Markets 2.0 under UNFCCC

Transcription

1 Markets 2.0 under UNFCCC Clima East, October 30 th 2013 International Climate Negotiations Workshop Vilnius Andrei Marcu Senior Advisor CEPS

2 Market Decisions on Warsaw SBI Review of CDM M&P Review of JI CDM appeals Process SBSTA Framework for Various Approaches New Market Mechanisms Non market Mechanisms

3 Review of CDM M&P 3/CMP.1 Review of CDM M&P at ninth CMP session CMP requested SBI to carry out review at 39 th session Requested CDM EB and stakeholders to provide input to the process A workshop was also organized prior to SB 38 Consider the output of the High Level Panel on CDM Policy Dialogue

4 Review of CDM M&P Topics considered Executive Board Accreditation of DOE Participation requirements Validation and registration MRV Methodologies Other matters

5 Review of CDM M&P Conclusion: A wish list to satisfy everyone Reality CDM market currently slowing down and no demand No reason to issue or put new projects through unless from LDC Some solutions are being sought out to salvage the CDM

6 Joint Implementation (JI) Two SBI agenda items related to JI: Review of the JI guidelines (7b) Expedited issuance of ERUs (7c)

7 Review of the JI guidelines Based on the proposal from JISC made in 2012 Key attributes for JI decided in Doha: Single track Aligned or unified accreditation process with CDM Clear information on projects to be provided by Parties, stakeholders, and accredited entities in English Appeals procedure Clear additionality requirements Mandatory requirements for host Parties on approval of baselines and MRV No progress made so far review at COP 19 challenging

8 Expedited issuance of ERUs Status quo means no issuance till 2016 for ER occuring in CP2 Various proposals made so far: Use of CP1 AAUs credit now, deduct later New JISC proposal: advanced issuance of CP2 AAUs capped at an amount equivalent to [1] per cent of a Party s assigned amount established for the first commitment period for the purpose of the ERU issuance. To be accounted for when the CP2 AAUs are issued.

9 Lessons learned To review CDM & JI we need to think of lessons learned KP mechanisms infrastructure was valuable Lack of synchronization between regulators Process politicization Clarity of objectives Competition and leakage System stability What B+C good for?

10 What are issues of the future Make the machinery more efficient Make the machinery to produce goods for which there is a market and demand

11 Assumptions Do we believe that: There will be an international CC agreement? There will be compliance obligations? Obligation for all to contribute? That the regulator that sets constraints also determines what is used to show compliance through: inventories the units used and their characteristics

12 Current situation There is an international agreement : KP There is an underlying Int l Compliance Unit (ICU): AAUs Linking efforts Within the the int l agreement: Australia/EU (tbc). All transfers of domestic units is backed by AAUs/ICU Outside the int l agreement: Quebec/California. Bilateral recognition

13 Source: Presentation by UNFCCC Secretariat

14 Future world International market mechanisms and units CDM, JI, NMM Many (numbers and types) of domestic mechanisms & units No UN backed ICU (AAUs) Two scenarios Linking for UN compliance Linking markets outside an international agreement

15 Future world Heterogeneity Many systems Many units Competition among market players for mitigation opportunities Competition between different approaches/protocols to implement those mitigation opportunities

16 New Market Mechanisms Durban Decision Defines a new market-based mechanism, operating under the guidance and authority of the Conference of the Parties, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries, which is guided by decision 1/CP.16, paragraph 80, and which, subject to conditions to be elaborated, may assist developed countries to meet part of their mitigation targets or commitments under the Convention;

17 New Market Mechanisms Doha Decision Requests the Subsidiary Body for Scientific and Technological Advice to conduct a work programme to elaborate modalities and procedures for the mechanism defined in decision 2/CP.17, paragraph 83, drawing on the work of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention on this matter, including the relevant workshop reports and technical paper, and experience of existing mechanisms, with a view to recommending a draft decision to the Conference of the Parties for adoption at its nineteenth session; Also requests that the work programme consider possible elements of the mechanism referred to in paragraph 50 above, for example the following:

18 Framework for Various Approaches Durban Decision Acknowledging the role of various approaches, including opportunities for using markets, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries, Noting that Parties may, individually or jointly, develop and implement such approaches in accordance with their national circumstances, Emphasizes that various approaches, including opportunities for using markets, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries, must meet standards that deliver real, permanent, additional and verified mitigation outcomes, avoid double countingof effort, and achieve a net decrease and/or avoidance of greenhouse gas emissions;

19 Framework for Various Approaches Doha Decision Considers that any such framework will be developed under the authority and guidance of the Conference of the Parties; Decides that the work programme (a) The purposes of the framework; (b) The scope of approaches to be included under the framework; (c) A set of criteria and procedures to ensure the environmental integrity of approaches in accordance with decision 2/CP.17, paragraph 79; (d) Technical specifications to avoid double counting through the accurate and consistent recording and tracking of mitigation outcomes; (e) The institutional arrangements for the framework;

20 Framework for Various Approaches Why do we need an FVA? What services does it provide? What are NMM? Does anyone need them? What service do they provide Depends assumptions are important

21 New Market Mechanisms Different definitions Market mechanisms designed/operated/recognized at the UNFCCC level Cover broad sectors of the economy, but does bot exclude project based (why is that needed?) There is some flexibility in implementation at the national level

22 New Market Mechanisms Different definitions Seen as sectoral in nature Sectoral trading: ex-ante issuance Sectoral crediting: ex-post issuance Actually.. anything goes now difficult to find commonality in M&P Challenges Private sector participation Capacity for implementation Political will why use UNFCCC mechanisms when I can define my own?

