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Negotiations and Agreements on Climate Change at Bali

The Bali Action Plan drawn up last month was only an echo of the US position without any quantitative commitments on emissions reductions. Even though there was a general support for incentives to reduce deforestation, India's proposal to include conservation and enhancement of forest carbon stocks was opposed by Brazil, the European Union and other countries. An analysis of the two main decisions taken at the UN climate change conference last month.

COMMENTARY

not ratified the KP. Moreover, in recent

Negotiations and Agreements

years, the US and other industrialised countries have indicated that any exten

on Climate Change at Bali

sion of the KP or alternative future agreement must involve the large, fast-growing developing countries: especially, China Gautam Dutt, Fabian Gaioli and India. Thirdly, it was recognised that

The Bali Action Plan drawn up last month was only an echo of the US position without any quantitative commitments on emissions reductions. Even though there was a general support for incentives to reduce deforestation, India’s proposal to include conservation and enhancement of forest carbon stocks was opposed by Brazil, the European Union and other countries. An analysis of the two main decisions taken at the UN climate change conference last month.

Gautam Dutt (gdutt@mgminter.com) and Fabian Gaioli are at the University of Buenos Aires, Argentina.

Economic & Political Weekly january 19, 2008

T
he annual conference of the parties (COP) to the 1992 UN Framework Convention on Climate Change and the annual conference of the parties serving as the meeting of the parties (CMP) to the 1997 Kyoto Protocol (KP), ratified in 2005, were held in Bali, Indonesia, from December 3-15. About 10,000 delegates participated in the event, called COP13/CMP3.

There were a number of major issues on the agenda. Several events added to the importance of the meeting. In the first place, the consequences of climate change are increasingly felt and were further highlighted by the Fourth Assessment Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). This feeling was further reinforced by the fact that the Nobel Peace Prize, involving climate change concerns, was awarded to former US vice-president and environmentalist Al Gore and the IPCC. Secondly, the KP, which involves quantitative commitments to reduce the emissions of greenhouse gases (GHG) by industrialised countries has come into effect on January 1, 2008 and ends in December 2012. There is no agreement for the period beyond 2012.

Of particular concern was that the single largest source of GHGs, the US, had tropical deforestation was a major source of the carbon dioxide (CO2) emissions. While the current rules of the Clean Development Mechanism (CDM) of the KP includes incentives for afforestation and reforestation, no compensation exists for the protection of existing forests. This was another significant agenda item for the meeting.

One important event during the conference was Australia’s ratification of the KP. Despite a strong economy, Australian voters recently decided to change the government in favour of the Labour Party, whose main platform was based on a proactive position to tackle climate change. Although sworn in as prime minister only on December 3, the first day of the United Nations (UN) conference, Kevin Rudd submitted Australia’s ratification of the KP during the conference. Thus all industrialised countries except the US have now ratified the KP.

Besides official meetings, the conference offered a venue for so-called side events, hosted by a wide range of organisations, including UN and other international organisations, governments, universities, non-governmental organisations (NGOs), etc. Side events covered a wide range of issues including vulnerability and adaptation to climate change, mitigation,

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links between climate change and other issues, etc. For a summary of selected side events, please see http://www.iisd.ca/ climate/cop13/enbots/.

The two main agreements of COP13 – the Bali Action Plan (BAP) and the deal on the protection of forests in developing countries – are described below.

Bali Action Plan

Despite the large numbers of meetings, both official and as side events, the main focus of Bali was reaching an agreement for the period post-2012. Prior to the conference, there were divergent proposals from the key industrialised and developing countries. The European Union (EU), which expects to meet its commitments under the KP had been proposing a 20 per cent reduction of GHG emissions with respect to 1990 levels for European countries, to be achieved by 2020. However, given the nature of the urgency at the start of the conference, the EU proposed a 25 per cent to 40 per cent reduction to be achieved by 2020, following the specific recommendations expressed in the IPCC Fourth Assessment Report. The EU recognised that developing countries cannot be expected to make firm quantitative commitments on emissions reductions.

