Reed Smith Client Alert

Authors: Peter Zaman Pryderi Diebschlag

Type: Client Alerts

Introduction

The 19th Conference of the Parties (“COP”) to the United Nations Framework Convention on Climate Change (the “Convention”) opens today at the National Stadium in Warsaw, the Republic of Poland. For those who recall COP 14 in Poznań just before the Copenhagen COP, many will feel a strong sense of déjà vu as this COP also is one that is leading up to a more significant COP in Paris in 2015.

At a COP where the absence of ambition levels feature high on the agenda, many will question the choice of the host country, as Poland is currently one of the three most coal-dependent nations in the world. Ironically, Poland has decided to simultaneously host the International Coal & Climate Summit (18-19 November 2013) during the closing days of the conference, and Deputy Prime Minister Janus Piechocinski has already announced that it will not support an increase in emission reduction targets in Europe by 2030.

The Conference is scheduled to run until Friday, 22 November 2013, under the supervision of His Excellency Marcin Korolec, the Minister of Environment for the Republic of Poland, whom we expect to assume the Presidency of the UNFCCC process. However, in light of past experiences of this annual event, we expect high-level ministerial negotiations to continue throughout much of the weekend of 23/24 November, and that any key agreements are likely only to be reached in those concluding hours.

Over the coming days, and for the duration of the two-week conference, we will provide short daily updates on the key developments in Warsaw. However, for today’s purposes, we will briefly describe the key issues due to be debated, and provide our expectations of where we might find ourselves at the end of these two weeks.

Background

The Copenhagen Conference (COP 15) in 2009 was so burdened by the weight of expectation that it effectively collapsed, leaving the parties without a binding agreement to take forward, and only a loose statement of political intent to show for their efforts. This is, however, a grim and arguably disparaging view of the Copenhagen Conference, which did at least successfully establish the Green Climate Fund (“GCF”), reform aspects of the clean development mechanism (“CDM”), and achieve agreement on the Copenhagen Accord, the first stepping stone away from the Kyoto Protocol, towards a more exclusive treaty approach.

Whilst having no binding effect, the Copenhagen Accord adopted a “pledge and review” method, inviting Annex 1 countries to the Convention to commit to their own, self-imposed limits on emissions, and encouraging non-Annex 1 countries to implement their own mitigation actions. In doing so, it provided a basis such that the following Cancun Conference in 2010 (COP 16) was able to give those emissions limits (now termed “quantified emission limitation or reduction objectives” (“QELROs”)) some legal weight.

At the Durban Conference in 2011 (COP 17), the parties established the “Ad Hoc Working Group on the Durban Platform for Enhanced Action” (“AWG-DP”), a new group formed under the auspices of the Convention, tasked with developing either “a protocol, another legal instrument or an agreed outcome with legal force under the Convention”. The AWG-DP is due to complete its work by 2015, with a view to the resulting “legal instrument” entering force in 2020. Important decisions were also taken as to the funding of the GCF, further promoting reducing emissions from deforestation and forest degradation (“REDD+”) activities and laying the ground work for discussions in Doha as to a second commitment period of the Kyoto Protocol.

The Doha Conference in 2012 (COP 18) successfully achieved its primary goal of securing a second commitment period of the Kyoto Protocol (“KP2”), but while mild progress was made in the AWG-DP, it cannot be said that anything substantial was achieved in the spheres of mitigation or financing commitments in preparation for 2015. Despite the announcement that Japan, Canada, Russia, and New Zealand would not sign up to a second commitment period under the Kyoto Protocol, the Doha Conference did help to inject some faith that a new international agreement to commence in 2020 could potentially be achieved.

KP2 will run from 2013 to 2020 but, with the above-mentioned countries opting out, the resulting binding emission reduction commitments now only apply to approximately 15% of global emissions. One significant change is that there will be a cap on the carryover of AAUs, and those countries without a binding QELRO under KP2 will no longer be able to use or sell them, nor will they have access to the flexible mechanisms under KP2. This change was strongly opposed by Russia, whose objections were ignored by the COP. This may lead to some discussions in Warsaw being derailed, as we have already seen the Subsidiary Body for Implementation unable to meet recently because of objections raised by Russia, Belarus and the Ukraine, who voiced concerns at “deficiencies in the UNFCCC application of UN system rules of procedure, norms and principles”.

