Sao Paulo Workshop 7-9 August 2006 Overview of Sao Paulo Proposal

1. S B A I C Sao Paulo Workshop 7-9 August 2006 Overview of Sao Paulo Proposal for an Agreement on Future International Climate Policy

2. S B A I C Core Elements of Sao Paulo Proposal • Article 2 Medium & Long Term Goals • Common but Differentiated Quantified Commitments • Annex I/B Parties Quantified Commitments • Non Annex I/B Parties Sustainable Development Commitments • Carbon Markets • Technology • Adaptation • Universality & Stability

3. S B A I C Article 2 Medium & Long Term Goals Adoption would enable: • Better evaluation of progress by the regime as a whole • Better alignment of climate policy with science • No reason to interpret Article 2 to focus solely on GHG concentrations – link to SD

4. S B A I C Article 2 Possible Set of Indicators • a maximum temperature increase of 2oC by 2100 • a maximum atmospheric concentration of CO2 such as 450 or 550 ppmv by 2050 • greenhouse gas emissions by Annex I Parties to the Convention at least 15 per cent below their combined 1990 emissions in 2020 • global food supply sufficient to reduce hunger by A by [date] • maximum loss of natural ecosystems of X by [date ] • Others? E.g. increased share of renewable energy of X by [date]? Increased access to low carbon energy?

5. S B A I C Annex I/B Parties Quantified Commitments • 2008-2012: Kyoto commitments & compliance features retained • 2013-2018: greater choice of targets more adjustable to fit changing economic circumstances, including hardship • An Annex I/B Party may choose a commitment that is a combination of: • an absolute emissions limit (tCO2e/year); • emissions intensity limit (tCO2e/unit GDP); and • new and additional funding (USD per year) to a maximum of 10% of its commitment (based on international carbon price)

6. S B A I C Automatic Extension of Annex I/B commitments • Post 2018, commitments made more stringent automatically on an annual basis but always 5 years ahead of taking effect e.g. 2019 commitments agreed in 2013 & 2020 in 2014 • Commitments only become more stringent if compliance through trading is possible or becoming less expensive • Proposed formula means excess allowances/hot air gradually eliminated

7. S B A I C Automatic Extension of Annex I/B commitments • Smaller more frequent adjustments promote compliance culture • Current 5 yearly pattern encourages hold outs & use of future commitments negotiations to renegotiate existing targets • Automatic extension generates regulatory certainty, technology push & pull & global lifestyle changes • More reassurance that dramatic, adverse economic circumstances will not get ignored for 5 years

8. S B A I C Economic Hardship • An Annex I/B Party whose real GDP has declined by more than 1% during a year may request that its target be equal to its emissions for that year

9. S B A I C Sustainable Development Commitments for Non-Annex I Parties • For developing countries CC is part of many other problems • Annex I/B type targets not effective or appropriate: limited capacity, rapid economic, social and demographic changes in global context • Proposal: allow DCs to adopt such targets but main focus of next round: rapid integration of CC into SD policies & measures (SD-PAMs)

10. S B A I C Non –Annex I Parties SD-PAMs • Create a new annex listing non-Annex I Parties that agree to undertake voluntary actions to achieve SD and to report regularly on specific actions through national communications • Actions earn political recognition but do not generate tradable credits (programmatic CDM exists to achieve this purpose) • Easier funding for SD-PAMs • Either through special procedures for Convention/Kyoto funding mechanisms OR • Direct non-Convention/Kyoto funding to SD-PAMs through IFIs, or special new global fund) • Contribution of such SD-PAMs could be evaluated every 5 years as part of progress towards Article 2 medium & long term goals

11. S B A I C Non –Annex I Parties SD-PAMs • Development of SD-PAM related methodologies by Consultative Group of Experts by 2008 and agreement of these at time of adoption of agreement in 2009 • Secretariat produces dedicated compilation & synthesis report or “register” on SD-PAMs with quantified reductions where possible • First report end of experimental phase 2012 • Second report by 2017 to contribute to overall review of agreement and every 5 year thereafter

12. S B A I C Limits on transfers of CERs for Non –Annex I Parties • An overall limit on transfers of CERS and country specific limits on transfers by non-Annex I Parties since 2005 • Once a limit is reached, a non-Annex I Party is expected to consider adopting a quantified commitment • If it decides not to, it is deemed to withdraw & loses access to benefits

13. S B A I C Limits on transfers of CERs for Non –Annex I Parties • Limits • increase with population • decrease with per capita emissions • decrease with per capita GDP • Limits on transfers frontload domestic action by Annex I Parties, generate a more steady demand for CDM & distribute its benefits more widely (e.g. Africa/SIDs/GRULAC) • Provide incentives for improved regime effectiveness • without being prescriptive • without setting arbitrary graduation deadline unrelated to institutional capacity to undertake climate mitigation • Further work on when limits reached needs to be done…

14. S B A I C Carbon Markets • Carbon markets boosted by regulatory certainty & increased demand from Annex I Parties • Clean Development Mechanism continues with minor improvements • current CDM levy could provide €325million up to 2012 • 2% levy on CDM extended to Joint Implementation and to International Emissions Trading • More modelling needed to elaborate funding potential

15. S B A I C Compliance • Compliance assessed every five year • Penalty remains the same: 30% of excess emissions

16. Adaptation Proposals • Inclusion increases chances of agreement • A pilot phase of “adaptation activities implemented cooperatively” in 2008 • A “pilot phase” shifts emphasis from • inaction/workshops • Funding stand alone projects • Towards learning-based policy approach that promotes programmatic action • A new Adaptation Experts Committee (ACE) to provides coherence/guidance

17. Adaptation Funding • Requirements to screen infrastructure & investment for climate risks from 2008 • Enhanced funding from better resourced Adaptation Fund • In longer term: • insurance mechanisms elaborated by 2010 for extreme events • Institutional & policy linkages created with development & disaster related international funds as these key to long term improvements in adaptive capacity/resilience

18. S B A I C Technology Transfer • Long term framework promotes global technology pull & push • Improved access to information to proprietary technologies • Process to resolve complaints about restrictions on technology transfer

19. S B A I C Technology Research and Development • Technology Fund resourced by • JI/ET levy • In-kind contributions private sector • Private individuals/foundations? • Funding provided to non-Annex I Parties for: • collaborative projects to develop new technologies through international research efforts

20. S B A I C Universality and Stability • Memoranda of Understanding (MOUs) could also be agreed to extend scope of regime by including agreements covering: • aviation and marine • global industries e.g. aluminium • Proposal allows non-Parties to agree a MOU which could ensure they are making comparable efforts & do not benefit from staying out (as the Montreal Protocol does) • Competitive effects after 2012 become more significant if entire countries/sectors stay out

21. S B A I C Universality and Stability • Competitive effects after 2012 become more significant if entire countries/sectors stay out • Proposal allows non-Parties to agree a MOU which could ensure they are making comparable efforts & do not benefit from staying out (as the Montreal Protocol does) • MOUs could also be agreed to extend scope of regime by including agreements covering: • aviation and marine • global industries e.g. aluminium