Developed countries who have commitments under the Kyoto Protocol are negotiating loopholes for themselves that could lead to almost 400 Mt of extra emissions each year. After giving some background, I will describe the status of the negotiations, describe the loopholes, and quantify them. This will help us to see who the worst offenders are.

Emissions associated with land use are classified under the Kyoto Protocol as LULUCF – Land Use, Land Use Change, and Forestry. This includes deforestation – which is when you log a forest and replace it with some other form of land use such as grassland; but does not include forest degradation – which is what occurs when you log a forest and allow a forest to grow back. Because unlogged forests can store large amounts of carbon, emissions associated with forest degradation can be quite significant, but not accounted for. This can lead to perverse outcomes, for example it is possible to log old growth forests, use the wood to generate electricity, and not account for any of the emissions.

As a way of addressing this, the Kyoto negotiations have been looking at how to have countries include forest management in their accounts – this would include emissions from forest logging. Forests naturally absorb carbon dioxide, so when including forest management, reference levels (baselines) need to be negotiated so that countries don’t get credited for the removals that naturally occur anyway. Late in 2009, just before the Copenhagen negotiations started, countries submitted their preferred reference levels, as well as estimates of emissions in 1990, projections for the first commitment period (2008-2012) and projections for the second commitment period.

Each country proposed a reference level for itself, the numbers are given below (click on the image to enlarge it):

Forest Management Reference Levels

The problem with this approach is that each country has an incentive to choose a reference level that is generous to it. This is what has happened. Some countries who chose particularly generous reference levels for themselves include Russia, which chose a range between 0 and -177.8 Mt CO2-e of emissions, so that it gets credited if its forests are more of a sink than -177.8 Mt, but is only debited if its forests become net emitters and is projected to have emissions of -274 Mt in the first commitment period; New Zealand, who chose a reference level based on its forecast for 2013-2020, which is 19.4 Mt higher than its forecast for the first commitment period (over 23% of New Zealand’s 2005 emissions); and Japan, which chose a reference level of 0. These numbers all add up to 213-391 Mt CO2-e of excess allowances per year for Annex I countries compared to their projected forest management emissions for the first commitment period (depending on which number is used for Russia).

There was some extensive discussions on this issue at the Bonn climate negotiations on June 7, 2010, in the contact group on Further Commitments for Annex 1 Parties under the Kyoto Protocol. These negotiations were not broadcast, but some of what happened was broadcast on twitter (look up the #COP16 or #UNFCCC hashtag). I don’t know which countries did or did not have a constructive role in these negotiations, but would be very interested in finding out. The LULUCF negotiating text is here.

I have recently written a working paper, available from the Environmental Economics Research Hub website.

Wood, P. J., 2010, ‘Climate Change and Game Theory: a Mathematical Survey‘, Environmental Economics Research Hub Research Report No.62.

The abstract is as follows:

This survey paper examines the problem of achieving global cooperation to reduce greenhouse gas emissions. Contributions to this problem are reviewed from non-cooperative game theory, cooperative game theory, and implementation theory.

Solutions to games where players have a continuous choice about how much to pollute, games where players make decisions about treaty participation, and games where players make decisions about treaty ratification, are examined. The implications of linking cooperation on climate change with cooperation on other issues, such as trade, is examined. Cooperative and non-cooperative approaches to coalition formation are investigated in order to examine the behaviour of coalitions cooperating on climate change.

One way to achieve cooperation is to design a game, known as a mechanism, whose equilibrium corresponds to an optimal outcome. This paper examines some mechanisms that are based on conditional commitments, and could lead to substantial cooperation.

This post was published in Crikey on Friday, 14 May 2010.

When defending putting off the Carbon Pollution Reduction Scheme (CPRS) until “the end of the Kyoto commitment period”, Kevin Rudd stated that “progress on global action has been slower than any of us would like”. The Copenhagen Accord may not have resulted in a legally binding agreement, but countries are now working out policies to implement their Copenhagen commitments. The Australian policy to not reintroduce legislation until 2013 leaves Australia in danger of being left behind.

