KP 2nd commitment period, flexible mechanisms and AWG-KP decision

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Date produced: 27/01/2011

1. If there is no second commitment period (CP2) of the Kyoto Protocol (KP), will the CDM continue as a viable mechanism as usual, with demand driven eg by linkage to the EU ETS? JI and ET are explicitly linked solely to achieving obligations under Article 3, but the CDM has a dual purpose, including promoting sustainable development in developing countries (article 12.2).

2. Does para 6(b) of the AWG-KP Decision mean that if, say, Russia and Japan (both are KP Parties), had a QELRO under 1(b)(i) of the Bali Action Plan (which does include that option for Annex I countries), that they could access ALL KP mechanisms if other countries went ahead with a KP CP2? Just the CDM if not? Would the US as Annex I Party (but not KP) also be able to access the KP mechanisms?

3. In para 3 of draft decision ~/CMP.6 (page 5 of FCCC/KP/AWG/2010/CRP.4/Rev.1) the text effectively has an option for the decision text to overturn the provisions of the entry into force provisions of Articles 20 and 21 – is this legally feasible? or would the changes have to be made to the treaty itself and therefore undergo a ratification process of their own?

1. Continuity viability of the CDM

As noted in the question, the CDM has a dual purpose (assisting Non Annex I Parties achieve sustainable development AND assisting Annex I Parties meet their Article 3 commitments). As such, even without a CP2 of the Kyoto Protocol (KP) (and thus no commitments for Annex 1 Parties to meet), the CDM is highly likely to continue to be a legally viable mechanism to assist developing countries achieve sustainable development.

Whether it will be economically or practically viable post 2012 (and in the absence of a second commitment period) will depend on the demand for credits generated by CDM (CERs) and, in part, whether these will be accepted, in whatever form, to help countries (developed or developing countries) meet their mitigation targets / actions under the LCA track. The issue of market based mechanisms employed under the LCA Decision adopted in Cancun has been left open. The parties and other observers are invited to propose such mechanisms this year so that a decision on which market mechanisms (if any) to include into the LCA regime can be adopted at COP17 in Durban.

If such mechanisms are not agreed and credits from CDM projects are not allowed to be taken into account for the purposes of meeting mitigation targets / actions submitted under the LCA Decision, the demand for CERs (and thus the economic and practical viability of the CDM) will be driven by the extent of linkage with the EU ETS and any other national or regional emissions trading schemes which are being developed.

2. Access to the Kyoto Protocol Mechanisms

The question asks whether Russia and Japan could access the KP mechanisms in a CP2 (despite not entering into a CP2 themselves) if they had agreed to specific quantified emission limitation and reduction objectives under the Bali Action Plan.

Definition of terms:
Before addressing this question, a distinction should to be drawn between
• quantified emission limitation and reduction commitments as set out in Article 3(1) of the Kyoto Protocol (QELRCs) which are legally binding under the KP;
• quantified emission limitation and reduction objectives specified in the Bali Action Plan (at Para 1(b)(i)), the legal status of which is not prescribed. It should be noted that the use of the term ‘QELROs’ by policy makers and negotiators in relation to the KP refers to QELRCs under the KP. By implication, therefore, the use of the term “quantified emission limitation and reduction objectives” in the Bali Action Plan also refers to QELRCs; and
• quantified economy-wide emission reduction targets (QEWERTs) which are taken note of in the decision in Cancun adopting the outcome of the AWG-LCA. These are not the same as QELRCs in the sense of KP or quantified emission limitation and reduction objectives set out in the Bali Action Plan.

In any case, even if it could be said that QEWERTs under the LCA Decision adopted in Cancun are the same as QELRCs under the KP (which it is suggested they are not), taking on QEWERTs under the LCA track would not guarantee parties to the Convention who do not take on a CP2 to the KP (or who are not parties to the KP) access to the KP mechanisms.
For the purposes of answering this question, we will focus on the flexible mechanisms established by the KP and the compliance mechanism.

Flexible Mechanisms – Kyoto Parties:
In order to be eligible to access the flexible mechanisms, parties need to satisfy certain criteria. These eligibility criteria relate only to the first commitment period (criteria for CP2 have not, to our knowledge, been drafted or adopted yet).

In order to use carbon credits generated by the CDM or joint implementation or to access the international emissions trading scheme created by the KP:
1. countries must be a Party to the KP (which would rule out the US even if it took on QELRCs under the LCA track); and
2. must have calculated their assigned amount in accordance with Decision 13/CMP.1.

In order to calculate a Party’s assigned amount in accordance with Decision 13/CMP.1:
1. that Party must be a party to the Kyoto Protocol; and
2. have a commitment inscribed in Annex B to the Kyoto Protocol.
Parties to the KP that do not take on a CP2 would have no assigned amount to calculate.
Thus if the eligibility criteria for CP2 remain the same as for the first, countries not taking on a CP2 (e.g. potentially Russia and Japan) would be ineligible to benefit from the credits created by the flexible mechanisms.
On the other hand, since the eligibility criteria for CP2 have not been agreed, it would be open to the KP parties to say that countries which are party to the KP but not taking on a CP2 are able to access the flexible mechanisms. It is possible that this issue has been left open so as not to prejudice negotiations under the LCA track relating to the use of market mechanisms in meeting the QEWERTs taken note of under the LCA Decision.
The position in relation to the US is slightly more complicated and will be addressed below.

