Renew On Line (UK) 26

Extracts from the May-June 2000 edition of Renew
These extracts only represent about 25% of it

11. Climate Change: COP-6 doubts

The next round of the UN Climate Change negotiations- COP-6, the sixth meeting of the 'conference of parties' to the UN Framework Convention on Climate Change- is to be held in the Netherlands in November. At COP-5 in Bonn last year, there was much stress put on the hope that COP-6 would mark the final stage of agreement on the details of the protocol set out at the 1997 Kyoto conference in time for the World 'Rio plus ten' Eco-summit scheduled for 2002. However there are growing doubts as to whether COP-6 will succeed in resolving the key issues that have emerged from previous rounds.

The Kyoto protocol called for emissions of greenhouses gases in the developed ('Annex-1') countries to be cut by around 5% from 1990 levels by 2008-2012- more for some, less for others. For example, the EU agreed to an 8% cut. (Some countries, including Russia, managed to get exemptions, while Australia won an 8% increase). It also outlined a range of economic mechanisms to help to achieve this- including trading of emission permits amongst Annex-1 countries and technology transfer between Annex-1 and the other countries, via the so called 'clean development mechanism'.

Although the protocol was supported by all participants in outline, only a few developed countries have so far formally ratified - although, interestingly New Zealand, so far not a very green player, announced recently that it would ratify. The most notable absence is of course the USA. The protocol only becomes legally binding when ratified by 55% of all the countries involved and when that also involves the industrialised Annex-1 countries producing 55% of emissions in 1990. The USA's contribution then was 36%, the EU's 24%, Russia's 17.4%, Japan's 8.5%, Canada 3.3%, Poland 3% and Australia 2.1% - the others were all less. So ratification by the USA is pretty vital - although 55% could just about be attained if most of the others ratified, and this 'go it alone without the USA' option may well have to be adopted- depending on the outcome of the US Presidential election. With that also occurring in November, the timing is tight. If Gore wins then ratification seems possible, although even then, the Republican majority in Senate may still continue to resist.

By contrast, the European Union has, throughout, adopted a very positive stance, with the UK playing a leading role. However, while the EU’s overall stance may be positive, there are some major disagreements on the detail. Some are due to internal disagreements over how to distribute the overall 8% EU reductions agreed at Kyoto amongst the various countries and as to specific internal mechanisms for harmonising the EU response to Climate change. A recent report by the London-based Institute for European Environmental Policy suggested that COP-6 could lead to a "further setback" unless the EU can develop a clear and robust negotiating position. It argued that diverging views between member states and the complexities involved in policy making at EU level mean that the EU "consistently negotiates as less than the sum of its parts." (See http://www.ieep.org.uk).

By comparison, it argued, the USA administration had a much clearer and more coherent view. However, as we've noted above, there is a big gap between the US administration and the political reality in the US Senate. The Republican majority is still far from convinced of the reality of the Climate Change threat, is worried about the impact on the USA of meeting it should it turn out to be real, and believes that the developing countries should in any case make similar commitments to emission reduction. That's only a voluntary option under the Kyoto accord.

Some of the EU's difficulties can be traced back to there being differing views within the EU on how to deal with US intransigence. For example, a key issue concerns the details of the emission trading proposed at Kyoto. They were meant to provide an incentive for clean technology development, but they also allow countries to offset their own emissions by claiming emission savings from projects carried out in other countries. In the language of the Kyoto protocol, these 'offshore' savings were meant to be 'supplemental' to the savings made at home by Annex-1 countries- not a major substitute for local, national, projects. However, the USA has argued that 'supplemental' could be anything up to 90% or more, whereas the EU has tried to insist on at least a 50% 'concrete ceiling'- i.e. at least half must come from savings at home. A compromise may be reached at COP-6: some EU politicos seem tactically willing to abandon the 'concrete ceiling' and make the Kyoto mechanisms more 'flexible' in order to get the support of the USA for ratification. The USA evidently sees emission trading as a way to soften the impact of the Kyoto emission targets

