EDF Talks Global Climate

Clouds on the horizon: The legal status of the Kyoto Protocol’s Clean Development Mechanism

In sunny springtime Bonn at the climate talks, discussions are intensifying about the future of the Clean Development Mechanism (CDM).

The CDM was established in 1997 by the Kyoto Protocol on climate change. The Protocol set caps on the carbon pollution of more than 30 industrialized countries for the years 2008-2012, and the caps were amended to extend them to 2020.

The Protocol provides that when industrialized countries invest in projects that cut carbon pollution in developing countries, the CDM can issue carbon credits – called Certified Emission Reductions (CERs). The Protocol then authorizes industrialized countries to increase their emissions above their commitment levels and use the credits to comply with their emissions commitments by claiming them as offsets against pollution growth.

Since its launch over 20 years ago, the CDM has been analyzed extensively – from the transparency of its institutions, to the geographic distribution of its projects, the marginal costs of CDM investments, the environmental effectiveness of these investments, their vulnerability to fraud and deregistration, and the future potential of the CDM in the context of the 2015 Paris Agreement, whose new frameworks for addressing climate change supplant the Kyoto commitments starting in 2020.

Legal status of CDM

One topic that has received little attention, however, is the legal status of the CDM and of the carbon credits issued by it.

Is there a legal basis for the CDM’s institutions to continue after the Kyoto Protocol’s commitments expire in 2020? If so, is there a legal basis for the CDM to issue carbon credits after 2020? And is there a legal basis for using CDM credits to meet emissions reduction obligations after 2020?

There’s a legal uncertainty hovering over any prospective post-2020 use of Certified Emission Reductions (CERs) to meet emissions obligations.

Initial legal analysis indicates that while the Kyoto Protocol may provide a legal basis for the CDM’s institutions to continue, there is no legal basis for using CERs to meet any other emissions reduction obligations after 2020. Article 12.3(b) of the Kyoto Protocol authorizes one use, and only one use, for the CDM’s carbon credits: it provides that industrialized countries may use CERs to contribute to part of their compliance with their emissions commitments under the Protocol.

That means there’s a legal uncertainty hovering over any prospective post-2020 use of CERs to meet emissions obligations, whether in the context of the Paris Agreement or the market based mechanism known as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which was adopted by the International Civil Aviation Organization (ICAO) in 2016.

This legal uncertainty has many practical implications. One is that as nations move to implement their emissions reduction commitments (known as “nationally determined contributions," or NDCs) under the Paris Agreement, some hope that the CDM’s institutions and tools could unleash investment in emission reductions in sectors not covered by NDC pledges.

The volume of emissions in those “non-NDC” sectors may be quite significant: a new analysis indicates that up to one-third of the greenhouse gas emissions of the Paris Parties might lie outside the NDCs. Failure to adopt rigorous rules for monitoring and accounting for carbon credits in these sectors could create perverse incentives to let non-NDC pollution balloon. Whether the CDM is up to this task remains unclear.

What would clarify the situation is the following: If Parties to the Paris Agreement – and the Parties to the Kyoto Protocol – want the CDM and its carbon credits to serve new purposes after 2020, the Parties will need to take key legal steps before 2020 to adapt them to the new realities of the Paris Agreement.

The good news is that these legal steps – which may include amending the Kyoto Protocol – are fully within the authority of the Conference of the Parties serving as the Meeting of the Parties to the Protocol (CMP) and the authority of the Conference of the Parties serving as the Meeting of the Parties to the Paris Agreement (CMA) to undertake. But if the CMP and CMA fail to act, then the future of the CDM, from a legal perspective, will remain a cloudy one.

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Why the developing world needs to be included in climate engineering research

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Devastating cyclones in Fiji. Deadly heat waves in Europe. Drought in Somalia.

Communities around the globe are already feeling the impact of the billions of tons of climate pollution that humans dump into Earth’s atmosphere every year and the serious changes to the climate it causes, but people living in the global south in particular are on the front line of climate change.

