Time for change

Foundation for a Low Carbon Future: Essential Elements of a Copenhagen Agreement

WRI identifies key elements for a successful and possible outcome in Copenhagen

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In December 2009, twenty thousand people, including about 40 heads of state, will converge in Copenhagen to decide how the world responds to escalating climate change over the next half century.

If successful, the meeting of 192 member countries of the UN Framework Convention on Climate Change (UNFCCC) will send a clear signal to business and industry, governments and citizens around the world. Commitments made and mechanisms agreed will signal that the future belongs to a low-carbon economy and that tomorrow’s winners will be those that invest in clean energy solutions. It will also set in motion swift support for the most vulnerable in adapting to a warming world.

Copenhagen should serve as a foundation for and springboard to a new legally binding global climate agreement. Realistically, the summit is likely to result in a foundational outcome that encourages immediate action to reduce emissions and signals commitment to greater action in the near future. The negotiations are likely to conclude in a series of decisions that will lock in progress made so far, together with an overarching high-level political declaration that the final agreement will be legally binding. This new, comprehensive, and legally binding instrument will be the goal of negotiations in 2010, once the United States has passed the domestic legislation necessary to commit to a final target and timetable for reducing greenhouse gas emissions.

This brief paper, rooted in WRI’s long-running analysis of the complex and interconnected issues under negotiation, identifies key elements for a successful and possible outcome in Copenhagen (categorized in this document by The Big Picture Agreement, Building a Sound Foundation, and Support for Developing Countries). These include a clear set of follow-on negotiations to complete a legally binding agreement. This process could be achieved in two stages - at a continuation of the COP 15 Copenhagen session six months later (a so-called COP 15 bis), and at the next full conference of the UNFCCC parties (COP 16) in Mexico in December 2010. Putting in place a clear process to agree upon the final legally binding instrument(s) in one negotiation track will be key to success. After two years of negotiations, many of the elements required for an effective post-2012 climate agreement are already clear.

The world sets a goal to keep global average temperature below 1.5–2 degrees Celsius in comparison with pre-industrial levels. This is in line with the best scientific guidance which warns that greater warming will spawn increasingly dangerous and unpredictable impacts. To limit temperature rise, countries also agree to reduce global emissions by at least 50 percent below 1990 levels by 2050.

In order to meet this goal, a high-level declaration would contain a set of substantive agreements in the form of targets and timetables from developed countries and emission reduction actions by developing countries. Financial commitments from the former to support the latter in their mitigation and adaptation efforts between now and 2020 must also be included.

Developed countries as a group — including the United States, 27 European Union countries, Japan, Australia, Canada and Russia — would commit to reducing emissions by at least 80 percent by 2050. These countries would also commit to cutting collective emissions by 25 to 40 percent below 1990 levels by 2020. Additionally, each developed country would also commit to an economy-wide 2020 emission reduction target (known as a Quantified Emission Reduction Commitment or QERC) and an emissions pathway through 2030. These national targets could be in the form of a range until the final legally binding instrument(s) is agreed in 2010.

Developing countries would agree to take nationally appropriate climate mitigation actions that will reduce emissions significantly (e.g., 15 to 30 percent) below business-as-usual levels by 2020. African, Asian and Latin American governments could implement emission reduction policies and measures in all major economic sectors, including forestry (deforestation is responsible for 15 percent of global greenhouse gas emissions). Some large developing countries that are major economic players and substantial greenhouse gas emitters, such as China, Brazil, and Mexico also would agree to individual non-binding goals to curb national emissions within the range. The amount of financial support that developed countries come up with will fundamentally determine the level of action to which developing countries are prepared to commit.

Country actions and commitments would be reflected in long-term nationally appropriate low-carbon planning processes.

For these commitments to form the basis of an effectively functioning agreement, a framework of international climate machinery needs to be built around them. This will require a COP decision mandating that negotiations conclude in a legally binding instrument that contains the following specified mechanisms and institutions.

All countries’ commitments and actions would be formally registered at Copenhagen which requires creation of an official registry or schedule. These could be amended post- Copenhagen only in order to make them more ambitious. Support pledged by developed countries for developing country actions would also be included.

