EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 10.9.2009 
SEC(2009) 1172 
COMMISSION STAFF WORKING DOCUMENT 
accompanying the 
 
COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT , THE COUNCIL, THE EUROPEAN 
ECONOMIC AND SOCIAL COMMI TTEE AND THE COMMITTEE OF THE 
REGIONS  
  
Stepping up international climate finance:  A European blueprint for the Copenhagen 
deal  
 
{COM(2009) 475 final} 
 
EN 2   EN 1.  PLEDGES OF ANNEX I COUNTRIES AS OF 7 SEPTEMBER 2009 
Table 1: Pledges of Annex I of Annex I countries as of 7 September 2009 
 emissions in t CO 2eq low end high end 
 1990 2005 rel 1990 rel 2005 rel 1990 rel 2005 
Australia 416155 529524 13% -11% -11% -30%
Belarus 127361 75594 -5% 60% -10% 52%
Canada 592281 734491 -3% -20% -3% -20%
Croatia 32527 30561 -20% -15% -30% -25%
EU 27 5572021 5153699 -20% -14% -30% -24%
Iceland 3409 3709 -15% -22% -15% -22%
Japan 1272056 1358065 -9% -15% -25% -30%
New Zealand 61948 77354 -10% -28% -20% -28%
Norway 49698 53800 -30% -35% -30% -35%
Russian Federation 3326404 2123359 -10% 41% -15% 33%
Switzerland 52800 53790 -20% -21% -30% -31%
Turkey 170059 312420 84% 0% 84% 0%
Ukraine 922013 425666 -20% 73% -20% 73%
United States 6135243 7106638 0% -14% -7% -20%
Annex I total 18734206 18038941 -9% -5% -16.5% -13%
Shaded countries did not make formal pledges!  The following assumptions are made for 
illustration: 
Croatia : Targets similar to the EU27 are assumed 
Turkey : For both the low and the high end, a return of emissions to 2005 levels by 2020 is assumed. 
United States : The low end reflects objective mentioned by President Obama, the high end taken from 
the indicative economy-wide reduction target as cont ained in the Waxman/Markey bill endorsed by 
the House of Representatives on 26 June 2009. Depe nding on the further development of that bill in 
the Senate the implied reductions compared to 199 0 could be higher or lower than indicated.  
Pledges differ in scope and conditionality. The following qualifications apply:   
Australia: High end is conditional on CPH agreement (450ppm, comparable efforts), including 
LULUCF and carbon market use (data in the table does not include LULUCF)  
 
EN 3   EN Canada: Target relates to domestic  emission reductions only, unconditional to CPH agreement, 2006 
reference year  
EU: High end is conditional on CPH agreement (com parable Annex I efforts, adequate DC 
contributions)  
Japan : High end is recent announcement of new Japanese Government and conditional on CPH 
agreement 
New Zealand : Target conditional on CPH agreement ( 450ppm, comparable efforts), including 
LULUCF and carbon market use 
Russian Federation : Using range indicated by President Medvedev on 19 June 2009, unconditional to 
CPH agreement 
 
EN 4   EN 2.  THE SCALE AND TIMING OF TOTAL CLIMATE FINANCE IN DEVELOPING COUNTRIES : 
A SUMMARY  
The scale of necessary financia l flows cannot be determined as  a single figure in isolation 
from the other key questions. While it is import ant to ensure the mobilisation of adequate 
resources by contributing countries, the Copenha gen agreement needs to design a process for 
developing countries to set out their concrete needs and proposals for the 'supported actions' (- 
which go beyond developing countries' unsupported own action), both on the mitigation and 
adaptation side. Climate finance will essentially  be a process of 'matching' those needs and 
proposals with the available financial support. 
The bottom-up approach relies on the country-dr iven design of policies and strategies for 
mitigation and adaptation at national level. To ensure broad acceptance and therefore effective implementation of these strategies  they will have to be desi gned, implemented and monitored 
with the active participation of all concerned stakeholders and be integrated into poverty 
reduction/national development strategies, as recognised by the EU's proposal on a 
Framework for Action on Adaptation and low-carbon growth plans.  
Reducing emissions in developing countries 
The scale of emission reductions in developing c ountries and consequently  the additional cost 
of their actions will depend on the overall level of ambition of the Copenhagen agreement. 
Earlier this year the Commission estimated the a dditional cost of global climate action in line 
with the EU's objective to p eak global emissions before 2020
1.  
Under this 'global appropriate action' scenario , the total net additional cost of mitigation 
action in developing countries in  the energy, industr y, agriculture and forest sectors amounts 
to around € 94 billion in 2020. However, thes e are results of rough top-down modelling 
exercises. In practice, cost estimates will have to be build from bottom up when developing countries develop their nationally  appropriate mitigation actions (NAMAs) in the context of 
gradually evolving low-car bon growth plans. This  also means that the financial flows will 
have to be built up step by step corresponding to the evolving policy/programme/project pipeline which will limit the absorp tion capacity at the early stages. 
Table 2: Total additional costs in developing countries, 'Appropriate global action' Scenario 
Total additional costs 2 020 (Billion €, 2005 prices) 
billion €, 2005 prices 2020 2030 
Mitigation1 94  
– Energy & industry 71  
– Agriculture (non-CO 2) 5  
– Reduced Emissions from 
Deforestation and forest Degradation (REDD) 18  
                                                 
