To view Part I of “Update on Developments in Russia’s Renewable Energy Sector,” please click here.  

Investment in Renewable Energy

After the 2008 announcements and proposals calling for increased investment in production of solar products in Russia (see earlier ClimateIntel postings), some steps were taken by the government and by industry.  For example, Nano Solar Technology (NST), created in June 2009, undertook a solar module project in the Republic of Chuvashia.  This 49/51 joint venture is owned respectively by Russian state corporation Rusnano and the Renova Group of Companies.  Oerlikon Solar has been chosen to provide a 120 MW end-to-end line for the production of thin film modules.   The equipment is scheduled to be delivered to a new production facility located on the territory of the chemical plant “Khimprom” (city of Novocheboksarsk) in 2010, with production scheduled to start in 2011.  This project will significantly increase the production capacity of the Russian PV market.  Ryazan Metal Ceramics Instrumentation Plant in Ryazan Oblast is already using a 12 MW module manufacturing line supplied by Spire Corporation. Bogoroditsk Plant of Techno-Chemical Products in Tula Oblast also received a solar module manufacturing line from Spire Corporation last year (see previous ClimateIntel postings).  Both Russian plants are daughter companies of the holding company OJSC Russian Electronics, which is controlled by state corporation Rostekh.

Some investments have also been undertaken in the nascent biofuel sector.  OJSC RT-Biotekhprom, a wholly-owned holding company of state corporation Rostekh, announced plans to produce biofuel pellets and butanol in Arkhangelsk Oblast.  The wood pellet facility will have an annual capacity of 150,000 tons and is expected to be completed in Fall 2010.  The head of RT-Biotekhprom also heads an affiliated company — OJSC Biotechnologies Corporation — which is developing plans to produce two million tons of biofuel additives for motor fuels (gasoline and diesel) in the future.

The Ministry of Regional Development in September 2009 discussed a major project to promote energy efficiency in Arkhangelsk Oblast.  This project seeks to convert boilers from coal and diesel to biomass (from readily available wood waste in the region) and to set up production of biofuel pellets.   

As concerns hydropower, the development of small hydro power plants in the country appears to have slowed.  The fund “New Energy” created in early 2007 to implement RusHydro’s 2006 program for building small hydro power (SHP) plants with new capacity of up to 300MW by 2010, has been unable to handle the task, according to a source familiar with the situation.  In 2008, the fund’s portfolio included 383 prospective SHP projects with total capacity of 2.1 GW.

Prospective wind power projects are also in the news.  In 2009, the Russian daughter company of Canada’s Greta Energy Inc announced plans for a 72 MW wind project in the Yeisk district of Krasnodar Krai and began negotiations with manufacturers of wind turbines and related equipment.  The company plans to put three wind power facilities into commercial operations in early 2012.  According to a media report, Greta Energy “plans to invest up to €250 million in its first wind farm” near Russia’s Black Sea coast.  The Russian daughter company of The Netherland’s Windlife Energy is the leading developer of a 200 MW wind farm project (with 100 wind turbines) in Murmansk Oblast. This project is expected to be fully completed by the end of 2013.  Various wind power projects, as well as challenges facing the industry, were discussed during the first national conference held by the Russian Wind Industry Association in mid-November 2009. 

It may not take long before Russian hydrocarbon companies also begin to invest in domestic wind power projects.  For example, LUKOIL, citing the Yeisk project, has publicly expressed interest in a pilot project proposed near the city of Lagan on the Caspian Sea. 

However, it is less certain that the country’s wind-power capacity will reach the goal presented by RusHydro in 2008 to increase wind power capacity tenfold (from an estimated 12 MW in 2005 to a target capacity of 120 MW in 2010).  The federal government’s January 2009 decree did not include specific percentages for each type of RE input (i.e., small hydro, wind, solar) to be used in electricity generation.  Specific targets were in a draft decree, but these were later removed, according to a person familiar with the situation. 

The future development of the renewable energy sector depends on the Ministry of Energy speeding up work on developing and adopting additional RES regulations responsive to the market.  Currently, the number of finalized projects is small and the amount of government support for renewable energy is quite limited - especially when measured against the huge amounts allocated for gas and oil development projects.  It will take not only the passage of new laws and favorable regulations, but also a long-term political and financial commitment to further develop the renewable energy sector before one can speak of “breakthroughs” in this area.

