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The emperor’s new clothes: redressing the Kyoto Protocol
Climate Policy 2 (2002) 161–177
The emperor’s new clothes: redressing the Kyoto Protocol Michael Lisowski∗ University of Cambridge, Wolfson College, Barton Road, Cambridge, Cambridgeshire CB3 9BB, UK Received 19 November 2001; received in revised form 31 January 2002; accepted 6 February 2002
Abstract US President Bush repudiated the Kyoto Protocol because, in his view, it is ‘fatally flawed in fundamental ways’. This paper evaluates seven proposals to redress the protocol according to their potential to deal with three key issues that have reinforced US intransigence: hot air, cost uncertainty and developing country participation. It argues that negotiations on intensity targets hold the most promise. Because intensity targets limit hot air, but do not limit economic growth, and a high variance of carbon intensity exists among countries with similar GDP per capita, intensity targets based on best practice levels might be agreeable to developing countries and the US. If a protocol specifying such targets were implemented, less warming would be associated with larger world GDP than would otherwise be the case, and countries’ carbon intensity and emissions per capita would tend to converge to best practice levels at every stage of development. © 2002 Elsevier Science Ltd. All rights reserved. Keywords: Intensity targets; Developing country participation; Best practice; US participation; Emissions per capita; Carbon intensity
The emperor of Kyoto was running around the stage for a long time naked and it took President Bush to say, ‘he doesn’t have any clothes on’. —Andrew Card, US President Bush’s Chief of Staff (New York Times, 12 June 2001). 1. Introduction US President Bush’s decision to repudiate the Kyoto Protocol shocked the world. The Clinton administration had worked constructively within the Kyoto process despite the intransigence of the US Senate. Many hoped the Bush administration would do the same. Instead, to the dismay of environmentalists world-wide, the new administration aligned itself with the US Senate, and acknowledged the logic of the Byrd-Hagel Senate resolution. The non-binding resolution, passed unanimously in 1997, clearly ∗
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indicates Senate opposition to any protocol that threatens serious harm to the US economy, or that commits Annex I Parties to emissions reductions but exempts developing countries from similar emissions limits or reductions (S. Res. 98, 12 June 1997). Fortunately, all is not lost. Though the US administration proclaimed the death of the Kyoto Protocol, it considers climate change to be a real problem and remains engaged in the UNFCCC process; as President Bush explains, “the Kyoto Protocol was fatally flawed in fundamental ways. But the process used to bring nations together to discuss our joint response to climate change is an important one” (MSNBC, 12 June 2001). Given a recent resolution unanimously approved by the Senate Foreign Relations Committee re-affirming the Byrd-Hagel resolution and calling on the administration to negotiate a new international response to climate change, it is fair to conclude that this stance has the support of the Senate (Pianin, 2 August 2001). For the time being, the EU will stand by the Kyoto Protocol in the hope that it can be brought into force in 2002. The protocol took years to negotiate and could guide a decade of climate policy in those states that ratify it. The Emperor of Kyoto is not naked. But he will need new clothes. Given the US accounts for about a quarter of world greenhouse gas (GHG) emissions and a reversal of the anti-Kyoto opinion so common in the US Senate and administration is unlikely, discussions on redressing the Kyoto Protocol are required if an environmentally effective regime is to emerge. These discussions are scheduled to begin in 2005 if the protocol enters into force (Kyoto Protocol, 1997; Article 3.9), but may begin earlier if it does not. After considering the Kyoto Protocol’s prospects under EU leadership, seven proposals for developing the climate change regime are surveyed.1 These are judged on their potential to deal with three key issues that have reinforced US intransigence: hot air, cost uncertainty and developing country participation.2 It is argued that, with the possible exception of GHG intensity targets for developing countries, none of the alternatives would greatly encourage US reengagement. Assuming the US continues to insist on an international response that does not threaten ‘serious harm’ to its economy and that includes commitments for developing countries, discussions on developing country and even developed country GHG intensity targets may be the best way to further the climate change regime. 