1 See SEC(2009) 101. 
 
EN 5   EN Adaptation2 [10-24] 23-54 
Total 104-118  
1 SEC(2009) 101 
2 UNFCCC Secretariat estimate for 2030 
Supporting the poorest to adapt to  inevitable climate change 
Current estimates of adaptation needs are extrem ely variable. A more pr ecise estimate based 
on incremental financing needs for national adapta tion strategies will have to be made over 
time as efficient strategies are designed. The UNFCCC Secretariat estimated that adaptation 
costs in all developing countri es for planned adaptation could range between € 23-54 billion 
per year in 20302. Numbers for 2020 are linearly extrap olated starting in 2012 at € 0 going to 
€ 23 – 54 billion in 2030. 
Adaptation priorities in devel oping countries have so far been  framed in national adaptation 
plans (such as NAPAs in LDCs) which in most cases lack strategic (long term) and 
crosscutting perspective that sustainable and effective climate adaptation will require. While 
existing plans provide a useful basis for immediate investments on priority actions, 
developing countries must move beyond in dividual projects towards a programmatic 
approach integrating systematically adaptation c oncerns in national polic ies, strategies, plans 
and budgets.  
For an effective inte gration of adaptation in deve lopment strategies, a sound and 
comprehensive assessment of the lik ely impacts of climate change will be required as well as 
adequate institutional and technical capacity.  
As regards funding, priority will  be given to the most vulnera ble developing countries and in 
particular LDCs, small island developing states (SIDS) and Af rican countries (as defined in 
the Bali Action Plan),. In line with the commitme nts in the Paris Agenda , the EU will provide 
wherever possible their s upport as budgetary financing using country systems. 
Fast start funding 2010-2012 
The establishment of effective domestic instituti ons in developing countries will need to be 
assisted with capacity building already from  2010 onwards, for example, to prepare and 
implement effective national low-carbon growth plans. In addition, early  international support 
is required to build the necessary database, including emission inventories, which should 
become the backbone of measurement, reporting and verification.  
As regards adaptation, an early commitment by the developed countries ahead of Copenhagen 
increasing the global contri bution to adaptation fundi ng between now and 2013 could 
contribute significantly to trust-building with th e poorer developing countries in the run-up to 
the Copenhagen conference. It would also provi de an important bridge before any new post-
2012 arrangements are in place. 
                                                 
2 Recent studies indicate that costs might be higher as some sectors were only partly included in these 
estimates: see for instance 'Assessing the costs of  adaptation to climate change: A critique of the 
UNFCCC estimates, Martin Parry, Nigel Arnell, Pam Berry, David Dodman, Samuel Fankhauser, Chris 
Hope, Sari Kovats, Robert Nicholls, David Sattherwaite, Richard Tiffin, Tim Wheeler, Published: Aug 
2009 – IIED'. 
 
EN 6   EN 3.  ADDITIONAL COSTS IN DEVELOPING CO UNTRIES FROM MITIGATION ACTIONS  
The technical analysis The analysis carried out for the January 2009 communication "Towards a comprehensive 
climate change agreement in Copenhagen' analys ed the costs of a 30% reduction target for 
developed countries by 2020 compared to  1990, appropriate own mitigation action by 
developing countries and the im pact of the carbon market. 
It concluded that total additional costs in de veloping countries by 2020 wo uld be equal to € 94 
billion, but this was in part due to the extra reductions necessary to generate offset credits 
which increases costs in developing countries.  
Taking into account the financia l flows generated via the car bon market in the energy and 
industry sector, the remaining net total additional costs were es timated at € 56 billion in all 
sectors, of which € 33 billion in the energy and industry sector (see  table below). This 
requires the assumption that all profits from se lling offset credits w ould also be used to 
mitigate GHG emissions in developing countries, pr eferentially first those with high costs.  
The remaining € 33 billion costs in the ener gy and industry sector are additional costs 
associated to a large extent with energy effici ency measures. These are considered low cost 
but have long pay-back times, longer than acceptable normally fo r the private sector to invest 
into.  
The other € 23 billion rela te to costs associated with agricu lture and forest sector, which are 
not compensated in any manner through th e carbon market in these projections. 
Table 3:  Estimate of additional costs in develo ping countries from mitigation actions 
Total additional costs 2 020 (Billion €, 2005 prices) 
 Internal reduction cost 
2020 of reductions Net costs incl. 
carbon market flows 
Developing countries 94 56 
– Energy & industry 71 33 
– Agriculture (non-CO 2)5  5 
– Reducing Emissions from 
Deforestation and Forest 
Degradation (REDD)18 18 
Financial flows carbon market 38 38 
Source: Analysis for SEC(2009) 101  
 
