Info Service on Climate Change (Oct13/10)
Developing countries stress importance of non-market approaches
Geneva, Oct 25 (Alejandro Rafa) – Developing countries stressed the importance of ‘non-market based approaches’ (NMA) and wanted them supported as part of the outcome at UNFCCC’s COP 19 in Warsaw.
This was expressed at a UNFCCC organized workshop, held on October 7th on “non-market approaches” (NMA), under the Subsidiary Body on Science and Technical Advice (SBSTA), as mandated in decision 1/CP.18, paragraph 47.
The NMA workshop was part of a 3 day session held form 7-9 October, in Bonn, Germany, on the ‘Framework for Various Approaches (FVA)’, New Market Mechanism (NNM) and NMA. (See previous reports on FVA and NNM).
Many developing countries gave examples of effective NMA approaches which they said needed to be supported further.
The workshop included presentations from Parties and experts, with Bolivia elaborating on its proposal for a Joint Mitigation and Adaptation Mechanism, and many developing country Parties emphasizing the importance of supporting NMAs, including feed-in-tariffs, regulation in the transport sector, and funds that support a range of objectives and co-benefits (such as the Amazon Fund of Brazil). Many said this was particularly important given that the Convention was inherently a non-market approach and markets were not appropriate tools for a wide range of settings. They also emphasized that approaches needed to respect the principles of the Convention, such as equity and common but differentiated responsibilities (CBDR) and the right to sustainable development.
There was divergence amongst Parties over the importance of ‘quantifying’ or converting all approaches’ outcomes into ‘units’ and how these units would then intersect with ‘market-based’ or carbon trading approaches. Some developed countries, particularly the European Union and Liechtenstein (on behalf of the Environmental Integrity Group), suggested that non-market approaches were dealt with under other bodies and negotiations under the Convention and so, they could not identify particular proposals to be advanced under a focused NMA work programme.
There was an emerging consensus that some form of registry or repository of non-market approaches could be a useful outcome, with further work needed to elaborate the next steps for approaches listed in the repository. There was little clarity as to whether this would fit under the FVA.
Richard Muyungi, Chair of SBSTA, opened the workshop by thanking donors for allowing support to all Parties who wished to attend, saying that 70 non-Annex 1 and 15 Annex I Parties were in attendance. He declared that there would be an ‘unofficial side event’ on the 11th of November at COP 19 in Warsaw to further share outcomes. He noted that the issues were ‘important in themselves’ but were also ‘directly linked to other processes, including the new agreement in 2015.’
The Executive Secretary, Christiana Figueres described the IPCC Working Group 1 release (on September 27th) as ‘an alarm bell.’ She said Parties needed to increase mitigation or face a ‘very high cost of adaptation.’ She called on Parties to do conceptual work and come up with a definition of NMAs.
Tomasz Chruszczow (Poland) as the incoming COP 19 President, called for “VCCC”: ‘visibility, comparability, communicability, and certainty.’ He called for a ‘decision in Warsaw that would be an important step along the road to Paris.’ He said there was a need for a system to ‘ensure comparability’. He said that Poland was organizing a high level event on markets on the 20th of November.
The workshop was facilitated by Eduardo Sanhueza (Chile) and Natalia Kushko (Ukraine) and they began by inviting the Secretariat to provide some input.
The Secretariat noted that this year was the first time NMA was being discussed separately from the NMM and the FVA (all three emerged under the Bali Action Plan item 1 (b) (v) ‘Various approaches, including opportunities for using markets, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries’). It said that there was convergence among Parties’ from their submissions that NMAs do not result in a tradeable commodity; that some were being implemented and so duplication should be avoided; and that an ‘international element’ was required. There was outstanding need for clarity on scope and purpose and whether NMAs should be under the FVA. It said possible roles for the UNFCCC with respect to NMAs could include: supporting information sharing, encouraging and supporting other institutions or mechanisms, and developing a registry to help track actions.
Sanhueza, as Co-facilitator, began the session by asking Parties what they understood by the term “non-market approaches” and how to avoid duplication given that NMAs were often primarily domestic in nature.