When the post-2012 international climate agreement comes into effect, it is critical that countries employ both common methodologies to track greenhouse gas emissions and common international accounting standards. Without such rules, comparing emission reduction actions taken by different countries will be like comparing apples and oranges. Such rules will also be important to enable a global carbon market to operate effectively and help drive down the cost of climate change mitigation.

The agreement would therefore include common international accounting and reporting standards for countries taking on targets in four key areas: 1) comprehensive reporting and review of national GHG emissions; 2) common standards for quantifying, reporting, and reviewing emission reductions, including from changes in land use, land-use change, and forestry; 3) common standards for national GHG registries and 4) common methodologies for estimating emission reductions from developing country projects or programs funded by developed countries (known as offsets).

A robust mechanism to measure, report and verify the commitments and actions that countries agree to take is critical to promote trust between nations, and to ensure that promised greenhouse gas reductions actually materialize. This would include deployment of expert review teams to assess country efforts. Delivery of the support that developed countries pledge to developing countries would also be measured, reported and verified. An Implementation Committee would be established, providing a forum for expert review teams to share findings with countries.

The UNFCCC Conference of the Parties could be mandated to encourage countries to meet their obligations and empowered to find a country out of compliance. Tools to encourage compliance could include possible suspension of a country’s rights and privileges under the agreement.

It is critically important that the Copenhagen agreement remains consistent with the latest science on climate change. This will require institutionalized reviews to help ensure that countries’ collective commitments meet the objectives the world has set. The first would review countries’ efforts in light of the latest IPCC review of science in 2014. Further emergency reviews could be triggered by a group of countries if new scientific evidence warrants swifter attention than scheduled in the agreement.

No deal will emerge from Copenhagen, or subsequently, without significant commitments of financial, technology and capacity building support from industrialized to developing countries. This requires two decisions. The first is particularly important both to build trust and respond to urgent need, and is a fast start fund to help the poorest countries respond to the existing destructive impacts of climate change on lives and livelihoods and build capacity to act. The second is a decision to create the post-2012 financial architecture and identify sources of funds. WRI views the following mechanisms and support frameworks as a workable solution.

A new financial mechanism created in Copenhagen could establish a single fund with four components - adaptation, technology, mitigation and forestry. The most vulnerable countries would have direct and expedited access to this money, which would have robust transparency and accountability rules attached. Developed and developing countries would be equally represented on the fund’s governing boards, which would fall under the authority of the Conference of the Parties to the UNFCCC. The financial mechanism could include a role for existing but reformed international financial institutions.

Fast start fund This new mechanism would be immediately operational with annual prompt start funding of $10 to $15 billion pledged by developed countries in Copenhagen for adaptation and capacity building from 2010 through 2012.

Longer term funding Developed countries would commit to deliver substantially larger amounts by 2020, with a specific figure to be agreed upon in 2010. Sources could include domestic cap-and-trade programs which provide set-asides for the aforementioned public funds, and perhaps bunker fuel levies on international aviation and shipping. All countries would contribute to the fund – based on responsibility and ability to pay – except for the poorest and most vulnerable. Additional and predictable financing must be earmarked for climate change by industrialized countries, and not diverted from official development assistance budgets.

Countries would agree to take and support actions that will significantly reduce emissions from deforestation and significant forest degradation (known as REDD) in natural forest ecosystems by 2020. This would require agreement on the creation of a REDD mechanism at Copenhagen. This mechanism would initiate and direct performance-based financing that reflects the varied national circumstances and needs of individual developing countries. A first phase would channel financing for policies and measures leading to improvements in governance of forests that are necessary for countries both to achieve emission reductions and to provide credible emission reductions into an international system. A second (and possible subsequent) phase(s) would channel support for countries to achieve real, additional, verifiable and permanent reductions in greenhouse gas emissions. Reporting and verification components of the REDD mechanism would include tracking governance improvements and emission reductions. Impacts of activities on biodiversity and the rights of indigenous peoples and local communities would also be monitored.

forest degradation in developing countries

This new mechanism would seek to speed the deployment of clean energy and low-carbon technologies in developing countries. Countries would decide to double climate research and development funding by 2015 and include innovation and capacity building centers in developing countries. Countries would also create a mechanism to handle issues surrounding intellectual property rights (IPR).

