoid the worst dangers of climate change has increased, so has the political pressure on governments to conclude an effective agreement.

The Fourth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC), which shared the 2007 Nobel Peace Prize with former US Vice President Al Gore, has promoted the powerful voice of the scientific community and a growing chorus of public support to this urgent call.

In addition, a number of independent studies, such as the report for the British government by former World Bank Chief Economist Sir Nicholas Stern, have highlighted concerns that the economic and social costs associated with the increasing impacts of climate change will far outweigh the costs of effective mitigation of GHG emissions. In fact, the costs associated with mitigation of climate change seem relatively small when viewed on a global basis over the next several decades, and in addition yield many potential economic, social and human health benefits.

However, despite the obvious conclusions that early action is required, questions of who does what, when, and within what framework present political difficulties for government negotiators faced with the large task of, in effect, reshaping the global economy without either a clear mandate as to how that should be achieved, or unambiguous backing by all governments involved.

In the autumn of 2005, anticipation grew over a 'showdown' in Montreal over the future of the Kyoto Protocol, which had just (finally) entered into force in February of that year. The future of the global regime, which was in large part designed around a US-driven demand for legally binding emissions reductions obligations driving a global carbon market, and which was in fact designed to accommodate the US as a large buyer of credits, was seriously jeopardized by a change in Bush Administration policy in early 2001 and its subsequent argument that a global regime, particularly a binding global regime, was neither necessary nor desirable. However, the intervening years saw an uneasy but effective alliance between the EU and key developing countries to get the regime established, ratified and finally operational for the first commitment period, 2008-2012.

Article 3.9 of the Kyoto Protocol states that:

   commitments for subsequent periods for Parties included in Annex I shall be established in amendments to Annex B to this Protocol. The Conference of the Parties serving as the meeting of the Parties to this Protocol shall initiate the consideration of such commitments at least seven years before the end of the first commitment period mentioned in Paragraph 7 above.

As a result, just as the Protocol was becoming operational, countries had to establish a process for negotiating targets for the second commitment period, which would start following the expiration of the first commitment period in 2012.

Most countries and many experts entirely discounted the possibility that the Kyoto Protocol signatories would in fact agree to move forward with these negotiations. The US in particular was hostile to any such negotiations, stating over and over again that the Kyoto Protocol was 'fatally flawed'. However, thanks to both the resolve of the majority of countries to move forward with global climate protection and the resolve of US civil society and business organizations, as well as the skillful leadership of the Canadian Presidency, in December 2005 the Montreal COP agreed to move forward on negotiations for a second commitment period as specified in the treaty. The US delegation at first refused to participate in the talks, but at last came back to the table and agreed to proceed with negotiations. This major reversal marked the beginning of a new phase of the international climate negotiations.

Over the next two years, the negotiations proceeded on two parallel tracks: the Kyoto Protocol track mentioned above and the so-called 'dialogue' under the Convention, made up by a series of workshops covering a broad range of topics but with no formal relationship to the negotiations. In December of 2007 at the 13th COP in Bali, countries achieved:

• An agreement to launch negotiations under the Convention to replace the 'dialogue';
  
• An agenda and process for conducting those negotiations; and
  
• An end date for the negotiations of COP 15 of December 2009 in Copenhagen.

The critical pieces of the negotiation process for the future regime will be conducted primarily under the following three processes;

• The Ad Hoc Working Group on Long-Term Cooperative Action under the Convention (AWGLCAC - now shortened to AWG-LCA): this group was newly established at the COP in Bali, with the aim of creating a framework in which the US will negotiate until there is a new administration in place at the beginning of 2009; and in which China, India, Brazil and South Africa (and Japan to some extent) will negotiate until the US is fully engaged.
• The Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG - now called the AWG-KP): this is the main ongoing working group of the Parties to the Kyoto Protocol to consider further commitments by Annex I Parties for the period beyond 2012. The aim is to ensure that no gap arises between the first and the second commitment periods. AWG-KP reports to the COP/MOP at each session on the progress of its work.
• The Second Review of the Kyoto Protocol pursuant to its Article 9: the Article 9 review is where the formal consideration of the evaluation and potential improvements to the Kyoto Protocol takes place. This would be the major point of review for the entire climate regime if the US had ratified the Kyoto Protocol along with other countries, but in the current circumstances it has been difficult to get agreement on moving forward on this.

These bodies/processes will all feed into the formal COPs at the end of each year, where all the final political decisions will be taken, either at the COP (Convention) or the COP/MOP (Kyoto Protocol) level, and this will be where all the pieces will have to be put together into a coherent whole.

For the wind sector, the outcomes of these negotiations are critical on a number of key points:

• The rigour of the emission reduction targets;
  
• The resultant future price of carbon;
  
• Technology transfer agreements that actually work; and
• An expanded carbon market.

THE NEED FOR STRONG COMMITMENTS

The driver of the global climate regime must be rigorous, legally binding emission reduction targets for an increasing number of countries under the Kyoto Protocol, or its successor agreement. Rigorous emission reduction targets for industrialised countries will send the most important political and market signal that governments are serious about creating a framework for moving towards a sustainable energy future. The indicative range of targets for Annex-I countries agreed to by the Kyoto Protocol countries at Bali of CO₂ reductions of 25-40 per cent below 1990 levels by 2020 is a good starting point, although they would need to be closer to the upper end of that range to stay in line with the EU's stated policy objective of keeping global mean temperature rise to less than 2°C above pre-industrial levels.

