COP25 05: At the end of the conference, goodwill does not equal ambition

By Brendan Bateman

18 Dec 2019

The outcome of COP25 is disappointing for business in particular which had been very vocal in calling for an increase in not just in parties’ ambition, but the timeframe for the transition to the new “green” economy.

Billed as the “time for action” conference, COP25 came to a close in Madrid at 2pm on Sunday, almost 44 hours after its scheduled finish of Friday 6pm, gaining the unenviable reputation as the longest running conference since the inception of the UNFCCC. The clear sense from the plenary conference floor was a reluctance by the parties and the Chilean presidency to give up in the face of some intransigent positions adopted by a handful of countries, including Australia, mainly over statements relating to ambition and the crucial Article 6.

The delegates were, despite a clear lack of any meaningful rest over the previous 48 hours, remarkably respectful and conciliatory during the closing plenary, but this goodwill could not hide the disappointment that for the second year in a row, the parties had failed to complete the rulebook for the Paris Agreement. This has now been kicked down the road to COP26 in Glasgow, which had been earmarked to focus on parties increasing the ambition in their Nationally Determined Contributions (NDCs), rather than finalising rules. 

This is not to say that COP25 was a failure – decisions were made and there was progress on a number of important issues, even if subject to some caveats by parties which were noted by the president of the conference, Chile’s Minister for the Environment, Carolina Schmidt.

Key decisions made at COP25

  • The Chile-Madrid Time for Action: an initiative intended to foster a strengthening of mitigation and adaptation in relation to oceans, and adaptation in relation to land. During the plenary session, Brazil dropped its objection to the inclusion of the paragraphs dealing specifically with oceans and land.
  • The review of the Warsaw Implementation Measure on Loss and Damage: there was support for the decision – albeit without any commitment to additional funding, and a note that the approval was without prejudice to the parties‘ position on the issue of governance (ie. whether the COP will have an ongoing supervisory role or if it would come under the exclusive jurisdiction of the Paris Agreement);
  • Periodic review of the long-term 2 degree goal under the UNFCCC: the review will start in the second half of 2020 and conclude in 2022.
  • Response measures dealing with the positive and negative effects of transitioning to low-emission societies: this would include the “just transition” concept.

Decisions made during the various conference streams can be accessed here.

Other successes outside of the formal conferences processes included the growth of the Climate Ambition Alliance, the launch of the Santiago Action Plan to bring consideration of climate change into mainstream decision making by finance ministers, and the development of the San Jose Principles for High Ambition and Integrity in International Carbon Markets. Thirty-one countries have through these principles committed to robust rules for carbon markets under Article 6, including not allowing any pre-2020 or Kyoto credits to meet commitments under the Paris Agreement and to deliver overall mitigation outcomes to achieve net zero emissions.

That's great, but what about Article 6?

There was also some progress on possible text for Article 6 which will form the basis for future negotiations at an intercessional meeting scheduled for June 2020, with the view expressed by some delegates that the maturing of the debate will enable the remaining obstacles to be overcome. However, those negotiations will not be based on the final draft text but on all of the draft texts prepared by the Chilean COP Presidency in Madrid. This means that many issues apparently resolved in the near-final drafts will be liable to be reopened. Experience also suggests that Article 6 will become the avenue for the introduction of all manner of issues, even if unrelated to the substance of the Article, simply because it presents a leverage point.

The key issues which prevented the parties from reaching agreement on the text for Article 6 included:

  • how to account for bilateral trade between countries in emissions reductions to avoid potential double-counting;
  • whether accounting adjustments should be made for activities under Article 6.4, including those that are outside the scope of a country’s NDC;
  • parties’ ability to use carry over credits to meet obligations under NDCs and other transitional arrangements from the Kyoto Protocol. Australia is the only country which has publicly reserved the right to use carry over credits to meet its commitments under the Paris Agreement. Australia’s Emissions Projections for 2019, released less than a month ago, revealed that it could meet its current NDC 26-28% emissions reduction target almost entirely by relying on such carry over credits;
  • the share of proceeds from any transactions under Article 6 to fund governance of the mechanisms and provide funding for adaptation, with the final draft text providing for a levy of 2% of traded offsets. A key concern raised by developed countries and the business community was that levies on transactions will not raise more funds, just reduce the number of activities and therefore opportunities to reduce emissions;
  • how to ensure an overall mitigation in global emissions is achieved, rather than simply emissions in one country being offset by emissions in another country, and whether this principle applies equally to Articles 6.2 and 6.4; and
  • providing express protection for human rights under these mechanisms to avoid the risk that projects authorised under the mechanism might come at the expense of the rights of local communities.

The road ahead to COP26

COP25 represents a lost opportunity to finalise the rules for the Paris Agreement, which agreement is due to come into effect next year, and to increase ambition to reduce emissions consistent with the science and the goal of the agreement. In the words of Carolina Schmidt at the closing plenary, this demonstrates the absence of a clear consensus to increase ambition to reduce emissions well beyond the current commitments in parties’ NDCs which are already well short of the level of emissions reductions required to limit the increase in average temperatures to below 2 degrees.

The outcome of COP25 is disappointing for business in particular which had been very vocal in calling for an increase in not just in parties’ ambition, but the timeframe for the transition to the new “green” economy. The closing statement to the plenary made on behalf of international business and industry NGOs read by Tennant Read from the Australian Industry Group, made plain business’ disappointment about the lack of meaningful progress on developing the rules for the market mechanisms in Article 6 which have the potential, if designed well, to deliver cost-effective abatement at the scale required to achieve emissions reductions consistent with the goal of the Paris Agreement.

The failure to agree on the rules for international carbon markets under Article 6 will also impact on the ability of the 90 or so countries which have indicated an intention to use these mechanisms to meet commitments in their NDCs, to further increase their ambition as part of the 2020 stocktake. Unless the rules are clear, it difficult to reliably plan future projects or domestic policies to further reduce emissions.

The time for action conference unfortunately resulted in a time for more words. While demonstrating a degree of goodwill and an intention to deliver more ambitious action in the future, the outcomes fell well short of the expectations of scientists, business and broader society.

There is now a lot on the agenda for the next conference in Glasgow, and increasing expectation about what needs to be achieved. There is risk is that notwithstanding the ambitions of the British Government (including its own legal commitment to achieve net-zero emissions by 2050), the entrenched positions of countries such as Australia, Brazil and the USA will mean that absent any change in policy of those countries, we could see a repeat of Madrid.


Get in touch

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.