In addition to the fast start funding, a new adaptation framework would be agreed at Copenhagen that promotes both immediate and long-term integrated action by all countries to adapt to the impacts generated by rising global temperatures. This would provide reliable adaptation support for all developing countries, with the most vulnerable first in line. Assistance will support development of planning and review processes, building of institutional capacity, implementation of practical on-the-ground projects, and scaling up of action through international cooperation networks and initiatives.

There are two tracks of talks under the UN negotiations, one within the UNFCCC and one within the Kyoto Protocol. Many countries (especially from the developing world) seek to maintain and strengthen the Kyoto Protocol while others, notably the United States, would prefer to work solely within the UNFCCC framework. As a result, countries may fail to decide at Copenhagen on the final legal form of a binding new climate agreement. Specifically, they may not agree whether there will be one new legally binding agreement or two, with the Kyoto Protocol continuing for those that are parties to it and a separate agreement for others.

If this is the case, countries must set a date by which such an agreement will be concluded, and a clear, timely process to complete the negotiations. To be most effective, this should include continued involvement of ministers and heads of state and be focused in one track of negotiations to decide the final legal instrument(s).

To expedite this process, countries could decide in Copenhagen that two high level meetings of the Conference of the Parties to the UNFCCC are needed next year. The first would be a continuation of COP 15 and take place in June 2010. The second would be the regular annual COP meeting in December in Mexico. If the key elements described above are put into place at Copenhagen, they would provide a springboard to finalize a new, long-term, and effective global climate agreement in 2010.

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Europe began its cap-and-trade system in 2005, with a three year learning period (phase 1). In recent U.S. Senate climate hearings, cap-and-trade critics pointed to the challenges of that first phase as a sign that cap-and-trade was a failure. But as more results are identified and understood, Europe’s first phase is looking more and more like a success. Today Europe has a stable cap-and-trade system, improved by the lessons learned when it was first implemented, and industry in Europe have certainty that carbon pricing is here to stay.

Price volatility for carbon is often cited as a problem in the EU Emissions Trading System (ETS). In fact, for the second trading period, the price has been relatively stable. The chart below shows the comparative stability of European Union Allowances (EUAs) – the emissions reduction ‘currency’ (in blue) – when compared to the price volatility of other commodities such as coal, oil, and gas.

Another charge leveled at the EU ETS is that officials had allocated too many allowances for polluters in the first phase, with no real abatement (greenhouse gas emissions reductions) taking place. It is true that in May 2006, the results from the first year showed that there were fewer emissions than allowances. But was this overallocation or was it, perhaps, that European states, venturing into uncharted territory, had underestimated how cheap and easy it would be for companies to reduce their emissions? The earlier UK emissions trading system, for example, exceeded its five year target in the first year. Companies, once they started to implement greenhouse gas reduction measures, were quite effective at cutting back on emissions, and needed fewer allowances than predicted.

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So is the carbon market working today? In 2006, only 15% of the companies covered by the ETS were taking the future cost of carbon into account. Point Carbon and others found that a year later, about 65% of companies in the trading system were making their future investment decisions based on having a carbon price – and that is precisely the response needed.

Europe has stuck with cap-and-trade because of its cost-effectiveness and its ability to deliver an environmental outcome.

What are the big lessons we can draw from the early EU experience? First, a market needs scarcity in order to create demand and a carbon price. Second, achieving the right level of scarcity right away is difficult, because governments and companies are nervous and tend to overestimate how difficult and expensive it will be to cut back on emissions. Reducing emissions in practice is much easier, at least in the early years, than we had expected, and that is good news, but it makes it harder to get real demand in the market at the beginning. These early challenges do not mean that cap-and-trade is fundamentally flawed, as some have suggested. Europe has stuck with cap-and-trade because of its cost-effectiveness and its ability to deliver an environmental outcome. Companies do not need to know what the carbon price will be in 2020 (just as they do not know the price for oil or coal will in 2020). They do need to know that there will be a carbon price in 2020, and in Europe at least, they know that the ETS is here to stay.

Critics should step back and look at the overall picture of the EU ETS rather than make judgments on its various elements. In future pieces we will explore issues raised about the EU ETS, and show how many of the criticisms have thus far been misplaced and how Europe has addressed some of the early lessons.

