TWN Info Service on Climate Change (Oct13/09)
24 October 2013
Third World Network  

No agreement on establishing a ‘new market mechanism’ in Warsaw

Geneva, Oct 24 (Alejandro Rafa) – A workshop on market mechanisms saw no agreement on establishing a ‘new market mechanism’ in Warsaw, at the UNFCCC’s 19th COP.

On October 8th the UNFCCC’s Subsidiary Body on Science and Technical Advice (SBSTA), held a workshop on a ‘new market mechanism’ (NMM), following a request that the Secretariat organize a workshop to advance its work towards fulfilling the mandate proposed in decision 2/CP.17, paragraph 83. This was part of a 3 day workshop from 7-9 October, held in Bonn, Germany, which also saw discussions around the ‘Framework for Various Approaches’ (FVA) and ‘Non-Market Approaches’ (NMA).

Discussions were broad ranging and a variety of proposals as to what the NMM could be were put forward by Parties, with little clarity on the form the NMM was to take. There was also focus on whether market mechanisms could actually lead to an increase in ambition and whether market mechanisms do actually lead to emission reductions.

Many developing countries, including Brazil, were cautious about advancing the details of the NMM without further clarity on: its scope and purpose; how it would result in increases in ‘ambition’ (or developed country Parties’ mitigation commitments under the Convention); and how to address the current over-supply and low price of carbon-market units under the clean development mechanism (CDM).

Bolivia called for a ‘moratorium’ on new market mechanisms under the ‘precautionary principle’ until scientific analysis of the impact of market mechanisms could be assessed by Parties.

Developed countries, particularly the European Union and Norway, said there was a connection between the NNM and ambition and focused their interventions on technical details relating to possible proposals.

Several Parties, including the Philippines and Nicaragua, expressed concerns that the Secretariat’s summaries (both informally within the workshop and in the provided draft technical synthesis of submissions) did not adequately reflect the divergence in views among the Parties.

The workshop was co-facilitated by Laurence Mortier (Switzerland) and Derrick Oderson (Barbados) and contained several focused sessions including on the scope and purpose of the NMM, options on modalities, how to define ‘broad segments of the economy’, registering and tracking of units, and on a ‘prompt start’ to the mechanism.

Views were particularly divergent on the scope and purpose and the need for a ‘prompt start.’ Parties also disagreed on whether nationally appropriate mitigation actions (NAMAs) and reducing emissions from deforestation and forest degradation in developing countries –plus (REDD+) should be considered under the NMM.

The Secretariat began the workshop by presenting a synthesis of submissions received and suggested that possible characteristics around which there was convergence could include: a rules -based mechanism, operating with the FVA, which  contributes to NAMAs and does not ‘shift the burden’ to developing countries.

The co-facilitator began the first session on ‘scope and purpose’ by asking Parties to direct their comments to: the role of the COP; the difference between the NMM and existing mechanisms; relevant linkages; institutional arrangements; supplementarity, and the promotion of sustainable development.

Scope and purpose

The Philippines made a preliminary intervention expressing concern about the presentation of items as having reached ‘points of convergence’ as many Parties had not made submissions yet but may hold divergent views.  It stated strongly that the words ‘points of convergence’ was something it was not ‘comfortable with.’

The Secretariat clarified that the areas of convergence were ‘a subjective interpretation based on what was submitted in writing.’

Bolivia emphasised that ‘there is no convergence on the issue of the NMM.’ It said that it’s ‘views and submissions had not be taken into account’. It said ‘there is no doubt of the failure of the existing market mechanisms.’ It said ‘the collapse of the carbon market and the subsequent low carbon price is due to a lack of ambition from developed countries.’  Oversupply and lack of demand were the hallmarks of the current market mechanisms, it said. With ‘no increase in ambition there is no justification for a new market based mechanism,’ it added further.

It outlined that market mechanisms cannot achieve the scale of reductions needed to meet 1.5 degree C or 2 degree C’ limit in temperature rise and argued that focusing on market mechanisms obscures real responses.  It reminded Parties that they needed emissions to be at most at 44GtCo2e (Giga-tonne CO2 equivalent) in 2020 to limit warming to 2 degree C, and lower for 1.5 degree C, but warned that ‘we are heading for 57GtCO2e’  which would ‘increase temperature between 3-4 degree C’ having ‘dramatic’ impacts on ‘the planet and people.’