In particular, it is becoming increasingly likely that China will introduce a price on greenhouse gas emissions before Australia does. China Daily is reporting that China is likely to be levied between 2011 and 2015. Business Green has reported that the Chinese language Economic Information Daily quoted the Chinese Ministry of Finance saying that the tax will be introduced in 2012 or 2013, will start at 20 yuan per tonne of carbon dioxide, and rise to 50 yuan (about $A8) by 2020. Professor Ross Garnaut has since announced that China is better than Australia on climate action. Ironically, Business Green is reporting that China will also introduce resource tax reform, probably not welcome news to the mining companies that have been complaining about the CPRS and an Australian resource rent tax.

The US Senate is now considering a Bill — the American Power Act — that will place a cap on emissions from 2013. It would reduce carbon pollution by 17% by 2020, and more than 80% by 2050. Australia is committed to a 60% reduction by 2050. The US legislation may not get past the Senate, but the Obama Administration is supporting it and not planning to postpone things until 2013.

In 2009, emissions covered by the European Union emissions trading scheme dropped by 11%. Part of this drop in emissions would have been due to the global recession, but the EU ETS has been in operation since 2005. Tony Abbott has advocated a “wait for the rest of the world” strategy on climate change, and Kevin Rudd now appears to be advocating the same thing. If Australia’s policy is to wait for the rest of the world, then the time to act is now.

Today the Rudd Government backed away from implementing their emissions trading scheme (the CPRS) until 2013, making a carbon price in Australia before then very unlikely. The CPRS had many flaws, but was far superior to there being no carbon price at all, and could have been changed later. The Rudd government was facing difficulties getting a carbon price through parliament, but there were two ways that it could have done so:

  • It could have negotiated with the Greens to implement an interim carbon tax, while the details of an emissions trading scheme are worked out later;
  • If could have used the CPRS legislation as the trigger for a double dissolution election, in which case the legislation could be put before a joint sitting of both houses of parliament.

Instead the government has decided that they dont want climate change to be an election issue, and the Prime Minister has hardly mentioned climate change in the past 3 months. This contrasts very strongly with his rhetoric last year. At Copenhagen, he gave a speech where he said:

When I arrive home at the end of this week, will I be able to sit down, look my children in the eyes and tell them in clear conscience that I did absolutely everything I could to achieve action to avoid dangerous climate change.

Because if we cannot, then we will have failed in our basic duties as leaders of our nations, as fathers and mothers of our children and custodians of our nations’ future.

The children of the world are watching.

They are listening.

And history will be the judge of each of us here today.

Now that the Copenhagen meeting is over, does this mean that history will no longer be judging our action on climate change? Will Kevin Rudd be able to look his children in the eye and say “I did absolutely everything I could to achieve action to avoid dangerous climate change”? History may well judge that Kevin Rudd has jumped the shark today.

Kevin Rudd has said (in defense of postponing the CPRS)
“The rest of the world is being slower to act on appropriate action on climate change.
“It’s very plain that the correct course of action is to extend the implementation date.”
In her paper ‘A Polycentric Approach for Coping with Climate Change’. Policy Research Working Paper 5095. World Bank., Nobel prize winner Elinor Ostrom said:
Given the severity of the threat, simply waiting for resolution of these issues at a global level, without trying out policies at multiple scales because they lack a global scale, is not a reasonable stance.

Ostrom has made it clear why it is unreasonable for individual countries to wait for the rest of the world.

UNFCCC climate change negotiations have resumed in Bonn. Between April 9 – April 11, meetings are occurring for both the ad-hoc working group for long-term cooperative action under the convention (AWG-LCA), and the ad-hoc working group on further commitments under the Kyoto Protocol (AWG-KP). These working groups have been tasked with completing the Bali action plan by the COP 16 meeting in Cancun, Mexico. Some of the Bonn meetings are webcast here. According to the UNFCCC website:

The first sessions of the AWG-KP and AWG-LCA in 2010 will focus on the organization of work of both working groups this year, including the need for additional meeting time, with a view to reaching a successful conclusion of their work at COP 16 /CMP 6 in Cancun.

