n.40 March

2016

n. 40 March2016

International Climate Policy is a bi-monthly magazine aimed at providing a clear analy-sis of the worldwide evolution of both inter-national and domestic climate and energy policies, as well as the carbon market.

For questions and comments please contact: Katie Johnson – katie.johnson@feem.it

The magazine is organized into four sections focused on i) international nego-tiations and national policies, ii) European and international energy policy, iii) flexible mechanisms and developing countries, and iv) evaluation of the carbon price in the European and global markets. The infor-mation and data presented in each section are not only an update of recent events, but also an extrapolation of the quantitative implications of these events, based on a detailed analysis of academic papers and published reports. Every two months the most important proposed or applied poli-cies and actions are briefly introduced and analyzed. Each article includes boxes, figu-res, and graphs in order to provide in-depth examination and data exemplifications. All papers and reports used in the analyses are cited at the end of the relevant article.

INTERNATIONAL NEGOTIATIONS AND NATIONAL POLICIES

4. Climate and energy targets in China’s 13th Five-Years Plan Aurora D’Aprile

6. Palestine celebrates full membership to the UNFCCC Elisa Calliari

ENERGY POLICY

8. US Supreme Court Stays Obama’s Clean Power Plan Katie Johnson

10. Biofuel report kept secret during Renewable Energy consultation

Katie Johnson

FLEXIBLE MECHANISMS AND DEVELOPING COUNTRIES

12. Morocco: a focus on the COP 22 host’s climate action Elisa Calliari

14. Where are Green Climate Fund dollars flowing? Aurora D’Aprile

THE CARBON MARKET

16. Carbon markets February 2016 – March 2016 Marinella Davide

FEATURING

International Climate PolicyDirector: Prof. Carlo CarraroEditor: Katie S. JohnsonContributing authors: Isabella Alloisio, Aurora D’Aprile, Marinella Davide, Elisa Calliari, Katie S. JohnsonGraphic designer: Renato Dalla Venezia

Info: info@iccgov.org

ISSN 2279-7270

A joint initiative of

In collaboration with

The Chinese government has officially adopted the much-awaited 13th Five-Year

Plan, the national blueprint that outlines the policy framework, pri-orities, and economic and social development goals for the 2016-2020 period [2]. On March 16, Chinese lawmakers approved the final text at the annu-al session of the National People’s Congress in Beijing. It is the first Five-Year Plan drafted under the current leadership of President Xi Jinping and Premier Li Keqiang, and also the first since China’s economy entered what experts call the “new normal,” a phase of moderate growth based more on domestic consumption than on the previous dominance of exports. The wide-ranging plan includes several binding and guiding tar-gets for China’s economy and pol-icy until 2020. It sets an average annual growth rate of national GDP between 6.5 and 7 percent and in-cludes measures to face the coun-try’s challenges, such as poverty eradication and increasing urban-ization.

Chinese state news agency Xin-hua called it the “greenest” Five-Year Plan ever: “...the newfound zeal for green development comes against a backdrop of China’s eco-nomic shift from the old “growth at all cost” model, which has left air, water and soil tainted, to a sustain-able one,” it said [3]. The plan fea-tures 13 binding targets, of which 10 relate to the environment, sus-tainable development and natural resources.The most relevant targets con-cerning climate and energy for 2020 include:

•reduction of energy intensity (en-ergy consumed per unit of GDP) by 15 percent compared with 2015 levels;reduction of carbon intensity by 18 percent compared with 2015;

•absolute limit for energy con-sumption of 5 billion tons of stan-dard coal equivalent (the current level is 4.3 billion tons);

•15 percent share of non-fossil energy in primary energy con-sumption.

According to the World Resources Institute, the new Five-Year Plan sets China on a path to a 48 per-cent reduction in carbon intensity levels by 2020 compared to 2005 levels, thus exceeding the original target of a 40-45 percent reduction by that year announced in 2009 be-fore the Copenhagen climate sum-mit [4]. The 13th Five-Year Plan builds on a series of increasing cli-mate commitments announced by China in the past years. In November 2009, before the UN-FCCC climate conference in Co-penhagen, a decision by the Stand-ing Committee of China’s State Council set the goal of reducing the country’s carbon intensity (the amount of greenhouse gases emit-ted per unit of GDP) by 40-45 per-cent by 2020 compared with 2005 levels and increasing the share of non-fossil fuels in primary energy consumption to around 15 percent by 2020. The decision was later formalized to the UNFCCC as Chi-na’s “Copenhagen pledge” [5]. In November 2014, in the U.S.-Chi-na Joint Announcement on Climate

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CLIMATE AND ENERGY TARGETS IN CHINA’S 13TH FIVE-YEARS PLAN

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Change, for the first time China made its intention to peak CO2 emissions “around 2030” official, pledging “best efforts to peak ear-ly,” and committed to increase the share of non-fossil fuels in primary energy consumption to around 20 percent by 2030 [6]. Partly recalling the commitments of November 2014, the Intended Nationally Determined Contribu-tion submitted to UNFCCC in June 2015 includes peaking CO2 emis-sions before 2030, reducing car-bon intensity by 60 to 65 percent by 2030 compared to 2005 levels, in-creasing the share non-fossil fuel sources in the primary energy mix to 20 percent by 2030, expanding the forest stock volume by 4.5 bil-lion cubic meters over 2005 levels, and targeting non-CO2 GHG emis-sions through various actions [7].A more recent US-China joint announcement occurred in Sep-tember 2015 on the occasion of Xi Jinping’s state visit to Washington, D.C., and provided further details about China’s planned strategy to reduce emissions and promote low-carbon development [8]. It in-cluded: the commitment to lower CO2 emissions per unit of GDwP by 60-65 percent from the 2005 level and increase the forest stock volume by around 4.5 billion cubic meters on the 2005 level by 2030:

