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6th Letter from Madrid

by Henrique Schneider*

The 25th United Nations Climate Change conference (COP25) took place in Madrid, Dec 2 – 13. Henrique Schneider was on site and represented Switzerland …

Dear friends of the spiritual!

The Clean Development Mechanism, dearly called CDM, is a carbon market mechanism under the Kyoto Protocol. It is the sole multinational offsetting mechanism through a market mechanism that works (sort of). Yearly, its Executive Board receives further guidance from the COP. Usually, this guidance is to keep up the (sort of) good work and lift the spirits of a secretariat in need if something to do.

This year and keeping in mind that the mandate of the CDM ends in 2020, I suggested that its Executive Board takes notice of what is being developed under the Paris Agreement. Taking notice just means acknowledging that there is something happening. This spirit of openness not only did not fly; it scared negotiators to such a degree that is prevented them from taking a decision. For the first time in history, there will be no further guidance.

Why is this important? It is not (except, you are in the CDM). But it is indicative of the process.

So, why not take notice of what is happening? Because, as the developing countries argue, if you take notice, you realize that your mandate could end, and they don’t want that. If they don’t take notice, there is no end of mandate. Fair enough.

In the self-summoned spirit of compromise, the developing countries did want to urge the Executive Board to be prudent in the management of financial means. Nothing wrong with that. I blocked it anyway. Why? Because they inserted a little fragment of text “in order to maintain its further operation”. If your mandate ends in 2020, there is nothing to maintain. Switzerland says: no.
No decision; no further guidance. What now? I don’t know. I am not a minister. That’s why they are here this week. In any case…this second, ministerial week, seems to be tougher that the first week was. The spirits of compromise and friendship that roamed through the halls of this industrial park seems to be have encountered some ghostbusters in form of ministers.

Still writing in my own name and not possessed by any spirit,
Cheers
Henri


*Henrique Schneider is a professor of economics at the Nordkademie University of Applied Sciences in Elmshorn, Germany and chief economist of the Swiss Federation of Small and Medium Sized Enterprises in Bern, Switzerland.

5th Letter from Madrid

by Henrique Schneider*

‘COP25’ – the 25th United Nations Climate Change conference was held in Madrid, Dec 2 – 13. Henrique Schneider was on site and represented Switzerland …

Dear friends of the dough!

Money is good – but first: This was an uneasy weekend at the COP25. Well, not for everyone, but for us, the people devising regulation disguised as markets. We continued our deliberations.
This time, the facilitators are trying to negotiate without texts. Instead, they bounced ideas in informal contexts. For any normally trained person, this seems nothing out of the ordinary. For negotiators, it is an abomination. Negotiators negotiate text; that crowd is not much for thinking, let alone discussing other people’s ideas. And then there are deadlines. In theory, last Monday we decided a decision. A decision is text-bound. How to decide on a text that no one saw before?

The second week of the COP marked a much more important turn. The first week concerns itself with technicalities, the nuts and bolts, and the nitty-gritty. The second week was about grandeur. Excellencies and right honorable people, aka. ministers and state secretaries started populating these halls having their meetings, their impromptu ideas and their solution-seeking-problems-pop-ups. That is why, we needed the technical decisions, once the ministers are here, you get grandness only.
Money…

How much does a COP cost? This is difficult to say. We know that the UNFCCC – United Nations Framework Convention for Climate Change – has a core budget of some 27 Million US Dollars per year. Add the contributions to the different trust funds and action funds and you get 100 million USD. Finally, there is money in the other bodies and mechanisms belonging to the convention: The Green Climate Fund, the Clean Development Mechanism, the Climate Network Center and Network, and so on. At the end, we are looking at an operative budget of around 200 Million US Dollars.
Where does the money come from? Donors, specifically, countries. In theory, there is a method for calculating the country’s contributions. In practice, developed countries pay overproportionate. Even more pragmatic, some countries are pledged to contribute but do not. Taking only the core budget of 27 million into account, it is somewhat special that some 8 million USD haven’t been paid yet. Now it gets better: Who are the agents with the largest arrears? The US is pledged to contribute some 3 million USD. 0, Zero, it did. Brazil is some 1.5 million USD behind. Greece or Colombia were still 150’000 amiss, each. And Samoa owes 170 USD. Seriously, how dare they?