For further information about this topic, please contact Akin Gump.

Additional legislation and executive branch implementing regulations will be required to boost substantial private investment in domestic renewable energy (RE) projects inasmuch as  private investment in this area will follow - not precede - the federal government’s investment in major projects.  Private Russian companies will nevertheless continue to undertake feasibility studies as they await federal legislation, as well as the development of specific regulations as required by certain provisions of the 2007 federal law “On Electric Power.”

Electricity Generation

In April 2008, the Chairman of the State Duma Energy Committee spoke of the need for the federal government to develop and introduce regulations based on the 2007 law “On Electric Power” concerning RE pricing and economic incentives, and to articulate “clear economic rules” for attracting investors.  Subsequently, the federal government issued an important decree on June 3, 2008 (№426) for determining the qualification of generators that use renewable energy sources (RES).  On November 17, 2008, the Ministry of Energy issued a regulation (№187) for the issuance, transfer and redemption of renewable energy certificates (RECs).  This regulation, which came into force on February 27, 2009, is likely to be reworked in 2010.  The executive directive issued on January 8, 2009 outlined the federal policy on the use of renewable energy for electricity generation and tasked the Ministry of Energy with developing regulations and other follow-up actions (see previous ClimateIntel posting). 

According to Anatoly Kopylov, Vice President of the Russian Wind Industry Association (RAWI) and a leading expert on renewable energy policy issues, a series of regulations still need to be developed and adopted detailing RES provisions and the requirements of the 2007 law.   Some concern mark-ups for electricity generated from RES, as well as the volume of electricity to be purchased on the wholesale market.  Other regulations concern “rules, criteria and procedures for providing federal budget subsidies to compensate costs associated with connecting RES generators of up to 25MW” to the grid.

The draft bill “On Heat Supply” (#177427-5), introduced in the State Duma in March 2009, was passed in a first reading on November 11, 2009.  Although “renewable energy sources” (RES) are not specifically mentioned in the text of the proposed legislation, the Ministry of Energy’s website comments that the draft bill envisions “measures for development of RES in the area of heat supply.”  Amendments and comments are to be submitted to the State Duma Energy Committee by February 10, 2010.

It is interesting to note that Russia’s efforts to create a legislative framework and regulations for renewable energy have been paralleled by Kazakhstan.  Legislation adopted earlier by Kazakhstan “On Support for the Use of Renewable Energy  Sources” was signed into law in July 2009.  Work on relevant regulations in Kazakhstan is currently under way.

Alternative Fuels

The draft bill “On the Use of Alternative Motor Fuels” (#130858-4), initially introduced in the State Duma in January 2005, has been revised for a third time by the authors and reviewed by the State Duma Energy Committee, which is overseeing this initiative.  On October 9, 2009, the Energy Committee sent the draft bill to the State Duma Council.  According to the draft ruling posted on the Duma website, the State Duma Council recommended that the draft bill be resent to the State Duma Legal Department, the Presidential Administration, the Cabinet, and various committees of the Russian parliament for comments and suggestions.  One criticism already received by the Energy Committee notes that the draft bill does not address the issue of “mandatory certification of alternative motor fuels” as they relate to current emission requirements.  The text of the draft ruling of the State Duma Council suggested that the Energy Committee receive feedback until November 13, 2009 and that the Committee should then prepare the draft bill for a first reading during the spring (January-July 2010) Duma session.

Although more than two years have passed since a legislative initiative on biofuels was announced, the fate of the draft bill, “On the Bases for the Development of Bioenergy in the Russian Federation,” is not clear.  Presented as a joint effort of both the Ministry of Agriculture and the Federation Council Committee on Economic Policy, the text of the 2007 draft bill has still not been posted on the State Duma website.  The head of the Bioenergy Development Center at the state-owned Russian Research Institute for Mechanization in Agriculture recently announced that the Agriculture Ministry had contracted the Institute to work on the draft.  Thus, it is not clear who is ultimately responsible for the introduction of this draft bill in the Duma.  In an interview with the “Regions of Russia” journal (Issue #9, September 2009), the head of the Center noted that the steps required for “mass production of equipment for bioenergy projects in Russia” have still not been taken and that the country’s “mechanical engineering is not ready to participate in the development of the new industry.”

