Introduction
The AWG-KP closed on Thursday 6 December 2012 amidst on-going discussions in the other Working Groups. The atmosphere is beginning to become tense as delegates see the end of the conference approaching with two Working Groups still active.
The Doha Conference: Day Eleven
Meetings continued throughout the day with draft papers slowly taking form around the conference, sentence by sentence, square bracket by square bracket.
The revised draft conclusions paper, proposed by the Chair of the AWG-KP is impressive in the scope of the optionality that is still available. However, the COP is scheduled to finish on Friday 7 December 2012 and with so many choices on the table, at this stage it looks implausible that substantive decisions will have been made before the weekend, if at all. As has become the “norm” at these conferences, it looks like discussions will extend into the weekend.
AWG-KP
As the negotiations continued late into Wednesday night, the closing plenary was pushed back to Thursday morning. Chair Diouf put forward a revised paper in which the outstanding issues have been distilled into distinct alternative options for the CMP to discuss and finalise. Many will regard this with relief, as when it was first envisaged at the Bali COP in 2007, the discussions were expected to be completed in 2009.
The potential for lengthy debate in the CMP is still significant given the level of optionality in the draft paper. For example, as regards the smooth transition between the first and second commitment periods, three primary options are put forward. Option 1 requires each party to provisionally apply the amendment to the Kyoto Protocol from 1 January 2013 pending its formal entry into force, whilst Option 2 allows the parties to elect to do so, and Option 3 allows the commitments and responsibilities contained in the amendment to be complied with, rather than the amendment itself.
A further example, regarding access to the flexible mechanisms by parties not signing up to a second commitment period, denies such parties the ability to participate in the flexible mechanisms, or alternatively allows them to participate, with further decisions needing to be made for each possible allowance type, including potentially the JI mechanism.
A spin-off group, comprising members from all regional groups will now conduct a legal review of the text and report to the CMP President if any changes are required. It was emphasised that this group will not reopen any substantive discussions.
The key outstanding issues, which have not changed in the past few days, continue to be the level of Annex I Parties’ ambitions, operational aspects of a second commitment period under the Kyoto Protocol, the length of that commitment period, access to the flexible mechanisms for parties who do not sign up to a second commitment period, and the carry-over of AAUs.
By way of background to the AAU carry-over issue, the debate concerns the fact that under the cap-and-trade system established by the Convention, Annex I Parties can only emit up to the level of their allocation of AAUs. If a country reduces their emissions, this may leave excess AAUs which can be traded to allow another Annex I Party to emit in excess of their commitments. The issue arises due to the natural reduction of industry in Russia, the Ukraine and Poland, such that collectively they currently hold an estimated 12.6 billion excess AAUs. As these excess AAUs do not represent intentional, proactively achieved emissions reductions, many people have labelled those AAUs “hot air” due to their lack of environmental integrity. As a result, there is a push to stop AAUs being carried over from the first to the second commitment period under the Kyoto Protocol. Understandably, this is strongly opposed by the aforementioned countries (amongst others) which hold substantial excess AAUs that represent a potential future source of income.
Given the lack of agreement regarding carry-over, a new route forward is being utilised under which informal negotiations are taking place to convince countries not to buy surplus AAUs in order to meet their commitments under the Convention. Thus far, we understand that Australia, Switzerland, Norway and now Japan have all agreed not to trade AAUs. In the AWG-KP discussions, the EU therefore noted that while the carry-over of AAUs is an important issue, the sting has been taken out of it as there will be limited demand for AAUs between 2013 and 2020.
Whilst this is, prima facie, potentially an elegant solution, it overlooks the fact that AAUs can potentially be converted into Emissions Reduction Units (“ERUs”) with a view to sale into the EU Emissions Trading Scheme (“EU ETS”). If the market for AAUs disappears, it will be necessary for the European Commission to control the conversion of AAUs into ERUs in order to protect the EU ETS market. A vote on the ban of ERUs is on the agenda for the EU’s Climate Change Committee on 13 December. No doubt the outcome of these COP negotiations will weigh heavily on that vote.
AWG-LCA
Whilst the AWG-KP was closing, discussions as to long-term finance continued in the AWG-LCA and its closing plenary was postponed Friday. As previously mentioned, any issues that cannot be finalised within the working group will need, upon its closure, to be redistributed to other work streams. As most of these will likely be transferred to the AWG-DP, the closing plenary session of that work stream has also been postponed to Friday, immediately following the close of the AWG-LCA.
COP
A further plenary stocktaking session was held in the evening. With the AWG-KP closed, all eyes turned to Chair Tayeb, who indicated the AWG-LCA’s consultation process should be concluded that evening.
The delegates from Brazil and Norway reported that their ministerial outreach programme continues, intended to further reduce the differences of opinion on the numerous square brackets remaining in the AWG-KP outcome paper. As reported yesterday, similar outreach programmes have been established to consider long-term finance, reporting guidelines, loss and damage, the composition of the CTCN Advisory Board, and reporting obligations by parties outside of the Kyoto Protocol. These groups all reported a generally positive outlook, without any substantive progress worthy of note.
Conclusions
Previous COPs have often overrun and if the Ad Hoc Working Groups are anything to go by, this conference is likely to follow in that tradition. With the conference’s timetable currently approximately two days behind schedule and a multitude of issues remaining on the table, the delegates have their work cut out.
On a positive note, the developing countries began to come forward with their own pledges yesterday, with the Dominican Republic committing to an unconditional 25% emission reduction below 2010 levels by 2030 in absolute terms.
Client Alert 2012-275