It noted that since the NMM was ‘defined’ in 2011, ‘the two largest carbon markets (the EU ETS and the CDM) have suffered drastic price collapses and ongoing problems with integrity.’ It said that ‘given the urgent need to reduce emissions, the centrality of the markets discussion is distracting, dangerous and irrelevant.’

It reminded Parties that ‘markets’ were introduced in the Kyoto Protocol (KP) to ‘increase flexibility and enhance ambition,’ but that ‘in the absence of increased ambition’ now was ‘not the time to enhance new market mechanisms.’ Instead, Bolivia called for ‘a moratorium on new market mechanisms under the precautionary principle.’ It said the moratorium could be suspended after an assessment showed that carbon markets can ‘actually reduce emissions.’ It concluded that in the context of the FVA ‘only non-market based approaches’ should be considered.

Brazil said there was a ‘common understanding’ among Parties ‘that we are all in favour of increasing ambition’ in order ‘to keep temperature rise below 2 degree C’ as a ‘global goal.’ Therefore, the first question was, would the NMM ‘increase ambition and how can that be demonstrated.’ It said that if it is ‘offsetting then it is a zero sum game,’ and ‘is of no interest.’ It emphasised that ‘ambition should not be contingent on access to market based approaches.’ It said the main avenue to increase ambition was ‘government led policy to meet commitments.’ It affirmed that ‘any market based approach should be supplementary to domestic actions.’

It said that in order to evaluate possible market based mechanisms, Parties needed to ‘ask where demand is.’ It is not the market that will create ambition; it is ambition that will create the market, Brazil added. It noted that today ‘the only demand is created by the KP.’

One outstanding question, said Brazil, regarding the NMM was how it would differentiate between Annex 1 and Non Annex 1 Parties, considering national circumstances. It added that it did not agree that current existing mechanisms were not delivering a net contribution to mitigation. It said that the CDM has already shown a reduction in emissions and has the potential of 7 Gt of registered projects. It reminded Parties that this represented an opportunity for a market and suggested that ‘we should put an effort into exploring all potential’ from those existing market mechanisms, ‘before engaging in new ones.’ It concluded that discussion about ‘flexibility’ was ‘not be helpful at this moment.’ What was needed was ‘commitments.’ It said a ‘flexible approach’ was not the right way to proceed with market mechanisms. 

The Philippines said its ‘hesitation’ had been expressed by Bolivia and Brazil, and that it wanted to better understand market mechanisms' ‘effectiveness and role.’ It wanted to see ‘why the EU loves the NMM’, for example by understanding how the CDM and EU-ETS had or had not delivered. It added that with respect to sustainable development, it was important to consider how that could be achieved whilst respecting sovereignty, given that what ‘might be cost effective for the funding Parties’ may not be cost effective for the host country in the long-run (as it may represent ‘low hanging fruit’) and it may not align with the sustainable development priorities of host countries.

Swaziland said that ‘different approaches have different outcomes’ and ‘building on evidence of market based approaches in Africa, our approach would be to be cautious.’  It said that in particular, special attention should be paid to ensure the NMM was under the COP, that Annex 1 Parties scaled up their targets (as it was ‘impossible to have a carbon market if the targets are weak or non-existent’, this was particularly important with the current price ‘going negative’), that it was not complicated for developing countries to participate, that it ensured geographical distribution, and that for sustainable development reasons it minismised offsets. It said the NMM should be voluntary, in the context of sustainable development, and must be supplementary to domestic action by Annex 1 Parties. It concluded that to ‘bring back a strong price’ Parties needed to agree to ‘strong rules.’

Cuba said it did not see the relation between NMM and ambition; it said ‘ambition is related to political will and commitment.’ It said it was currently ‘taking actions using its own resources.’ So it asked ‘how other countries can’t do the same’ and added it could not see how NMM ‘will solve the problem of the level of ambition.’ It said that ‘the unpredictable market has failed in many cases and cannot provide the solution’.  It called on Parties to analyse what has happened with the existing mechanisms, ‘instead of trying to create new ones.’ It informed the facilitators that it would like to see reflected in the summary of the session ‘that there is no agreement on the need for new market mechanisms.’  It concluded that any decision on NMM should be linked with discussions in the Ad hoc Working Group under the Durban Platform (ADP) and any agreement should follow the procedures and principles of the Convention particularly CBDR.