The one surefire way to address the climate change problem is to cut pollution. But given the urgency of the challenge and notably insufficient pledges by nations to reduce their future climate-warming emissions, the concept of solar geoengineering is being discussed as a way to cool the planet, fast.

Fostering inclusive and informed decision-making

Also known as “solar radiation management” or SRM, solar geoengineering is a controversial idea for reducing the temperature-related impacts of climate change. The leading proposal would involve spraying tiny reflective particles into the upper atmosphere to reflect away a little of the sun’s inbound energy, mimicking the cooling effect of volcanoes.

The consequences of solar geoengineering are still uncertain, and developing countries could be most affected by its use. SRM could lower global temperatures and reduce some of the harmful effects that poor countries face due to climate change, such as higher temperatures, changes to rainfall patterns and stronger tropical cyclones. But it could have unexpected and damaging side effects, could cause international tensions, and could distract policymakers from cutting carbon emissions.

Most discussions to date on SRM research governance, as well as most research activities, have taken place in developed countries. That needs to change. Writing in Nature today, a group of 12 scholars from across the developing world made a bold call for developing countries to lead on the research and evaluation of SRM geoengineering.

The Comment in Nature is linked to the launch of a new SRM modelling fund for scientists in the global south. Administered by The World Academy of Sciences (TWAS) and the SRM Governance Initiative, with funding support from the Open Philanthropy Project, the modelling fund will provide grants to scientists who want to understand how SRM might affect their regions.

Supporting developing country efforts to lead on SRM research and evaluation is an important and positive step towards ensuring that an inclusive and informed set of voices contributes to decision-making on geoengineering research and governance. EDF played an early role in the NGO community in promoting governance of climate engineering research. In 2010, EDF co-founded the SRM Governance Initiative with the Royal Society and The World Academy of Sciences, in order to engage a diverse and global range of voices to discuss SRM research and appropriate governance. Increasing numbers of environmental NGOs have joined us in this effort, and some of them have endorsed small-scale research.

SRM is not a 'technological fix' for climate change…but it needs to be understood 

Without exception, all scientific reports have confirmed that SRM is no substitute for reducing greenhouse gas emissions, since it would at best mask some of the impacts of climate change. The environmental, economic, social, ethical, political and legal risks of using these technologies are also poorly understood. That means we still need to do everything we can to address the emissions problem head on. We need to cut climate pollution now.

But it also makes sense to explore and understand the implications of solar geoengineering. As the world warms, some may propose the use of geoengineering technologies, or even deploy one of them. We need to understand the potential consequences before that happens.

It will be critically important to have strong rules in place to govern any outdoors research that proceeds, to deal with the technology’s profound social, ethical and geopolitical consequences. Governance regimes should be established in parallel with the very first experiments.

By expanding geoengineering research and governance to better integrate developing country perspectives and expertise, we stand a much better chance of making informed, legitimate decisions on the potential role of these technologies, if any, in global efforts to tackle climate change.

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States Should Welcome REDD+ into International Aviation Carbon Offset Program

Sectoral scale REDD+ programs meet or exceed proposed CORSIA offset

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Source: pixabay.com

Two important climate change initiatives are advancing and their future success looks more and more intertwined. The Carbon Offset Reduction Scheme for International Aviation (CORSIA) of the UN’s International Civil Aviation Organization’s (ICAO) is approaching the end of a policy-making phase to finalize environmental criteria for offset programs – which will be necessary for airlines to meet the international aviation sector’s climate commitments. At the same time, many countries striving to conserve their tropical forests are looking for sources of funding for large-scale programs for Reducing Emissions from Deforestation and Degradation (REDD+).

