Issue #2 SB - 13 | 09 - 15 September | Lyon, France.

Wednesday 13 September 2000

Title: The cost of, and potential for, reducing carbon emissions in the European Union and US - implications for domestic policy and international negotiations
Sponsors: International Project for Sustainable Energy Paths (IPSEP) and the European Business Council for Sustainable Energy (e5)
Contact: Florentin Krause <ipsep@igc.org>
Internet: http://www.ipsep.org / http://www.e5.org

The United States can achieve most of its Kyoto Protocol commitments through domestic action, at a net economic benefit to the tune of $48 billion in 2010. That was one of the findings presented by Dr. Florentin Krause, IPSEP (photo right), during this special presentation of new economic research findings on how the European Union and the United States can cut carbon emissions while making money. The event was chaired by Paul Metz of e5.

Challenging the conventional wisdom that climate change economics must be addressed from a burden sharing perspective, Krause demonstrated how the US and EU could shift to a benefit sharing approach through investment-led productivity growth, using: domestic transformation reforms that reduce transaction costs and other market barriers; domestic fiscal reforms to tackle the deadweight losses arising from taxes and subsidies; and international emissions trading. He explained that the economic benefits would include total factor productivity gains from energy efficiency investment, policy-induced reductions in technology costs, and lower pre-tax fossil fuel prices. Summarizing his research findings, Krause said the US could achieve 63% of its Kyoto commitments through domestic action by 2010 at a net economic benefit of $48 billion, and 90% of its commitments by 2020 at a net benefit of $108 billion. He said the EU could go even further, achieving benefits equivalent to 2% of the EU's GDP.

Describing the flexibility mechanisms as over-rated, he found that a least cost approach could reduce the significance of global trading by a factor of ten. Concluding, he described how developing countries also have a stake in domestic OECD no regrets action.

Rob Bradley, Climate Network Europe, wondered why the European Union had not taken up the kind of approach outlined by Krause, such as tackling subsidies for fossil fuel and shifting the burden of taxation away from labour and onto sources of pollution. He accused the European Commission of pursuing an ambiguous approach.

Discussion: The European Commission panelist, Peter Zapfel, told a Greenpeace representative that he believed it was possible to address climate change without the construction of 80 new nuclear power plants in Europe.

More information: The IPSEP study, "Energy Policy in the Greenhouse" is available in PDF format at www.ipsep.org

Related links: Climate Network Europe: www.climnet.org

Title: Experiences and methodologies of technology transfer programmes Sponsors: International Energy Agency (IEA), Climate Technology Initiative (CTI)
Contact: Debra Justus <debra.justus@iea.org>
Internet: http://www.climatetech.net

Abraham Haspel (photo right), CTI, explained that the Initiative aims to foster international cooperation for accelerated development and diffusion of climate-friendly technologies and practices. Developing countries and transitional economies are invited to formulate a technology assessment exercise, or CTIP. The program's focus is on country-driven plans for action and implementation. Private sector involvement is deemed crucial, Haspel noted, and the host country may have to adapt its domestic regulatory framework to enable private sector investment.

Norbert Nziramasanga, on behalf of the Southern Africa Development Community (SADC), emphasized that his project experience shows that broad support from all stakeholders is required, and sometimes patience needs to be exercised.

David Hales, USAID, emphasized the United States' commitment to help developing countries reduce greenhouse emissions. He stressed that an enabling environment in the host country is needed, although donors should not dominate the process.

Speakers were in general agreement that projects need to be country-driven, private sector involvement is key, and cultural and language barriers may exist.

Discussion: A panel of experts noted that much valuable experience is currently being gathered, and that technology transfer is moving away from the traditional model and towards a new era of sharing technology and know-how, where there is no question of 'one-size fits all'.

Title: Business views on fast-tracking the CDM approval process
Sponsors: U.S. Business Council for Sustainable Energy (BCSE) & European Business Council for a Sustainable Energy Future (EBCSEF)
Contact: Lisa Jacobson <ljacobson@bcse.org>
Internet: U.S. Business Council for Sustainable Energy: http://www.bcse.org

Michael Marvin, BCSE, introduced the event on business views on fast-tracking the CDM approval. Panelists addressed the benefits of supporting the EU proposal for a positive list of eligible CDM projects.

Panel I: Benefits and leading proposals to fast-track the CDM:
John Palmisano, Palmisano & Associates, argued that the benefits of an early start for the CDM include generating information on costs, institutions, transactions, capacity building needs and unintended consequences. He advocated a learning-by doing approach that might help prompt ratification of the Protocol.

