NATIONAL INTEREST ANALYSIS—DOHA AMENDMENT TO THE KYOTO PROTOCOL 1. Executive summary The Doha Amendment to the Kyoto Protocol was adopted in 2012 and establishes the Kyoto Protocol’s second commitment period (from 2013 until 2020). Parties to the United Nations Framework Convention on Climate Change (UNFCCC) are currently negotiating a new global climate change agreement, due to be agreed at the UNFCCC conference in Paris in December 2015, and expected to take effect from 2021. While the Kyoto Protocol now covers only a small share of global emissions (12 per cent), the entry into force of the Doha Amendment is important for maintaining momentum of the ongoing negotiations. New Zealand’s acceptance of the Doha Amendment will support its entry-into-force and demonstrate our commitment to the UNFCCC process. Human-induced climate change through the emissions of greenhouse gases is causing temperature rise and sea level change around the world. Countries, including New Zealand, have been collaborating on a global response under the UNFCCC since 1992. The Kyoto Protocol, adopted in 1997, set legally binding quantified emission reduction targets for participating developed countries. New Zealand participated in the Kyoto Protocol’s first commitment period from 2008 to 2012 and subject to completion of a routine compliance process, will meet its emission reduction target for that period. New Zealand chose not to take a commitment under the Protocol for the second commitment period; instead it has taken a voluntary target under the UNFCCC for the same time period. Nonetheless, New Zealand remains a Party to the Protocol, has some ongoing obligations under it, and has stated domestically and internationally that it will apply the broad Kyoto Protocol framework of rules to its target. Parties to the Kyoto Protocol have been encouraged to accept the Doha Amendment as soon as possible in order to expedite its entry into force. This requires 144 Parties to deposit instruments of acceptance with the United Nations Depositary. New Zealand’s objectives in the current climate change negotiations are to secure an effective global agreement, that includes commitments from all of the world’s major emitters, and has rules that favour (or do not unfairly disadvantage) New Zealand’s specific national circumstances. An effective agreement is in New Zealand’s strong economic and environmental interests as a small, trade-exposed country with an economy grounded in the primary sector. There are no disadvantages, significant risks or costs to New Zealand accepting the Amendment. Our current legislation and practices are consistent with the obligations the Amendment will create for us. This National Interest Analysis (NIA) has been prepared in accordance with Parliamentary Standing Order 398. It concludes that there are strong reasons for New Zealand to accept the Doha Amendment to the Kyoto Protocol.

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2. Nature and timing of the proposed treaty action The ‘Doha amendment to the Kyoto Protocol’ (the Amendment) was adopted as decision 1/CMP.8 at the Conference of the Parties serving as the Meeting of the Parties to the Kyoto Protocol in Doha, Qatar in December 2012. Under Article 20, paragraph 4 of the Kyoto Protocol, the Amendment will enter into force for those Parties having accepted it on the 90th day after the date of receipt by the Depositary of an instrument of acceptance by at least three fourths of the Parties to the Kyoto Protocol (144 of the 192 Parties). All Parties to the Kyoto Protocol have been encouraged to accept the Amendment as soon as possible in order to expedite its entry into force. As at 7 September 2015, 43 Parties had deposited their instrument of acceptance. As a consequence of accepting the amendment, Schedule Two of the Climate Change Response Act 2002, which contains the Kyoto Protocol, will need to be amended by Order in Council to bring it into alignment with the Amendment. The Government proposes to accept the Amendment as soon as practicable after Parliament has completed the treaty examination process. If New Zealand deposits its instrument of acceptance before the Amendment comes into force, it will only be bound by it from the date at which it enters into force. The Amendment will not apply to Tokelau. 3. Reasons for New Zealand to accept the Amendment 3.1 Background Climate change is a global issue requiring a global response. The UNFCCC was adopted in 1992 to address human-induced climate change and now has 196 Parties1. The Kyoto Protocol was adopted in 1997, and sought to achieve the objective of the UNFCCC by setting legally binding quantified emission reduction targets for participating developed countries2. The Kyoto Protocol entered into force in 2005 and the first commitment period ran from 1 January 2008 to 31 December 2012. New Zealand ratified the Kyoto Protocol in 2002 and for the first commitment period took a responsibility target to reduce its emissions to 1990 levels. Despite gross emissions increasing, New Zealand will meet its Kyoto Protocol target (subject to completion of routine compliance processes). This has mainly been achieved through forestry offsets and international purchasing3.