EN 7   EN 4.  A NEW SECTORAL CREDITING MECHANISM  
The Commission’s earlier Communication3 identifies the development and implementation of 
domestic cap and trade systems and the bilatera l linking of those systems as one of the key 
elements of the EU’s post-2012 strategy. It prop oses that, in parallel to the UN negotiations, 
the EU should promote the creation of a r obust OECD-wide carbon market by 2015, to be 
further extended to economically more adva nced developing countries by 2020. In this 
context, the Commission proposed the creation of a new sectoral car bon market crediting 
mechanism, for economically more advanced  developing countries and highly competitive 
economic sectors, as an interim step toward th e development of (multi-sectoral) cap and trade 
systems in developing countries. Provisions have  also been put forwar d for the participation 
of developing countries in sector al international emissions trading. 
To ensure a coherent transi tion, the Commission also propos ed that the EU should seek 
common ground with the US and other countries  implementing cap-and-trade systems and 
generating demand for offset credits in a co ordinated manner. The Commission furthermore 
proposed that the CDM should be reformed, cred iting only those projects that deliver real 
additional reductions and go beyond low cost op tions. The Commission's approach was to a 
large extent supported by the 2009 March Environmental Council4, the 2009 European Spring 
Council5 and the June 2009 Economic and Financial Affairs Council6. Building on this, the 
EU has furthermore put forward conc rete proposals in the UN negotiations. 
Differences with the CDM 
There are two main differences  between the CDM and the SCM (or sectoral trading). The first 
is that the CDM typically applies to a single project, which is usually related to a single 
installation, whereas the SCM woul d cover an entire sector (steel , cement, power, etc.) – i.e. a 
number of installations. The second  is that the CDM credits emission reductions that are 
additional to the emissions that would have occu rred in the absence of the project (business as 
usual), while the SCM would credit reductions  against a more ambitious threshold (see 
graph). This threshold should reflect the capac ity of developing countries to undertake own 
appropriate action that does not generate offset credits. 
It does not credit all reductions from the sect or, but only those between the crediting threshold 
and actual emissions. The reductions between th e sectoral BAU emissi ons and the crediting 
threshold can therefore be considered an own mitigation contribution of the developing country resulting from the SCM.  
The EU has proposed that the ne w SCM is an interim step toward the development of cap and 
trade systems in developing countries. The develo pment of such cap and trade systems is to 
take place at the national level fo llowing national design choices.  
In the context of the Kyoto framework, the net re sult of trades in allowances between Kyoto 
Parties under linked domestic multi-sectoral trad ing systems are shadowed by a transfer of 
assigned amount units under the Kyoto Protocol's  International Emissions Trading Provisions 
(Article 17 KP) to ensure that the net result  of the transactions between domestic trading 
systems are also recognised for complian ce under the Kyoto Protoc ol. Should the Kyoto 
Protocol’s accounting framework continue post -2012, provision should be made to enable the 
                                                
 
3 COM(2009) 39. 
4 Brussels, 3 March 2009. 
5 Brussels, 29 April 2009. 
6 Luxembourg, 9 June 2009. 
 
EN 8   EN recognition of allowances resulting from bilatera lly linked domestic sectoral or multi-sectoral 
trading systems, even if one of those systems is in a deve loping country (and thus has not 
been allocated AAUs). If a de veloped country links its emi ssions trading system with a 
domestic sectoral or multi-sectoral trading syst em in a developing country and wishes to use 
the net results of trades betw een the two systems for complian ce with its oblig ations under the 
Copenhagen Agreement, that Agreement will therefore need to provide for such recognition.  
Figure 1 Illustration of the Sectoral Crediting Mechanism 
2008 2006 2010 2012 2014 2016 2018 2020creditscrediting thresholds
actual emissionssectoral BAU
crediting period 1 crediting period 2
2022 
Incentives for developing countries to m ove from CDM, via SCM, to cap and trade 
The new SCM has to be sufficiently attractive for developing countries to provide incentives 
to move from the project based CDM appr oach to the SCM approach. Incentives for 
developing countries to move towards a SCM include: 
– The developing country would receive credits in case a sector beat s its no-lose target. 
Those credits can be sold on the carbon market, providing revenue.  
– The SCM can provide credits on a greater s cale than project-base d crediting, thus 
providing a better possib ility for more structural transformation of sectors to become low-
carbon sectors and deeper emission reduc tion cuts in developed countries.  
– When the Copenhagen agreement provides for phase-out of CDM for certain economically 
more advanced developing countries and/or sectors, there is an incentive for those 
countries to move to the SCM. This incenti ve can be further amplified by the recognition 
rules of CDM and SCM credits in the EU ETS and other linked car bon markets by means 
of putting in place more generous quantitative limits for SCM rather than CDM credits. 
– Moving from a project-specific to a sector-wid e approach will reduce transaction costs for 
the country and installations covered under the SCM.  
– The developing country sector administrator w ould directly receive th e credits instead of 
project developer as is the cas e in the CDM, providing flexibili ty for the country to choose 
how to use the resulting revenue. 
 