Several issues have played a significant role so far:

  • There is a proposal that the Secretariat draft a new next that would draw on both the LCA text from last year, and the Copenhagen Accord. The other option would be to continue negotiating on the old text. If there was a new text, it would be released before some negotiations in June. At the time of writing, it seems like a new text is being opposed by Bolivia, Venezuela, Egypt and Saudi Arabia.
  • Countries are staking out (and to a certain extent re-iterating) the positions. Some non-Annex I parties have emphasised the importance of the Kyoto Protocol, and that Annex I parties to the Kyoto Protocol should have stronger commitments, and that loopholes involving permit carryover and LULUCF accounting should be addressed.
  • Russia stated that negotiations should be more efficient; countries should not use up time by repeating their positions; and negotiations should not take place at night, so that negotiators could get some sleep (this particular point received applause).
  • An issue for discussion is the number of meetings, some suggestions for two additional meetings.
  • The US stated made a statement that included the following points: Copenhagen was a remarkable breakthrough because: an agreement to limit temperature rises to 2 degrees; a framework where countries can list their actions or targets; a framework for transparancy; finance commitments; technology; adaptation; and REDD. But there was not much progress in the formal negotiations on the ‘crunch issues’, over 100 pages of brackets. But heads of state achieved things that the formal process could not. The accord should materially influence negotiations. Support chairs proposal to draft new text.
  • Ghana stated that Annex I parties should fund the extra meetings and fund the participation of two participants from each non Annex I party.
  • In order to simplify the negotiations, and make them more inclusive, the chairs of each working group have proposed to create a single contact group corresponding to each working group.
  • Papua New Guinea has called for ministers to meet in order to provide political direction, and when progress is made, then negotiators should meet and integrate progress into the negotiating text.
  • Other negotiators, including the Phillipines, have said that the process should be ‘party driven’ in order to avoid the ‘mistakes of Copenhagen’.

The difficulties with finding cooperation on climate change were illustrated at Copenhagen, which resulted in a political ‘accord’, but where there remained too much disagreement to arrive at a binding international treaty. There has been an ongoing political debate about the role of the United Nations, and whether more could be achieved in negotiations involving smaller groups of countries. The Copenhagen negotiations may have made the latter more likely. The lead US climate change negotiator, Todd Stern, stated:

You can’t negotiate in a group of 192 countries. It’s ridiculous to think that you could.

but that

It is certainly premature to write off the UNFCCC. There is a credibility that is provided by the full group. So on the one hand, I don’t think you can negotiate in that grouping, but on the other hand, it’s good for there to be a larger grouping that the smaller representative group can come back to.

Some of the rules [of the UNFCCC] can be difficult. If you’ve got 185 countries wanting to do something and a handful that don’t want to, that blocks everything.

Nicholas Stern has offered a different perspective, stating that “The fact of Copenhagen and the setting of the deadline two years previously at Bali did concentrate minds, and it did lead… to quite specific plans from countries that hadn’t set them out before”, and that it was vital to stick with the UN process, whatever its frustrations. Stern also stated that the “disappointing” outcome of December’s climate summit was largely down to “arrogance” on the part of rich countries.

Other perspectives in this debate have been offered by Jonathan Pershing, Robert Stavins, and Andrew Light. Gro Harlem Bruntland, the UN special envoy on climate change, has said that there is likely to be a two-track process, with negotiations both within, and outside the UN.

I have written more on the role of different countries at Copenhagen (including ‘rich’ countries) here. A major deadlock in the negotiations is due to developing countries being unhappy with Canada, Japan and Russia not being willing to be part of a second commitment period to the Kyoto Protocol. Another problem is that Saudi Arabia and other OPEC members (many of these countries could be considered to be ‘rich’, even though they are not Annex I countries) are blocking discussion of new legally binding protocols under the UNFCCC, sometimes using lack of progress under Kyoto as an excuse.

Game theory can provide useful insights when considering debates such as these. In fact, there has been a parallel debate in the game theory literature on whether cooperation is more likely to arise from a `grand coalition’ of all countries, or from smaller coalitions. The debate has been surveyed by Chander and Tulkens. An important contribution is from Finus and Rundshagen, who consider different ways to model coalition formation as a non-cooperative process.

In some ways the Annex I parties to the Kyoto protocol behave like a coalition — members behave more cooperatively with respect to each other than they do towards non-members. The set of Annex I Parties to the Kyoto Protocol is similar to the ‘open membership’ coalitions described by Finus and Rundshagen. Other countries are free to join the Annex I Parties, but generally they don’t want to. Many Annex I countries instead want to leave.