The situation is made even more complex by the fact that, following its economic collapse, Russia's emissions have now fallen well below the 1990 datum level used in the Kyoto protocol. That means that, if a formal emission trading system was established in the context of the emission targets set at Kyoto, Russia would have, in effect, spare unused emission permits to sell and could engage it what has become called 'hot air trading', with the USA being a major potential beneficiary. It could buy in essentially 'virtual' permits rather than having to make any real savings itself. This so called 'loop-hole' problem will also have to be dealt with at COP-6. It was certainly the sticking point at earlier rounds of negotiation.

By contrast the Clean Development Mechanism (CDM) was seen as less problematic. However, there are now some key decisions to take on this, concerning which technologies and projects should be eligible. Existing projects cannot be included retrospectively, but in principle any new project which reduces emissions should be acceptable- including switching from coal to gas, energy conservation measures, clean transport technologies and of course renewable energy projects.

However, the nuclear lobby, which was very visible at COP-5, argues that nuclear power should also be accepted as an option. As we reported in Renew 124, there was strong opposition to this view at COP-5 but the issue was not resolved formally.

There's also the issue of large hydro - as noted in our Technology section, there are arguments against that being included as a viable tool for socially and environmentally sustainable development.

In some ways this debate mirrors that currently going on at the national level concerning which technologies should be 'accredited' for the purpose of green power retail market trading. Except that, in the case of the CDM, rather than individual consumers choosing between rival green power offerings and having a direct influence, the decision will presumably be up the UN Climate Change Secretariat, operating within general rules established, hopefully, at COP-6.

The Secretariat certainly faces some difficult problems when it comes to operating this scheme. For example, it will have to decide whether candidate projects are additional to projects that would have happened otherwise: there is talk of setting a 'baseline' level for savings, reflecting what is called, in Kyoto speak, the 'additionality' or otherwise of projects. Presumably this will leave out the cheap and easy projects, which will go ahead anyway, and focus the CDM support on genuinely additional projects, which are likely to be more in need of subsidy. But it's hard to see how the baseline level can be calculated in the abstract- it will vary from situation to situation, and some observers fear that renewables will not fare well in the costs comparisons. Certainly that was one of the views that emerged from the conference on CDM organised recently by the Royal Institute of International Affairs. Indeed, it seems that disenchantment with the whole exercise was rife amongst many renewable energy interests represented there.

The problems don’t stop there. Assuming agreed baselines can be set, there will have to be mechanisms for ensuring that the agreed emission savings are actually made in practice. Some form of policing and compliance mechanism will be required- as for emission permit trading generally. One idea is to have a system of fines for non-compliance with CDM targets, with the revenue raised going to help the most vulnerable non-Annex-1 countries deal with Climate Change related problems. This too will have to be resolved at COP-6.

No one knows what the scale of uptake for CDM will be, but it could be around £10bn annually from 2002/3 onwards- which is the current best guess of when the Kyoto protocol arrangements could start to operate. The scale of emission trading amongst Annex-1 countries could be much larger, especially if the USA gets its way, but that's even more uncertain. A lot of speculative emission trading projects have already been established by companies, presumably in the expectation that they can be linked, eventually, into a global trading system, but there is no guarantee that a rational coherent system will emerge.

Add to all this the issue of whether 'carbon sinks' and reafforestation should be included in the system, and if so how, and the agenda for COP- 6 looks very full. Will it work? Wouldn't a simpler system be better- one that doesn't rely so much on the paper trading of emissions? Certainly though something has to be done. If not, then the future looks grim: as the chart shows, emissions will rocket. So all eyes will be on the Hague and Washington in November. Meanwhile, we had all better bone up on the Kyoto terminology: A is for additionality, B is for baseline...

* A special ‘Costs of Kyoto’ issue of the IAEE’s Energy Journal looks at the impacts of the Kyoto mechanisms and argues that they might work better if the overall emission reduction target was set higher.