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Kyoto Dead; Long live Cancun?

Oslo, 7 April 2011: Thomson Reuters Point Carbon

The pre-sessional UNFCCC talks in Bangkok this week (April 3-8), which represent the first big meeting of parties since Cancun last December, confirm that the parties are working on the task of actually implementing the overarching precepts enshrined in the Cancun Agreements rather than on establishing a second commitment period under Kyoto, according to Thomson Reuters Point Carbon, the leading provider of market intelligence, news, analysis, forecasting and advisory services for the energy and environmental markets.

External factors also suggest agreement will not be reached on a second Kyoto commitment period come the Durban talks this December (COP17). According to Stig Schjølset, Senior Analyst at Point Carbon, “Given recent nuclear closures in Japan, it is now more unlikely than ever that Japan will sign up to a new commitment period under Kyoto. This move away from nuclear in favour of more polluting alternatives, reflected in other countries, may also mean that more ambitious reduction targets are less likely to be agreed in Durban, than was the case before the Tsunami struck”.

Given the direction in Bangkok, and global moves away from nuclear power, it seems unlikely that the Durban talks will result in legally-binding document. Instead, last year’s Agreement in Cancun, now widely hailed as the “conference of the parties (COP) that saved the UN process”, will form the basis of the post-2012 framework.

”International climate talks have been hobbled to a large extent by current domestic policies in the US which make it close to impossible to adopt a legally binding agreement on climate change after the Kyoto Protocol expires”, explains Schjølset, adding “however, even without a formal successor to Kyoto the international community can defer to the Cancun Agreement as a de facto post-2012 framework and the talks in Bangkok indicate that this is precisely the direction being taken.”

The Cancun Agreement implies reduction targets will remain non-binding, there will not be any compliance regime and not all market mechanisms will be strictly governed at UN level. The Clean Development Mechanism (CDM) will, however, continue to exist post-2012, though it will become more fragmented as new mechanisms will be less standardised and harmonised at UN level. Each country will, in the future, be more able to define which offsets can be used to achieve national reduction pledges, predicts Thomson Reuters Point Carbon. Although the CDM will continue post-2012 it could die a natural death if there is limited demand for Certified Emissions Reductions (CERs) outside Europe. Unless other regions also implement more ambitious climate policies that create demand for projects registered after 2012 investments in new projects might dry up over the next years.

Schjølset explains; “The international framework for the 2013-20 period will essentially resemble a pledge-and-review system, and enhanced monitoring, reporting and verification (MRV) in all countries will be a core element of this system. The MRV system will ensure transparency on emissions and reduction measures and this will to some extent facilitate international scrutiny of progress towards reduction pledges. However, it is still unclear what would happen if it is established that countries are falling behind on their targets, but we do not foresee a strong role for the UN in terms of forcing countries into compliance”.

Thomson Reuters Point Carbon sees potential inherent benefits to the defacto acceptance of the Cancun Agreement. Enhanced MRV would make it possible to track national and global emissions and assess trends over time, thereby helping countries – especially developing nations - identify the most appropriate mitigation policies. It also gives observers and NGOs the opportunity to “name and shame” countries for their reduction efforts (or lack of). In addition, the fact that reduction targets are subject to continuous and intense UN negotiations is probably contributing to at least some countries taking on more ambitious targets and policies than they otherwise would.

Schjølset concludes: “The future global climate change framework will to a large extent reflect the new world order that has emerged since the Kyoto Protocol was adopted in 1997. Advanced developing economies like China, India and Brazil have become dominant actors challenging the hegemony of industrialised nations economically and politically. The emerging economies are now playing key roles in designing the post-2012 framework and they will also shoulder a larger share of the responsibility for curbing global emissions in future”.

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