Info Service on Climate Change (Oct13/08)
Divergent views on scope and purpose of framework for various approaches
Geneva, Oct 23 (Alejandro Rafa) – On October 9th the UNFCCC’s Subsidiary Body on Science and Technical Advice (SBSTA) held a workshop on the ‘framework for various approaches’ (FVA).
The 38th session of SBSTA had requested the UNFCCC Secretariat to organize a workshop to advance its work towards fulfilling the mandate proposed in decision 1/CP.18, paragraph 44.
There were divergences between countries over the ‘scope and purpose’ of the FVA, with differences over whether the ‘purpose’ of the FVA is to ‘account’ and ‘track’ units from different and domestic carbon trading schemes. There were also deep differences over the ‘scope’ of the FVA, and whether carbon markets not recognised by the Convention should be considered within the scope. Whether ‘non market approaches’ (NMAs) should be a part of the ‘scope’ was also considered.
There was some convergence among Parties that COP 19 in Warsaw should focus on the first ‘stage’ of work, of defining the scope and purpose of the FVA and that would lead to some form of ‘information sharing platform.’ There was divergence as to whether this would lead on to other ‘stages’ or would perform other functions such as accounting.
In general, developing countries advocated for the FVA to be focused on information-sharing. Many developing countries emphasised the importance of NMAs to the FVA and discussed examples, such as the Amazon Fund and Bolivia’s Joint Mitigation and Adaptation Mechanism (JMAM).
Brazil spoke strongly of the dangers to environmental integrity of accepting approaches from outside of the Convention into the FVA. Bolivia was of the view that the FVA is not a framework for the governance of carbon markets outside of the Convention. It wanted the FVA to be developed in the context of the urgent need for actions resulting in urgent emission reductions to ensure global emissions were less than 44Gt of CO2e by 2020.
Swaziland consistently highlighted concerns with the low level of developed countries’ mitigation pledges and the correspondingly low price of carbon units in the clean development mechanism (CDM).
Japan and New Zealand continued to advance that non-Convention approaches should be considered under the FVA and that the FVA should serve a role in accounting for or tracking units. The European Union (EU) also saw the purpose of the FVA as accounting and tracking units.
The workshop was co-facilitated by Giza Gaspar Martins (Angola) and Martin Cames (Germany). The first session was directed at considering the purpose and scope and links to other relevant matters, including institutional arrangements and relationship to the COP.
The Secretariat began by suggesting that ‘areas of convergence’ included that the FVA ‘could’ oversee the international transfer of units and/or ‘outcomes’ meet commitments and targets under the UNFCCC. It said there were several options to move forward including on agreeing ‘common principles’, ‘minimum criteria’ and/or a platform for reporting and information-sharing. It said questions still remained over whether the FVA should include both market and non-market approaches, both UNFCCC and non-UNFCCC units and whether it was solely focused on mitigation. It said Parties also needed to consider institutional issues and in Warsaw, could make a decision ‘on the purpose and scope.’
Japan saw the purpose of the framework to ‘facilitate and coordinate’ any approaches where ‘mitigation outcomes cross a border’ in order to ensure environmental integrity. It said that the ‘joint crediting mechanism’ (JCM) (Japan’s bilateral offset scheme developed outside of the UNFCCC) and any emissions trading schemes (ETSs) linked to each other internationally should be covered. It said such transfer should be required to be reported both ex-ante and ex-post and that the information on transfers and the accounting framework should be the focus of the FVA. It concluded by saying that ‘no country wants to damage environmental integrity.’
Bolivia said the purpose of the FVA should be to serve as a platform for knowledge sharing, to develop best practices, to provide some kind of expert review and assessment of policies and approaches and their contribution to efforts under the Convention. It continued that the FVA should include approaches that enhanced both mitigation and adaptation and strengthened the implementation of NMAs. It stated that the FVA is not a framework for the governance of carbon markets outside of the Convention. It was ‘not an institution that accounts or registers internationally traded units and was ‘not to legitimise sub-national processes.’ It should ‘not be a framework to encourage a bilateral system relating to carbon markets.
