Explaining Kyoto credits, Australia and the Emissions Budget For Paris (Part 1)

While parties to the United Nations Framework Convention on Climate Change met in Poland this year, there was a lot of reporting on the potential for Australia to use banked Kyoto credits to meet our obligations under the Paris Agreement.

Here’s a smattering of it, mostly based on a report put together by Climate Analytics.

The meeting in Katowice is a major opportunity for the international community to hammer out the rules of Paris. Despite the wide acclaim that the Paris Agreement received, there actually isn’t much detail in it for the sorts of nuts and bolts issues that countries need to in order to know if they are meeting their obligations.

Some countries, ours included, are using this opportunity to tweak the rules in our favour. For us, one of the biggest issues is our ability (or potential lack of ability) to include as credit in Paris the fact that our emissions never got close to exceeding either of our Kyoto goals.

This is a complicated issue, and it is important. If you care about climate change, and want to make an informed choice at voting time, you really need to understand this. Too few Australians do.

This is part one of a two part article [EDIT: it actually ended up being 3 parts. See below.]. Before we can discuss the issue of Kyoto carry-over, we need to establish some basics of what our pledges are, how they work, and how we are performing.

**Please note an important disclaimer. While this is what the Commonwealth Government uses to calculate its budget for the second commitment of the Kyoto Protocol, it is not the right way to do it under that agreement. I chose to explain what the Government does, rather than the strictly correct method because this is more useful for understanding domestic policy.**

Australia’s pledges under the UNFCCC

The United Nations Framework Convention on Climate Change (‘UNFCCC’) does not force countries to reduce their emissions. Created in 1992, That international treaty provides the scaffolding for our international legal regime for climate action. It was designed to put in place a mechanism to negotiate and agree upon emissions reductions. It has been agreed to by every member of the United Nations.

Under the UNFCCC, there have been three rounds of negotiated emissions reduction obligations. Those periods, with Australia’s commitments, are:

  • Kyoto Protocol Commitment Period 1 (‘Kyoto CP1’) covers the period from 2008 to 2012 (inclusive, so five years). Only developed countries were bound to reduce their emissions.
    • Australia’s target under Kyoto CP1 was to increase our emissions by no more than 8% when compared to 1990 levels by 2012.
  • Kyoto Protocol Commitment Period 2 (‘Kyoto CP2’) covers the period from 2013 to 2020 (inclusive, eight years). Only those countries who were bound by Kyoto CP1 and who chose to participate in Kyoto CP2 were bound to reduce their emissions.
    • Australia’s target under Kyoto CP2 was to reduce our emissions by 5% when compared to 2000 levels by 2020.
  • Paris Agreement (‘Paris’) covers the period post 2021. Countries choose the length of their commitment, either 5 or 10 years. All countries are expected to submit a self-determined greenhouse gas mitigation goal called a Nationally Determined Contribution (‘NDC‘).
    • Australia’s NDC is to reduce our emissions by between 26% and 28% when compared to 2005 levels by 2030. We chose to make our pledge cover the entire decade of 2021 to 2030.

How the pledges work

However, and this is where things start to get complicated, when Australia declares to the international community that ‘We will reduce our emissions by x% compared to y year by z year’. That doesn’t mean that our emissions actually need to be x% below what they were in y year by z year.

This is because we use a budget approach to calculate our emissions. Budget approaches were standard under Kyoto CP1 and Kyoto CP2. Under Paris, it is no longer standard and countries can determine the type of pledge themselves. This makes things very messy. Australia has kept the budget approach though. 

The following chart shows our emissions, projected emissions, and emissions budgets under Kyoto CP2 and Paris. For simplicity, I’ve omitted the 28% reduction component. Paris targets aren’t binding, but that is not even relevant.

(1) Kyoto CP1 end point (+8% compared to 1990); (2) Kyoto CP2 end point (-5% compared to 2000); 
(3) Paris end point (-26% compared to 2005). [Data Source]

A budget approach means that our emissions pledges under each period aren’t just an absolute emissions reduction in the target years. Our pledges, at least for Kyoto CP2 and Paris, are calculated by drawing a line from the end point of our last pledge to the end point of the current period.

On paper, each year is expected to be a step closer to the goal for that period, moving in a straight line toward it and away from the end point in the previous period. In the chart above, I’ve called that progression the baseline.

