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Benefits of being a party to the Protocol in negotiating the rules for future commitment periods
"Greenhouse gases are accumulating in Earth’s atmosphere as a result of human activities, causing surface air temperatures and subsurface ocean temperatures to rise. Temperatures are, in fact, rising. The changes observed over the last several decades are likely mostly due to human activities, but we cannot rule out that some significant part of these changes are also a reflection of natural variability. Human-induced warming and associated sea level rises are expected to continue through the 21st century." - US National Academy of Sciences, June 2001
This document is a National Interest Analysis (NIA), prepared in accordance with Parliamentary Standing Order 385, in relation to New Zealand’s decision on whether to ratify the Kyoto Protocol to the United Nations Framework Convention on Climate Change.
The NIA is set out using the following structure:
Three appendices are included:
This analysis faces the considerable challenge that it must account for economic, environmental, social and cultural effects of both:
The timeframes and uncertainties involved make it difficult to precisely identify and quantify both the effects of climate change and the benefits of limiting that change. The key difficulties are that:
This analysis can, therefore, only provide quantitative estimates of economic and environmental effects for the targets to be achieved in the first commitment period from 2008 to 2012, noting that this is only a first step in a long-term process in which both the economic and environmental (and associated social and cultural) effects will change significantly as a result of the second and subsequent commitment periods.
Where the Protocol came from
In 1992 at the Rio “Earth Summit”, the world community adopted the United Nations Framework Convention on Climate Change (also called the UNFCCC or simply the “Framework Convention”). The ultimate objective of the Framework Convention is to achieve:
"Stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic (human induced) interference with the climate system."
Achieving the Framework Convention’s objective will eventually require major reductions in global emissions of greenhouse gases compared with both present-day levels and future projected levels of emissions.
New Zealand and virtually all the world’s countries have ratified the Framework Convention. Led by the United Nations, it is the global multilateral response to the risks of human caused climate change. By ratifying, the developed countries (listed in Annex 1 to the Framework Convention – see Appendix 1 for this list) committed themselves to adopting policies and measures to limit greenhouse gas emissions and to protect and enhance carbon sinks, with the aim of reducing emissions to 1990 levels by 2000.
In the mid-1990s, it became clear that the voluntary emissions targets agreed under the Framework Convention were not going to be met. The Conference of the Parties to the Framework Convention agreed, in a decision known as the Berlin Mandate to:
"begin a process to enable it [the Conference of the Parties] to take appropriate action for the period beyond 2000, including the strengthening of the commitments of the Parties included in Annex I to the Convention (Annex I Parties) in Article 4, paragraph 2(a) and (b), through the adoption of a protocol or another legal instrument"
In December 1997 at Kyoto, the countries that had ratified the Framework Convention agreed to a first text of a Protocol to the Framework Convention. The key commitment agreed to was that developed countries would take on legally-binding emissions targets for an initial “commitment period” from 2008 to 2012, subject to ratification by individual countries and the Protocol’s entry-into-force. New Zealand signed the Protocol on 22 May 1998, but will not be bound to comply with its specific obligations before it has ratified and the Protocol has entered into force.
The Kyoto Protocol aims to ensure:
Article 26 of the Protocol provides that no reservations may be made to the Protocol.
It is the intention of the Government to ratify the Kyoto Protocol by late-August 2002.
The Protocol will enter into force for New Zealand 90 days after New Zealand ratifies the Protocol, or upon the date that the Protocol becomes operative, whichever is the later.
The Protocol will enter into force for all ratifying countries 90 days after the date on which:
To date, 47 countries have ratified or acceded to the Protocol, two of which are developed (Annex I) countries with binding emissions targets under Annex B of the Protocol, and 46 of which are non-Annex-I countries without binding targets.
The text of the Protocol itself anticipates that future amendments will be needed in future in order to make further progress towards the objective of stabilising greenhouse gas concentrations.
Article 3, paragraph 9, of the Protocol states that Parties shall establish commitments for the second commitment period (and later commitment periods) by amending Annex B of the Protocol. Countries that have ratified the Protocol must start negotiations on those future commitments by the end of 2005.
