Commission staff working document accompanying the communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Towards a comprehensive climate change agreement in Copenhagen - Additional background information- {COM(2009) 39 final} {SEC(2009) 101}
Date: 2009-01-28
Institutions: European Commission
Subjects: European Union, association agreement (EU), climate change, energy policy, environmental protection, third country

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 28.1.2009 
SEC(2009) 102 

COMMISSION STAFF WORKING DOCUMENT 

accompanying the 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN 
ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE 
REGIONS 

Towards a comprehensive climate change agreement in Copenhagen 

- Additional background information- 

{COM(2009) 39 final} 
{SEC(2009) 101} 

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Table of content 

1. 

2. 

3. 

4. 

5. 

6. 

Low carbon development strategies............................................................................. 3 

Technical provisions for monitoring, reporting and verification ................................. 5 

Public funds and international carbon crediting mechanisms to support developing 
country mitigation ........................................................................................................ 6 

Compliance and enforcement....................................................................................... 6 

Funding early action through a Global Climate Financing Mechanism (GCFM) ....... 7 

Financing global research, technology development and demonstration .................... 8 

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1. 

LOW CARBON DEVELOPMENT STRATEGIES 

Low carbon development strategies need to include: 

– 

– 

– 

– 

– 

a  credible  pathway  to  limit  the  country’s  emissions  through  nationally  appropriate 
mitigation actions 

an  emissions  inventory  including  key  parameters  (e.g.  emission  intensity)  and  a 
projection of business-as-usual emissions for key sectors; 

a  portfolio  of  action  to  address  emissions  in  key  sectors  following  a  two-track 
approach: 

– 

– 

autonomous action (mainly “win-win” and low-cost action), that are mainly to 
be financed and implemented by the country itself, and that could be supported 
by capacity building and targeted international loan schemes; 

supported action requiring assistance due to the incremental costs, in the form 
of financing, technology or capacity building for implementation; 

estimates  of  emission  reduction  targets  from  each  category  of  action,  in  the  short 
term (2020-2030) and with an identification of long-term (2050) targets; 

specific needs to support implementation. 

The first set of strategies should cover a period of five years, but individual action and support 
could be updated more frequently. 
Developing  country  strategies  should 
the 
identify 
implementation of proposed action resulting in incremental costs that cannot be sustained by 
the country itself. This could include: 

the  support  required 

to  enable 

– 

– 

– 

Financial  assistance,  if  possible  performance-based,  to  implement  policies  and 
measures, e.g. action to reduce deforestation and other mitigation action; 

International  crediting  mechanisms,  including  no-lose  sectoral  crediting  approaches 
as well as “classic” CDM for less advanced sectors; 

Technology  cooperation,  including  joint  technology  development,  cooperation  on 
technology 
for 
policies 
demonstration projects. 

(including  standards)  and 

technology  deployment 

Key  to  the  low  carbon  development  strategy  approach  will  be  ensuring  a  sufficient  level  of 
ambition, which is linked to the ability to raise appropriate support for concrete proposals for 
action.  Discussions  on  linking  proposals  for  action  to  support  should  be  facilitated  by 
independent technical analysis of the proposed strategy and action, in particular: 

– 

– 

– 

Methodology and assumptions to estimate business-as-usual emissions; 

Technology and policy assumptions underlying proposed action; 

Proposed support to implement the action, in particular an estimation of incremental 
costs; 

Methodology  and  assumptions  to  estimate  the  mitigation  impact  of  proposed  action. 
Discussion  of  a  country’s  strategy  in  the  Facilitative  Mechanism  for  Mitigation  Support 
should be based on the independent technical analysis. 

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.

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2. 

TECHNICAL PROVISIONS FOR MONITORING, REPORTING AND VERIFICATION 

Developed countries 

Developed  countries  should  improve  the  measurement,  reporting  and  verification  of  their 
emissions.  Future  inventories  should  be  prepared  on  the  basis  of  the  improved  2006  IPCC 
inventory guidelines. Sufficient resources should be made available to ensure a robust annual 
expert  review  of  those  inventories.  Developed  countries  should  furthermore  provide  every 
two  years  an  update  of  their  climate-related  policies  and  emission  projections,  building  on 
current EU practice. An in-depth review of these reports should include learning from good 
practice  and  early  identification  of  problems  in  meeting  emission  targets  on  the  basis  of 
projections. 

