The defining issue of our time
‘Climate change is the defining issue of our time – and we are at a defining moment’, said the UN Secretary General a few weeks before the 24th session of the UN Climate Change Conference (COP24) held in Katowice in December 2018. Indeed, in recent years we have seen a growing awareness of climate change issues with citizens and governments around the world. One of the largest climate change protests ever seen took place on 15 March 2019. Over a million young people from over 100 countries went on strike calling for more ambitious action on climate change. The strike was inspired by the Swedish schoolgirl Greta Thunberg, who caught the media’s attention by protesting outside the Swedish parliament every Friday throughout 2018. In September 2019, the Global Climate Strike attracted millions of people who joined young climate strikers on the streets to demand an end to the age of fossil fuels and climate justice.
Across the globe, visible signs of climate change keep emerging. One of the most visible and striking examples is one of the largest and fastest-moving glaciers in the world, Sermeq Kujalleq, which is melting and shrinking at a great and increasing rate. Sermeq Kujalleq has become a symbol of climate change and the pressing need to reduce its causes and alleviate its consequences. Several government representatives have visited Greenland and Sermeq Kujalleq to discuss climate change and possible actions to be taken to mitigate its causes and adapt to its impact, including in 2016, where then US Secretary of State, John Kerry, and then Danish Minister for Foreign Affairs, Kristian Jensen visited Greenland to discuss Arctic cooperation and to get a first-hand impression of climate change and the challenges it poses for Greenland.
In May 2017, the Arctic Monitoring and Assessment Programme published the updated report ‘Arctic Climate Change Update 2019’ to its second Snow, Water, Ice and Permafrost in the Arctic assessment report. According to the updated report, the pace of change in the Arctic is so rapid that new records are being set annually, and each additional year of data strengthens the already compelling evidence of a rapidly changing Arctic. The report sets out the following fundamental conclusions:
- the Arctic is rapidly shifting into a new state, driven by rising temperatures caused by increases in greenhouse gas concentrations in the atmosphere;
- trends over the next few decades are largely determined by past, present, and near-future emissions, requiring planning for adaptation at local and global scales;
- efforts to reduce greenhouse gas emissions over the coming years can limit the extent of Arctic climate change, especially after mid-century, but the Arctic of the future will certainly be very different regardless of the emissions scenario; and
- arctic glaciers, ice caps, and the Greenland Ice Sheet would continue to melt even under ambitious emissions reductions, contributing significantly to a long-term rise in the sea level.
IPCC report on climate change
The Intergovernmental Panel on Climate Change (IPCC) is the leading body for assessing the science related to climate change. It was established by the United Nations Environment Programme and the World Meteorological Organization to provide the world with clear scientific assessments and reports on the current state of climate change and its potential environmental and socio-economic consequences.
The IPCC is a scientific body. It reviews and assesses the most recent scientific, technical and socio-economic information produced worldwide relevant to the understanding of climate change. Thousands of scientists from every part of the world contribute to the work of the IPCC.
On 30 August 2010, the IPCC welcomed the findings of an independent review of its processes and procedures by the InterAcademy Council, which is a respected 18-member umbrella group for various national academies of science from countries around the world.
The review lasted nearly four months and examined every aspect of how the IPCC’s periodic climate science assessments are prepared, including the use of non-peer-reviewed literature and the reflection of diverse viewpoints. The review also examined institutional aspects, including management functions, as well as the panel’s procedures for communicating its findings to the public. The review report contains numerous recommendations on how to further improve and strengthen the policies and procedures of the IPCC.
The IPCC has released five assessment reports, in 1990, 1995, 2001, 2007 and 2014.
The IPCC is currently in its Sixth Assessment cycle. During this cycle, the panel will produce three Special Reports, a Methodology Report on national greenhouse gas inventories and the Sixth Assessment Report. On 1–5 May 2017, the IPCC held a scoping meeting in Addis Ababa to draft the outline of the Sixth Assessment Report, which brought together 200 experts. The Sixth Assessment Report is due to be completed in the first half of 2022.
Climate Change 2013: The Physical Science Basis (Working Group Report I) contains in its Summary for Policymakers evidence of climate change. Some of the most important are as follows:
Observed changes in the climate system
Warming of the climate system is unequivocal, and since the 1950s, many of the observed changes are unprecedented over decades to millennia. The atmosphere and ocean have warmed, the amounts of snow and ice have diminished, sea level has risen, and the concentrations of greenhouse gases have increased.