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The treaty aims to stabilise greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. In order to meet this goal, countries recognise temperatures should not rise beyond two degrees above pre-industrial levels. 2 Under the Kyoto Protocol principle “common but differentiated responsibilities” developing countries were not obliged to commit to binding targets, recognising that the largest share of historical and current global emissions has originated from developed countries. 3 New Zealand is currently in the process of demonstrating compliance with its first commitment period target under the Kyoto Protocol via a ‘true up’ process. New Zealand’s true-up period report is expected to be reviewed by an international team of experts in March 2016. We expect the report to confirm that New Zealand complied with its obligations.

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The purpose of the Amendment is to establish quantified emission limitation or reduction commitments (QELRC) for the Kyoto Protocol’s second commitment period (CP2), from 1 January 2013 to 31 December 2020, for participating developed countries. Additionally, it makes a small number of minor changes to the operation of the Kyoto Protocol. New Zealand chose not to take a QELRC under the Kyoto Protocol’s CP2, instead it has taken a target of five per cent below 1990 levels for the period 2013–2020 under the UNFCCC [CAB Min (13) 27/9]. New Zealand remains a Party to the Kyoto Protocol, has some ongoing obligations under it, and has stated domestically and internationally that it will apply the broad framework of the Kyoto Protocol rules to meet its target. 3.2 Key features of the current situation Greenhouse gas emissions continue to rise globally and in New Zealand. As a consequence, global average temperatures are increasing with projections of a three to five degree rise by 2100. This threatens to have significant long-term adverse effects on the global economy, societies and ecosystems. As a small, trade-exposed country with an economy based in the primary sector, New Zealand needs an effective global response to climate change to safeguard its economy and environment. As such, New Zealand has been actively involved in negotiations under the UNFCCC and the Kyoto Protocol. However, the global response has not so far been adequate – the Kyoto Protocol imposed obligations on too few countries and therefore did not tackle the bulk of global emissions. Developing countries now produce over half of global emissions and need to participate meaningfully in an agreement in order for it to be effective. UNFCCC Parties are negotiating a new global agreement to apply to all countries (developed and developing) on an equal legal basis. The agreement is expected to be concluded in Paris in December 2015 and to take effect from 2021. A number of high level issues under negotiation have yet to be resolved, and detailed rules to implement the new agreement are likely to be negotiated in the period 2016–2020. In the period before 2021, most Parties have set QELRCs under the Kyoto Protocol’s CP2 (38 Parties listed in Annex B of the Amendment), or pledged emission reduction targets (developed countries) and ‘mitigation actions’ (developing countries) under the UNFCCC. While the Kyoto Protocol now covers less than a quarter of global emissions, the Amendment’s entry into force is seen as a signal of good faith by developing countries, and is therefore important for maintaining momentum in negotiations. As indicated by UN Secretary General Ban Ki-moon in his letter to the governments of Parties to the Kyoto Protocol, the Amendment is a “critical step in the global effort to tackle climate change”. 3.3 Key reasons why New Zealand should accept the Amendment There are a number of reasons in favour of New Zealand accepting the Amendment. First, acceptance would signal New Zealand’s continuing commitment to the UNFCCC, the Kyoto Protocol and the global effort to conclude an effective climate change agreement. This is important for maintaining positive-standing in climate change negotiations so that New Zealand can influence decisions that may carry significant impacts. New Zealand has stated

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publicly that it remains a Party to the Kyoto Protocol in good faith and continues to meet its commitments under it. Accepting the Amendment is important for demonstrating this. Second, New Zealand’s acceptance would contribute to meeting the threshold for entry into force of acceptance by three fourths of Parties (144 of the 192 Parties). Only 38 Parties have taken emission reduction commitments under the Kyoto Protocol’s CP2 therefore those without commitments also need to accept the Amendment in order for it to enter into force. Third, if New Zealand chose not to accept the Amendment when the majority of other countries do, our positive-standing in the negotiations could be compromised. It is difficult to predict the impact this would have on New Zealand’s ability to influence negotiations but it could leave us in a vulnerable position at the point when key decisions are being taken. 3.4 Policy objectives the Government wishes to achieve The policy objectives the Government wishes to achieve by accepting the Amendment are to: • • • •