The FVA should be developed in the context of the urgent need for actions resulting in urgent emission reductions to ensure global emissions were less than 44Gt of CO2e by 2020. It said that discussion should be linked to the Ad hoc Working Group under the Durban Platform (ADP). It concluded that the UNFCCC was ‘inherently a non-market approach’ and that market approaches should not be ‘automatically considered.’ The assessment of approaches and the scope of the FVA should be based on and align with Articles 2, 3, and 4 of the Convention.
Ecuador reminded Parties that climate change required ‘urgent measures’. It said that developing countries needed ‘lower cost technology’. To ensure cost-effectiveness, Parties should set common rules for actions that achieve ‘a net reduction and/or avoidance of global emissions.’ These rules should cover ‘all units’ including under the UNFCCC, domestic schemes and other approaches. It suggested a ‘two-tier’ approach with ‘competencies assigned to the host country’ and the UNFCCC ‘issuing units’ and ensuring the ‘destination of funds.’ It said this would facilitate the transfer of finance to developing countries and reminded Parties that the extent to which developing countries were able to act would depend on support.
The European Union (EU) said that the FVA needs to ensure a robust accounting framework. It asked Japan specifically about double-counting issues and asked all Parties as to what was needed on ‘technical issues.’
Japan said that considering the JCM was within the COP decision which clearly says ‘we must avoid double-counting.’ It said that issues of ‘double-usage’ and ‘double-issuance’ could easily be avoided with coordination, although ‘double-crediting’ maybe harder to solve. The EU encouraged Parties to consider the ‘whole spectrum of double-counting’ and to use the term ‘outcomes’ so as not to presuppose ‘units.’
Georgia said Parties should focus their discussion on the scope and purpose. It said to raise political ambition you need political commitment and that would be hard with something so broad. For this reason it also suggested changing the name of the FVA.
Guyana said the FVA should function under the authority and guidance of the COP; it should adhere to principles of the Convention, particularly common but differentiated responsibility (CBDR) and equity, and should take into account national circumstances and different capacities. On the purpose and scope, it said the FVA should be concerned with developing a common set of principles, standards and accounting rules, and should allow for both market and non-market approaches. It summarised its function as ‘oversight in crediting and trading units’, to avoid double counting and support developing countries’ mitigation actions.
Liechtenstein on behalf of the Environmental Integrity Group (EIG) said the FVA should enhance cost effectiveness, promote mitigation, facilitate mitigation ambition, ensure that standards are met and should avoid double-counting of effort. It said its scope should cover approaches both inside and outside the UNFCCC and should include market and non-market approaches. It encouraged Parties to consider the link to the New-Market Mechanism (NMM), particularly in light of its link to the Kyoto Protocol.
Poland, as the incoming President of COP 19, said Parties are ‘are entering a brave new world’, where ‘we need to ensure the environmental integrity under the multilateral system.’ It said approaches of a ‘purely domestic nature’ should be the prerogative of the host country. ‘A pilot’ assumes the testing of a machine, and that ‘if there are no elements, such a pilot is not possible.’ It encouraged Parties to develop ‘components of the machine’ and to ‘start this in Warsaw.’ It said it did not see this as ‘only for markets.’ It said that ‘Quebec can link to California’ but that this ‘does not need to link to the UN.’ It said that FVA was ‘not the accounting system; it’s the information system for the accounting system.’ It welcomed ‘positive submissions from across the aisle’, including New Zealand and Ecuador.
Brazil said Parties needed to be clear on the purpose between a ‘mechanism for transparency’ and one ‘for approving and overseeing transfers.’ It said the UNFCC was the ‘main spine of the climate regime and should continue to be so’; Parties could ‘open the window to see what’s happening outside’ but they should do so carefully so as ‘not to allow in unhealthy elements that undermine the whole system.’ It said that transparency was needed, but that if Parties were talking about information, knowledge and information sharing, then they did not ‘need to talk about double-counting and MRV (measuring, reporting and verification) or anything like that.’ It also reminded Parties of existing mechanisms, such as the CDM, JI (joint-implementation) and international emissions trading (under the Kyoto Protocol) and so said they should be cautious in adopting ‘another framework.’