ICAO recently hosted a seminar in Montreal on carbon markets. The seminar occurred as ICAO Member States are considering draft Standards and Recommended Practices (SARPs) for implementing CORSIA, including environmental integrity criteria for offset programs and emissions credits. With some countries having submitted their observations on the proposals this week, and more slated to do so by April 20th following a series of regional seminars on CORSIA, the 36-member ICAO Council aims to finalize and adopt the SARPs this June. ICAO’s CORSIA Resolution directs the Council to establish, with the technical contribution of ICAO’s Committee on Aviation Environmental Protection (CAEP), a standing technical advisory body to make recommendations to the Council on the eligible emissions units for use by the CORSIA. While the Council is establishing this body, proponents of different programs like the Clean Development Mechanism (CDM) and REDD+ will be informing decision makers about their ability to supply high-integrity offsets.

Why REDD+ is a great solution for CORSIA

REDD+ is the only sectoral set of policy approaches to be featured in the Paris Agreement, which will govern global climate action starting in 2021. REDD+ received special recognition by the world’s climate policy makers, for two reasons. First, dramatic reductions in emissions from deforestation can play a key role in the battle to avert dangerous climate shifts. Second, the world’s nations have set out a multilaterally agreed framework for measuring these reductions, ensuring that forest protection proceeds with environmental/biological and social safeguards, providing basic guidance for market-based transfers of these reductions, and ensuring environmental integrity through accounting and transparency. The UNFCCC’s 2013 Warsaw Framework for REDD+ and related UNFCCC Decisions set a precedent for these programs to proceed at jurisdictional or national rather than simply project scale in order to develop and enforce policies to address deforestation at a large scale, prevent leakage of deforestation, and avoid double claiming of emissions reductions.

Parallel to the development of the Warsaw Framework for REDD+, the World Bank, nine donor governments and TNC created the Forest Carbon Partnership Facility (FCPF) to help tropical forest countries prepare plans to reduce deforestation nationwide, and to pilot results-based payments for those reductions. These countries are succeeding in reducing emissions from deforestation – and payments for their results could be issued by the end of 2018.

The guidance provided by Warsaw Framework for REDD+ and the upcoming results of the FCPF are two important reasons why REDD+ should be a source of offsets for CORSIA. As the FCPF is demonstrating, REDD+ that meets the UN’s multilaterally agreed Warsaw Framework is achieving real results, and deserves to be a source of offsets for CORSIA.

A recent analysis of REDD+ by Climate Advisers demonstrates how REDD+ programs implemented under the Warsaw Framework meet CORSIA’s draft Emissions Unit Eligibility Criteria. Another just released study by Climate Advisers discusses why REDD+ is a good option for airlines needing to meet their CORSIA obligations.

What are other potential offset suppliers for CORSIA?

During an ICAO seminar held in February in Montreal, potential offset suppliers gave short presentations of their programs to an audience of about 200 people. Reviewing the workshop program, one can’t help but notice a big focus on the CDM. The CDM’s existence is not guaranteed in the new post-2020 climate regime for many reasons. But one prominent factor is the risk that if the CDM actually did achieve real reductions, those reductions could be claimed both by the host country in the context of the Paris Agreement, and by an airline in CORSIA. That would negate the climate benefit of CORSIA. Flawed CDM credits should not be allowed to crowd quality REDD+ credits out in CORSIA.

But can REDD+ actually supply CORSIA? EDF researched this question and found that the answer is yes – even when doing proper accounting to ensure no double counting. Another interesting finding is that if REDD+ is used, many emerging markets could see net economic benefits. See, for examples, analyses by Climate Advisers of net benefits for Colombia, Ethiopia, Indonesia, and Peru.

Making a match of REDD+ and CORSIA

Evaluating CORSIA’s draft Emissions Units Criteria, REDD+– under the Warsaw Framework for REDD+ or the FCPF– meets or exceeds them. Sourcing offsets from REDD+ offers more than just environmental benefits. In addition to generating significant potential supply of emissions reductions, REDD+ activities can also generate significant economic and social co-benefits, in addition to offering higher regulatory certainty than other mechanisms. CORSIA policy makers would be well advised to acquaint themselves with REDD+ – the only sectoral program for the new Paris climate regime agreed upon by 193 countries.

