6. Finland’s experiences of cooperative approaches and visions for their future use
6.3 Opportunities for Finland to engage in cooperative approaches
society than if all action were to be domestic. On the other hand, international cooperation allows Finland to enhance its contribution without limiting Finland’s ambition by the domestic mitigation potential and the pace of the domestic transition.
6.3.1 Option 1. Preparing for raising the ambition of EUs NDC, including through cooperative approaches
The INDC target of the EU is “at least” 40 % through domestic efforts, thus the EU could potentially submit a more ambitious NDC even for the period until 2030, or raise its ambition from the level of -40 % by the use of cooperative approaches. In the case of submitting a more ambitious NDC, there could be potential for allowing international cooperation. If the EU eventually increases its NDC substantially, it might be attractive for Finland to purchase and transfer mitigation outcomes from other countries or utilise the Paris mechanism for purchasing credits, even before the year 2030. A significant increase in the EU emission reduction target would also generate additional demand for market based cooperative approaches. As Finland has useful experiences from piloting the use of the flexibility mechanisms under the Kyoto Protocol, this could be an area where Finland could do pioneering work also under the Paris Agreement.
In anticipation of an increasingly ambitious EU target, Finland could start scoping options for meeting a more ambitious EU target with various measures such as partly utilising the cooperative approaches under the Paris Agreement.
6.3.2 Option 2. Overachievement of the EU target by using cooperative approaches (use outside the NDC)
Cooperative approaches could be used for over-achieving the non-ETS targets, even if the legally-binding targets should be met with domestic measures only. In any case a governmental buyer such as Finland would use cooperative approaches to meet its non-ETS sector targets (guided by the Effort Sharing Decision (ESD)).
Cooperative approaches, such as the Paris mechanism could also be used as a means to robustly calculate the emission reduction potential and outcome of climate finance. In this case the emission reduction units could be cancelled, and not accounted towards the NDC of the climate finance provider.
In the Kyoto context, Sweden and UK have utilised Kyoto mechanisms to enhance their international target with a more ambitious domestic target and as an MRV tool to deliver results-based climate finance, respectively. These countries, together with three other EU Member States, also overachieved their Kyoto targets and cancelled their surplus AAUs.100
The option to utilise cooperative approaches may enable Finland to be more ambitious than what it would be if it was limited to domestic mitigation potential.
100 Government of Sweden (2016): “Five EU Member States decide to cancel surplus of Kyoto Protocol units”. Available online at: http://www.government.se/articles/2015/12/five-eu-member-states-decide-to-cancel-surplus-of-kyoto-protocol-units/
6.3.3 Option 3. Using similar approaches inside the EU (use towards the NDC)
There may also be other options for Finland to finance cross-border mitigation projects apart from the cooperative approaches under the Paris Agreement. The EU 2030 climate and energy package has created a possibility for an “ESD-mechanism”, whereby an EU country purchases units from another EU country through projects in the non-ETS sectors.101102 However, this mechanism is not yet operational, and its rules are not yet clear. It could be interesting to study in more detail what possibilities there are for Finland to take advantage of the ESD-mechanism, and what potential there would be on the supply side. A positive element of this mechanism is that it is in line with the EU’s aim to achieve its INDC targets through internal measures. This means that there could be trade of emission reductions within the EU through the ESD-mechanism.
In both cases, i.e. cooperative approaches under the Paris Agreement and the ‘ESD-mechanism’ within the EU, Finland could consider the same approach it took with respect to JI under the Kyoto Protocol where Finland had N2O abatement projects that generated emission reductions for both Finland and the buyer country. This could be a viable case especially when reducing the more potent greenhouse gases than carbon dioxide, such as methane, HFCs, or N2O, because they create a relatively larger amount of CO2e reductions.
When sharing the emission reductions between buyer and seller, it creates a win-win situation for both Parties.
6.3.4 Option 4: Using non-market based approaches under the Paris Agreement
In addition to market-based approaches, Finland could utilise also non-market based approaches under Article 6. Examples of non-market based international approaches that Finland could use for climate change mitigation under the Paris Agreement include for example:
promoting international fuel efficiency and GHG emission standards for vehicles – the EU103 and USA104 are developing and implementing own standards which could be exported to other countries
promoting international use of more efficient building codes - transferring Finnish expertise on building standards to other countries
promoting (international) minimum levels for excise duties for e.g. energy products for fuel and transport, and electricity, which are already in place inside the EU105
supporting fossil fuel subsidy reforms.
Other non-market cooperative approaches Finland can use already before 2030 include capacity building for mitigation and adaptation, and international technology transfer. If provided by Finland to developing countries, these do not directly reduce Finland’s emissions but can bring other benefits such as export revenues. The Paris mechanism may also be utilised as an MRV tool for non-market-based approaches e.g. for measuring emission reductions of activities supported by climate finance.
101 http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/145355.pdf
102 There are also other flexibilities for reaching the ESD targets, already in use in the EU. This include e.g. banking and borrowing, and transfers of Annual Emission Allocations (AEAs) between member states. These are discussed in more detail in VTT’s recent report Siljander, Ekholm et al (2016): Flexibilities under the EU’s Effort Sharing Decision towards 2030, available at http://www.vtt.fi/inf/julkaisut/muut/2016/VTT-R-02315-16.pdf
103 http://ec.europa.eu/clima/policies/transport/vehicles/cars/index_en.htm
104 http://www.nhtsa.gov/fuel-economy
105http://ec.europa.eu/taxation_customs/taxation/excise_duties/energy_products/rates/index_en.htm
6.3.5 Actively participating in the development of the Paris rulebook on cooperative approaches for other reasons
Finland could have an interest in participating in the development of the Paris Agreement’s cooperative approaches even in the case it would not use them itself. These incentives could include:
increasing the level of global mitigation ambition,
advancing the global pricing of carbon emissions,
ensuring the environmental integrity, transparency and robust accounting of mitigation actions and transfers of mitigation outcomes,
enhancing the mitigation of emissions from international transport, including aviation and shipping, and
sharing lessons from Kyoto mechanisms.
Regarding the advancement of global carbon pricing, the issue is topical also for Finnish internationally competitive industry. If carbon pricing would become global through increasing linking of carbon pricing systems and increasing use of cooperative mechanisms for mitigation, this would be beneficial also for the competitiveness for Finnish industry by creating a more level playing field in industry worldwide.
6.4 The governmental buyer’s perspective – lessons learned and considerations for the future