• the commitment to give priori-ty, in distribution and dispatching, to renewable power generation and fossil fuel power generation of higher efficiency and lower emission levels;

• a national emission trading system, covering key industry sec-tors such as iron and steel, power generation, chemicals, building materials, paper-making, and nonferrous metals (planned to start in 2017);

• the increase in the share of green buildings (in newly built buildings) to 50 percent by 2020;

• the increase in the share of public transport in motorized travel to 30 percent in big- and medium-sized cities by 2020;

• a fuel efficiency standards for heavy-duty vehicles (to be final-ized in 2016 and implemented in 2019);

• an “effective” control of HFC-23 emissions by 2020;

• ¥20 billion (around USD 3 bil-lion) to support other developing countries in implementing cli-mate actions through a new fund, the China South-South Climate Cooperation Fund.

Looking at the existing commit-ments and plans of the world’s second-largest economy and the largest emitter of greenhouse gases, the new Five-Years Plan appears coherent with the current Chinese path towards greener and low-carbon development.According to experts, the new plan features more as a continuation of the environmental protection efforts set out in the 12th Five-Year Plan (2011-2015) rather than a departure from it [9]. However, in certain aspects the latest plan goes further.For instance, this is the first time that a Five-Year Plan includes a specific target for PM2.5, the harmful particulate matter that contributes to air pollution, with the goal of limiting factory emis-sions of PM2.5 down to 25 percent of total output.Other measures envisioned to address pollution, a major envi-ronmental and health concern in China, are an increased planned reduction in the amount of air pollutants, such as sulfur dioxide

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(SO2) and nitrogen oxides (NOx), and the requirement of a mini-mum of 80 percent of days “with good air quality” by 2020.

Reduction of China’s carbon intensity from 2005 levels [10]

References [1] Photo: Gee Way (2013) Skyline Watching - Shanghai, China. [2] Xinhua (2016) China’s 13th Five Year Plan (in Chinese). [3] Zhang Zhengfu (2016) Commentary: China embraces green growth era with “greenest” blueprint. Xinhua. [4] Geoffrey Henderson, Ranping Song and Paul Joffe (2016) 5 Questions: What Does China’s New Five-Year Plan Mean for Climate Action? World Resource Institute. [5] Department of Climate Change, National Development and Reform Commission of China (2010) Letter including autonomous domestic mitigation actions. UNFCCC. [6] The White House (2014) US-China Joint Announcement on Climate Change. [7] Department of Climate Change, National Development and Reform Commission of China (2015) China’s INDC. UNFCCC. [8] The White House (2015) US-China Joint Presidential Statement on Climate Change. [9] Charlotte Middlehurst (2016) China maps out development for the next five years. Chinadialogue. [10] World Resource Institute (2016) Reduction of China’s carbon intensity from 2005 levels, in Geoffrey Henderson, Ranping Song and Paul Joffe (2016) 5 Questions: What Does China’s New Five-Year Plan Mean for Climate Action?

On 17th March 2016 the State of Palestine upgraded its status from “Observer” to

“Party” to the UNFCCC, becom-ing its 197th member. This follows the deposit of Palestine’s instru-ment of accession on December 18th 2015, announced with pride during the closing statements at COP21 [2]. This formal entry comes after the United Nation recognition of Pal-estinian statehood in 2012 [2] and the subsequent invitation by the UNFCCC to join the Convention in July 2014. The first time Palestine participated in climate talks was in 2009 at COP15 in Copenhagen and in the form of “observer en-tity” [4]. When Palestine joined UNESCO in 2011, the United States react-ed to the decision by suspending their funding to the Paris-based institution, accounting for almost a fifth of its annual budget [5]. This was done by virtue of two US laws that prohibit contributions to or-ganizations granting membership to the Palestinians [5]. Up to date, it is not clear whether Palestine

entry in the UNFCCC will trigger a similar opposition [4]. The Holy See remains now the only observ-er within the Convention, while Taiwan is completely excluded from the process because of the blockage imposed by the Chinese government. Besides the symbolic importance, the full membership is likely to substantially change (for good) the way the country has been dealing with climate change threats so far. Not only will the State have the opportunity to advance nation-al needs and interests in interna-tional talks, but it will also have access to a set of resources pre-viously precluded. As an observer, Palestine could not count on the financial support of the Global En-vironmental Facility (GEF), which is the UNFCCC financial mecha-nism administering both the Least Developed Countries Fund (LDCF) and the Special Climate Change Fund (SCCF). Access to the GEF was limited to the Small Grant Programme. Similarly, Palestine was excluded by Clean Develop-ment Mechanism (CDM) projects

not being Party to the Kyoto Pro-tocol [7]. Coordinated international sup-port is of outermost importance for enhancing Palestine climate resilience. The country is exposed to a number of hazards, including rising temperatures, heatwaves, floods, droughts and sea level rise [7]. In particular, a significant in-crease in mean annual tempera-ture has been registered for the past 50 years (+ 1°C) and a further increase is expected up to 2050, ranging from 1 to 2°C. Climate scenarios also project a decrease of mean annual precipitations of about 30 percent in 2050 and with higher levels of significance in 2100 [9].Particularly severe impacts are expected on water resources, al-ready stressed as an effect of cur-rent demographic and economic growth as well as the asymmetric water allocation between Pales-tine and Israel [9]. While Israelis have access to 330 litres/person/day on average, Palestinians can enjoy only 60-100 for domestic use and personal hygiene [5]. In some