CARBON PRICES

In addition to achieving climate protection goals, strong emission reduction targets are necessary to bolster the price of carbon on emerging carbon markets, and the regime needs to be broadened so that we move towards a single global carbon market, with the maximum amount of liquidity to achieve the maximum emission reductions at the least cost. While the EU ETS and the CDM are the two major segments of the market, and are growing enormously, they need to be broadened and deepened until they are truly global and the market is able to 'find' the right price for carbon. Achieving that objective must not be at the cost of the integrity of the system, and it will take significant experimentation and time; but it must be clear that that is the final objective, and that governments are agreed to sending the market a signal that the global economy needs to be largely decarbonized by 2050, and effectively completely decarbonized by the end of the century.

TECHNOLOGY TRANSFER

One of the fundamental building blocks of the UNFCCC when it was agreed in 1992 was the commitment by industrialised countries to provide for the development and transfer of climate-friendly technologies to developing countries. While a noble statement of intent at the time when the world was contemplating how to spend the 'peace dividend' resulting from the end of the Cold War, reality has turned out somewhat differently. For the most part, governments do not own technology (other than military), and are therefore not in a position to 'transfer' it, even if they were in a financial position to do so, which most are not.

However, in the meantime, through economic globalisation, enormous quantities and varieties of technologies have been 'transferred' through direct and indirect foreign investment, world trade and a variety of means used by the private sector as the economy has become increasingly global. As a result, the abstract government and academic debate about technology transfer in its current form has at times become dated, as it no longer reflects the economic reality of today.

Having said that, the political and moral obligations on the part of industrialised countries to deliver on this promise do exist. Developing countries, rightly, are not slow to remind their industrialised countries negotiating partners of that fact, nor that reaching some resolution of this subject will be a key part of a post-2012 agreement.

The development and dissemination of technology is a complex subject, which varies widely from sector to sector and from country to country. In the first instance, it is useful to distinguish between three major categories in this discussion:

1. The dissemination of existing climate-friendly technology;
   
2. Research and development and deployment of new technologies; and
   
3. The transfer, on a grant or concessional basis, of both mitigation and climate adaptation technologies to least developed countries and small island states.
   

Furthermore, it is necessary to define technology transfer activities under UNFCCC framework and those which can be supported by public funds which would be established internationally as part of the post-2012 negotiation. From the wind industry perspective, category (1) above is most relevant, and the correct division of labours between government and the private sector in that area is of key importance. If these parameters were clear, it is possible that a useful role for the UN system on this subject might be devised.

EXPANDED CARBON MARKETS

The global climate regime can only be aided by the expansion and integration of the emerging carbon markets. Larger markets lead to more liquidity, which in turn results in more active markets and a greater likelihood of finding the 'right price' for carbon given the overall objectives to reduce emissions in the most cost efficient fashion. However, markets are by definition imperfect, and require substantial and rigorous regulation to function effectively towards their stated goals.

In pursuit of the final objective of a global, seamless carbon market, there are a number of steps that can be taken. First and foremost, it is essential that the US as the world's largest CO₂ polluter, joins the global carbon market, which was in fact designed largely at the instigation of the US and with the expectation that the US would be the major 'buyer' on the global market.

Second, the membership of Annex B needs to be expanded to include those countries which have recently joined the OECD and those whose economies have grown to reach or even exceed OECD or EU average income per capita. And third, there are many proposals under discussion for improving the scope and the effectiveness of the CDM in the period after 2012.

A SECTORAL APPROACH FOR THE POWER SECTOR

The sectoral approach has been proposed as one way to reform the CDM. A sectoral approach could also avoid the counterfactual and hypothetical questions of additionality at a project-by-project level. The concept was further developed into a broader discussion of using sectoral approaches to engage developing countries more fully in the post-2012 regime. The project-based approach does not satisfy the requirements for achieving rigorous measures to create the 'significant deviation' from baseline emissions growth in rapidly industrialising countries that models show are required to achieve an emissions pathway consistent with rigorous climate protection targets.

To ensure the maximum uptake of emissions-reducing technology for the power generation sector, the Global Wind Energy Council (GWEC) and others are exploring options for a voluntary electricity sector emissions reduction mechanism. The main characteristics of this proposal involve establishing a hypothetical baseline of future emissions in the electricity sector in an industrialising country, quantifying the effect of national policies and measures, and on that basis establishing a 'no regrets' target baseline for the entire electricity sector, which would usually mean a limitation in the growth of emissions in the sector. Reductions in emissions below that baseline in the electricity sector would then be eligible to be traded as credits on international carbon markets.

The advantages of this system over the current project-based CDM would be in terms of the simplicity and scope of its operation, encompassing both clean energy production as well as a built-in incentive for energy efficiency, while providing potentially very large sources of investment in the decarbonization of the energy sector of a rapidly industrialising country. It would also be a good stepping stone between the current situations of non-Annex I countries and their eventual assumption of an economy-wide-cap as the regime develops in the future.

Source: GE

 

 

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