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IISD Second Annual Forum of Developing Country Investment Negotiators: 2-4 Nov 2008

IISD Second Annual Forum of Developing Country Investment Negotiators: 2-4 Nov 2008. Climate Change and International Investment Agreements Riekie Wandrag. Climate Change / Global Warming. United Nations Framework Convention on Climate Change 1992 Kyoto Protocol (into force Feb 2005)

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IISD Second Annual Forum of Developing Country Investment Negotiators: 2-4 Nov 2008

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  1. IISDSecond Annual Forum of Developing Country Investment Negotiators: 2-4 Nov 2008 Climate Change and International Investment Agreements Riekie Wandrag

  2. Climate Change / Global Warming • United Nations Framework Convention on Climate Change 1992 • Kyoto Protocol (into force Feb 2005) • Obligations on Industrialised Countries to reduce greenhouse gas emissions as per agreed targets between 2008 - 2012 (Annex 1 countries) • No reduction targets for Developing (non-Annex 1) countries

  3. Kyoto Protocol: CDM • Provides for “trade-off” in emission reductions (emissions trading) • Article 12: Clean Development Mechanisms • Allows developed country to outsource obligations to reduce emissions to developing country CDM is a tool for leveraging foreign investment for sustainable development into developing countries

  4. CLEAN DEVELOPMENT MECHANISMS (CDM) • REQUIREMENTS: • Located in Non-Annex 1 Developing Country (acceded to Kyoto Protocol) • CDM must lead to long term emissions reduction • Must assist in achieving sustainable development • Must lead to technology transfer • Additionality (CDM aspect not part of business-as-usual of project) Result in tradable CER’s (Certified Emissions Reductions or Carbon Credits)

  5. Investment in Climate Change • Climate Change investment opportunities creates opportunities for sustainable development • Examples of Climate Change Investments: CDM’s Clean energy projects (wind, solar energy) Timberland / reforestation

  6. Implications for Investment Agreements • General: careful drafting! • Definitions of Investment / Investor • Policy space / Public Welfare exceptions • Expropriation? • Dispute Resolution / arbitration clauses • Choice of law

  7. Further implications for Developing countries re CDM’s • Ratify & implement Kyoto Protocol • National Legislation & Policy formulation • Clear regulatory frameworks required on: • Environmental Law • Energy Law • Investment Law / regulation • Sustainable Development Policy • Establishment of DNA • Regional harmonisation of policies?

  8. DESIGNATED NATIONAL AUTHORITY (DNA) • To host CDM projects, country must set up Designated National Authority (DNA) • DNA must certify that CDM contributes to sustainable development in order to achieve carbon credits i t o Kyoto Protocol • Country can determine own criteria for sustainable development

  9. SOUTH AFRICAN EXAMPLE • SUSTAINABLE DEVELOPMENT: • 4 Main Criteria • Economic development • Social development • Environmental compliance • General Project Acceptability (equality of distribution of project benefits)

  10. Other implications • Need for capacity building / training • Current efforts in Africa: • Nairobi Framework to expand beneffits of CDM in Africa • Established 2007 by UNDP, UNEP, WB, AFDB & UNFCCC • CDM Capacity building project in Ethiopia, Kenya, Mauritius, Mozambique, Tanzania & Zambia.

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