2. Leveraging EU leadership to create a comprehensive regime Several observers have bemoaned the lack of leadership exhibited by the EU and US in the climate change negotiations (Oberthur and Ott, 1999, p. 301; Benedick, 1991, p. 10; Flavin, 1998; Baumert and Kete, 2001). The principles, norms, rules and decision-making procedures that might comprise an effective climate change regime can be difficult to create and uphold in the absence of leadership (Krasner, 1983, p. 15). Leaders can build trust and demonstrate the technical viability of emissions reductions by taking unilateral measures; they can develop technologies that make arguments to delay regulation implausible; they can build pro-regulatory coalitions; and they can apply moral suasion in finely balanced situations. Hegemonic leaders can even supply the public good themselves and influence the choices of other states by altering payoffs with side payments. US leadership was crucial to the Montreal Protocol’s negotiation (Benedick, 1998; Parson, 1993, p. 69). 1 Burden-sharing rules like the triptych approach and multi-sector convergence approach (see Bode et al., 1998; Battjes et al., 2001) will not be explored here. These rules are designed to facilitate negotiations on quota allocations and do not represent fundamentally alternative ways of approaching the negotiations. 2 For an alternative analysis of similar proposals, see Pershing and Philibert (2001).
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An ‘EU leadership initiative’ is now underway to move the climate change negotiations forward without the US, thereby creating a multi-track regime (see Oberthur and Ott, 1999, pp. 301–311; Ott, 2001, pp. 290–291; Grubb and Gupta, 2000). The EU is encouraging states to ratify the Kyoto Protocol and to use it as a framework for substantial action beyond ‘no regrets’ measures. Though the immediate environmental impact of implementing the protocol without the US would be negligible,3 if the majority of developed countries fulfil their Kyoto commitments, developing countries will be more likely to consider emissions limits for the second commitment period. The US, which has made its participation contingent on the ‘meaningful participation’ of developing countries, might then be brought on board. Certainly, the EU will improve its credibility with developing countries by ratifying and implementing the protocol, by sponsoring adaptation projects in developing countries and by promoting the clean development mechanism (CDM). But engaging developing countries on the issue of targets will remain extremely difficult without US participation in the protocol. The US is the wealthiest country and largest GHG emitter in the world, and the UNFCCC decrees that all developed country parties “should take the lead in combating climate change and the adverse effects thereof” (Article 3.1). The US refusal to commit to a target unless developing countries do likewise strengthens the resolve of developing countries against targets. The EU will have to face this dilemma head-on and hold concurrent discussions with developing countries and the US if its leadership is to be ultimately successful. Assuming the protocol is brought into force, how might these discussions be framed? If the protocol is not brought into force, on what basis might negotiations continue? 3. Redressing the protocol: evaluating the options A liberal frame of reference has dominated the climate change negotiations. Liberalism draws on a mechanical view of nature in which humanity must learn to live in a finite system (see Haas, 1983). The prevailing image is of the market facing a permanent ecological constraint. Should the constraint be transgressed, ecological and human systems will be doomed to entropy and will run down. Thus, the objective of the UNFCCC is to ensure that the atmospheric concentrations of GHGs do not cross the line from ‘safe’ to ‘dangerous’ levels, and the Kyoto Protocol uses a quantity mechanism to prompt emissions reductions. The protocol sets emissions limits and uses market mechanisms like emissions trading to preserve the market’s efficiency while operating under these limits. Various alternatives have been proposed for developing the climate change regime, many of which challenge the Kyoto Protocol’s implicit liberal assumptions. Contraction and convergence, for instance, seeks to place equity in efficiency’s stead as the focal point of the climate change regime. It is argued that governments should be guided by egalitarianism when prescribing emissions targets. Command and control measures, meanwhile, sacrifice economic efficiency for simplicity and political control. Price mechanisms offer efficiency, but dispense with the mechanical view of a threshold, instead preferring to tax each tonne of emissions on the assumption that each tonne will cause a fixed increment of climate change. Like the Kyoto Protocol, these proposals are each based on a particular perception of the problem, and hence, its solution; they rely on certain referent structures, such as particular scientific or economic 3
The Kyoto Protocol requires a 5.2% reduction in Annex I emissions from 1990 levels, which implies a 5.5% reduction of global emissions relative to business as usual estimates. Implementing the protocol without the US, which is the largest emitter and possesses a relatively high target and a relatively high business as usual emissions estimate, will lead to a mere 0.9% reduction in global emissions from business as usual projections (Hagen and Holtsmark, 2001, pp. 2–3).