Lisa Jacobson, BCSE, outlined approaches to fast-tracking CDM project approval, such as the adoption of emissions performance benchmarks and thresholds for the size of projects, while excluding requirements such as additionality and baseline determination.

Jos Delbeke (photo right), European Commission, presented the European Union proposal for a positive CDM list designed to reduce uncertainties. The proposal would designate a list of safe, environmentally sound projects based on renewable energy sources, energy efficiency improvement and demand-side management approaches to energy and transport. Wytze van der Gaast, Joint Implementation Network, cautioned that the proposal could be time consuming.

Panel II: Developing country views and project case studies:
Dr. Coto, Fundacion Solar, recalled the lessons from aggregating electrification projects in Central America. He suggested that such projects, such as biogas generation, which may not be funded by the private sector, should be considered under the CDM. Dr. Ramana, Winrock International, India, highlighted the differences in scale between renewable energy projects and CDM requirements, stressing the importance of bundling projects to reduce transaction costs.

Panel III: Industry and environmental views:
Jorge Barrigh, Ballard Generation Systems, argued for clear terminology in the context of the CDM. Dr. Tod Delaney, First Environment, Inc., supported the EU proposal, arguing that it would enable strategic decision-making, shorten the project cycle time, and help developing countries' institutions to develop CDM policies. Liam Salter, World Wide Fund for Nature (WWF), stressed the importance of domestic action in order to prevent free riders from "hijacking" projects. On the inclusion of sinks under the CDM, the WWF stated that the risks far outweigh the benefits.

Related links: http://www.jiqweb.org ; http://www.winrock.org ; http://www.panda.org

Title: Quantifying Kyoto - Impact of the options in the draft negotiating texts
Sponsors: The Royal Institute of International Affairs (RIIA) with the World Bank, the Institute for Global Environmental Strategies (IGES) and the Royal National Institute of Public Health and the Environment (RIVM)
Contact: Christiaan Vrolijk <cvrolijk@riia.org>
Internet: www.riia.org

The sponsors of this event presented results from an expert workshop, Quantifying Kyoto, convened earlier this year to consider the different dimensions of flexibility in the Kyoto Protocol and to assess their likely combined impact. The presentations covered the likely 'demand' from OECD countries; the impact of various restrictions on use of the mechanisms; and the various sources of supply of credits.

Christiaan Vrolijk, RIIA (photo left), outlined the main aims and questions for participants. The results summarized in the table show that the overall impact remains highly uncertain. The first presenter, Michael Grubb, (photo above, seated right) showed wide-ranging results from economic models, and contrasted these against (mostly lower) projections in national communications to the FCCC. He concluded that a reasonable planning range, assuming a modest degree of domestic action within OECD countries, would be for demand in the region 300-700MtC/yr average during the commitment period. The second presenter, Erik Haites, FCCC (photo above, seated left), showed results illustrating that the most important influences on compliance costs for the OECD would be availability of pre-2008 credits on the CDM, restrictions on the mechanisms, restrictions on 'hot air' sales, and the strength of a compliance/liability regime. Transaction costs and charges on the mechanisms had much a lower impact.

Finally, Bert Metz, RIVM, (photo left, seated right) summarized the workshop discussions on supply, using the expert assessment from the earlier workshop as summarized in the table (right). The presenters noted that at the mid- and higher end of these ranges, the availability of credits might substantially exceed the demand from the OECD, leading to a very low 'price of carbon' and little incentive for domestic action in the OECD countries.

More information:

The full papers of the workshop will be available on: http://www.riia.org/Research/eep/quantifying.html

A brief summary will be published in the new journal, Climate Policy: http://www.climatepolicy.com

A RIIA briefing paper will be available at COP-6.

Title: Sinks in the Kyoto Protocol : carbon upset or carbon offsets? Lessons learned from plantation projects
Sponsors: Friends of the Earth International (FoEI), KIKO Forum, World Rainforest Movement (WRM), FERN
Contact: Yuri Onodera, Friends of the Earth (FoE) <yurio@iea.att.ne.jp>
Internet: http://www.foei.org

