Points of Divergence: Linkages and Differentiating Obligations under the Transparency Framework

The Transparency Framework under Article 13 of the Paris Agreement covers all components. At least, that is what the Agreement seems to say at first blush. However, as Parties begin to flesh out specific procedures, it is obvious that they disagree with the extent of the Transparency Framework’s coverage.

The Philippines, speaking for the G77 and China negotiating group, emphasized the importance of linking the procedures of the Framework with the provisions on financing. The Philippines went so far as to suggest that such a linkage should receive its own section. Article 9 of the Paris Agreement specifies the reporting requirements for developed country parties, which includes providing qualitative and quantitative information on financial resources to assist developing country Parties in their mitigation and adaptation efforts. The Philippines urged the Parties to consider incorporating the developed country Parties’ obligation under Article 9.1 into the procedures of the Framework.

Credit to the World Resources Institute

Credit to the World Resources Institute

Not surprisingly, the European Union opposed conflating the developed country Parties’ obligations under different articles, stating that Parties come into dangerous fields when they do so. In the European Union’s perspective, the language in Article 9 that refers to biennial reporting obligations is referenced only in party submissions. At most, the procedures in the Transparency Framework can include the Article 9 provisions as an inherent part of the information to be reported under Article 13.9. It does not warrant its own section with subsequent provisions.

Another point of contention is the difference between the reporting requirements for developed country Parties that are mandated to provide support to developing country Parties and the reporting obligations of developing country parties that choose to provide such support. Article 13.9 of the Paris Agreement obligates developed country Parties to provide information on financial, technology transfer, and capacity-building support they provide. It does not impose the same obligation on developing country Parties. Parties do not dispute this. However, they disagree on whether developing country Parties that choose to provide support to fellow developing country Parties should report the same types and quantity of information as their developed country counterparts.

Unlike the issue of linkages mentioned above, developing country Parties negotiating this issue do not all believe that they should be subject to different reporting requirements for the support they provide. Brazil, in particular, stated that developed and developing country Parties should be subject to the same reporting obligations. However, developing country Parties should be afforded some amount of flexibility. Though the Parties are far from agreeing to this proposal, this seems to be a reasonable way of interpreting the text of Article 13.9, especially given Article 13’s emphasis on flexibility.

Further from this proposal is the view of some developed country Parties that the developed and developing country Parties should be subject to the same reporting requirements without any reference to flexibility or common but differentiated responsibilities and respective capacities (CBDR-RC). Developing country Parties are under no obligation to provide support to others. Their decision to extend support is purely discretionary. Such discretion removes special considerations. While this interpretation is logically sound, it moves further away from the language of the Agreement and is unlikely to meet any significant support.

Overall, progress in establishing the procedures for the Article 13 Transparency Framework has been moving at a glacial pace. Yet, move it has. After much grandstanding in the last few days, it would seem that Parties have calmed enough to openly express agreement on some simple areas. Momentum and urgency will continuously build as Parties approach the end of this negotiating session.


The Inevitable Linkage Discussion

phpThumb_generated_thumbnailjpg

Let’s face: it is almost the end of 2014 and we are still negotiating an international agreement to mitigate climate change for after 2020. The good news is that several countries have taken the initiative, and adopted climate change policies. These policies vary from emissions trading, carbon taxes, performance standards, among others. But what role will these regional, national, or sub-national policies play under the new international agreement? Yesterday, the International Emissions Trading Association (EITA) held a side event to address this question. The discussion, “Linkage Among Climate Policies in the 2015 Paris Agreement”, had as panelists leader researches on the topic: Robin Stavins, from Harvard University; Daniel Bodansky, from Arizona State University; and Dirk Forrister, from  EITA, among others. The discussion was based on the latest report from the Harvard Project on Climate Agreements, “Facilitating Linkage of Heterogeneous Regional, National, and Sub-National Climate Policies Through a Future International Agreement” (November, 2014).

The concept of linkage is fairly simple; it refers to the idea that distinct carbon pricing instruments can be linked together to meet the general goal of reducing greenhouse gas emissions. The linkage can occur is two ways: direct and indirect. The direct linkage occurs when two different schemes mutually accept the emission reduction units from one another to meet their goals. The indirect linkage occurs when two programs, for example cap-and-trade schemes, do not allow the trade of allowances between their programs, but both are direct linked to a third, common trading scheme.

xxx

As wisely explained by Daniel Bodansky, to address this issue the new international agreement can follow three distinct approaches.  The first is to expressly forbid any linkage between different carbon pricing schemes. The second approach is to be silent about the issue, and the third, preferable approach is to allow linkage between different carbon pricing schemes. Allowing linkage would provide a number of benefits to participating countries, including: cost savings; improvement of individual market, through the decrease of market power and price volatility; and equity distribution. Another main interesting point is that, as Robert Stavins (left) pointed out, allowing the linkage between different schemes can potentially increase overall national emission reduction ambitions, as more market options are made available. 

To allow linkage between different climate policies, all panelist agreed that the new agreement shall include a paragraph as simple as possible. As proposed by the panelists, the paragraph shall be limited to expressly allow linkage, define key terms, and provide basic guidance regarding tracking emissions to ensure the environmental integrity. In their opinion, further detailed rules shall be decided by future meetings of the Conference of the Parties. 

While challenging, linkage is already happening in different levels. In fact, the issue is very similar to the decision, in 1997, to allow the co-existence of emissions trading, joint implementation, and clean development mechanisms under the Kyoto Protocol. Countries are also already dealing with this issue in the national, or sub-national level. California and Quebec Emission Trading Schemes, for instance, are linked since 2013. The same is true for the European Union and Norway Emission Trading Schemes, that signed their linkage agreement back in 2007. Other linkage agreements are expected to happen as the number of cap-and-trade programs increase; up to date there are 20 regional, national, or sub-national trading schemes in operation or scheduled to enter into operation. The linkage issue will not go away, and several examples and options have already been deeply discussed. The remaining question is if the Paris agreement will take the necessary step and deal with this issue, or if the new agreement will be silent.