M van Schalkwyk: International Emissions Trading Association
Forum

26 September 2007

The pace of climate change negotiations is out of step with the urgency
indicated by science. With the first commitment period of the Kyoto protocol
ending in 2012, we are approaching a key point in the increasingly urgent task
facing us.

Achieving climate stability requires individual nations to rise above short
term self-interest for the benefit of the long term common good. And though we
have different responsibilities, we all have a common responsibility to act in
accordance with our national capabilities.

In working towards a fair, effective, flexible and inclusive climate regime
beyond 2012, the message from a developing country perspective is clear: We
take our responsibilities seriously. We are already making a meaningful
contribution within our respective capabilities; we are willing to do more. But
the trigger must come from the North. Besides broadening participation to
include the world's largest historical emitter, the United States, creating a
more empowering technology and financing framework will be a precondition. A
core of the solution underpinning any future agreement must be a balance
between sustainable development and climate imperatives, and between historical
responsibility for the problem and taking responsibility for the future.

When we meet in Bali in December this year, we should agree on a process to
conclude negotiations, by 2009, on a strengthened climate regime that builds on
the United Nations Framework Convention on Climate Change (UNFCCC) and its
Kyoto protocol. This process should be outlined in a Bali road map.

Chair, success by 2009, and beyond, will depend on our collective political
will to strike a balance between five key areas of work, namely adaptation,
mitigation, managing the unintended consequences of climate policies and
measures for the economies of other countries; technology development,
diffusion and commercialisation, and also financing and investment.

No agreement on the international climate architecture will be complete, or
politically feasible, if adaptation is not accorded much higher priority in our
deliberations. Moving from vulnerability assessments to the implementation of
those adaptive activities indicated in such assessments is critical. This will
require financial resources to be up-scaled by two to three orders of
magnitude. New sources of funding could come from both market and non-market
sources, for example, the proceeds of the auctioning of emission allowances in
Annex B countries, involuntary levies against emissions, user charges and/or
the extension of the two percent, Adaptation Fund levy to all three Kyoto
Protocol flexible mechanisms.

Chair, turning to mitigation, there are three strands that have to be woven
into one multilateral framework.

* firstly, more ambitious and quantified emission reduction targets for all
developed countries under the Kyoto Protocol
* secondly, re-engagement of the United States of America (USA) in the full
multilateral process and binding emission reductions
* thirdly, recognition of, and incentives for enhanced mitigation action by
developing countries.

In this context, initiatives such as the United States hosted Major
Economies Meeting are welcome as meaningful contributions to the multilateral
process. The outcome of this initiative should contribute to the building of
bridges to enable the transition from the fragmented status quo to a coherent
regime where all Annex I Parties take on quantified emission reduction
targets.

Chair, the science tells us that greenhouse gas emissions must peak and
decline within the next 10 to 15 years. We cannot delay taking real action.
Therefore, commitments by some Annex I Parties which focus on voluntary "pledge
and review", or emissions intensity or long term research and development, will
not be an adequate substitute for absolute emission reduction targets.

Chair, carbon markets will remain an important element in the climate
architecture after 2012. In this regard, three issues deserve some attention,
namely:
1. broadening the scope of the Clean Development Mechanism (CDM),
2. de-fragmenting the status quo
3. ensuring a more equitable geographic spread of CDM projects.

Long term ambitious commitments and much stricter mid-term targets for
emission cuts by all developed countries would be critical to fuel demand in
the carbon market. This would also ensure that we maintain price levels, it
would provide adequate time horizons for investors, and at the same time it
would increase investment in low carbon economic growth in developing
countries. Should the regime evolve to include new gasses or asset classes
after 2012, there should be a concomitant increase in stringency of emission
reduction targets.

An all-encompassing global carbon market regime which includes all developed
countries is the first and ultimate aim. However, it may be that the market
does not evolve this way in the short term. In this instance, it is essential
to create linkages between the various national or regional cap-and-trade
carbon markets, as a first step leading to full de-fragmentation.

On the supply side, several approaches for extending the architecture of the
CDM have been suggested. This includes proposals to extend the CDM to economic
sectors and/or policies. Common to these proposals is the recognition that we
can achieve more for both the atmosphere and sustainable development under an
enhanced CDM. Likewise, a number of proposals have been made to appropriately
scale the CDM to also incentives smaller mitigation projects.

South Africa recognises that the evolution of the Clean Development
Mechanism and the further creative development of market mechanisms could
provide up-scaled incentives for developing countries to enhance their climate
action. But then this should be based on the modification of the existing
architecture, drawing on the valuable lessons learned during the first
commitment period, rather than a newly designed framework.

Chair, whilst the development of large scale CDM projects is important, many
of the economies in Africa have small to minor mitigation potentials. We must
therefore find a way to seize the opportunities that exist to develop
appropriate small scale mitigation projects, simple in structure and finance,
but with high contributions to sustainable development.

Finally, Chair, we should also recognise that carbon markets can assist in
driving investment in low carbon technologies up to a point. In addition to
participation in Kyoto carbon markets, South Africa supports a strategic
approach of sustainable development policies and measures, or so-called
sustainable development policies and measures (SD PAMs), for developing
countries.

An SD-PAM would be a commitment to implement a policy or measure that makes
the development path of a country more sustainable, and with climate
co-benefits. Because SD-PAMs focus on large-scale policies and measures and are
not limited to projects or programmes, the co-benefits may be substantial.

Funding for implementation could come from both climate and non-climate
sources; and from public as well as private investment. Some SD-PAMs can also
be designed to provide market-based opportunities, linking them to this
potentially large source of climate-friendly investment. But policy actions
should ideally be linked to other incentives that address incremental cost gaps
and facilitate the deployment of low carbon technologies on preferential
terms.

The SD-PAMs approach makes it possible for developing countries to pledge
measurable, reportable and verifiable mitigation actions, supported by
technology and enabled by finance, and consistent with their sustainable
development objectives. These would be measurable mitigation actions, but of a
different kind than quantified targets for developed countries.

Chair, in conclusion, we realise that we must all act with a greater sense
of urgency. We are looking to the United States as the world's largest
historical emitter to play a global leadership role. No nation has the inherent
right to hold to ransom the future of all nations. We need a clear and credible
signal from the North and for our part; we stand ready to take on our fair
share of responsibility.

Enquiries:
Riaan Aucamp
Cell: 083 778 9923

Issued by: Department of Environmental Affairs and Tourism
26 September 2007