This post first appeared on East Asia Forum.

The negotiators at Cancún are currently trying to negotiate a ‘balanced package’ – also known as a ‘six-pack’ – that combines progress on mitigation, transparency (measurement, reporting and verification – or MRV), adaptation, finance, technology, and REDD+ (reducing emissions from deforestation and forest degradation). The Mexicans are extremely determined to get some sort of outcome from the conference – both for the climate and for multilateral negotiations. They so far seem to have been quite confident in the way that they have facilitated the negotiations, and there seems to be much more trust in the Mexicans from Parties than there was for the Danes last year.

What is uncertain is how ‘good’ the decisions will be – in terms of criteria such as ambition (including capacity to ramp up ambition later), efficiency and equity; how detailed the decisions would be; and whether there is sufficient consensus to get a package of decisions at all. Different Parties are interested in progress on different elements of the six-pack, so the total level of progress will be determined by whatever element has the least progress. For example, the United States requires progress on mitigation and transparency in order to support progress on adaptation, finance, technology and REDD+.

There are two tracks to the negotiations: one track is focused on further commitments under the Kyoto Protocol for ‘Annex I parties’ (which consists of developing countries, but does not include many countries that could be considered ‘developed’ such as Qatar, Saudi Arabia, and Singapore); the other track is focused on implementing the Bali Action Plan – that covers the six-pack described above. Developing countries (including China) have stated that for an agreement, they require progress on a second commitment period of the Kyoto Protocol. There could be progress on ‘technical’ aspects of the Kyoto Protocol – such as new gases, surplus emission allocations, and accounting for forest management. But Japan has now stated clearly what many have already known – that they do not intend to inscribe their target into the second commitment period. If this issue is not resolved, it could cause a potential deal to unravel.

Below is a summary of where things are at in the six-pack:

  • On mitigation, key questions are how to anchor pledges that were part of the Copenhagen accord, and what could be done later to increase ambition. Points of contention include how developed country commitments relate to the Kyoto Protocol and the nature of developing country commitments. China has said that it would submit its emission reductions as a binding UN resolution – but this is conditional on progress on a second commitment period to the Kyoto Protocol. Todd Stern has described China’s announcement as nothing new.
  • There is some information on transparency in the negotiating text, but the United States want more detail. The Indian Environment Minister Jayram Ramesh has put forward a proposal, but it is uncertain how much support there is for it from major developing countries.
  • On adaptation, there is relatively clean text. But some countries (including Saudi Arabia) want adaptation to be linked to ‘response measures’, which essentially means that as well as assisting countries with adapting to the effects of climate change, oil exporting countries would somehow be compensated for lost fossil fuel revenue.
  • On finance, a major point of debate has been the establishment of a fund, that was called for as part of the Copenhagen Accord. Some countries wanted it established at Cancún, but others argue that time will be needed to set it up and that it should instead be set up in the period between Cancún and the negotiations next year in Durban, South Africa. Areas of discussion include the transitional committee to set it up, the operating entity of the fund, and its relationship to the World Bank. Australia’s Minister Combet has been involved with consultations on finance.
  • On technology, there is clean text, but the United States is likely to block progress if they do not see progress on other issues.
  • The text on REDD+ is largely complete, with most of the remaining areas of disagreement (mainly on the role of market mechanisms) expressed as clear options.

The Mexican Foreign minister, Patricia Espinosa, stated on Wednesday December 8 that an ambitious and broad package of decisions is within reach but we no not have it in our grasp. We are now in the final stage of negotiations, where the final political issues need to be resolved, and negotiators may not get much sleep. If nearly 200 countries can come up with an ambitious and broad package of decisions, it will be a major success in diplomacy that could rejuvenate the UN process.

The climate negotiations commenced today in Cancún. Today was dominated by opening plenaries, these are open to observers, and webcasts are made available on the internet. These generally consist of set piece speeches from the main negotiating blocs. Things of interest that happened include:

  1. PNG proposed that in the case that the UNFCCC cannot reach a consensus on something, as a last resort there should be some sort of vote, which would then require some sort of supermajority to make a decision. This proposal was opposed by Bolivia, India, and Saudi Arabia.
  2. The previous negotiations this year on long-term cooperative action have resulted in very dirty text with a large amount of brackets (parts of the text where there is not consensus, and which would could be deleted), and a large amount of pages. The chair has prepared here own text to facilitate negotiations. Various Parties (countries) have made comments or criticisms of the text, but it seems like it will be a useful basis to go forward.
  3. Japan made a comment in the opening plenary of the ad-hoc working group on further commitments under the Kyoto Protocol that its 25 percent emission reduction target is not a target that it plans to inscribe into the Kyoto Protocol.

Unlike Copenhagen, participants haven’t had to line up for long to get into the venue -instead the shuttle buses have been slowed down by a traffic jam that was caused by security arrangements. The main venue where the negotiations have taken place – the “Moon Palace Hotel” – is a giant fancy golf resort but where people who are not staying at the hotel have been subjected to bad expensive food and bad coffee. There have been problems with the internet all day, with it only working intermittently. Not ideal for getting things done.