Detection and attribution of climate change
Human influence has been detected in warming of the atmosphere and the ocean, in changes in the global water cycle, in reductions in snow and ice, in global mean sea level rise and in changes in some climate extremes . . . This evidence for human influence has grown since AR4. It is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century.
The International Energy Agency’s World Energy Outlook (WEO)
WEO draws on the latest data on energy markets and technology trends and provides detailed analyses of energy issues including oil, gas and coal supply and demand, renewable energy technologies, electricity markets, energy efficiency, access to energy, and demand-side management to 2040. WEO 2018 was released on 13 November 2018. Electricity is the special focus of WEO 2018.
WEO 2018 sets out that the geography of energy consumption continues its historic shift to Asia and that oil markets, for instance, are entering a period of renewed uncertainty and volatility, including a possible supply gap in the early 2020s. Further, demand for natural gas is on the rise, which erases talk of a glut as China emerges as a giant consumer.
WEO outlines multiple future pathways for global energy to 2040. One of them is the ‘New Policies Scenario’, which describes where existing policies and intentions might lead the energy system, in the expectation that this will inform decision-makers as they seek to improve this outcome. The New Policies Scenario reflects all government policies that are already in place as well as those that have been announced. Under current and planned policies, modelled in the WEO 2018 New Policies Scenario, energy demand is set to grow by more than 25 per cent to 2040, requiring more than US$2 trillion a year of investment in new energy supply.
The International Energy Agency’s World Energy Outlook 2019 is to be released on 13 November 2019.
UN Climate Change Conferences
Each year, sessions of the Conference of the Parties to the UNFCC (COP) and of the Conference of the Parties Serving as Meeting of the Parties to the Kyoto Protocol (CMP) are held as a UN Climate Change Conference.
In the first year of this publication, 2009, the conference (COP15 and CMP5) was held in Copenhagen. It did not deliver the results expected or at least hoped for, which was legally binding agreements on emission reduction and limitation targets, and activities for all parties under the UNFCCC and for developed parties under the Kyoto Protocol. However, the negotiations resulted in a political agreement entitled the ‘Copenhagen Accord’ and a decision (Decision 2/CP15) stating that the COP ‘takes note of the Copenhagen Accord of 18 December 2009’. The accord was attached to the decision as an unofficial document and was agreed upon by 114 parties to the UNFCCC. The parties further agreed to establish a procedure whereby states supporting the Copenhagen Accord could accede to it.
As some of the main elements, the states (parties) agreeing on the Copenhagen Accord:
- recognised the scientific view that the increase in global temperature should be below 2°C to combat climate change;
- recognised that deep cuts in global emissions are required according to science;
- agreed that developed countries (Annex I parties) will commit to economy-wide emissions targets for 2020, to be submitted to the UNFCCC secretariat by 31 January 2010, and agree that these parties to the Kyoto Protocol will strengthen their existing targets;
- agreed that developing countries (non-Annex I parties) will implement mitigation actions – nationally appropriate mitigation actions (NAMA) – to slow the rise in their carbon emissions and that information on the NAMA was to be submitted to the UNFCCC secretariat by 31 January 2010;
- agreed that least developed countries and small island developing states may undertake actions voluntarily and on the basis of international support; and
- recognised the crucial role of reducing emission from deforestation and forest degradation (REDD), the need to enhance removals of greenhouse gas (GHG) emission by forests and the need to establish a mechanism (including REDD-plus) to enable the mobilisation of financial resources from developed countries to help achieve this.
At COP17 and CMP7 in 2011 in Durban, South Africa, the parties reached an agreement, now known as the Durban Platform, that extended the Kyoto Protocol from 1 January 2013. The agreement to extend the Kyoto Protocol was an accomplishment that avoided a gap between the phases of the Protocol. At the following COP18 and CMP8 in 2012 in Doha, Qatar, the parties further adopted a proper amendment to the Kyoto Protocol, the ‘Doha Amendment’. The amendment extends the Kyoto Protocol for a second period, until 31 December 2020. Thirty-seven countries and the EU are committed to new reduction targets for this second period, which are included in the amendment. Canada, Japan, New Zealand and Russia did not commit for the second period.