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PALESTINE CELEBRATES FULL MEMBERSHIP TO THE UNFCCC

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areas of the West Bank, people survive with an endowment as little as 20 litres/person/day [10], against the optimal standard for daily consumption of 100 litres/person/day recommended by the World Health Organisation (WHO) [5]. This already worrisome situa-tion is expected to further worsen: climate scenarios indicate that most of the droughts occurring between 2031 and 2060 will be classified as extreme, against the moderate risk registered in past decades [9]. The figure shows rel-ative changes of selected water indicators between current (1961-1990) and future (2031-2060) con-ditions, representing the impact of three climate scenarios [13]. Consistently, the National Cli-mate Change Adaptation Strategy and the accompanying Plan [5] launched in 2010 by the Palestin-ian Government, identify water in-security as one of the main priori-ty for action. While pointing to the inefficient allocation among uses as one of the main drivers behind water insecurity, the strategy also reflects on its implications for food availability. It thus identifies a series of no-regret and low-regret measures for enhancing adaptive capacity in both domestic and ag-ricultural uses. Such measures include, for instance, increased use of water harvesting, introduc-tion of more efficient irrigation techniques, selection of heat tol-erant crops, as well as planning

and management options like the establishment of clear water use priorities. Although not elevated to a nation-al priority, climate change is also given consideration within the National Development Plan 2014-2016 which identifies the promo-tion of effective adaptation strat-egies among its most important policies. At the institutional level, responsibilities on climate change issues and on environmental pro-tection/conservation are assigned to the Environment Quality Au-thority (EQA) within the Palestin-ian Government, in cooperation with the Ministry of Agriculture and the Palestinian Water Author-ity according to agreed planning priorities.

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References [1] Photo: Palestinian landscape with olive trees and settlements (n.d.) RNW.org on Flickr. [2] State of Palestine (2015) Closing Statement at COP21. [3] UN General Assembly (2012) Resolution 67/19. [4] Pashley, A. (2015) Palestine toasts full membership of UN climate body. [5] BBC News (2011) Mahmoud Abbas raises Palestinian flag at Unesco. [6] B. D. Schaefer (2011) What Palestinian Membership Means for UNESCO and the Rest of the United Nations. [7] ClimaSouth Project (2016) Palestine National Climate Change Policy. [8] EQA (2010) Climate Change Adaptation Strategy and Programme of Action for the Palestinian Authority. UNDP/PAPP, Jerusalem. [9] GLOWA Jordan River Project (2009) Climate change in the Jordan River region. [10] BC News (2010) Obstacles to Arab-Israeli peace: Water. [11] European Parliament (2016) Water in the Israeli-Palestinian conflict (Briefing). [12] WHO (2003) Domestic Water Quantity, Service, Level and Health. [13] GLOWA Jordan River Project (2013) A view on current and future water resources.

Relative changes in selected water indicators between current (1961-1990) and future (2031-2060) conditions, representing the impact of three climate scenarios

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US SUPREME COURT STAYS OBAMA’S CLEAN POWER PLAN

Despite the U.S. Supreme Court’s February 9th ruling to delay implementation

of the Clean Power Plan until le-gal challenges to the regulation are completed, the White House claims that it will still be able to meet greenhouse gas (GHG) emissions reductions commit-ments agreed to at COP21 in Par-is last December. Many however worry that this decision undercuts progress made in the Paris Agree-ment, as the world’s second big-gest emitter (at least temporarily) loses its primary instrument to achieve its 26-28 percent GHG re-ductions target by 2025. The Clean Power Plan, announced by President Obama and the En-vironmental Protection Agency (EPA) on August 3, 2015, is de-signed to lower carbon emissions from U.S. power plants by 32 percent from 2005 levels by 2030 by use of flexible and achievable standards. The plan addresses existing and new fossil fuel-fired power plants and relies on a fed-eral-state partnership to achieve the national objective. Unlike the

