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
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
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
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
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)
Possible corridors to stabilization
Source of stabilization paths: IPCC WGIII chapter 2, post SRES scenarios, CO2 only
5
6
7
8
9
10
11
12
13
14
1970 1980 1990 2000 2010 2020 2030 2040
Glo
bal
an
thro
po
gen
ic C
O2 e
mis
sio
ns
(GtC
)
450
550
Post 2012 Framework
“Three-legged” policy platform
1. Annex I Parties in KP - Targets
2. Annex I Parties outside KP - Responsibilities
3. Developing countries - Programs
Menu of Options – Annex I
Continue with Kyoto Protocol Technological cooperation or technology
protocol Carbon intensity reductions Coordinated sectoral PAMs
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
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
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
Mitigation Policy Time Frames
Global GHG
Emissions
Time
Short term Long termMid term
Target emissions
level for CO2
stabilization
2015 2030 2050+
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
Financial Flows to Developing Countries from Industrialized Countries, 2000
Development Banks
6%
Other Multilateral Institutions
4%
FDI 43%
FDI covered by ECA
investment insurance
6%
International Finance Corp.
2%
Bilateral Aid12%
Other private 27%
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
Project and Trade Finance for Energy-Intensive Sectors in Developing Countries Supported by ECAs, 1994-99
0
5
10
15
20
25
30
35
40
45
50
East andSoutheast
Asia
Latin Americaand
Caribbean
IndianSubcontinent
Africa Middle East
Bill
ion
US
$
Oil and Gas DevelopmentTransportation InfrastuctureAircraftFossil-fueled Pow erEnergy Intensive Manufacturing
Source: WRI, Maurer & Bhandari, The Climate of Export Credit Agencies (2000), based on Project Finance Ware , Capital Ltd. Copyright 1997-99).
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
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
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
“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?
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?
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?
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
[email protected], [email protected]
http://www.ccap.org