Bridges Trade BioRes Review • Volume 4 • Number 4 • November 2010

Cancun: Will COP16 live up to low expectations?

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Nearly a year ago, when the 193 members of the UN Climate Convention pasted the politically charged Copenhagen Accord into the final decisions of their annual conference, many said the agreement would never hold. Others, however, held that the political will building up to the Copenhagen meeting could carry through 2010 and yield greater results in Cancun. Yet on the eve of the 2010 Conference of the Parties, expectations are low. Many key countries as well as the UNFCCC Executive Secretary, Christiana Figueres, have clearly stated that a comprehensive deal including emissions reductions is out of the question at this year’s meeting. Instead, the best case scenario is a small package agreement that would cover climate governance and agriculture and that would include early planning on new institutional mechanisms, as well as partial delivery of promised funds. Such an accord, observers say, could keep spirits, relatively, high.

The global landscape has changed much over the past 12 months. As the financial crisis continues to undermine economic stability and employment rates around the world, voters – particularly in rich countries – have other priorities for how politicians should be engaging on the international stage. Addressing climate change is no longer a critical concern; in some cases, it is increasingly considered a threat to national interests. The most obvious example of this is in the United States, where Republican gains in November’s mid-term elections essentially hamstrung the Obama administration on climate policy. The once palpable expectations that the US would tackle climate change at home and take on a highly demanded leadership at the UNFCCC talks have given way to disappointment.

The role of the global economy in hindering the progress of global climate talks cannot be understated. Fiscal belt tightening around the world has led to protectionist sentiments in many countries. While politicians on the international stage spin diplomatic niceties about committing to global cooperation, the same politicians often change their tune when addressing national audiences, especially in the private sector. Energy and carbon-intensive industries are pressuring their legislators to ease off the climate protection crusade, worried that the additional costs required for lowering emissions will further cripple their bottom lines. Some industries in the US and Europe have gone so far as to finance expensive campaigns to undermine climate change credibility, while others have threatened to pack up and move their businesses elsewhere.

Because most countries keep a close eye on the US when formulating their own climate policies, the failure of the US climate bill marked a key turning point in the talks at the UNFCCC. Indeed, the collapse of that legislation erased all reasonable likelihood that a deal would be reached in Cancun. Although the Obama administration and congressional cohorts worked throughout 2010 to pass a robust energy and climate bill – complete with a cap-and-trade scheme – fears in certain sectors over the loss of global competitiveness effectively extinguished those efforts. Even the inclusion of border carbon adjustment measures such as protective tariffs was not enough to save the bill.

All eyes on the US and China

Turbulent US-China relations have greatly influenced the pace of negotiations over 2010, and the continued acrimony has been cited by many experts as the most difficult issue facing the talks in Cancun and beyond. The interdependent trading partners are the world’s top emitters of greenhouse gasses (GHGs). And while the US continues to quake under the pressure of economic contractions and China digs in its heels to keep it from slipping, neither appears prepared to make major concessions on an agreement that will have high long-term costs for some of their most competitive economic sectors.

For a global climate change pact to be effective, it is crucial to get buy-in and active participation from the world’s top two GHG emitters. However, the two countries continue to be at odds over the very basics of how to proceed. Beijing continues to favour an approach that includes clear emissions reduction targets for developed countries, while it enables financial and technological support to developing countries for their voluntary actions. Washington, however, argues that a new agreement should include measurable, reportable and verifiable emissions cuts for developing countries and that the overall agreement should simply support a “bottom up” national policy approach. China demands a second phase of the Kyoto Protocol that binds only developed countries to reductions. Whereas the US – which is not a party to the Protocol – thinks it should be scrapped in favour of an agreement that reflects new global realities.

Bridging the chasm of binding commitments will be difficult. Even discussions over the provision of financial support to developing countries to help with climate change adaptation, which appeared to be one area of possible movement in Cancun, were marred recently when China announced they would not accept any financing agreement that had binding strings attached. Any financing package, they argued, should be completely free of obligations.

Spectre of Climategate lingers

Turbulence is nothing new to the climate negotiations. The low expectations heading into Cancun will likely soften the blow if agreement falters on one issue or another. In contrast to the shockwaves that rocked the climate community when “Climategate” made headlines around the world only weeks before last year’s Copenhagen COP got underway, the lead-up to Cancun has been relatively tranquil.

Last November, the science of climate change came under fire when climate sceptics leaked the contents of more than 1,000 stolen emails between IPCC scientists. Critics argued that the emails proved climate scientists had intentionally exaggerated climate change, but three independent enquiries have since dismissed the accusations. Still, the incident managed to shake the Copenhagen talks and monopolised much of the media attention during that time. Since then, climate scepticism and general indifference to climate change has been on the rise in the US and in Europe.