The European Union is closer to a ‘classical’ coalition. They choose their emissions in a cooperative manner, negotiate collectively in the UNFCCC, and participate in an emissions trading scheme together. Membership is not open, and decided collectively, in a manner similar to the ‘exclusive membership games’ described by Finus and Rundshagen. Processes where countries link their emission trading schemes may also work in a similar way to an exclusive membership game. In the cases studied by Finus and Rundshagen, although open membership coalitions are easier to join, the equilibria for exclusive membership coalitions involve larger coalitions and a more cooperative outcome.

A possible implication of this is that a process where a small amount of ‘major emitters’ negotiate a coalition, which others are then free to join, is likely to be less successful than a process that tries to find the largest possible group of countries who are willing to cooperate with each other. Carbon market linkage may also facilitate cooperation.

The podcast of the ANU event “What Really Happened at COP 15″ is here.

The notes for my talk are below, as well as some slides (which I wasn’t able to show on the day).

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What really went on at the Copenhagen Climate Change Conference? Was it a ‘fiasco’ or a positive step forward? Those are some of the questions to be addressed by a panel of experts tomorrow at The Australian National University.

The panel discussion – Post Copenhagen: Where do we go now? – will bring together people who experienced the COP15 discussions first hand. They will attempt to shed light on what really happened at the negotiations, what the failure to reach a binding agreement means and what comes next.

The discussion includes Associate Professor Janette Lindesay of the Fenner School of Environment and Society at ANU, Dr Peter Wood of the Resource Management in Asia-Pacific Program and ANU students Jonathan Pickering, Phoebe Howe and Alexei Trundle. The discussion will be moderated by Executive Director of the ANU Climate Change Institute, Professor Will Steffen.

Professor Steffen said although the Copenhagen discussions had been seen as a failure by many, there were still reasons to be optimistic about future negotiations.

“Although the Copenhagen Accord did not go as far as many would like it, it represents a significant progress towards an international agreement,” said Professor Steffen. “The Accord continued to draw on climate change science as underpinning foundation of efforts to stabilise the climate. In particular, the agreement that the rise in global temperature should be limited to two degrees or less is based on a massive body of research on human interference with the climate system.”

The lunchtime discussion will be streamed live at www.livestream.com/anuchannel with an online chat room allowing for viewer interaction and discussion.

Parties associated with the Copenhagen Accord have now submitted their quantified economy-wide emission targets and mitigation actions. These submissions are on the UNFCCC website. The US Climate Action Network has provided a useful table which summarises these submissions.

It is useful to have a ‘schedule’ (such as the chapeau of the accord) in which as many emitters as possible list their targets and commitments. It is also useful to have conditional targets (along with conditions) placed into this schedule. If countries are able to commit to both conditional and unconditional targets, then we have a framework that could lead to countries choosing their targets cooperatively. This has been strongly suggested by research on mechanisms that implement public goods.

Unfortunately the way that these things are done in the accord is far too vague to work. It is hard to say what the accord’s targets imply in terms of actual emissions, because issues such as LULUCF accounting, international trading, carryover of Kyoto AAUs, and definitions of ‘business as usual’ are completely unspecified. Furthermore, the conditions that countries have specified for their conditional targets are completely vague, and it is impossible to be able to tell with much certainty from the accord schedule whether any of these conditions have been met. For example, the EU conditions use words like “comparable emission reductions” and “responsibilities and respective capabilities” without stating what these conditions actually mean.

A global framework for emission reductions should have an accounting framework that converts commitments into actual emissions. When countries make conditions for their commitments, these conditions should be based on this framework. Countries would then know what they would need to do in order for other countries to increase their level of ambition.

If a legally binding treaty is negotiated, it should be designed with these considerations in mind. Unfortunately progress on a legally binding agreement has been difficult: at Copenhagen, Tuvalu proposed to form a Contact Group to discuss legally binding agreements, but this was blocked by China, India, Saudi Arabia, and some other OPEC states.

Australian opposition leader Tony Abbott has launched a new climate policy. The plan states on page one:

Our policy will cost $3.2 billion over 4 years, while the ETS costs $40.6 billion over the first four years.

