1. IISD Second Annual Forum of Developing Country Investment Negotiators: 2-4 Nov 2008 Climate Change and International Investment Agreements Riekie Wandrag

2. Climate Change / Global Warming United Nations Framework Convention on Climate Change 1992 United Nations Framework Convention on Climate Change 1992 Kyoto Protocol (into force Feb 2005) Kyoto Protocol (into force Feb 2005) –Obligations on Industrialised Countries to reduce greenhouse gas emissions as per agreed targets between 2008 - 2012 (Annex 1 countries) –No reduction targets for Developing (non- Annex 1) countries

3. Kyoto Protocol: CDM Provides for “trade-off” in emission reductions (emissions trading) Provides for “trade-off” in emission reductions (emissions trading) Article 12: Clean Development Mechanisms Article 12: Clean Development Mechanisms –Allows developed country to outsource obligations to reduce emissions to developing country CDM is a tool for leveraging foreign investment for sustainable development into developing countries

4. CLEAN DEVELOPMENT MECHANISMS (CDM) REQUIREMENTS: REQUIREMENTS: –Located in Non-Annex 1 Developing Country (acceded to Kyoto Protocol) –CDM must lead to long term emissions reduction –Must assist in achieving sustainable development –Must lead to technology transfer –Additionality (CDM aspect not part of business-as- usual of project) Result in tradable CER’s (Certified Emissions Reductions or Carbon Credits)

5. Investment in Climate Change Climate Change investment opportunities creates opportunities for sustainable development Climate Change investment opportunities creates opportunities for sustainable development Examples of Climate Change Investments: Examples of Climate Change Investments:CDM’s Clean energy projects (wind, solar energy) Timberland / reforestation

6. Implications for Investment Agreements General: careful drafting! General: careful drafting! –Definitions of Investment / Investor –Policy space / Public Welfare exceptions –Expropriation? –Dispute Resolution / arbitration clauses –Choice of law

7. Further implications for Developing countries re CDM’s Ratify & implement Kyoto Protocol Ratify & implement Kyoto Protocol National Legislation & Policy formulation National Legislation & Policy formulation Clear regulatory frameworks required on: Clear regulatory frameworks required on: –Environmental Law –Energy Law –Investment Law / regulation –Sustainable Development Policy Establishment of DNA Establishment of DNA Regional harmonisation of policies? Regional harmonisation of policies?

8. DESIGNATED NATIONAL AUTHORITY (DNA) To host CDM projects, country must set up Designated National Authority (DNA) To host CDM projects, country must set up Designated National Authority (DNA) DNA must certify that CDM contributes to sustainable development in order to achieve carbon credits i t o Kyoto Protocol DNA must certify that CDM contributes to sustainable development in order to achieve carbon credits i t o Kyoto Protocol Country can determine own criteria for sustainable development Country can determine own criteria for sustainable development

9. SOUTH AFRICAN EXAMPLE SUSTAINABLE DEVELOPMENT: SUSTAINABLE DEVELOPMENT: 4 Main Criteria 4 Main Criteria –Economic development –Social development –Environmental compliance –General Project Acceptability (equality of distribution of project benefits)

10. Other implications Need for capacity building / training Need for capacity building / training Current efforts in Africa: Current efforts in Africa: –Nairobi Framework to expand beneffits of CDM in Africa –Established 2007 by UNDP, UNEP, WB, AFDB & UNFCCC –CDM Capacity building project in Ethiopia, Kenya, Mauritius, Mozambique, Tanzania & Zambia.