Bolivia affirmed that the UNFCCC ‘is an inherently a non-market based approach’ and that therefore there is an urgent need to orientate its implementation to the development of non-market based approaches, mechanisms and instruments. It highlighted the principles in Article 3 that are to guide parties, particularly CBDR and the right to sustainable development. It said that these required a non-market based approach that reinforced cooperation, solidarity and complementarity. It also highlighted that the commitments in Article 4 of the Convention, such as technology transfer and support for adaptation, all required non-market based approaches. It called on all Parties to prevent the dangerous anthropogenic interference with the climate system without the commodification and financialisation of Mother Earth.
It said an international non-markets based architecture was needed: beginning with Annex I Parties taking on emission cuts to reflect their historical responsibility; followed by institutions to support the conditions for the provision of finance, technology and capacity building needs. It emphasized that Parties needed to overcome ‘the bridge between mitigation and adaptation as they are two indivisible elements.’ To that end it said that NMAs should include consideration of adaptation and that units or trading were ‘not the most important thing’ and that instead Parties needed to focus on ‘people and Mother Earth.’
It proposed that in the context of 50% cuts in emissions on 1990 levels in 2020 by developed countries, there could be a registry of online actions that are to be achieved jointly, contingent on the transfer of finance and capacity building for the purpose of solidarity. The benefits produced by these actions would be accounted for in a repository internationally and the larger the stock in the repository the less obligations would need to be fulfilled locally. It said the institutions to support this should be poly-centric.
Nicaragua said that a non-market based approach was essential. It said it was a ‘market approach that has led us to where we are’ and that ‘putting profits before people has led us here.’ It called for a ‘new economic order.’ It told delegates that ‘if you don’t know were you want to go then any road will take you there’, but affirmed that, ‘we know where we want to go, we want to be in harmony with Mother Earth.’ It said Parties needed to take steps to work toward that with the solidarity, cooperation and complementarity highlighted by Bolivia. It called on all Parties to show the same passion for NMAs as some do for the NMM. It also called for consideration of consumption and production patterns, and noted the negative impact that subsidies on agriculture in the North have on small scale farmers, peasants and indigenous peoples and their right to food in the developing world.
Brazil said that market based mechanisms were ‘of a complementary and additional in nature’ and so the core was how to integrate non-market approaches. It said it envisaged something that would be related to the promotion of existing initiatives and the promotion of, or a repository of, best practices. It said consideration needed to be given to the difference between ex-ante and ex-post support. It highlighted its submissions on REDD+ on results based payments and the operating entities of the financial mechanism and suggested that a designation of the REDD+ mechanism or a repository of REDD+ results could be an example of advances under the NMA. It suggested that agriculture was another example of how NMA could elaborate work further, including in supporting information sharing and access to scientific tools and solutions. It said this was related to adaptation and could be included in the framework as part of the ongoing work.
Saint Lucia said that NMA was a ‘mitigation related topic from Bali’, so should be ‘mitigation focused.’ It said that its scope could include initiatives under the Convention that do not result in ‘tradeable units’ (those that were tradable and eligible for use against a commitment.) It suggested that consideration should be given to green investment funds, loans, and concessional finance, to advance areas where market based mechanisms may not result in additional or permanent reductions. It noted that some subsidies and incentives perversely encourage fossil fuel consumption and said that represented an opportunity for non-market approaches. It was also was concerned that some approaches, such as dealing with HFCs or other gases with high global warming potential, or with land based units, would ‘flood the market’, having a negative effect. It concluded that there were funds and financial mechanisms under the Convention; the question was which initiatives Parties wanted to advance.
Swaziland emphasized the Convention and its requirement that Parties consider the diverse needs of developing countries, particularly their priority to address poverty eradication, ensure food security, and realize their right to sustainable development. It affirmed the principles of the Convention, particularly equity and CBDR. It also called on Parties to recognize the importance of Article 4.7.
Guyana called for Parties to accelerate action on NMAs that were operating already such as National Adaptation Plans, nationally appropriate mitigation actions (NAMAs) and the Nairobi Work Programme. It agreed that REDD+ offered a number of non-market opportunities, and that to bring agriculture under the international regime would require measuring the impact of climate change on food security.