The estimates of the total cost of the COP is around 5 million USD. I am happy to report that I cost less than 2000 US Dollars (cash out). Now, I am what I call a bargain.

Writing on my behalf and not on anyone or anything else’s …
Henri


*Henrique Schneider is a professor of economics at the Nordkademie University of Applied Sciences in Elmshorn, Germany and chief economist of the Swiss Federation of Small and Medium Sized Enterprises in Bern, Switzerland.

4th Letter from Madrid

by Henrique Schneider*

‘COP25’ – the 25th United Nations Climate Change conference held in Madrid, ended yesterday. Henrique Schneider was on site and represented Switzerland …

Dear counters of beans!

Today, let’s get to the Who is Who. But first this: Climate summits are a progressive science. Our markets made quite a stride. We even managed to get some text going. Text is important, because work is concluded, in this process, by adopting decisions. Decisions are texts, and texts need to be drafted.

What did we agree? We will have a thin decision text stating some principles on how the new markets should work. And we will have annexes developing a work program on what to think about. The question is now, what gets into the decision. Two issues are salient: SoP and OMGE.

SoP means shares of proceeds. The poorest nations want to get money for every transaction in the market; regardless of who is involved. OMGE means overall mitigation in global emissions. This means that regardless of which market transaction, there has to be an additional discount for the atmosphere.

Example: If you reduce one ton, you cannot sell the full ton to another party. You can only sell, say 0.9 ton. But the acquirer pays the full value plus the shares of proceeds on the full ton.
Are you irritated by me calling this a market? You should be! At least, I counter it – in the name of Switzerland – heads on. And am almost decapitated by everyone else.

If you dislike this granularity of discussions, let’s return to the who is who: According to the provisional list published by the United Nations, there is a grand total of 26706 participants registered for COP25.This breaks down into: 13643 people representing specific parties, 9987 from observer organizations – such as those living on government handouts (aka. scientists), the munchers and looters and subvention-addicts (aka. business groups), or various demented or perverted (aka. non-governmental organizations) – and 3076 pursuers of the hermetic arts (journalists).

Overall, that amounts to around 4000 more participants than at COP24 in Katowice last year. The number of party delegates is approximately the same as in Poland, but there are around 2500 more delegates from observer organizations and almost twice as many media. (It’s in Spain, right…?)

The country with the most delegates is, by some distance, Côte d’Ivoire with 348. The Democratic Republic of the Congo (DRC) come second with 293 people. Making up the rest of the Top 5 this year is Spain (with 172 delegates), Brazil (168) and the Congo (165).
Despite the United States’ recent decision to start the formal process of withdrawing from the Paris Agreement, its delegation is 78 people. In Europe, France has 125 people and Germany 102. The European Union’s delegation is 125 people. Switzerland, of which delegation I am a member, has 17. The UK has 48.

It saddens me to observe that Bolivia (the plurinational state of) sends no one this year. Venezuela (the Bolivarian state of) remains quiet. These two have provided us with many hours of bizarreries in the past. They seem caught up in the web they have spun.

I have been reminded to state that I am writing this on my behalf. This and any other issues of Markets in Madrid reflect not the views of the Swiss Delegation, the Swiss Federation of small and medium-sized enterprises, or any other institution. This or any other issue of Markets in Madrid contains no views. Just facts.

Best,
Henri


*Henrique Schneider is a professor of economics at the Nordkademie University of Applied Sciences in Elmshorn, Germany and chief economist of the Swiss Federation of Small and Medium Sized Enterprises in Bern, Switzerland.

3rd Letter from Madrid

Madrid. Source: wikipedia.org
Madrid. Source: wikipedia.org


by Henrique Schneider*

‘COP25’ – the 25th United Nations Climate Change conference in Madrid, ends today, 13 December 2019. Henrique Schneider is on site and represents Switzerland …

Brethren!

No. I am not being condescending. I am just addressing you as I have been addressed today. Ok. The Australian negotiator who used this phrase didn’t actually use it, instead, she put it much more politically correct and gender neutral. She said: Brothers.

This, however, was not the day’s highlight. It was my first time visiting of the Spanish canteen. Dismal, just dismal. A complicated system as one would only expect in Spain. And, as one would expect it here, it invariably leads to no results. Tellingly, a severe discussion broke out whether my broth was a first course or a main dish. At the end, they decided it was neither.

