Report on UNFCCC Negotiations meeting in Bonn

UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE

Report on UNFCCC Negotiations meeting in Bonn

David Rhodes, chief executive, NZ Forest Owners Association

June 2009

Setting

From 1-12 June 2009, several UNFCCC (United Nations Framework Convention on Climate Change) meetings took place in Bonn in the lead up to the critical meeting of the Conference of the Parties (COP 15) to be held in Copenhagen, Denmark, in December 2009. Of most interest to the NZFOA were:

• Discussions of the working group on Long Term Cooperative Action (LCA) on the Climate Change Convention (6th meeting)
• Discussions of the working group on further commitments under the Kyoto Protocol (8th meeting)
• Negotiations on LULUCF (land Use, Land Use Change and Forestry)

Summary

The LCA and the Kyoto Protocol working groups are scheduled to conclude their work by Copenhagen. This seems very unlikely despite three more formal negotiating sessions having been convened between now and then. It is likely that there will be a political announcement in Copenhagen based on a range of submitted targets that will avoid the process falling over. It seems equally inevitable that negotiations on the detail, particularly the contentious issues, will need to continue post-Copenhagen

The US will almost certainly not join the Kyoto Protocol. It will commit to an “implementation agreement. Its bilateral negotiations with other countries, most notably China, will be crucial. These talks will determine the US commitment and this in turn will influence the targets of other developed countries within the Kyoto Protocol. It will also provide something of a lead to the developing countries which have so far shown no sign of even making any voluntary commitment targets.

For the issues of most interest to the New Zealand forest sector – those related to LULUCF – the debate in Bonn was quite positive, particularly on harvested wood products. There is now a reasonable expectation of agreement in Copenhagen. However, this progress will be somewhat meaningless unless the wider negotiations can also be agreed.

There is widespread awareness of the land-use flexibility problems that New Zealand is experiencing but because it is not an issue for other Annex One countries it is a challenge to get agreement that the rules should be changed to cater for one small country. More than once I heard the comment that it would be better for everyone if New Zealand wasn’t in Kyoto at all because of its uniqueness and the problems it brings.

NZFOA objectives for the Bonn meeting

The objectives of FOA involvement, which coincided with meetings with the International Forest Stewardship Council (FSC), were to provide support to the MAF negotiators on the LULUCF issues, engage with non-industry parties, particularly where officials did not have this avenue available to them, and to ensure that the International Council of Forest and Paper Association (ICFPA) messages on forestry were utilised.

International Council of Forest and Paper Associations (ICFPA) statement

The ICFPA “messages to the parties” that were finally agreed at an international forest industry CEOs roundtable meeting in London the previous week were provided to the New Zealand delegation in Bonn (refer attachment). The Forest Owners Association has worked hard to have wording included which is supportive to the New Zealand cause and the language is considered by the NZ LULUCF negotiators to be very useful. It is now being used in discussions with other delegations.

LCA

The Convention entered into force on 21 March 1994, and now has 192 parties. The “Convention dialogue” at this meeting was expected to concentrate on a Chair’s negotiating text which covered mitigation, adaptation, finance and technology. Whilst a negotiating text has been produced it is a wish list of everything each country wants to see included, as well as a lot of wording that tries to rule out those things they do not support. The bracketed (not agreed) text is overwhelming and the negotiating text is now over 200 pages long. There is a lot of duplication and obviously much wording that is incompatible. With 5 months remaining it will be a big challenge to condense this to a meaningful agreement.

There was also quite a bit of discussion about the interaction between WTO rules and the climate change discussions. It is becoming evident that some of the measures proposed for the next Kyoto round could run foul of the WTO rules. One proposed way around this is the adoption of a “peace clause” that would recognise for an interim period of time that some of the climate change action by countries would not strictly adhere to WTO trade regulations.

Kyoto Protocol and Annex 1 Emission Reductions

The Kyoto Protocol entered into force on 16 February 2005, and now has 184 parties. A key focus of the Bonn meeting was supposed to be consideration of Annex I parties’ aggregate emission reductions in the post-2012 period.

Overall, the progress made is a big concern, even by the normal slow speed of UN climate change discussions. There remains a clear divide between the positions of the EU, the US and the G77 over who should be committing to what. [The G77 is a loose coalition of developing nations. The founding membership of 77 countries has since expanded to 130.]

Developed countries, the EU in particular, are reluctant to engage on any further discussion on aggregate targets and commitments. They frequently cite the lack of certainty about the US position as being a reason for not doing so. This is factor, but more importantly they are waiting for some sign of commitment from the developing nations.