This is comparing oranges with apples. It is referring to the their policy spending $3.2 billion, and the ETS raising $40.6 billion from sale of permits (much of which will go back to households or polluters), but they are completely different things. And the “cost” of a policy is how much is spent on emission reductions, be it by firms, the government, or whatever. This has nothing to do with the amount of auction revenue in an ETS.

The Coalition does not appear to understand the difference between price and cost. Professor Ross Garnaut spelled out the difference at a public lecture at the ANU in November 2007:

Finally, it is worth differentiating between the price of carbon and its cost to the economy. The cost to the economy is not, as some have suggested, the carbon price set for emission permits. The “price” is not the cost – this has been a fallacy of the Australian discussion to date.

The cost to the economy is the expenditure on substitutes net of existing higher costs imposed through mandatory schemes. While carbon prices will rise over time, the cost of mitigation does not rise at the same rate. It could be more or less depending on expenditure on substitutes such as renewable energy development, increased costs of structural industry adjustment and improving energy efficiency.

But over time, the incremental cost of new energy sources applies to a smaller part of the economy; and continued technological and institutional improvement in supply of the new substitutes for the old high-carbon activities may bring down their cost, even when the carbon price is rising.

In a new low for the Australian media, today’s Syndey Morning Herald Online describes climate change skeptic/denier Christopher Monckton as a British Scientist. Christopher Monckton, also known as ‘Lord Monckton’ or ’3rd Viscount Monckton of Brenchley’  does not have any science qualifications, nor has he published in peer reviewed scientific journals. He is, however, British, one thing the SMH subeditors did get right.

As well as not believing climate change science, he also told a US audience that at Copenhagen the US government will sign a treaty (which he has read) that will create a world government and “at last the communists who piled out of the Berlin Wall and into the environmental movement and took over Greenpeace so my friends who founded it left within a year, because they’d captured it; now the apotheosis is at hand. They are about to impose a communist world government on the world.”

While this makes for entertaining prose, this does not further anyone’s understanding of the climate debate, except to illustrate the lunacy of some of the opponents of action on climate change.

Monkton, who would be a nobody if he wasn’t such a lunatic, is getting a huge amount of media attention in the Australian media. At the same time, people who have expertise on climate change and its mitigation do not get a mention in the media. For example, Ross Garnaut, who put together a comprehensive report on climate policy for the Australian Government in 2008, gave a speech today. In it he made recommendations on what target the Australian Government should submit as part of the Copenhagen Accord, commented on the role of the UNFCCC, and described the proposal from the Greens for an interim carbon tax as a “politically practical way forward”. None of this has yet been mentioned in the Australian media, except for Carbon + Environment Daily, which is only available to people who pay $729 for an annual subscription.

Update: To its credit, The Sydney Morning Herald has since published Garnaut’s speech in its Tuesday edition. It has also updated the AAP article on Monckton with a more accurate headline (that no longer describes him as a scientist).

The Greens have proposed an interim carbon tax for Australia. The basic idea is that there would be a carbon tax of $20 for two years, and in that time, policy decisions on an ETS would be made. The details are here. Professor Garnaut made a similar proposal in the Garnaut Review.

This is a very sensible idea. A big issue with carbon pricing policy is that before a carbon price is introduced, there is a very strong incentive for polluters to act like the sky will fall in. This is because they know that would lead to weaker policy, or more compensation, or both. This creates a very bad environment for a government to make decisions about targets, especially about targets for the next ten years or longer. Introducing a carbon price first is a much wiser way to go about things.

This would probably be a good idea in the US as well. Getting climate legislation through the US Senate is very difficult, and will become more difficult now that the Republicans have an extra senator. It may be easier to introduce a low carbon tax now (possibly equal to the price floor in the proposed US legislation), and then introduce a cap on emissions later. Australian policy could show the way forward for US policy.

Good climate policy provides certainty for investors in low emission technology. When a cap is introduced, it could be possible to maintain the current price as a floor in carbon price.