Since COP15 and CMP5 in Copenhagen in 2009, one of the most important UN Climate Change Conferences was COP21 and CMP11, which was held in 2015 in Paris, France. The conference closed with the adoption of the first-ever legally binding global climate agreement, the Paris Agreement. The Paris Agreement consists of 29 articles and was concluded by 196 parties (195 countries and the EU). The Paris Agreement provides a long-term goal of keeping the increase of global warming to well below 2°C and the aim to limit the increase to 1.5°C (article 2). According to article 4 in the Paris Agreement, the governments agreed to aim to reach global peaking of GHG emissions ‘as soon as possible’ and to undertake rapid reductions thereafter. However, no specific target for emissions was fixed. The developed countries agreed to continue to support the climate actions in developing countries (article 9). The parties further agreed to meet every five years (from 2023) in order to take stock of the implementation of the Paris Agreement and to assess the collective progress towards achieving the purpose of the Paris Agreement and its long-term goals (article 14).
In 2016, COP22 and CMP12 was held in Marrakesh, Morocco. The conference also served as the first ‘Conference of the Parties serving as the Meeting of the Parties to the Paris Agreement’ (CMA1), the governing body of the Paris Agreement. Being the first UN Climate Change Conference after the adoption of the Paris Agreement at COP21, the Climate Change Conference in Marrakesh was an important transitional moment, pivoting from the years of negotiation that produced the Paris Agreement to a new phase focused on implementation. The participating parties adopted 35 decisions, mostly related to the implementation of the Paris Agreement, and agreed to finalise the more detailed rules for implementation by 2018.
The following COP23, CMP13 and a second meeting of the parties to the Paris Agreement (officially referred to as CMA1-2) was held in November 2017 in Bonn, Germany. The focus of the conference was to advance the ambitions set out in the Paris Agreement and to achieve progress on its implementation guidelines. The participating parties agreed on the ‘Talanoa’ Dialogue, which is a process designed to help the implementation of contributions by 2020 and help each party consider the adequacy of their actions. The participating parties adopted 12 decisions, making significant progress towards clear and comprehensive implementation guidelines for the Paris Agreement. One of the key decisions was the decision to operationalise the Local Communities and Indigenous People’s Platform, which is a way to ‘strengthen the knowledge, technologies, practices and efforts of local communities and indigenous peoples related to addressing and responding to climate change’ and to increase their involvement in climate negotiations. Further, the participating parties decided on the establishment of a gender action plan to enhance the participation of women in UNFCCC processes, recognising their critical role in climate action.
Most recently, COP24, CMP14 and CMA1-3 was held in December 2018 in Katowice, Poland. One of the important tasks was to ensure the full implementation of the Paris Agreement. The participating parties agreed on a common framework and details for reporting and reviewing progress towards their climate targets in the Paris Agreement Rule book. The conference also brought a close to the Talanoa Dialogue. The high-level section issued the Talanoa Call for Action, which calls upon all countries and stakeholders to act with urgency. Further, the conference had major focus on the special report on the impacts of global warming, published by the IPCC. Another outcome was a proposal by the UN Secretary General, Antonio Guterres, to convene a Climate Summit in September 2019.
COP25, CMP15 and CMA2 will take place in Parque Bicentenario Cerillos in Santiago de Chile, Chile from 2 to 13 December 2019 with a pre-sessional period from 25 to 30 November 2019.
United Nations Framework Convention on Climate Change (UNFCCC)
The UNFCCC (1992) entered into force on 21 March 1994 and has, as of August 2019, been ratified, accepted, acceded to or approved by 197 countries and the EU, making it almost universal.
The commitments under the UNFCCC cover all anthropogenic emissions by sources and removals by ‘sinks’ of all GHGs, except those covered by the Montreal Protocol on Substances that Deplete the Ozone Layer (1987). It is a protocol to the Vienna Convention for the Protection of the Ozone Layer (1985) and only covers certain types of powerful GHGs that deplete the ozone layer, such as chlorofluorocarbons, halogens and hydrochlorofluorocarbons. According to article 2 of the UNFCCC, its ultimate objective is to achieve stabilisation of GHG concentrations in the atmosphere at a level that will prevent dangerous anthropogenic interference with the climate system. Such a level should be achieved within a time frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner. Greenhouse gases can accumulate in vegetation and soils in terrestrial ecosystems. In the Convention and the Kyoto Protocol, any activity, process or mechanism that removes GHG from the atmosphere is referred to as a ‘sink’.
