The Cancun Agreements put the. achievements and shortcomings The Cancun Agreements of 11. the climate debate throughout 2010

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Durban Update Author Malik Amin Aslam Khan Climate Change Expert Executive summary This policy brief outlines key points for Pakistan's climate negotiating team at the th 17 Conference of the Parties

The policy brief concludes by elaborating the stakes for Pakistan in the current negotiations.

1 Durban Update Author Malik Amin Aslam Khan Climate Change Expert Executive summary This policy brief outlines key points for Pakistan's climate negotiating team at the th 17 Conference of the Parties (COP) in Durban. It analyses the Cancun Agreements and progress on their implementation before elaborating the key outstanding issues. The policy brief concludes by elaborating the stakes for Pakistan in the current negotiations. The Cancun Agreements achievements and shortcomings The Cancun Agreements of 11 December 2010 were not legally binding, as the Kyoto (Protocol) was, and did not spell out clear emissions targets for developed countries, as integrity of the process at the global negotiations table. Achievements The Cancun Agreements put the climate negotiations process back on track and marked out signposts for the future. Governments agreed to hold Kyoto did. However, they revived a the temperature increase to below 2ºC faltering negotiations process that was from pre-industrial levels: the key derailed a year earlier in Copenhagen. issue. They also agreed to 'review' this They injected much-needed, faith into target between 2013 and 2015 in the UN-based multilateral system of relation to a more challenging, 1.5ºC. environmental governance, based Subsequent verification on whether upon consensus amongst 194 the world is on track towards this divergent nations. This governance target is expected to lead to was in danger of being consigned to 'appropriate action'. the dustbin of history if Cancun failed to deliver. The Cancun Agreements chalked out The ghosts of Copenhagen haunted the climate debate throughout 2010 and had a strong bearing on Cancun which tried to redress the causes of that momentous failure. At Cancun, expectations of an outcome were low while the negotiations process was inclusive and transparent to the extent that even informal consultations amongst selected countries were announced to all participants. The Mexican hosts steered the wayward process with skills to rebuild trust amongst countries, rather than trying to force a consensus. The resultant Cancun Agreements proved the value of maintaining November 2011 a range of new instruments to move from agreement to implementation: a Green Climate Fund for the international management, d e p l o y m e n t a n d accountability of long-term funds for developing country support. a Technology Mechanism to get clean technologies to the right place, at the right time and to best effect. an Adaptation Framework to b o o s t i n t e r n a t i o n a l c o o p e r a t i o n t o h e l p developing c o u n t r i e s protect themselves from the impacts of climate change. Policy Brief November 2011

2 a Registry where developing countries will detail voluntary plans to limit greenhouse gas emissions and the support they need. The REDD+ concept (Reducing emissions from deforestation in developing countries, including conservation) which provides financial compensation was clarified in the Agreements but is full implementation was postponed. Most importantly, Cancun sent a clear signal of the need to shift the paradigms of future economic growth towards low carbon trajectories fuelled by clean energy technologies. However, Cancun's achievements pale in comparison to what was not achieved. Shortcomings The Agreements lacked specifics on climate finance and emission reduction targets. The extensive architecture and framework proposed under these agreements hinges upon the availability of climate finance that is not yet certain. Even the pledges by developed countries to provide $30 billion in fast track finance and $100 billion in long-term finance remain pipe dreams. Second, the most essential but contentious decision about future emissions reduction targets (post Kyoto or post 2012) was quietly pushed deferred. This jeopardizes the certain continuation of the carbon market, the single largest source for alternate climate finance (generating more than $80 billion in 2010 alone). This convenient escape from reductions targets suggest that the commitment by the developed countries to act on climate change diminished, rather than improved, at Cancun. Third, the only specifics of the Agreements informal financial pledges of$100 billion per year in long term finance, were not based on any identified needs of developing countries or on the ability of developed countries to pay. This arbitrary number that emerged in Copenhagen is now formalized as the de-facto financing need. Finally, the Nationally Appropriate Mitigation Actions (NAMAs) that began as voluntary declarations of developing country intent for climate action were transformed into soft emission commitments requiring monitoring, review and verification (MRV). The unstated process seems to be moving the historically responsible developed countries away from binding commitments while tying impacted developing countries to emission commitments - a move that will only deepen mistrust. While Cancun put in place the nuts and bolts to trigger climate action, the overall package omits the most essential ingredients: specific commitments to limit emissions and certain finance to assist low carbon development and adaptation. Outstanding issues Other major issues come under the broad categorization of the dual negotiations tracks of the Bali Action Plan (BAP) framework: Issues for the Ad Hoc Working Group on Further Commitments under the Kyoto Protocol (AWG-KP) This working group was created in 2005 in Montreal (COP/MOP1) to look at further commitments for Annex-1 parties under the Kyoto Protocol and is discussing the following issues: Annex-1 further commitments post-2012: The decision on the second commitment period of the Kyoto Protocol remains the key issue. This was the 'elephant in the room' that was ignored in the Cancun Agreements and is the main issue haunting negotiations. The time for decisions is running out, with the Kyoto period ending in late 2012 and no decision as yet on what will replace it. Continued uncertainty on this central decision impinges upon the overall credibility of the exercise, threatens to derail the progress of the carbon market and indicates global complacency on meeting the main goal: a global temperature rise within 2ºC of pre-industrial levels. Options from negotiating groups include: A legally binding second commitment period with the EU taking the lead with carbon caps. Having no new commitment period but a voluntary 'pledge and review' system based on voluntary emission caps and no international verification but with potentially wide scaled participation. Drawing out a transitional regime or Kyoto extension to bridge the period until a new legally biding treaty takes effect. The latter option seems most likely, given continued hard-line stances from different countries. Flexibility mechanisms: The main issue is the continuation of the carbon market, based upon emission trading, joint implementation and CDM. 2

