Designing Future International Actions on Climate Change

1. Designing Future International Actions on Climate Change Ned Helme, Executive Director Catherine Leining, Senior Policy Analyst Center for Clean Air Policy * * * Bonn, Germany Eighteenth Session of the Subsidiary Bodies June 2003

2. About CCAP • Non-profit environmental think-tank • Founded in 1985 to develop, promote, and implement innovative solutions to energy and environmental problems • Involved in international climate change debate for over ten years • Involved in design of CO2 trading system in EU and trading workshops in accession countries • Strong record of bringing together key gov’t and industry stakeholders to facilitate dialogue on major issues

3. Overview of the CDM/Future Actions Dialogue • Brings together negotiators from ~30 Annex I and non-Annex I Parties for informal discussions • Design and implementation of the CDM • International actions on climate post-2012 • 7 meetings since May 2000 • Funded by Annex I governments • Australia, Canada, Denmark, European Commission, Germany, Japan, Netherlands, New Zealand, Norway, Sweden, UK, USA

4. Partners & Collaborators • Foundation for International Environmental Law and Development (FIELD), UK • Energy & Development Research Centre (EDRC), South Africa • ECOFYS, Germany • World Resources Institute (WRI), USA • Additional research institutes and consultants

5. Stabilization Needs • Pre-industrial atmospheric CO2 concentration = 280 ppm • Current concentration = 360 ppm • Future stabilization requires concerted effort over short, mid, and long term • Eventually, global emissions must fall below 1990 levels for stabilization • Longer delay means higher stabilization level • Hedging strategy: Leave stabilization options open (e.g., 450, 550 ppm)

6. Possible corridors to stabilization 14 13 12 550 11 10 Global anthropogenic CO2 emissions (GtC) 9 8 7 450 6 5 1970 1980 1990 2000 2010 2020 2030 2040 Source of stabilization paths: IPCC WGIII chapter 2, post SRES scenarios, CO2 only

7. Post 2012 Framework • “Three-legged” policy platform • Annex I Parties in KP - Targets • Annex I Parties outside KP - Responsibilities • Developing countries - Programs

8. Menu of Options – Annex I • Continue with Kyoto Protocol • Technological cooperation or technology protocol • Carbon intensity reductions • Coordinated sectoral PAMs

9. Menu of Options - DCs • Technology transfer, CDM, GEF (current options) • Sectoral CDM • Sustainable development policies and measures (SD PAMs) • Reducing emissions footprint from Annex I investments (e.g., MNC caps, ECA / WB shift) • Carbon intensity targets (sectoral, economy-wide) or sectoral targets • Absolute targets

10. Other Considerations • Menu or stepwise approach • Binding versus nonbinding (pledge & review) • Umbrella indicators versus target • Hybrid – use overarching voluntary carbon intensity as indicator and combine with CDM, SD/PAMS, etc. • Holding developing countries harmless in terms of cost of reduction or new technologies so their development priorities are not compromised • Creating incentives for long-term transition to low-carbon development and economic growth for both Annex I and non-Annex I countries

11. Technology RD&D • 2nd track to complement KP targets and timetables • RD&D “push” complements ET “pull” • Critical for long-term solution, but not a panacea • Could be based on Montreal Protocol model although key differences exist • Pros of technology approach • Compatible with economic growth • Incentives to participate • Cons of technology approach • Less environmental certainty • Government picks technology winners • Difficulty in setting standards

12. Mitigation Policy Time Frames Short term Mid term Long term Global GHG Emissions Target emissions level for CO2 stabilization 2015 2030 2050+ Time

13. Annex I Emissions Footprint • Annex I GHG footprint in DCs is significant • Particularly in the power generation sector • Climate protection may be possible via institutions that generate financial flows • Many complexities exist • Policy options • Pool of concessionary funding • Financial set-asides • Special lending provisions • Climate-friendly portfolio standard • Increased transparency

14. In 2000, about US$225 billion flows to developing countries from industrialized countries annually—about 4% of the GDP of developing countries. • These flows are the financial footprint of industrialized countries in developing countries and a means of influencing the technologies used in the future. • Sources of financial flows are both public (official) and private. • Export Credit Agencies (ECAs) are national financial agencies that support exports of goods and services from their origin countries—$85 billion in 2000

16. Sectoral CDM • CDM currently is project based • Creates potential disincentive for proactive climate PAMs in DCs (tougher baselines) • Link between project baseline and sectoral policy can be complicated • Enabling sectoral policies as CDM projects: • Provide needed resources for policy implementation • Larger volume of reductions possible with lower transaction costs from aggregation • Reduced potential for leakage • Challenges of additionality assessment and monitoring

17. SD PAMs • DCs could undertake SD PAMs that reduce climate impacts of development priorities • Could be harmonized or country-specific • Could be binding or nonbinding pledge • Could leverage climate and non-climate funding • Could be linked to trading system, or kept separate • Challenges: defining SD PAMs, baselines/ measurement, monitoring, uncertainty of emission reductions, capacity needs • Many DCs are doing this already

18. Carbon Intensity Targets • Different structure from hard caps; not more or less stringent by definition • Two approaches • Sector-specific (e.g, electric utilities) • Multi-sector/economy-wide • Largest benefit is correlation between emissions target and economic activity • Largest problems are lack of environmental certainty, measurement difficulties, transparency, and enforcement

19. “A La Carte” Menu • Annex I countries achieve absolute emissions reduction • With consideration of costs/benefits distributed across constituencies • DCs determine best approach based on national circumstances and capacity • Rather than strict linear progression • Key Question • How do we link “a la carte” approach to the need for real global progress in the 2020 period?

20. Discussion Questions • How can we differentiate among countries according to national circumstances and capacity? • Annex I (inside & outside KP) • Non-Annex I • Interest in stepwise progression versus “menu” approach for DCs over time?

21. Discussion Questions, Cont. • Interest in approaches that transcend the Annex I and non-Annex I divide? • Harmonized sectoral PAMs and SD PAMs • Greening financial flows from Annex I countries to non-Annex I countries • How can we create a structure that incentivizes technological innovation and implementation and engages developing countries?

22. For more information…. • Please contact: Ned Helme or Catherine Leining Center for Clean Air Policy 750 First St. NE #940 Washington, DC 20002 USA Tel. +1 202 408 9260 Nhelme@ccap.org, cleining@ccap.org http://www.ccap.org