According to article 4 of the Convention, all parties shall develop, periodically update, publish and make available to the Conference of the Parties national inventories of anthropogenic emissions by sources and removals by sinks of all GHGs not controlled by the Montreal Protocol. Parties to the Convention shall also formulate, implement, publish and regularly update national programmes. They must contain measures to mitigate climate change by addressing anthropogenic emissions by sources and removals by sinks of all GHGs (except those covered by the Montreal Protocol) and facilitate adequate adaptation to climate change. Further, all parties shall promote and cooperate in the development, application and transfer of technologies and processes that control, reduce or prevent anthropogenic emissions of all GHGs (except those covered by the Montreal Protocol) in all relevant sectors. These include the energy, transport, industry, agriculture, forestry and waste management sectors.
The industrialised countries listed in Annex I (Annex I parties) undertook a non-binding commitment to reduce their GHG emissions to 1990 levels by 2000. These parties include the 24 original OECD members, the EU and 14 countries with economies in transition to market economy. At COP3 in Kyoto in 1997, Croatia, Liechtenstein, Monaco and Slovenia became Annex I parties and the Czech Republic and Slovakia replaced Czechoslovakia as an Annex I party. The Annex I parties, except three (Belarus, Turkey and the United States) also undertook binding commitments to limit or reduce their emissions of six GHGs in the first five-year commitment period from 2008 to 2012 under the Kyoto Protocol. The parties and their respective commitments are listed in Annex B to the Kyoto Protocol.
According to article 4.3, countries listed in Annex II shall provide financial resources and facilitate technology transfer to developing countries. Annex II parties include the 24 original OECD members (except Turkey, which in 2002 was deleted from Annex II by Decision 26/CP7 adopted at COP7) and the EU.
The Kyoto Protocol to the United Nations Framework Convention on Climate Change (1996) entered into force on 16 February 2005 and has, as of August 2019, been ratified, accepted, acceded to or approved by 191 countries and the EU. Canada withdrew from the Kyoto Protocol effective from 15 December 2012.
The detailed rules for the implementation of the Kyoto Protocol were adopted at COP7 in Marrakesh in 2001 and are called the Marrakesh Accords (see above).
Quantified commitments to limit or reduce emissions
Under the Kyoto Protocol, the industrialised countries listed in its Annex B (except the United States, which has not ratified the Protocol) undertook binding commitments to limit or reduce their emissions of six GHGs in the first five-year commitment period from 2008 to 2012. These quantified commitments apply to 37 countries and the EU (Annex B parties).
CO2 is the principal GHG and the gas for which calculation of emissions can be made most simple and precise. The other five GHGs are therefore generally converted into tonnes of CO2 equivalent (CO2e) in relation to calculation of amounts concerning quantified commitments under the Kyoto Protocol. Likewise, emissions of all six GHGs are generally referred to as CO2e emissions of the GHGs listed in Annex A to the Protocol.
According to article 3, Annex B parties shall, individually or jointly, ensure that their aggregate anthropogenic CO2e emissions of the GHGs listed in Annex A do not exceed their assigned amounts. These amounts are calculated pursuant to the Annex B parties’ quantified emission limitation and reduction commitments inscribed in Annex B and in accordance with article 3, with a view to reducing their overall emissions of such gases by at least 5 per cent below 1990 levels in the first commitment period from 2008 to 2012. Further, article 3 sets out that calculations concerning fulfilment of commitments shall include net changes in GHG emissions by sources and removals by sinks resulting from direct human-induced land-use change and forestry activities, limited to afforestation, reforestation and deforestation since 1990. The net changes shall be measured as verifiable changes in carbon stocks in each commitment period. GHG emissions by sources and removals by sinks associated with such activities shall be reported in a transparent and verifiable manner and reviewed in accordance with articles 7 and 8. Removals by sinks are caused by accumulation of GHG in vegetation and soils in terrestrial ecosystems. Sinks are any activities, processes and mechanisms that remove GHG from the atmosphere.
Annex B parties’ quantified emission limitation or reduction commitments are set out in Annex B. A committed country’s average annual emissions in 2008 to 2012 must not exceed a specified percentage of between 92 and 108 of its emissions in its base year or period. The average commitment of all countries is a reduction of 5.2 per cent.
The base year is generally 1990 for all industrialised countries, except for a few countries undergoing the process of transition to a market economy. Their base years or periods are other years or period of a few years around 1990, for example, 1989 (Bulgaria and Romania), 1988 (Poland) or the average of 1985 to 1987 (Hungary). All industrialised countries may choose to use 1995 as the base year for total emissions of HFCs, PFCs and SF6 (F-gases).