Indonesia said there was ‘no convergence of understanding’ and that if all the ideas were brought together in Poland that would be ‘catastrophic.’ The focus should be on ‘supporting mitigation action in developed countries through actions in developing countries while promoting action in both.’ It should ensure sustainable development and be cost effective. It suggested that the FVA include renewable energy development, energy efficiency and land based approaches. It said the should be under the COP and have the NMM and other market mechanisms within it.
The co-facilitator, reflecting on Brazil’s intervention, asked what Parties wanted to do with mechanisms that were already functioning.
New Zealand said that tools are needed to ‘meet our international commitments’; the FVA would facilitate effective tools with environmental integrity. It said its scope should include approaches under the UNFCCC as well as new approaches, and those developed by Parties that have units that are traded internationally to meet commitments made under the UNFCCC. It said the FVA could also allow an information sharing approach and learn from mechanisms that exist.
Papua New Guinea said that all approaches developed, recognised and implemented by Parties under the Convention, should be integrated into the FVA. It said it should include sectoral approaches and that units under the FVA should be used for UNFCCC compliance. It said double counting should be avoided and that adequate financial support should be provided in consideration of the different national circumstances of Parties.
Swaziland said that it was concerned that market-based approaches and NMAs were not the same. It did not think having NMAs and market approaches within the FVA was a ‘feasible proposal’, and suggested ‘separate frameworks.’ It said Parties also needed to address concerns over trade distortion.
Liechtenstein said the FVA should include existing mechanisms to draw on the information and knowledge that has been created. The EU said transparency was ‘a good place to start’ but it said ‘we also need an accounting framework’ because when you combine various approaches there can be problems with the double-counting of efforts, which would reduce overall effort.
The co-facilitator offered a preliminary summary of the discussion saying that it appeared there was ‘no disagreement’ that the purpose should ‘address international aspects of approaches, such as the transfer of units and outcomes.’ He said ‘nobody spoke against’ market-based approaches being included nor that mitigation should be considered. He said there was further work on whether NMAs should be included, and whether adaptation, technology transfer, and capacity building would have a role. He added that there were ‘a variety of views’ on what would be the institutional setup, and that this was linked with the purpose. This could include a platform for information sharing/transparency, or a further ‘tier’ including accounting frameworks, an oversight function, and a management tool.
The next session on ‘lessons learned’ included presentations from Norway on experiences from the CDM; Brazil on the Amazon Fund, as an example of a NMA that creates real and measurable long-term reductions. It also said the CDM had environmental integrity on ‘real, permanent and measurable’ reductions; and Angola on a more holistic concept of ‘environmental integrity’ that considered the ‘continued health of essential life’ as well as alignment with national and local priorities.
Saint Lucia on behalf of AOSIS gave an extensive presentation on lessons from across the regime, highlighting that to ‘pick and choose’ rules does not lead to environmental integrity. It said that where there were different types of commitments and common accounting rules were even more essential; if tradeable units were involved then more systems would be needed. It said a key lesson was that ‘trading requires binding economy wide targets’ and ‘annual accounting.’ It said Parties should draw on the collection of institutions that exist and their qualitative and quantitative standards. It said a ‘hard lesson’ from the issue of ‘hot air’ (or surplus assignments) was the need to consider the accuracy of historical information and how to construct conservative baselines.
It said lessons from Track One of JI showed the ‘challenges’ of nationally issuing units. It said having international oversight was ‘necessary to provide credibility.’ It said that current market mechanisms and LULUCF accounting rules could be undermining commitments. It said institutions needed flexibility to be able to deal with unforseen events, such as financial crises. It said that ‘a large volume of low cost units creates pricing challenges.’
It emphasised that establishing ‘a fragmented or decentralised approach to offsets would undermine credibility.’ It said the role of the FVA should be to develop and operate rules that ensure net global emissions, stop double counting, address market and non-market based approaches and ensures that all approaches are contributing to a ‘share of proceeds.’ It said the purpose and elements of the mechanism needed to be agreed before piloting. It also highlighted existing challenges on double counting, including between host and investors and warned against double-counting between periods (e.g. pre and post 2020).
