Vattenfall on COP15

The following report offers a summary and some conclusions about what took place at COP 15, based on information from persons following the event.

What happened in Copenhagen?

The International Emissions Trading Association (IETA), has released a statement regarding the outcome of COP 15. The organization seeks to promote the use of carbon markets as a climate solution, and from IETA’s perspective the results were mixed. While the direction the world is heading is a little clearer than before the meeting, they write, the fortnight also saw some steps backwards for market-based solutions, as developing nations remained critical and no progress was made on key elements like the Clean Development Mechanism.

The climate conference in Copenhagen came to a confused and confusing close on Saturday morning. A document called the Copenhagen Accord was presented to the conference, which chose to ‘recognize’ the Accord, but not to adopt it by consensus. What this means is still unclear.

The Accord itself was agreed between the heads of state of Brazil, China, India, the United States, and South Africa. While it is remarkable that the heads of these vital countries negotiated the text personally, it does mean that the document is not, at this point, a United Nations document. 

It is often the case at such mega-conferences that decisions are taken by smaller groups of crucially important countries. While the UNFCCC process will continue, the result from Copenhagen is further proof that the hard work of developing international climate change policies will have to be taken up in smaller groups, as well, if the countries with the responsibilities to reduce emissions are to move forward together. One can imagine that the G20 and Major Economies Forum will both continue to work on climate change. Whether or not they will use the Copenhagen Accord as a basis for this work remains to be seen.

Shortly before the meeting started in Copenhagen, the 3C Initiative presented the Business Leaders’ Climate Scorecard – a tool for evaluating the progress made during and after Copenhagen. As we await the meeting’s conclusions today, it’s worth reviewing what we think are the important issues that need to be handled, and why.

1. Global Goals — Ambitious and specific common goals for the global community. These will show where the world is headed, and how fast, which is the most important signal for our investment planning.

2. Caps and committments — strong, credible emission caps and other policy committments will effectively set the price on carbon. Committments from all major emitting countries will be reinforce each other’s credibility.

3. Coverage — all major players and all major sectors must be impacted by the agreement if it is to be considered fair, effective, and sustainable.

4. Financial transfer — funds from the wealthier countries can help lower costs for developing countries and keep them from ‘locking in’ to high-emitting trajectories. Funds for adaptation will support sustainable development and lower risks for businesses operating globally. A large offset market will allow mitigation to proceed in a cost effective manner.

5. Monitoring, reporting and verification — transparent and credible strategies are needed to create trust in the agreement.

6. Emerging technologies — a joint effort can help to push the development and deployment of tomorrow’s low-emitting solutions worldwide.

7. Room for progress — many issues will require ongoing negotiation, including how to handle the impacts on free trade, and how to link carbon markets together. The agreement should show an understanding of the need for ongoing negotiation and set timetables where possible.

All kinds of people come to Copenhagen these days; activists, NGO’s, delegates,  young and old, from allover the world. Hotels are booked long time ago and some of the people coming to Copenhagen don’t have money and/or reservations for the hotels. Some of them stay in private homes.

I’ve had the privilege to host a climate-guest; Kim from Cape Town University in South Africa has slept on my couch for a couple of days. It’s always fun to have strangers from all over the world visiting for a few days (I do this regularly). You see Denmark differently when discussing education/town planning/family traditions/etc. with people coming from very different backgrounds. But this time it was different. We didn’t talk much about the differences, but instead the discussions were about the global challenges we have in common. “How do you work with climate issues in your country”, “What’s the public opinion”, “How will this end (COP15, not the world…)”, etc.

Kim was busy going to meetings and spending hours (actually days) getting to register at Bella Centre, and I was busy with normal stuff (work, family etc.), but the brief moments we had together were fruitful. She told me about the long lines outside the Bella Centre, the different NGO’s she met at meetings and how she experienced Copenhagen. I think the biggest impression for her was to meet so many people engaged in the climate debate. In South Africa she is part of a small minority concerned about the climate. The focus is (understandable) mainly on providing electricity and clean water to the parts of the population who are without today.

For me it was some very interesting discussions, and I can only recommend it.

Felicia Fock, Copenhagen, December 17

Vattenfall is presenting its plans today for the first wave power plant outside the Shetland Islands in the eastern Atlantic. The project could achieve installed capacity up to 20 MW as early as 2014, and it can be expanded to produce many times over that capacity. Read more!

One of the main issues in the negotiations is how any country should be able to trust that another country does what it has promised. In the creation of the Kyoto Protocol, there was no real belief in trust: the Kyoto system is built on ex ante decided reduction targets, an allocation of Kyoto units (country allowances or correctly Assigned Amount Units), and international supervision. In addition, the Protocol is legally binding and there are sanctions when there is non-conformance decided by the compliance committee.