Under the Kyoto Protocol, the EU member states jointly have binding emission reduction commitments of 8 per cent; their average annual emissions in 2008 to 2012 must not exceed 92 per cent of their emissions in 1990 (or 1995 for F-gases as regards some EU member states).
With the Doha Amendment, it was decided to extend the Kyoto Protocol for a second period through 2020. The Amendment includes a replacement of Annex B, which sets out new quantified emission limitation or reduction commitments for the period 2013 to 2020 for a number of countries. Canada, Japan, New Zealand and Russia have all declined to commit for a second period. A committed country’s average annual emissions in 2013 to 2020 must not exceed a specified percentage of between 76 and 99.5 of its emissions in its base year or period. The average commitment of all countries for the second period is a reduction of 18.7 per cent.
The EU member states jointly have binding emission reduction commitments of 20 per cent; their average annual emissions in 2013 to 2020 must not exceed 80 per cent of their emissions in 1990. Further, the EU has pledged to increase the reduction commitment to 30 per cent if other major parties agree to also increase their commitments.
Even though the Doha Amendment was adopted at COP18 in Doha, Qatar, it must subsequently be accepted by the parties to the Kyoto Protocol in accordance with articles 20 and 21 of the Protocol to enter into force. This means that a total of 144 acceptances are required for the entry into force of the amendment. As of 15 July 2019, 130 parties have given their acceptance and the amendment is therefore not yet effective.
Flexible mechanisms – GHG projects and emissions trading
Under the Kyoto Protocol, the industrialised countries must meet their quantified limitation and reduction commitments primarily through national measures. However, they may also use supplementary means in the form of three market-based mechanisms. These flexible mechanisms are:
- joint implementation (JI) in accordance with article 6;
- the clean development mechanism (CDM) in accordance with article 12; and
- emissions trading in accordance with article 17.
These mechanisms may be used by industrialised countries to meet their emission targets in a cost-effective way and to stimulate green investment, particularly in developing countries (CDMs) and industrialised countries in the process of transition to a market economy (JIs).
The Kyoto Protocol and the Marrakesh Accords provide that the use of the flexible mechanisms shall be supplemental to domestic action. Domestic actions shall thus constitute a significant element of the efforts made by each party included in Annex I to the UNFCCC to meet its quantified limitation and reduction commitments under article 3(1) of the Kyoto Protocol and its Annex B.
International emissions trading scheme
Parties with commitments under the Kyoto Protocol Doha Amendment (Annex B parties) have accepted binding targets for limiting or reducing their emissions in the second commitment period from 2013 to 2020. The targets are set as levels of allowed emissions, called assigned amounts, which are divided into units, called assigned amount units (AAUs). They are expressed in a specified general emissions unit: tonnes of CO2e (tCO2e).
Under the international emissions trading scheme (IETS) in article 17 of the Kyoto Protocol, countries that have not used all their AAUs because they have emitted less than their emission targets may sell the unused AAUs to other countries that need more (because these countries have emitted more than their emission targets). It is therefore possible to trade emission allowance units, which is often described as carbon trading on the carbon market, mainly because CO2 is the most important GHG. For the same reason, emission allowances are sometimes referred to as carbon allowances.
The emissions trading scheme under the Kyoto Protocol also includes trading of other emission units. They are based on the reduction of emissions of GHGs or the removal of GHGs from the atmosphere by various activities. Since these units are tradable credits for reductions or removals, they are often called reduction or removal units or simply carbon credits. The main units or credits are:
- emission reduction units (ERUs);
- certified emission reductions (CERs); and
- removal units (RMUs).
As emission reduction units and certified emission reductions are created by project activities under the Kyoto Protocol schemes for the respective projects and units, they are sometimes referred to as project units or project credits.
Joint implementation and emission reduction units (ERUs)
ERUs are generated by JI project activities, which are aimed at reducing GHG emissions or removing GHGs from the atmosphere by sinks in accordance with article 6. Projects aimed at enhancing removals by sinks by land use, land-use change or forestry (LULUCF) activities must conform to the provisions under article 3(3) and (4) and Decision 9/CMP1, paragraph 4 and are thus limited to projects concerning afforestation, reforestation, deforestation, revegetation, forest management, cropland management and grazing land management.
Agreements on JI projects are made between two industrialised countries (Annex I parties to the UNFCCC) as host country and donor country, respectively. Projects are mostly made in industrialised countries undergoing the process of transition to a market economy (typically, eastern European countries or their eastern neighbours, eg, the Czech Republic, Poland or Russia). However, projects may be carried out in any country with quantified emission commitments under the Kyoto Protocol (Annex B parties).