By contrast, the G77 and China repeatedly make the point that the process must be led by developed nations and that there is no mandate within the Kyoto Protocol under the current terms and references to be debating what commitment or action should be taken by developing nations – something the developed nations disagree with. Developing countries describe any moves by developed countries to discuss their obligations as an attempt to re-write the convention. Countries such as India, China, Saudi Arabia and Singapore are vigorously opposing any proposals to reconsider the definitions of developed and developing countries although the GDP/capita of some of the richest “developing” countries is higher than some of the poorest “developed” countries and sooner or later this will have to be discussed.

There are some huge divisions in views as, for example, between the OPEC countries and AOSIS (Association of Small Island States). There is also an increasing level of discord by some of the members within the G77 but the public position of not taking on any type of target remains united. The most intransigent of the developing nations is unquestionably India.

The aggregate percentage reduction required to achieve stabilisation of carbon in the atmosphere at below 450 ppm, and limit global warming to no more than 2°, is being hotly debated. The posturing by both developed and developing countries has increased and the variation in estimates has continued to expand accordingly. The estimates now range from a 15% reduction to a 79% reduction or more. Much of the discussion on what is the appropriate overall emissions reduction level that is required is dependent on particular modelling that may have been done one or other parties. For example, the EU has stated that a proposed 30% aggregate reduction by 2020 is based on modelling showing that a 50% probability of limiting global temperature to below 2°.

Most Annex 1 countries have offered a commitment in the range of 16 – 24%, but some significant caveats and assumptions are associated with these pledges as, for example, with Australia, and not all are based on the same base year (eg 1990, 2000, 2005 etc). It is likely that New Zealand will preface its target, when it announces it in August, with some of its own conditions.

[Annex I countries are signatories to the UNFCCC which have agreed to reduce their emissions of greenhouse gases to targets that are mainly set below their 1990 levels. ]

Several developing countries have pointed out that the aggregate reduction based on the pledges made by Annex I parties falls below the level that the science community considers necessary. The process of arriving at the aggregate by building from the bottom-up has also been criticised with claims that it has not worked in the past so why should it now.

However, at the moment it is unclear what the aggregate commitments of developed countries will deliver in total: in part this is because of the variation in how they have been estimated and on the baseline they relate to. For comparison the average level of reduction by Annex I parties for the first commitment period for emissions of all greenhouse gases was 5.2% below 1990 levels.

It seems likely that concluding a second round of aggregate commitment reductions will need negotiation beyond Copenhagen. It is possible that there will be recognition before Copenhagen, e.g. the next meeting in Bangkok, that the current numbers are inadequate and they will be increased but this is very unlikely. It appears much more likely that a range of numbers will be submitted and further assessment, and negotiation, will be required.

Complementarities

One of the problems with assessing the various commitment targets is that countries have such varying individual circumstances. Because of this there has been discussion on whether targets can or should be related to GDP, or population, or some other measure. This is all part of the effort to try to achieve complementary effort.

New Zealand has done considerable work on looking at our emissions based on GDP and population. Indeed, there are few developed countries that have the same level of population increase since 1990 (the highest in the OECD) over recent years that New Zealand has. If this is taken into account then the emissions per capita are not dissimilar from those of many other developed countries, including the EU. Such arguments can, and clearly will, be used in the presentation of New Zealand’s case, but ultimately New Zealand will still have to declare a quantitative target. This is to be tabled in August.

A number of possible criteria have been proposed as the basis for making comparisons between countries including the following:

•The European Commission propose that it be based on four criteria which are population growth, emissions per GDP, previous efforts and GDP per capita

•The Japanese propose some measure of trying to equalise the marginal abatement cost for countries. This will be based on the total cost to the countries of their efforts represented as a percentage of GDP in 2020.

•Australia and New Zealand propose a total economic cost which again could be a function of GDP contribution.

•Developing countries almost en masse propose that the comparability should be based on “historical responsibilities”.

Ben Gleisner (NZ Treasury) has developed a model which is receiving quite a bit of interest from those who would like to investigate the impacts of these factors. Ben’s model allows countries population, economic data, etc to be entered and then produce a result that can be compared with other countries. The outcomes of the model do depend on the toughness of any emissions target such that the harder the target the greater proportion of emissions reductions that must be met by rich countries.

This type of analysis can only be taken so far and too much analytical rigour will be opposed because ultimately there will be a need for political wriggle room for countries. The analysis will help potentially in avoiding grossly inequitable results, but will not be a substitute for political trade-offs which are an inevitable part of UNFCCC outcomes. Such analysis might also provide some rationale for revisiting targets before 2020 if the “pledges” likely to come out of Copenhagen are found to be obviously inadequate.