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demonstrate New Zealand’s continued commitment to the UNFCCC, the Kyoto Protocol and the global effort to conclude an effective climate change agreement support the Amendment’s entry into force maintain New Zealand’s standing and influence in future negotiations to ensure we are in a strong position to negotiate the outcomes that are important to us help support positive negotiation dynamic for conclusion of a new climate change agreement in Paris

Advantages and disadvantages of the treaty entering into force and not entering into force for New Zealand 4.1 Advantages

Many developing country Parties to the UNFCCC see entry into force of the Amendment as a signal of good faith in negotiation of an agreement that is applicable to all. Because the Kyoto Protocol embeds specific responsibilities for developed countries, entry into force of the Amendment signals developed countries are committed to meeting their responsibilities. Entry into force of the Amendment therefore may support conclusion of the new agreement. New Zealand’s acceptance will support the Amendment’s entry into force. Acceptance by New Zealand will validate our previous statements that we remain a Party to the Kyoto Protocol in good faith, and will apply its rules to our target. It will also underscore our continued commitment to the international effort to address climate change. This, in turn, will help maintain New Zealand’s standing in negotiations and could improve (or at least maintain) New Zealand’s ability to influence negotiation of the new global climate change agreement. By contrast, if New Zealand does not proceed with accepting the Amendment, while the majority of other Parties to the Kyoto Protocol do, this may erode our ability to influence others in the negotiations.

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New Zealand’s existing laws and practices align well with the obligations created by the Amendment. 4.2 Disadvantages No disadvantages or risks have been identified in New Zealand accepting the Amendment and meeting its obligations, as our current legislative framework and existing practices are already consistent with the obligations imposed under the Amendment. 4.3 Overall assessment Taking into account the anticipated advantages and disadvantages, there are strong reasons for New Zealand to accept the Amendment.

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Legal obligations from accepting the Doha amendment

The Amendment contains the following key substantive provisions (obligations): a) The establishment of the CP2 of the Kyoto Protocol (to run from 1 January 2013 to 31 December 2020) and the emission reduction commitments (QELRCs) for Parties which inscribed them for this period (Article 1, A) b) The addition of a new gas, nitrogen triflouride (NF3), to the list of greenhouse gases in Annex A covered by the Kyoto Protocol4 (Article 1, B) c) An obligation for Parties with commitments inscribed to ensure that they do not, individually or jointly, exceed their assigned amounts, with a view to reducing their overall emissions of such gases by at least 18 per cent below 1990 levels in the commitment period 2013 to 2020 (Article 1, C) d) A simplified adjustment procedure to enable Parties to increase the ambition of their commitments (Article 1, D, E) e) The calculation of assigned amounts for CP2, based on Parties’ commitments (Article 1, F) f) A requirement for any Party whose assigned amount for CP2 is higher than its emissions in the first three years of CP1 multiplied by eight to cancel units equivalent to this difference (Article 1, G) g) The ability for units from market based mechanisms established under the UNFCCC to be used towards meeting a commitment (Article 1, J). The obligations that relate to emission reduction commitments under CP2 would not apply to New Zealand, as a Kyoto Protocol Party without a QELRC. The only obligation, therefore, of relevance to New Zealand is the addition of NF3 in Annex A. The inclusion of NF3 will be relevant to New Zealand to the extent that we have ongoing reporting and review obligations under the Kyoto Protocol, which focus on the gases included in Annex A. In practice, this will not have any material impact because New Zealand is

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Annex A of the Kyoto Protocol contained six gases for the first commitment period of the Kyoto Protocol: carbon dioxide; methane; nitrous oxide; hydrofluorocarbons; perfluorocarbons and sulphur hexafluoride. NF3 is a chemical that is released in some high-tech industries, including in the manufacture of many electronics.

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already required to report on this gas under the UNFCCC and there are no NF3 emissions in New Zealand. Under Article 26 of the Kyoto Protocol no reservations may be made to the Protocol. Under Article 19 of the Kyoto Protocol, the provisions of Article 14 of the UNFCCC on settlement of disputes apply. Disputes between Parties should first try to be resolved by negotiation or other peaceful means of their own choice. If the dispute is not settled, it gets submitted to either the International Court of Justice or arbitration procedure. If after 12 months the Parties concerned have been unable to settle their dispute, it can be submitted to a conciliation commission by any Party to the dispute.

