Recent Climate Change events in Bali and Australia

The central aim of the conference was the achievement of a comprehensive international climate change agreement in 2009. Its outcome was the launch of a two-part negotiating process, one under the Convention¹  and the other under the Protocol² , toward that agreement. The Convention negotiations will be conducted by a new Ad Hoc Working Group on Long-term Cooperative Action under the Convention which will meet four times in 2008 and ‘shall complete its work in 2009’ and report to the 15th Conference of the parties to the Convention in Copenhagen in December 2009. The Protocol negotiations will be conducted by the existing Ad Hoc Working Group on Further Commitments for Annex I Parties under the Protocol, which will meet at least six times between now and December 2009.

Clearly, the next two years will be important for the development and implementation of international policy to stabilise the concentrations of greenhouse gases in the atmosphere. One of the principal areas of concern will be policy on emission targets.

At Bali, almost all key matters on this issue were left to future talks. Prospects of movement on this issue appeared early when Australia announced that it had ratified the Protocol, and over the course of the talks at Bali some long-standing differences on other issues were resolved, for example: on a fund to help developing countries to adapt to climate change, and on steps to reduce tropical deforestation. But on the issue of emissions targets the talks soon divided along familiar lines: the EU sought, and the US resisted, binding commitments for the US, and developing countries sought further financial assistance while resisting binding commitments for themselves. Compromise only emerged after UN Secretary-General Ban Ki-moon and Indonesian President Susilo Yudhoyono, in an unusual final plenary session, pleaded for agreement. In the end, the US resiled from its concept of a future framework based on nationally defined (not internationally binding) commitments, developing countries agreed for the first time to consider taking ‘measurable, reportable and verifiable’ mitigation actions, and developed countries agreed to consider taking ‘commitments or actions’ which could include emissions targets. But the form and level of any future commitments is very much at large.

The decisions taken at Bali under the Convention recognise the need for ‘deep cuts in emissions’ and call for the development of a ‘long-term global goal for emissions reductions’, but they do not specify any degree or timing for the cuts or reductions. The EU had called for developing country emissions to be 25-40 per cent below 1990 levels by 2020 and to be ‘well below half’ of 2000 levels by 2050, but the US strenuously resisted these calls. The Bali Convention decisions merely footnote the conclusion of the International Panel on Climate Change in its Fourth Assessment Report that ‘under most equity interpretations’ developed country emissions must fall by 10-40 per cent by 2020.

More detailed are the decisions taken at Bali under the Protocol, which Australia has now ratified but the US, now alone among industrialised countries, has not. The Protocol decisions note that global emissions must peak in 10 to 15 years and decline to well below half of 2000 levels by 2050, and that this requires developed countries as a whole to reduce their emissions to 25-40 per cent below 1990 levels by 2020.

Nevertheless, the decisions taken at Bali, under the Convention and under the Protocol, leave wholly open both the form and level of any future commitments to emissions limitations.

But the Bali talks did make important decisions in other areas.

There was resolution of long-standing differences on the Adaptation Fund established under the Protocol to assist developing countries that are particularly vulnerable to the impacts of climate change. The differences arose in the following facts: the Adaptation Fund is supported by a 2 per cent levy on projects in developing countries which generate emissions credits through the Protocol’s Clean Development Mechanism (CDM); this is unlike other funds under the Convention and the Protocol, which are supported by contributions from developed countries. Developing countries argued, accordingly, that the Adaptation Fund should not be administered by the Global Environment Facility (GEF) (which is dominated by developed countries) but by a separate administration in which developing countries are more equitably represented. At Bali, it was agreed³ to establish a 16-member Adaptation Fund Board to manage the fund and to recommend strategic policies and priorities. The GEF would act as the fund’s secretariat and the World Bank as its trustee. The Adaptation Fund is currently worth about €37 million and is expected to increase very substantially in value as the number of CDM projects continues to grow.

There was also agreement to reconstitute the Expert Group on Technology Transfer (EGTT). Prior to Bali, developing countries had sought to establish the EGTT as a standing body with decision-making powers, and to create a new fund allowing developing countries access to technologies by ‘buying out’ intellectual property rights, and developed countries had resisted this initiative. But at Bali, it was agreed⁴ to reconstitute the EGTT for a further five years with new and wide-ranging terms of reference including consideration of, among the options for technology funding, a venture capital fund related to, or included in, a multilateral financial institution.

Reduced Emissions from Deforestation and Degradation in Developing Countries (REDD) were also key issues at Bali. Actions to reduce or avoid deforestation do not presently qualify to generate emissions credits under the Protocol. In the last two years, developing countries have advanced two principal proposals: one would entitle countries which reduce deforestation to emission credits for reduced deforestation; the other would entitle countries which reduce deforestation to payments from an international fund rather than to emissions credits. At Bali, it was agreed⁵ to encourage demonstration projects and the use of ‘indicative guidance’ (spelt out in conference document) for those projects, and to appoint the Subsidiary Body for Scientific and Technological Advice to undertake a program of action focused on developing emissions baselines against which reductions can be measured, and to report on that program to the 14th Conference of the Parties to the Convention in Poznan in December 2008. A related development at Bali was the launch by the World Bank of its Forest Carbon Partnership Facility (FCPF)⁶ consisting of two component funds (of US$100million and US$200 million respectively) for ‘baseline capacity building’ and for project funding.