New Zealand position on KP commitments for 2012 onward

At a higher level New Zealand has something of a dilemma in how to advance its case. In Bonn, Japan announced a mid-term emission reduction target of 15% from 2005 levels by 2020. This leaves two Annex 1 countries – Russia and New Zealand that have not declared a target. In fact New Zealand received the ‘Fossil of the Day’ award (supposedly a mark of shame) from the environmental groups early in the first week for this very reason.

The original strategy of the New Zealand negotiators to push the line that rules must come before targets is clearly no longer tenable with the vast majority of countries having declared their hand in the absence of knowing the rules.

New Zealand has something of a mountain to climb in terms of trying to make progress against a 1990 baseline with emissions expected to be 45% above that level by 2020. Based on this even a 20% reduction for New Zealand will be a significant challenge. To be manageable it would appear that the New Zealand target may need to be a positive increase in emissions, not unlike the sort of target that Australia negotiated in the first commitment period. To achieve agreement on such a target, however, requires compelling arguments to convince others that New Zealand is indeed “carrying its weight” and making progress on emissions reductions..

LULUCF

The LULUCF Working Group was provided with substantially more meeting time than most other sub-discussions and within that the vast majority was devoted to the issues of interest to New Zealand, particularly harvested wood products.

Forest offsetting

There now appears to be widespread acceptance that New Zealand’s reasons for wanting a change in the LULUCF rules are valid. Nonetheless, there is also a widespread reluctance to be tinkering with the rules when the problem is restricted to a small area like New Zealand. The challenge for New Zealand continues to be able to demonstrate that any additional rule change wording can be quarantined to allow New Zealand to practice offsetting without encouraging offsetting in areas where it is not wanted or desirable (ie natural forests in developing countries).

Harvested Wood Products (HWP)

Progress towards the recognition of the carbon stored in harvested wood products has also been positive. The New Zealand’s “emissions to atmosphere” approach still remains one of the key options under discussion and there is growing alignment with one of the key EU proposals.

The Bar

The bar refers to countries having the ability to set their LULUCF targets based on their expected business-as usual emissions trend over time. It remains a concept that still has strong interest and support including by the US, Japan, Canada and Australia.

In discussions on the ‘bar concept’ being advanced by the EU, New Zealand has been making it clear that it could only support this concept if it applies only to 3.4 forests (i.e. pre-1990). It has also been made clear in Bonn that in New Zealand’s case we would expect the bar to be negative for some periods of time. This has obviously come as a surprise to some countries but has not been challenged.

There is now also considerable discussion of ultimately moving towards a comprehensive landscape accounting approach, particularly under LULUCF. A number of submissions, including those from Norway, the US, and Papua New Guinea, propose a move in this direction.

Another term that is now being used widely in the Kyoto discussions, particularly with respect of agriculture, is NAMA (Nationally Appropriate Mitigation Action). This is particularly confusing terminology as the NAMA term is already well-established in the WTO negotiating where it is refers to Non Agricultural Market Access.

The NAMA terminology arose out of the Bali Action Plan which calls for measurable, portable and verifiable mitigation commitments or actions by developed countries, but allows developing countries to pursue NAMAs conscious of their sustainable development aspirations and their technology and financing abilities. NAMAs are clearly expected to be formulated at a national level and obviously operate on a voluntary basis. Such pledges by developing countries would be recorded in a NAMA registry which would also record the parallel support being given by developed countries in terms of either technology or financial support.

REDD (Reducing Emissions from Deforestation and Degradation)

Essentially this is about developed countries paying developing countries not to deforest. The concept has now been expanded to REDD+ (Red plus) to recognise that enhancement of carbon stocks is also something that should legitimately be encouraged. It received an awful lot of discussion in Bonn with plenty of people trying to push it to the top of the agenda.

Whilst everyone agrees on the importance of REDD for addressing deforestation, the views on how it should be implemented remain diverse and for it to be included in any substantive way by Copenhagen a lot of meeting of the minds is going to have to happen.

The challenges of REDD are well known and include:

Identifying those forests that really would have been lost without REDD from those that were never really at risk (ie the emissions reductions must be additional)

Must include all rainforest countries or else the problem will just migrate.

The incentives must be big enough to make a difference and overcome the current high incentive to deforest to another landuse – something we understand in New Zealand.

The benefits must flow to the local communities (not the governments) or else the locals will be part of the problem.

Must preserve biodiversity – i.e. not encourage native forests to be replaced by planted forests even if there is no net carbon loss.

Despite this list, I believe that those who conclude that REDD will be too difficult to be implemented underestimate the incentive for developed countries to make it work – it is the cheapest form of mitigation. Furthermore, it is hard to see how the 20 C climate stabilization goal can be achieved.