EN 9   EN Likewise, incentives will be needed to ensure  that developing countries move towards cap-
and-trade. Incentives, in addition to  the ones listed above, include:  
– Credits would be issued ex an te rather than ex post.  
– When the Copenhagen agreement provides for a phase-out or sunset clause for the SCM, 
there is a regulatory incentive for a deve loping country to move  to cap-and-trade. 
– The threshold would generate a price signal in the sector that could drive mitigation action 
in a cost-effective way. 
– If the cap and trade system is linked to th e international carbon market, business has an 
interest in moving to such system as it provides more control ove r reduction options and 
any credits resulting from reductions. 
– If the cap and trade system is linked to the international carbon market, business can 
achieve compliance by buying allowances from other markets (import of foreign allowances, while system overall may be a net exporter for quite some time). 
Coverage 
One of the key architectural issu es is which sectors in which countries are eligible for the 
SCM. Or put differently, international rules shou ld be clear on which se ctors or countries can 
no longer participate in the CDM.  
The main objective of the SCM is to initiall y cover sectors that have a large reduction 
potential, sectors that are most e xposed to carbon leakage, or se ctors that significantly affect 
production costs of sectors exposed to carbon leakage. The two leakage-related categories 
require inclusion of sectors that sell products  or services in inte rnationally competitive 
markets as well as the power sector. This me ans that the SCM should initially focus on all 
major industry sectors covered by the EU ETS, including the cement,  iron and steel, refining, 
as well as a number of chemical industry sector s, but also the aviation and maritime sectors. 
In view of the EU's position on crediting for fo restry sectors, this se ctor should be excluded. 
Criteria to help determine whet her a specific country should use the SCM for a specific sector 
could include a country’s pe r capita GDP, its total and per capita GHG emissions. These 
criteria could also help to determine different capacity thresholds to determine the inclusion of 
installations in a sector, expanding the covera ge for a country that has a higher GDP and 
higher emissions. 
For sectors to be included in the SCM, it mu st be assured that their emissions can be 
monitored with sufficient accuracy in all relevant installations in the sector and that the institutional frameworks are av ailable within the country to implement the SCM. The degree 
of homogeneity of installations within the releva nt sector will also need  to play a role in 
whether a sector is included, or whether a subset of installations in that  sector is included. In 
practice, one should start off with  covering rather large installa tions in each sector (e.g. power 
plants above 300 MW installed capacity) and include smaller installations later on as 
appropriate.  
Setting the crediting threshold 
Setting the crediting threshold wi ll be a controversial political decision. Possible approaches 
include: 
– Setting the threshold in relation to actual a nd verified emissions which are collected for 
one or two years prior to SCM implementation 
 
EN 10   EN – Estimating business as usual and setting the thre shold at a fixed percentage below that or a 
dynamic percentage that is related to the leve l of development of a country or sector or 
other objective criteria; 
– Estimating a benchmark related to available technology or technology used in a reference 
case (country, region, global etc.). 
Crediting thresholds could in pr inciple be formulated on an absolute or intensity basis. 
Intensity-based thresholds may initially be more attractive to protect the environmental 
integrity in view of emissions data uncertainties. Even if one  would initially accept intensity-
based threshold for a few years, countries should ev entually apply absolute thresholds so as to 
maximise environmental effectiveness.  
Any implementation of sectoral carbon market mechanisms (eit her on a "no-lose" or binding 
basis) will require robust governance, to ensu re credibility and environmental integrity. The 
international governance structure should be full y integrated into that for NAMAs and will 
need to be complemented by a governance stru cture at the national level in developing 
countries. 
 
EN 11   EN 5. POTENTIAL SCOPE OF SUPPORTED ACTIVITIES UNDER 'FAST START ' FINANCE , 2010-
2012 
Immediate financial needs for international p ublic finance after the conclusion of the 
Copenhagen agreement are estimated to range  from € 5-7 billion annually from 2010-2012. 
The priority areas for the fast  start funding identified are: 
Capacity building - € 1-2 billion p.a. 
• All developing countries, except least deve loped countries, should set up annual GHG 
emission inventories and low-carbon growth plans by the end of 2011. 
• Up-to-date emissions inventories along with key indicators (e.g. em ission intensity) and a 
projection of business-as-usual emissions for ke y sectors or source categories are the basis 
for developing a meaningful low-carbon gr owth plan. Significan t support for data 
collection, data analysis, reporting and verification will be required. 
• Increase capacity of developing countries to  move towards integrating climate change 
concerns in national development strategy as a cross-sectoral long te rm challenge, which 
will allow clarifying the adaptation needs.  
• Increase the knowledge base on impacts in mo st vulnerable countries  and regions, as well 
as on adaptation options, preparing the re levant information for decision-making. 
Mitigation including technology deployment – € 1 billion p.a. 
• Support for the Global Energy Efficiency and Renewable Energy Fund (GEEREF), a 
public-private partnership, will ensure equity ca pital to clean private sector initiatives in 
developing countries. 
• Access to clean energy tec hnologies for poor populations. 
• Build capacity for domestic cap-and-trade systems in economically more advanced 
developing countries and highly competitive se ctors and contributions to e.g. the World 
Bank Carbon Partnership Facility would provide  technical assistance for the development 
of sectoral crediting mechanism. 
• Reduce emissions from deforestation and fo rest degradation (REDD). Public funding 
should initiate and build up the readiness of  developing countries , including building 
monitoring capacities, prepari ng and implementing policy refo rms. Contributions to the 
World Bank Forest Carbon Partnership Facility will help build this capacity and to tap into any future system of positive incentives for REDD. 
• Support changes in agriculture through land use and livestock management practice, 
seeking synergies between sustainabili ty, food security and poverty reduction. 
• Support maintenance and restoration of car bon rich ecosystems including peatlands, 
wetlands, forests and natural grasslands. 
Adaptation – € 2-3 billion p.a. 
• Urgent implementation of immediate priorities identified in National Adaptation 
Programmes of Action (in LDCs) or in othe r relevant national document (in other 
vulnerable countries), via increased financing through the Global Climate Change 
Alliance, the Least Developed Countries Fund, bilateral and multilateral channels. 
 