With less political and public pressure and low expectations for solutions this year, the Mexican beach resort summit might actually be poised to yield a number of lesser but important results. At a mini-ministerial meeting to discuss preparations for the Cancun meeting, Margaret Mukahanana-Sangarwe, chair of the Ad Hoc Working Group on Long-term Cooperative Action (AWG-LCA) highlighted a number of issues that are ripe for agreement and others that require more negotiation but that could be resolved in Cancun. Three issues stand out as most ready for decision: REDD+, agriculture, and technology. The rapid advance in and outside the UNFCCC on the issue of Reduced Emissions from Deforestation and Forest Degradation (REDD) – the forest protection mechanism that absorbs CO2 into the world’s jungles and native forests – makes it an easy win for Cancun and an obvious area to begin moving on a global level while more difficult issues and sectors gain clarity. In addition, concise text that establishes a formal process to address the agricultural sector has been ready since June.

Difficult issues

Among the more difficult issues that will likely undergo intensive negotiation in Cancun are financing, adverse effects of response measures, mitigation, and the shared vision. Despite China’s grumblings on the conditions of a financing package, the final decision will likely include enthusiastic declarations on new funding and possibly even first steps towards a new fund or finance coordination mechanism. Many of the details of such an institution are on the table, but this issue is tightly entangled with the more contentious mitigation issues. On mitigation, there are two fault lines: first the question of how to increase and manage developed country mitigation commitments across the LCA and KP decisions. The second is how to handle the level and nature of developing country mitigation actions, as it relates to the financing and technology support they will receive for these actions.

The proposal for establishing a “registry” has been under discussion for a while, and is also linked to the contentious question of how to monitor, report and verify developing country actions. Finally, the question of “response measures” considers the social and economic impacts that climate action taken at the national level have on other countries. In this regard, the trade issue of border carbon adjustments is centre stage, with developing countries pushing language in the agreement that would prohibit such unilateral measures that could have an impact on international trade. While this language will certainly find no resolve in Cancun, there is the chance that countries might establish a more collaborative, dispute prevention approach by setting up a consultative body or process that assesses response measures and their impacts.

The issues that are impossible to resolve in Cancun are mitigation, a global cut within the shared vision, how to address the interplay with international trade, market-based mechanisms such as a global emissions trading scheme, long-term financing, and many details on technology transfer and development, such as intellectual property rights and technology pools.

Despite the handful of early-harvest options, countries may be willing to walk away empty handed if they find that the Cancun package is not balanced in the interests it servers or in its treatment of the Kyoto Protocol issue – basically this means advancing on the Kyoto track. The Chair will be pushing for a single decision that captures all the agreed pieces. Although this may prove overly optimistic, keeping all issues in one document will help to reflect balance, if it is achieved, and provide a clear picture of what remains to advance over the coming year.

In this issue…

Probably more than any other issue, border carbon adjustment (BCA) measures stand at the crossroads of the trade and climate change worlds. Put simply, BCA’s are meant to help prevent “leakage” and help protect competitiveness in countries that have implemented emissions reduction schemes. In the article “Practical aspects of border carbon adjustments: Assessing costs from a trade facilitation perspective,” Sofia Persson, an analyst at the National Board of Trade in Sweden, sheds light on the costs that a BCA could bring to the private and public sectors in both exporting and importing countries. Persson’s article approaches the issue from a trade facilitation perspective and suggests that countries should look closely at the multiple layers of complexity associated with BCAs before implementing them.

The aforementioned expectations for progress on financing include the possibility of striking a deal to effectively manage emissions from bunker fuels – highly polluting fuel used in shipping and aviation. The High-Level Advisory Group on Climate Change Financing (AGF) has floated the idea of charging the transportation industry for their carbon emissions to raise revenue for climate financing. The AGF’s proposal, however, has been met with opposition by some developing countries that oppose the fact that the plan has no exemption for developing countries. Joachim Monkelbaan explores the issue and provides analysis on what to expect from negotiations at COP 16.

The enhanced Reducing Emissions from Deforestation and Forest Degradation (REDD+) initiative – which adds conservation, sustainable management of forests, and enhancement of forest carbon stocks to their efforts to create financial value for the carbon stored in forests – is poised to make progress in Cancun. While REDD has already been explored at length elsewhere, Gregory Hudson examines the issue from a trade perspective.

While large-scale biofuel production and trade have been hotly debated over the last few years, many of the potential small-scale solutions in this area have been largely overlooked. Henrique Pacini, Dilip Khatiwada, and Thomas Lönnqvist explore some of these small-scale solutions - such as biogas produced locally from waste and residues - noting that they often are better suited to local conditions in developing countries. They then discuss linkages between small-scale biofuel and international trade.

Developing countries derive important nutrition from their fisheries, which help ensure food security and often provide important export revenues. Global fisheries, already hard hit by overexploitation, face additional threats from climate change. Graeme MacFadeyn has looked at how fisheries are being affected by climate change; he proposes pre-emptive and adaptive strategies that countries can take to secure their food supplies as well as the benefits associated with continued exports and trade in this area. He provides pointers on potential funding for such strategies, including through Aid for Trade.

We hope you enjoy this special issue of the BioRes Review.