It is difficult to assess precisely what amendments might be made to Annex B. However, it is likely that the amendments to Annex B of the Protocol (along with amendments to Annex I of the Framework Convention) will:
In addition, Article 18 of the Protocol states that the Conference of the Parties to the Protocol shall, at their first meeting after the Protocol enters into force, approve appropriate and effective procedures and mechanisms to determine and address cases of non-compliance with the Protocol. The Article also provides for a means by which these procedures and mechanisms can entail binding consequences, namely by amendment to the Protocol.
It should be noted that amendments to the Protocol cannot enter into force for New Zealand without New Zealand’s consent.
New Zealand may formally withdraw from the Kyoto Protocol either by withdrawing from the Protocol itself, or by withdrawing from the Framework Convention. In both cases, notice of withdrawal can be given at any time from three years after the date upon which the relevant agreement enters (or entered) into force, with withdrawal taking effect one year after the date upon which notice was given.
The most important obligation that would be imposed on New Zealand would be to ensure that New Zealand’s total greenhouse gas emissions for the first commitment period (the five years from 2008 to 2012) are no higher than five times New Zealand’s 1990 level of emissions, or that we have taken responsibility for any emissions over this level through the emissions trading mechanisms and sinks provisions of the Protocol.
Taking responsibility for excess emissions would require New Zealand to offset those emissions by making use of domestic forest sink activities or emissions reductions made elsewhere in the world (via trading and project mechanisms under the Protocol). The terminology applying to emissions accounting under the Protocol is explained below.
Other obligations for New Zealand would be to:
A more complete list of obligations under the Protocol is attached as Appendix 2.
In order to implement the Protocol’s obligations, a significant body of operational rules is under development by international negotiation. Those rules are now almost completely finalised, and will be adopted at the first Meeting of the Parties to the Protocol after it comes into force. New Zealand has played a significant role in the formulation of these rules, which will not bind New Zealand in the absence of consensus.
These rules will be subject to a rigorous compliance regime administered by international bodies, consisting of both annual reviews of information supplied by Parties under Article 8 of the Protocol, and compliance procedures and mechanisms. These also will be formally adopted at the first Meeting of the Parties to the Protocol. New Zealand has successfully promoted a strong and transparent compliance regime as being in the interests of all Parties.
To comply with the Protocol’s accounting system, a country must ensure that its emissions at the end of the 2008-2012 period are matched by an equal quantity of “assigned amount”, which is measured in units of tonnes of carbon dioxide-equivalent (“emission units”). Upon entry-into-force of the Protocol, each Annex I country is credited with an initial assigned amount based on its 1990 level of emissions and its Annex B target. A country’s total quantity of assigned amount, referred to in this report as “emission units”, can be increased by the addition of:
Use of the Protocol’s flexibility mechanisms – Joint Implementation (Article 6), Clean Development Mechanism (Article 12) and international emissions trading (Article 17) - must be supplemental to domestic action.
These different types of unit are all measured in carbon dioxide-equivalent and are collectively referred to here as “emission units”, except where distinction is necessary.
New Zealand has an initial assigned amount for the first commitment period currently estimated to be 365 million tonnes of carbon dioxide-equivalent. That is, New Zealand is allowed to emit 365 Mt of carbon dioxide (or equivalent in other gases) over the years 2008 to 2012.
At present, around 60% of New Zealand’s greenhouse gas emissions consist of methane and nitrous oxide, mainly from agriculture, with the remaining 40% consisting of carbon dioxide. This emissions profile is unique among developed countries, where carbon dioxide is usually the most common type of greenhouse gas emitted.
New Zealand is expected to emit between 50 and 75 million tonnes over its 365 Mt initial assigned amount during the commitment period. It is expected that around 50 Mt of this will be carbon dioxide emissions from growth in energy use, principally from transport and thermal electricity generation. Growth in agricultural methane and nitrous oxide emission will contribute up to another 25 Mt.