EN 12   EN • Build up experience in areas re quiring further work, e.g. synerg ies between disaster risk 
reduction and climate adaptation, including the use of risk transfer mechanisms as a safety 
net for the most climate vulnerable populati on (e.g. pilot programmes on insurance).  
Technology research, development an d demonstration - € 1 billion p.a. 
• Contributions to the Global Partnership es tablished by the Major Economies Forum to 
drive transformational low-carbon, climat e-friendly technologies. Accelerating the 
adoption and application of cost efficient en ergy efficiency measures in a multilateral 
context, e.g. through the In ternational Partnership for Energy Efficiency Cooperation. 
• Assistance to key developing country part ners on technology demonstration, e.g. co-
financing of carbon capture and storage demons tration such as contributions to the Near 
Zero Emission Fossil Fuel initiative, advanced sola r technology initiatives. 
 
EN 13   EN 6.  EXAMPLES OF CONTRIBUTION KEYS FOR SHARING GLOBAL FINANCIAL EFFORT  
GDP (2008, Intl.$, at market prices, source Worldbank) and greenhouse gas emissions (2005 
energy and industrial emissions + 2000 LULU CF, source: WRI-CAIT database) of G20 
Members as possible indicators to calculate contribution keys for sharing of the global 
financial effort (GDP and emission pe rcentages relative to world total) 
Table 4: Examples of contribution keys for sharing global financial effort  
      GHG 75% GHG 50% GHG 25% GHG 10% 
  GHG 
Emissions GDP GDP 25% GDP 50% GDP 75% GDP 90% 
        
EU-27 11.07% 32.55% 16.4% 21.8% 27.2% 30.4%
USA 14.46% 25.29% 17.2% 19.9% 22.6% 24.2%
Japan 2.97% 8.74% 4.4% 5.9% 7.3% 8.2%
Canada 1.75% 2.49% 1.9% 2.1% 2.3% 2.4%
Australia 1.22% 1.81% 1.4% 1.5% 1.7% 1.7%
China 15.80% 6.87% 13.6% 11.3% 9.1% 7.8%
Mexico 1.60% 1.93% 1.7% 1.8% 1.9% 1.9%
Brazil 5.26% 2.87% 4.7% 4.1% 3.5% 3.1%
Russia 4.44% 2.86% 4.0% 3.7% 3.3% 3.0%
India 3.99% 2.17% 3.5% 3.1% 2.6% 2.3%
South Korea 1.21% 1.65% 1.3% 1.4% 1.5% 1.6%
Indonesia 6.96% 0.92% 5.4% 3.9% 2.4% 1.5%
South Africa 0.94% 0.49% 0.8% 0.7% 0.6% 0.5%
Saudi 
Arabia 0.82% 0.83% 0.8% 0.8% 0.8% 0.8%
Turkey 0.91% 1.41% 1.0% 1.2% 1.3% 1.4%
Argentina 0.82% 0.58% 0.8% 0.7% 0.6% 0.6%
Total G-20 74.22% 93.47%         
Total LDCs < 0.7% <0.5%     
 
EN 14   EN 7.  IMPACT OF DESIGN ELEMENTS ON THE SCALE OF EMISSION REDUCTIONS  
Targets for developed countries matter for the po tential demand of offset credits in the global 
carbon market. The lower the targets, the lower the potential demand an d carbon prices within 
this global market. 
But not only the targets matter, also other el ements under discussion in the negotiations on 
comparability can have potentially a large imp act on this demand. The table below estimates 
what the total shortfall is between emissions in  baseline and the target s proposed for the group 
of developed countries. This measure is used as a proxy for the potential demand for offset 
credits.  
The second column gives an estimate of this projected shortfall comp ared to baseline on 
average for the whole period 2013 – 2020. 
The following design elements are analysed: 
• The level of the reduction target: . Scenario A assumes that developed countries take on 
collectively a target of -30% compared to 1990 by 2020 whereas the other Scenarios 
assume that targets only add up to a reduction of -10%, si milar to the lower range of 
pledges that is proposed at present.  
• Surplus AAUs banked or not: Several  Annex I countries have greenhouse gas emission 
levels that are well below their Kyoto Protocol targets and are therefore expected to have a 
lot of emission rights in excess over the pe riod 2008-2012 (the so called surplus AAUs 
under the Kyoto Protocol)7. Scenarios A and B assume that the potential net ‘surplus’ 
AAUs’ from the period 2008-2012 are not availabl e for compliance by developed countries 
in the period 2013 – 2020. The other Scenarios a ssume the opposite, i.e. that these surplus 
AAUs are available for compliance after 2012.  
• Starting level: Also the starting level in  2013 and the trajectory of targets over the period 
2013-2020 matters for the demand over this period.  For this analysis it is assumed that 
targets evolve linearly over the period 2013- 2020. But the starting level is assumed 
different for different scenarios. In scenario D it is assumed that in 2013 the starting level 
is the Kyoto Protocol target for the period 2008 – 2012. This will lead again to the generation of surplus AAUs for those countri es that have at present greenhouse gas 
emission levels well below their Kyoto targets
8. Instead the other Scenarios assume that the 
starting level in 2013 is the Kyoto target or the 2010 emission level, whatever is lowest.  
Potential demand for offsets credits reduces with  60% when comparing scenario B to A. This 
decrease is even larger when co mparing scenario C to A, i.e. -80%. In scenario D there could 
be potentially no demand at all for offset cred its but rather a surpluss of available AAUs 
compared to the average emissions over the period 2008-2012. 
Table 5: Potential impact level of ambiti on targets on demand for offset credits 
                                                 