Indonesia said that NMAs should be domestic only and could form part of NAMAs. It said that it saw NMAs as supporting approaches domestically with the FVA as more market based. It gave the example of reducing emissions from deforestation and forest degradation-plus (REDD+) which it saw as in its ‘first phase’ producing units for a domestic carbon market or for a NAMA; then when it was more ‘sophisticated’ it being considered under the FVA; and then finally if some of the units produced could be considered against commitments in the Convention it would be under the NMM.
DR Congo said that there are many things related to climate change that cannot be covered by the market. It said few people are aware of the role of forests in the fight against climate change and that it was clear that NMAs, like those discussed by Bolivia and Brazil had a role to play with REDD+.
The European Union (EU) said that existing NMAs are very important and ‘complement’ market based approaches. It said mechanisms without the market were important and were the default approach under the UNFCCC, with most of them quite successful. It noted that some approaches, such as agriculture and REDD, were already being considered under the Subsidiary Bodies. It said it was important to discuss issues in the ‘right fora’ as Parties ‘have enough work.’ It emphasized that domestic measures should not be discussed under NMAs.
Lichtenstein on behalf of the Environmental Integrity Group (EIG) said that NMAs ‘complement market approaches’ but that duplication was a major concern. It said it liked the proposal of Brazil to use a registry as a showcase for non-market approaches.
A co-facilitator asked if there was a clear division between domestic and international approaches if many developing countries may not be able to act on an approach without international support.
The EU said that ‘NMAs are a complement’ and that essentially anything that was not CDM (clean development mechanism), JI (joint-implementation), IET (international emissions trading) or the NMM could be classified as an NMA. It saw NAMAs as an opportunity to focus international support for domestic action.
Georgia said it perceived ‘a group of countries with a fundamental skepticism of market mechanisms’ and that they wanted alternatives so as to be able to participate without participating in a market mechanism. It said clarification on what those alternatives could be was important.
The Philippines discussed the difficultly of delineating the international and the domestic in the context of its feed-in-tariffs, which currently included a ‘life line’ subsidy for the poorest, but that this cost, an incremental cost in the terms of the Convention, could be supported through NMAs. It noted that despite the CDM’s purpose, given that the price of Certified Emission Reductions (CERs) are ‘so low’, that developers consider them the ‘icing on the cake’ and so it suggested that perhaps NMAs could help achieve ‘clean development.’
Saudi Arabia said that every nation had a ‘main priority’ of responsibility to its own people, and that NMAs were a way to contribute to ensuring sustainable development. It suggested that developing countries were focused on NMAs because they feared the market-based approaches. It said countries needed to know how much finance, technology transfer and capacity building would be available in order to plan, and with that support achieve ‘concrete results.’ It said that with respect to the ‘scope’ of NMAs that fossil fuels were ‘a little piece of the haystack’ that should not be ‘pick-pocketed’, particularly as getting rid of fossil fuel subsidies would burden people in their access to energy and transport. It suggested that as fossil fuel subsidies were being considered under the ADP they should be left there.
The EU emphasized its understanding of a distinction between domestic and international approaches, citing the example of its eco-labeling policy and it’s emissions trading scheme (ETS) as domestic NMA and market approaches respectively. It said as a ‘question of sovereignty’, the UNFCCC should not intervene on domestic policies. It currently understood REDD+ to be an NMA but that maybe in the future it would have market elements, and that regardless, it should not be considered ‘under this agenda item.’
Later sessions included presentations by Parties and experts, including Bolivia, Liechtenstein (EIG), the Project Developers Forum and the Environmental Defense Fund (EDF).
Bolivia presented its proposal for a Joint Mitigation and Adaptation Mechanism (JMAM) that could operationalise the principles and commitments in Article 3 and 4 of the Convention, which present an ‘inherently non-market based approach.’ It emphasized the recognition of the JMAM in the text of the decision in Durban and support for ‘all approaches’ in the declaration from Rio+20. It said that the JMAM could create a ‘global repository’ of units that recognized mitigation and adaptation, as they are ‘indivisible.’ It said this approach would not lead to the commodification and financialisation of Mother Earth, but instead would be founded in cooperation, solidarity and complementarity.