Clean Air Act, which sets stan-dards that states then implement, the EPA would establish interim and final statewide goals under the new rule. States would then implement measures to ensure that the power plants in their area – individually, together, or in com-bination with other measures – achieve their final targets by 2030.Under the Plan, two options are available for states to meet their goals. The EPA would inform states of what they believe can be achieved in terms of emission re-ductions, and leave it to states to decide how best to achieve that level of reduction, unless the state rather not come up with a plan, in which case the EPA would do so. State measures plans include a mix of regulations implemented by the state, such as renewable energy standards and programs to improve residential energy ef-ficiency that are not included as federally enforceable components of the plan. Otherwise, emis-sions standards plans include source-specific requirements en-suring all affected power plants

within the state meet their re-quired performance standards. Beyond the flexibility allowed in meeting emissions reductions goals, the Clean Power Plan fur-thermore provides incentives for early deployment of renewables and efficiency measures benefit-ing low-income communities, and tools to help states implement market-based approaches.According to the EPA, the Clean Power Plan provides states and utilities both ample flexibility and time to achieve the required emis-sion cuts, thus offering the power sector the opportunity to optimize pollution reductions while main-taining a reliable and affordable supply of electricity for ratepay-ers and businesses [2]. Moreover, the transition to cleaner sources of energy will reduce emissions also from other harmful air pol-lution: in 2030 sulfur dioxide’s emissions from power plants will be 90 percent lower compared to 2005 levels, while emissions of ni-trogen oxides will be reduced by 72 percent, leading to benefits in terms of thousands of premature

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deaths avoided and thousands fewer asthma attacks and hospi-talizations in 2030 and every year beyond. Addressing the media, the EPA administrator, Gina McCarthy, said the plan would cost about USD 8.4 billion with total benefits estimat-ed between USD 34 and 54 billion. States would have been required to submit a final plan by Septem-ber 6, 2016 (or 2018 at the latest if an extension were requested) be-fore the Supreme Court‘s decision to uphold the Clean Power Plan.

Lawsuit challenging the Clean Power Plan

Following the August announce-ment of the Clean Power Plan, coal-producing states vowed full-scale resistance. In a letter sent to all 50 governors, Senate Majority Leader Mitch McConnell support-ed the resistance, urging not to comply with the plan.Twenty-nine states and dozens of corporations and industry groups then decided to challenge [3] the EPA’s Clean Power Plan, arguing that it is “the most far-reaching and burdensome rule EPA has ever forced onto the states.” The controversy with the Clean Power Plan is not a constitutional issue, however, as states are not required to do anything specifical-ly. Therefore the problem is rather a legal issue based on the convic-tion that the EPA is overstepping its authority under Section 111(d) of the Clean Air Act to regulate broad swaths of the economy, and its authority to use Section 111(d) for power plants at all.Contention is based on the fact that there are two versions of Section 111(d), one from the Sen-ate and one from the House of Representatives, that both aim to prevent the EPA from issuing du-plicative regulations. The Senate version prohibits the EPA from writing a second rule to control a pollutant that is already regulat-ed, while the House version bars the EPA from using Section 111(d) to regulate an emission source (i.e. power plants) that is already subject to Section 112 rules. The EPA argues that it should be

allowed deference from the courts in choosing the Senate version of the amendment. If they prevail on this argument, other arguments will undoubtedly follow, for ex-ample regarding whether Section 111(d) was intended to authorize a major overhaul of the power system, and the selection of car-bon-reducing measures used to set state targets.Those contending the Clean Pow-er Plan argue that Section 111 is intended to apply only to systems at a single emitting source, not to all sources or power plants within a state’s power sector, and fur-thermore that the EPA is seeking to force states to implement a na-tional policy against their wishes.

Supreme Court ruling and next steps

Following the Supreme Court’s 5-4 vote, an emergency order was issued to the EPA to put the plan on hold. This is the first time that the Supreme Court has granted a request to halt a regulation before review by a federal appeals court. The White House released a state-ment [4] on February 9th lament-ing the decision:

We disagree with the Supreme Court’s decision to stay the Clean Power Plan while litigation pro-ceeds. The Clean Power Plan is based on a strong legal and tech-nical foundation, gives States the time and flexibility they need to de-velop tailored, cost-effective plans to reduce their emissions, and will deliver better air quality, improved public health, clean energy invest-ment and jobs across the country, and major progress in our efforts to confront the risks posed by cli-mate change. We remain confident that we will prevail on the merits. Even while the litigation proceeds, EPA has indicated it will work with states that choose to continue plan development and will prepare the tools those states will need. At the same time, the Administration will continue to take aggressive steps to make forward progress to reduce carbon emissions.

The U.S. Court of Appeals for the D.C. Circuit will hear the case and make a decision this sum-mer. However, even if the D.C. Circuit upholds the rule and the parties appeal successfully to the Supreme Court, the justices like-ly will not issue a decision until 2017. The replacement for the re-cently deceased Justice Antonin Scalia (who would have likely vot-ed against the plan) adds further uncertainty to the situation.It follows that the regulation has entered into the 2016 US presi-dential elections debate, and will now ultimately rest in the hands of the next presidential adminis-tration. On one side Democratic candidate Hillary Rodham Clinton commented that the “Clean Pow-er Plan is a significant step for-ward in meeting the urgent threat of climate change.” On the other side, Republican candidates have attacked the new regulations, accusing Obama of conducting a “war on coal,” with former Repub-lican candidate Jeb Bush calling the new plan “irresponsible and overreaching.”

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References [1] Photo: Claire Anderson (2016) Supreme Court, Washington, D.C. [2] EPA (2014) EPA Fact Sheet: Clean Power Plan. [3] State of West Virginia, State of Texas, et al., v. Environmental Protection Agency (2016) Application by 29 states and state agencies for immediate stay of final agency action during Pendency of petitions for review. [4] The White House (2016) Press Secretary Josh Earnest on the Supreme Court’s Decision to Stay the Clean Power Plan.