7 Note that these surpluses of AAUs are estimated to be also larger than any potential demand from other 
Annex I countries that have ratified the Kyoto Protocol but are expected to have higher emissions than their targets over the period 2008-2012. Note also that no demand can be expected from the US, given 
that it has not ratified the Kyoto Protocol.  
8 For the US that has no Kyoto Target, the emission level of 2010 is taken as a target in all scenarios. 
 
EN 15   EN  Average 
reduction 
2013-2020 
Scenario A: Appropriate reduction case (' 2 degrees Celsius scenario') 
(-30% vs 1990 in 2020, no surplus AAUs banked, target 2013 is the 
lowest of 2010 emissions or KP target 2008-2012) -17% 
Scenario B: Current pledges + No surplus AAUs  
(Low pledges as from 08/2009, no surplus AAUs banked, target 
2013 is the lowest of 2010 emissions or KP target 2008-2012) -7% 
Scenario C: Current pledges + Surplus AAUs 
(Low pledges as from 08/2009, surplus AAUs banked, target 2013 is 
the lowest of 2010 emissions or KP target 2008-2012) -3% 
Scenario D: Current pledges + surplus AAUs  + start from KP 
target in 2013 
(Low pledges as from 08/2009, surplus AAUs banked, target 2013 is 
the KP target 2008-2012 with the exception of the US which would 
use 2010 emissions)  1% 
Source: Simulation based on baseline by POLES, JRC  
For this assessment baseline emission data are used of the POLES model. Scenario A was the 
scenario assessed in the Staff Working Document that accompanied the Commission 
Communication “Towards a comprehensive clim ate change agreement in Copenhagen” of 
January 2009. 
 
EN 16   EN 8.  DETAILED DESCRIPTION OF THE DECENTRALISED GOVERNANCE STRUCTURE  
This Annex sets out the detail of the Eur opean blueprint for a decentralised bottom-up 
governance structure which is the result of inte nsive discussions with many negotiating 
partners worldwide and builds also on th e EU's extensive cooperation experience. 
Guiding prinicples 
For an overall governance structure to be efficient, effective, a nd equitable it needs to take 
into account: 
• Coherence/Subsidiarity : To meet the objectives it seems most efficient to build on the 
existing financial architecture, which is decentr alised and applies different channels in line 
with their respective comparative advantage to deliver support, including bilateral and 
multilateral initiatives as well as internationa l financial institutions. It will make use of 
both UNFCCC and non-UNFCCC institutions. 
• Transparency:  As sources and scale of funding would be multiple, coordination and 
facilitation among the different organisations will  need to be greatly improved compared to 
existing structures. A fully transparent and up- to-date reporting system will be essential. 
Only this will allow for comparing efforts of different contributing countries and for 
making sure that there is equitabl e access for developing countries. 
• Accountability and equity:  However, developing countries regard traditional multilateral 
and bilateral routes as donor  dominated and argue for a new centralised fund. Thus, 
shaping the governance structure needs to offe r sufficient prospect of improvement (e.g. 
increased developing country voice and simplified access to  funds), whilst retaining 
enough flexibility and safeguards for contributors  (e.g. choice over which channels to use, 
fiduciary standards). 
• Rewarding performance:  It should be kept in mind that  public funding will always be 
scarce. This situation will be aggravated for a number of years in view of the fact that 
public deficits due to the current economic recession will remain high for a number of years. Therefore, performance-based mechanisms will have to be established ensuring the most efficient use of scarce public financial re sources. This also calls for adhering to the 
principles of aid effectiveness when delivering external public funds at country level (Paris 
and Accra declarations). 
• Additionality:  There is an on-going international debate as regards the relationship 
between climate change finance and Offi cial Development Assistance (ODA), which 
already dates back to the beginning of th e climate negotiations. The main fear of 
developing countries is that developed c ountries would rededicate current ODA from 
traditional sectors like education and health to climate change. ODA and additional climate 
change finance should be seen as compleme ntary, and both financing streams shall support 
the development and implementation of natio nal sustainable development strategies 
integrating climate-resilience and low-carbon deve lopment paths. In any case, establishing 
a fully transparent reporting of all public fi nancial flows to and its ultimate uses in 
developing countries will be essential. 
• Complementarity:  Advocating a decentralised governance structure, however, should not 
preclude the possibility of a new multilatera l fund, if necessary. A multilateral fund, like 
the Mexican Green Fund, could indeed add va lue if it provides funding for themes and 
geographical areas where it is difficult to secure appropriat e flows from other channels. 
The fund would therefore be complementary or a ssume the role of 'donor of last resort'. 
 
