Heleen de Coninck (ECN/IVM) ECN side-event COP13 – December 7th, 2007 Fragmentation of international regimes: cap-and-trade agreements and TOAs Heleen de Coninck (ECN/IVM) ECN side-event COP13 – December 7th, 2007

Introduction Aim: To explore the consequences of co-existing cap-and-trade and technology-oriented agreements in an international climate regime Project: Compatibility of TOAs with cap-and-trade approaches (with VU University of Amsterdam and Utrecht University) Acknowledge Dutch government for funding and support, however, this presentation is not meant to represent the views of the Dutch government

Methodology Identify cap-and-trade and TOA variants Analyse all combinations and identify the major frictions if they would co-exist TOAs: CCS and sugarcane-based bioethanol Cap-and-trade variants: Kyoto-Continued Multistage: no-lose/intensity Rules and modalities of co-existence: Separate: e.g., APP and Kyoto Linked: e.g., ETS and CDM Joined: e.g., CDM and Kyoto

Institutional analysis: bioethanol Kyoto Continued In this case, all countries in the TOA are also Kyoto countries. TOA introduces technology bias in the EU Kyoto-continued-implementation. If side-CDM arrangement can be made, possibly a geographical bias in CDM towards Africa. The agreement has no consequences for Brazil. Multistage (no-lose and intensity) African and EU countries can trade similarly as in the Kyoto-continued case. The TOA introduces a technology bias in the EU-implementation, and possibly also a geographical bias in policy-CDM towards Africa. The TOA does not affect Brazil’s multi-stage targets as Brazil is only technology supplier in the TOA.

Institutional analysis: CCS Kyoto Continued US could exchange CCS-based credits with the Kyoto-continued, although a methodologically challenging baseline would be needed. To guarantee environmental integrity of the Kyoto-continued agreement, the baseline of the EU or Russia could be adopted. A policy-CDM-type of agreement could be agreed between China and India, as Kyoto-ratifying countries without a binding target. Multistage (no-lose) For US, Russia and EU: same as Kyoto-continued For China and India, risk of double-counting with no-lose baseline. Solution: take CCS agreement into account in baseline. Multi-stage (intensity) Same as no-lose. Accounting may be more complex

Consequences of post-2012 patchwork TOA always causes a “technology bias” in a technology-neutral cap-and-trade treaty, so reduces cost-effectiveness Fragmentation of the international institutional landscape: Several treaties with similar aim but different sets of rules Problems with consistency, accountability and transparence More possibilities for power play; has been shown to weaken weak Parties Avoid fragmentation of the climate regime! TOA and cap-and-trade regimes both coordinated under one UNFCCC umbrella

Thank you More information and report copies: Heleen de Coninck Energy research Centre of the Netherlands Unit Policy Studies Radarport 60/P.O.Box 56890 1040 AW Amsterdam deconinck@ecn.nl Tel. +31-224-564316