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knowledge; and at times they include implicit or explicit reference to an idea of justice (see Berman and Zartman, 1982, pp. 87–143). Many of these alternative proposals have already been compared in broad categories on the basis of their likely environmental effectiveness, cost-effectiveness, contribution to economic growth and sustainable development, and implications for equity (see Pershing and Philibert, 2001). They will be compared here on the extent to which they encourage US reengagement. If a proposal is to redress the Kyoto Protocol, it must deal with three key issues that have reinforced US intransigence: hot air, cost uncertainty, and developing country participation. ‘Hot air’ refers to the excess emissions allowances contained in some states’ Kyoto targets. They were granted to countries with economies in transition to encourage them to accept targets and to make it cheaper for non-EU Annex I countries, and especially the US, to meet their targets. Russia’s target, for instance, now exceeds its business as usual emissions projections by 31–42% (Moe and Tangen, 2000, pp. 40–41).4 The Ukraine’s target presently exceeds its emissions by about 100% (Grubb et al., 1999, p. 170). Since hot air emissions credits were granted in negotiations instead of created through costly mitigation projects, these states will be happy to sell them at almost any price. The consequent availability of cheap hot air credits will undermine incentives to make real, costly emissions reductions. Perhaps more importantly, countries like the US that need to buy hot air to meet their targets will find ratifying the protocol difficult to justify. These states will be “dangerously dependent on other countries to meet [their] emissions targets” (White House, 11 June 2001, p. 13), and will enrich Russia and the Ukraine without causing a great number of additional emissions reductions (Victor, 2001, p. 10).5 The problem of cost uncertainty arises because the Kyoto Protocol’s quantitative targets will raise the price of carbon by an unknown amount. The price will depend on, among other factors, the prevalence of hot air and the marginal cost of emissions abatement. The IPCC currently reports a wide range of estimates: US$ 15 –150 per tonne carbon. The IPCC further estimates the total cost of implementing the protocol to be between 0.1 and 1.1% of projected GDP (IPCC, 2001, p. 8). The magnitude of these estimates, the potential that they may be low estimates, and the range of uncertainty discourages lawmakers from ratifying and implementing the protocol, particularly in the US. In the context of so much cost uncertainty, it easy to claim that the Kyoto targets are ‘precipitous’ and risk “significantly harming the US and global economies” (White House, 11 June 2001, pp. 13–14). Developing country participation is the most controversial issue addressed by negotiators to date. President Bush justified repudiating the protocol by noting how it exempts developing countries from emissions controls (White House, 11 June 2001, p. 13), and the Senate Foreign Relations Committee recently called for a new international response that conforms to the Byrd-Hagel resolution (Pianin, 2 August 2001). Developing country emissions are already significant, and they are growing fast. China, for instance, is the world’s second largest GHG emitter, and its emissions are expected to rival those of the US by 2010 (IEA, 2000). But limits on emissions growth are presently unacceptable to developing countries. Developing countries are concerned that limiting their emissions growth may limit their eco4
Emissions are currently more than 40% below 1990 levels and show no sign of recovery. Russian estimates of emissions growth have been revised downwards three times since 1995 (see Grubb et al., 2001, p. 26). 5 In principle, the hot air problem could be resolved within the Kyoto framework if each country holding hot air pledged to reinvest the income received from emissions trading into emissions reduction projects. Russia has already made a proposal in this regard, and the EU has indicated its preference to buy only from states with such a mechanism in place (see Mastepanov et al., 2001). But a series of ad hoc pledges will not address the potential problem of developing country hot air in future commitment periods, nor will limiting hot air in such a manner, which will raise the cost of compliance, encourage US re-engagement.