To work out if we’ve met our obligations in a particular period, you add up the actual emissions from Australia for the whole period. For Kyoto CP2, that would be our emissions 2013 to 2020 inclusive. You then compare that to the total we could emit under the baseline, which I’ve called the budget.

If the total of our actual emissions over the period are less than the budget for that period, we have met our obligations. If the total of our actual emissions over the period is more than the budget, we have failed.

As you can see from the chart pretty clearly, in Kyoto CP2, the total of our actual emissions almost certainly won’t be more than the budget. We exceed the baseline in some years, but the amount that we go over the baseline in those years, as well as the number of years where we go over it, is smaller than those where we are well under the baseline.

Australia’s performance under Kyoto CP2

And so, while our 2020 emissions are expected to be virtually identical to what they were in 2000, under Kyoto rules, we can still say that we met our goal of reducing emissions by 5% compared to 2000 by 2020.

Part of the reason we can say this is because the extremely high starting point for the Kyoto CP2 baseline (marked (1) in the chart). That start point is based on our Kyoto CP1 target (an 8% increase on 1990 at 2012). The baseline then travels in a straight line down to -5% compared to 2000.

The way the baseline works, our ‘5% below 2000 levels by 2020’ goal is actually an average 2% increase on 2000 levels in each individual year.

So, two things: First, it’s important under a budget approach to know both the start point of the budget and then end point. Second, …

Of course we met our Kyoto target, it was a ridiculous target for a developed country!

The headline figure, a 5% reduction on 2000 levels, already made our target the weakest in the world under Kyoto CP2. However, the high starting point meant that we didn’t have to reduce our emissions at all in Kyoto CP2. We just had to not grow by much.

Australia’s expected performance under Paris

Paris is our first actual reduction goal under the UNFCCC.

Doing the same averaging exercise for Paris that we just did for Kyoto CP2, turns our (minimum) 26% reduction on 2005 levels by 2030 into a 20% reduction compared to 2005 for each individual year in the decade. Which sounds good until you remember that 2005 was the third highest year on record.

It has been standard at the UNFCCC to compare emissions to 1990 levels. But this is deeply problematic for Australia. 1990 was also an exceptionally high emitting year for Australia. This is because there was a lot of completely avoidable land clearing in that year which released a lot of locked up carbon. While not as high-emitting as 2005, it was still very high.

To accurately put our Paris goal into context, I’m going to pick a different, non-standard but defensible, comparison. In order to meet our Paris goals, our average emissions for each year needs to be 10% lower than they have been so far in this decade (2011 – 2017).

In that period, we have done virtually nothing on climate change at a Federal level. We had a relatively weak carbon price, with lots of carve-outs for big industry, for two years. We had the Renewable Energy Target. We had the Emissions Reduction Fund delivering abatement for three years.

Are we going to meet our Paris goal?

A new round of emissions projections is due from the Commonwealth Government any day now, but on their most recent emissions projections, things are not looking good for Paris.

We will not meet our Paris targets ‘in a canter’, as our Prime Minister claims. Certainly not while we keep galloping mindlessly in the opposite direction.

The red region in the chart shows our Paris overshoot. That region is the difference between our expected emissions, taking into account all policies we have at all levels of government, and our budget.

The difference is big. It’s really big. By Government estimates, we are going to miss our Paris goal by 868 million tonnes of carbon dioxide-equivalent greenhouse gases. I think the ‘that’s equivalent to taking x cars off the road’ analogy is not particularly useful because when you’re dealing with large numbers of cars it’s hard to really get a sense of scale. In this case, I’ll do it.

That’s because this one is easy to comprehend. The Paris overshoot we currently have is roughly equivalent to taking every single car, every single truck, and every single van off the road across the entire country for the entire decade (887 Mt).

There are better ways to meet this goal.

We could try a carbon price.

… or, we could cook the books.


Continue reading this series:

NB: I have elided two technical points in the above explanation. If you are relying on this to provide background for serious research, You need to be across these extra points:

  • As stated in text, this post is based on our domestic interpretation of the emissions goals, as used in the Department’s annual emissions projections. This does not match with the goals for Kyoto CP2 as described in the Doha Amendment to the Kyoto Protocol. The legal effect of the domestic interpretation is questionable, but this post is intended to explain how it is communicated domestically.
  • The start point for Kyoto CP2 isn’t quite drawn from end of Kyoto CP1, but is instead the continuation of a linear progression from the middle, 2010.