Developed  countries  should  also  significantly  improve  the  measurement,  reporting  and 
verification  of  support  provided  to  developing  countries.  Support  for  both  mitigation  and 
adaptation  actions  should  be  annually  measured  and  reported  in  parallel  with  “traditional” 
Official  Development  Assistance  (ODA).  This  should  build  on  existing  reporting  practices, 
such as the OECD Development Assistance Committee (OECD DAC) database and should be 
complemented by new indicators on technology transfer. 

Developing countries 

Developing countries should regularly monitor and report action on mitigation and adaptation. 
This should form the basis for exchanging information, identifying and sharing good practice 
and regular peer reviews. 
Following the assessment of a developing country’s low carbon development strategy in the 
Facilitative  Mechanism  for  Mitigation  Support,  developing  countries  could  enter  mitigation 
action  (both  autonomous  and  supported  action)  in  a  registry  for  nationally  appropriate 
developing country mitigation action. This registry, which should be operational as of 2012, 
will include a description of the action, quantified mitigation benefits and any other benefits. 
It will increase the visibility and recognition of action undertaken by developing countries. 

Developing  countries  do  not  currently  provide  regular  emission  inventories,  which  makes  it 
hard to identify opportunities for action and impossible to determine the effectiveness of their 
mitigation  efforts.  The  Copenhagen  agreement  should  ensure  that  all  developing  countries, 
except  the  Least  Developed  Countries,  provide  annual  emission  inventories,  at  least  for  the 
key emitting sectors of their economies, as of 2010 using the 2006 IPCC inventory guidelines. 
Comprehensive  capacity  building  and  technical  and  financial  support  must  be  provided  to 
help them prepare these inventories. 

In addition, a credible peer review process, building upon experience with the expert reviews 
under the UNFCCC, is needed to assess actual implementation of mitigation and adaptation 
policies and the quality of emission inventories. This should also include the support received 
for  implementation.  All  action  entered  in  the  registry  should  be  subject  to  this  verification, 
even if they do not receive third country or international support. 

Sectoral Approaches as a tool to engage the private sector 

Several  sectoral  approaches  have  arisen  as  a  promising  tool  to  facilitate  action  on  climate 
change: 

– 

Industry led sectoral approaches have demonstrated that they are capable of building 
globally industry cooperation on climate change, leading to a better understanding of 
existing emissions and potential improvements as well as the sharing of best practice.  

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– 

Further opportunities exist in using sectoral approaches as an element in  

– 

– 

– 

building low carbon development strategies,  

developing sector-specific technology development and demonstration as well 
as  

realising  sectoral  crediting  mechanisms  as  part  of  a  future  global  carbon 
market.  

In  conclusion,  sectoral  approaches,  built  on  public  private  partnerships,  can  help  mobilise 
action  by  business  in  both  developed  and  developing  countries  and  assist  the  transition 
towards a global low carbon economy. 

3. 

PUBLIC FUNDS AND INTERNATIONAL CARBON CREDITING MECHANISMS TO SUPPORT 
DEVELOPING COUNTRY MITIGATION 

Support  for  the  incremental  costs  of  such  investment  should  come  from  a  range  of  sources. 
The  UNFCCC1  estimated  the  annual  additional  investment  and  financial  flows  needed  in 
developing countries at US $ 65 billion per year by 2030.  
Public funds 
These  should  leverage  larger  private  finance  flows  and  can  be  employed  in  a  variety  of 
instruments,  including  pure  grants,  interest  reduction,  publicly  supported  loan  facilities  and 
venture capital funds. Support for mitigation action should include: 

– 

– 

– 

Capacity  building.  Public  grants  can  focus  on  up-front  capacity  building  and 
monitoring  systems  and  be  mobilised  as  of  2010.  A  significant  amount  will  be 
required for mitigation and technology cooperation until 2015. 

Project-based programs such as the Global Energy Efficiency and Renewable Energy 
Fund  (GEEREF),  providing  equity  to  the  innovative  private  sector  in  developing 
countries.  

A  Global  Forest  Carbon  Mechanism  that  provides  performance-based  incentives  to 
reduce deforestation emissions.  

International carbon crediting mechanisms 

Project-based  offsetting  in  the  Clean  Development  Mechanism  (CDM)  has  demonstrated  its 
limits  both  in  scale  and  environmental  integrity.  New  sector-wide  mechanisms,  including 
sectoral  no-lose  targets,  should  be  developed  to  provide  broad  incentives  and  credit  only 
action  that  that  are  additional  and  go  beyond  low  cost  options.  The  EU,  as  part  of  its  2020 
unilateral  20%  reduction  target,  has  already  committed  to  using  up  to  3  Gt  CO2  reductions 
through the CDM and Joint Implementation (JI) until 2020.2 In addition, a pilot phase should 
start  in  2013  for  reducing  emissions  of  deforestation  and  forest  degradation  by  establishing 
forest  carbon  credits  that  can  be  used  exclusively  for  government  compliance.  Certain  pre-
conditions would need to be met before any inclusion of forests in carbon markets could be 
considered as a realistic option. 