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nomic growth, and note that emissions limits based on historical emissions allocate far more emissions permits or rights to developed countries than to developing countries, despite the historic responsibility of developed countries for climate change.6 While their concerns are justified, their unwillingness to accept targets, coupled with that of the US, threatens the environmental effectiveness of the emerging climate change regime. None of the proposals for developing the climate change regime are perfect. But to the extent that they address hot air, cost uncertainty and developing country participation, framing the negotiations in their light may lead to a new or adapted protocol capable of garnering US participation. 3.1. Contraction and convergence The Global Commons Institute has offered ‘contraction and convergence’ as an ethical solution to the problem of climate change (Meyer, 2000).7 The proposal is to negotiate a date by which a target atmospheric carbon dioxide concentration is to be reached, calculate the corresponding permissible global emissions levels and distribute emissions rights to states on a per capita basis. Since developed countries currently emit approximately 3.3 tonnes per capita and developing countries emit about 0.5 tonnes per capita, developed country per capita emissions would have to contract as developing countries pursue economic development and their per capita emissions expand. Ultimately, per capita emissions would converge. Until then, emissions trading would provide a revenue stream for developing countries. At first glance, contraction and convergence seems like a reasonable approach. It would allow for economic growth and emissions growth in developing countries, but require emissions reductions in countries that have grown rich by over-emitting in the past. Though costs would remain uncertain, there would be no hot air in this scheme, and developing countries would have a financial incentive to participate. But implementing contraction and convergence is problematic because emissions rights are to be allocated to governments on a per capita basis, not to the word’s citizens. Autocrats could quickly pervert the egalitarianism underpinning contraction and convergence by using their countries’ allocations to enrich themselves, instead of using them to develop their countries’ economies. There is no sense in distributing equal per capita emissions rights to governments if a significant number of them are unlikely to act in their people’s best interests. Moreover, if one of the reasons for increasing developing country participation in the climate change regime is to encourage US participation, it is important to recognise that the financial incentive for developing countries to participate in this scheme comes at the expense of developed countries, and would discourage developed countries from participating in it. While equal per capita rights are ideal for developing countries with large populations, high demographic growth rates and low per capita emissions, they are an anathema to developed countries with small populations, low demographic growth rates and high per capita emissions. Equal per capita rights would give the US 5% of world emissions rights, China 21% and India 16%. Given the US produces 22% of world carbon dioxide emissions, per 6
The historic responsibility for climate change rests squarely on industrialised countries. Between 1900 and 1999, the US produced 77 billion tonnes of carbon, the EU 56 billion, and Russia 22 billion, accounting for 30.3, 22.1 and 8.9% of total world emissions, respectively. China and India combined produced a mere 22 billion tonnes of carbon over this same period, accounting for 9% of the world total (World Resources Institute, 2001). 7 For a survey of similar approaches, see Grubb (1995, pp. 485–486). Battjes et al. (2001) propose a multi-sector convergence approach to burden sharing. The proposal is to determine national targets on the basis of convergence of national sector per capita emissions to global sector emissions norms.