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BIOFUEL REPORT KEPT SECRET DURING RENEWABLE ENERGY CONSULTATION

The public consultation peri-od for the European Union’s (EU) Renewable Energy Di-

rective for 2020 to 2030 ran from 18 November 2015 to 10 February 2016. Following the closure of the review period, the European Com-mission (EC) published the Globi-om Study [2] on indirect land use change in March 2016, despite having been in possession of the report during the consultation process. As the results of the re-port would have been relevant to the review of the Directive, the move has led many to question the openness and transparency of the manner in which the Commission is choosing to operate. In defense of the EC’s choice to withhold the report, Commission spokesperson Anna-Kaisa Itkonen said, “The Commission’s work on gathering and analysis of the lat-est available scientific evidence and available research results on ILUC in relation to production of biofuels consumed in the EU is ongoing and is not limited to one study” [3]. Dick Roche, for-mer Environment Minister of Ire-land and current biofuel lobbyist lamented the missed opportunity of incorporating the report’s find-

ings into the Directive, noting that “The Commission had possession of the Globiom Study during the consultation period and decided against releasing it even though its content clearly relates to the consultation” [3].The study was commissioned in 2013 because of the EU’s waver-ing position on the promotion of the biofuel industry. In 2009, the EU launched an ambitious pro-gram to promote the use of re-newable fuels in the transport sector. Specifically, the policy called for 10 percent of the ener-gy used in each member state’s transport sector to be renewable by 2020, thereby encouraging the development of sources including biofuels, biogas, and electricity. Taking a 180-degree shift in 2012, the Commission then announced plans to limit crop-based biofuels to 5 percent of transport fuel by 2020, based on the idea that the existing program led to price in-creases for food in the developing countries, and to land use chang-es that contributed to increased greenhouse gas emissions. Many of the biofuel producers in West-ern Europe were left frustrated with the drastic change in policy

after having made significant in-vestments to meet the 10 percent target. The complete change in biofuel policy was seen as an at-tempt to maintain the current lev-el of biofuel production, as 2011 EU data showed that biofuels pro-duced from food crops constituted about 4.5 percent of EU transport fuel.The intent of the Globiom Study is therefore to provide an assess-ment of indirect land and carbon impacts from biofuel consumption in the EU to better inform the pol-icy discussion. It aims to quantify emissions resulting from the ex-isting EU biofuel policy up to 2020 due to direct or indirect land use change. In regards to biofuel con-sumption and cropland expansion, direct land use change is when new cropland is created for the production of biofuel feedstock; whereas indirect change is when existing cropland is used for bio-fuel feedstock production, thereby forcing food, feed, and materials on new cropland elsewhere. The study compares a baseline (world without additional biofuels) scenario to a policy scenario based on the European Union Renew-able Energy Directive to find the

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additional biofuel demand using the Globiom model. It was carried out by a consortium of three com-panies Ecofys, IIASA, and E4tech, bringing together research on re-newable energy sectors and land use change modeling. The results of the study indicate that in adopting an undifferenti-ated approach to biofuels in its policy, the EC ignores the fact that different biofuels produce differ-ent impacts (see figure), and that perhaps a single and uniform pol-icy is not the best approach. Some of the main findings include:

• The increased demand for eth-anol made from conventional eth-anol feedstocks (sugar and starch crops) and cellulosic biomass can be met with low impacts on land use change and low land use change emissions.

• The resulting increased demand for sugar and starch crops used in ethanol production can be met

Overview of modelling results: LUC emissions per scenario [2]

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without impacting food prices by 2020.

•Conventional ethanol feed-stocks have lower land use change impacts than other bio-fuel feedstocks, and cellulosic ethanol feedstocks have a low or even positive impact on land use change. For example, key feed-stocks used to produce ethanol in the EU would have LUC emis-sions of 14g CO2 e/MJ for maize, 15g CO2 e/MJ for sugar beet, and 34g CO2 e/MJ for wheat; cellulos-ic ethanol feedstocks would have LUC emissions of 16g CO2 e/MJ for straw ethanol, 0g CO2 e/MJ if a sustainable straw removal rate is introduced, and -12g CO2 e/MJ and -29g CO2 e/MJ for perennials and short rotation crops.

• If abandoned land in the EU is used for the production of biofu-els, then land use change impacts and emission can be even lower.

While the Globiom Study pro-vides some clarity on the land use change impact of biofuels con-sumed in the EU, those who par-ticipated in the public consultation process were unfortunately un-able to read and reflect on the re-sults or include comments based on the report findings in the public consultation process for the Re-newable Energy Directive for 2020 to 2030.

References [1] Photo: Rasmus Landgreen (2014) Field. Upsplash. [2] ECOFYS, IIASA & E4tech (2015) The land use change impact of biofuels consumed in the EU - Quantification of area and greenhouse gas impacts. European Commission. [3] Georgi Gotev (2016) Late publication of biofuels study raises questions. EurActiv.