3 These require the seamless transition beyond mitigation actions that go unrecognized at 2012 of the Kyoto commitments or the international level. This reporting was very Quantified Emission Limitation and Reduction flexible and non-standardized but was included in Objectives that drive this market. Funds are the Cancun Agreements as 'soft' carbon emission injected into the adaptation fund by taxing CDM targets or voluntary 'pledges' by developing proceeds. Any interruption of the process could countries. The agreements call for increasing undermine the carbon market and the transparency of mitigation efforts through MRV adaptation fund, both of them relevant for of supported NAMAs in what is now termed climate financing in developing countries. The International Consultation and Analysis (ICA), continuity of commitments beyond 2012 is raising issues of whether this should be countrysupported by most developing countries, while a driven or require outside experts. The sequence, number (including Pakistan) support the scope and required outputs for ICA are under possible inclusion of nuclear energy for carbon active negotiations. Developing countries credit generation under the CDM. demand that this analysis is facilitative rather than comparative, while developed countries Land use, land-use change and forestry want them to be more stringent and mirror the (LULUCF): Discussions on this issue focus on requirements laid out for their International closing loopholes in this sector that could Assessment and Review. undermine the environmental integrity of developed country targets. Particular issues It is clear that the Cancun Agreements injected include a proposed cap on forest management new jargon into an already complex debate. and harvested wood products for use within the Many developing countries fear that debate carbon markets under the Kyoto regime. could become embroiled in unraveling 'buzzwords', distracting from the central Issues for the Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA) principles of 'common but differentiated responsibilities' and 'historical responsibility'. This group was formed in Bali in 2007 (COP/MOP3) to focus on long term cooperation between Annex-1 and Finance: This is probably the most central issue, Non-Annex1 countries, particularly on mitigation, driving consensus on the others, as was clear in adaptation, finance, technology transfer, capacity Cancun. The promise by developed countries to building and a shared vision for future cooperation. deliver fast track finance of $30 billion (2010- Significant progress has been made on a range of issues: 2012) and long-term finance of $100 billion per year by 2020 was the clincher at Cancun. The Mitigation by developed and developing implementation architecture initiated at Cancun countries / NAMAs: The primary challenge is to including the Green Climate Fund (GCF), the raise the ambition of developed country pledges Technology Executive Committee (TEC) and the and get leading developing economies to share older Adaptation Fund all hinge upon availability the burden. While developed countries' of finance that is credible, additional and mitigation actions driven by emissions sustainable. commitments are dealt with under AWG-KP, associated issues are discussed under this track There has been significant progress through the including MRV and the creation of a common transitional committee on finance, which was international accounting framework. For Annex-1 tasked with streamlining the architecture and countries this includes discussions on operationalising the GCF by Durban: an objective International Assessment and Review (IAR) of that seems within reach. The creation of a commitments and comparability of effort, Standing Committee is also under discussion, biennial reports and their role as an early warning with the Pakistan proposal on the table and system and, most importantly, raising the level of options on its roles and functions generating ambition all of which emerged from the Cancun diverse views. The developing countries see the Agreements. Committee as an overarching body that oversees the GCF, reports directly to the COP and conducts For developing countries, this is the main track to MRV of support, while the developed countries consider mitigation actions through NAMAs. see a more diluted advisory role, with the NAMAs aim to report developing country Committee reporting to the Subsidiary Body on 3