The Truth About Cap-and-Trade in Europe

Has cap-and-trade in Europe worked? WRI’s Senior Fellow Jill Duggan, who helped implement the EU trading scheme, sorts the myths from reality.

Europe began its cap-and-trade system in 2005, with a three year learning period (phase 1). In recent U.S. Senate climate hearings, cap-and-trade critics pointed to the challenges of that first phase as a sign that cap-and-trade was a failure. But as more results are identified and understood, Europe’s first phase is looking more and more like a success. Today Europe has a stable cap-and-trade system, improved by the lessons learned when it was first implemented, and industry in Europe have certainty that carbon pricing is here to stay.

Price volatility for carbon is often cited as a problem in the EU Emissions Trading System (ETS). In fact, for the second trading period, the price has been relatively stable. The chart below shows the comparative stability of European Union Allowances (EUAs) – the emissions reduction ‘currency’ (in blue) – when compared to the price volatility of other commodities such as coal, oil, and gas.

Another charge leveled at the EU ETS is that officials had allocated too many allowances for polluters in the first phase, with no real abatement (greenhouse gas emissions reductions) taking place. It is true that in May 2006, the results from the first year showed that there were fewer emissions than allowances. But was this overallocation or was it, perhaps, that European states, venturing into uncharted territory, had underestimated how cheap and easy it would be for companies to reduce their emissions? The earlier UK emissions trading system, for example, exceeded its five year target in the first year. Companies, once they started to implement greenhouse gas reduction measures, were quite effective at cutting back on emissions, and needed fewer allowances than predicted.

Critics claim that the trading system has not changed behavior. However, a look at the numbers from the Community Independent Transaction Log (CITL), which tracks allowances from the EU ETS member states, shows that in 2005, when the price of carbon was high, emissions went down. As the carbon price fell in 2006, emissions went up. In 2007, the price was so close to zero that there was hardly any carbon constraint in Europe, and there were actually 11.6 million more tonnes of CO2 emitted than allowances allocated for that year. These numbers suggest that the carbon price did in fact influence behavior – it encouraged cuts when the price was higher in the earlier years providing for extra allowances, while a lower price led to an increase in emissions.

The figures fit with early analysis undertaken by economists Ellerman and Buchner, Barry Anderson and others that found significant abatement in the EU ETS in its first years of operation, meaning that companies took real action to reduce their emissions. More research is necessary to confirm these figures, and Ellerman and others will be publishing more analysis next year. But there are strong indications that the carbon price in the first phase was very effective in driving a reduction in greenhouse gases.

So is the carbon market working today? In 2006, only 15% of the companies covered by the ETS were taking the future cost of carbon into account. Point Carbon and others found that a year later, about 65% of companies in the trading system were making their future investment decisions based on having a carbon price – and that is precisely the response needed.

Europe has stuck with cap-and-trade because of its cost-effectiveness and its ability to deliver an environmental outcome.

What are the big lessons we can draw from the early EU experience? First, a market needs scarcity in order to create demand and a carbon price. Second, achieving the right level of scarcity right away is difficult, because governments and companies are nervous and tend to overestimate how difficult and expensive it will be to cut back on emissions. Reducing emissions in practice is much easier, at least in the early years, than we had expected, and that is good news, but it makes it harder to get real demand in the market at the beginning. These early challenges do not mean that cap-and-trade is fundamentally flawed, as some have suggested. Europe has stuck with cap-and-trade because of its cost-effectiveness and its ability to deliver an environmental outcome. Companies do not need to know what the carbon price will be in 2020 (just as they do not know the price for oil or coal will in 2020). They do need to know that there will be a carbon price in 2020, and in Europe at least, they know that the ETS is here to stay.

Critics should step back and look at the overall picture of the EU ETS rather than make judgments on its various elements. In future pieces we will explore issues raised about the EU ETS, and show how many of the criticisms have thus far been misplaced and how Europe has addressed some of the early lessons.