Introducing the concept of tree plantations in the South, Larry Lohmann, The Corner House, described plans to meet the Kyoto commitments by planting trees as a neocolonialist concept that will reinforce a system of inequalities. On carbon sink plantations, Jorn Stave, NorWatch, described projects in Tanzania and Uganda. He highlighted issues of permanence and leakage, and land tenure conflicts. Simone Lovera, (photo left) Friends of the Earth Paraguay, referred to a new FoEI, WRM and FERN report "Tree Trouble, A compilation of testimonies on the negative impact of large-scale, monoculture tree plantations prepared for COP-6 ". She stressed that a major concern about these schemes is the undermining of the original funding commitments to forestry initiatives agreed at UNCED in 1992. Sandy Gauntlett, the International Research Institute for Maori and Indigenous Education (IRI), spoke of the implications of plantations for indigenous cultures around the world. He stated that prior to tackling plantations and carbon sinks, NGOs and Indigenous People Organizations (IPOs) must address the issue of global inequity. Hendro Sangkoyo, Forum for Indigenous Peoples and Local Communities on Climate Change, presented a position paper stating that as peoples on the frontline of climate change impacts they have the right to participate in the FCCC. On LULUCF he stressed concerns about the profound implications of carbon sinks for land rights, and supported the creation of an Adaptation Fund. Ricardo Carrera, (photo below, seated right) in his concluding remarks, stated that sinks are not a "breathing space" but may lead to the establishment of millions of Eucalyptus plantations.

Discussion: On efforts to move towards more sustainable land management systems in the tropics, it was highlighted that governments are not regulating the proliferation of large monoculture plantations. It was suggested that a transparent CDM would need international socio-cultural standards.

More information:
World Rainforest Movement: http://www.wrm.org.uy/
FERN: http://www.greennet.org.uk/fern/

Title: Design options for the CDM governance structure
Sponsor: Centre for Clean Air Policy (CCAP)
Contact: Catherine Leining <cleining@ccap.org>
Internet: http://www.ccap.org

Ole Plougmann, (photo right, seated center), a delegate from Denmark, explained that CCAP and the Foundation for International Environmental Law and Development (FIELD) has sponsored the CDM Dialogue Group to encourage informal discussions between developing and developed countries.

The discussion outcomes were presented by Ned Helme, CCAP (photo above, seated far left). He stressed the importance of streamlining the governance process and the need for efficiency and cost effectiveness, while maintaining the environmental integrity of CERs. Participants agreed that the primary function of the COP/MOP should be the overall design of the CDM and developing CDM policy. However, he explained, less consensus exists on the depth of involvement of the Executive Board (EB), on whether the Operating Entity (OE) should be a private or government entity, and on the relation between the EB and OE.

Agus Sari, (photo above, seated right) a member of the Indonesian delegation, urged greater public involvement in the discussion on the CDM's governance. He also advocated a role for the public in an appeals procedure linked to project approval.

On deciding baseline methodologies, Jo Simons, (photo right) United Kingdom delegation, expressed a preference for an IPCC assessment of methodologies with final approval falling to the EB. She supported the formation of a panel of experts accountable to the EB.

United States delegate, Trigg Talley, noted that establishing baselines in the US was a major policy challenge, and, while supportive of IPCC's involvement, he emphasized that baselines remain a policy issue.

Discussion: Issues debated included lessons learned from the Montreal Protocol, agreeing a positive list of clean technologies, accreditation of the OE, and the prompt start of the CDM.

Title: Briefing: The International Emissions Trading Association (IETA) position paper for COP-6
Sponsors: The World Business Council for Sustainable Development (WBCSD) in collaboration with the International Emissions Trading Association (IETA)
Contact: Dave Moorcroft <moorcroft@wbcsd.ch>
Internet: http://www.wbcsd.org ; http://www.ieta.org

Introducing the IETA as a new organization aiming to contribute to the debate on the design and implementation of international rules and guidelines for emissions trading, Andrei Marcu highlighted core activities. These include information gathering and dissemination, capacity building in developing countries and EITs and facilitation of business partnerships.

Charlotte Grezo, BP, (photo above, seated right) utlined the Proposal for a Carbon Trading Scheme in the UK developed by the UK Emissions Trade Group. She highlighted the voluntary character of the scheme, in which companies will participate if incentives are available. The scheme aims to deliver post-Kyoto targets with minimum impact on competitiveness and to be compatible with the international ET rules.

Morten Prehn Sorensen, Danish Energy Agency, reported that the Folketing (parliament) approved Denmark's national ET scheme in 1999. The scheme will help Denmark achieve national targets to reduce emissions by 20%, compared to 1988 levels, by 2005. He noted that the system sets quotas for emissions reductions from the electric power sector.

Jos Cozijnsen, The Netherlands, (photo above, seated left) delivered a comparative study of ET systems in Europe. He noted that Denmark, UK, the Netherlands and Norway had developed plans while the EU had launched a discussion paper. Germany, Italy, Austria, and Belgium, are focusing on partial aspects of ET systems such as taxation and JI projects.