Brazil asked all Parties to consider the ‘additionally criteria’ in the context of NMAs, as it would be different than that for tradeable units. It asked Saint Lucia for clarification on what internationally legally binding reduction targets outside of the second commitment period of Kyoto it was referring to. Ecuador asked Saint Lucia whether the economy-wide targets are to apply to developing countries as well. Timor Leste asked whether the legally binding economy wide targets made under a COP decision [i.e. those not in the Kyoto Protocol] were to be ‘further elaborated’ to be more legal and binding or whether they risked ‘being ignored.’
Japan said it was of the view that the CDM was ‘not the best’ and highlighted the inequitable distribution of projects it created and the delays in issuing credits. It said the CDM could be improved but that Parties also needed alternative approaches ‘to accommodate each country’s circumstances to enhance mitigation action.’
The Philippines said it appreciated Angola’s presentation that ‘environmental integrity goes beyond numbers.’ It said that in the context of the Amazon Fund that suggested that, although environmental integrity and preventing double counting was important, ‘precision can prevent us from reaching real reductions.’ It said there was a difference between helping Annex 1 Parties to achieve their commitments and the objective of sustainable development and poverty eradication and that these could conflict. For this reason it said NMAs were important and needed to be reflected in the FVA. It said that projects like the Amazon Fund, which focus on stopping deforestation, but then also help with climate change needed to be supported and asked Brazil to elaborate on how consideration of the ‘mitigation as a co-benefit’ might work.
Saint Lucia in response to questions about economy-wide targets said that ‘having access to the CDM was a benefit’ for participation in Kyoto. It said in the context of the Convention there should be ‘no backsliding’ and that developed countries could not use the Convention as a ‘way out’, and needed to take on legally binding economy wide targets. It said that it was not trying to ‘guess where we will end up post-2020’ but that it assumed a legally binding instrument applicable to all with commitments differentiated among all due to capabilities and so it said the framework needed to be clear on whether it was accounting against pre or post-2020 pledges.
Norway said that Parties will ‘change their preferences over time.’ It said there was ‘a huge gap’ and that Parties could use the CDM to generate ‘some of the reductions we need,’ but that ‘we need much more’ including sectoral approaches. It said Parties should consider’ when and where we have new bodies’ and suggested there was no need for a new body for international emissions trading as registries already existed.
Angola said its approach was to emphasises that environmental integrity went beyond ‘carbon markets and numbers.’ It said that in particular host country perspectives, sustainable development and the principles of the Convention needed to be considered.
Brazil said the Amazon Fund had several types of projects, all with mitigation outcomes; some direct and some indirect but all with other co-benefits. It explained that ‘the purpose is not to be precise’ about the number of tonnes emitted as ‘none of it will be traded.’ It said that this did not stop the reductions from being ‘real and measurable.’ With respect to the CDM it recognised Japan’s concern and said ‘it was not ‘perfect’ but was the ‘best we have’ and that ‘no market instrument could fill the whole emissions gap’ and to do that ‘we need much more than markets.’
Swaziland said in reviewing lessons of the CDM, the issues of ‘fair access’, ‘geographical distribution’ and ‘differentiated capacities’ needed to be considered. It said that the CDM was an ‘incentive’ to participate in Kyoto but as a number of Parties had not joined the second commitment period further reflection was needed. It also said there had been little effort to raise the price within the CDM. More broadly it said it was unsure of what the work programme on the FVA was to do and how it would lead toward 2015.
Brazil said Parties needed to ‘apply the principles of the Convention’ to ensure ‘no back-door entry’ for approaches with less integrity. It said the lesson from Kyoto was that standards are to be met. It said new standards should be at least as stringent as those under Kyoto. It said that without anticipating the results of ADP participating in the FVA should be a benefit for those participating in a legally binding agreement with targets. ‘No one should be able to claim benefits before accepting responsibility’ it said.