In explaining the JMAM, it called on Parties to identify some metrics for achievement of both mitigation and adaptation targets internationally and suggested that the GCF could be the means to provide the transfer of finance to achieve them. It said that the reduced carbon emissions and adaptation benefits should be counted in the ‘global repository.’ This would give an indication of ‘international coordination’ and ‘not only domestic effort’ and would create a ‘common property of the United Nations.’ It noted that in REDD+, the discussion of non-carbon units had been marginalized, and there ‘had not been space for discussion’ of the JMAM and it had instead been ‘referred to the NMA.’
Liechtenstein for the EIG said that NMAs were a tool to promote mitigation ‘without the involvement of transferable units’ and that they were ‘complementary to market instruments’ and that ‘purely domestic units were outside of the scope.’ It said there was a divide between ‘accountable’ approaches (some mechanism without tradable units) and ‘non-accountable approaches’ (more like ‘capacity building.’) It specified several NMAs such as phasing out fossil fuel subsidies, and phasing out the consumption of HFCs, but said that fossil fuel subsidies was under the ADP Workstream 2 and that HFCs should be considered under finance. It concluded that NMAs were important contributors to mitigation action but that as they are ‘dealt with elsewhere’ there is no added value to ‘addressing them here.’
Saudi Arabia asked about how the phasing out of fossil fuels impacted on food and other sectors and poverty in general. Indonesia asked how NMAs could be measured, reported and verified (MRVed). Saint Lucia asked how the EIG would distinguish ‘accountable units’ from ‘tradable units’ and whether a ‘contributor country’ to an NMA was contributing as a part of its mitigation or finance commitment; whether ‘it would be counted in tonnes, or Euros, or both.’ It also asked whether the EIG was describing an ‘offsetting tool’ which by its nature would ‘not create actual emission reductions.’
Georgia asked for clarity on how any approach in a developing country would not have an international dimension given the need for support. Swaziland asked if non-tradable units were generated from non-market approaches how they would be divided from tradable units.
Liechtenstein agreed that fossil fuel subsidy reform was ‘not a fixed concept’ and so called for further evaluation and studies. It said it thought NMA contributions would be counted in tonnes, but as they did not involve the private sector, they were different to the CDM or JI and the units would not be tradable. It stressed to Saint Lucia that ‘when you contribute you should be able to get it counted’ so that ‘goes in the offset direction’ but added it would be with a ‘net decrease effect’ and so for that reason stringent MRV was necessary, at least at the level ‘already in place.’ It clarified that it saw domestic approaches as those that had effects reflected only in ‘national inventories’ even if the project implementation needed some international element.
Gareth Phillips (Project Developer Forum) gave a presentation where he suggested that Parties used the term ‘market based mechanism’ to refer to ‘carbon market’ approaches, or approaches that create units. Parties would need carbon markets to cover some emissions, other international treaties to cover gases with high global warming potential, and NMAs to ensure 99% of emissions were covered. He said given this, the NMA could not be considered in isolation from the FVA. He provided some suggestions to the design of the NMM, including that ‘supplementarity’ be defined to reflect the need for a contribution from the host (i.e. developing country) to mitigation effort. He provided several examples of activities that would not create units and therefore needed to be ‘financed in a different way’ including emission standards for cards and trucks, where baselines were difficult to determine and therefore generating units was hard. He suggested ‘practical means’ for achieving NMAs including working with manufacturers, providing incentives, protecting intellectual property and implementing regulations.
Jamaica asked whether the examples were more like NAMAs. The EU also asked for the distinction from NAMAs and the NAMA registry and what the ‘added value or role of the UNFCCC’ with respect to NMAs was. Georgia welcomed the presentation as giving further clarity as to why NMAs were important – in order to cover all emissions.
Brazil added the example of the ‘Amazon Fund’ as an NMA, which it said was created to tackle forests with care, as it did not see emission reductions in forestry management as the overriding priority and that they would not want it to produce units which would then be used to continue ‘industrial emissions in Northern countries.’ It also reiterated the difference between financial and mitigation commitments in the Convention and said that ‘they are separate and not tradable.’
