Category: Paris Agreement

Paris ratification maths

September 20, 2016

The joint announcement by the US and China that they would ratify the Paris Agreement and the more recent announcement by Brazil has raised the prospect that the agreement could enter into force sooner rather than later. Could it even happen prior to COP22 in Morocco or at least by the end of 2016? Certainly the G20 gave entry into force a boost when they included this in their Communique earlier this month.

We reiterate our commitment to sustainable development and strong and effective support and actions to address climate change. We commit to complete our respective domestic procedures in order to join the Paris Agreement as soon as our national procedures allow. We welcome those G20 members who joined the Agreement and efforts to enable the Paris Agreement to enter into force by the end of 2016 and look forward to its timely implementation with all its aspects.

Paragraph 1 of Article 21 of the Agreement specifies the requirements for entry into force as follows;

This Agreement shall enter into force on the thirtieth day after the date on which at least 55 Parties to the Convention accounting in total for at least an estimated 55 percent of the total global greenhouse gas emissions have deposited their instruments of ratification, acceptance, approval or accession.

The UNFCCC is running a tracker page and the exact status by country can be found on the UN Treaties site.

entry-into-force

The combined emissions of China and the United States account for most of the 39% shown in the tracker picture above (mid-September). But of course they are only two parties, whereas 27 have ratified so far. Many of these are small island states, such as Barbados and the Cook Islands, some of which may be challenged in the near term by rising sea levels. So what might be a potential pathway to 55 / 55?

In terms of the number of parties, the Alliance of Small Island States (AOSIS) which consists of 44 members can get us most of the way there. With AOSIS and the 12 other non-AOSIS parties that had ratified by mid-September, the 55 Party threshold is surpassed. So it would appear that entry into force on this basis is achievable as other countries will doubtless come forward as well.

But 55% of global emissions may be a bit more difficult. The 40 AOSIS countries are all low emissions, so even their combined impact will be below 1% of global emissions. Starting with the USA, China and Brazil, the bar moves above 40% and with AOSIS, Norway, Peru and others who had ratified by mid-September it will approach 42%.

The 55 country and 55% line could easily be crossed with ratification by the other major emitter, the EU, but the parliamentary process in Brussels would  normally push this into 2017. However, the political push behind the Paris Agreement can hardly be described as normal. At an EU leader summit last week, there was a strong indication given that EU ratification could happen in as little as three weeks.

If the EU fast track doesn’t happen, 13% of global emissions have to come from somewhere else. Some combinations of major emitters that could deliver this are as follows;

  1. Australia, Japan, South Korea, South Africa, Thailand, Vietnam and Venezuela gets to about 10%.
  2. Russia and India are at least 5% each.
  3. Canada, Australia, Japan, Ukraine, Mexico, Saudi Arabia, Kazakhstan also combine to about 10%
  4. Taiwan, Turkey, Algeria, Argentina, Egypt, Pakistan, Nigeria, Malaysia, Kuwait, Iran and Indonesia combines to about 10%.

Russia and India are clearly important, as was Russia with the Kyoto Protocol. But their early ratification isn’t essential. The other lists above clearly show that there are sufficient 0.6-3% countries to get this over the line. The first list, combined with Iran and Indonesia is but one example.

Given progress to date, a concerted push by AOSIS and perhaps the likes of the Umbrella Group (a UNFCCC collection of countries including USA, Australia, Japan and Canada amongst others), entry into force of the Paris Agreement is quite feasible in the nearer term. With the EU on board it is almost certain.

Revisiting global emissions accounting

September 13, 2016

As COP 22 approaches and negotiators face the task of implementing the Paris Agreement, they will be required to interpret, expand on and operationalize the various Articles of the Paris text. One such piece is Article 6, which offers a framework that can support the establishment of a global carbon market. But the rules of that market may be very different to ones that have preceded it.

The design of the Kyoto Protocol resulted in a particular emissions accounting architecture that is a mixture of allowance allocation against a cap, combined with a provision for project based credits originating outside the cap (supplied by developing countries in the case of the Kyoto Protocol, i.e. non-Annex 1). These credits effectively raise the cap when they are imported into a covered system such as the EU ETS.  Within the Kyoto Protocol, allowance allocation was handled through the Assigned Amount Unit against targets agreed by developed countries (Annex 1) and the most widespread crediting or offset system is the Clean Development Mechanism (CDM) which operates on a project by project basis in developing countries. This basic design has been translated into many jurisdictions, including locations such as California which is not covered by the Kyoto Protocol.

