STRICTLY PRIVATE CONFIDENTIAL 16 October 2009 ccclon 2

STRICTLY PRIVATE & CONFIDENTIAL 16 October, 2009 \ccclon 2 k 303user$cameron. ironsideCopenhagen Alternative. ppt

Current Position Post BKK • EU raised, on the 2 nd day of the First week of BKK, the idea of integrating the AWG-KP and AWG-LCA into one text, effectively taking the ‘best elements’ of the KP and integrating them into a new UNFCCC • The suggestion was implicitly supported by Developed Countries, but is now seen as having been forced too early, and the proposal was met with strong opposition by Developing Countries as a bloc. • Developing Countries have refused to allow the KP to be done away with: this is the only legal framework in terms of which Developed Countries are bound by targets, and Developing Countries are not prepared to see these removed. • At the same time, the USA has made it clear that it has no intention of being bound by the Kyoto Protocol (and it is therefore currently only involved in the AWG-LCA track of negotiations). • Furthermore, the United States does not believe that it can take on either a timetable or targets: it firstly requires internal support to do so, and secondly believes that to do so now would reduce the chances of getting any internal legislative targets agreed (although there now appears to be some talk of an ability to commit to a target, it is not going to meet Developed Country target requirements of 25 – 40% below 1990 by 2020). \ccclon 2 k 303user$cameron. ironsideCopenhagen Alternative. ppt 2

TWO STREAM SOLUTION • Continue with both AWG-LCA and AWG-KP • Streamline both so that largely public sector funding dealt within the AWG-LCA negotiations, and deal with changes to existing structures of the KP within the AWG-KP negotiations • Set an overarching country-neutral emissions reduction target • Accept that the USA will not at this time become a party to the KP • Utilise the AWG-LCA stream to address Developing Country issues surrounding Adaptation, Forestry and Agriculture and technology Transfer with structures to provide for developed country public finance for this. • Create a connection or declaration, in terms of which the USA binds itself to the principles of the KP, without being bound by it, as well as to domestic commitments • Drive both targets and Private Sector mitigation involvement through existing KP framework. \ccclon 2 k 303user$cameron. ironsideCopenhagen Alternative. ppt 3

EXISTING STRUCTURES, AND THE PROPOSAL KP GROUP LINKING MECH BAP GROUP • All Parties except US • US Declaration committing to principles of KP, and to establish Domestic targets • All KP Parties + US • Retain existing structure • Establish overall emissions reductions target • Deepen D’ed C binding targets • Global Commitment to Overall target • Retain continuity of framework • Attached to KP • Reform CDM • Introduce Sectoral Framework • Provide for Opt-in Targets for D’ing C’s • Provide MRV framework for both D’ing and D’ed C’s • Expand re-enforce existing KP financing Provisions • Trigger Clause for US signature of KP (Aus Proposal)? • Possible timeframe for US commitment to KP / Most Developed D’ing C commit to Binding Targets? • ? Time frame limits for performance / evaluation? \ccclon 2 k 303user$cameron. ironsideCopenhagen Alternative. ppt • Establish overall emissions reductions target • No binding individual targets • Provide public sector Finance for: • Forests • Agriculture • Adaptation • Technology Transfer • Strong finance commitment and framework from USA (&other D’ed C’s) 4

DEVELOPING COUNTRY BENEFITS : 1. Can obtain commitment iro Adaptation, Forestry, Agriculture, and Technology transfer without them being linked to reduction commitments on the part of Developing Countries. This addresses areas of real concern to them. 2. Can continue to develop private sector mechanisms to address mitigation 3. Removes the sticking point of linking reduction targets to funding required for Adaptation etc 4. Provides solid mix of public and private sector funding 5. Can include timeline for US incorporation into KP, and commitment to binding targets (linked to Most Developed D’ing C’s committing to targets) 6. Allows for independent development of NAMA’s, supported by D’ed C public Sector funding 7. Retains distinction of ‘common but differentiated responsibilities’ between Developed and Developing Countries \ccclon 2 k 303user$cameron. ironsideCopenhagen Alternative. ppt 5

