The USA steps in

 

This week has seen the United States table draft negotiating text to the United Nations in the lead up to Copenhagen, or more formally “United States Input to the Negotiating Text for Consideration at the 6th Session of the AWG-LCA“. I should say that this text appears very preliminary at the moment, but it does recognise the key elements that most parties are now discussing.

 

Importantly, the text highlights the need for assistance to developing countries, with the paragraph;

The development of low-carbon strategies and the implementation of mitigation actions of developing country Parties will, as appropriate, be supported by financing, technology, and capacity-building, as set forth in Section 4 and Appendix 3.

At this early stage though, Section 4 and Appendix 3 don’t really contain much. The US negotiating team are also seeking input, particularly from business, given the expectation that private finance and project investment will play a significant role.

This then brings me to some ideas in this area. There are some useful lessons in the EU that can be applied more broadly. Rather than simply relying on the CO2 market to deliver reductions, the EU has also focussed on certain classes of technology and structured programmes and targets to promote and develop them. This is most apparent for carbon capture and storage where the EU has set a strong agenda;

  • Established a 10-12 project demonstration programme, with an incentive structure that stretches through to 2015.
  • Ensured that the CO2 market recognises CCS as a viable mitigation technology.
  • Implemented an incentive structure to augment the financing provided by the carbon market (the use of 300 million allowances from the ETS New Entrant Reserve). This additional funding is in recognition of the higher cost demonstration stage that now faces CCS as a new technology.

Whether it is CCS or some other technology area, the idea of establishing specific programmes of activity, setting timelines and ensuring adequate funding needs to make its way into the international agreement.

One idea which has been put forward by the World Business Council for Sustainable Development, repackages the original notion of sectoral agreements. They have proposed a large-scale sector-based approach introduced into the framework. The approach would give rise to agreements, each negotiated for a specific sector by a limited number of parties (i.e. governments), as “satellites” to the main agreement, but utilising the infrastructure (crediting mechanisms, clean technology funds, MRV etc.) offered by the overall framework. Each agreement would have a specific purpose and would operate by encouraging wide spread business-led project development in the target countries, incentivised by the mechanisms and the availability of targeted funding and financing. The projects would typically result in the introduction of infrastructure and new technologies into developing countries together with the capacity for ongoing operation and future expansion.

This then puts developing countries on a pathway towards substantial future action. Ideally, each agreement would lead to the sector within the developing country involved to then adopt a long term binding mitigation target. Importantly, the adoption of a target in a developing country is then specifically linked with the necessary funding and capacity building such that those countries can then realistically manage CO2 emissions going forward.

Such agreements would be structured as follows:

  • Each represents a quantifiable and manageable mitigation or adaptation action plan. Unlike developed economies that have the capacity for structures such as economy-wide “cap-and-trade” systems, a more clearly definable project based programme could be initially used to tackle developing country emissions.
  • Each would be negotiated separately, typically by a limited number of parties (e.g. parties to an agreement on emissions from coal fired power stations might include China, India and South Africa as those nations taking specific action and the USA, Japan, the EU and Australia as those gearing their emissions trading systems to accept credits as a funding mechanism) as a “satellite” to the main agreement.
  • Each agreement would have a clear purpose and end point. The scope would be clearly defined and the objectives would be agreed upfront.
  • Each agreement would be able to draw on the supporting “cocoon” for funding, such as the creation of credits (offsets) through a project mechanism, MRV capacity and so on.
  • Each agreement should include the eventual implementation of a long term binding target for the sector or sectors in question.
 

 

The approach has broad application and could be extended into areas such as avoided deforestation and afforestation (i.e. as envisaged under REDD).