Copenhagen – the start of a new phase of global climate change negotiations

After an extended final night of negotiations in Copenhagen, the gavel finally came down on 19 December to close the fifteenth Conference of the Parties (COP15) to the United Nations Framework Convention on Climate Change (UNFCCC) and the fifth conference of parties serving as the meeting of the parties to the Kyoto Protocol (COP/MOP5).

Initial expectations going into COP15 had been for the adoption of an ambitious high-level political agreement that would form the basis for further negotiations to reach a legally binding agreement during 2010.

In the end, after last-minute negotiations between heads of state and government, political consensus emerged around the “Copenhagen Accord”. Initially struck between the “big five” (the United States, China, Brazil, South Africa and India) the Copenhagen Accord was subsequently presented to the COP for adoption. However, given remaining opposition from a handful of developing countries (including Venezuela and Bolivia), the accord was ultimately only “noted” by the parties. As such, the accord represents a political declaration of the intent by the countries that endorse it to pursue the objectives set out therein. But it is not legally binding.

Aspirational targets

The Copenhagen Accord contains an aspirational target of keeping global warming to below two degrees Celsius (which equates to limiting global emissions of greenhouse gases to 450 parts per million, or ppm). It also provides for the creation of the Copenhagen Green Climate Fund, to which developed countries pledge to provide financing to help developing countries fight climate change. The amount pledged is in the order of US$30 billion between 2010 and 2012, increasing to US$100 billion per year by 2020.

Developing countries that are signatories to the accord agree to implement nationally appropriate mitigation actions (NAMAs) that will be reported in national communications every two years, with provision for “international consultation and analysis” of those mitigation actions. The NAMAs that are to be supported by technology, finance and capacity building will be subject to international measurement, reporting and verification. The accord also recognizes the important role of reducing emissions from deforestation and forest degradation (called REDDplus), and the need to enhance the removal of greenhouse gases by forest sinks, as well as the important role of markets in achieving cost-effective mitigation actions.

Despite the circumstances surrounding its adoption and the general chaos that surrounded COP15, the significance of the Copenhagen Accord should not be underestimated. In a process characterized by incremental progress, the accord represents a step-change, albeit small, in the international climate change negotiations, with developing countries for the first time agreeing to put forward domestic mitigation actions for international scrutiny. While falling well short of the economy-wide targets adopted by developed countries under the Kyoto Protocol, this does represent a significant departure from previous positions of key developing countries – notably China and India – that it was the responsibility of only developed countries to reduce emissions.

Just the beginning

However, the Copenhagen Accord is only the beginning of the next phase in international climate negotiations, and over the course of the next year the real challenge will be for parties to maintain the political momentum reflected in the accord and turn the political intentions set out in it into legally binding agreements.

Based on positions of parties during COP15 it appears likely that any legally binding agreement will continue on a two track basis, under both the Kyoto Protocol, which at this stage appears likely to be extended into a second commitment period for developed country targets after 2012, and under a new protocol to the UNFCCC to give legal effect to commitments by developing countries (and the United States as a non-Kyoto party).

For the carbon market, the full impact of the outcome of Copenhagen will take some time to analyse. Under the accord, developed and developing countries that signed up were required to submit their national reduction targets and NAMAs by 31 January 2010 to be included in annexes to the accord. Given that countries were unable to move beyond the high-level political intent contained in the accord to substantively negotiate the quantum of their individual and collective commitments at COP15 itself, market participants have been keenly observing the targets that have ultimately been put forward by developed and developing parties. Early indications are that these fall well short of the collective levels required to limit global emissions to 450ppm, and so the anticipated increase in demand in global carbon markets is unlikely to materialize, which will see further downward pressure on carbon prices.

In parallel to the high-level political negotiations that culminated in the Copenhagen Accord, the parties agreed to extend the mandate of the ad-hoc working group on long-term cooperative action and the work of the ad-hoc working group on further commitments under the Kyoto Protocol with a view to concluding negotiations on those two work streams before the next COP scheduled for Mexico City in December 2010. The heavily bracketed text from the different work streams of those groups will form the basis of negotiations throughout this year.

The COP and COP/MOP were also able to reach conclusions on key issues being considered under the Subsidiary Body on Scientific and Technological Advice and the Subsidiary Body on Implementation. Of note, COP/MOP5 agreed upon the guidance related to the clean development mechanism (CDM) and joint implementation. Notably, COP/MOP was unable to decide whether to support carbon capture and storage as an activity under the CDM, and has invited further submissions on key issues such as permanence and managing leakage.

Paul Curnow is a member of Baker & McKenzie’s environment and environmental markets practice.

Zhang Danian is the chief representative of the Shanghai office of Baker & McKenzie. His practice focuses on environmental compliance, regulatory affairs, foreign direct investment, joint ventures and merger and acquisition projects in the PRC.

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