Nicaragua said it did not believe that markets would increase ambition as it had not happened so far. In fact, ‘what we have seen is a decrease of ambition.’ It had been ‘waiting since Cancun for this ambition to increase’ yet, ‘there has been no ratification of the KP second commitment period.’ It said it wanted a legally binding outcome negotiated by the Parties, and not imposed as occurred in Copenhagen.

It continued that ‘everything indicates that markets have been a failure, and have not achieved the increase in ambition, nor the credibility that we were hoping for when the CDM was agreed.’ It said that it was too early to consider a new mechanism unless the ADP had dealt with the issue, and doing otherwise would be ‘prejudging what the ADP will agree on.’ It concluded by noting ‘a difference to the discussions: that the NMA fits within the Convention; while the new market will depend on further negotiations.’

Saint Lucia said it expected the COP to exercise guidance and authority to ensure the environmental integrity of commitments and the regime as a whole. It would exercise that authority through establishing rules that would then be applied by institutions under the COP. With respect to individual Parties, it said that the COP should: set eligibility criteria; review caps; inventories; should see that registries meet the criteria of the COP; should ensure conformity checks are performed; ensure checks to see the transfer of units criteria are satisfied; and should check the share of proceeds.

It saw the NMM as different to the CDM as it should be structured to deliver net global reductions. It was very clear that there is a substantial gap between commitments and where we need to be, and that net global reductions would give confidence that the NMM will ‘benefit us all.’ In terms of links it said it was ‘clearly’ linked to the FVA, and the establishment of common accounting rules under the Convention. It said Parties have to ensure that no double counting occurs, including across the KP and the Convention units. On institutional arrangements it suggested modeling on the KP.

It said that the relationship between the NMM and ambition was that ‘the more ambitious you are the more you can use NMM.’ It called for access only to those with ‘economy wide targets.’ It said that its use should be supplementary and ‘there is value in being clear on what that looks like.’ It said that voluntary participation could be assured by seeing in which sectors Parties are interested in and that wider participation would be encouraged by net emissions reductions.

Timor Leste asked for more time to discuss the NMM in a formal setting. It suggested that by COP 19 ‘we may only come up with a procedural decision on how we can move forward.’ It said that existing submissions do not address all critical issues. It called for the new mechanism to be under the guidance and authority of the COP. It said that as the CDM is only for Parties that sign Kyoto; a new mechanism was needed ‘to encourage new Parties to take actions.’ It noted that the existing CDM was helping sustainable development by allocating 2% of the share of proceeds, and so the NMM could do the same thing ‘but also to address loss and damage.’ It said, however, that the CDM was ‘not working well’ and Parties needed to ‘learn’ from those experiences. It concluded that the NMM should be voluntary but that non-KP should take part.

Guyana called for all sectors to be included in its scope, including deforestation and sustainable forest management. It said the NMM should be rules based, should facilitate the implementation of NAMAs and be within the FVA. It said participation should be voluntary and not introduce targets for developing countries.

Indonesia said the NMM should be under the guidance and authority of the COP. It said the difference with existing mechanisms would be that the NMM should be able to accommodate more types of projects and activities, particularly small scale projects. It said the NMM should have ‘more standards’ than the FVA and that ‘everyone should participate especially those with high levels of ambition.’

Jamaica flagged that market mechanisms ‘must be supplement to domestic action’ and called on Parties to ‘define the amount that can be achieved through markets.’ It said Parties should look at ways of making sure the NMM works to be more than offsetting, including using short crediting periods, fixed amounts of units and retiring units.

Papua New Guinea said that the NMM ‘should raise the level of ambition of developed countries under Convention.’ It said that sectors should be considered, including reducing emissions from deforestation and forest degradation-plus (REDD+) but that the level of additionality should be clearly identified. It said to contribute to ambition that reference levels could be set below business-as-usual and that some emission units could be ‘set aside.’