One of the building blocks needed to implement REDD is good information. More than half of the developing countries do not yet have complete national GHG inventories and significant financial support will be needed for this to be completed. But it appears that this may be happening.

A study carried out for MAF last year estimates that if REDD units are freely available in the market it would reduce the price of carbon by around 50%. Greenpeace have a report which suggests a higher reduction. In theory the significant reduction in the cost of reducing emissions provided by REDD could allow countries to take on more stringent targets and keep the price of carbon about the same, but the chances of this seem remote. ENGO’s are concerned that if REDD credits are available then developed countries will access this cheaper option ahead of investing in new emissions-reduction technology in developing countries through the CDM (Clean Development Mechanism) and this will work against reducing industrial emissions.

For REDD credits to be available in quantity though many of the above issues will have to be dealt with. From my discussions with the US they appear more concerned about not enough REDD credits being available – and their proposed climate change framework clearly relies on utilising them.

The position of the USA

The US has been participating much more heavily in the Kyoto discussions even though it only has observer status and obviously there are many countries that want to know what the views of the US are, including the EU, so this has been welcomed. That said, the US is committing the majority of its effort elsewhere. It was telling that even before the end of the first week Jonathan Pershing (head of the US climate change delegation) left Bonn to join the chief US trade negotiator in Beijing to continue bilateral discussions with China on the subject.

The Obama administration’s commitment to a regulatory scheme is clear but what also seems clear is that the US will not be joining the Kyoto Protocol in the foreseeable future, if ever. While the US is not formally bound by Kyoto, it has nonetheless submitted an implementation agreement to the convention parties. Pershing spoke to the business NGO group that the NZFOA is part of and commented that contrary to the views of many, the US considers that this will be binding. He also made some comment on carbon sinks, noting that the US was very interested in counting forests but no decision had yet been made, although increasingly the US is starting to intervene in discussions on forestry. He stated that the US is clearly interested in establishing a “level of integrity” around the inclusion of forests.

The Waxman Markey Bill (American Clean Energy and Security Act of 2009) is before the US House of Representatives and seemingly making good progress. [TW: This has now been passed by the House and now has to go through the Senate]. Forestry offsetting has been provided for in a significant way including the use of up to 50% of domestic emissions being able to be dealt with through utilising offshore offset credits. Importantly, REDD units have been provided for in a big way with a percentage of emission allowances being set aside “to provide incentives to reduce deforestation in developing countries”.

There is an interesting private sector alliance that has formed in the US in support of this which includes the three largest power companies and some of the leading ENGO’s. These “Avoided Deforestation Partners” have produced a joint agreement which calls on the government to support measures to curb deforestation including REDD.

The US recognises that it will face the same issues around REDD units that the Kyoto negotiators are struggling with but they will make their own determination of what qualifies. There are, for example, provisions in the bill for forestry offsets to be judged on the basis of biodiversity and use of native species.

Potentially the limited percentage of New Zealand units allowed to be traded offshore should qualify but international offset credits from developed countries will only qualify where the US has a bilateral or multilateral agreement or arrangement with the country in question. Even developing countries will need to enter into such agreements to establish the conditions of their participation. The US EPA will likely be the agent acting for external parties and would sell emission allowances at auction without an obligation to necessarily obtain the highest price.

There are also provisions to “minimize potential leakage and to encourage countries to take nationally appropriate mitigation actions” potentially through identifying specific sectors within countries with respect to which the issuance of international offset credits on a sectoral basis is appropriate. Factors taken into consideration could be the country’s gross domestic product and the country’s total greenhouse gas emissions.

It is planned that only 80% of the amount of the international offsets will qualify for the domestic emissions reduction (ie it will take five international units to reduce 4 domestic units). This will affect the value only in terms of the relative cost of alternative reduction options.

It is intended that by 2020 “the activities to reduce deforestation shall provide greenhouse gas reductions in an amount equal to an additional 10 percentage points of reductions from United States greenhouse gas emissions in 2005”. For anyone desperate to learn more about the detail of the US bill they can read the entire 648 pages at: http://energycommerce.house.gov/index.php?option=com_content&task=view&id=1560

Clearly the relationship between the US market and the EU trading system is very important and the proposed inclusion of forestry by the US can be expected to cause the EU to review its policy of not including forestry.

The US is pushing for a longer commitment period than 2020. This has positives and negatives. Greenpeace, in particular, are concerned with moving beyond 2020 because they believe that a number of countries in the developing category at the moment are on the border of this definition and will struggle to justify maintaining a ‘developing country’ status in the next few years. If the next negotiation period is pushed out beyond 2020 then the opportunity to revisit the obligations of such countries will also be deferred.

ENDS

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