Clean development mechanism (CDM) and certified emission reductions (CERs)
CERs are generated by CDM project activities, which are aimed at reducing emissions or removing GHGs from the atmosphere in accordance with article 12. Projects aimed at enhancing removals by sinks by LULUCF activities are limited to projects concerning afforestation or reforestation (Decision 16/CMP1, Annex, paragraph 13).
Agreements on CDM projects are made between a developing country as the host and an industrialised country (Annex I party to the UNFCCC) as the donor. Projects are performed in developing countries.
Land use, land-use change and forestry (LULUCF) and removal units (RMUs)
RMUs are based on LULUCF activities, such as afforestation or reforestation that remove GHGs from the atmosphere in accordance with article 3(3) and (4).
Activities must conform to the provisions under article 3(3) and (4), and are limited to afforestation, reforestation, deforestation, revegetation, forest management, cropland management and grazing land management (Decision 16/CMP1, Annex, paragraphs 2 and 6).
Activities generating RMUs are performed by industrialised countries (Annex I parties to the UNFCCC) in their own countries. However, as mentioned above, some LULUCF activities may be performed as JI projects and, thus, generate ERUs. Such activities are instead performed in one industrialised country by another industrialised country or a legal entity authorised by it to perform activities concerning emission reduction units.
Transfer of Kyoto units between countries
Any ERUs or assigned amount units (AAUs) that an industrialised country (Annex I party) acquires from another industrialised country under article 6 (on joint implementation) or article 17 (on emissions trading) are added to the assigned amount for the acquiring country (article 3(10)). Consequently, any such units that an industrialised country transfers to another industrialised country under article 6 or article 17 are subtracted from the assigned amount for the transferring country in accordance with article 3 (11).
Any CERs that an industrialised country acquires from a developing country under article 12 are added to the assigned amount for the acquiring country (article 3(12)).
Registries and transaction logs
Transfers of all emission units (AAUs, ERUs, CERs and RMUs) are tracked and recorded in the registry systems under the Kyoto Protocol. Generation of ERUs, CERs and RMUs is also recorded in the registry systems. There are two types of registry systems under the Kyoto Protocol: national registries and the Clean Development Registry.
National registries are implemented by industrialised countries with commitments under the Kyoto Protocol (Annex B parties). National registries contain accounts where units are held in the name of the government or any legal entities that are authorised by the government to hold and trade units.
The Clean Development Registry (CDM Registry) is implemented by the UNFCCC secretariat under the authority of the CDM executive board. The CDM Registry records issuance of CDM credits (CERs) and distributing of them to national registries. Accounts in the CDM Registry are held only by CDM project participants. It is not possible to register trading of CERs between accounts in the CDM Registry.
The registries record both holdings and transfers of units and therefore settle trades by transferring units between accounts of sellers and buyers and operate through (electronic) links between each registry and the International Transaction Log (ITL), administered by the UNFCCC secretariat. The ITL verifies registry transactions in real time to ensure they are consistent with rules under the Kyoto Protocol. The ITL requires a registry to terminate a transaction proposed by it if the ITL finds that the transaction is not in accordance with rules under the Kyoto Protocol.
National and regional emissions trading schemes that use units under the Kyoto Protocol must also make settlements of trades through these registries and the ITL. This is the case, for example, when EU units, which are also Kyoto units, are traded in the EU Emissions Trading Scheme. But these transactions are likewise recorded in the supplementary Community Independent Transaction Log (CITL), which has been implemented by the European Commission.
In December 2015, the parties to the UNFCCC adopted the Paris Agreement by Decision 1/CP.21 at COP21 in Paris. The adoption of the Paris Agreement, which entered into force on 4 November 2016, establishes a new framework combining nationally determined contributions (NDCs) with new multilateral mechanisms aimed at ensuring transparency and accountability and promoting greater ambition over time.
According to article 2 of the Paris Agreement, the parties commit to strengthen the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty, including by:
- holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognising that this would significantly reduce the risks and impacts of climate change;
- increasing the ability to adapt to the adverse impacts of climate change and foster climate resilience and low greenhouse gas emissions development, in a manner that does not threaten food production; and
- making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.