Reluctant to sign onto legally binding multilateral agreements, the US does its best to frame trust as and compliance differently from what is done in the Kyoto Protocol. The perspective the US is launching contains elements of trust-building instead of rigid compliance regimes.

What is the US view? Firstly, the US wants to know what the other countries are planning, how, when and how much will be done by what time. An ex ante provided plan which is available for public or multilateral scrutiny needs to be provided by the country.

Secondly, how can the country provide evidence that it has done what it has said it should do? Under Kyoto, the UNFCCC coordinates review teams with international composition, going from country to country assessing the inventories and policies of the countries. Is there an alternative to such multilateral control? It is open to discuss where to set the level in order to find the level of trust.

Given the institutional lock-in that affects the US due to the dependence on the Congress for approving international agreements and the Congress’ current position, Kyoto-like multilateral control cannot be accepted. Instead the solution is to require nationally binding rules. That is, the country needs to show its plans including the ability for enforcement and the sanctions of domestic non compliance, the plans for funding etc.

The final question is whether this proposed system will work. For the small island states, this is not convincing enough, but neither is a binding enforcement treaty such as the Kyoto Protocol unless it provides the emission cuts and funding needed. So what system will deliver? This dilemma will be part of the main talks at the end of the Copenhagen negotiations and there is no easy answer.

In Copenhagen, the issue of “regional distribution” of CDM-projects is on the agenda again, but addressing the issue is as difficult as before: the flow of CDM money imitates the flow of other investments and this pattern is not likely to change with CDM, not even with substantial capacity building funding as long as the infrastructure and economic development do not show to be significantly improved.

Texts that aim at simplifying regulations for small scale projects and creating specific rules for Least Developed Countries are proposed under the current negotiations, but it is doubtful that these proposed wordings will change the regional distribution of CDM-projects.

One area where the Least Developed Countries (LDC)and above all Africa could benefit from CDM is in the forestry area. Reforestation projects, i.e. planting new forests or plantations for industrial use, under the CDM would be very suitable for parts of Africa and LDCs and could have nice environmental and development advantages as well.

Unfortunately, carbon credits from CDM Afforestation and RDeforestation projects are not accepted in the EU Emissions Trading Scheme ETS and the credits that are issued by the CDM Executive Board are temporary. The fact that the credits are temporary means that they will have to be replaced either by new temporary credits or by any other non temporary Kyoto unit.

Lack of demand from installations in the EU and issuance of temporary credits  taken together makes the demand very small globally. The easiest way for the EU to contribute to the solution of the “regional distribution” problem would be to change the EU Emission Trading Scheme regulations, or to discuss other solutions than temporary crediting with other Parties. 

At the beginning of the second week of negotiations in Copenhagen, Africa has slammed the brakes in the negotiations: maybe revisiting CDM reforestation regulations in the EU and internationally is one are where the EU and other industrialized countries can can create compromises to the benefit of Africa and the LDCs. A demand in the EU and an alternative approach to temporary crediting would change the regional distribution picture.

//Johan Nylander PhD, Climate Policy and Carbon Finance

The Clean Development Mechanism (CDM) was introduced with the Kyoto Protocol forming the flexible mechanisms together with International Emissions Trading and Joint Implementation. The CDM was created to provide Annex-I-countries (countries with quantitative emission reduction targets) with an alternative to reduce emissions domestically or in other industrialized countries.

The CDM is a project-based mechanism under which a project can result in carbon credits. The emissions reductions of the project are compared to a baseline scenario, and the reductions as well as the selection of baseline have to be verified by an independent entity. CDM is supervised by the CDM Executive Board, which approves of baseline and monitoring methodologies as well as approves the projects.

Accused of being a cheap loophole for industrialized countries, the CDM has nevertheless become a full scale successful mechanism, also promoted by the host countries, i.e. the developing countries. As a market driven instrument, CDM has expanded mostly into China, Brasil and India, countries where the reduction potential is quite high and where there are emerging infrastructures and significant economic growth.

For several years, the least developed countries have asked for more CDM-projects and to be able to gain from the flow of carbon finance from the developed world. As CDM has developed, projects are mostly domestically funded, and the carbon finance adding adds an extra income to the projects that make investment more attractive. This has lead to that CDM is working in countries where projects in the energy and industrial sectors generally are feasible, while however, an extra push is needed in order to create greener projects.

Vattenfall is currently running a marketing campaign at Kastrup Airport in Copenhagen. It consists of examples from our operations put in a relevant perspective for travellers at the airport.

For example, at an elevator we state how much wave power it takes to operate the elevator. At an escalator, how much wind power is needed to keep the escalator running for a certain amount of time. Each message encourages the interested to seek more information via a link on our website.