Posted in Aviation, Deforestation, REDD+, Uncategorized / Leave a comment

Carbon Credit Shell Game: the Clean Development Mechanism in New Climate Accords

Belo Monte Dam under construction on the Xingu River in the state of Pará, Brazil in 2013 | Photo credit: Letícia Leite-ISA

In the middle of terrifying weather headlines – mega-forest fires in California, serial super-hurricanes slamming the Caribbean, heat waves in the Arctic – it’s more important than ever to achieve large-scale reductions in carbon pollution, fast.

Two new international accords are starting to move industry and governments in the right direction – the UN Paris Agreement, and the International Civil Aviation Organization’s (ICAO) Carbon Offsetting and Reduction System (CORSIA), which this week launches a series of regional seminars to inform aviation stakeholders about the system’s implementation procedures. President Trump’s refusal to face the climate challenge has really only mobilized everybody else to move ahead.

But other dangers lurk. A shadowy lobby is pushing hard to revive the Clean Development Mechanism (CDM) – a relic of an outdated, failed attempt at climate action.

Contrived under the Kyoto Protocol, the CDM was supposed to let industrialized countries buy carbon credits from emissions-reductions projects in developing countries. These credits were supposed to represent real, verifiable emissions reductions that wouldn’t have happened without the CDM projects. The last part part—“additionality” — is key. Otherwise, developed-world power companies and cement factories just pollute more without actually making any real emissions reductions anywhere.

Twenty-one years and almost 3 billion tons CO₂e of purported “offsets” later, we know it didn’t work. Fully 85% of CDM projects are “unlikely to be additional,” says the most comprehensive, up-to-date study of the CDM. (It’s only “unlikely” because it’s typically very hard to tell what would have happened if the projects didn’t get done). The corruption has become systemic, especially in the biggest CDM countries – China, India and Brazil – where 90% of the credits come from. A US State Department analysis of wind power projects in India that could generate as much as 500 million tons of CO₂e credits found that project developers routinely keep double books. They do one term sheet showing the project is viable to get financing, and another term sheet for the CDM, showing that the project is inviable without CDM credit, i.e., is “additional”. A project that needed carbon credit to work would be far too risky for a bank to finance, investors said.

Brazil is a major offender. Its biggest CDM player, state power company Eletrobrás, told the CDM Executive Board that its Amazon mega-hydroelectric dams needed CDM credit to attract investors. At the same time, it told investors that the dams were fully viable on their own. We know this in part because the same dams (all registered, validated, and generating CDM carbon credit) are under investigation in the gigantic, Brazil-wide corruption investigations nicknamed “Lava Jato” (Car Wash). They are also prime exhibits in a lawsuit for fraud in US federal court brought by investors in Eletrobrás stock. The dams are, of course, socio-environmental nightmares too.

In short, there are excellent reasons why the EU Emissions Trading System no longer accepts CDM from Brazil, China and India, as well as whole categories of projects, and why California’s carbon market categorically rejects international credits from anything resembling the CDM. This in turn is part of the reason that CDM credits have effectively zero value in the market. They will go on having zero market value unless the CDM lobby (led by Brazil) in the Paris Agreement and CORSIA succeeds in foisting them onto the new markets.

If they get away with it, both the new, promising agreements to lower atmospheric carbon will be irrevocably tainted.

Environmentalists and government negotiators should keep fake CDM carbon credits from high-emissions emerging economies out of Paris and CORSIA, at risk of increasing rather than decreasing GHG pollution. There are much better – real – ways to control emissions, which I’ll be addressing in a future post.

