United Nations mechanisms

In 2011, the 17th session of the Conference of the Parties (COP 17) to the UNFCCC agreed that a new international climate change regime would be established by 2015 for implementation in 2020. This new instrument or arrangement would require Parties to enhance their mitigation efforts in the post-2020 period, beyond the second commitment period of the Kyoto Protocol. The intention is that Parties will be held to account on the basis of common but differentiated responsibilities under the one instrument, unlike the Kyoto Protocol that divides Parties into developed and developing nations, with and without legally-binding carbon constraints, respectively.

Negotiations on the new regime will intensify over the next few years, and will be very important for the future of global climate change mitigation efforts. In the meantime, the Kyoto Protocol remains the principal mechanism for giving effect to these efforts. The Kyoto Protocol provides the compliance arrangements by which Annex B Parties (essentially Annex I, mainly developed, countries that have ratified the Kyoto Protocol) can deliver on their negotiated emission reduction targets. The Kyoto Protocol establishes three fully fungible carbon markets called flexibility mechanisms or Kyoto markets. These include two project-based markets called Joint Implementation (JI) and the CDM, as well as a cap and trade system called International Emissions Trading (IET).

JI and CDM allow for developed countries to claim offset credits for emission reductions generated from their investment in projects in other countries – JI for projects in Annex B countries and CDM for projects in non-Annex B countries, which are mostly developing countries. These credits, referred to as emission reduction units (ERU) and certified emission reduction (CER) units respectively, can be used by Annex B emitters to acquit against their carbon liabilities and/or sell on in a number of existing and emerging carbon markets. IET allows developed countries to trade in their assigned amount units (AAUs) which are generated as a consequence of their legally binding emission reduction targets and which are ‘supplemental’ to meeting their own needs.

The negotiating landscape for CCS under the UNFCCC remains complex. There are five main mechanisms affecting the global deployment of CCS in the UNFCCC agenda. These are:

  • inclusion of project level CCS projects/abatement under the CDM;
  • adoption of a Technology Mechanism;
  • adoption of a Financial Mechanism;
  • registration of Nationally Appropriate Mitigation Actions (NAMAs); and
  • potential for New Market Based Mechanisms (NMBMs).

UNFCCC ARCHITECTURE

The UNFCCC is the principal international negotiating forum driving country-by-country action to prevent dangerous levels of climate change. It consists of the Convention itself, which is the parent treaty accountable to the COP, and the Kyoto Protocol, which is the subordinate legal instrument accountable to the Meeting of the Parties to the Kyoto Protocol (CMP).

Supporting the implementation of the Convention and the Kyoto Protocol are five subsidiary bodies, of which two are permanent (Subsidiary Bodies for Implementation, SBI; and Scientific and Technological Advice, SBSTA), and three are ad hoc working groups (the Long-term Cooperative Action under the Convention, AWG-LCA; Further Commitments for Annex I Parties under the Kyoto Protocol, AWG-KP; and the Durban Platform for Enhanced Action, ADP).

The AWG-LCA and ADP report and make recommendations to the COP; the AWG-KP reports and makes recommendations to the CMP; and the SBI and SBSTA report and make recommendations to either the COP or CMP depending on what they have been tasked to implement or advise on respectively (Figure 35).

FIGURE 35 UNFCCC organisation

CCS in the CDM

In 2010 at CMP 6, CCS was provisionally adopted into the CDM, providing that a limited number of issues were resolved. This initiated a year-long program throughout 2011 to enable the SBSTA to draft a suite of modalities and procedures (rules) which Parties negotiated in Durban. In 2011, CMP 7 conditionally adopted the rules that currently underpin the inclusion of CCS in the CDM The conditions included a requirement that CCS project participants quarantine 5 per cent of their CERs to effectively serve as insurance to remedy any unforeseen or adverse environmental and/or social effects of projects. This reserve is however conditionally refundable at the end of the project.

The CMP tasked the SBSTA to further examine two additional CCS in CDM-related issues during 2012. The first of these was the need to establish an additional permanent global reserve of CERs as an additional fiscal safety net for host countries of CCS projects, should something unlikely or untoward occur. The second was the transboundary movement of CO2 across borders, for projects that involve the CO2 being captured in a developing country and transported and permanently stored in a different country.

The UNFCCC Secretariat has managed two related submission processes throughout 2012 on these issues. At the 36th Session of SBSTA in May 2012, the Secretariat was tasked with the drafting of a technical report on transboundary issues for consideration by SBSTA at its 37th meeting, to be held in the margins of COP 18 at Doha in November/December 2012. The matter of the establishment of a general reserve looks unlikely to be resolved in 2012.

