EU to Raise its Paris Climate Pledge, Canada and China Finalising National Carbon Pricing Schemes

28 June 2018

The EU is looking to increase its emissions reduction target for the year 2030 under the UN’s Paris Agreement on climate change following the political consensus on three clean energy files over the past fortnight. 

Under the Paris Agreement, all countries have made climate pledges, known as nationally determined contributions (NDC), to collectively keep global warming below two degrees Celsius compared to pre-industrial levels. The EU has a bloc-wide NDC, and has negotiated internally with member states on how they can collectively meet those goals. 

In its current pledge, the EU has committed to lowering greenhouse gas emissions (GHG) by at least 40 percent below 1990 levels by 2030. However, the new, increased 2030 targets on renewable energy and energy efficiency mean that the bloc is on track to achieve deeper emissions cuts. (See Bridges Weekly, 21 June 2018

“Both new targets would de facto mean that the European Union would be in a position to raise the level of ambition of the NDC and increase its emissions reduction target from the 40 percent to slightly over 45 percent by 2030,” said EU Climate Action and Energy Commissioner Miguel Arias Cañete. 

A formal change of the NDC will require approval from EU member states. The European Commission plans to send the request to the Council after the summer break, setting in motion a negotiation process among the EU institutions. 

Second climate action ministerial

The EU’s climate chief made the remarks during the second Ministerial on Climate Action, an informal meeting hosted by the EU, China, and Canada in Brussels, Belgium from 20-21 June. 

First held in Montreal, Canada last year, the ministerial is a joint effort by the three global powers to build momentum for the implementation of the Paris accord and drive greater climate ambition. 

The Brussels meeting brought together ministers and other high-level representatives from 36 countries who reiterated their commitment to concluding the Paris “rulebook” by the end of the year. 

The Paris Agreement was reached in 2015 and entered into force one year later. However, most of the details to put the accord into action were left for later negotiations. The deadline for concluding these discussions is the 24th Conference of the Parties (COP24) under the UN Framework Convention on Climate Change (UNFCCC), which will be held in Katowice, Poland, in early December. 

Progress on the Paris “rulebook” has been slow so far. At the ministerial, participants discussed various unresolved political and technical issues and called on negotiators to switch gears and use the “emergency” session scheduled for early September in Bangkok, Thailand, to produce a negotiating text for COP24. (See Bridges Weekly, 17 May 2018

The chairs’ meeting summary urges negotiators “to ensure that the text that emerges after the Bangkok session leaves as few issues of political importance as possible, for ministers to resolve.” 

Scaling up international climate pledges

Parallel to the climate ministerial, a group of 23 countries issued a joint declaration stating their openness to consider increasing their Paris climate pledges.

This so-called “Declaration of Ambition” also highlights a series of additional milestones on the international climate calendar, including a high-level summit in September 2019 held by the UN Secretary-General, António Guterres, aimed at marshalling greater financial commitments and political ambition towards meeting the climate challenge. 

According to the statement, the signatories “commit to exploring the possibilities for stepping up [their] own ambition” going forward. 

Eight EU member states are among the signatories, which counts a range of countries from different world regions and varying levels of economic development. It includes Argentina, Canada, Chile, Colombia, Costa Rica, Denmark, Ethiopia, Fiji, Finland, France, Germany, Maldives, Marshall Islands, Mexico, Monaco, the Netherlands, New Zealand, Norway, Rwanda, Saint Lucia, Spain, Sweden, and the United Kingdom. 

Poland, the host of this year’s COP, was the only EU country at the climate ministerial not to sign onto the declaration. The COP24 host is known for defending its coal industry and opposing more stringent EU climate regulations. 

Climate pledges urgently need to be scaled up, experts and international agencies say. A 2017 report by UN Environment shows that even full implementation of current NDCs will only deliver one-third of the emissions cuts needed to keep global warming below the two degrees Celsius limit. Without deeper emissions cuts, this puts the world on a path towards a three degrees Celsius increase from pre-industrial levels by 2100. 

Parties will take stock of their collective efforts towards the Paris Agreement temperature goal at COP24. This exercise will serve to inform the next round of NDCs. Countries with 2025 targets have to submit new pledges by 2020, while those with 2030 targets have to communicate updates to their existing goals by that same deadline. 

China, Canada push ahead with carbon pricing

The success of the Paris Agreement depends on the implementation of concrete climate measures. Carbon pricing schemes are an increasingly popular tool for doing so. Proponents say that an adequate price on carbon gives polluters incentives to reduce their emissions while spurring investment in low-carbon technologies and initiatives. 

According to a recent World Bank report, carbon pricing schemes have been implemented or are scheduled in 45 countries and 25 sub-national entities, either in the form of a carbon tax or an emissions trading system (ETS) which caps total emissions at a declining rate and allows companies to trade emissions allowances on the market. In total, carbon pricing currently covers 20 percent of annual global greenhouse gas emissions. 

The official launch of the Chinese national emissions trading scheme at the end of 2017 was a significant addition to the carbon pricing landscape. At 3.5 billion tonnes of carbon dioxide, it is more than double the size of the EU’s carbon market, which has long ranked as the world’s largest. However, many technical details of the Chinese ETS still have to be finalised. (See Bridges Weekly, 18 January 2018

According to Chinese media, the allowance allocation plan was approved by the State Council in April, while work on the registration and transaction system, the accounting and verification of historical emissions data, and capacity building is underway. 

Canada is also progressing with the introduction of its federal carbon pricing system. Initially scheduled for this year, the start date has been postponed to 1 January 2019. 

Under the “Pan-Canadian Framework on Clean Growth and Climate Change,” provinces and territories have to meet a minimum carbon price, starting at C$20 (US$15) in 2019 and rising by C$10 (US$7.51) at least annually until 2022. Provinces and territories have the option of using their own system, either through a tax or cap-and-trade system, or following the federal programme. (See Bridges Weekly, 15 December 2016 and 22 February 2018

Under the federal system, producers and distributors of fossil fuels will be subject to a tax based on the carbon emissions from combusting the fuels, while heavy industry will be given emissions caps and charged the tax for any emissions above that level. Companies falling below the limit will be able to sell credits.

The federal system will come also into effect as a “backstop” mechanism where provinces or territories opt out of carbon pricing or their systems do not meet the federal requirements. 

Ontario, Canada’s most populous province, is likely to face the imposition of the federal system following the 15 June announcement by its newly elected Premier Doug Ford to scrap the existing ETS. That scheme is linked with Québec and the US state of California under the Western Climate Initiative. 

The Conservative has vowed to fight the federal government’s carbon pricing policy in the Supreme Court, echoing a similar threat by Saskatchewan Premier Scott Moe. 

In addition to Ontario and Québec, provincial schemes are currently in place in British Columbia and Alberta, which both operate carbon taxes. Manitoba is due to launch a carbon tax in September, while Nova Scotia is preparing a cap-and-trade scheme for 1 January 2019. Other provinces are also working on their own programmes, although no plans have been submitted for assessment to the federal government ahead of its September deadline. 

ICTSD reporting; “No province asks to use federal carbon pricing system by deadline,” 28 March 2018, CTV NEWS; “Ottawa stands firm on carbon price after Doug Ford’s Ontario election win,” 8 June 2018, THE STAR; “Eight EU countries signal openness to increased Paris climate pledge,” 21 June 2018, CLIMATE HOME NEWS; “Cañete: EU ‘de facto’ upping carbon reduction pledge to -45%,” 21 June 2018, EURACTIV; “The cumulative volume of the national carbon emission quota allocation and distribution plan has exceeded 200 million tons,” JXYUQING, 19 April 2018.

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