In order to achieve these goals, the Agreement establishes:
- an enhanced transparency framework with reporting and review obligations for all parties and ‘built-in flexibility’ for developing countries with limited capacity in accordance with article 13;
- a ‘global stocktake’ every five years starting in 2023 to assess collective progress toward the agreement’s long-term goals in accordance with article 14; and
- a mechanism to ‘facilitate implementation’ and ‘promote compliance’ in a ‘facilitative’ and ‘non-punitive’ manner in accordance with article 15.
In most cases, however, the Paris Agreement does not specify a deadline for completing the decisions that are required on a wide range of topics, including with regard to the above-mentioned framework and mechanisms.
At the first meeting of the governing body of the Paris Agreement (CMA1), at COP22 in Marrakesh in 2016, no decisions were ready for adoption. The parties therefore decided that the decisions had to be ready for adoption at by COP24 in Katowice in 2018 at the latest. The COP and CMA met jointly at COP23 in Bonn in November 2017 to review the progress. Thus, the COP23 decision text states the confirmation of the parties’ firm determination to oversee and accelerate the completion of the work programme under the Paris Agreement by its 24th session in December 2018 and to forward the outcomes for consideration and adoption by the Conference of the parties serving as the meeting of the Parties to the Paris Agreement at the third part of its first session.
At COP24, the participating parties adopted the Katowice Rulebook (also called the Paris Agreement Rulebook). The purpose of the Rulebook is, inter alia, to establish an effective international system for promoting and tracking progress and to empower the parties to build national systems for the implementation of the Paris Agreement. Some of the most important principles in the Rulebook are:
- requirements for the parties for communication and tracking the progress for the nationally determined contributions (NDC);
- guidelines for how to communicate and report on adaption measures.;
- there will be a global review every five years, which will analyse whether adaption efforts are adequate and consider how to deal more effective with the impact of climate change;
- all parties shall submit their first biennial report by the end of 2024; and
- all parties shall use the same calculation methodologies based on the 2006 IPCC guidelines.
With regard to the United States, former President Barack Obama accepted the Paris Agreement through executive action in September 2016. On 1 June 2017, his successor, Donald Trump, announced that the United States will withdraw from the Paris Agreement. However, according to article 28 of the Paris Agreement, the earliest possible effective withdrawal date by the United States is 4 November 2020. Until the withdrawal is effective, the United States may be obliged to maintain its commitments under the Agreement.
EU approval and implementation of the UNFCCC, the Kyoto Protocol and the Paris Agreement
The EU approved the UNFCCC in 1993, the Kyoto Protocol in 2002 and the Paris Agreement in 2016. They entered into force in the EU on 21 March 1994, 16 February 2005 and 4 November 2016, respectively.
The UNFCCC and the Kyoto Protocol have been approved and implemented by various EU decisions and provisions, including:
- Council Decision of 15 December 1993 concerning the conclusion of the United Nations Framework Convention on Climate Change (94/69/EC);
- Council Decision of 25 April 2002 concerning the approval, on behalf of the European Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the joint fulfilment of commitments thereunder (2002/358/EC);
- Commission Decision of 10 February 2005 laying down rules implementing Decision No. 280/2004/EC of the European Parliament and of the Council concerning a mechanism for monitoring Community GHG emissions and for implementing the Kyoto Protocol (2005/166/EC); and
- Council Decision of 5 October 2016 on the conclusion, on behalf of the EU, of the Paris Agreement adopted under the United Nations Framework Convention on Climate Change ((EU) No. 2016/1841).