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Read more [EcoEarth.info]

US Senate to act on climate bill in 2010

Agence France-Presse: The US Senate will act in early 2010 on legislation to battle climate change, Democratic Senate Majority Leader Harry Reid said Tuesday, ending hopes of a breakthrough by next month's global talks. "We are going to try to do that sometime in the spring," Reid told reporters, with a White House-backed push to remake US health care still dominating the Senate agenda just weeks before the congressional session ends. The decision confirms that the US Congress will not adopt ...
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Emulating Western lifestyles: Consumption and carbon footprints in less industrialized countries

Physorg: In recent decades, a new global middle class has exploded, with a total population exceeding one billion people. A new study in the Journal of Consumer Research explores the consumption attitudes of some of these members of the "new class." "Our primary interest with this new class concerns climate change," write authors Tuba Üstüner (Colorado State University) and Douglas B. Holt (University of Oxford). "Many pundits and marketing experts claim that these consumers seek to emulate ...
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India adopts single pollution standard norms

Agence France-Presse: India on Wednesday tightened air quality rules and said it will enforce a single standard for industrial and residential pollution. The Revised National Ambient Air Quality Standards rule would lead to the use of "clean fuel" to lower emissions, Environment and Forests Minister Jairam Ramesh said. The announcement came less than a month before the December 7-18 climate change summit in Copenhagen. India, among the world's biggest polluters, has come under international pressure ...
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As controversial as his message, Gore insists on switch to clean energy and a new politics

Oregonian: Though we're pumping more global warming pollutants into the air, fewer of us believe we're really changing the climate. And the prospects for agreements within and among nations to reduce emissions of greenhouse gases like carbon dioxide keep getting delayed. Now the person most responsible for raising public consciousness on climate change, Nobel laureate and former Vice President Al Gore, is touring the country to tell us how to avert the calamities he has long projected. In ...
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Obama aims for Copenhagen agreement that can take immediate effect

Times (UK): President Obama has attempted to restore confidence in international negotiations on climate change by saying that next month's UN summit in Copenhagen should deliver an agreement on emissions with "immediate operational effect'. The US President was speaking yesterday in Beijing two days after his officials had ruled out signing a legally binding treaty in Copenhagen. "Our aim is not a partial accord or a political declaration but rather an accord that covers all of the issues in the ...
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World on course for catastrophic 6° rise, reveal scientists

Independent (UK): The world is now firmly on course for the worst-case scenario in terms of climate change, with average global temperatures rising by up to 6C by the end of the century, leading scientists said yesterday. Such a rise -- which would be much higher nearer the poles -- would have cataclysmic and irreversible consequences for the Earth, making large parts of the planet uninhabitable and threatening the basis of human civilisation. We are headed for it, the scientists said, because the ...
Read more [EcoEarth.info]

Climate Change Likely to Increase African Hunger Woes

Inter Press Service: Africa, the continent already most affected by hunger and food scarcity, is likely to see its woes increased due to climate change and the changing rain patterns it provokes, experts and scientists say. According to data gathered by the German Institute for Meteorology and Climate Research, variability in the rain patterns in Africa, especially in the Western region, has substantially increased since the early 1980s. Harald Kunstmann, director of the institute, says that while ...
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A climate change warning we ignore at our peril

Independent (UK): Two years ago, the United Nation's International Panel on Climate Change forecast an increase in global temperatures by the end of the century of between 1.8C and 4C, depending on the success of nations in reducing their carbon emissions. But now an international team of scientists, led by Professor Corinne Le Quéré of the University of East Anglia, argues that the world is in fact on course for a 6C rise in temperature by 2100. These might sound like small numbers. But their implications ...
Read more [EcoEarth.info]

EU, Russia discuss energy, trade and climate

STOCKHOLM (Reuters) - The European Union's Swedish presidency urged Russia on Wednesday to do more to combat climate change and discussed Russian energy supplies to Europe, which could be threatened by a dispute with Ukraine.
Read more [Reuters]

Climate change deal must aim to help women: U.N.

