Australia: Momentum building towards Paris Convention on Climate Change

Introduction

The last few weeks have seen an increasing number of announcements and developments across the globe as the momentum builds towards the critical international climate change negotiations which will take place in Paris at the end of the year. These negotiations are conducted under the United Nations Framework Convention on Climate Change (Convention, also known as the "UNFCCC"), and this year it is anticipated that the negotiations will produce an agreement which lays out a plan for global greenhouse gas reductions for the post 2020 period.

This update provides a high level overview of what can be expected from the Paris climate change negotiations, and the events that will take place in the lead up to the intense two week period of negotiations in December. It also highlights a number of recent developments which have the potential to have significant implications for the resource and energy sectors, and which are helping to fuel the optimism that a successful outcome may be able to be achieved in Paris.

Recent developments and announcements

The last few weeks have seen a number of announcements and developments which are evidence of a growing shift toward recognising the need to act seriously and quickly on the difficult issue of climate change mitigation (reduction of greenhouse gases). Of note, there are a number of recent developments which foreshadow the increasing moves towards the transformation of the global energy sector.

These announcements and developments include:

• A decision by the Parliament of Norway to require the country's US$890 billion sovereign wealth fund to limit holdings in companies that produce or burn coal. In particular, the following companies will be divested: mining companies that derive more than 30% of their revenues from coal and power companies that generate more than 30% of their energy from coal. Analysts believe 122 companies will be affected resulting in the fund selling off assets worth around US$8 billion
• South Korea scrapping plans to build four coal-fired power plants in favour of supporting more nuclear energy use for power generation
• Legislation being progressed in California to require state pension funds to divest from coal
• A statement by the G7¹ leaders that the world should phase out the use of fossil fuels this century. At a recent G7 leaders meeting in Bavaria, Germany, the leaders said that in line with scientific findings, "deep cuts in global greenhouse gas emissions are required with a decarbonisation of the global economy over the course of this century". The seven leaders said they supported cutting emissions by 40 per cent to 70 per cent by 2050 from 2010 levels
• A letter to the UNFCCC from European oil and gas companies, including BP, Statoil, Shell, Eni, BG Group and Total asking for "clear, stable, long term, ambitious policy frameworks" to be established at Paris, and stating that "a price on carbon should be a key element of these frameworks". This letter called on governments, including at the UNFCCC negotiations in Paris and beyond, to:
• • introduce carbon pricing systems where they do not yet exist at the national or regional levels, and
  • create an international framework that could eventually connect national systems.
• The release of BP's annual Statistical Review of World Energy, which found, among other things, that:
• • energy use and economic growth diverged last year
  • China's energy demand grew at its slowest pace since 1998, and
  • global coal output was down -0.7% in 2014 amid flat use in China
• Electric car Tesla entrepreneur, Elon Musk's, release of his PowerWall battery storage system
• The release of a new International Energy Agency report, which includes a new scenario - the "bridging scenario" - which envisages a peak in coal consumption by 2020, and
• Release of the Pope's encyclical on 18 June 2015, which stated that "there is an urgent need to develop policies so that, in the next few years, the emission of carbon dioxide and other highly polluting gases can be drastically reduced - for example, substituting for fossil fuels and developing sources of renewable energy" and called for fossil fuel-based technology to be "progressively replaced without delay".

Why is Paris significant?

In 2011, two years after failing to reach consensus on a global climate change agreement in Copenhagen in 2009, the "Parties to the Convention" (essentially the global community, because almost all countries in the world are parties to the Convention), agreed to establish a process under the Ad Hoc Working Group on the Durban Platform for Enhanced Action (known as the ADP) to:

It is anticipated that the 2015 Agreement will seek to put in place a regime which can set the world on a pathway of emissions reductions to limit temperature increase to 2°C² by the end of the century. Implementation of the 2015 Agreement will then take place from 2020.

The 2015 Agreement is expected to be adopted by the Parties to the Convention at the climate change negotiations in Paris, which will be held from 30 November 2015 to 11 December 2015 (Paris negotiations).

Two of the key steps which need to happen ahead of the Paris negotiations are:

• Countries submit their intended nationally determined contributions; and
• Progression of a draft negotiating text for the 2015 Agreement.

INDCs

In the Lima Call for Climate Action adopted at COP 20 in December 2014, countries were invited to submit their "intended nationally determined contributions" (INDCs) well in advance of Paris, and by the first quarter of 2015 by those countries ready to do so.

INDCs are essentially each country's indication of their post 2020 emissions reduction targets and proposed actions, having regard to their own domestic circumstances and capabilities. They can also cover other matters, such as a country's adaptation strategy, or the support needed to adopt low carbon pathways.

While most countries have begun preparing their contributions, to date only 12 INDCs have been formally communicated to the UNFCCC Secretariat (representing 40 countries, due to the combined EU communication). You can follow the communication of INDCs here. Australia is expected to convey its INDC to the UNFCCC Secretariat in July.