Developed countries who have commitments under the Kyoto Protocol are negotiating loopholes for themselves that could lead to almost 400 Mt of extra emissions each year. After giving some background, I will describe the status of the negotiations, describe the loopholes, and quantify them. This will help us to see who the worst offenders are.

Emissions associated with land use are classified under the Kyoto Protocol as LULUCF – Land Use, Land Use Change, and Forestry. This includes deforestation – which is when you log a forest and replace it with some other form of land use such as grassland; but does not include forest degradation – which is what occurs when you log a forest and allow a forest to grow back. Because unlogged forests can store large amounts of carbon, emissions associated with forest degradation can be quite significant, but not accounted for. This can lead to perverse outcomes, for example it is possible to log old growth forests, use the wood to generate electricity, and not account for any of the emissions.

As a way of addressing this, the Kyoto negotiations have been looking at how to have countries include forest management in their accounts – this would include emissions from forest logging. Forests naturally absorb carbon dioxide, so when including forest management, reference levels (baselines) need to be negotiated so that countries don’t get credited for the removals that naturally occur anyway. Late in 2009, just before the Copenhagen negotiations started, countries submitted their preferred reference levels, as well as estimates of emissions in 1990, projections for the first commitment period (2008-2012) and projections for the second commitment period.

Each country proposed a reference level for itself, the numbers are given below (click on the image to enlarge it):

Forest Management Reference Levels

The problem with this approach is that each country has an incentive to choose a reference level that is generous to it. This is what has happened. Some countries who chose particularly generous reference levels for themselves include Russia, which chose a range between 0 and -177.8 Mt CO2-e of emissions, so that it gets credited if its forests are more of a sink than -177.8 Mt, but is only debited if its forests become net emitters and is projected to have emissions of -274 Mt in the first commitment period; New Zealand, who chose a reference level based on its forecast for 2013-2020, which is 19.4 Mt higher than its forecast for the first commitment period (over 23% of New Zealand’s 2005 emissions); and Japan, which chose a reference level of 0. These numbers all add up to 213-391 Mt CO2-e of excess allowances per year for Annex I countries compared to their projected forest management emissions for the first commitment period (depending on which number is used for Russia).

There was some extensive discussions on this issue at the Bonn climate negotiations on June 7, 2010, in the contact group on Further Commitments for Annex 1 Parties under the Kyoto Protocol. These negotiations were not broadcast, but some of what happened was broadcast on twitter (look up the #COP16 or #UNFCCC hashtag). I don’t know which countries did or did not have a constructive role in these negotiations, but would be very interested in finding out. The LULUCF negotiating text is here.

The difficulties with finding cooperation on climate change were illustrated at Copenhagen, which resulted in a political ‘accord’, but where there remained too much disagreement to arrive at a binding international treaty. There has been an ongoing political debate about the role of the United Nations, and whether more could be achieved in negotiations involving smaller groups of countries. The Copenhagen negotiations may have made the latter more likely. The lead US climate change negotiator, Todd Stern, stated:

You can’t negotiate in a group of 192 countries. It’s ridiculous to think that you could.

but that

It is certainly premature to write off the UNFCCC. There is a credibility that is provided by the full group. So on the one hand, I don’t think you can negotiate in that grouping, but on the other hand, it’s good for there to be a larger grouping that the smaller representative group can come back to.

Some of the rules [of the UNFCCC] can be difficult. If you’ve got 185 countries wanting to do something and a handful that don’t want to, that blocks everything.

Nicholas Stern has offered a different perspective, stating that “The fact of Copenhagen and the setting of the deadline two years previously at Bali did concentrate minds, and it did lead… to quite specific plans from countries that hadn’t set them out before”, and that it was vital to stick with the UN process, whatever its frustrations. Stern also stated that the “disappointing” outcome of December’s climate summit was largely down to “arrogance” on the part of rich countries.

Other perspectives in this debate have been offered by Jonathan Pershing, Robert Stavins, and Andrew Light. Gro Harlem Bruntland, the UN special envoy on climate change, has said that there is likely to be a two-track process, with negotiations both within, and outside the UN.

I have written more on the role of different countries at Copenhagen (including ‘rich’ countries) here. A major deadlock in the negotiations is due to developing countries being unhappy with Canada, Japan and Russia not being willing to be part of a second commitment period to the Kyoto Protocol. Another problem is that Saudi Arabia and other OPEC members (many of these countries could be considered to be ‘rich’, even though they are not Annex I countries) are blocking discussion of new legally binding protocols under the UNFCCC, sometimes using lack of progress under Kyoto as an excuse.

Game theory can provide useful insights when considering debates such as these. In fact, there has been a parallel debate in the game theory literature on whether cooperation is more likely to arise from a `grand coalition’ of all countries, or from smaller coalitions. The debate has been surveyed by Chander and Tulkens. An important contribution is from Finus and Rundshagen, who consider different ways to model coalition formation as a non-cooperative process.