Compliance mechanism – Kyoto Parties:
In relation to the compliance mechanism (and assuming a legally binding CP2 is adopted by most KP parties), its current purpose and mandate is to address issues of non-compliance by Parties to the KP (thus meaning the US cannot currently be subject to its procedures) with obligations contained in the KP.
Thus, as presently constituted, the compliance committee would have no role in relation to failures by Annex I Parties to the Protocol which do not take on a CP2 to meet their QEWERTs under the LCA Decision. Arguably, the mandate of the compliance committee could be broadened to include such a role if there is political will. However, strictly speaking, since the LCA targets fall outside of the KP, there is likely to be strong resistance to such an amendment by Annex I Parties not taking on a CP2.

The position of the US:
The question of allowing the US access to the flexible mechanisms and the compliance procedures created by the KP (though it is noted that the political reality is such that the US is unlikely to want to be subject to the compliance procedures) raises the issue of the extent to which a non-KP party can participate in KP mechanisms.
In effect, allowing the US access to the relevant mechanisms only, without requiring it to take on the other obligations of the KP, is to allow it to “cherry-pick” which of the KP provisions it wants to apply to it. In other words, this would operate as allowing the US to make reservations to the KP, something which is prohibited by Article 26 of the KP. As such, it is submitted that, strictly speaking, it would not be possible to allow the US to access the KP mechanisms while not accepting the whole of the KP.

However, even if this is incorrect and the CMP is able to decide that the US shall be eligible for the relevant mechanisms, since the US is not a party to the KP, it would have no voting powers within the CMP. As such, it is questionable whether the US would want to access mechanisms over which it has no formal control.

3. Provisional application of amendments to Article 21 of the Kyoto Protocol

Chapter I of the Revised proposal by the Chair dated 4 December (FCCC/KP/AWG/2010/CRP.4/Rev.1) deals with the amendments to the Kyoto Protocol pursuant to its Article 3(9). It is drafted in the form of a draft decision (Draft Decision). The annex to Draft Decision sets out the proposed amendments currently under negotiation. One of the proposed amendments seeks to amend the provisions of Article 21 of the KP (which deals the requirements for adoption of proposals for new annexes to the KP and amendment of existing annexes to the KP).
Agreement for provisional application

Paragraph 3 of the Draft Decision seeks to ensure that all amendments adopted pursuant to paragraph 1, Option 1 are applied provisionally by each party (as allowed by Article 25 of the Vienna Convention on the Law of Treaties) from the conclusion of the first commitment period until the relevant amendments formally enter into force for that party (i.e. after the relevant ratification procedures have been complied with and once the relevant timeframes have passed). This would include amendments to Article 21, if agreed.

Effect of amendments to Article 21:
The rest of this answer assumes that amendments to Article 21 are adopted by the Parties. It is important to note that the proposed amendments to Article 21 are still heavily bracketed and as such, until there is agreement on the final form of the amendments, it is not possible to identify exactly what the effect of the amendments would be. Therefore, only a theoretical discussion about the implications of an amended Article 21 is possible.

Applicability of the provisionally applied amendment procedure:
The provisional application of amendments to Article 21 raises the question of whether, once the amendments have been adopted (and provisionally applied), future amendments to annexes can be made under the amendment procedure which is provisionally applied rather than the one that exists in Article 21 as it presently stands.

Before the end of the first commitment period and after the amendment’s entry into force:
Amendments to annexes adopted prior to the adoption of the Draft Decision would be subject to the present provisions in Article 21 of the KP. Similarly, amendments to annexes adopted after the amendments to Article 21 enter into force will be subject to the amended amendment procedure.

After the end of the first commitment period and before the amendment’s entry into force: Would amendments adopted between these two periods be subject to the present or the amended rules relating to amendment of annexes?
Provisional application of treaties (and, by extension, amendments) binds Parties under international law, until the amendments to Article 21 formally enter into force. Therefore, an argument could be made that Article 21, as modified by the provisionally applied amendments, would be the basis for amendments to the annexes after the conclusion of the first commitment period until the date on which the amendments to Article 21 enter into force for each Party.
Depending on the scope of amendments to Article 21 agreed by the Parties, this could mean that future amendments to the Annexes (and in particular, Annex B) could be made binding without requiring the consent of each Party (written or otherwise) or giving them the option of opting out of such amendments (as Article 21 currently allows).

Is this consistent with international law?
It is an accepted rule of international law that states are to perform international obligations in good faith and that international treaty obligations cannot be imposed upon a state against its will.
As such, it is not clear whether the proposed amendments to Article 21 (the indirect effect of which could be to impose treaty obligations upon a non-consenting state) are compatible with the law of treaties and customary international law. Notwithstanding the fact that states would have agreed to the provisional application by way of COP decision, the fact these potentially far-reaching amendments would not have gone through the amendment procedure undermines the consensual nature of international rule making and raises the question of the amendment’s compatibility with international law.
From a practical perspective, it is difficult to see how a state (particularly an Annex I Party) would agree to provisional application of amendments to the KP amendment procedures if the effect of them would be to remove the right of that Party to accept or reject any future amendments.

Discretionary nature of provisional application
It should also be noted that provisional application cannot be required of any state – each state has a discretion as to whether or not to agree to provisions providing for the provisional application of a treaty (or amendments to a treaty). Reasons for non-acceptance could be political, legal, policy-based or based on some other reason entirely.
As such, the effectiveness of a provision providing for provisional application of amendments to the KP will depend on the number of countries, particularly Annex I Parties (who have a particular interest in amendments to Annex B), that agree to it and its consistency of those amendments with the law of treaties and customary international law.