4 Implementation (SBI). discussion, linked to the issue of dividing available global financing between mitigation and The key issue remains the source and scale of adaptation, with developing countries preferring long-term finance to enable implementation for a focus on the latter. Also, the creation of a developing countries. With controversy around Climate Change Vulnerability Index of countries the promised fast track finance due to perceived remains a contentious issue, as the definition of recycling of old ODA funds, this long term finance highly vulnerable countries was opened up at faces two challenges Cancun after a heated debate, but awaits a final negotiated agreement. The sources, with developing countries favouring the more predictable and equitable route of Technology Transfer and Capacity Building: The public finance and scale-up of budgetary two elements of the Technology Mechanism, finances, while developed countries favor namely the Technology Executive Committee 'innovative' funding sources that put the onus on (TEC) and the Climate Technology Centre and the profit-driven private sector and fund Network (CTCN) were agreed for implementation generation through indirect global taxation such at Cancun. The TEC was operationalized with a as aviation carbon tax. meeting in 2011, but other issues remain pending such as its linkages with the Climate Technology the obvious financing gap between the end of the Centre and Network (CTCN) especially whether it fast track financing period in 2012 and the start of govern it directly (the view of most developing long-term financing in The key question is: countries), selection of a host country for CTCN what happens in the meantime? Some suggest and the scale and options for its financing. There scaling up by at least $10 billion per year till is also debate on whether the TEC reports to the Subsequently, the concept of MRV of financing SBI or directly to the COP, with developing and support, and maintaining a Registry of such countries favoring the latter. financial support, are also on the table and mired in contentious negotiations. The most contentious issue of Intellectual Property Rights (IPR) for the transfer of innovative Undoubtedly, the issue of finance underpins and appropriate technologies remains progress on all other issues and is the one that can unresolved, with extremely divergent views make or break negotiations among countries. Developing countries, striving for low carbon growth, demand open access to REDD+: REDD+ received a boost with a specific new technologies and relaxation of the IPR mention in the Cancun Agreements. However, barrier, while developed countries want a the key pending issue remains financing for the stringent IPR regime to support private REDD+ implementation phase (phase 3). Various innovation. The issue remains on the table with options are tabled for Durban, including a specific various submissions and options for possible window under the GCF. convergence, mostly linked to a similar debate under the World Trade Organization regime. The Adaptation: This is key for most developing development of enabling capacity in developing countries that are at the wrong end of climate countries is also under discussion, with the vulnerability. Pending issues include availability of future finance remaining a common operationalizing the Adaptation Committee by thread. determining its composition, functional mandate, working procedures and links to other Shared Vision and the Review : The discussions existing institutions. The main negotiations focus on the future shared vision that drives the climate remains its placement. Developing countries talks remains inconclusive. The two key issues want a fully-empowered committee with an from Cancun were the long-term global goal and oversight role that reports directly to COP, while the peak year, with most developing countries developed countries want a diluted role and asking for equity to be considered alongside a would prefer it reports to the SBI. clear definition of the goals and the need for different peaking years. The further financing of the Adaptation Fund (with uncertainty over future CDM proceeds), Finding a way to ensure that commitments and and its placing within the GCF, are also under actions by countries keep the temperature 4