There is no internal momentum for developing biofuel technologies in Russia and the country must rely on foreign technology in this area (as in many other areas) for launching domestic projects - despite the fact that in late 2007 then-President Vladimir Putin stressed the need to create conditions for private companies to produce biofuel in Russia (see previous ClimateIntel posting).  One of the drags on progress in this area is opposition - possibly from the Ministry of Finance - to lowering the excise tax on biofuel for domestic use.

As in the electricity generation area, Kazakhstan is developing a draft law “On State Regulation of Production and Turnover [Sales] of Biofuel,” which was approved by the lower house of the Kazakh parliament in a first reading in May 2009 (see previous ClimateIntel posting).  A related draft law outlining serious penalties for violations of the law was also approved.

The Russian executive branch continues to voice support for the development of the nascent renewable energy sector.  As concerns biofuel development in Russia, President Dmitry Medvedev said at a September 2009 meeting of the Commission for Modernization and Technological Development of Russia’s Economy that Russia has “made some advances here but [we] have few results to show for it so far,” adding that “this is something that requires very detailed preparation, but it is nevertheless important for our country.”  It is not clear whether the President’s objective assessment of the situation will lead to accelerated work at lower levels in federal ministries and agencies, given the severity of the economic downturn and the many other areas in which the Russian economy is lagging or underperforming.

To view Part II of “Update on Developments in Russia’s Renewable Energy Sector,” please click here.

For further information about this topic, please contact Akin Gump.

As negotiations at Copenhagen near conclusion, it is increasingly unlikely that a global deal can be made.  On Tuesday, the United Nations released the latest official draft agreements that will be presented to world leaders (including President Obama) in the final two days of the climate conference.  The recent drafts acknowledge that industrialized nations have historically been responsible for global greenhouse gas emissions and, thus, must lead efforts to combat climate change by providing funding and technology to poorer nations.  Both the text from the Long Term Cooperative Action working group and the document from the Kyoto Protocol working group, however, leave many critical issues unresolved.  Most notably, the international community has not agreed upon targets for emission cuts and adaptation funding.

Emission reduction targets

Developed countries and developing countries disagree on which countries should be obligated to reduce their emissions and what the level of these commitments should be. Leading developing countries insist on an extension of the Kyoto Protocol, which imposes obligations to reduce greenhouse gas emissions only on industrialized nations.  A rift within developing countries emerged when small island states and several African states insisted on a new protocol that would not only impose more stringent emission cuts for developed nations, but also expose developing countries to the risk of mandatory cuts. The European Union and the U.S., on the other hand, are calling for a more comprehensive document that would impose mandatory emission cuts on large emerging economies like China.  Developed countries also seek to delay the implementation of legally binding emission reductions.

The size of emission cuts and the benchmark for measuring these reductions is also a point of contention between developed countries. The EU has committed to cutting its emissions by 20% by 2020, and by 30% if a strong global agreement is reached. The EU’s proposed emission reductions are measured against 1990, as called for in earlier international agreements.  By contrast, the U. S. wants to use 2005 as the baseline year for cutting emissions because (i) the U.S. never joined Kyoto and (ii) this benchmark is more relevant to the Obama administration.  The U.S. has committed to cutting emissions by 17% of 2005 levels by 2020.  This corresponds to a cut of 3-4% beneath 1990 levels by 2020.  Senator John Kerry reinforced the legitimacy of the U.S. commitment to an international agreement by guaranteeing that this commitment would be enforced domestically, provided that China and other developing countries meet the U.S. demand for transparency and accountability on their emission reductions. 

Other issues, such as the “peaking year” concept, are also creating roadblocks.  India has taken the lead in opposing the imposition of a “peaking year” on the emissions of countries like India, China, Brazil and South Africa, which would demand that developing countries “peak” their emissions by 2025.  Instead, India proposes limiting the increase in global temperatures to within 2 degrees Celsius of pre-industrial times.  A smaller group of 43 of the smallest and most vulnerable developing countries has stated they will not accept any rise of more than 1.5 degrees Celsius since, they contend, anything higher would lead to disastrous consequences (e.g., a rise in sea levels as a result of climate change).