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MOROCCO: A FOCUS ON THE COP 22 HOST’S CLIMATE ACTION

While celebrations for the recently approved Paris Agreement will continue

with the High-Level Signing Cer-emony in New York on April 22nd, technical work has already begun in preparation of COP22. Hosted by the Government of Morocco, the forthcoming climate talks will take place in Marrakesh from 7-18 November 2016. The country is re-solved in showcasing the world its leadership on climate change in the Middle East and North African (MENA) region. A first step along this line was taken on February 4th, when King Mohammed VI inaugurated the first plant of the Ouarzazate solar complex, a giant project of concentrated solar pow-er (CSP) aiming to reach a 580 MW capacity [2]. The country is the only in North Africa with no fossil resources and is currently importing 91 per-cent of the energy supplied from abroad [2], including gas from Al-geria and oil from Saudi Arabia, Iraq and Russia [2]. Such energy dependency has prompted the government to be a forerunner of

Elisa Calliari renewable energy development. Launched in 2009, the National Energy Strategy and the relat-ed National Priority Action Plan (PNAP) set ambitious targets for wind, solar, and hydropower ca-pacity on the order of 2GW each [5]. If met, the targets translate to having 42 percent of the country’s total installed electricity gener-ation capacity being deployed by renewables by 2020 [3]. Morocco further raised the stake with the release of its Intended National Determined Contribution (INDC) in June 2015 [6]. The doc-ument sets a target of 50 percent of installed electricity production capacity by renewables by 2025, together with a reduction in ener-gy consumption of 15 percent by 2030. It also pledges a substantial reduction of fossil fuel subsidies, building on the Subsidy Removal Programme, which was launched in 2013 to contrast the growing budget deficit resulting from the heavy subsidization [7]. The trans-formation of the energy sector is outlined as a key strategy for at-taining the ambitious emissions

reductions included in the INDC. The country pledges an uncon-ditional target of -13 percent of greenhouse gas (GHG) emissions by 2030 compared to a business as usual (BAU) scenario. However, the figure could substantially in-crease (up to 32 percent) in case international financial support is provided. In line with other de-veloping countries, the Moroccan INDC places particular impor-tance on adaptation. The country is exposed to a number of cli-mate-related hazards including drought, floods, desertification and sea level rise [6]. Impacts on water availability are of particu-lar concern, especially when con-sidering the already worrisome present situation. According to the World Resource Institute (WRI) Aqueduct World Risk Atlas, most of Moroccan territory has to deal with a medium to extremely high water risk, which is expected to increase by a factor of 2.8 by 2040 [8]. With more of 90 percent of arable land being rain fed, a con-traction between 15–40 percent of primary agricultural production

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could be experienced by the end of the century [9]. Consistently, Mo-roccan quantified adaptation goals for 2020 and 2030 are mainly tar-geting water management mea-sures including, for instance, the substitution of water withdrawal from overexploited aquifers by withdrawals from surface water, desalinization projects, the reuse of treated wastewater, and water savings across domestic and pro-ductive uses. Besides the water sector, attention is also drawn on reforestation (+200,000 hectares) as well as measure to combat soil erosion. How do the Moroccan commit-ments compare with those of other North African neighbours? The table shows both mitigation and adaptation pledges by Mo-rocco, Tunisia [10], Algeria [11], and Egypt [12] as contained in their respective INDCs. Sectors prioritised for adaptation action are pretty similar across the re-gion and mainly focus on the water sector, given the project-ed impacts of decreased precip-itation and rising temperatures on the scarce regional water endowment. Mitigation efforts are instead more differentiated. Egypt’s qualitative and unquanti-fied commitment seems minimal and entirely conditioned by foreign financial, technological, and tech-nical assistance. Tunisian pledges are undoubtedly more ambitious, opting for a 41 percent reduction in carbon intensity conditional to the provision of external support of estimated USD 18 billion. How-ever, the chosen intensity target (tCO2eq/GDP) is somehow am-biguous, as it could be met both

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in the case of an increase of GDP dominating the increase in emis-sions, as well as in the case of an actual reduction of emitted CO2 . Algeria is instead more in line with Moroccan pledges, committing to a 7 percent unconditional reduc-tion against the baseline sce-nario and a conditional one of 22 percent. On the whole, Morocco’s pledges seem more ambitious with respect to its neighbouring countries, confirming its region-al leadership towards low carbon and climate resilient develop-ment. It was not by chance that the 2015 Climate Change Perfor-mance Index Report has included Morocco in the top 10 of the most climate policy engaged countries. The report annually evaluates and compares the climate-protection performance of 58 countries ac-counting together for more than 90 percent of global energy-relat-ed CO2 emissions [13].

UNCONDITIONAL TARGET

CONDITIONAL TARGET

TARGET TYPE PRIORITISED ADAPTATION ACTIONS

Morocco 13% 32% Baseline scenario water, agriculture, forests,

Algeria 7% 22% Baseline scenario water, agriculture, health,

Tunisia 13% 41% Intensity target water, agriculture, heal-

Egypt “high CO2 mitiga-tion levels”

n.a. n.a. water, agriculture, health, co-astal zones, tourism, energy, rural areas, population and roads

Mitigation and adaptation goals up to 2013 contained in North African Countries’ INDCs

References [1] Photo: Philippe Roos (n.d.) Ain Beni Mathar Integrated Thermo Solar Combined Cycle Power Plant. Flickr. [2] Climate Policy Observer (2016) Morocco’s massive solar plant unveiled in the Sahara desert. [3] IEA (2014) Morocco 2014 – Energy Policies Beyond IEA Countries: Executive Summary and Key Recommendations. [4] Kingdom of Morocco (2013) Energy sector. Key numbers. [5] Climate Policy Observer (2016) Morocco Country Profile (National Policy). [6] Kingdom of Morocco (2015) Intended Nationally Determined Contribution. [7] IMF (2014) Subsidy Reform in the Middle East and North Africa. [8] WRI (2016) Aqueduct World Risk Atlas. [9] Schilling J. et al, (2012) Climate change, vulnerability and adaptation in North Africa with focus on Morocco. Agriculture, Ecosystems and Environment, vol. 156. [10] Tunisia (2015) Intended Nationally Determined Contribution. [11] Algeria (2015) Intended Nationally Determined Contribution. [12] Egypt (2015) Intended Nationally Determined Contribution. [13] Germanwatch and CAN (2015) Climate Change Performance Index. Results 2015.