In climate negotiations, issues of accountability and transparency are very important. If the leader of a country pledges to reduce their emissions by a certain amount by a certain year, then they should be held accountable to that pledge, and judged accordingly. If a country pledges to increase their emission reduction if other countries emission reductions add up to a certain amount, then they should be accountable for that, and there needs to be a transparant mechanism for tallying and adding up different countries emission reduction commitments.

But accountability and transparency are not just about emission reduction commitments. These issues are also important for the negotiations themselves. If in negotiations, a country waters down the strength of the agreement, or obstructs progress, then the rest of the world will judge that country, and arrive at their own conclusions about whether they were negotiating in good faith or not. The fact that the plenaries are televised online, and some contact groups are open to observers, helps to facilitate transparency on this issue.

In the interests of transparency, I will list below some of the things that happened during the negotiations that countries perhaps should be held accountable for. These include:

  • Russia’s on-again off-again emission reduction target;
  • Saudi Arabia, China, India, Venezuela, Algeria, Kuwait, Oman, Nigeria, and Ecuador blocking discussion on proposals for a legally binding agreement from Tuvalu, Australia, Japan, the United States and Costa-Rica.
  • Japan (supported by Russia and Canada) putting into question whether there would be a second commitment period to the Kyoto Protocol;
  • the talks being suspended for 5-6 hours on Monday Dec 14 (when there was a lot of work to do);
  • the United States watering down the nature of commitments from developed countries at the final AWG-LCA plenary;
  • in the COP plenary that occured after the final AWG-LCA plenary, India proposed to delete collective emission reduction commitments by 2050 from the LCA text, as well as proposals to periodically review progress;
  • the (admittedly weak) Copenhagen Accord could only be ‘noted’ by the Conference of Parties, for the COP to do anything stronger (like adopt it) was blocked by Sudan, Venezuela, Bolivia, Cuba, and Nicaragua – this was a highly acrimonius meeting;
  • a proposal from Tuvalu to discuss a legally binding treaty at COP 16 next year was blocked by China, India, and Saudi Arabia.

According to Google Trends. I guess it might have something to do with COP 15.

Amount of searches involving 'climate change'

There were three things that resulted from the talks in Copenhagen:

  • A 13 paragraph ‘political accord‘ was agreed by most of the parties, but could only be ‘noted’ by the COP because there was not consensus.
  • The negotiations on extending the Kyoto Protocol had unresolved issues, and the next meeting in Mexico will return to this. The key text that resulted from the Kyoto side of the negotiations is here.
  • The negotiations on long-term cooperative action also had unresolved issues, which the Mexico meeting will have to resolve. The key text that resulted from the long-term cooperative action (LCA) side of the negotiations is here.

What did not result from Copenhagen was a framework for developing a fair, ambitious and legally binding agreement. What was positive about the accord was a commitment on finance from developing countries, which would add up to $100 billion per year by 2020, but whether actual commitments will add up to this number is still unresolved.

While the the Kyoto and LCA negotiations did not result in a successful conclusion, the draft texts are now considerably shorter, and the unresolved issues are more obvious. Whether there is a successful outcome to the negotiations at a later date depends crucially on how these issues get resolved.

Some undecided issues related to the Kyoto Protocol include how land use, land use change, and forestry is accounted for; carry-over of permits from the first commitment period (hot air); the scale of the Annex I (developed country) commitments; and how these commitments are represented in a table, and the issue of base years and reference years (a less important issue, but the one that takes up most of the negotiators time). The most important unresolved issues for the LCA track are the precise nature of developing and developed country mitigation commitments and actions, and whether anything from the text will facilitate a legally binding agreement.

The final meeting of the Ad-hoc Working Group on Long-Term Cooperative Action (AWG-LCA) was supposed to commence early in the evening on December 16. It instead commenced at 4.45 in the morning on December 15, after negotiations went through the night. The meeting was considering a new version of a text on long-term cooperative action that is to be considered by world leaders over the next few days. In this meeting, the United States delegate watered down the nature of any mitigation commitments that would be required from developed countries. The text that he is referring to (with the changes included) is here.

A fundamental problem with any international treaty is that for it to work it has to be ratified by its Parties, in this case including the United States Senate.

At an earlier meeting of the Conference of Parties, when discussing Tuvalu’s proposal for a fair, ambitious and legally binding deal, the Tuvalu negotiator made some eloquent remarks on the role of the US Senate in these negotiations, noting the irony that the fate of the world is in the hands of a few US Senators.