Another issue is the “hot air” concern.  With the collapse of the heavy industrial base of the Soviet Bloc countries in the 1990s, a large number of the carbon rights, or Assigned Amount Units (AAU), held by Russia, Ukraine and other Eastern European countries were never used.  If, under the new deal, the former Soviet Bloc countries are allowed to sell these surplus AAUs, or “hot air”, to nations that fail to meet post-2012 emission targets, this could impair all emission reduction commitments under the new deal by up to one-third.

Funding commitments and transparency

The G77 group of countries, backed by the least developed countries and small island states, are seeking $400 billion per year (1% of the GDP of industrialized nations) to help developing countries grow without increasing their greenhouse gas emissions.  Developed nations have not made offers anywhere near that level, nor do the latest draft agreements provide for funding beyond 2012.  As a compromise, the African Union chief negotiator Meles Zenawi has called for a significantly scaled-back finance deal, calling for $50 billion per year for developing countries by 2015 and $100 billion per year by 2020, with half of these funds allocated to vulnerable and poor countries, regions such as Africa and small island states.

China has acknowledged the needs of poorer developing nations in conceding that these nations should take priority in receiving aid to combat climate change.  China maintains its position, however, that industrialized nations should provide 0.5-1% of their annual GDP as funding to subsidize the efforts of developing nations to curb greenhouse gas emissions.  Further, China strongly opposes carbon tariffs proposed by other countries to protect their domestic industries. China has also refused to submit to international verification of whether it is actually implementing its reduction commitments.

The U.S. has rejected the proposal that industrialized nations contribute up to 1% of their GDP. The U.S. and other developed countries also seek to monitor developing countries on their compliance with whatever commitments are ultimately made, or at a minimum, to subject countries’ emission reports to international consultation and review.  The concern is that, without such compliance checks, some developing countries may have an incentive to “pad” the amount of their greenhouse reductions or otherwise game the system and that other countries may not sign on to the international agreement due to its lack of transparency.

With less than two days remaining for the climate change negotiations at Copenhagen, it is critical that the international community reach some sort of workable consensus on the key issues of emission reduction targets, funding commitments and transparency of the global system.

For further information about this topic, please contact Akin Gump.

The two-week Copenhagen climate change conference (COP15), part of the ongoing effort to negotiate a successor to the 2007 Kyoto Protocol, commenced this week.  Only a few days into COP15 the mood is less than optimistic and parties are not overly ambitious, leaving many to wonder whether a new agreement can be reached or whether COP15 will produce only another roadmap for a potential agreement. 

Delegates have been staking out their positions amidst discussions on long-term cooperative action, a shared vision, finance, mitigation and technology under the Ad Hoc Working Group on  Long-term Cooperative Action under the Convention (AWG-LCA); Annex I emission reductions; and the potential consequences under the Ad Hoc Working Group - Kyoto Protocol (AWG-KP) and Reduced Emissions from Deforestation and Degradation (REDD) under the Subsidiary Body for Scientific and Technological Advice (SBSTA). Talks about the leaked “climate gate” e-mails abound and the leak of Danish text, that gives wealthier, industrialized nations more power, has already created a rift between industrialized and developing countries.  U.S., China, Brazil, India, etc., who have pledged new reduction targets, have been criticized for their lack of aggression in reducing greenhouse gas (GHG) emissions. 

At the helm, UN Climate Chief Yvo de Boer believes failure is not an option and an agreement is a must.  At a minimum, his focus includes the following:

1. How and to what extent industrialized countries will reduce their GHG emissions?
2. How China and India, and other major developing countries, will limit the growth of their emissions?
3. The origination of financing for developing countries that need assistance monetary assistance for GHG emission reduction and adaptation.
4. The management of money.