Posted in Aviation, Brazil, Emissions trading & markets, Paris / Leave a comment

Ontario Joins California and Quebec for Largest Carbon Auction Yet: All Current Allowances Sell

Toronto, Ontario skyline. Photo by Nextvoyage from Pexels https://www.pexels.com/photo/architecture-buildings-canada-city-457937/

The results of the first California-Quebec-Ontario joint auction of greenhouse gas allowances were released today, and even with a record-high volume of allowances for sale, the current auction sold out with the price clearing just above the floor. This is an indication of the strength and stability of the expanded market.

Even more significantly, this was Ontario’s inaugural Western Climate Initiative (WCI) auction, and it is a real-world demonstration of the benefits of linking cap-and-trade programs. Ontario’s participation in the WCI brings more trading partners to the table, helps keep compliance costs low, creates an opportunity to increase ambition to reduce emissions, and models what international climate action can look like.

First, let’s do the February numbers:

  • All 98,215,920 current allowances offered were sold, including 23,743,316 allowances from Ontario, and 14,894,520 previously unsold allowances. This is the first auction including allowances from Ontario, and the second offering of held allowances.
  • Allowances cleared at $14.61, this is 8 cents above the floor price of $14.53. This is down from the $1.49 above the floor price in the November, 2017 auction. However, this is not surprising given the significant increase in allowances for sale, and the floor price itself has increased 96 cents since November.
  • 8,576,000 future vintage allowances sold of the 12,427,950 allowances offered. These allowances will not be available for compliance until 2021, demonstrating there is confidence in the growing WCI market into the future.
  • Approximately $725 million was raised for California’s Greenhouse Gas Reduction Fund. This revenue will be invested in improving local air quality, building sustainable and affordable housing near transit, and helping low-income families weatherize their homes.
  • Ontario raised an estimated $377 million USD and Quebec an estimated $155 million USD to fund their own climate investments.

So what does it all mean?

By selling out of allowances, the market quelled concerns that supply would outstrip demand due to the unprecedented number of allowances for sale. These results show that the market is stable, and with the addition of new trading partners from Ontario, the demand for allowances is healthy.

This greater availability of allowances does contribute to the price clearing just above the floor, but rather than something to be concerned about, this demonstrates the importance of that price floor. It is a key feature to keep the market and the revenues on an even keel.

Another feature of the linked cap-and-trade program is the ability to bank allowances. It is possible that allowance prices will rise after 2020, and companies are planning ahead. Some may be buying the limited number of allowances they are allowed to save now, when they are less expensive, supporting the strong demand we saw in the February auction.

Every allowance that is banked represents one ton of carbon emissions that are not released into the atmosphere now. Greater emission reductions sooner mean less cumulative emissions, and that is a win for the environment. Lower emissions now also creates an opportunity for California to consider tightening the cap in the coming years. This would drive even deeper emission reductions as the state looks to the ambitious 2030 target.

For Ontario, these results also demonstrate some of the benefits of participating in a larger carbon market. Ontario’s last solo auction did not clear, perhaps because of partisan campaign promises to abandon cap and trade and leave the Western Climate Initiative. Even with demand potentially dampened in Ontario due to this uncertainty, all of Ontario’s allowances sold to buyers in the larger market. This provides proceeds that can fund Ontario’s transition to a clean economy. We can’t know what would have happened in an Ontario-only auction, but this seems a clear example of the stability that joining a larger market can generate.

We often talk about California and Quebec setting an example on climate action in the face of the Trump Administration determination to go backwards. Today’s results demonstrate that the Western Climate Initiative has gained a valuable new partner in Ontario, and that this partnership is succeeding.

Posted in California, Canada, Carbon Market Cooperation / Tagged | Leave a comment

New report shows landscape of finance for REDD+ and climate action in forests

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A new report from Environmental Defense Fund and Forest Trends identifies the sources of funding currently available for REDD+ and climate action in forests, and analyzes the challenges and opportunities for accessing and coordinating this finance. Designed to serve as a resource for negotiators, policymakers, practitioners, NGOs, and others involved with the implementation of REDD+ and climate action in forests, the report aims to contribute to scaling up, coordinating, and allocating funding in a timely, efficient, and effective manner.