The European Union said it liked market mechanisms and thinks that ‘they are an essential part of the framework.’ It said that changes in investment patterns were needed and that markets were needed to achieve that. It saw the COP as having management and control over the modalities and procedures of the NMM, with the UNFCCC serving as secretariat, but with flexibility for host countries. It said the NMM would be different to existing mechanisms because it would result in ‘a net contribution to mitigation’ and the ‘scope should be sectoral.’ It said there was ‘a link between the mechanism and ambition’ and that it ‘expected it to contribute’ but did not propose an ‘appropriate relationship’ between the two. It said that participation in the NMM should be voluntary and would be supplementary to domestic action in developed countries. It concluded that the NMM would support sustainable development by producing emission reductions ‘quicker and cheaper.’

The EU called for a ‘decision to have a framework and elements of the framework.’  It said it saw this ‘in the 2015 deal context.’ It said Parties needed to come up with something ‘credible’ that they could ‘sell to domestic communities.’ It said that on the issue of ‘low hanging fruit’ it was important for countries to decide what they wanted to offer and what they would retain for their own actions.

Poland as the incoming President of COP 19/CMP 9 reminded Parties of the mandate from SBSTA and said it would try to facilitate the achievement of the mandate. It sought clarity on what would be units which ‘emanate from the NMM’ that will be ‘good for compliance with UNFCCC obligations’ for the COP to approve.

Liechtenstein on behalf of Environmental Integrity Group encouraged Parties to focus on two questions: whether Parties could take decisions based on recommendations from an executive body that harmonises rules across mechanisms; and how could the NMM go beyond offsetting and have as its ‘main achievement’ the net reductions or avoidance of emissions.

Norway said that all Parties needed to enhance ambition. It said to do so will necessitate a low carbon development path and that an increased use of carbon markets was vital to achieve that path. It said that prices needed to be beyond 20 or 30Euros per tonne to be able to cope with the challenge. It said it was this perspective that led to its support of the NMM. It called for ‘market participation under the new regime’ and there should be a ‘strong UN role.’ It said there was a need to track units and suggested the NMM could be ‘broader’ than the CDM’s project based approach. It suggested that the CDM could continue as well and that Parties should work on concrete links between the two. It said it needed the use of markets to be able to be ambitious and concluded that the NMM should be voluntary and every country could accede to it on its own terms.

Japan said that each implementing party should be able to ‘define the sector’ and that ‘those proposed’ must then be assessed ‘by an international body’, removing some ‘free-choice’ for the Parties. It said that as ‘every source within a sector’ must then be measured, reported and verified (MRV-ed); then participation is not ‘entirely voluntary.’

New Zealand said that ‘to be ambitious we need tools to meet our commitments and markets are an efficient and effective tool.’ It reiterated that markets were a ‘voluntary tool and there is no compulsion on Parties to use them.’ It said it wanted a better understanding of the role of COP, or a body under COP, and the flexibility of Parties to develop their own procedures. It asked if the COP assess and approves, what are the elements that Parties have to meet to get approval and which elements would be left for interpretation?

The second session of the day focused on options for modalities, beginning with a presentation by the World Bank. The subsequent discussion focused on perceived problems with current modalities of the CDM including the current over supply of units, the lack of demand, the lengthy review process, the lack of an appeals process, and the risk to developing countries of uncertainty in prices.

The third session focused on the definition of a ‘broad segment of the economy’ and began with a presentation from the Climate Markets and Investment Association. Parties then discussed how such an approach might ‘engage’ the private sector, and the extent to which government policies and actions would influence outcomes.

The fourth session focused on criteria for recording and tracking and included a presentation from the Secretariat on the existing International Transaction Log and its capacities. Discussion focused on how this connected to ‘double counting’ with the EU saying that ‘registries reflect rules, and they do not lead to an absence of double-counting by themselves. If rules are not clear from beginning it’s very expensive to implement systems; so early clarity is important.’ Poland said that some functions may be a part of ‘the mechanism’ and others a part of the FVA, with Parties having ‘slightly different views as to what they are.’

The fifth session included a panel discussing ‘lessons learned from existing approaches’ and also focused on MRV and ‘share of proceed’ proposals. The EU in its presentation called for a future ‘simple decision on modalities and procedures’ with ‘guidance attached to it.’ Papua New Guinea, on behalf of the Rainforest Coalition, in its presentation suggested that capacity building was necessary for an early start to the NMM, and that a key lesson learned from Kyoto was that ‘forests were left out.’ It called for ‘common standards’ and the ‘setting aside of units’ to ensure net reductions. The Republic of Korea gave a presentation proposing ‘credited-NAMAs’ (C-NAMAs) which would be a hybrid of ‘bottom up and top down’ approaches, including a tiered approach to reporting and the launch of a ‘pilot phase’ to ensure a prompt start. Jürg Füssler of INFRAS, a Swiss consultancy, provided some technical information on lessons for creating baselines.