4. 

COMPLIANCE AND ENFORCEMENT 

A  robust  compliance  and  enforcement  system  is  key  to  ensure  the  implementation  of  a 
Copenhagen  agreement.  Such  system  will  need  to  build  upon  the  existing  system  under  the 

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UNFCCC secretariat. 2007. Investment and Financial Flows to Address Climate Change. 
Equivalent to €45 billion for the period 2008-2020 at a price of 15 €/t CO 2. 

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Kyoto Protocol, which has already proven its effectiveness in the first non-compliance cases 
brought before its Compliance Committee. The experience with the application of the current 
system  provides  a  solid  basis  to  adjust  the  current  system  to  the  needs  of  a  Copenhagen 
agreement. One particular aspect that should be explored in this context is how to deal with 
Parties  that  would  not  ratify  the  Copenhagen  agreement  which  could  potentially  undermine 
the overall environmental effectiveness of a global accord. 

5. 

FUNDING  EARLY  ACTION  THROUGH  A GLOBAL CLIMATE FINANCING MECHANISM 
(GCFM) 

The Global Climate Financing Mechanism could be a short-term EU answer to the challenge 
that poor and most vulnerable developing countries are facing when tackling climate change. 
It  aims  to  allow  spending  immediately  on  priority  climate-related  investments  in  those 
countries,  contributing  to  rapidly  reduce  the  current  gap  between  the  limited  availability  of 
funding and the need for climate-related priority investments (estimation of adaptation needs 
for  developing  countries  by  UNFCCC  Secretariat  amounts  to  €  23  to  54  billion  per  year  in 
2030). It will contribute to providing valuable returns on the ground in terms of development, 
in particular building climate resilience.  

The GCFM has a temporary nature. It is conceived as a bridging facility to deliver substantial 
funding while a new architecture for climate financing is being built for the post-2012 period, 
paving the ground for its effective implementation in the longer term. Timing of the initiative 
is also important for the strong political signal it provides to the targeted countries during the 
negotiations.  Being  an  EU  initiative  of  significant  size,  this  signal  would  be  much  stronger 
than smaller individual Member States initiatives. 

The GCFM is not a new fund, but a fundraising mechanism which EU Member States would 
join  on  a  voluntary  basis.  Funds  raised  would  be  used  to  complement  existing  instruments 
with their proper ways of delivery. Funds raised would be predominantly allocated to existing 
funding  instruments  depending  on  their  comparative  advantage.  In  this  context,  various 
criteria such  as  efficiency,  effectiveness, coordination  and coherence,  support  to approaches 
which  integrate  climate  change  into  national  planning  processes  and  budget,  the  Paris 
Declaration principles, as well as absorption capacity, could be used. 

The GCFM would raise funds on the capital market through the issuance of "climate" bonds. 
Repayment  of  the  bonds  over  a  long-term  period  (20  years)  would  be  ensured  by  legally 
binding commitments from supporting EU Member States. They would agree on contributing 
to the overall level of funding according to relevant criteria, such as their GDP per capita and 
their level of GHG emissions.  

The funds would be used with a priority for adaptation activities in poor developing countries 
most  vulnerable  to  climate  change  (e.g.  in  agriculture,  water,  health,  sustainable  natural 
resources  management).  It  is  expected  that  adaptation  costs  will  rise  over  time  as  climate 
impacts will worsen before effects of mitigation are felt and global temperature is stabilized. 
Even  with  reduced  emissions  from  now  on,  the  impact  of  past  emissions  would  be  felt  for 
quite  some  time.  Delaying  interventions  in  adaptation  actions  risks  putting  in  danger 
investments already done to reach development objectives. One clear example justifying early 
intervention  in  adaptation  is  disaster  risk  reduction.  Studies  reveal  that  for  each  dollar 
invested in disaster risk reduction, benefits between two and four dollars can be expected in 
terms of avoided or reduced social and economic impact of natural disasters. 

Given  the  importance  of  early  mitigation  activities  in  some  targeted  developing  countries, 
there  is  some  flexibility  to  allocate  a  share  of  the  funds  raised  to  mitigation  activities,  still 
through the appropriate existing instruments.  

