Post-Kyoto: Reflections on the Institutional Dimension

1. Post-Kyoto: Reflections on the Institutional Dimension Dr Charlotte Streck Siena 9 June 2006

2. Climate Change Regime Cornerstones • Take into account intra- and intergenerational justice • Broad contract between societies and people • Approach must be multi-disciplinary, multi-sectoral, international • Be adequate to the scale of the problem • Must involve private and public actors • Climate change policy needs to be based on a strong regulatory regime (intl. + ntl.) • Be based multi-sectoral partnerships

3. Post-Kyoto: Status Quo • No agreement yet. • COP-11: setting of the negotiations framework: • Parties of the UNFCCC will engage in “open and non-binding exchange of views” on future long term co-operative action to address climate change, including further research and development of cleaner technology. (Decision title: “Dialogue on long-term cooperative action to address climate change by enhancing implementation of the Convention”) • Parties to the KP: Decision to initiate negotiations of the second commitment period without delay. The negotiations will commence on May 2006. A decision on the second commitment period is to be adopted by the COP/MOP “as soon as possible. Based on Art. 3.9. (Decision title: “Consideration of commitments for subsequent periods for Parties included in Annex I to the Convention under Article 3, paragraph 9, of the Kyoto Protocol”) • Parties to the KP: Expansion in scope of the KP under Art. 9 KP could establish a third negotiations track

4. Achievements of the KP • Establishment of a negotiation framework • Builds on international participation • Establishment of a system which creates and allocates (“quasi”-) property rights to emissions • Creation of transferable emission permits • Involves private sector into treaty compliance • Creation of institutions and infrastructure (registries) • CDM as Framework for financial, capacity, and technology transfer Despite significant flaws, it is worth to build a post Kyoto regime on the achievements of the Protocol

5. “Kyoto II” needs to move beyond “Kyoto I” Kyoto I: • Does not include the US • No emission limitation commitments from developing countries • Is limited in scope (does not cover large sources of emissions such as aviation or deforestation) • Does not address adaptation

6. Emission Trading • Is by now an universally accepted mechanism in climate policy. Actors that were opposing the concept in Kyoto, have turned into supporters (NGOs, EU). • Will be the mechanism which bears highest chances to bring those entities that are currently not participating to the table. • Allows for “special solutions” acceptable to developing countries (or the US…) • Success of CDM and JI are key to create an atmosphere of cooperation.

7. Emission Trading after 2012 Should • Build on KP mechanisms • Enlist comprehensive support, allow for different compliance mechanisms • Take into consideration the principle of common but differentiated responsibilities • Needs to move beyond the project-by-project approach • Needs to be linked to a more comprehensive LULUCF framework (transfer of sequestration assets) • Aim at avoiding free-riders • Trigger technology transfer as well as technological change

8. Common but differentiated responsibilities • The principle of Common but Differentiated Responsibilities will have to guide discussions. • Developing countries will only accept emission limitation measures if they are linked of mechanisms that ensure financial transfers. • If carefully designed, ET mechanisms will allow to raise the funds; ET must be perceived as chance, not as a constraint. • ODA can be used to support the compliance and enforcement structures of developing countries. • Banking of surplus allowances will allow for a “soft landing” for economies in transition.

9. Baselines and Accounting Rules • Challenge: Involve US + developing countries into an effective GHG mitigation system • Means: • Combination of elements of a cap-and-trade and crediting approach • US • allow for LULUCF crediting + trading • allow for full flexibility • consider “as-if Party” approaches • allow for recognition of sub-national schemes and efforts • opt-in of non governmental entities • Developing countries • Crediting approach: develop sectoral or even national baselines • Recognize existing CDM projects • Consider GIS-type approaches which help triggering investments • Make eligibility for trading dependent on participation criteria • Participation voluntary for most developing countries; mandatory for G-20 countries

10. LULUCF post-Kyoto • Forestry emissions responsible for >25% of global emissions • LULUCF not fully included in Kyoto • Key for addressing the problem as well as for forging international consensus • Create incentives for conservation to address the problem of deforestation (eg national baselines, compensated reductions, carbon stock approach) • Full credit for sequestration and mitigation activities • Links mitigation with adaptation strategies

11. Adaptation • Post-Kyoto regime has to include incentives for the creation of adaptation measures • Problem: how to finance adaptation: • GEF-approaches are not sufficient • Like LULUCF, adaptation needs to be linked institutionally to mitigation measures in order to access the funds available in the energy sectors • Financial transfers from private to private necessary • GIS approaches for adaptation should be developed

12. Questions Charlotte Streck Climate Focus +31 64 64 2 64 81 C.Streck@climatefocus.com