Brazil responded to the presentations by saying that ‘the more I listen the more pessimistic I become on the possibility of reaching a common understanding on modalities and procedures at the next COP.’ It said that ‘in one month we will not be able to solve all the issues.’ It added that the Secretariat’s summary of the presentations did not reflect all the views expressed. It said it expected the report of the workshop to be more consistent with the views expressed throughout the day.

It continued that ‘markets are based on credibility’ and so that ‘when I listen to proposals on flexible MRV, and own baselines, and having tiered approaches then we are going away from needed credibility.’ It said that ‘credibility requires a clear definition of rules, and an upfront definition of rules.’ It asked how Parties could possibly reconcile having credited-NAMAs, sectoral approaches, and having REDD+ all in the NMM together. It asked if there was going to be different modalities on each approach, and if so it suggested discussing ‘each one on their own merit.’ It said that environmental integrity had been mentioned by all presenters but it ‘failed to understand’ how environmental integrity was served by each of the proposals.

It reiterated that 'market based approaches should exclude the use of offset mechanisms, particularly in the case of REDD+.'  It said it understood that 'REDD+ is a non-market based approach.' It said that in order to limit warming to below 2 degree C, governments needed to make sure that reductions had integrity and that with respect to REDD , this required 'that the results from REDD+ should not serve as a basis to concede allowances to Annex 1 countries.' It concluded that 'if we do that, we will fail across the whole system.'

It continued by saying that the idea of C-NAMAs required 'a lot of discussion' as NAMAs were 'presented as a result of a delicate and balanced negotiation.' It said that NAMAs were originally envisioned as a way for Annex 1 countries to comply with finance commitments under the Convention.

The Philippines supported the intervention by Brazil. It was looking at how the NMM would benefit Parties 'in terms of transformative change' but that 'what we have seen so far is the number of risks, rather than benefits.' It particularly drew attention to risks around price stability and problems of hot air and oversupply. It reaffirmed that 'markets have to deliver ambition.' It said that currently there was no guarantee that ambition would be increased and that was the missing element.  It said seeing an increase in ambition and then dealing with it in terms of tools was a 'more credible sequence.

Nicaragua agreed with Brazil. It said Parities did not have enough time to be able to engage in serious negotiation about the NMM for an outcome in Poland. It reminded Parties that it put two reservations on the outcomes from Doha: one on the lack of ambition in the KP; and two on the  lack of ambition in finance. It said that until it saw 'good movement in good faith' on both of those issues it would be 'impossible to think' there will be a good agreement in Warsaw.

Swaziland asked Parties to recall the KP and asked 'what came first, the Protocol or the rules for emission trading?' It said it was the Protocol that came first and that created the demand for trading. It said that today Parties, had to deal with the assumption that 'pledge and review' will create the demand for the commodity. It said Parties need to consider 'how are we going to then create incentives in the market system we are trying to design' if demand for carbon is low. It said this would be particularly difficult because, the pledge and review process would not raise the level of ambition to the extent that science dictates. It also warned Parties against making a lot of assumptions, and to work through outstanding difficult issues. It highlighted particularly land use change and forests, 'where the issue of common accounting and permanence is very difficult to determine.'

It concluded that a 'share of proceeds' system would be welcome but noted that 'where demand is not likely to increase, it follows that the share of proceeds will be minimal.' For this reason it called for 'supplementary support of the Adaptation Fund, as it was important to our livelihoods.'

Timor Leste said that neither REDD nor NAMAs should be discussed under the NMM. It said discussion of tracking and registries would take two years and so at COP19 the preliminary modalities should be focused on.

Saint Lucia said that Parties should talk about 'what a real reduction is.' It said that the fact it was 'measurable' would 'scrape off many things.' It reminded Parties that according to the mandate, the NMM was about 'additional reductions…’. It said Parties should be 'striving to find a tool' to ensure they were not uncertain about 'net reductions.' It said it was 'not about pet projects' and it 'had to be credible.' Egypt said the NMM needed to be under the UNFCCC to avoid double-counting and to ensure criteria.