The report, “Mapping Forest Finance: A Landscape of Available Sources of Finance for REDD+ and Climate Action in Forests”:

    • Describes the sources of finance available for each phase of REDD+ —Readiness (Phase 1), Implementation (Phase 2), and Results-based Finance (Phase 3) – and related climate action in forests by detailing each finance source’s: type, mechanism, eligibility requirements, scale, access process, scope, and challenges.
    • Presents information that is both historical and forward looking so as to provide context and inform future decisions when it comes to planning REDD+ implementation and supporting financial strategies combining a diversity of funding sources. The Green Climate Fund, for example, recently announced a pilot program for forest sector results-based payments. Additionally, while not yet an available source of results-based finance, transfer-based payments (TBPs) are a potential source of viable funding for performance based results. Parties in the UNFCCC are currently negotiating internationally transferred mitigation outcomes (ITMOs) as a part of Article 6.2, which will determine the exact nature of TBPs in relation to REDD+.
    • Reveals many challenges with and opportunities for accessing and coordinating finance for REDD+ and climate action in forests at the international and national level. Key challenges identified include minimizing the gap between what is available and what is needed for each REDD+ phase; developing cohesive national visions that can be translated into usable investment plans; allocating funding appropriately according to cross-sectoral and coherent national finance strategies; and aligning requirements and criteria under funding sources for consistency and coherency of requirement processes so to facilitate access and disbursements.
    • Highlights challenges specific to forest landscape restoration (FLR), such as the high costs associated with addressing degradation and promoting sustainable management of forest landscapes, when compared to activities for reducing emissions from avoided deforestation. This challenge creates the need for more comprehensive national REDD+ visions that include activities to address the barriers for sustainable management of forests and enhancement of carbon stocks; and
    • Describes the opportunities for both accessing and coordinating finance, which range from exploring viable, complementary sources of market-based REDD+ finance for Phase 3 to redirecting sources of funding for agriculture, for example, to finance REDD+ activities.

The report also reflects how many finance sources are able to fund multiple phases of REDD+, considering that REDD+ phases often overlap and operate simultaneously, as seen in the infographic below which shows the sources of finance and funding mechanisms for the three phases of REDD+. Such a comprehensive landscape of complementary and/or synergistic sources of funding can contribute to defining efficient and coherent financial strategies for REDD+ design and implementation.

The report, produced with support from IUCN as part of ongoing efforts to accelerate action on REDD+ through forest landscape restoration, is timely as the coordination of financial support for REDD+ and climate action in forests will continue to be a top agenda item at the upcoming Bonn intersessional, having featured prominently during COP 23. During the COP, country negotiators – as a continuation of REDD+ focal point meetings held since COP19 – resumed discussions on the coordination of support for the implementation of activities in relation to mitigation actions in the forest sector by developing countries, including institutional and financial arrangements. Negotiators debated the potential need for additional governance arrangements for improving the coordination of support for REDD+ funding and implementation. Additionally, side event and panel participants, country representatives, and others involved with REDD+ and climate action in forests expressed concerns over the availability, sustainability, and coordination of funding for results. Yet, negotiators could not agree on a decision and the co-chairs decided to continue negotiations during the next meetings to be held in May 2018.

The report aims to contribute not only to upcoming UNFCCC conversations pertaining to improving access to and coordination of finance for REDD+ and mitigation actions in the forest sector but, by clarifying the challenges with and opportunities for adequately accessing and coordinating funding for REDD+ and climate action in forests, will also contribute to ensuring that funding is made available and disbursed in a timely, efficient, and effective manner.

View the report at edf.org/mappingforestfinance.

Posted in Deforestation, Forestry, REDD+ / Leave a comment