5 increase below the 2ºC target is a basic Building Coordinating Body to design a requirement of the climate regime and a major dedicated 'fast start' capacity-building challenge to negotiations. In Cancun, programme. governments agreed to review the adequacy of Agreed modalities and composition for the the 2ºC target, on the basis of the best available Adaptation Committee to make it operational in science. This Review, expected between 2013 and , is to be carried out in the light of the Outlining a robust MRV framework, including ultimate objective of the Convention, and overall guidelines and timetables for biennial reports, progress towards achieving it. Verification of and procedures for IAR for developed countries progress is then expected to lead to appropriate and International Consultation and Analysis (ICA) action. In Durban, governments need to decide for developing countries. on the principles, scope, the modalities and the Adopting guidance on monitoring and way forward for the Review. Very divergent implementation of REDD+ safeguards, and a perspectives remain, with the only point of comprehensive safeguard system for the Green convergence being the need for this whole Climate Fund. process to be driven by countries. Agreeing the rules for a registry that links developing country mitigation action with Legal options for the future: There is necessary support, and records developing simultaneous discussion under the two tracks of country mitigation actions without support. AWG-LCA and AWG-KP on the issue of legal Ensuring adequate, predictable and sustainable options or a new legally binding agreement. This finance for REDD+. remains extremely contentious. Securing a mandate to negotiate a legallybinding instrument while extending the Kyoto The menu of legal options under discussion for a commitment period to finalize and preserve the Durban outcome include a legally binding only legally binding instrument with emission instrument (LBI); a mandate to conclude an LBI reduction targets and timetables. with a clear roadmap; a declaration on the future instrument that leaves the legal form open; The stakes for Pakistan continuing discussions to identify the appropriate Pakistan faces the impacts of climate change without form of the different elements of the agreed having contributed to its causes. While it addresses these outcome; affirming the importance of an LBI; and impact makes its case for global support, it must tap into continuing to address all of the Bali Action Plan the evolving climate finance architecture to support a pillars. Given the inflexible posturing, the future development that is carbon friendly and climate expectation is for a time-bound mandate to agree resilient. on an LBI. Expected outcomes Climate change negotiations are at a critical stage and could lose traction if the second commitment period fails to materialize which seems likely given current positions. The negotiating groups could also experience considerable strain, as in Cancun, with more vulnerable countries succumbing to short-term financial offers to give up long-term collective positions. Likely outcomes are as follows: Completion of the design process of the Green Climate Fund and its operationalization. Agreement on the functions of the Standing Committee. Establishing a time-bound exercise to agree the structure, functions, components, locations and workplan for the Climate Technology Centre and Network. Establishing an adequately-resourced Capacity Pakistan needs to establish its high climate vulnerability while garnering tangible financial benefits for its own climate mitigation actions. Access to new climate finance will depend upon the availability of assimilative capacity in developing countries like Pakistan. The country needs to prepare by creating a specialized National Climate Fund to develop projects and national entities to secure and channel climate finance. This model has been applied successfully in Indonesia and Bangladesh and will allow Pakistan to focus its domestic efforts, demonstrate its national commitment to tackling climate change and, most importantly, attract matched financing from climate donors and specialized funds. Global climate negotiations are painfully slow to deliver much-needed finance, but remain the only option for vulnerable countries like Pakistan. 5

6 REFERENCES Aslam, Malik Amin, Climate Politics at a crossroads views on building a consensus Published in "Climate Policy Journal", (2007) Volume 7, Elsevier Science, United Kingdom. Aslam, Malik Amin, The AGF : A flawed prescription Published by LEAD Pakistan (2010), Islamabad, Pakistan Aslam, Malik Amin, National Economic and Environmental Development Study (NEEDS) To be published by UNFCCC secretariat (2011), Bonn, Germany Aslam, Malik Amin, The Cancun conundrum, NEWS Daily ( ), Islamabad -Pakistan Aslam, Malik Amin, The Cancun Outcome, NEWS Daily ( ), Islamabad-Pakistan Earth Negotiations Bulletin, Summary of Panama Climate Change Talks, IISD publication (2011), USA Groenewald, Yolandi, COP17-Deal or no deal?, Mail and Guardian online, UK. Climate Action Network, Durban Expectations, September 2011, CAN publication. Mutaba, Hussain and Mirza Salman Beg, Reports on intercessional meetings at Bonn and Panama, October 2011, Islamabad-Pakistan About the Project This policy brief was originally produced as one of a project series to support the Government of Pakistan delegation to COP17 in Durban, South Africa, in November The purpose of the briefs was to provide up-to-date information about key negotiation topics in the run-up to the negotiations. Further progress was made at Durban however these policy briefs may still be useful as background information and context for the current position. The project was funded by the Climate & Development Knowledge Network (CDKN). CDKN aims to help decision-makers in developing countries design and deliver climate compatible development. They do this by providing demand-led research and technical assistance, and channelling the best available knowledge on climate change and development to support policy processes at the country level. e: enquiries@cdkn.org t:+44 (0) This document is produced at the request of the Government of Pakistan as a specific output of a project to support capacity-building for negotiators in Pakistan. This project is funded by the Climate & Development Knowledge Network (CDKN). CDKN is funded by the UK Department for International Development (DFID) for the benefit of developing countries. The views expressed and information contained in this document are not necessarily those of or endorsed by CDKN or DFID, which can accept no responsibility for such views or information or for any reliance placed on them. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, the Climate and Development Knowledge Network's members, the UK Department for International Development (DFID), their advisors and the authors and distributors of this publication do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. Copyright 2012, Climate and Development Knowledge Network. All rights reserved.

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