EU climate regulations
In addition to the regulations mentioned above, other major EU climate regulations are:
- the Emission Trading Scheme (EU ETS) Directive (2003/87/EC), as subsequently amended, which establishes a scheme for GHG emission allowance trading within the EU and includes provisions on GHG emissions permits, allocation, use and surrender of allowances, and monitoring and reporting of emissions;
- the Regulation on a Mechanism for Monitoring and Reporting GHG Emissions and for Reporting other Information at National and Union level Relevant to Climate Change (Regulation (EU) No. 525/2013) repeals and replaces the Monitoring Mechanism Decision No. 280/2004/EC of the European Parliament and of the Council. It establishes a mechanism for monitoring of EU GHG emissions and for implementing the Kyoto Protocol in the EU and its member states. Member states must report and verify information relating to commitments pursuant to the Kyoto Protocol. Particularly, emissions of GHGs must be monitored and reported;
- the Linking Directive (2004/101/EC), which amends the EU ETS Directive by introducing provisions that authorise member states to allow operators of installations to use project-based emission reduction credits (ERUs and CERs) to meet their obligation to surrender emission allowances under the EU ETS Directive;
- the Registries Regulation (EC) No. 2216/2004, which lays down provisions, specifications and requirements concerning a standardised and secured system of registries (in the form of electronic databases) established by each member state and the European Commission;
- the Second Registries Regulation (EC) No. 994/2008, which is an amended version of the first Registries Regulation and applies from 1 January 2012;
- the Aviation Directive (2008/101/EC) amends the EU ETS Directive by establishing a particular emissions trading scheme for emissions from aviation activities within the framework of the general EU ETS;
- the Renewable Energy Directive (2009/28/EC), which establishes a common framework for the promotion and regulation of production and use of energy from renewable sources. The Renewable Energy Directive is amended by Directive 2018/2001/EU, which must be implemented into national law by 30 June 2021;
- the EU ETS Amending Directive (2009/29/EC), which amends the EU ETS Directive to improve and extend the EU ETS for the period 2013 to 2020 (Phase III of the ETS). It includes other activities (installations) that are sources of emissions and other types of GHGs. The deadline for implementing the Directive into national legislation was 31 December 2012;
- the Geological Storage Directive (2009/31/EC), which contains provisions on geological storage of CO2;
- the Energy Performance of Buildings Directive (2010/31/EU), which repealed the previous directive with effect from 1 February 2012 and contains provisions on both new and existing buildings;
- the verification of GHG emission reports and tonne-kilometre reports and the accreditation of the Verifiers Regulation (EU) No. 600/2012 and Monitoring and Reporting of Greenhouse Gas Emissions Regulation (EU) No. 601/2012, both pursuant to Directive 2003/87/EC. The regulations form part of a series of implementing provisions preceding the start of the third trading period in 2013. The aim is to make monitoring, reporting and verification of GHG emissions more complete, accurate and transparent. The regulations apply from 1 January 2013;
- the Energy Efficiency Directive (2012/27/EU) as subsequently amended, which amends Directives 2009/125/EC and 2010/30/EU and repeals Directives 2004/8/EC and 2006/32/EC. The Directive establishes a common framework of measures for the promotion of energy efficiency within the EU in order to ensure the achievement of the EU’s 2020 20 per cent headline target on energy efficiency and to pave the way for further energy efficiency improvements beyond that date. The Energy Efficiency Directive is amended by Directive 2018/2002/EU, which must be implemented into national law by 25 June 2020;
- the Regulation on monitoring, reporting and verification of carbon dioxide emission from maritime transport (2015/757/EU), which also amends Directive 2009/16/EC;
- the Directive on procurement by entities operating in the water, energy, transport and postal services sector (2014/25/EU), which also repeals Directive 2004/17/EC;
- the Decision concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme and amending Directive 2003/87/EC. The Decision applies from 1 January 2018;
- the Regulation on binding annual greenhouse gas emission reductions (2018/842 amending Regulation No. 525/2013). The regulation sets out binding targets for each member state for domestic reductions in economy wide greenhouse gas emissions by 2030 compared to 1990; and
- Regulation 2019/631/EU setting CO2 emission performance standards for new passenger cars and for new light commercial vehicles and repealing Regulations 443/2009/EC and 510/2011/EU.
National emissions trading schemes and systems
EU emissions trading scheme (EU ETS)
EU member states are part of the EU ETS. It is established and governed by the Emissions Trading Scheme (EU ETS) Directive (2003/87/EC) as amended by the Linking Directive (2004/101/EC) and the Aviation Directive (2008/101/EC). The EU ETS has been improved and extended for a Phase III by the ETS Amending Directive (2009/29/EC).
The ETS Amending Directive provides for the centralisation of the EU ETS national registries into a single EU registry. In mid 2012, the transition to the single registry was completed. By 20 June 2012, the system was activated.
In 2018, the EU adopted Directive 2018/410 revising the EU ETS Directive. The revision improves and extends the EU ETS for the period 2021 to 2030 (Phase IV of the ETS). The Directive must be implemented in national law by 9 October 2019.
There are generally no statutory or mandatory emissions trading schemes or systems in the other states covered in the chapters of this book.
A number of international market organisations are publishing standard form emissions trading documentation for trades on the secondary market, including the International Emissions Trading Association, the European Federation of Energy Traders and the International Swaps and Derivatives Association.
International, regional and national climate regulations are becoming increasingly important for many reasons. Some of them appear in the above-mentioned assessments and remarks of global leaders from science, business and international organisations. We hope that readers find useful and interesting information about these subjects in the following pages.