New Zealand is permitted to emit beyond its initial assigned amount if it obtains more emission units (and thus increases its assigned amount correspondingly) by purchasing them on the international market, by undertaking emissions-reducing projects in other countries, or through carrying out sink activities. Current estimates are that, during the commitment period:
At a national level, New Zealand is therefore expected to have a surplus of assigned amount over emissions of between 35 and 60 million units over the five years of the first commitment period. While removal units from sinks are likely to provide a significant benefit to New Zealand, the amount of this benefit will depend on future new planting scenarios, whether forests are replanted, future harvesting scenarios and how much scrub has regenerated since 1990.
It is in New Zealand’s long-term environmental and economic interest to maintain a stable climate.
Climate change and global warming, and changes in climate extremes, will affect New Zealand. New Zealand has features that make it vulnerable to the effects of climate change, including:
In addition, climate change is not solely a domestic issue for New Zealand. Impacts on other countries, including trade partners and competitors, and nations with which New Zealand has strong social, cultural and political links (for example, Pacific Island nations), will have implications for New Zealand. For example, increases in flooding or sea levels in low-lying nations may give rise to “environmental refugees” wishing to re-settle in less affected countries.
Some aspects of climate change could be beneficial for parts of New Zealand, at least in the short term for low levels of warming. Benefits of low-level global warming for New Zealand could include faster plant growth, longer growing seasons, and warmer winters. The balance between positive and negative effects will depend on regions and sectors, and will most likely change over time. It will also depend on adaptive responses to the effects of climate change.
The most recent New Zealand-specific assessment of climate change impacts by the New Zealand Climate Change Programme was not able to determine whether climate change would bring about a net cost or benefit to New Zealand in the short term, or at what point any positive impacts could turn negative. However, the assessment concluded that there would be temporary winners and losers in New Zealand. Long term, the overall effects are expected to become increasingly negative.
Stabilising atmospheric greenhouse gas concentrations at safe levels will require an effective, globally-coordinated response
Action by New Zealand or any other country acting alone, however, will have little significant impact in remedying the problem of global warming. The Kyoto Protocol is an important step because it is a multi-lateral environmental agreement to:
Clearly, however, stabilising atmospheric concentrations of greenhouse gases at any level would depend upon emissions reductions well beyond those agreed to for the Kyoto Protocol’s first commitment period. The expectation is that the Protocol will be further extended and developed over many years in order to achieve its overarching objective of stabilising atmospheric greenhouse gas concentrations. This is likely to include binding obligations on countries that do not take on emissions targets during the first commitment period.
Meanwhile, the agreement reached under the Protocol would:
Despite statements by the US, there is no alternative international agreement on the horizon. Furthermore, there is no obvious multilateral forum other than under the United Nations for such negotiations to occur.
To date, the text of the Kyoto Protocol has been negotiated by Parties to the Framework Convention. New Zealand has taken part in those negotiations, and has been very influential in achieving favourable outcomes for New Zealand, including a 100% target, largely unrestricted international emissions trading, and the inclusion of sink credits.
These make New Zealand one of a small group of countries, with those in eastern Europe, Russia and the Ukraine, that is projected to have surplus emissions quota. New Zealand would, in a technical sense at least, be able to meet the letter of its commitments under the Protocol, for the first commitment period, without taking further domestic action. New Zealand could be advantaged (at least during the first commitment period) at a macroeconomic level, by being able to:
However, once the Protocol has entered into force, Article 13.2 of the Protocol provides that only countries that are Parties to the Kyoto Protocol will be able to take decisions under the Protocol. Countries that are Parties to the Framework Convention but not the Protocol will be able to participate as observers but will not be able to take part in decision-making.
In particular, amendments to Annex B and the emissions limitation and reduction targets under the Protocol will only be able to be made by Parties that have ratified the Protocol.
This means that delaying ratification until, say, just before 2008, would seriously undermine New Zealand’s influence and negotiating position without any obvious benefit. The Protocol would still enter into force, and New Zealand would still have binding targets.