Additionally, the work of the Ad Hoc Working Group on Further Commitments for Annex 1 parties under the Kyoto Protocol (“AWG-KP”) drew to a close in Doha. The GCF, Climate Technology Centre and Network, and the Adaptation Committee will continue to exist, but several outstanding aspects, including discussions as to financing, REDD+ and Nationally Appropriate Mitigation Actions (“NAMAs”), were reallocated to other work streams.

Expectations from COP 19

The key areas that we expect to be focussed on during the Warsaw conference are finance, adaptation and mitigation, and some progress towards clarifying the legal structure and design of the new climate change agreement ahead of 2015.

Finance: Significant discussion will likely be aimed at clarifying short-term capitalisation of the GCF in order to make it fully effective, and we expect agreement to be reached on a long-term road map for scaling up to the US$100 billion funding target per year by 2020. Such discussions will be particularly poignant given that this will be the first time that the GCF will report to the COP.

The Standing Committee on Finance will also have questions to answer regarding its interaction with the GCF in order to ensure that work is not being duplicated.

From various countries’ initial statements, we anticipate that the usual divisions will reappear, with Annex 1 countries favouring the mobilization of private finance, while non-Annex 1 countries drive for public funding, at least in the near future.

COP 19 will also be the first COP to involve representatives of the business sector, meeting together in a newly created Business Forum. This is expected to lend a commercial focus to some of the side events, but it remains to be seen whether this will lead to a change in the atmosphere of the COP as a whole. In any event, the input of these representatives will be of fundamental importance to the debate as to the role and scope of private finance for the GCF.

The New Agreement: With little substantive progress made in Doha towards reaching a legally binding agreement in 2015, or even a draft for discussion in 2014, we expect to see an agreement reached in Warsaw on a roadmap for the AWG-DP. There will also undoubtedly be heated discussion – and it is hoped, agreement – as to the legal form or structure of such “a protocol, another legal instrument or an agreed outcome with legal force”.

Confidence in the process is at risk of waning, so a roadmap with clear milestones will provide direction and will hopefully reintroduce some faith that agreement can and will be reached in 2015.

We believe that REDD+ will also have an important role to play in this arena, and has been championed by many as a key part of any post-2020 agreement. Several draft decisions, agreed in principle at the Bonn Climate Change Conference, will be presented to the COP for agreement in Warsaw.

A decision on the principles and format for monitoring, reporting and verification (“MRV”) is also expected as this will be required in order to allow the implementation of parties’ emission commitments under the new agreement.

Adaptation and Mitigation: The Subsidiary Body for Scientific and Technological Advice will report on the outcomes from their work on the framework for various approaches (“FVA”) and a new market mechanism (“NMM”), with the aim of adopting a final decision in Warsaw. Much needs to be done here in order to boost legal certainty if private sector financing of emissions reductions is to be realised. If any decisions do flow from these work streams, they will be intricately linked to progress in the AWG-DP and can only be expected in the closing hours of the conference.

Loss and Damage: In Doha, it was agreed that an “institutional arrangement, such as an international mechanism” was necessary in order to provide developing countries with finance, technology and capacity building support to address loss and damage caused by climate change. However, actual decisions as to what this could look like were postponed to COP 19. Given the strong opposition by several countries, including the United States, we suspect that if such an agreement is reached, it will be weak as a result of bargaining between the parties in pursuit of more fundamental progress under the AWG-DP.

Conclusions

This is meant to be the year of “more focussed work”, and with the recent conclusions of the UN’s Intergovernmental Panel on Climate Change still fresh in everyone’s minds, and the images of destruction in the Philippines dominating the news, we can only hope that genuine progress will be made.

COP 19 in Warsaw was only ever touted as a working-level COP. Headline-grabbing decisions are not expected, but steady progress and a clearer roadmap with specific goals and targets are necessary if a legally binding agreement in 2015, for implementation in 2020, is to be achieved.

 

Client Alert 2013-293