Despite these outstanding issues, there appears to be nothing of a procedural nature stopping CCS project proponents from now applying to have their project registered under the CDM.

In July 2012, the CDM Executive Board (EB) established a 10-member CCS Expert Working Group (CCS WG), supported by a CCS Expert Roster. The Chair and co-Chair of the newly established CCS WG (Brazil and Australia) will help steward the process of CCS-related methodological developments. Members of the CCS WG were announced at the 68th meeting of the CDM EB in July 2012. The process to establish a roster of CCS experts followed establishment of the CCS WG, and members will essentially be called upon to assist with desk reviews of proposed new methodologies prior to the CCS WG forwarding its advice to the CDM Secretariat for consideration and approval by the CDM EB.

The acceptance of CCS in the CDM potentially marks an exciting new era for the global deployment of CCS as a major mitigation option in developed and developing countries alike. It will not only help facilitate the establishment and refinement of the institutional arrangements necessary to support CCS projects, but also enhances community confidence in its application due to its international acceptability.

The CDM has clearly been successful in helping deploy many sorts of mitigation projects in developing countries, but it is unlikely that, given the depressed value of the CERs, the CDM alone can make marginally uneconomic CCS projects economic (let alone early-mover CCS projects in developing countries). While most CDM commentators would suggest that it may take some time for CCS projects to be fully rewarded under the CDM, the mechanism (and other project-based schemes such as Joint Implementation) is generally recognised as a necessary and important source of additional funding.

CCS in other UNFCCC mechanisms

CCS is currently being explicitly discussed in the AWG-LCA and SBSTA negotiations, and it remains of intrinsic relevance to the other negotiating tracks.

The AWG-LCA track is examining cooperative action beyond 2012. Under this track, both the Technology Mechanism, including the Climate Technology Centre and Network (CTCN), and the Financial Mechanism’s Green Climate Fund (GCF) are being negotiated. These initiatives are critically important to the future of CCS, as developing countries will depend on the CTCN to facilitate needs assessments and project-level activities, and the GCF is a major source of finance for such projects.

The Technology Mechanism needs to be operational by the end of 2012, and the implementation issues surrounding this mechanism are being managed through the Technology Excutive Committe and the SBI.

The Technology Mechanism will inevitably play a significant role in accelerating the demonstration and diffusion of low emission technologies such as CCS. The associated CTCN will help establish the enabling environments and capacity building needs required to overcome market (and human and institutional) barriers.

The Financial Mechanism already includes provision of an agreed ‘fast start’ finance for developing countries approaching US$30 billion up to 2012, and the establishment of a US$100 billion a year (by 2020) GCF administered initially by the World Bank to support adaptation and mitigation actions (projects, programs, policies, and other activities) in developing countries.

The AWG-LCA carries responsibility for the provision of funding resources for the GCF to support mitigation action and technology cooperation (especially for developing countries) by mobilising public and private-sector funding and investment. The GCF Board and the SBI is responsible for its implementation.

The GCF was launched at COP 17, and positively cites CCS as an example of a likely eligible technology. Six bids to host the GCF were received by the secretariat, including from Germany (Bonn), Mexico (Mexico City), Namibia (Windhoek), Poland (Warsaw), Korea (New Songdo City), and Switzerland (Geneva). At the time of writing, the GCF had just hosted its first board meeting, where these applications are to be considered, but the meeting had to be postponed three times due to procedural issues. It is expected the Board will forward to the COP a recommendation for a host at COP 18. The World Bank (GCF Interim Trustee) has been ready to receive contributions from Parties from as early as May 2012. While some Parties have formally expressed willingness to pay, at the present time no contributions have yet been received.

In regards to NAMAs, it was agreed at COP 16 that countries requiring international support in the form of technology, finance, or capacity building will be recorded in a registry where the action and the support for that action can be matched. It was also agreed that governments will continue to work towards establishing one or more new market-based mechanisms to enhance and promote the cost-effectiveness of mitigation actions. A key aspect of the NAMA agenda is the extent and possibility of linking them to NMBMs and existing crediting arrangements.

The AWG-LCA is also looking at the role and legitimacy of NMBMs and how they can facilitate real and enhanced mitigation action, as well as help transfer, develop, and deploy low-emission technologies such as CCS.

Negotiations affecting the Kyoto Protocol are managed under the AWG-KP track. CCS is explicitly cited in the Kyoto Protocol as being a legitimate mitigation technology. This negotiating track is relevant to CCS in that it:

  • currently defines the legally-binding short to medium-term emission constraints (over what is called commitment periods);
  • defines the scarcity of emissions within carbon markets (CDM, JI, and IET); and
  • drives the market discovery of carbon prices.