The EU reminded Parties that they were 'mandated' to address modalities and procedures. In response to Swaziland's question it claimed that the EU 'linked to the CDM before Kyoto came into force and that generated demand.' It said it was 'important to have movement' on the NMM so that Parties could 'see what’s available for mitigation.' It said 'a simple decision' addressing key issues and a process to define further guidance would be enough progress in Warsaw.

Japan said that 'without clear understanding on what mechanism we are talking about, we cannot talk about modalities and procedures.' It said Parties should 'try at least to accommodate' three different mechanisms and make separate modalities and procedures for each. It did not think that discussing C-NAMAs as applying for the post-2020 period was helpful and strongly suggested that 'we should not talk about mechanisms post 2020' not to preclude that those mechanism may continue, but because it was 'subject to discussion under the ADP.'

Poland said the challenge was 'how to define for different things.' It said that the NMM would be 'one of the elements under the FVA' and so with the NMM there was an 'opportunity to define it under the COP to set the gold standard.' It said the NMM should 'show what we aspire to.'

The EU called on Parties to 'focus on what we can agree on.' It said ''we agreed a broader scope, so let’s discuss that.'  It said that Parties agreed to have modalities a long time ago and 'so credibility is an issue in connection to that statement.' The Republic of Korea said a higher level of ambition is needed but that it could be dealt with in other fora. It said the 'NMM cannot decide where the demand is.'

The final session began with a presentation by the Secretariat on how to 'ensure a prompt start' to the NMM. It suggested that the experience of a pilot phase on 'activities implemented jointly' could be instructive, and in that example, no units were issued or used, but a reporting format was developed. It said the key choices were between a 'centralised' and 'decentralised' approach and whether Parties wanted to move in 'one step' or 'two steps.' It described the decentralised approach as being where Parties trialed their own versions of the NMM, perhaps with a registry of approaches; in contrast to a centralised approach that had a body implementing core procedures and reviews. It said Parties needed to resolve the question of governance and how units in a pilot phase would be treated, whether they would count toward mitigation or finance commitments and whether retroactive application would be allowed.

Swaziland said Parties were 'still battling with the registry of NAMAs' and that 'to do another registry would be a challenge at this point.' The EU said it 'wouldn’t call it a prompt start as it should have been agreed at the last COP.'

Saudi Arabia said it encouraged a NMM but that it did 'not want to make the same mistakes as before.' It reminded Parties of the 2008 financial crisis, driven by a belief that 'house prices will never go down', and said it did not want to see a system built on a similarly questionable belief. It said there was a difference being doing something quickly and doing it right. It said that if support for NAMAs is premised on the NMM and then later, there is no ambition then 'developing countries will lose.' It said that if Annex 1 were to increase ambition and then was not able to deliver it, 'it had not lost anything' but that if developing countries invested in the NMM then they lose the opportunity to invest in schools, roads and hospitals.

It continued that a focus on sectors could be confusing and exclusive, as for example, a focus on forests would 'penalise' those without. It also said that the experience in ICAO was 'not a success story for markets' and that voluntariness may be spoken about but that in implementation it may not happen.

It concluded that the countries that were pushing for the NMM had 'an incredible amount of units at low prices' and so asked 'why do you want a new market?' It said there would be 'an increase in supply but no demand'; unless Parties believed ambition would increase. It said that 'belief is not sufficient for countries to make dramatic changes in their national policies.'

Bolivia said it was 'very premature' to talk of a prompt start. It said that after the discussions of the workshop it was very pessimistic about the possibility of progress in Warsaw. It noted that a 'pilot' that was decentralised considers many mechanisms rather than 'a' NMM and that needed to be disentangled. It said that 'talking about creating more supply in addition to the oversupply' without 'talking about the demand side' was 'not a serious approach.' It said it would not support putting the future of the planet in the hands of the market and the private sector, and said that NMAs must play a central role.

It said that the workshop had not provided any scientific information, or data on how to tackle the mitigation gap. It said it had heard about 'expectations, and hopes' but had not seen 'information on the real scope of the market to tackle the ambition gap.' It warned that 'markets appear to be an end in themselves' rather than 'instruments to limit temperature rise below 2degree C.' It said it did not think a decision could be reached in Warsaw. It reiterated to the secretariat that they needed to consider all views and include divergent views in its summaries.