Ratification would maintain New Zealand’s credentials in other areas of bilateral and multilateral negotiations and diplomacy. New Zealand, as a small country with little economic weight, relies on leverage created through active and constructive engagement internationally. It is viewed as a country that is honest, constructive and reliable. We play our part and make a credible contribution across a wide range of areas, even where there are not direct gains for us. We cannot therefore pick and choose across significant negotiations.
Advancing New Zealand’s interests internationally relies on a multi-lateral approach, whether it is in trade, environmental or other matters. Being seen to attempt to “free ride” on actions by other countries under the Kyoto Protocol would not be in New Zealand’s long-term foreign policy interests.
Ratifying the Protocol would also help maintain New Zealand’s environmental image in the eyes of overseas markets and consumers. New Zealand markets itself on a “clean, green” image, using marketing slogans such as “100% Pure”. Ratifying the Protocol would maintain the credibility and value of such branding.
Ratification of the Protocol by New Zealand could help to generate momentum in favour of ratification by other Annex I countries. It would also demonstrate Annex I support for the Protocol outside the European Union and economies-in-transition. In addition, ratification would demonstrate New Zealand’s commitment to a coordinated and legally binding international approach to reducing atmospheric greenhouse gas concentrations.
In the longer term, commitment by New Zealand could also help to influence the positions of developing countries in the Asia-Pacific region in respect of taking on emissions obligations under the Protocol in subsequent commitment periods.
 These procedures will be applied by the “Compliance Committee”, an international body comprising an enforcement and a facilitative branch. The enforcement branch will have the power to (among other things) impose a penalty on a Party for allowing emissions to exceed its assigned amount in a commitment period. The penalty will be in the form of a reduction in assigned amount for the following commitment period, at a level equal to 130% of the amount by which the Party is in default..
 As various greenhouse gases warm the atmosphere at different rates, they are generally expressed in terms of carbon dioxide-equivalent emissions. For example, methane is 21 times more effective than carbon dioxide at warming the atmosphere over a 100-year time frame. All references in this NIA are to carbon dioxide equivalent unless otherwise stated.
Measures are also sometimes given in “carbon equivalent” – this is meaningless in a literal sense, as carbon itself does not contribute to global warming, not all greenhouse gases contain carbon, and those that do (such as methane and carbon dioxide) have different warming potentials. When the term “carbon equivalent” is used, it refers to the carbon mass in carbon dioxide, which is 0.27 tonnes of carbon per tonne of carbon dioxide (ie multiply CO2 mass by 12/44 or 0.27 to get carbon mass). So 1 tonne of methane would be equivalent to 21 tonnes of carbon dioxide or 5.7 tonnes of carbon.
 Removal units can also be obtained, up to a certain limit, under Article 3.4 of the Protocol, by accounting for the changes in a country’s total carbon stock including soil carbon as well as forests. Countries can then gain removal units from management of pre-1990 forests, rangelands and agricultural lands. New Zealand’s Article 3.4 limit is negligible compared with its quantity of Article 3.3 removal units, and scientific estimates suggest that the net effect of pursuing Article 3.4 would be negative for New Zealand in the first commitment period. As such, it is unlikely that this option will be pursued by New Zealand for the first commitment period.
 Under the Protocol, New Zealand is required to put in place by 31 December 2006 a national system for estimating greenhouse gas emissions and removals by sinks (Article 5.1). New Zealand’s initial assigned amount will be finalised at that time.·
 In this regard, developing countries have made it clear at international negotiations that they will not take on emissions targets until Annex I countries have first taken action to reduce emissions. This has been agreed as a principle of both the Framework Convention and the Protocol.
 A measure of this influence can be seen in the key role played by New Zealand at critical negotiating sessions – most recently in Marrakech and Bonn in 2001 but also going back to Kyoto in 1997.
 Most countries have targets below 100%; that is, they are expected to reduce their emissions below 1990 levels.
 To the extent that this surplus is based on removal units (sink credits), New Zealand may need to surrender emission units at a later date when the Kyoto forests from which the removal units were sourced are harvested. This will depend on the extent of the one-off net benefit to New Zealand from removal units.