Swaziland asked how, if there were no units generated, you could see what the contribution was.
The Philippines explained that when it ‘crafts policies and measures we do not think just about emission reductions’ and gave the examples of addressing pollution from motorcycles and ‘jeepnies.’ It said consideration of sustainable development more holisitically would have positive impacts, and that finance, technology transfer and capacity building would be needed to achieve it. It agreed that the Amazon Fund was a good example of an NMA.
Saudi Arabia echoed Swaziland and the Philippines and said that the ‘elephant in the room is to implement there has to be support.’ It said a 20 year plan to address the transport sector would have no effect without support.
Nicaragua urged Parties to think what needed to occur under technology transfer to deliver NMAs. It said that in 2006, 80% of its energy came from fossil fuel sources and that today that was under 40%. It was aiming to reach 94% renewables and 100% energy access by 2020 (from 50% in 2006). It said all of this was a human-focused programme, directed at people and the poor, and that there was no need for it to be under a market mechanism.
Phillips said that NMAs could be a way of determining finance and identifying approaches and best practice. He said financing could be ‘result based’ but not necessarily ‘CO2 reduced base.’ He agreed there were similarities to NAMAs but that NMAs could be an additional way of presenting activities and attracting finance, with the role of the UNFCCC to act as a repository of guidelines, tools, and of a registry.
The Environmental Defense Fund (EDF) said that the NMA should have a home in the FVA and the FVA should have a home in the new agreement. He said that a ‘pilot needs a plane’ and so many NGOs warned against Parties launching a ‘pilot’ of NMAs or the FVA in Warsaw. He suggested a ‘climate integrity test’ for approaches to be included under the FVA.
After the presentations, the co-facilitator directed Parties’ attention to defining NMAs, including the question of ‘what is international’ and what it meant to be ‘non-tradable.’
Saint Lucia emphasized that its understanding was that NMAs were ‘more than non-tradeable’ but that they do not ‘result in internationally traded units’ or ‘anything accountable to developed country Parties’ legally binding mitigation commitments.’
Australia noted that the question was ‘tradeble by whom’ as Bolivia’s proposal included units so the issue may be that the private sector cannot trade the units. It also said that the results of the NMA would result in reductions that would be accounted for in a nation’s inventory and that needed to be considered.
The EU appreciated the examples provided but said there were already agenda items on finance and capacity building, and that a broad definition would lead to the discussion of all existing approaches. Japan said it understood NMA to be approaches that ‘do not result in the international transfer of mitigation outcomes’, which is the language from the existing text.
The co-facilitator asked if NMAs were a complementary or alternative approach to market-based approaches.
Saint Lucia said that until there was clarity on the transfer of units, tonnes, or outcomes, it was hard to say ‘what’s complementary as we do not know what the other half is.’
Bolivia stressed that NMAs were an alternative to market based mechanisms as markets ‘cannot close the gap of 16 Gigatonnes of CO2e identified by UNEP’; so a more comprehensive approach was needed. There needed to be a non-mitigation focus and that non-market approaches provided such an alternative.
The co-Facilitator asked if there were any other suggestions for a concrete outcome in Warsaw.
Brazil said that further information gathering about existing NMA was needed and that could serve as ‘a reference for further action at a later stage.’ It felt the discussion was ‘not mature enough to go beyond that.’ It said that the decision in Warsaw could ‘invite parties to provide examples of NMAs to be a part of a repository of ideas or initiatives for future reference and consideration. Saint Lucia emphasized that NMAs came from the Bali Action Plan under the mitigation heading and so it was ‘problematic’ to include other elements. Brazil expressed concern that phrasing as ‘when markets are insufficient’ suggests that markets are the first priority and it would not agree with that.
The Secretariat then reported on the ‘creative corner’, a public brain-storming sheet that was open throughout the day, and listed answers to the question ‘what is your favourite NMA?’ Answers included: fossil fuel subsidy removal, NAMAs, bans, eco-lables, cognitive development, green investment funds, concessional loans, and that there was no need to standardize everything and compare units.