Liechtenstein said that the NMM had been 'defined' in Durban which was 'almost like established' and that it had been 'incorporated into the KP' by the Doha amendment, and so it needed to be 'filled with substance.' It said it wanted a 'pilot phase' but that 'after today's discussion' Parties would need to 'continue the work programme into 2014.'

Norway said it appreciated Parties discussing ambition, especially when the 'carbon market is as low as it is.'  It said that 'we know the gap, we know we have to do a lot more.'  It noted that it had a conditional target of moving from 30% to 40% reductions on 1990 for 2020 but that depended on other Parties' actions. It wanted to discuss how it could be carbon neutral and said a 'pilot phase' would be a step forward.

Brazil said that it welcomed 'any effort', however said that 'not every effort needs to be recognised by the COP.' It said that there were criteria at the international level to be met for the purposes of environmental integrity and 'as stewards of the regime' Parties needed to be careful recognising any effort that’s undertaken.

It said that creating an administration for the NMM seemed 'too ambitious' as there wasn't even a conclusion on what a ‘broad segment of the economy was’, let alone what sectors or MRV standards may be required. It said that a decentralised approach could already be 'reflected in national communications' as any Party could define a purely domestic market. It was only in the trade of units where common reporting needed and that for the COP to recognise such units 'required very careful evaluation so as to ensure that the whole climate regime was not compromised.' It said this evaluation should be based on the principles and structure of the Convention and KP as these both applied in the pre-2020 period. It warned Parties that focusing on instruments outside of the Convention put at risk the work inside the Convention. It said Parties should be encouraged to use what is in the Convention. It asked why Parties should recognise actions outside of the convention. It concluded that of the Secretariat's proposed options it would select 'Option Zero– no pilot phase, no prompt start.' It said that was the only possible option.

Saint Lucia said that Parties 'had to elaborate modalities' and had already defined and explained what characteristics the NMM might have. It was agreed that the NMM would lead to net reductions. It was also agreed that KP may use NMM in their commitments. It said it 'did not like' that agreement, but said it represented a need for standards. It said these standards should be 'more stringent' then those under Kyoto, because of lessons learnt. It said Parties needed to nail what ‘permanent’, ‘real’, and ‘net’ meant. There is need to also consider whether they were 'building on Kyoto mechanisms' or which tools and rules they would build on.

It said a ‘prompt’ start could happen only after there was a structure to deliver net global emission reductions; and once Parties knew how the share of proceeds would work; where the units would be held (central or nationally) and when there were agreed standards ‘that are better than what we have under the Kyoto Protocol.’ It said that ‘these must be agreed before running ahead with this tool.’ It suggested that countries could ‘propose sectors’ in which they thought the NMM could work and then Parties could review if the ‘elements were satisfied.’ It concluded that it thought the NMM had ‘potential’ but that Parties needed to be ‘careful.’

Ecuador said that discussions of the NMM needed to discuss technology transfer, finance, and capacity building for developing countries.

The Philippines supported the interventions of Swaziland, Saudi Arabia, Bolivia and Brazil saying ‘we are not there yet and we need more information.’ It appreciated the information on Norway on increasing its ambition and asked for more information on that in the context of the NMM.

Nicaragua agreed with Saudi Arabia, Bolivia, Brazil, Ecuador, and the Philippines, that a pilot phase launching in Warsaw was not feasible, nor was it reasonable to expect a prompt start. It reiterated that it agreed with ‘zero prompt start.’ It urged the Secretariat to include all of the opinions of the Parties its summary.

The EU said that ‘progress was not dependent on complete progress.’ It said it would like to see ‘a decision that was mandated for last year.’ It said it shared ‘concerns on the rules, ambition and credibility’ and said it hoped to join with others in addressing them.

The co-facilitator concluded the workshop by presenting an informal summary of the day and announced the results of the ‘creative corner’ which was an open brainstorming space to generate a new name for the NMM. The leading option was: ‘EMMA – Enhanced Mitigation Mechanism Activity’. Other options included: ‘EM2’; ‘Mother Earth Mechanism’; ‘Clean Earth Mechanism (CEM)’; ‘Joint Mitigation Markets or Standards (JMMS)’, and ‘World Trading Framework (WTF)’.