President Obama, Secretary of Energy Stephen Chu and EPA Administrator Lisa Jackson are scheduled to attend the final week of COP15.  The U.S. will likely discuss its new emission reduction target of 17% below 2005 levels by 2020, with a trajectory to 42% reduction by 2030 to meet the goal of 83% by 2050, as well as actions taken by EPA to address GHG emissions.  While China has found the U.S.’s position to be underwhelming, State Department envoy Todd Stern fired a shot across China’s bow, declaring that the more advanced developing countries must reduce their GHG emissions and that the U.S. would not provide funds to China for development of greener industry.

COP15 concludes on Friday, December 18 and a final agreement appears highly unlikely.  With the U.S. and China seemingly drawing lines in the sand, the final week would seem to portend much in the way of atmospherics.

For further information about this topic, please contact Akin Gump.

After international negotiators met in Barcelona at the beginning of November, predictions on the likely outcomes-or lack thereof-from December’s Copenhagen conference have popped up everywhere. In the immediate aftermath of the Barcelona meetings, the consensus amongst those in the United States and the West more broadly was that Copenhagen was headed for failure-at least insomuch as a legally binding treaty with emission reduction targets like Kyoto Protocol is off the table.

Since then, the situation has become more muddled. Evidence abounds for those looking either to take a more optimistic view of the upcoming meeting, or those looking to bolster the more pessimistic outlook.  In recent days, the optimists may be gaining more evidence. President Obama’s recent trip to China gave rise to several positive announcements with regard to the two country’s climate action, including from a joint statement released at the end of these bilateral meetings, which noted that-

The United States and China, consistent with their national circumstances, resolve to take significant mitigation actions and recognize the important role that their countries play in promoting a sustainable outcome that will strengthen the world’s ability to combat climate change.  The two sides resolve to stand behind these commitments.

In the past few days, both countries have backed up that statement by announcing that they will come to Copenhagen with hard commitments to emissions reductions; the U.S. “in the range of 17%” while Chinese have pledged to reduce the carbon intensity of their economy by 40-45%. Just pledging commitments of any kind is a significant step for Copenhagen; it was disputes over commitments like these that derailed the Barcelona talks.

The nature of these commitments, however, may give the pessimists some ammunition-President Obama’s commitment is still tied to action in the Congress, where any outcome is far from certain. In any case, a reduction of 17% is much less than many developing countries were calling for and much less than the IPCC suggested cuts of 25-40% by 2020. For China, some experts have noted that currently enacted policies seem designed to cover fully China’s commitment, meaning that the Chinese have essentially pledged themselves to “business as usual” emissions.

The pessimists can also point to the outcome of a hastily convened meeting between Danish Prime Minister Lars Lokke Rasmussen and leaders of Pacific Rim nations. Describing that meeting, US Deputy National Security Adviser Mike Froman said, “There was an assessment by the leaders that it was unrealistic to expect a full, internationally legally-binding agreement to be negotiated between now and when Copenhagen starts in 22 days.” Should an agreement like this actually come out of Copenhagen, it might give the U.S. Congress a chance to pass binding climate legislation; it might be possible that a 2010 meeting in Mexico City would become the new goal date for a binding international treaty.

For some, any lowering of expectations for December undermines any hope of success because it takes the pressure off of international negotiators; the Kyoto Protocol, after all, came about as the result of 11^th hour actions, similar to the commitments now coming from the U.S. and China. It is possible that the situation is not as dire as it seemed the first week of November, and that the two negotiators with the most power might be committed to an ambitious meeting after all. And so, it remains possible that December could still hold some surprises for all prognosticators of international climate policy.

For further information about this topic, please contact Akin Gump.

Based on petitions filed by a consortium of Chinese auto producers, China’s Ministry of Commerce (MOFCOM) recently initiated investigations into alleged dumping and subsidization of U.S.-made autos.  The investigations, which according to MOFCOM’s initiation notices cover “saloon and cross-country cars” with engine displacement above 2,000 cc, could result in the imposition of antidumping and countervailing duties on imports of covered U.S. autos exported to China.  Some trade analysts view these investigations as a politically motivated response to the recent U.S. announcement of special “Section 421″ safeguard duties on Chinese-made tires, pursuant to a China-specific provision of U.S. trade law that allows the President to restrict imports of Chinese goods found to be causing market disruption.