6. Measures which the Government could or should adopt to implement the treaty action

Overall, New Zealand’s current legislation and practices are consistent with the obligations that would apply to New Zealand under the Amendment. The Climate Change Response Act 2002 (the Act) is New Zealand’s primary legislation for addressing climate change. The Act includes the text of the Kyoto Protocol in Schedule Two. While not required in order to comply with the Amendment, Schedule Two will need to be amended by Order in Council under section 50(8) of the Act to bring it in line with the Amendment. No other measures have been identified as necessary in order to implement the treaty action.

7. Economic, social, cultural and environmental costs and effects of the treaty action

No direct economic, social, cultural and environmental impacts have been identified related to the proposed treaty action. However, an indirect impact of accepting the Amendment will be an operational change to the current mandatory emissions reporting period (MRP) for post-1989 forestry participants in the New Zealand Emissions Trading Scheme (NZ ETS) and the Permanent Forestry Sink Initiative. Under the Act, MRP means any subsequent commitment period to CP1 or where there is no subsequent commitment period: • the five year period commencing on 1 January 2013, and • each subsequent five year period after that5. Once the Amendment comes into force, CP2 will supersede the current five-year MRP (201317), extending it out to 2020. This is expected to have positive benefits to post-1989 forestry participants and the Government by delaying the administration of processing returns and 5

Section 189(9) of the Act

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undertaking relatively expensive collection of field data out to eight years6. Additionally, it would align with the timeframe for reporting on our 2020 emission reduction target However, it is unknown when the Amendment will come into force thereby creating regulatory uncertainty on the timing of the MRP. This is an operational issue that officials will work with foresters to address to ensure minimal impacts or costs. A review of the NZ ETS, scheduled to commence this year, could be an appropriate place to consider this.

8. Costs to New Zealand of compliance with the Amendment The Amendment will not impose new costs as New Zealand’s current legislative framework and existing practices are already consistent with the obligations imposed under the Amendment.

9. Completed or proposed consultation with the community and parties interested in the treaty action The following government agencies have been consulted in the preparation of this NIA: the Ministry of Foreign Affairs and Trade, the Ministry for Primary Industries and the Treasury. The Department of Prime Minister and Cabinet and the Environmental Protection Authority were informed. No public consultation on the proposed acceptance has been carried out. Consultation was assessed as not necessary because of the minimal impact on New Zealand from the acceptance.

10. Subsequent protocols and/or amendments of the treaty and their likely effects 10.1 Amendment process under the Kyoto Protocol Articles 20 and 21 of the Kyoto Protocol describe the process for amendments to the Kyoto Protocol to be adopted. Any Party may propose amendments to the Protocol and these shall be adopted at an ordinary session of the Conference of the Parties serving as the Meeting of the Parties to the Kyoto Protocol. Parties are to make every effort to reach agreement on a proposed amendment by consensus, but if this is not possible the amendment is to be adopted by a three-fourths majority vote of the Parties present and voting at the meeting. Instruments of acceptance of the amendment are to be deposited with the United Nations Depositary. An adopted amendment will enter into force for all Parties that have accepted it on the ninetieth day after the date of receipt by the Depository of an instrument of acceptance by at least three quarters of the Parties to the Protocol. The amendment will enter into force for any other Party on the ninetieth day after the date on which that Party deposits with the Depository its instrument of acceptance of the amendment.

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Participants with forests 100 hectares or greater are required to do field measurements once within a MRP, costing around $10,000 to $30,000.

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10.2 Subsequent climate change agreements Parties to the UNFCCC are negotiating a new Protocol, another legal instrument or an agreed outcome with legal force under the Convention to be applicable to all Parties. This agreement is scheduled to be concluded and adopted in Paris in December 2015 and to come into effect and be implemented from 2021.

11. Withdrawal or denunciation provision in the treaty Parties may withdraw from the Kyoto Protocol in accordance with Article 27. Notice of withdrawal can be given at any time from three years after the date upon which the relevant agreement enters (or entered) into force, with withdrawal taking effect on year after the date upon which notice was given.

12. Agency Disclosure Statement The Ministry for the Environment has prepared this national interest analysis. It has undertaken an analysis of the issue of implementing the Amendment and the potential legislative and regulatory changes necessary to bring about implementation. As part of that process, it has considered the option of not entering into the treaty, but concluded that on balance there are strong reasons for New Zealand to accept the Doha Amendment to the Kyoto Protocol.

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