EU said the FVA should deal with the fact that ‘we’ve had three teams in the league and now people want more teams.’ It noted that ‘some pledges are not compatible with access to market mechanisms.’
The next session included a presentation on double-counting by Lambert Schneider of the Stockholm Environment Institute in his personal capacity. He described different ways ‘double counting’ could occur including: across regimes (e.g. Montreal Protocol or International Civil Aviation Organisation); ‘double issuance’ or two units created for the same reduction; ‘double transfer’ or that it’s present in two different Parties’ accounts’; and ‘double claimed’ that both Parties claim it against their international commitments, e.g. as a part of a nationally appropriate mitigation action (NAMA) and a to meet a quantified emission limitation and reduction objective (QELRO). He said to deal with double-counting not only accounting but design, tracking and unit rules were needed.
Poland asked if the best approach would be for issuance to occur locally and usage issues to be accounted for globally? It assumed that if a unit was in a domestic registry it would be accounted for in the international transaction log and would be tracked by the FVA if it moved internationally.
Schneider said this could happen but that guidance and rules were needed.
Brazil said that as many Parties already have rules it was important to have an exchange of information and study approaches as they exist ‘instead of creating new rules.’ It said the ‘first step ahead should be more information sharing from approaches that are already there and could be candidates for the FVA.
Links to other issues
The final session included a presentation from the Secretariat on ‘links to other issues’ with a focus on NAMAs, and how to deal with countries that plan to fulfil their NAMAs with finance from ‘markets.’ New Zealand also presented on a ‘possible decision’ in Warsaw, emphasising that its vision was for Parties to meet their UNFCCC commitments with ‘units from market mechanisms within the framework’, including from mechanisms created bilaterally ‘in harmony’ with the UNFCCC. It said there was ‘convergence’ on the purpose and scope and that Warsaw could ‘identify options’ for a decision at a ‘later point in the process.’ It suggested a technical body could be initiated to conduct a review and propose a ‘table’ to collect and collate information on approaches.
Brazil said the way forward needed to make clear that ‘this exercise does not mean anticipating the content of the 2015 agreement’ which it said should not be ‘contaminated by what happens under the FVA.’ It stressed that there should not be reporting to the COP of any individual approaches as it was concerned this would give ‘implicit recognition of the approach.’ It said Parties needed to consider ‘the extent to which we can get information on the table’ without creating an expectation but ‘that the mere furnishing will qualify that approach as being recognised.’ It said there needed to be space for NMAs and consideration of CBDR.
Saint Lucia responded to New Zealand’s proposal of generating a list by saying that ‘a bottom up approach to establishing common standards is unusual.’ It added that only collecting from Parties that had an approach to propose would not reflect the full range of views.
Poland said it was ‘very interested in an ambitious result in this area.’ Reflecting the presentation by New Zealand it said it was looking forward to ‘an exchange of information.’
The EU said it considered the purpose as ‘establishing common accounting standards and conformity checks for units or quantifiable outcomes crossing Party boundaries and used towards commitments under the Convention.’ It said it did not see the FVA as a space to discuss NAMAs. It emphasised that ‘there are different units being generated by various approaches and so we need an accounting framework to deal with those.’
Swaziland asked how the crediting of NAMAs, as discussed by the Secretariat, would avoid offsetting.
Japan said it agreed with New Zealand and that ‘waiting until all questions are understood by all Parties’ would take too long and it was important to ‘act now.’ It said that ‘nobody can prevent Parties taking some action, including mitigation action.’ It said as Parties are trying to do this they should be accommodated and that ‘this type of framework would be valuable’ including on the issue of double-counting. It pointed out to Parties that some CDM the credits are currently being double-claimed and despite this, Parties continued to support it. It said the FVA was important even if it was not incorporated into the ADP.
Brazil responded that ‘when a country says they are willing to do something quickly and cannot wait, the first thing we expect is the Kyoto Protocol second commitment period ratification.’ It said that this was ‘the first step’ and the ‘main approach.’ It said that Parties seeking ‘flexibility and the shortest way to meet their own goals, by trying to have their schemes outside of the Convention accepted by us’ was ‘not a good way forward and compromises the entire system we have built.’