LONDON (Reuters) - Women bear the brunt of drought, rising seas, melting glaciers and other effects of climate change but are mostly ignored in the debate over how to halt it, the United Nations Population Fund (UNFPA) said on Wednesday.
Read more [Reuters]

Diary of public protest events

A calendar of actions during the Copenhagen conferenceThousands of activists from all over the world will soon descend on Copenhagen with one message: that world leaders must agree a deal that will be effective in reducing global emissions, and be fair for the people most vulnerable to climate change.
Read more [EarthWire]

Carbon market clouded by uncertainty

Ahead of next month's climate change talks in Copenhagen, the BBC's Damian Kahya takes a look at the carbon trading sector.
Read more [EarthWire]

World on course for catastrophic 6' rise, reveal scientists

Independent (UK): The world is now firmly on course for the worst-case scenario in terms of climate change, with average global temperatures rising by up to 6C by the end of the century, leading scientists said yesterday.
Read more [EarthWire]

Carbon market clouded by uncertainty

Ahead of next month's climate change talks in Copenhagen, the BBC's Damian Kahya takes a look at the carbon trading sector.
Read more [EarthWire]

Food seed banks need $250 million, experts warn

LONDON (Reuters) - Seed banks need a further $250 million to preserve all varieties of food crops including those which may best survive future climate changes, the Global Crop Diversity Trust said Wednesday.
Read more [Reuters]

Brazil sets example on halting forest loss

Brasilia, Brazil: The recent announcement by Brazil – one of the world’s top emitters of greenhouse gases from deforestation - that it is adopting new emissions reduction targets could help steer negotiators in Copenhagen toward a stronger climate change deal.

Brazil’s top environment ministers said late last week the country is committing to an emission reduction target of between 36.1 and 38.9 percent by 2020. Brazil announced those figures only a day after saying new data showed the lowest deforestation rates in the Amazon in the past 21 years.

The new commitment can help unblock and steer climate negotiations toward a new global agreement in Copenhagen, which will be considered next month, said WWF-Brazil CEO Denise Hamú.

"As Brazil announces these figures, it moves from a situation where it merely holds developed countries to account to a situation where it can be a role model in the establishment of a new low-carbon development model for the world," Hamú said.

"It should be noted, however, that the data needs to be more detailed,” she said. “We are not sure which baseline scenario was used, that is, how the Brazilian government estimated Brazil's emission growth trends by the end of the next decade. Neither do we know how we will reach those targets.”

“No detailed information is available on all actions across the various industries and on our low-carbon plan of action. It is fundamental that all government policies be consistent with the announcement made today," Hamú said.

As far as international climate negotiations are concerned, Brazil now has a more legitimate case to demand a clearer financial support commitment from the developed nations for the establishment of adequate actions to adapt to the effects of global warming, according to WWF.

Data released by the Brazilian government earlier this month showed that the deforestation rate in the Amazon fell between August 2008 and July 2009. Overall, the deforested region is a 45 percent smaller than Amazon land cleared the previous year, or between August 2007 and July 2008.

This is the lowest rate of deforestation in the Amazon since record-keeping began in 2000, and down from a high of more than 27,000 square kms in 2004.

However, deforestation also must be reduced in other damaged forest areas in Brazil, such as in the Cerrado, according to WWF:

Despite conservation efforts, global deforestation continues at an alarming rate – 13 million hectares per year, or 36 football fields a minute. It generates almost 20 per cent of global greenhouse gas emissions and halting forest loss has been identified as one of the most cost-effective ways to keep the world out of the danger zone of runaway climate change.


Read more [WWF]

WRI’s Lash Says China-U.S. Agreement a Major Step in Global Climate Negotiations

Leaders of China and the U.S. announced today that their countries will work hard alongside other nations to produce a substantive international climate agreement at a major United Nations climate conference next month.

In response, Jonathan Lash, president of the World Resources Institute, said, “The outcome of today’s discussions between President Barack Obama and President Hu Jintao on climate and energy sends an encouraging signal for a positive result at the upcoming climate summit in Copenhagen.

“The statements by the two leaders and the joint communiqué following their meeting reflect a shared sense of urgency about achieving progress toward a comprehensive agreement on climate change, and a shared vision of the transition to a low carbon economy as a source of innovation and economic opportunity,” Lash added. “It is particularly encouraging that both leaders signaled their commitment to national action to reduce heat-trapping pollutants, and to cooperation on a wide range of projects to promote technologies to achieve that goal.”

For much more information on the upcoming climate talks, visit the Countdown to Copenhagen page on WRI’s Web site.