Market News

 August 11, 2009
The Road To Copenhagen

 In December 2009, the Plenary United Nations Conference of the Parties on Climate Change will convene in Copenhagen (the "Copenhagen COP") to produce an outline for international climate change regulation after 2012. However, much needs to be accomplished before December. The United States plans to play an important role in Copenhagen provided the U.S. Congress adopts federal climate change rules itself. Canada likely will join with the U.S. in negotiations.

Preparation for the Copenhagen COP has generated much recent discussion and activity. This update discusses U.S. and Canadian activities.

Background. The Kyoto Protocol ("Kyoto") is an international agreement linked to the United Nations Framework Convention on Climate Change (the "UNFCCC"). Kyoto set binding targets for 37 industrialized countries ("Annex I countries") to reduce their greenhouse gas ("GHG") emissions between 2008 and 2012, on average to five per cent less than 1990 levels.

Kyoto’s last compliance period concludes December 31, 2012.1 By then, a new international agreement must be finalized (and ratified by each nation) to achieve the emission reductions required by the Intergovernmental Panel on Climate Change to combat climate change.

Negotiations Leading To Copenhagen

Two negotiating tracks lead to Copenhagen. The first, the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Protocol (the "AWG-KP") is working to define post-2012 commitments under the Kyoto Protocol. The second, the Ad Hoc Working Group on Long-term Cooperative Action under the Convention (the "AWG-LCA"), is preparing a negotiating text for an agreement requiring long-term international cooperative action.

In June, the two negotiating tracks met at the Bonn Climate Change Talks (the "Bonn Talks"). The Bonn Talks included both Kyoto and non-Kyoto signatories including Canada and the U.S.

The Bonn Talks

Commitments Under Kyoto

The AWG-KP (which did not include the United States, India or China) considered two draft documents, including a proposal on Kyoto amendments, but did not decide on aggregate emission reduction targets for developed countries.

The Draft Treaty Negotiating Text

The AWG-LCA (which did include the United States, India and China) considered a draft post-Kyoto Climate Treaty originally released in May 2009. This is the first negotiating draft for post-Kyoto agreement to require all developed nations (basically, Annex I countries and the U.S.) to adopt legally binding emission mitigation and reduction. The draft is vague. It calls for global GHG emissions to be significantly less than 1990 levels by 2050, and for global temperature increases to be limited to 1.5 to 2º C above nineteenth century pre-industrial levels (when atmospheric carbon dioxide levels were approximately 280 ppm CO2e). The draft calls for financial assistance to developing countries to support their adaptation to carbon control, and suggests that developing nations adopt voluntary "nationally appropriate" mitigation actions ("NAMAs") such as Clean Development Mechanisms and Reducing Emissions from Deforestation and Degradation.

The draft is general and includes various alternative texts. However, it points to a nationally implemented, targeted, cap and trade program primarily applicable to developed countries. Developing or lesser developed countries would receive assistance from developed countries seeking offsets or would make voluntary commitments. If private sector funding to assist developing countries proves inadequate, the draft suggests additional public sector funding. The draft supports venture capital funds for emissions reductions as well as insurance programs to be deployed against weather and crop risks. The draft does not clearly indicate whether or how China or India, as developing countries, would be bound to GHG reductions.

The participant’s comments on the negotiating text and proposed additions and modifications resulted in a revised negotiating text issued in late June, which will be discussed further at upcoming meetings. The participants at the Bonn Talks did not reject the draft negotiating language. This was considered a promising development.

Although Kyoto relied on a uniform cap and trade program across all Annex I countries, the participants at the Bonn Talks did not rule out the use of NAMAs by developed and developing countries alike to meet their emissions targets. That is, each country might choose its own method to achieve its reduction goals, whether cap and trade, carbon tax or some other method. Implementing language to define NAMAs remains to be negotiated.

Upcoming Negotiations

Participants will meet for further negotiations in Bonn on August 10-14. Prior to the Copenhagen COP, meetings are also scheduled to take place from September 28-October 9 in Bangkok and from November 2-4 in Barcelona.

