The Ecosystem Marketplace's V-Carbon News
Carbon beyond Kyoto... Carbon for the Rest of us

News this December all focused on Bali, Indonesia, a small island that became the epicenter of a veritable tsunami of climate change news as it hosted the annual meeting officially known as "the Thirteenth Session of the Conference of the Parties to the UN Framework Convention on Climate Change (COP 13) and the Third Session of the Meeting of the Parties to the Kyoto Protocol" (or, as insider called it, COP/MOP 3). The supposed mission of the event–which brought together over 10,000 attendees from all over t world—was for countries to agree on a post 2012 framework for internationally reducing greenhouse gas emissions. The question, in other words, was: What happens in a "post-Kyoto" world?

After two weeks of negotiations, with the United States being widely blamed for obstructionism, countries did not leave the plenary room with the precise emissions reduction targets that many in the environmental community may have wanted. However, by Saturday –a day later than expected and following a dramatic U-turn by the United States delegation—delegates did leave with the seemingly innocuous consensus "that deep cuts in global emissions will be required to address climate change." Behind this obvious statement, however, lies the seed of what could become a radical shift in approach on climate change. In addition to the consensus, the Bali meeting endorsed a big picture 'roadmap' for internationally reducing emissions post 2012, and charted a course for committees to delve into the details over the next two years. So, while Bali didn't itself come up with the edifice that will help us address the worst effects of climate change, it set the foundation for that partnership to be built over the next two years.

Major landmarks in the Bali roadmap include: (i) a plan to build a new Adaptation Fund financed by a 2% levy on CDM projects; (ii) continued support for clean technology transfer; and (iii) a new approach to the role of forests in efforts to address climate change.

The role that forests and deforestation played at the Bali conference is worth highlighting, not least because, for the first time in over a decade, delegates formally acknowledged that deforestation was a signification source of greenhouse gas emissions (contributing around 20% of global emissions). To address this issue, the Bali roadmap mandated further research on the issues surrounding creating financial incentives for avoiding deforestation and created a new Ad Hoc Working group to hammer out the devilish details of reducing emissions from deforestation and degradation (or REDD, in the acronym-filled world of the UN) over the next two years. Delegates also adopted a decision to support REDD 'demonstration' projects in developing countries. In the first of a three part series (www.ecosystemmarketplace.com) on REDD, the Ecosystem Marketplace explores the diversity of views on how to move forward on these issues.

Beyond this new approach to forests and deforestation, by the end of the two week conference, Kyoto signatories were also able to welcome a new member into the Kyoto ratification circle as Australia's newly elected Prime Minister, Kevin Rudd, officially ratified the treaty. The move left the United States standing virtually alone in opposition to the Protocol. As Australia incorporates Kyoto into policies at a national level, the country will need to address how to blend two already thriving non- Kyoto carbon markets (the New South Wales Greenhouse Gas Reduction Scheme and a thriving over-the-counter voluntary market) into its overarching national emissions reduction goals.

While the "center ring" of the three-ring circus that was Bali focused on Kyoto and on negotiating the protocol's future, numerous stakeholders and side events were abuzz about the "non-Kyoto" carbon markets. In addition to the official US delegation representing the Bush Administration's views, there were also numerous representatives from U.S.-based NGO's scattered throughout dozens of side events in Bali, proving that U.S views on this issue are anything but monolithic. Adding to the multitude of views coming from the land of Uncle Sam was former Vice President and recent Nobel laureate, Al Gore, who called on delegates to be aware of the fact that "Over the next two years, the United States is going to be somewhere it is not now." He called on the conference to anticipate these changes and prepare for them. Echoing these sentiments, U.S. Rep. Jay Inslee, a democrat from Washington state and member of the House Energy and Commerce Committees, noted that many U.S. government officials were not present in Bali because they were busy negotiating a landmark climate change bill for the country, the Lieberman Warner Bill. He added that "The U.S. is about to join the rest of the world." Both these sentiments were given further credence when, on December 5, the U.S. Senate Environment and Public Works Committee passed the Lieberman Warner Climate Bill.

At COP-MOP 3, voluntary carbon markets garnered a surprising amount of space in the minds of delegates. For example, with the acknowledgement that deforestation is a major source of greenhouse gas emissions, a variety of project developers seeking a means of conserving forests via carbon finance hotly debated the risks and benefits of trying to sell avoided deforestation carbon credits into the voluntary markets. One attendee noted that, at the regulatory level "There is so much uncertainty with REDD now... so we're looking at the voluntary market, there my biggest concern is finding a buyer." Even the World Bank's newly launched Forest Carbon Partnership Facility is looking towards the voluntary markets as a potential source of funds.

Beyond Bali –and despite the fact that developments emanating from Bali were overwhelming—there was also news that trading on the Chicago Climate Exchange doubled in 2007 over and above 2006. Also on the exchange front, a variety of banks, brokers, and other financial institutions made waves last week when they launched the "Green Exchange", a new international trading platform for carbon credits from Kyoto CDM, the EU Emissions Trading Scheme, as well as the voluntary markets (in addition to other emissions credits, renewable energy, and a variety of environmental markets). December was a busy month indeed! Read on to learn more.

—The Editors

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