MOFCOM’s countervailing duty investigation is notable because it is the first to target U.S. government funding to automakers intended to spur the development of next-generation clean energy drive-trains.  The programs subject to MOFCOM’s investigation include the U.S. Department of Energy’s Advanced Technology Vehicles Manufacturing (ATVM) Loan Program, the Troubled Asset Relief Program (TARP), the “Cash for Clunkers” program and various tax incentives related to hybrid and electric autos.  Of the thirty-one distinct U.S. federal and state programs under investigation by MOFCOM, most are related to U.S. government efforts to stimulate the U.S. auto industry’s transition to the production of more efficient and greener vehicles.

The investigation also highlights a tension between the Obama Administration’s energy policies and international trade rules.  On the one hand, the Administration is concerned that U.S. global leadership in green technology innovation is waning and has launched a series of initiatives - including financial assistance programs like ATVM - intended to restore U.S. leadership in this area.  Speaking at a recent energy conference, U.S. Energy Secretary Steven Chu suggested that the U.S. is behind other countries in high-tech green manufacturing areas such as solar photovoltaic technology, hybrid vehicle batteries and high-voltage transmission lines, and he urged aggressive action to promote these and other emerging green technologies.  U.S. Rep. Bobby Rush (D-IL) sounded similar themes in opening a recent hearing before the House Subcommittee on Commerce, Trade and Consumer Protection, on the topic “Growing U.S. Trade in Green Technology,” where he exhorted the U.S. to adopt “a strong long term export promotion policy to turn our economy toward what will make us a global leader.” 

On the other hand, government assistance programs intended to stimulate production and export of specific technologies may fall within the definition of “subsidy” in the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement).  Such subsidies, when found to be conferred on specific industries (and when other conditions set out in the SCM Agreement are satisfied), may be countervailed through the imposition of import duties that offset the competitive advantage bestowed by the subsidies.  The SCM Agreement contains no exception for subsidies that purport to advance environmental purposes.  In 1995, when the SCM Agreement became effective, it included exceptions for certain environmental subsidies.  These exceptions lapsed in 2000, however, leaving subsidy programs with purported environmental purposes vulnerable to countervailing duty actions.

The U.S. and its major trading partners - many of whom are actively promoting emerging green energy technologies - will need to remain cognizant of the risk that their promotion of domestic champions could also spur trade friction.

For further information about this topic, please contact Akin Gump.

 After a week of talks-sometimes heated, sometimes not-of two key negotiation groups of the UNFCCC, there remains considerable work to be done to meet the goals of the Bali Action Plan. In fact, at the end of the week, it appeared a near certainty that there would be no binding legal agreement developed at the Copenhagen meetings upcoming in December, with only a political agreement being developed at that meeting. At the same time, however, there was considerable work on a number of other issues that would make up any new agreement, leaving some negotiators with the hope that an agreement could be reached in 2010.

The major sticking point for Parties seemed to be the level of ambition-or, more truly, the lack of ambition-on display from developed countries. The gap between developed country commitments and those called for by developing countries (with the general accompaniment that those larger commitments are “required by science”) proved a stumbling block throughout the week. Those debates also created the most dramatic moment of the conference when, on Monday afternoon, the Africa Group walked out of negotiations, demanding that the issue of “numbers” be resolved before negotiations continued. While the Africans were eventually brought back to the table, the stalemate over emissions cuts remained.

In other areas, however, more substantive progress occurred, particularly in the areas of developing country mitigation actions, cooperative sectoral approaches, technology transfer and forest carbon. On developing country mitigation-addressed under paragraph 1(b)ii of the Bali Action Plan-the Parties significantly consolidated their work on Nationally Appropriate Mitigation Actions (NAMAs), and released a new document outlining plans for long-term development strategies, a registry of NAMAs, and the scale and scope of these actions. Those negotiators working on cooperative sectoral approaches continue to have significant work to accomplish, but a newly released document includes language addressing “bunker fuels”-the fuel oils used in international marine and aviation transport. The contact group addressing forest carbon pushed forward on a concept known as REDD+, or “Reducing Emissions from Deforestation and Degradation,” discussing ways to finance, implement and monitor forest protection programs.  The “+” in REDD+ indicates the intent that this effort go beyond current voluntary programs and initiatives developed by the UN-REDD Programme.