In contrast to the EU position, the US expressed the view that it was unwilling to make any quantitative commitments on emissions, and called for firmer action from large developing countries, such as China, India, Brazil and Mexico. Clearly these positions are not compatible, and, indeed, negotiations did not lead to a decla ration that was satisfactory to the principal players by December 14, the formal end-date of the conference. There were several possible outcomes: one would be that there was no progress with respect to the informal dialogue among the parties since the previous conference. Another would be a complete breakdown in the negotiations, which would be a major setback compared to agreement to date, however limited.

Late on December 15, and in part through public pressure at a plenary session, progress could be announced in the form of the BAP. Compared to the other possible outcomes, this was progress, insofar as the US, the EU, India, and other parties to the United Nations Framework Convention on Climate Change (UNFCCC), agreed on the text of a document.

But what did they really agree on? The BAP includes no quantitative commitments on emissions reductions for any country. In this sense, it is an echo of the US position. By recognising that climate change is real and something must be done about it, the document appears to advance little compared to the original 1992 UNFCCC. During the 15 years since that original Framework Convention, climate change has proven to be much more real, and the urgency for action has been widely recognised. So in some ways, we have come back to square one.

The only progress one might report is that the BAP sets forth a timetable for continuing discussions with the objective of reaching an agreement by COP15, in two years time. There is even talk of a Copenhagen Protocol, to follow the KP, since COP15 will be held in that city. Meanwhile, the BAP will be led by an ad hoc working group on long-term cooperative action that will convene four times during 2008.

The wording of the BAP: “Decides to launch a comprehensive process to…”, “Decides that the process shall be conducted”, “Agrees that the process shall begin without delay”, etc, suggests that the “Action” is indeed a “Process”. Thus the BAP has earned the nickname “Bali Road Map”.

Both Al Gore and former US presidential candidate senator John Kerry attended the conference and defended the US position that large developing countries such as China and India should make firm commitments with respect to their GHG emissions. However, both expressed their concern for the action their government was taking at the conference.

The timetable for results under the BAP clearly indicates that the world must wait until the US presidential elections are held in November 2008, and the new president takes office in January 2009, before any meaningful agreement might be reachable where the US, the EU and other industrialised countries could agree on a more tangible course of action to combat climate change. It should be noted that there is some room for optimism. Several bills presented to the US Congress by both Democrats and

january 19, 2008 Economic & Political Weekly

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Republicans call for significant cuts in the country’s GHG emissions. Indeed, many US states and cities already have enacted their own commitments, so the path is already being paved.

Nevertheless, the nature of the BAP “non-agreement” leaves entirely open what the post-2012 regime for climate change mitigation might be. The possible scenarios were aptly labelled by Murphy (2007) in a side event in the early days of the UN conference: “daughter of Kyoto; back to UNFCCC; contraction and convergence; global tax; and anarchy reigns”. Recently, in an article in this journal [Dutt and Gaioli 2007], we have discussed “contraction and convergence”, and a “global tax” on GHG emissions. “Daughter of Kyoto”, which would be a continuation of the KP, extended beyond 2012, was also discussed, though not by that name. “Back to UNFCCC” would be going back to that 1992 agreement and starting afresh, which is close to what was finally agreed in the BAP, which, in extra time, narrowly avoided the “anarchy reigns” scenario. The first four scenarios would also be possible outcomes to any future agreement.

Indian Position

So where does this leave India? India and other developing countries participate in the KP, especially through the Clean Develop ment Mechanism (CDM), whereby the GHG emissions reductions in registered CDM projects earn revenues through the sale of the certified emissions reductions (CERs). Currently, a market for CERs exists only up to 2012. Thus, in principle, new CDM projects can only count on CER revenues till 2012. Beyond that year, current and new CDM projects can either wait for the emergence of a “daughter” to the KP to continue the revenue stream, or commercialise the emissions reductions in one of the voluntary markets as voluntary emissions reductions (VERs). Given the maturity of the CDM institutions and infrastructure and successful project development, and both formal and side-event discussions on how to improve and strengthen the CDM, it is very likely that any subsequent agreement will include provisions for its extension. The current perspectives for the CDM are, in

Economic & Political Weekly january 19, 2008

fact, much better than those prevailing in the period before the KP was ratified in 2005, when CDM players were operating in a context where the CDM rules and institutions had yet to be formalised.

