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IETA Post-2012 Principles

IETA Post-2012 Principles

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Published by ieta2
This document lays out the views of the International Emissions Trading Association (IETA) in relation to the development of a post-2012 international climate change agreement. These positions explicate how the agreement could best draw in private sector participation and capitalize upon the strengths of the private sector in addressing climate change efficiently and effectively. This document is produced as a result of IETA’s efforts to provide clear, relevant private sector input into the negotiation process. IETA aims to clarify the basic requirements for essential private sector participation as well as identify the practical implications of proposed new treaty arrangements for the private sector.
This document lays out the views of the International Emissions Trading Association (IETA) in relation to the development of a post-2012 international climate change agreement. These positions explicate how the agreement could best draw in private sector participation and capitalize upon the strengths of the private sector in addressing climate change efficiently and effectively. This document is produced as a result of IETA’s efforts to provide clear, relevant private sector input into the negotiation process. IETA aims to clarify the basic requirements for essential private sector participation as well as identify the practical implications of proposed new treaty arrangements for the private sector.

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Published by: ieta2 on Jan 13, 2011
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01/13/2011

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Principles for a Post-2012International Climate Change Agreement
 
This document lays out the views of the International Emissions TradingAssociation (IETA) in relation to the development of a post-2012 internationalclimate change agreement. These positions explicate how the agreement couldbest draw in private sector participation and capitalize upon the strengths of theprivate sector in addressing climate change efficiently and effectively. Thisdocument is the first produced as a result of IETA’s efforts to provide clear,relevant private sector input into the negotiation process. In this work andsubsequent documents, IETA aims to clarify the basic requirements for essentialprivate sector participation as well as identify the practical implications of proposed new treaty arrangements for the private sector.
IETA’s views are shared with regard to the following issues:
Goals and TargetsCommitment Period DurationEnforcementNew Forms of Differentiation and CommitmentInventories and MRVFlexible Mechanisms
 
Transition Period ManagementSupplementarityCarbon Market DesignEmission Reduction and Sequestration in the Land-Use Sector
 
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1. Goals and Targets
IETA believes that the Parties should agree firm targets for the next commitment period;indicative medium-term (~2030) targets that lay out a series of ‘rolling targets’ forsubsequent commitment periods; and a long-term (~2050) global goal. The Bali ActionPlan makes it clear that these goals and targets should be in accordance with theprinciple of common but differentiated responsibilities and respective capabilities, andpredicated on the need to ensure comparability of effort among all Annex-I Parties.
 To ensure the predictability and effectiveness of international climate efforts, IETA believesthat it is essential that the Parties establish a clear timeframe of emission reduction goals andtargets that extend over the next several decades, and that those goals and targets areenshrined in national legislation to ensure their credibility.
 
The provision of such goals, and their subsequent translation into domestic legislation, willensure that carbon pricing becomes embedded in long-term capital asset planning. Long-termcertainty of carbon constraints is required to drive the research, development, and deploymentof new technologies in countries facing emissions caps - especially in key energy productionand industrial sectors - as well as to enhance the predictability of carbon finance availabilityfor countries whose emissions remain uncapped.IETA advocates the use of ‘rolling targets’ as a means of strengthening the credibility of goalsand targets set
beyond 
the next commitment period. Rolling targets establish a series of indicative targets for successive commitment periods. They leave some flexibility toincorporate scientific or political developments through allowing the targets to be setanywhere within a small, pre-established range. A series of rolling targets, if incorporated indomestic legislation, would go a long way to ensuring the credibility of medium-term emissionlimitations by setting each Party firmly on a trajectory toward the medium-term target itagreed at the international level.
2. Commitment Period Duration
To accommodate the need for long-term investment certainty as well as the need forflexibility to set targets based on scientific or political developments over the medium-term, IETA advocates for the adoption of commitment periods with a duration of at least8 years
combined with
a system of rolling targets, as explained above.
 
For the private sector, longer commitment periods provide increased predictability andcertainty for business decisions and so facilitate private sector investment in the necessaryresearch, development, and deployment of low-carbon technologies. Longer commitmentperiods also give investors increased flexibility to deploy resources for emission reductionwhen most cost-effective for their business as well as to offset short-term fluctuations inemission levels resulting from economic cycles or unpredictable and one-off occurrences, likenatural disasters. If no other factors bore on the decision of commitment period duration,IETA would advocate, very simply, for very long periods, approaching twenty years.IETA understands, however, that there will likely be a need to allow for adjustments toemissions limits based on political developments and improved scientific understanding of theclimate situation, within shorter periods of time than would be ideal for investor certainty. Forthis reason, IETA advocates the aforementioned hybrid solution that aims for a strong,credible signal of a long-term carbon price (provided by rolling targets of a binding nature)while maintaining flexibility for businesses (through a minimum 8 year commitment period)and flexibility for political and scientific developments (through the provision of a range of acceptable targets, within which the fixed target will be decided based on the available
 
3scientific data and political developments at the time). Such a system would be similar tothose proposed for the UK and Australia.The choice of 8-year periods would bring the international commitment period in line withcommitment periods already established at the domestic level in some countries. Privatesector capital has already been adjusted to these established domestic emission tradingsystems and, once in motion, investment planning is not easily redirected or enhanced. IETAbelieves, therefore, that accommodating existing policy would be beneficial but is not the onlyway forward.
3. Enforcement
 IETA understands the difficulties of making targets formally binding under international law,but clear targets with enforcement provisions at the international level should lead to theestablishment of strong and enduring domestic policies. As implied in the previous sections, itis the strength of domestic policies that guides the private sector and drives investor behavior.IETA believes that international climate policy enforcement between governments should takeplace through the UNFCCC enforcement regime, which should be made more effective thanthe current Kyoto provisions have proven in practice. Whether under UNFCCC or tradeinstruments, Parties should agree to use the multilateral system of settling disputes instead of taking action unilaterally.
4. New Forms of Differentiation and Commitment
IETA does not take positions on what the commitments of Parties should be, or how theyshould be differentiated under the UNFCCC and its Protocols. IETA’s comment on these issuesis a practical reaction to strong indications that new forms of differentiation and commitmentmay exist among the Parties post-2012. These indications include the submissions fromParties to the UNFCCC noting that possibility as well as the Bali Action plan’s assertion that allcountries should act to address climate change in
 
accordance with the principle of commonbut differentiated responsibilities and respective capabilities.If such a situation were to arise, IETA, first and foremost, believes that clarity in terms of eachParty’s commitment, status, and legal obligation under the treaty is essential for the privatesector in each country to know and best prepare for its role. It is critical, therefore, that thecriteria for differentiation is clearly elaborated so to allow for forewarning about when andhow certain Parties, and the entities operating within them, will be expected to makecontributions.In addition, to accommodate the need to move to longer commitment periods, it is essentialthat the next agreement clearly provides procedures by which non-Annex I countries are able
IETA believes that the new international climate change agreement should include clear,meaningful, credible, and enforceable commitments for appropriate national andinternational action by Parties to reduce greenhouse gas emissions and to monitorprogress toward them.
 
IETA believes that changes to the current state of differentiation among the Parties,whether through the inclusion of new countries under Annex I or the incorporation of new forms of commitment under the treaty, must be guided by clear criteria madeexplicit in the new agreement. IETA also believes that any new forms of commitment,such as the use of sectoral targets, should only be agreed after careful consideration of and provision for the challenges likely to arise in their implementation and monitoring.

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