With scant weeks before Copenhagen-which once loomed as the deadline for developing a binding successor to the Kyoto Protocol-the world is left in somewhat of a confounding situation: while significant progress has been made on a number of issues, the distance to a binding agreement seems as far as it did a year ago.

For further information about this topic, please contact Akin Gump.

With fewer than six weeks to the UNFCCC meeting in Copenhagen-the deadline set by the global community to agree on a replacement to the Kyoto Protocol-the distance to a viable climate treaty remains great.  One of the most important areas of work that remains in flux regards the commitments, if any, the developing world will make to lessen or mitigate their growing carbon emissions.

There is broad consensus that, should developing countries continue on a business-as-usual trend of emissions growth, it will swamp any reductions made by individual developed nations, including the United States.  What should be done given that fact is another matter, as the nature and scope of commitments, if any, to be made by at least some developing countries is heatedly contested.  Developing countries often have less capacity for creating a sustainable economy. At the same time, some of the heaviest costs of emissions reductions can be avoided by developing countries, because in many cases, they are working to avoid future emissions, not reduce their current levels. While clear in both principle and practice that developing countries have a right to further economic growth, it is the global community’s responsibility to find ways, including through financing mechanisms and technology transfer, for that growth to not come at the expense of the environment.

The concept that negotiators have settled upon is that of the Nationally Appropriate Mitigation Action (NAMA). Unlike the commitments made by developed countries, which are specific, mandated, measurable commitment, NAMAs are voluntary actions supported by technological and capacity assistance from the developed world.

While negotiators reached agreement on the concept at the meeting in Bali, Indonesia in December 2007, as part of the Bali Road Map, there remains considerable negotiation to be done on the specifics. Work on the issues will continue at next week’s meeting in Barcelona. The major issues include:

• The types of actions that qualify as NAMAs-including countrywide or sectoral intensity targets, energy efficiency or renewable energy goals, cap-and-trade or carbon tax systems or participation in emissions trading schemes such as the Clean Development Mechanism;
• The development of monitoring, reporting and verification principles and oversight bodies;
• The creation of a registry of NAMA projects and the development of a life-cycle analysis methodology for NAMA projects; and
• The scope and enabling mechanisms for development and capacity assistance;

In other areas, more significant differences remain.  A major continuing issue involves whether NAMAs are contingent on and congruent to funding provided by the developed world, or can be attempted unilaterally.  Also remaining to be determined is the relationship of NAMA activities to any future flexible mechanism, which might replace or modify the Clean Development Mechanism, Joint Implementation and emissions trading as we know it.

For further information about this topic, please contact Akin Gump.

In introducing a hearing earlier this month on “Growing U.S. Trade in Green Technology,” Congressman Bobby L. Rush (D-IL), who chairs the House Subcommittee on Commerce, Trade, and Consumer Protection, painted a dismal picture of U.S. competitiveness in the field of emerging environmental, or green, technology.  There is no single definition of green technology, but the concept is widely understood as encompassing emerging technologies related to renewable energy, energy efficiency and the conservation of natural resources.

Citing statistics from the New America Foundation, Congressman Rush claimed that, over the last decade, the U.S. has moved from a positive overall green technology trade balance of $12 billion to a deficit of nearly $9 billion.  For some green technologies, the trade deficit has grown particularly severe.  According to written testimony submitted for the hearing by Steve F. Hayward of the American Enterprise Institute, the U.S. trade deficit for wind power components has, in recent years, grown to $20 billion.  To correct this imbalance, Congressman Rush urged the adoption of a vigorous and long-term U.S. export promotion policy to reclaim U.S. green technology leadership.

Expert testimony before the hearing addressed a variety of factors explaining the seeming decline in the global competitive position of U.S. green technology firms, including stiff tariff and non-tariff trade barriers maintained by major trading partners of the U.S.  These barriers to trade in green technology are maintained even as many U.S. trading partners provide substantial assistance to their domestic green technology firms, exacerbating the negative impact on U.S. firms.