In some ways the Annex I parties to the Kyoto protocol behave like a coalition — members behave more cooperatively with respect to each other than they do towards non-members. The set of Annex I Parties to the Kyoto Protocol is similar to the ‘open membership’ coalitions described by Finus and Rundshagen. Other countries are free to join the Annex I Parties, but generally they don’t want to. Many Annex I countries instead want to leave.

The European Union is closer to a ‘classical’ coalition. They choose their emissions in a cooperative manner, negotiate collectively in the UNFCCC, and participate in an emissions trading scheme together. Membership is not open, and decided collectively, in a manner similar to the ‘exclusive membership games’ described by Finus and Rundshagen. Processes where countries link their emission trading schemes may also work in a similar way to an exclusive membership game. In the cases studied by Finus and Rundshagen, although open membership coalitions are easier to join, the equilibria for exclusive membership coalitions involve larger coalitions and a more cooperative outcome.

A possible implication of this is that a process where a small amount of ‘major emitters’ negotiate a coalition, which others are then free to join, is likely to be less successful than a process that tries to find the largest possible group of countries who are willing to cooperate with each other. Carbon market linkage may also facilitate cooperation.

Below is blogging from the KP track of the negotiations. New draft texts have been released to Parties, I haven’t been able to get hold them yet. A “stocktaking plenary” is about to commence. There was supposed to also be plenaries for the LCA track of negotiations this evening, not sure if that is happening or not.

Chair: we agreed we would establish a contact group for the sole purpose of fixing up the text. After this plenary we will work on the contact group. Time is of the essence, we hope to have something good to report to COP/MOP tomorrow.

Co-chair: contact group on numbers resumed. in this session we used various methodologies to try to get agreement, small informal consultations were particularly helpful. through consultations clarified c. periods – choice of 5 or 8 years. agreed to have single base year, not to have a common base year. discussed reference years. discussed surplus AAUs and LULUCF. This ensured numbers would be meaningful from environmental perspective. we have forwarded you an annex, which is bracketed, it is not a clean text. we did not discuss the ?? decision. two options option A consequential; option B go beyond, but fit under 3.9 of KP. need to return to reference periods. no agreement on how to express aggregeate figure and what it is, also on ‘top down vs bottom up’. much work remains to be done on other possible amendments.

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The Federated States of Micronesia, on behalf of the Alliance of Small Island States (AOSIS), has distributed among the contact group on ‘numbers’ a document titled ‘Potential effect of Surplus AAUs on Annex I allowed emissions in 2020: Technical Background and Assumptions’. It states:

Several economies in transition (EITs) have Kyoto first commitment period (KP.CP1) (2008-2012) targets that exceed their likely emissions for that period. Paragraph 13 of Article 3 of the Kyoto Protocol permits that surplus Assigned Amount Units (AAUs) from the first commitment period are carried forward to “subsequent commitment periods”. This leads to the situation where surplus AAUs are created and potentially available for transfer to other Parties where they may be used towards compliance with their obligations. As a result, surplus AAUs that are transferred to other Annex I Parties or carried forward will lead to more emissions to the atmosphere than would otherwise have happened.

The scale of surplus AAUs in the first commitment period is sufficient, if transferred to and used by other Annex I parties to meet their obligations, to permit Annex I as a group to emit as business as usual levels through 2020.

What the document is saying is that if Kyoto emission permits (AAUs) are carried over from the first (2008-2012) commitment period to the second commitment period, then the Kyoto Protocol will not have a significant impact on developed country emissions. In terms of emissions, this would be equivalent to not having a second commitment period, which is also a possibility (and has some support from Japan and Canada).

The document also has analysis of the impacts that each parties preference for accounting for land use, land use change, and forestry would have on emissions. It suggests that this would have a similar impact, but not quite as great as the impact of banking AAUs.

The EU has made similar statement on banking AAUs from the first commitment period, noting that banking could lead to an increase in emissions even if Annex I emissions added up to a 30% reduction (which they do not).

In an informal briefing to NGOs, an Australian negotiator did speak in favour of banking AAUs. I have not yet observed Australia saying anything on this in the negotiations.

This is the second meeting of the Contact Group on Further Annex I Emission Reductions today. At the first meeting, further meetings of the Kyoto Protocol contact groups were postponed for about 5-6 hours, in response to Africa and the G77 postponing negotiations on the LCA text.

A non-paper was distributed, containing the various options suggested by parties at the Dec 12 meeting. There were:

  • A: 3 options for tables for Annex B;
  • B: four options for article 3, paragraph 1 and paragraph 1 bis;
  • C: article 3, paragraph 1 ter;
  • D: article 3, paragraph 1 quater;
  • E: article 3, paragraph 1 quinquies;
  • F: article 3, paragraph 7 bis;
  • G: article 3, paragraph 9 bis;
  • H: article 4, paragraph 2 bis;
  • I: article 4, paragraph 3.

The text of the non-paper was put up on the screen, like with many of these contact groups, there is likely to be quite a bit of editing of the text during the meeting. Lots of squealing noises coming from the microphones…

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