US And Canadian Preparations For International Action On Climate Change

United States

In January 2009, when U.S. Secretary of State Clinton appointed Todd Stern, an experienced international negotiator on climate change issues, as U.S. Special Envoy for Climate Change, Secretary Clinton promised the U.S. would take a lead role in designing, adopting and participating in international climate change activities that succeed Kyoto.

In April, representatives from the U.S., Canada and fifteen other large economies met in Washington, DC for a Major Economies Forum on Energy and Climate. In May, the U.S. submitted its comments on negotiations for international climate change action to the AWG-LCA.2

In part, the United States’ ability to play a major role in Copenhagen will depend on whether it has already (or is about to) enact binding GHG legislation in the U.S. It could be difficult for the U.S. administration to lead in Copenhagen if it has failed to prevail over Congress on the same subject. In Congress, on June 26, 2009, the Waxman-Markey bill, the American Clean Energy and Security Act (HR2454), passed the U.S. House of Representatives by a narrow vote of 219-212. HR 2454 would institute nationwide cap and trade regulation to reduce U.S. carbon emissions to 17 percent below 2005 levels by 2020. Now, the U.S. Senate must pass similar legislation, the two bills must be reconciled, and the President must sign the bill. As of July 16, 2009, Environment and Energy Daily analyzed the current Senate situation with respect to a vote on such legislation as 43 probable favorable votes, 35 probable unfavorable votes, with 21 Senators undecided.

However, current predictions in Washington DC are that the Senate will not take up climate legislation before resolving the latest issue du jour-health care reform-an issue that will likely occupy the Congress into the fall. This increases the possibility that U.S. legislation on climate change won’t be enacted before the Copenhagen COP. In any event, it seems likely that no significant Senate action on climate change will take place before September.

However, climate change delay in Washington may not have a major effect on the Copenhagen COP if the administration seems on the road to success in the Senate. Substantial progress, such as a bill having passed both Houses, would give the administration credibility and authority in Copenhagen even if the final legislation has not cleared conference committee or been signed into law.

Some commentators have suggested that the U.S. Environmental Protection Administration, which has been very quiet on climate change in recent months, might propose new carbon dioxide control regulations under the Clean Air Act, as much to caution Congress against inaction as to hinder climate change.


Like the U.S., Canada’s approach to negotiations leading up to the Copenhagen COP reflects shifting goals and actions established in Canadian domestic policies. Evolving Canadian federal domestic policies include emissions reporting requirements and the establishment of a national target of an absolute 20% reduction in GHG emissions relative to 2006 levels by 2020. The programs necessary to achieve this goal including corresponding mandatory targets and regulations has not yet been released.

Provincial policies vary and are at different stages of development. British Columbia, Manitoba, Ontario and Quebec have joined the Western Climate Initiative. Alberta and Saskatchewan are individually developing intensity-based reduction targets for large emitters. The Maritime Provinces of New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland entered a regional arrangement with the Governors of the New England States in 2001 that commits to a 10% reduction in 1990-level GHG emissions by the year 2020. British Columbia and Quebec have implemented carbon taxes.

In turn, these goals and actions reflect the economic realities of Canada and North America. Canada is pursuing reduced GHG emissions and adaptation to climate change without placing undue burden on its economic growth.

The Canadian Government’s position on international climate change negotiations, posted on Environment Canada’s website, declares, "a new global agreement is required to reduce emissions by at least 50% by 2050," and that, "any post-2012 global agreement must also include all major emitting countries."

It is not clear from the negotiations at the Bonn Talks what reductions Canada will propose in further negotiations leading towards the Copenhagen COP. At the Copenhagen COP, it is also expected Canada will seek international agreement to develop and deploy low carbon technologies based on market-driven policies and strategic investments.

Canada’s negotiating position at Copenhagen will necessarily support constructive and comprehensive action with its major economic North American partners to achieve a balanced outcome in the international negotiations.


The next session of negotiations takes place in Bonn from August 10 to 14. In light of recent meetings and discussions between the major emitting countries of China, India and the U.S., and also the uncertainty of progress of U.S. domestic legislation, it will be especially interesting to watch developments in these negotiations regarding the participants’ commitment to limiting future GHG emissions.

Reprinted with permission from The Road To Copenhagen: An Update On U.S. and Canadian Participation In Climate Change Negotiations, Perkins Coie and Fasken Martineau