US BENEFITS 1. Allows it time to develop and put in place an internal legal framework 2. Avoids any obligation to commit to the KP 3. Allows it to contribute, in a manner acceptable to D’ing C Climate Change Efforts, through negotiated BAP 4. This also allows it to demonstrate global leadership in providing funding where most needed (which is in line with what its negotiators have already proposed) 5. Allows it to leave open the possibility of further negotiation to compel Most Developed D’ing C’s to commit to binding targets (by linking this to their post-legislative ability to commit to targets) 6. Allows linking between internal Cap and Trade markets and international markets, allowing integration into international framework \ccclon 2 k 303user$cameron. ironsideCopenhagen Alternative. ppt 6

OTHER BENEFITS • Maintains growth of private sector mechanisms, and amended KP facilitates processes • Tying balance of KP parties into deep reductions will provide required balance across developed countries (addresses issues relating to leakages), and will ensure more effective use of private sector funding through developing carbon market • At the moment, while there appears to be the beginnings of an agreement on the continued role of the CDM, with improvements (rule based, baseline driven etc), there are substantial difficulties for the private sector in current development of the sectoral mechanism: • There is no reference to private sector involvement in the current draft • The current structure is focussed on NAMA’s and reporting, and practically makes it unfeasible for private sector participation. • The current structure foresees, in one draft, the trading of these credits on an intergovernmental level only • The changes proposed in this presentation will remove many of the barriers preventing private sector involvement in sectoral mechanisms, which has the potential to significantly increase the project market, and also the credits available for trade. \ccclon 2 k 303user$cameron. ironsideCopenhagen Alternative. ppt 7

How it will work: KYOTO PROTOCOL • The key elements of the KP are, and will continue to be, reductions targets for D’ed countries, and the use of flexible mechanisms to assist in achieving these targets, while at the same time transferring technology and assisting with sustainable development in D’ing C’s. • KP already carries an established precedent for private sector driven processes. • By combining the work done by the AWG-KP and the AWG-LCA (NP 30), the following will be addressed: • Retention of existing mechanisms • Improvement of the CDM: introduction of a rules based doctrine, baselines for project types etc • Introduction of sectoral mechanisms driven by private sector funding • Introduction of new technologies: New nuclear, CCS etc • Any requirement for NAMAs is removed • This essentially allows for mitigation to be funded by the private sector, backed by carbon market to assist D’ed C’s to meet targets • D’ing C’s still have the option to utilise mechanisms internally to generate funds through participation in the carbon market \ccclon 2 k 303user$cameron. ironsideCopenhagen Alternative. ppt 8

How it will work: UNFCCC • This stream will now incorporates the balance of the provisions of paragraph 1 of the BAP • This will be driven by the provision of finance by D’ed C’s in particular, and US in particular • NAMAs will be established, but rather than impose a burden on D’ing C’s, will: • allow for determination of actual emissions, and normative measuring standards • allow for joint establishment (i. e. D’ed and D’ing co-operation) of NAMAs, based on provision of finance and national circumstances: ‘common but differentiated responsibilities’ • NAMA development will be included in financing and so can utilise tier proposal to incentivise D’ing C’s willing to take unilateral steps beyond public funding commitments • MRV will be to the benefit of both D’ing and D’ed parties along the lines established in Shared Vision • Properly structured NAMAs and financing will drive private sector investment • Incorporation of WEF ‘Task force on Low-Carbon Prosperity’ combined with NAMAs means low carbon technologies can be funded by public–private funding in least cost areas • Feasible for Kyoto mechanisms (e. g. sectoral mechanisms) to be included in NAMAs, as means of achieving NAMA targets \ccclon 2 k 303user$cameron. ironsideCopenhagen Alternative. ppt 9

Conclusion • The proposal set out above has the advantage of dealing with the majority to the key issues to be decided before the details of an agreement can be resolved: finance will be provided without demand for targets for D’ing C D’ed C will be able to provide required emissions reduction targets, without the issues surrounding the US targets interfering with the process NAMAs will provide the means for D’ing C’s to evaluate emissions positions, and plan low carbon trajectory in conjunction with public sector finance (and so leveraged private sector investment), without same being unilaterally binding on them (in other word, will be backed by D’ed C finance) \ccclon 2 k 303user$cameron. ironsideCopenhagen Alternative. ppt 10

Contact Climate Change Capital CCC Head Office Climate Change Capital 3 More London Riverside London SE 1 2 AQ United Kingdom Tel: +44 (0)20 7939 5000 Fax: +44 (0)20 7939 5030 www. climatechangecapital. com \ccclon 2 k 303user$cameron. ironsideCopenhagen Alternative. ppt 11