Finally, the Bali conference advanced consideration of the eligibility of geological carbon capture and storage projects for inclusion in the CDM. This issue was considered as part of the agenda at Bali of the Subsidiary Body for Scientific and Technological Advice (Body)⁷ whose conclusions at Bali⁸ were to invite submissions for consideration at the Body’s next meeting in June 2008 towards a report to the 14th Conference of the Parties to the Convention in Poznan in December 2008. These conclusions were adopted by the parties at Bali⁹.

Full details of Australia’s responses to these developments at Bali, particularly as regards emissions targets, await the outcomes of the Garnaut Climate Change Review¹⁰. It remains the case in Australia that there is a need for a broad framework to guide government intervention in areas related to climate change.

In the meantime, the Australian Government has ratified the Kyoto Protocol, it has confirmed that a national emissions trading scheme (ETS) will be introduced ‘by 2010’, and it has announced that, in 2008, it will set interim emissions targets (for example targets to be met by 2020) once it has received analyses from Treasury and from the Garnaut Review. It has also committed to a broad range of related domestic initiatives including (among other things) ensuring that at least 20 per cent of Australia's electricity supply (approximately 60,000 GWh) is generated from renewable sources by 2020¹¹.

At present, the details of the Australian Government’s proposed ETS are not known. Presumably, it will aim to reduce Australia’s GHG emissions to 60 per cent of 2000 levels by 2050, the target announced prior to the recent federal election in Labor’s Action Agenda for Climate Change on 30 May 2007. Otherwise, the extent (if any) to which the current Australian Government’s scheme will depart from the detailed policy positions contained in the former Australian Government’s Australia’s Climate Change Policy released on 17 July 2007 is not yet known. It is also uncertain to what extent the current Australian Government will follow the former Australian Government’s discussion paper on Abatement incentives Prior to the Commencement of the Australian Emissions Trading Scheme. Important in these regards will be the conclusions of the Working Group on Climate Change and Water which was established at the 20th meeting of the Council of Australian Governments (COAG) on 20 December 2007. The objectives of the Working Group include the establishment of a national ETS incorporating state schemes and of a nationally-consistent set of climate change measures to support the ETS. The following factors are likely to figure in the considerations of the Working Group: on 5 December 2007, draft comprehensive federal greenhouse cap-and-trade legislation, known as the Liberman-Warner Climate Security Act, was introduced into the US Senate; on 23 January 2008, the European Commission is due to present a major climate and energy package which will include proposals for EU Directives concerning greenhouse gas emission reduction targets for the EU Member States and the amendment of Directive 2003/87/EC establishing the EU ETS and renewable energy targets for 2020. The latest draft of the EU proposal concerning emissions targets recalls the agreement of the EU leaders on 8 March 2007 to cut the EU greenhouse gas emissions by 20 per cent on 1990 levels by 2020. The draft proposal on the review of the EU ETS introduces a cap on emissions from the installations covered of 21 per cent on 2005 levels by 2020, as well as further provisions which will operate in the period 2013 to 2020. The draft proposal confirms the inclusion of aviation in the EU ETS as of 2013 and postpones the decision on the inclusion of maritime and road transport probably to 2011.

While uncertainty remains on the details of an Australian ETS, what is presently clear is that the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act) will be retained by the current Australian Government. That Act was introduced by the former Australian Government and came fully into effect on 29 September 2007, prior to the recent Federal election, albeit that regulations under it were awaited. The new Federal Department of Climate Change is currently preparing a Policy Paper on the NGER Act and proposed regulations for release on 4 February 2008 for public comment. The aim is that all regulations under the Act will be in effect by 1 July 2008. The central purpose of the NGER Act is to bring about the registration of certain types of corporations. The Act obliges registration under the Act if the corporation’s group exceeds certain energy-usage or greenhouse-gas-emission thresholds. The Act enables registration under the Act if one or more members of the corporation’s group is undertaking or proposing to undertake a ‘greenhouse gas project’, namely, an activity or series of activities designed to remove or reduce the emission of greenhouse gases and which meet the requirements specified in the regulations.

Finally, a possible significant outcome of Australia’s ratification of the Kyoto Protocol is the inclusion of a ‘greenhouse trigger’ in the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) addressed to projects which, in construction or operation (or both), will emit greenhouse gases and requiring those projects to undergo the impact assessment before being approved under that Act. The current Australian Government has promised to introduce a climate change trigger in the EPBC Act so that major new projects are assessed for their climate change impact as part of any environmental assessment process¹².

Clearly, real policy to stabilise the concentrations of greenhouse gases in the atmosphere is only just beginning to be formulated, internationally and in Australia. But equally clearly, the momentum toward the development and implementation of that policy is building strongly.

Footnotes

1. Available here
2. Available here
3. Available here
4. Available here and here
5. Available here
6. See the news release
7. Available here
8. Available here
9. Available here
10. See the Garnaut Review. The Garnaut Climate Change Review is a study by Professor Ross Garnaut, commissioned by Australia's State and Territory Governments on 30 April 2007. The Australian Government recently confirmed its participation in the Review. The Review will examine the impacts of climate change on the Australian economy, and will recommend medium to long-term policies and policy frameworks. The Terms of Reference for the Review are available here. The Review's final report is due on 30 September 2008: a draft is due by 30 June 2008.
11. At the 20th meeting of the Council of Australian Governments (COAG) on 20 December 2007, the Australian Government stated that an interim report on the progress towards this commitment will be delivered at the March 2008 COAG meeting, and that 'a final design' would occur by September 2008.
12. See Chapter 9.

For more information please contact

Name : John Taberner
Title : Partner
Office : Sydney
Phone : +61 2 9225 5427
Fax : +61 2 9322 4000
Email : john.taberner@freehills.com