The talks at Copenhagen are not exactly what would be called a smooth operation…

This is an excerpt from a short meeting (slightly less than four minutes) of the CMP, this original video of this meeting is here.

Below is blogging from the KP track of the negotiations. New draft texts have been released to Parties, I haven’t been able to get hold them yet. A “stocktaking plenary” is about to commence. There was supposed to also be plenaries for the LCA track of negotiations this evening, not sure if that is happening or not.

Chair: we agreed we would establish a contact group for the sole purpose of fixing up the text. After this plenary we will work on the contact group. Time is of the essence, we hope to have something good to report to COP/MOP tomorrow.

Co-chair: contact group on numbers resumed. in this session we used various methodologies to try to get agreement, small informal consultations were particularly helpful. through consultations clarified c. periods – choice of 5 or 8 years. agreed to have single base year, not to have a common base year. discussed reference years. discussed surplus AAUs and LULUCF. This ensured numbers would be meaningful from environmental perspective. we have forwarded you an annex, which is bracketed, it is not a clean text. we did not discuss the ?? decision. two options option A consequential; option B go beyond, but fit under 3.9 of KP. need to return to reference periods. no agreement on how to express aggregeate figure and what it is, also on ‘top down vs bottom up’. much work remains to be done on other possible amendments.

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The Federated States of Micronesia, on behalf of the Alliance of Small Island States (AOSIS), has distributed among the contact group on ‘numbers’ a document titled ‘Potential effect of Surplus AAUs on Annex I allowed emissions in 2020: Technical Background and Assumptions’. It states:

Several economies in transition (EITs) have Kyoto first commitment period (KP.CP1) (2008-2012) targets that exceed their likely emissions for that period. Paragraph 13 of Article 3 of the Kyoto Protocol permits that surplus Assigned Amount Units (AAUs) from the first commitment period are carried forward to “subsequent commitment periods”. This leads to the situation where surplus AAUs are created and potentially available for transfer to other Parties where they may be used towards compliance with their obligations. As a result, surplus AAUs that are transferred to other Annex I Parties or carried forward will lead to more emissions to the atmosphere than would otherwise have happened.

The scale of surplus AAUs in the first commitment period is sufficient, if transferred to and used by other Annex I parties to meet their obligations, to permit Annex I as a group to emit as business as usual levels through 2020.

What the document is saying is that if Kyoto emission permits (AAUs) are carried over from the first (2008-2012) commitment period to the second commitment period, then the Kyoto Protocol will not have a significant impact on developed country emissions. In terms of emissions, this would be equivalent to not having a second commitment period, which is also a possibility (and has some support from Japan and Canada).

The document also has analysis of the impacts that each parties preference for accounting for land use, land use change, and forestry would have on emissions. It suggests that this would have a similar impact, but not quite as great as the impact of banking AAUs.

The EU has made similar statement on banking AAUs from the first commitment period, noting that banking could lead to an increase in emissions even if Annex I emissions added up to a 30% reduction (which they do not).

In an informal briefing to NGOs, an Australian negotiator did speak in favour of banking AAUs. I have not yet observed Australia saying anything on this in the negotiations.

This is the second meeting of the Contact Group on Further Annex I Emission Reductions today. At the first meeting, further meetings of the Kyoto Protocol contact groups were postponed for about 5-6 hours, in response to Africa and the G77 postponing negotiations on the LCA text.

A non-paper was distributed, containing the various options suggested by parties at the Dec 12 meeting. There were:

  • A: 3 options for tables for Annex B;
  • B: four options for article 3, paragraph 1 and paragraph 1 bis;
  • C: article 3, paragraph 1 ter;
  • D: article 3, paragraph 1 quater;
  • E: article 3, paragraph 1 quinquies;
  • F: article 3, paragraph 7 bis;
  • G: article 3, paragraph 9 bis;
  • H: article 4, paragraph 2 bis;
  • I: article 4, paragraph 3.

The text of the non-paper was put up on the screen, like with many of these contact groups, there is likely to be quite a bit of editing of the text during the meeting. Lots of squealing noises coming from the microphones…

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