On 1 November 2015, the UNFCCC Secretariat will publish a synthesis report on the aggregate effect of the INDCs submitted. From this, it will be possible to assess whether the collective targets (and actions) will achieve the aim of limiting temperature increase to 2°C by the end of the century (Many commentators consider this will be highly unlikely).

Drafting the text

The drafting of the text for the 2015 Agreement is already well underway. The draft text started in Lima in December 2014, was adapted in Geneva in February 2015 and most recently was further discussed in Bonn in June 2015. The negotiating text, known as the Geneva Negotiating Text, is currently 90 pages long and can be found here. It is expected, however, that a much shorter version is likely to ultimately be agreed in Paris (For example, the Kyoto Protocol is only 21 pages). There is, therefore, a significant amount of negotiation to still take place over the next 5 months.

The lead up to Paris

The following are some of the key events that are to take place over the next 5 months:

• July 2015 – Australia's INDC is expected to be submitted to the UNFCCC Secretariat, as well as INDCs from China, New Zealand and Japan.

• Australia's INDC will be important to monitor as it will indicate the national policy direction which Australia will take post 2020. This is an area that has been politically uncertain for some time as the Government's Direct Action plan was initially only intended to cover the pre-2020 period. China's INDC will also be important because, as the world's largest emitter, an ambitious and comprehensive INDC from China will become a critical factor in the negotiations up to Paris and may influence the level of ambition brought forward by other countries in their INDCs.

• 31 August - 4 September 2015 –ADP 2-10 (Bonn, Germany)

• This is a meeting of the ADP, the subsidiary body of the United Nations that was established to develop the 2015 Agreement. This meeting will further negotiate the Geneva Negotiating Text to advance progress towards the text of the proposed 2015 Agreement.

• 15-28 September 2015 – the 70th session of the UNGA (New York, USA)

• The meeting of the United Nations General Assembly (that is, UNGA) will include, among other things, the "UN Summit for the Adoption of the Post-2015 Development Agenda" (That is, the launch of what will replace the "Millennium Development Goals" that expire in 2015). His Holiness Pope Francis will address the Assembly on 25 September 2015.

• 19-23 October 2015 - Third session of the ADP (Bonn, Germany)

• This meeting will again further work on the Geneva Negotiating Text to advance progress towards the 2015 Agreement and it will be a good indication of the likely form of the agreement that may be concluded at the Paris negotiations.

• 15-16 November 2015 - G20 Summit (Antalya, Turkey)

• The G20 Summit contains all of the world's main emitters of greenhouse gases and the Turkish Prime Minister has stressed the need for leaders to provide high level direction for the climate change negotiations, in a way that contributes to the UNFCCC process.

• 30 November-11 December 2015 – COP21 (Le Bourget, France)

• The Paris negotiations take place.

Current expectations for Paris

2015 is a critically important year for the UNFCCC process. The 2015 Agreement is expected to consolidate the mitigation efforts of all countries - whether developed or developing - into a single agreement, functionally replacing the Kyoto Protocol with a broader agreement that reaches beyond quantified commitments from Annex I Parties³ to the Convention.

It is expected that the 2015 Agreement will reflect in some form all six elements of the Durban Mandate, namely mitigation, adaptation, finance, technology development and transfer, capacity-building and transparency of action and support. These elements are all contained in the Geneva Negotiating Text and are providing the basis for the scheduling of the different sessions by the Co-chairs at the ADP negotiation sessions during 2015.

Thematic issues that are being discussed in the current ADP negotiation sessions include:

• Legal architecture of mitigation commitments:
• • legal character of mitigation commitments derived from INDCs
  • reference to global temperature goal
  • commitment cycles and review
  • enhancing ambition over time (no backsliding)
• Differentiation
• Adaptation
• Loss and damage
• Finance and other support
• Use of market mechanisms
• Common accounting and monitoring, reporting and verification, and
• Compliance and enforcement.

The expectation is that the ultimate outcome of the Paris negotiations will be the adoption of an internationally legally binding agreement under the Convention (for example, the Paris Protocol), supported by one or more COP decisions and potentially other non-binding documents (For example, an accompanying political declaration has been mentioned by some commentators).

Keeping you informed

Over the coming months, we will be releasing further updates on relevant developments (such as the announcement of Australia's INDCs) and prior to the Paris negotiations, we will publish a snapshot of the status of climate change and sustainability action in key jurisdictions across our global network.

Norton Rose Fulbright will be present at the Paris negotiations and we will be able to provide you with a tailored reporting service both during, and after, the negotiations. Please contact us if you would like further information about this service or if you wish to discuss any aspects of this legal update or the broader climate change and sustainability agenda.

Footnotes

¹The G7 countries include Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States
²There are some countries, and other commentators, who consider the goal should be 1.5°C, and it remains to be seen which figure may end up in the final agreement.
³Annex I Parties to the Convention include the developed countries.