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WHERE ARE GREEN CLIMATE FUND DOLLARS FLOWING?

After years of preparation and waiting, the Green Cli-mate Fund has taken the

first substantial steps towards its mission of mobilizing climate financial flows to developing and least developed countries. The beginning of 2016 has seen the official start of the first eight projects which received financial approval. The Fund is now aiming to decisively increase the level of funding, with an aspirational tar-get of approving USD 2.5 billion in funding proposals by the end of 2016.The Green Climate Fund (GCF) was established in 2010 by the United Nations at COP16 in Can-cun, Mexico, and reached the ac-tual capacity to fund climate-re-lated projects in May 2015. After having raised around USD 10 billion in pledges from over 40 governments in November 2015, the Fund approved the first eight projects to be financed with an overall initial GCF investment of USD 168 million. They range from resilient infrastructures and early warning systems in climate vul-

nerable areas such as Maldives, Fiji and Bangladesh, to invest-ment funds and green bonds de-signed to support the deployment of renewable energy sources and energy efficiency improvements in African and Latin American countries (see map). Taking into account the GCF financing allo-cated for the post-pilot phase of the green bonds project in Latin America and the Caribbean, the first eight projects will receive a total investment by the Green Cli-mate Fund of over USD 300 million [2]. The projects are co-financed in different sizes and ways by oth-er entities (funds, development banks, governments) with grants, loans or guarantees, generating a total investment of around 1.2 bil-lion. When looking at the figures, the predominance of mitigation proj-ects in attracting investments is evident, despite being fewer in number: only one project out of the eight approved in 2015 tar-gets mitigation goals, while five address adaptation needs and two

are classified as “cross cutting”. The fact actually reflects a global trend. According to a recent study, climate finance mobilized by de-veloped countries was estimated at an average of USD 57 billion an-nually in the period 2013-2014, of which three quarters support mit-igation activities, one sixth adap-tation, and a small share targeting both [3]. The Green Climate Fund is com-mitted to a 50:50 balance between mitigation and adaptation invest-ments, and it seems to be pointing in this direction for the next round of funding proposals. In 2016, the Fund plans to fund 22 projects and programs worth around USD 5.4 billion, of which the total GCF financing amounts to USD 1.5 billion (see chart). The funding proposals come from Af-rica, Asia-Pacific, Latin America, and in smaller numbers, Eastern Europe. They include renewable energy projects, agriculture resil-ience, water infrastructure, and land use and forestry manage-ment [4]. The allocation balance in the new

Aurora D’Aprile

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funding phase is decisively differ-ent: the cross-sectorial projects would receive the lion’s share of the planned investment (around USD 4 billion of total investment of which almost USD 1 billion from the Green Climate Fund), while the remaining GCF financial support would be almost equally split be-tween adaptation and mitigation projects (around USD 250 million of GCF funding each, although mitigation projects are expect-ed to receive twice the amount of their adaptation counterpart in to-tal investment). Even if all the planned projects for this year receive financial ap-proval, the scale of financing is still far from the 2016 target of USD 2.5 billion. There are 15 other projects in the GCF 2016 pipeline, but they are incomplete and thus the probability of being presented to the Fund’s Board by the end of this year is smaller. In order to fa-cilitate the access to financing for poorer and less-equipped coun-tries and entities, the Fund took some key operational decisions at the latest meeting of the Board held in early March in Songdo, South Korea. The Fund expand-ed the pool of accredited entities, those international, national and smaller institutions, both public and private, that can develop and submit funding proposals and are appointed to overseeing the man-agement and implementation of

Green Climate Fund: funded projects on 2015 [2]

References [1] Photo: Wikipedia (2014) Songdo, South Korea, location of Green Climate Fund headquarters. [2] Green Climate Fund (2015) Project Briefs 2015. [3] OECD & CPI (2015) Climate Finance in 2013-14 and the USD 100 billion goal. [4] Green Climate Fund (2016) Status of the Fund’s portfolio: pipeline and approved projects. [5] Green Climate Fund (2016) Press release: GCF Board closes key policy gaps as project pipeline reaches $1.5 billion, March 11, 2016.

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Green Climate Fund: projects with a >50% probability of presentation in 2016 [4]

the projects financed. Moreover, it approved the first grant (USD 1.5 million to Rwanda) under the Fund’s Project Preparation Facil-ity, a new instrument to support accredited entities from develop-ing countries to submit projects in line with GCF standards and crite-ria.