Protecting Forests

While a global agreement on addressing climate change was postponed, considerable progress was made on another issue: reducing emissions from deforestation in developing countries, known by the acronym REDD.

It has long been recognised that deforestation makes a significant contribution to CO2 emissions. However, the procedures developed following the KP postponed the subject of incentives for protecting forests in developing countries. After a slow start, the CDM provides incentives for qualifying afforestation and reforestation projects. But these incentives do not extend to the conservation of existing forests. Several countries with large forest areas, and where felling trees generates income, suggested that there should be some form of compensation for these countries to reduce their rate of deforestation. Indonesia is one of those countries, and indeed, this proposal was strongly supported by the Indonesian government, host to the UN conference.

While there was general support for incentives to reduce deforestation, a major bone of contention was the inclusion of conservation and enhancement of forest carbon stocks, proposed by India, and opposed by Brazil, the EU and other countries. While the final wording of the decision focuses on reducing deforestation, it does mention “enhancing forest carbon stocks due to sustainable management of forests”. The document sets forth a fast time-line for “addressing outstanding methodological issues”.

The methodological issues are likely to be significant. Unlike the emission of GHGs from energy and industrial processes, how land use, land use change and forestry (LULUCF) affects the balance of CO2 and other GHGs (methane and nitrous oxide) are far less certain. Thus, the UN-FCCC publishes emissions estimates from Annex 1 parties (industrialised countries) to the UNFCCC, both including and excluding LULUCF [SBI 2007]. While emissions excluding LULUCF show a smooth variation over time, the values are more erratic when LULUCF is included. In the latter case, Canada’s emissions increases from 473 Tg CO2 equivalent (1 Tg = 1 million tonnes) in 1990 to 800 in 1995, drops to 614 in 2000, increases to 828 in 2004, finally falling to 730 in 2005. The emissions increase 54 per cent over this period. If LULUCF were excluded, Canada’s emissions “only” increased by 25.3 per cent. The difference is even more dramatic in the case of Australia: without LULUCF, emissions increased 25.6 per cent from 1990 to 2005, while including LULUCF, the increase was only 4.5 per cent.

If there appears to be great uncertainty even for Annex 1 countries, larger uncertainties might be expected in developing countries, considering such factors as poorer data availability, illegal logging, etc.

Besides the purely technical issues of emissions estimates, forest activities must also consider biodiversity, the rights of forest dwellers, especially indigenous peoples, and other environmental and social aspects. It remains to be seen how well these issues can be resolved, but the REDD decision is an important first step towards protecting tropical forests.

While waiting for a possible “Copenhagen Protocol” to emerge in 2009, India can continue to take a proactive position with actions that have important development benefits besides climate change mitigation. We made a number of concrete suggestions in our earlier article [Dutt and Gaioli 2007]. India has already taken many of these steps [MEF 2007] and should continue in this path.

References

Dutt, Gautam and Fabián Gaioli (2007): ‘Coping with Climate Change’, Economic & Political Weekly, October 20.

MEF (2007): ‘India: Addressing Energy Security and Climate Change’, Ministry of Environment and Forests, Government of India, October. http:// envfor.nic.in/divisions/ccd/Addressing_CC_0910-07.pdf

Murphy, Deborah (2007): ‘A Way Forward: Developing an Effective Post-2012 Climate Regime’, presentation at the COP13 Side Event: ‘Squaring the Circle: Reconciling Rapid Economic Growth and GHG Mitigation’, Bali, Indonesia, December 7.

SBI (2007): ‘National Greenhouse Gas Inventory Data for Annex 1 Countries, for the Period 1990-2005’, Report of the Subsidiary Body on Implementation, FCCC/SBI/2007/30, October 24. http://unfccc. int/documentation/documents/advanced search/ items/3594.php?rec= j&priref= 600004364#beg

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