The market negotiations, however, began. We discussed for 10 hours how to adjust correspondingly. The problem is, at the end, simple. A country has a greenhouse-gas inventory. If it reduces, say, one ton of such a gas, it should count -1. But if it reduces and sells that reduction to another country, the reducing country should count +1 (it cannot claim that reduction its own) and the purchasing country can count -1 (it does claim that reduction its own). Good. No?

No! Some countries say, they cannot do it (aka. Pay me for doing it). Others state, they are not willing to do it (aka. Pay me for doing it). And other yet find out miraculous ways of undermining the simple accounting equation of selling and buying.

What does one do? We devised a menu of 5 different methods for adjusting correspondingly. A series of + and – that is a thing of mathematical beauty.

And we also negotiated the market that already exists, the Clean Development Mechanism. It took us just one hour. Some want to prolong its existence. Some want to kill it right away, because it does not fit within the Paris Agreement. Others remain cryptic.
What does one do? We tasked someone with developing a series of scenarios: killing it, sunset, run-out, zombiedom, and continuation. Of course, these scenarios were correspondingly adjusted into negotiation lingo.

Markets ahoi!
Best,
Henri


*Henrique Schneider is a professor of economics at the Nordkademie University of Applied Sciences in Elmshorn, Germany and chief economist of the Swiss Federation of Small and Medium Sized Enterprises in Bern, Switzerland.

2nd Letter from Madrid

Source: UNEP

by Henrique Schneider*

The 2019 United Nations Climate Change Conference, also known as COP25, is the 25th United Nations Climate Change conference. It is being held in Madrid, Spain, from 2 to 13 December 2019 under the presidency of the Chilean government. The conference incorporates the 25th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC).

Henrique Schneider is on site and represents Switzerland …

Dear friends of contentious issues

 

On the second day, two issues dominated this year’s United Nations’ climate change summit: The Turkey-issue and the Ukraine-issue. Both are indicative of the process in these halls, rooms, corner, and dens.

Turkey is, according to our procedures, a developed country. As such it is a nation with a self-imposed obligation to reduce greenhouse gas emissions under the Kyoto Protocol. So far so good. Back in 2015, Turkey realized that under the then-yet-to-come Paris-regime, being a developed country entails paying hundreds of millions into byzantine structures for financing developing countries. So, understandably, Ankara decided that it is not developed. It wants to be (counted as) poor.

Back in 2015, France’s approach was to promise everything to everyone. Consequentially, La Grande Nation promised to Turkey that Turkey would have an option to switch. Turkey, then, accepted the Paris Agreement (but did not ratify it yet) and all were merry. Now comes the problem: everyone forgot that specific promise. Now that the rules are being set, Turkey demands to be seen, catalogued, and counted as poor, so it may become recipient of disbursements of the rich, rather than a disburser.

The Ukraine is an independent nation in the middle of Europe, or so they claim. Russia invaded parts of the country and controls it through puppet regimes, mafia, and other friendly societies. In the climate process, the Ukraine does not seem to object to that geopolitical hiccup. In fact, the Ukraine and Russia belong both to the Umbrella Group, a group of nations that value their respective independence (other umbrellians are the US, Canada, Japan, Australia, New Zealand, or Norway sometimes).

The problem of the Ukraine is greenhouse gas emissions. More precisely, those emissions being emitted in the occupied / rebellious / uncontrolled part of the country. The Ukrainian position here is that emissions being generated there cannot be attributed to the Ukraine. But rest assured, fellow Ukrainians, the government did not give up those territories, just their emissions.

How does one deal with these issues? In the COP, they become agenda-items. This means, they are negotiated – by 200 or so countries. Everyone can have their say, as for example Tuvalu, which expressed its sincere feelings that Turkey should remain among its rich friends, or South Africa suggesting creating two register-entries for Ukraine, West and East. This is how the niceties begin.
And the markets; how are they doing? After all, that’s why I am here for. In the market-bubble, our group is taking it easy. Three days in and we are discussing how we want to discuss.

More on Markets in Madrid to follow.
Best,
Henri


*Henrique Schneider is a professor of economics at the Nordkademie University of Applied Sciences in Elmshorn, Germany and chief economist of the Swiss Federation of Small and Medium Sized Enterprises in Bern, Switzerland.