A feature of these systems is that the accounting normally handles the entities within the cap and the project outside the cap, but no attempt is made to account for the total greenhouse gas impact on the atmosphere or against a global goal to reduce overall greenhouse gas emissions. There is an implicit assumption that the sum of the various parts adds up such that the overall outcome is better than not having conducted the exercise at all. This happens because only a small percentage of the global economy sits under a cap, so there is no mechanism available to account for the total impact.  This is one reason why some Parties challenged the appropriateness of the Kyoto Protocol itself.

A further issue related to the current structure is the macro accounting of the external credit. Projects vary in type, ranging from clearly measurable emission reductions (e.g. capturing land-fill methane) to notional reductions (e.g. a wind turbine is built, but the alternative might have been more coal). Particularly in the case of the latter example which is an energy mix question, there is normally no resolution between the local project and the overall energy mix direction of the host country. A key question is typically left unanswered; if the import of credits into a cap-and-trade system raises the cap, has there been an equivalent, albeit probably notional, decline elsewhere.

But as the Paris Agreement starts to take hold, this will likely change. The Durban Platform, established at COP17 to create a global climate agreement applicable to all to replace the Kyotol Protocol, was designed to address these issues.

The Paris Agreement is built on the concept of Nationally Determined Contributions (NDC). These are set at national level and offer a direction of travel for a given economy in terms of its energy mix and/or greenhouse gas emissions. Although the first set of NDCs offered in the run-up to COP21 were varied in nature and in some cases only covered specific activities within the economy, over time they will likely converge in style and, for the Paris Agreement to deliver, must expand to cover all anthropogenic greenhouse gas sources.

The NDCs also lead us down another path – that of quantification. The first assessment of NDCs conducted by the UNFCCC in October 2015 and then refreshed in May 2016 required the quantification of all NDCs in terms of annual emissions and cumulative emissions through to 2030. This was necessary to establish an equivalent level of warming of the climate system, which is driven largely by the cumulative emissions of carbon dioxide over time. Without such an assessment, the UN cannot advise the Parties on progress towards the aim of the Paris Agreement.

The UNFCCC didn’t have a full emissions inventory on which to base this calculation, so they established one from the best data available. But Article 13 of the Paris Agreement introduces a transparency framework and calls on Parties to regularly provide;

  • A national inventory report of anthropogenic emissions by sources and removals by sinks of greenhouse gases, prepared using good practice methodologies accepted by the Intergovernmental Panel on Climate Change and agreed upon by the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement;       
  • Information necessary to track progress made in implementing and achieving its nationally determined contribution under Article 4.

The foundation for transparency is measurement and reporting, which further implies that emissions quantification is a foundation element of the Paris Agreement. Although nationally determined and always voluntary, the Agreement effectively establishes a cap, albeit notional in many cases, on national emissions in every country. The caps are also effectively declining over time, even for countries with emissions still rising as development drives industrialization.

Article 6 introduces the prospect of carbon unit trading through its internationally transferred mitigation outcomes (ITMO) and emissions mitigation mechanism (EMM). Text in paragraphs 6.2 and 6.5 is included to avoid any possibility of double counting;

. . . internationally transferred mitigation outcomes towards nationally determined contributions. . . . . shall apply robust accounting to ensure, inter alia, the avoidance of double counting,

Emission reductions resulting from the mechanism referred to in paragraph 4 of this Article shall not be used to demonstrate achievement of the host Party’s nationally determined contribution if used by another Party to demonstrate achievement of its nationally determined contribution.

These provisions, in combination with the progressive shift towards quantification of all emission sinks and sources, means that full national accounting for offset crediting must take place for both the recipient and the source of the units. For the recipient, there will be no change in their procedures in that the introduction and counting of outside units is already built in to the inventory processes underpinning the trading systems. But the source country will be required to make an equivalent reduction (also referred to as a “corresponding adjustment”) from their stated NDC, therefore tightening their contribution. This was a feature of the Joint Implementation (JI) mechanism under the Kyoto Protocol, but was not the required practice in the CDM.

The example shown in the box below illustrates this through a hypothetical case for a nature based transfer (NBT) from Kenya to Canada, utilizing the EMM as a means to acquire the necessary funding. The impact on the Kenya NDC implies a shift from a stated reduction of 30% from Business as Usual (BAU) in 2030, to some 37% below BAU. This ensures there is no double counting of the transferred amount and maintains the full integrity of the overall NDC approach such that the implied global cumulative emissions goal of the NDCs is maintained. However, Kenya will need to find further reductions in its economy as a result. One implication of this is that the price of carbon units may rise due to the additional demand that an overall emissions cap, even a notional one, places on the global economy.

Article 6 of the Paris Agreement offers great potential for carbon market development and emissions trading, therefore driving a lowest cost mitigation outcome and directing funding and financing to low emission technologies. But over time, it should also introduce an accounting rigor that has only featured in some quarters to date. This may well change the supply demand balance, leading to a more robust and enduring carbon market.

kenya-and-canada