For example, according to written testimony submitted by GE’s Managing Director for International Energy Policy, Timothy J. Richards, 91 of 153 WTO member states impose tariffs on wind turbines and solar panels.  In the case of wind turbines, the WTO-wide mean tariff rate is 7.4%.  These tariffs are also highly variable among WTO member states.  In the case of wind turbines, while the U.S. has bound its tariff rate at 1.3%, China applies a tariff rate of 8%.  Brazil’s is even higher at 14%.  Also according to Richards’ testimony, many WTO member states, including Canada, China and the U.S., have recently adopted procurement policies that effectively bar competition from foreign suppliers.

Several witnesses advocated that a central aspect of a U.S. strategy for promoting U.S. green technology exports should be a renewed commitment to an old idea - an Environmental Goods and Services Agreement (EGSA) under the WTO.  The basic principle underlying EGSA is to liberalize global trade for a defined range of green technologies to promote efficient and rapid global dissemination of these technologies.  The mandate for the negotiations dates back to the 2001 Doha Ministerial Declaration, which at paragraph 31(iii) calls for “the reduction, or as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.”  While this mandate does not expressly identify greenhouse gas emissions, the ongoing EGSA negotiations have, in recent years, come to be seen as an adjunct to the global negotiation of a successor to the Kyoto Protocol to the U.N. Framework Convention on Climate Change, which is set to expire in 2012.

The Bush Administration strongly supported EGSA, and in 2007 attempted to reinvigorate the talks with a multilateral proposal, submitted jointly with Canada, the EU, Japan, Korea, New Zealand, Norway, Taiwan and Switzerland.  This proposal identified a “Potential Convergence Set” of green technologies, mostly related to climate change mitigation, that might be more amenable to inclusion in the first phase of a market-opening agreement.  The Obama Administration recently signaled its agreement with the Bush Administration’s approach, and earlier this month resubmitted the 2007 proposal to the WTO entity overseeing the talks - the Committee on Trade and Environment - Special Session.

Notwithstanding the sense of urgency evident at Congressman Rush’s hearing to advance the competitive position of U.S. green technology industries, however, EGSA appears to face the same hurdles today as it did when sought by the Bush Administration.  One such hurdle is that the EGSA negotiations are currently linked to the broader trade negotiations in the ongoing Doha Round.  Unless WTO member states agree to sever the EGSA negotiations from the Doha Round, EGSA’s prospects will remain linked to highly controversial and difficult aspects of these negotiations - such as agricultural subsidies - that have defied resolution.  Further, the EGSA negotiations have not been able to overcome a deep divide between the proponents of the 2007 proposal and a group of developing countries, led by Brazil, that seek the inclusion of biofuels in any EGSA. 

While U.S. law- and policy-makers seem to agree that they must quickly find new ways to stimulate U.S. green technology industries, EGSA remains a distant and uncertain prospect.

For further information about this topic, please contact Akin Gump.

The International Air Transport Association (IATA) called on the UN Summit on Climate Change to support a “sectoral” approach to reducing aviation emissions under the leadership of the International Civil Aviation Organization (ICAO).  IATA, which represents some 230 airlines responsible for more than 90% of scheduled international air traffic, outlined the industry’s commitment to three sequential targets:

• Improving CO₂ efficiency by an average of 1.5% per year through 2020;
• Stabilizing net CO₂ emissions from 2020 onward; and
• Achieving a “long-term aspirational goal” of a 50% cut in CO₂ emissions by 2050 compared to 2005.

The aviation industry is currently responsible for approximately 3% of the man-made global climate change impact.

IATA and other aviation trade groups have emphasized the need for a sectoral approach.  Rather than regulating specific airlines or countries, the proposed sectoral approach would regulate the industry as a whole, thereby promoting effective cross-border regulation and level competition.  IATA’s Director General warned that “uncoordinated national and regional schemes are creating a patchwork of punitive taxes that fill government coffers, but do little or nothing to effectively manage aviation’s emissions.”  While IATA has enumerated certain guiding principles for the sectoral approach, including open access to carbon markets, the specific policy proposals will be developed in coordination with ICAO for potential inclusion in a post-Kyoto climate framework.  Aviation industry members will gather next in Montreal to formalize a proposal to take to the climate talks in Copenhagen.

For further information about this topic, please contact Akin Gump.