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Not enough domestically, nothing (yet) internationally

Power plant
(Photo: RWE)

April 2015 - In October 2014, the EU set out its climate change target to reduce emissions across its member states by 40 percent by 2030. When looked at internationally, this is quite a pledge. It  sparked hopes for the use of the Market Mechanisms on top of the domestic EU target. However, these hopes have not yet been fulfilled. The article summarizes the decisions and its implications for the UNFCCC negotiations.

In October 2014, the EU set out its climate change target to reduce emissions across its member states by 40 percent by 2030. When looked at internationally, this is quite a pledge and one that other countries should ideally be able to match. The two words that were placed before the target, namely “at least”, sparked hopes for an even more ambitious aim – use of the Market Mechanisms on top of the EU target, which in itself is not enough in climate policy terms.

The EU Council of 6 March was unable to fulfil these hopes. The EU continues to take a reserved stance and in doing so forgoes the opportunity to send out a clear message for Paris and to encourage other countries to make more of an effort in climate change mitigation. Whether this is a clever negotiation tactic or whether the EU, with its 28 member states, is currently not in a position to resume its earlier leadership role will remain to be seen until ‘at least’ the climate change talks in Paris.

What the EU decision means

As regards the climate change conference in Paris, it would be wise not to overrate the EU’s most recent decision. There is still time to tighten up the target in the lead up to the Paris talks. The EU decision itself explicitly contains the option for increased ambition within the overall climate change talks. In the wording of its decision, the EU makes it clear that increased ambition through the use of international certificates is certainly an option.

Nonetheless, the question still arises, and not just within the EU, as to what has prevented the EU from putting a proposal forward in the negotiations to date. And why should EU policy interests allow for greater climate change mitigation in the near future?

When it comes to defining the term ’at least’, there are several options available in addition to the Market Mechanisms.

Where the Market Mechanisms need to be in time for the Paris talks

Use of the Market Mechanisms is not a foregone conclusion. Bearing in mind the EU reform goals with the Market Mechanisms, the EU has targets which have either yet to find consensus in the negotiations or for which no compromise has been reached. The key issues are the substantial reform of the CDM modalities and procedures and the development of a new market mechanism that allows up-scaling of emission reduction measures. Advancement in these issues, the possibility of an agreement and the necessary associated decisions being produced in Paris would make it far easier for the EU to generate new demand for international certificates.

Paris shopping list

Expectations must remain realistic. After many years of climate change debate and negotiation, Paris is unlikely to produce decisions on specific mechanisms. The new quality to be achieved with the mechanisms should be laid down both in the climate change agreement and in a parallel conference decision that sets out the issues, tasks and responsibilities for the post-Paris period. Looking back to the situation that surrounded the Marrakesh Accords, it would be good if that process could be better structured in advance of the Paris talks.

Progress is, however, also possible outside the climate change negotiations. The willingness of host countries to integrate their ability to use the Market Mechanisms into their national policy strategies is a fitting way in which to illustrate how those mechanisms can contribute to real, robust reductions and support host countries’ own contributions to the global climate change effort.

Intensified efforts before Paris and after

In terms of the New Market Mechanisms, one of the biggest statements to come out of the EU came right before Bali: that the reform of the Market Mechanisms would lead to a greater role for national governments. If this is a key reform objective, intensifying outreach activities between the UNFCCC negotiation partners would be the key to achieving a consensus. But this can only be achieved if the focus is placed not on negotiation papers, but on the question of how such mechanisms can be used. What is needed is to ensure that market mechanisms can supplement national climate change policies – not at some abstract level, but as part of concrete reduction effort. National policy programmes with a strong climate change focus, the low carbon development strategies and the INDCs, which are to provide the basis for contributions from the international community, can serve to provide a context and platforms to achieve this.

Other options for increased ambition difficult

Of course, further reductions are available in principle in the sectors covered by the EU Emissions Trading Scheme (ETS) and in those covered by the effort sharing decision (ESD), from which the EU reduction target of 40 percent is to be drawn. But this is not the direction taken by the debate during the EU Council meeting on March 6. The reform proposals for the EU ETS largely contain measures which reinstate emissions trading as a highly effective instrument of EU climate change policy. Unfortunately, there are no signs that business might again use international certificates to achieve their targets in the medium term.

Light was shed on the scope for further reductions in the EU by proposals put forward to harness LULUCF as an offsetting pool for the 40 percent reduction contribution, which in itself would send out signals that are contrary to climate change policy thinking and would thus be discouraging. The good news is that no decision was reached on this. Drawing a cautious, preliminary conclusion, it would seem that use of the Market Mechanisms is far more likely than increased national reduction contributions.

As a next step, the EU INDC must be compared with the INDCs of other countries. In this regard, the Swiss INDC, with its 50 percent reduction target (of which 30 percent is to be achieved domestically), comes very close to the reduction path that is compatible with adhering to the 2°C global warming goal. Switzerland’s willingness to achieve 20 percent of its reduction target globally is a strong signal for the global carbon market.


by Thomas Forth

This article was published first in Carbon Mechanisms Review 1-2015