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As the poorest and most vulnerable developing countries would be targeted, many of which 
are  facing  problems  of  debt  sustainability,  grants  should  be  the  main  financing  modality. 
However, in order to increase the financial leverage, an additional option could be blending 
with  loans  from  European  development  financial  institutions  having  experience  in  this  field 
(EIB, KFW, AfD, etc). 

6. 

FINANCING 
DEMONSTRATION 

GLOBAL 

RESEARCH, 

TECHNOLOGY 

DEVELOPMENT 

AND 

Financing for global research, technology development and demonstration should include: 

Capacity building 

This  would  comprise  support  for  identifying  country-specific  needs  and  existing  capacity, 
support  for  expert  training  and  best  practice  guidance,  support  for  designing  and 
implementing  domestic  policies,  including  data  collection  and  the  provision  of  technology 
information. It could be implemented by existing organisations. 

Technology-oriented cooperation 

For  a  number  of  specific  key  technologies,  countries  should  agree  to  joint  R&D  and  large-
scale  demonstration  and  deployment  projects.  RD&D  projects  should  be  taken  forward  in 
cooperation  with  developing  countries  to  enhance  ownership  of  new  technologies,  in 
particular  intellectual  property  rights,  and  to  accelerate  the  deployment  and  diffusion  of 
advanced  technologies,  e.g.  through  technology  roadmaps.  The  IEA  has  identified  17  key 
energy technologies on both the demand and supply side that could initially serve as a starting 
point for discussing such roadmaps3, as well as those technologies identified under the EU’s 
Strategic  Energy  Technology  (SET)  Plan.  It  should  also  be  considered  how  to  strengthen 
existing  international  and  regional  technology  initiatives,  such  as  the  Carbon  Sequestration 
Leadership Forum, International Hydrogen Partnership. 

Action  should  also  be  taken  to  strengthen  innovation  and  diffusion  systems  in  developing 
countries,  to  enable  them  to  develop  and  adopt  new  technology  suitable  for  their  local 
circumstances and markets. This could be done through, for example, regional centres.  

Reducing market barriers 

Within the context of the WTO, tariffs and non-tariff barriers on clean environmental goods 
and services should be eliminated as early as possible in order to reduce the costs of advanced 
technologies  and  to  spur  their  deployment.  Using  trade  is  an  efficient  and  effective  way  to 
spread these goods and technologies internationally. Trade liberalisation in this area therefore 
would bring environmental, economic and commercial benefits for all sides. 

Intellectual Property Rights (IPR) 

is  necessary 

Protecting  IPRs 
technology  development  and 
to  encourage  research, 
demonstration,  as  well  as  large-scale  deployment.  Well  established  and  enforced  IPR  rules 
also help technology transfer through increasing the willingness  of enterprises to invest and 
license technology in emerging and developing countries. Countries should explore options to 

3 

Supply  side:  CCS  fossil-fuel  power  generation,  Nuclear  power  plants,  Onshore  and  offshore  wind, 
Biomass  IGCC  &  co-combustion,  Photovoltaic  systems,  Concentrating  solar  power,  Coal:  integrated-
gasification  combined  cycle,  Coal:  ultra-supercritical,  2nd generation  biofuels; Demand  side:  Energy 
efficiency in buildings and appliances, Heat pumps, Solar space and water heating, Energy efficiency in 
transport, Electric and plug-in vehicles, H2 fuel cell vehicles, CCS industry, H2 and fuel transformation 
Industrial motor systems. 

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strengthen  IPR  frameworks  to  protect  and  share  technology  and  further  strengthening 
incentives for innovation. 

Strengthening of knowledge 

Advance  understanding  of  the  processes,  evolution  of  climate  change  and  its  impacts  to 
society,  economy  and  ecosystems  is  required  for  the  preparation  of  efficient  and  effective 
climate  policies  to  adapt  and  mitigate.  In  particular,  strengthening  the  research  and 
observation  on  the  economic  and  social  dimensions  of  climate  change  mitigation  and 
adaptation should be further enhanced. 

Governance 

The  Copenhagen  agreement  will  need  to  establish  a  consultative  group  that  brings  together 
government,  private  sector,  civil  society  and  other  stakeholders’  expertise.  This  new  body 
should provide strategic guidance for research and technology development and international 
cooperation  drawing  on  technology  needs  identified  in  national  low  carbon  development 
strategies. It could also provide advice on the course of action with respect to actual barriers 
to technology diffusion and social uptake of technological innovations. 

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