EN 17   EN Contributions to such a fund could be determined in the same manner as the overall 
financial contributions, but because of its comp lementary nature would need to be modest 
compared than the total contribution. 
Governing the support to mitigation  
A country driven bottom-up approach seems to be the most appropriate way in order to 
determine the optimal blend and scale of necessa ry financial support. At the same time, the 
approach should encourage the exchange of go od practice providing conf idence to all actors 
and enabling the system to deliver both act ions and support effectively and efficiently. 
For mitigation the European blueprint foresees the following key elements: 
• Low-Carbon Growth Plans (also known as  Low Carbon Develo pment Strategies) : At 
the core of this approach is the concept of ambitious, convincing, country-owned, short, 
medium and long-term national low-carbon gr owth plans. These would comprehensively 
articulate the country specific objectives a nd planned nationally appropriate mitigation 
actions (NAMA), and guide national admini strations and the wider international 
community and donors. 
• Ex-ante technical analysis:  The approach should encourage the exchange of good 
practice providing confidence to  all actors and enabling the sy stem to deliver both actions 
and support effectively and efficiently. To this end, an ex-ante technical analysis should be 
conducted of all those NAMAs that require international assistance. 
• Registry:  In order to recognise the mitigation actions undertaken by developing countries 
and to assess their contributi on in the global fight against climate change, all actions, the 
technical analysis and the eventual impacts on emissions, as well as all financial support 
should be recorded. For this a central international registry  should be established which 
should include the most recent information on all actions, both supported and unsupported 
requiring support, and which will ensure transparency and wide recognition. Correspondingly developed countries should annua lly record all financial support in the 
registry, as due to the decentralised governan ce structure there will be multiple sources, 
donors and different scales of  funding and an optimal flow  of information on which 
mitigation support is delivered will be key. This will complement the existing OECD/DAC 
reporting. 
• Coordinating mechanism : In order to implement these f unctions within a decentralised 
governance structure and to ensure cont inued improvement of actions and support 
foreseen, a coordinating mechanism should be set up under the guidance of the UNFCCC. 
This independent international professiona l body under the UN would be resourced with 
wide technical expertise. It should specify harmonised guidelines that ensure sufficient 
quality of proposed actions It co uld convene technical panels to  assist in the technical and 
economic analysis. It should also set up the registry and based on the information provided 
to this by the Parties, it w ould regularly track and report on the implementation of actions 
and support. On this basis the matching function of the coordinating mechanism can focus 
mainly on areas facing most difficulties in  mobilising appropriate funding from other 
channels. It could, for instance, provide a gate way to relevant funds and contributors or 
organise donor conferences for specific type  of NAMAs or countries. However, it should 
be kept in mind that public funding will always be scarce. This situa tion will be aggravated 
for a number of years in view of the fact th at public deficits due to the current economic 
recession will remain high for a number of years. Therefore, performance-based 
mechanisms will have to be established ensu ring the most efficient use of scarce public 
financial resources. This calls for adhering to the principles  of aid effectiveness when 
 
EN 18   EN delivering external public funds at country leve l. In the future, the coordinating mechanism 
could act as the appropriate body to assist  in setting baselines  for the proposed new 
sectoral crediting and the sectoral trading mechanisms providing a shared body for both 
public and private funding. 
• Enhanced in-country coordination:  In any case, most functions  will be implemented in a 
decentralised manner such as the drawing up or  integrating individual actions plans into 
low-carbon growth plans by deve loping countries, the execu tion of the technical and 
economic analysis, the political endorsement, the decisions regarding releasing of funding, 
establishing annual emission inventories and third party verificati on of funding provided 
and emission reductions achieved. At country level, enhanced donor coordination must 
ensure harmonisation and alignment of funding. 
• Measurement, reporting and verification:  Furthermore, regular assessments/peer 
reviews of all actions and s upport and whether they meet the required ambition level 
should be conducted on the basis of information he ld in the registry and in annual emission 
inventories as well as provided in regul ar National Communications by developing 
countries and developed countries . These data would also feed into the global review of 
overall progress of developing countries act ions and developed country's commitments 
towards the 2°C objective proposed to be conc luded in 2016. This allows the reassessment 
and determination of further commitments, actions and financial flows which should always be brought in line with the latest scientific findings. 
Governing assistance to adaptation 
Adaptation benefits are primarily local  and progress towards clim ate-resilience cannot be 
measured easily. This implies that responsibilit ies among institutional actors will have to be 
shared differently than for mitigation. Theref ore, for adaptation the European blueprint 
foresees a simplified, and even further decentralised approach: 
• Integration into development/poverty reduction strategies:  A Copenhagen agreement 
should encourage and facilitate  a country led process of in tegrating adaptation concerns 
into development and/or poverty reduction st rategies which should also include the 
assessment of financial needs.  
• Guidance, exchange of information, and reporting: At the central international level, 
there should still be general gui dance on setting priorities and expected content of national 
adaptation responses, as well as analysis and sharing of good practic e and lessons learnt. 
Developing countries would also  need to report regularly on progress in the integration 
process and implementation in their National Communications which will have to be improved. 
• Enhanced in-country coordination:  The integration process will take place in-country 
and should include the assessment of financial needs. Coordination of  the various sources 
of climate funding and synergies with public international development assistance should 
be ensured at country level,  using existing mechanisms which coordinate ODA flows and 
reflecting the principles of aid effectiveness (the Paris Declaration of 2005 and the Accra 
Agenda for Action of 2008). 
The existing Least Developed Countries Fund, Special Climate Change Fund and Adaptation 
Fund, as well as the climate funding under the Global Environment Facility (GEF) are all 
subject to UNFCCC guidance. Decisions regard ing other channels remain with individual 
funds and contributors. At present, there seems to be no necessity to establish new vertical 
 