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CARBON MARKETS FEBRUARY - MARCH 2016

February saw the carbon price continue to fall, even if less dramatically than the previ-

ous month. The European bench-mark contract on March 18th was traded at 1.12€ (18 percent) less than at the end of January, and 3.34€ (40 percent) less than its last closure in December 2015.During February, however, pric-es dropped well below the €5.00 level for the first time in almost two years. Falling oil prices were among the drivers dragging the price down along with weak auc-tion results and the fear of an in-flux of supply from small indus-tries that have already received free EUA allocations for 2016. Overall in March, the December 2016 contract managed to con-solidate around €5.00, with trad-ing volumes generally high (see graph).EU ETS companies are currently in the process of receiving their free allocation allowances from Member States. On March 3rd, the European Commission released a report about the status of free allocation transfer to industrial

Marinella Davide

and heating sectors for 2016. The report showed that 21 countries already started to distribute their allocation volumes, accounting for around 71.4 percent of the total free permits available. Cro-atia, Finland, Italy, and Spain, on the contrary, have not yet started to allocate allowances to their in-stallations. A second update fol-lowed on March 17th that showed progress on both overall alloca-tion and Member States compli-ance. According to latest figures, the amount distributed rose to 74 percent by mid-March [3]. Croatia started to allocate permits to its installations and 14 countries al-ready transferred their entire free allocations budget. Additional al-locations are therefore expected in the next few weeks. According to ICIS Tschach Solutions, there is the risk that additional supply floods the market as countries like Italy and Spain start distribut-ing allowances to cash-strapped companies, which can decide to sell some of their volumes lead-ing to a slightly bearish impact [4]. The EU Commission will continue

to publish updates on the issue every two weeks. Debate about post 2020 targets and implications of the Paris agreement also helped to liven up the carbon market up. Following works within both the ITRE (In-dustry, Research and Energy) and the ENVI (Environment, Public Health and Food Security) com-mittees, European leaders gath-ered in Brussels on March 17th for the spring meeting of the EU Council and confirmed that the 28-bloc remains committed to its 2030 targets, including the emis-sions reduction target of at least 40 percent by 2030 compared to 1990, and the renewable energy and energy efficiency targets of at least 27 percent [5]. At the be-ginning of March, the European Commission released its assess-ment on the implications for the “Road from Paris,” concluding that the EU’s 2030 framework is in line with the commitments of the Paris Agreement [6]. Conversely, a recent study by Thomson Reuters called into question the credibility of EU’s plan, estimating that over-

all European emissions in 2050 will be 2 billion tons higher than the 80 percent reduction that the EU has defined as its domestic contribution to the 2°C goal [7]. As for the Kyoto Protocol’s carbon offset credits, in February CERs demand dried up due to the en-during effects of the global eco-nomic slowdown and as demand from the EU ETS approached its 2020 limits. This led CERs price to fall below €0.40 per ton and to register days without trading exchanges for the first time. Ac-cording to Carbon Pulse, this sit-uation will threaten the viability of many of the thousands of proj-ects in the CDM pipeline, actually vanishing the attempt to keep the

References [1] Photo: Rafael Matsunaga (2007) Sao Paulo Stock Exchange. Flickr. [2] Own elaborations from ICIS Tschach Solutions data and analysis. [3] European Commission (2016) Status table on free allocation to industry and heat production for 2016. Situation on 17 March 2016. [4] ICIS Tschach Solutions (2016) Official website. [5] Climate Policy Observer (2016) EU Council confirms 2030 targets, urges early ratification of the Paris deal. ICCG. [6] European Commission (2016) The Road from Paris: assessing the implications of the Paris Agreement […], Brussels, 2.3.2016, COM (2016) 110 final. [7] Thomson Reuters (2016) WHITE PAPER EU Climate Ambition: Falling Short of Long-term Targets? [8] Carbon Pulse (March 16, 2016) Questioning its future role, the CDM continues to scour for demand lifelines. [9] UNFCCC (2016) Meeting report - CDM Executive Board eighty-eighth meeting, 7-11 March 2016, Bonn, Germany.

scheme alive and find new buyers and uses in the run-up to 2020 [8]. The CDM’s Executive Board is indeed working to understand how the scheme could fit into the new international cooperative mechanism, as foreseen by the Paris agreement. During its last meeting, held from 7 to 11 March 2016 in Bonn (Germany), the Ex-ecutive Board “agreed to monitor the ongoing development of the provisions contained in Article 6” and requested that the UNFCCC secretariat prepare an analysis, including legal and technical as-pects, on the use of the CDM be-yond the end of the true-up period of the second commitment period of the Kyoto Protocol [9].

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Carbon prices 2015-2016 [2]

Front-year EUA and CER prices (weekly closure)

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EUA Dec. 2016 CER Dec. 2016

The International Center for Climate Governance (ICCG) was founded in 2009 as a joint initiative of the Fondazione Eni Enrico Mattei (FEEM) and the Fondazione Giorgio Cini. The ICCG is now an internationally renowned center whose activities focus on the design of climate policy and related governance issues.

The ICCG’s mission is to disseminate scientifically-based, socio-economic research in the fields of climate change mitigation and adaptation to policymakers, business leaders, academics and the general public. It seeks to achieve this at the local, national and international levels through interdisciplinary activities as well as through the production of climate and energy policy analyses and definitions of optimal governance models for climate change management.

www.iccgov.org