Why the battle over ‘Kyoto carryover’ is such a big deal for the climate

As delegates from the COP25 UN climate talks make their way home, many will be considering how it could be possible to resolve one of the core sticking points for negotiators could be resolved in time for the next round of talks in Glasgow.

Much of the battles between negotiators in Madrid focused on the issue of surplus emissions permits leftover from the Kyoto protocol.

As the global climate governance is set to transition from the constrained Kyoto Protocol into the all encompassing Paris Agreement, a small group of countries, including Australia, China, India the United States and Brazil, fought to protect their favourable position, created under the Kyoto Protocol through soft targets and convenient accounting loopholes.

Australia neither succeeded in securing agreement at the UN talks to allow for surplus Kyoto-era units to be carried over into the Paris Agreement nor was Australia prevented from doing so. In failing to reach an agreement in Madrid, negotiators will reconsider the issue at the next round of talks to be held in Glasgow in late 2020.

The level of attention given to the issue, and the resulting frustration expressed by negotiators on both sides, reflects the scale of emissions reductions that could be put as risk if countries conceded to the demands that surplus Kyoto units be carried over into the Paris Agreement.

The surplus Kyoto units come in various forms; those that Australia predominantly holds are ‘Assigned Amount Units’ (AAUs), which were allocated to countries with emissions reduction targets under the Kyoto Protocol.

Global monitor Carbon Market Watch has estimated that there could be as much as 15.8 billion surplus AAUs left over by the end of 2020. The vast bulk of these surplus units relate to overly soft targets allocated to former Soviet countries, including Russia and Ukraine, but many countries have some level of surplus units.

Only Australia is seeking to use their surplus AAUs, amounting to around 400 million tonnes, while countries like Russia, which holds more than 5 billion tonnes of surplus AAUs will not seek to use them, mostly because it has adopted sufficiently soft 2030 emissions reduction targets that ensure they aren’t required.

But bizarrely, while Australia has emerged as the biggest advocate for carrying over the surplus AAUs into the Paris Agreement, it doesn’t even rank amongst the Top 10 countries with leftover Kyoto permits.

The other main source of surplus Kyoto units are held by countries that did not have targets under Kyoto, who hold a vast number of ‘Certified Emissions Reductions’ (CERs) which were created under the Clean Development Mechanism, supporting the investment in projects that reduce emissions in developing countries, in particular, China, India and Brazil.

In addition to the 15.8 billion AAUs leftover from the Kyoto Protocol, there could be another 4.6 billion CERs held by these countries, while generally considered ’emerging’ economies, are growing as major contributors to global emissions.

China, India and Brazil sought to hold on to the CERs it had accumulated under the Kyoto Protocol so that they could be used towards meeting its 2030 Paris targets.

To put that into perspective, with more than 20 billion tonnes of surplus Kyoto-era permits floating around, it would be roughly the equivalent of a whole year’s worth of emissions from the United States, China, the European Union and India combined.

Analysis from Climate Analytics estimates that if the surplus units were carried over into the Paris Agreement, and used against countries 2030 emissions reduction pledges, they could reduce global ambition by as much as 25 per cent.

The proposal being pursued by Australia at the Madrid climate talks was not trivial in terms of global climate action, it would have had the effect of significantly undermining the strength of the Paris Agreement. This is why it was such a big issue in Madrid

“Efforts to seek recognition under the Paris Agreement for these historical artefacts, in the guise of or repackaged as “overachievement”, in an effort to minimise future mitigation efforts required, would be contradictory to the goals and principles of the Paris Agreement, to which Australia has itself subscribed as a Party,” ClimateAnalytics said.

“The potential downsides for carrying over of Kyoto credits go beyond the artificial reduction in required NDC ambition under the already-inadequate current set of NDCs.

According to the OECD, further risks include but are not limited to: a lack of ability to generate additional emissions reductions past the Kyoto mechanism, a reduction in incentive to invest in new projects given the glut of existing credits in the market, and double counting of credits between the recipient and host countries.”

Many countries have recognised that doing so would be counter to global efforts to reduce greenhouse gas emissions, and have committed not to use their surplus units. The European Union has effectively prohibited its members from using the surplus units and was one of the strongest advocates against their carryover in Madrid.

A group of more than 30 countries signed on to a set of ‘San Jose Principles’ developed by Costa Rica, that would effectively prohibit the carryover of the surplus units. This group included traditional Australian allies and trading partners, such as the United Kingdom, New Zealand and several Pacific Islands nations.

Australia was named by negotiators from Costa Rica during the closing plenary at the Madrid talks, along with Brazil and the United States, for their regressive positions during the talks. This was an unusual move, as negotiators generally tend to avoid naming specific countries during arguments out of diplomatic respect and reflects the level of frustration directed at the Australian delegation.

The issue will almost certainly be re-litigated in Glasgow next year, due to the clear scale of emissions reductions potentially at risk.