Nicaragua said it was not possible to add a new body without full clarity on its purpose.
Peru suggested that the FVA could advance in a staged process to be a ‘clearinghouse’ where information on mitigation efforts is registered. It said some of that information would then go through a process which would be validated internationally. Then, if according to rules ‘decided at another point in time’, those units are eligible they could enter international trading. It said it did not want to ‘preclude or agree to that trade’ but wanted the framework to ‘give us the space to do all of those.’ It said Warsaw should start with a staged process and not anticipate all problems and solutions.
Philippines said that as ‘one set of Parties has a different purpose in mind’ this ‘trickles down’ into different views on scope and institutional arrangements. It agreed with a staged approach and said Warsaw should focus on defining the scope and purpose, and consider implications for pre-2020 and post-2020 work.
The co-facilitator offered an informal summary of discussions and said there appeared to be convergence on a platform for information sharing. He said some areas for further discussion included: whether to include non-market approaches; the type of accounting system to be developed; what happens after information sharing; how environmental integrity could include ‘more than just numbers’; applicability pre and post 2020; whether the Kyoto mechanisms were a part; and linkages to other negotiations. He said in Warsaw, Parties could ‘consider elements without recognizing approaches’ and develop a ‘three-stage’ approach, first establishing a ‘clearinghouse’ to record information, second consolidating that information, and third considering how and if the outcomes are to be traded.
Japan said the Kyoto mechanisms should be included in the scope as they are market mechanisms.
Brazil appreciated the summary but emphasized the language would need to be considered carefully as ‘reporting’ and ‘clearinghouse’ may have different meanings and so it said it ‘would not like to commit to these terms.’ It disagreed with Japan and said the summary should reflect the need to discuss ‘whether or not to include Kyoto mechanisms.’
Bolivia said it did not think there was a ‘question mark’ over non-market approaches. It emphasized that when talking about NMAs then it was not only referring to mitigation but also the link between mitigation and adaptation.
Tomasz Chruszczow (Poland) as the incoming President of COP 19, said Parties would work on divergences and build on convergences. He said the NMM, NMA and the FVA, are ‘a focus’ as Parties would know from meetings ‘since March, testing ideas on how to create common platforms.’ He said ‘good tools’ were incentives to action, and would make Parties willing to be involved in mitigation, adaptation, finance, technology transfer and capacity building as they would see not only ‘the overall benefits’ but the ‘less prominent benefits’ of them joining the ‘common effort.’
Nicaragua suggested more effort could have been taken in ‘having a balance of presenters, with more presenters from developing countries.’ It assured Poland it would ‘do all we can to have a successful COP’, but noted serious issues in the lack of ambition and wanted to see deeper emission targets and movement on finance to get a commitment to transfer resources.
Bolivia reiterated its reservation on the development of the NMM saying it had ethical, scientific and other concerns about the use of markets in confronting climate change and ensuring the integrity of Mother Earth. It asked for the summary of the workshop to reflect its proposal for a moratorium (on the use of markets).
Japan said the FVA was ‘one of the most important agenda items for COP19 and the issue could not wait until COP20. It said it was not very optimistic there would be tangible output in Warsaw that could be implemented, but reminded Parties it was already implementing the JCM and said it would like ‘to share and get views on our mechanism.’ It said the FVA ‘would be a good place to enhance any approach, including the JCM.’
Swaziland said the issue of ambition was ‘very important’ and that Parties needed to focus on getting deeper targets. It said this was a political issue and Parties needed to align their thinking with its importance. It said it also shared Nicaragua’s concern and said presenters from developing countries were necessary to ensure the ‘circumstances and perspectives’ of developing countries were ‘tabled and considered.’
Philippines reiterated Swaziland’s intervention on the importance of ambition, and Nicaragua’s on having more balanced presentations.
The Chair of SBSTA Richard Muyungi closed the workshops and told Parties there would be more space and time to discuss the issues at COP19 and in 2014.