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Can RED Hot California Heat Up A Sedated Cancun?

December 4, 2010

In his concession speech after the 2010 mid-term elections,
President Obama said that prospects for meaningful US climate
change legislation are doubtful and will be for years.

With the US and the international community unable to take
even modest steps to combat global warming, the State of
California has stepped up in a big, big way. Despite record unemployment rates and deficits, California
voters trounced a measure that would have suspended AB
32, California’s landmark climate change law. California’s
AB 32 cap and trade program will soon be the biggest market
for compliance emission reductions outside of Europe.

In
the wreckage of the Copenhagen talks and the new political
landscape in America, California is the most dynamic jurisdiction
for climate change implementation in the world.

Just days before the 2010 elections, California’s regulatory body proposed regulations to implement cap and trade provisions of AB 32. One big question was whether California would allow regulated entities to use any emissions reductions from developing countries for compliance. The pending rules answered that question by allowing limited carbon credits into California from developing countries, provided that an entire economic sector in a given jurisdiction reduces emissions significantly below historical levels. So-called “sectoral credits” are a significant leap forward in carbon markets. The scale of mitigation for sectoral credits must go beyond simply stopping emissions at a single location or project.

Sectoral credits as envisioned in the California rules will demand scaled-down, low-carbon development of entire sectors across large geographic regions. This is a game-changing development for climate policy and finance. The historical approach of using climate finance on project-specific activities is the core operating procedure of the Kyoto Protocol’s Clean Development Mechanism and voluntary carbon credits. Now to access funds available under California’s cap and trade program, states and provinces in developing countries at large must reduce emissions. And given that the prospects for US legislation are pretty close to nil, California’s new rules are a welcome bright spot and could be the basis for linking with other international climate change policies.

California Takes A Giant RED Step.

Critically important, California’s proposed regulations stated that the first sector eligible for international offsets will be reducing emissions from deforestation (RED).  (For the policy wonks out there, yes that is only one D. The draft regulations suggest California will probably focus on deforestation first, before other issues such as degradation, soil, etc.). This handshake, whereby California would pay states in Brazil, Mexico or Indonesia to reduce deforestation, is a powerful endorsement of the work being done in the Governors Climate and Forest Taskforce (GCF) and in the reductions in deforestation already achieved by some key states and provinces. If REDD+ was an ember of hope for climate policy after the dark days of Copenhagen’s failure, RED, at least in California, is now on fire. (In an earlier article, I discuss how after Copenhagen, REDD+ emerged as the front-runner in international climate change cooperation. cop 16 clip image003 COP 16California indicated it would accept up to 74.3 million tons of CO2 reductions from sectoral credits, and forests are the only sector that is explicitly discussed in the regulations.

With California voters backing cap and trade legislation and California regulators blessing RED as the first option for sectoral offsets, what implications does this have for international climate negotiations in Cancun Mexico? Governments are meeting in Cancun, Mexico for the 16th Conference of Parties of the United Nations Convention on Climate Change (known as COP16). They are trying to resuscitate global climate change policy. The signs from the first week of negotiation are mixed. REDD+ continues to make substantial progress. The three pages of negotiating text on REDD+ in the 33 pages of key negotiations are largely free of disagreement, with one major exception. Bolivia has insisted that REDD+ can not “constitute the establishment or use of a market mechanism.” Bolivia doesn’t like markets. So for now even though the negotiating documents are getting close to the consensus needed to make them official decisions, REDD talks are stalled until Bolivia changes its position. (Supporting Bolivia in this outlier mode is Saudi Arabia.) Bolivia’s President Evo Morales is rumored to be attending, possibly with other left-leaning Heads of State to make their case in person. The United States has also said they won’t let any decision go forward on REDD+ without other concessions in the negotiations. Notably, the United States wants more clarity on verification and the role developing countries will play in mitigation. These are the same issues that helped sink the Copenhagen meetings.

With US federal climate change legislation out the window, and the viability of the UNFCCC in doubt, progress on REDD+ has devolved to the state and provincial scales in developing countries, many of them organized under the Governors’ Forest and Climate Taskforce (GCF). (Disclaimer, the Tropical Forest Group has been an advisor to the GCF for the past year). This so-called sub-national level is where REDD action has some traction. The GCF states and provinces are widely credited with helping California move aggressively on including reduced emissions from deforestation into the California climate legislation. And critically, an earlier decision (4/CP.15) from the Copenhagen talks provided a clear signal that sub-national REDD efforts could go forward. This helps firm up a potential legal link between what is happening in California, the progress states and provinces have made in reducing emissions, and the international community.

But there are many hurdles still ahead. First, the California regulations are only proposed. The California Air Resources Board will vote on the draft rules December 16th, 2010. Second, negotiations in Cancun are clearly stalled between countries that are OK with the Copenhagen Accord and countries that outright are hostile to the Copenhagen Accord.  And REDD+ is where Bolivian President Morales has drawn a clear line in the sand, at least for now. Third, Europe continues to refuse to allow developing country forestry credits into its Emission Trading Scheme. Given the collapse of US climate legislation and the emergence of RED in California, Europe and the biggest compliance in America (California) could not be on more different paths forward for international emissions reductions cooperation.