23 FVA what are the issues discussed? Purposes of the FVA Scope of FVA Criteria for environmental integrity Double counting Tracking Institutional arrangements for the FVA

24 FVA: Purpose & Scope Set of rules vs. minimum criteria and review vs. platform for sharing information Units vs. outcomes Only UNFCCC units vs. nationally defined units Only mitigation or also adaptation

25 FVA: Double counting & tracking Double counting for issuance Double counting for use Double counting for finance Tracking of units each transaction or netting?

26 FVA: Governance CDM EB - like body, supported by UNFCCC infrastructure Reformed CDM EB Polycentric system at various levels Create an interim body group of expert

27 Future world Int l Compliance Questions How does the international regulator ensure that the mitigation value of domestic units used for international compliance in a country other than were they were issued is what the issuer says it is? How do we ensure no double counting at issuance? How do we ensure no double counting at compliance? What is needed for transfer and tracking and who does it?

28 Future world Int l Compliance Questions How does the international regulator ensure that the mitigation value of domestic units used for international compliance in a country other than were they were issued is what the issuer says it is? How do we ensure no double counting at issuance? How do we ensure no double counting at compliance? What is needed for transfer and tracking and who does it?

29 FVA The FVA is a set of components and rules that will ensure that all approaches used for mitigation will be integrated, and receive recognition for UNFCCC compliance. Through the FVA, units created by a Domestic Market Mechanism in a jurisdiction will qualify/accede, under a protocol TBD, to be used for compliance with UNFCCC obligations, by a jurisdiction other than the one under which they were created. The FVA is not concerned with activities that are purely of a domestic nature and do not result in international transfers of units in one way or another.

30 FVA & NMM Assumption: A global agreement & UNFCCC compliance FVA CDM/JI SCM STM BOCM Australia ETS NMA- Yasuni NMM REDD REDD VCS

31 FVA & NMM Assumption: A global agreement & UNFCCC compliance FVA CDM/JI SCM STM BOCM Australia ETS NMA- Yasuni REDD VCS REDD NMM

32 Why do we need an FVA? If there is an int l CC agreement Unlikely that Party would allow the use of foreign units for domestic compliance if they cannot be passed through for int l compliance There is no information on the international mitigation value of a domestic unit Int l issuance and transfer made the KP market possible These are barriers for linking markets in the scenario of an international compliance regime

33 What will the FVA do? Allow domestically produced units to become good for UNFCCC compliance by Using a protocol to be determined That uses core units characteristics With a fixed mitigation value Binary At an exchange rate set by the regulator Allow domestic systems to link if they are created to help meet international obligations Provide information for UNFCCC compliance accounting (i.e., avoid double counting)

34 DMM Developed by Party A NMM? MRB T0 T1 T2 Approval Facilitation International DMM Party A Checks DMM Issues ICU Checks instructions from Party B regarding filtering Checks T1 / T2 DMM UNIT ITL ICU Issues DMM Units Issues request for issuance of ICUs Issues request for transfer to Party B National Register PARTY B 10/31/20 13 Centre for European Policy Studies (CEPS) Place du Congrès 1, 1000 Brussels, Belgium 34

35 FVA Governance Global level Local level (regional, national, sub national) Global Level Define Core Characteristics of Units Mitigation Units Accession Protocol (to FVA) Transparency or Approval Initial check of Domestic Units Periodical audit of Domestic Units

36 FVA Governance Global level Market Regulatory Board Compliance Body Transfer units internationally Tracking units internationally Avoid double counting at usage? Set environmental value for domestic units used internationally set Environmental exchange rate? Issuance of International Compliance Units

37 FVA Governance Local Level Avoid double counting at issuance. Issuance of units from Domestic Mechanisms Develop & operate Domestic Mechanisms

38 State of discussion for Warsaw Warsaw as a platform for Mechanisms 2.0 Challenge to undergo CDM and JI review due to time constraints Need to provide a clear mandate and process to allow for two tracks Items that will make the mechanisms more efficient Find a long term solution for CDM & JI in the new world Consider one B+C mechanism under the Convention the B+C mechanism of NMM

39 State of discussion for Warsaw B+C mechanisms with characteristics appropriate for the type of commitments taken Economy wide caps Sectoral caps Domestic offsets

40 What about Warsaw? - Define the FVA (in English create it) - Set up Transparency phase - Receive information from Parties - Provide Expert Group made from Parties and Stakeholders to - What are the ToR of the Expert Group?

41 Andrei Marcu