EN 19   EN funds for adaptation financing, unless they clearl y add value to mechanisms or funds already 
in place. 
Additionality of financial flows 
While for ODA it is possible to  build on the existing OECD /DAC reporting systems and 
improve them, where specific markers will be introduced, financial flows from new financing sources require complementary bottom-up mo nitoring. This should allow to account and 
report annually (to OECD and UNFCCC) on the financi ng being provided for the 
implementation of national climate resilience strategies. Developing countries would also 
need to report regularly on progress in the in tegration process and im plementation in their 
National Communications which wi ll have to be improved.  
At the central level under the UNFCCC, there s hould be a compilation of the needs, based on 
national assessments and a tracking of the fi nancial support. This  should allow for the 
identification of imbalances and gaps. This should  become an integral part of review process 
of National Communications from developing countries. 
There is an on-going internationa l debate as regards the relati onship between climate change 
finance and ODA, which already dates back to the beginning of the climate negotiations. The 
main fear of developing countries is that developed countries woul d rededicate current ODA 
from traditional sectors like educat ion and health to climate change. 
However, most of the international public gr ant financing for adaptation and mitigation has, 
until now, always met the agreed definition of ODA and, thus, it has been accounted against OECD countries’ ODA targets of 0.7 % of their GNI by 2015. 
In the short term, grants and hi ghly concessional loans that are ODA eligible will continue to 
play the central role in the public financing of  adaptation measures, particularly in the LDCs 
and SIDS. Furthermore, in fulfilling the 0.7 % goal, world development aid will more than 
double, as the present average for the OE CD/DAC is 0.3 % (0.42 % for the EU DAC 
countries). In absolute and real terms, this  means moving from US$120 billion in 2008 to 
around US$ 280 billion by 2015. Over this period, EU ODA will equally increase by some 
US$50 billion. Within this increase it will possible to accommodate some of the additional 
public funding required to cope with climate change, while ma intaining the overall focus on 
reaching the Millennium Development Goals targets. As climate change imposes an additional burden to developing countries, finance provided for adaptation and mitigation should therefore not come at the expens e of traditional development finance. 
In the medium/long term (after 2013), climate financing could become a blend of ODA and 
non-ODA resources depending on whether new fi nancing mechanisms envisaged under the 
UNFCCC will progressively phase -in. In this context, ODA and additional climate change 
finance should be seen as complementary, and both financing streams shall support the 
development and implementation of national sust ainable development strategies integrating 
climate-resilience and low- carbon development paths.  
In any case, establishing a fully transparent reporting of all public financial flows to and its 
ultimate uses in developing c ountries will be essential. 
 
EN 20   EN 9. POTENTIAL REVENUES FROM INTERNA TIONAL AVIATION AND MARITIME 
TRANSPORT  
Whilst there is quite good data available for emissions from international aviation there is 
considerable uncertainty regarding emissions fr om international shipping. Historic emissions 
for international aviation are provided by th e International Energy Agency (2009). Aviation 
emission projections for 2020 are based on  studies undertaken for the ICAO Group on 
International Aviation and Climate Change  (GIACC) and Committee of Aviation and 
Environmental Protection (CAEP) analyzed  by AEA Technology UK. Historical data for 
international shipping and projections co me from the Second IMO GHG Study 2009 (April 
2009) (MEPC 59/INF.10) which are the latest 'c onsensus' figures agreed by IMO but actual 
emissions could be +/- 20%. The IMO is curren tly assessing the possibi lity of developing 
market-based measures. 
Table 6: Emission data internatio nal aviation and maritime sectors 
 1990 2005 2020 (BAU) 
International shipping 468 795 982 
International aviation 255 389 648 
Total international bunkers 723 1184 1630 
Shipping (vs 1990) 0% +70% +110% 
Aviation (vs 1990) 0% +53% +154% 
Shipping (vs 2005) -41% 0% +24% 
Aviation (vs 2005) -34% 0% +67% 
Sources: AEAT, IEA, IMO  
For example, if one were to assume for illu stration purposes a 30% reduction target below 
2005 levels for international maritime , this would equate to 556 Mt CO 2. A 30% reduction 
target below 2005 levels for internationa l aviation would equate to 272 Mt CO 2. In total this 
would resemble a target for both sect ors combined equal to 828 mio ton CO 2. 
If it is assumed that this target would be 100% auctioned, and assuming prices between 20 € 
and 30 € per emission right, total revenue would be in the range of 17 to 25 billion € /per year. 
If no effective rules can be agreed at the global  level, the EU will, for instance, continue to 
raise revenue from the inclusion of aviation in its emission trading system that it can use for 
its own purposes. With auctioning of 15 % of the total allowances this could generate between 
€ 617 and 928 million p.a. after 2012 at a carbon price between € 20 and 30 per ton9. 
                                                 
9 Assuming historic emissions are equal to 216 Mt CO 2 and the target is 5% below these historic 
emissions. 
 
EN 21   EN