In the aftermath of the Copenhagen Summit, industries worldwide, including the mining industry, continue to face uncertainty on the post-2012 international climate change legal framework. On a positive note, however, the United States, China, India and Mexico have now recognized that climate change is one of the "greatest challenges of our time."
The 1997 Kyoto Protocol required its signatories to achieve clearly specified reductions in greenhouse gas (GHG) emissions by December 31, 2012. The Copenhagen Summit aimed at determining the post-2012 international legal framework applicable to GHG emissions reductions. After difficult negotiations at the Summit, the participants could only agree to an accord at the last minute.
This Copenhagen Accord produced neither a binding agreement nor any GHG emissions reductions targets that could accelerate national-level legal frameworks applicable to carbon-intensive sectors. Instead, it is a mere 30-country statement of intent to develop quantified international GHG emissions reductions targets before February 1, 2010.
Nevertheless, the Copenhagen Accord remains important. It illustrates the world’s biggest GHG emitters’ willingness to negotiate a global legal framework on climate change, particularly for the United States, which did not ratify the Kyoto Protocol.
As it stands, the outcome of the Copenhagen Summit continues to allow companies to implement carbon-reduction projects in developing countries in exchange for tradable emissions credits. Currently, one tonne of CO2 equivalent (equating to one certified emission reduction, or CER) is traded at about 12 Euros (about C$18.40).
To benefit from CERs, a company that aims to implement a project that reduces GHG emissions (e.g. using renewable energy) in a developing country must first submit a project design document (PDD) describing its project to the United Nations’ competent authority for registration on the UN registry. Annual GHG emissions reductions from a project thus registered must be verified by an independent professional. The UN authority then issues and transfers the appropriate quantity of CERs to the company’s account.
As many as 15 months can elapse between the preparation of the PDD and issuance of the first CERs. However, a company may sell its CERs for future delivery prior to their issuance and transfer onto its UN registry account. CERs can be purchased through specified stock exchanges or through bilateral agreements. Buyers can use CERs for compliance, for social responsibility purposes or for speculation.
Recently, projects concerned with afforestation, reforestation, deforestation and degradation-related emissions reduction, as well as carbon capture and storage, have gained popularity among our clients. Such projects are especially attractive to mining companies operating in developing countries as they encompass GHG emissions reductions targets, sustainable development goals and technological innovation.
To anticipate future regulatory requirements and benefit from a lucrative carbon market, mining companies must:
- Inventory GHG emissions for all their operations.
- Analyze various climate change strategies — technological innovation, GHG emissions reductions projects, purchasing CERs, etc. — to minimize GHG emissions and the cost of future regulatory compliance.
- Rigorously apply procedural requirements to their GHG emissions reductions projects to maximize CER issuance.
- Seek strategic advice from competent and experienced carbon market professionals so as to maximize available benefits.
National and international carbon markets represent a sterling opportunity for mining companies to move from traditional to newer business models based on low emissions, economic efficiency and greater social responsibility. The International Council on Mining & Metals’ Policy on Climate Change published in November 2009 and a recent survey commissioned by Natural Resources Canada on the State of Green Technology in the Canadian Mining Sector are both indicative of growing interest in such new business models.
More information about the United Nations Framework Convention on Climate Change can be found here.
Florence Dagicour received a Ph.D. from the Université de Poitiers (France) and a BCL/LLB from McGill University. An associate at Fasken Martineau DuMoulin LLP, Dagicour specializes in climate change law, carbon markets and nuclear law. She provides legal and strategic advice on climate change and assists clients in the implementation of carbon reduction projects, including drafting and negotiating contractual agreements.