Climate conference delivers agreement on twin-track talks

Montreal (Platts)--12Dec2005

The United Nations Climate Change conference in Montreal ended Saturday
morning with an agreement to begin talks on post-2012 Kyoto commitments, as
well as to hold non-binding talks--which will include the US--on future
climate change action.

     Despite last-minute interventions from Saudi Arabia and the Russian
Federation, the conference voted to adopt a resolution under Article 3.9 of
the Protocol calling for an ad-hoc working group to begin discussions on
future commitments from May next year. The Conference also rubber-stamped
Friday's decisions on the functioning of the Clean Development Mechanism,
Joint Implementation and the compliance mechanism.

     "We have initiated discussions over commitments of industrialized
countries in the period beyond 2012. We will be meeting in May 2006 to advance
the discussion by parties on Annex 1 commitments," said conference president
and Canadian environment minister Stephane Dion. 

     The Russian delegation had sought to add a mechanism for the approval of
voluntary targets by non-Annex 1 countries, but numerous nations pointed out
that Article 3.9 only covers Annex 1 countries. The Russian proposal was
eventually noted in the conference proceedings and will be considered in time
for a decision at next year's COP/MOP.

     Saudi Arabia had earlier asked for compensation for lost oil revenues
that would result from reductions in fossil fuel consumption, and threatened
to block the final agreement. At one point, UK environment minister Elliot
Morley was reported as saying: "The Saudis are really souring the atmosphere
of the talks."

     Environmental groups reacted extremely positively to the Kyoto agreement.
"Despite Russia's attempt to wreck the deal, this meeting has made a historic
agreement," said Friends of the Earth International vice chair Tony Juniper.
     Greenpeace International policy director Bill Hare said: "We've seen the
world move together to take the next step in the struggle against climate
change. The meeting has agreed on the Kyoto Protocol in a sense against the
will of the United States, which tried at crucial moments to break down the
meeting."

     UNFCCC TALKS DEAL BRANDED "VERY WEAK"

     The non-binding talks on future action under the Framework Convention
were finally agreed early on Saturday as well. "We have achieved what many
claimed was unattainable--a decision launching a dialogue on long-term
co-operative action to address climate change by enhancing implementation of
the Convention," said Dion.

     However, environmental groups called the Convention talks agreement "a
very weak" deal. "The US administration effectively forced the rest of the
world to bend over backwards to keep them on board," Juniper said.
     The US, which had at one point walked out of negotiations, finally agreed
to a document which commits member states only to an "open and non-binding
exchange of views" under the aegis of the UN Framework Convention on Climate
Change. Stephane Dion said the exchange of views may lead to new ideas which
could be taken up in negotiations elsewhere.

     Observers speculated that the US about-turn on the talks was the result
of their previous intransigence on the matter. "I think what [the US] realized
is that [their intransigence] was a strategic error, because it angered the
other countries and unified them around the Kyoto track," a non-governmental
source close to the talks told Platts. "It's the Kyoto track that threatens
the US because if Japan, China, the EU and others all start moving into carbon
markets, the US is isolated."

     The source characterized the text as an opportunity to "heal the wounds"
of the meeting and to give the US a chance to come away with an agreement, but
he added that the text meant "just workshops and a report", rather than
binding agreements.

     Sources also suggested the US had been angered by Canadian Prime Minister
Paul Martin's speech on Wednesday, which caused some complaints in Washington,
and by the appearance Thursday of former US President Bill Clinton who, in a
speech to the conference said the current Bush Administration was "dead wrong"
in its arguments against mandatory limits.

     DEVELOPING COUNTRIES ENGAGED WITH KYOTO

     The NGO source pointed out that "it's the deepening and broadening of
Kyoto that's really the message out of this [meeting], and that's the signal
to the carbon markets; that this is serious, it's going forward and the
developing countries are engaged."

     Earlier in the week negotiations on the future of the Protocol were close
to breaking down, according to one source close to the talks, as US
intransigence on the UNFCCC talks led at least one Kyoto party to consider
backing out of the Protocol.

     "That was the fear," an observer told Platts. "But Thursday night Japan
indicated that even if the US blocked the UNFCCC text they would stick with
the EU and the G7 and go ahead with the Kyoto agreement."

     Looking ahead, Alden Meyer of the US Union of Concerned Scientists echoed
the Russian proposal, telling Platts the negotiations over post-2012
commitments might also have to consider the expansion of Annex 1 to include
some of the faster growing developing nations.

     "Mexico, Singapore, South Korea and a few others really ought to think
about graduating into Annex 1," Meyer said. "They're close to the standard of
living of Annex 1 countries. There ought to be a mechanism that, as you get
rich enough, you take on the obligations of Annex 1 countries. That's
something that could be talked about in the second commitment period: how they
trigger that graduation."

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