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capita rights would require dramatic emissions reductions and massive transfers of wealth from the US to developing countries in the form of emissions trading (see Rose et al., 1998 for quantitative work). Developed countries, and particularly the US, will not agree to equal per capita rights as a result; they prevented reference to ‘global equitable allocations’ in the Kyoto Protocol to avoid even discussing the matter. Contraction and convergence is more likely to comprise the negotiating stance of developing countries than the solution to current negotiating difficulties. As Ernst Haas notes more generally: If equity is to define a regime there must be consensus on what constitutes a just social order, on its beneficiaries, on its place in time and in space. In the absence of such a consensus the affirmation of a specific egalitarian view is merely another input into a process of international negotiation, not an objective yardstick of diagnosis and prescription (Haas, 1983, p. 4). A compromise between per capita emissions rights and emissions rights based on historical emissions, which favour developed countries with high historical emissions, may be possible (for an exposition of a ‘fair compromise’, see Muller, 2001). But a weighted average of per capita and historical rights will be difficult to agree without large side-payments because the bargaining will be essentially zero-sum: the more weight placed on population than historical emissions, the more developing countries will benefit at the expense of developed countries and vice versa. 3.2. Command and control measures Command and control measures are mandatory policies and measures. Edmonds and Wise investigate a hypothetical technology protocol requiring new fossil fuel electric power plants installed after 2020 to remove all carbon from their exhaust stream and to use new synthetic fuels capacity to capture and dispose of carbon released in the conversion process. The protocol would also require non-Annex I nations to accept the same obligations as Annex I nations when their per capita income equals the average for Annex I nations in 2020 (Edmonds and Wise, 1999). Although a protocol based on command and control measures would do little to encourage additional developing country participation, proponents highlight various advantages to such an approach: command and control measures are relatively easy to implement and verify, they eliminate large financial flows from emissions trading and hot air, their costs are reasonably known, and the difficulty of allocating permits is avoided. Additionally, as the IPCC notes, “co-ordinated actions among countries and sectors may help to reduce mitigation cost, address competitiveness concerns, potential conflicts with international trade rules, and carbon leakage” (IPCC, 2001, p. 11). But these advantages come at the price of economic efficiency. Edmonds and Wise estimate their hypothetical technology protocol would be 30% more expensive than corresponding efficient alternatives (Edmonds and Wise, 1999, p. 151). Command and control measures are inherently less efficient than taxes and tradable permits because they do not allow for differences in the marginal cost of carbon control across sectors and between countries. These differences imply that some firms and countries can reduce emissions more cheaply than others and that forcing all firms and countries to take the same action will be needlessly expensive. Few states could support command and control measures because they are so inefficient, and because they violate their sovereign right to implement international treaties however they see fit. The US in particular has fought against co-ordinated policies and measures, let alone mandatory ones.
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3.3. Price mechanisms Like command and control measures, co-ordinated taxes have been proposed because they eliminate hot air and the need to allocate permits (Cooper, 1998). But unlike command and control measures, taxes are as economically efficient as quotas with emissions trading. Although all emitters face the same fixed fee or tax, only those who can reduce emissions at a cost that is less than the tax will do so. Emitters whose reductions are more costly than the tax will pay the tax instead of reducing. The resulting emissions level is achieved at the lowest possible cost because only the cheapest reductions are undertaken. A tax can provide additional economic advantages if revenue recycling leads to a ‘double dividend’ (Jorgenson and Goettle, 2000, pp. 28–33). A double dividend can occur when the revenue from a revenueneutral environmental tax is used to reduce an existing tax that is more distorting than the environmental tax. The environmental tax can thus encourage the behavioural change necessary to benefit the environment, while simultaneously improving the efficiency of the tax system. But the potential for a double dividend must be confirmed by empirical analysis and may not be present in all economies. Moreover, revenue recycling can take place under an emissions trading system: the government can use the revenues accrued from auctioning the permits to reduce existing taxes. Besides eliminating hot air and the need to allocate permits, the most important advantage to using a tax instead of a quantity mechanism is cost certainty. If the costs of reducing emissions are unexpectedly high, the price of carbon under a quantity mechanism will rise until there is sufficient incentive to reduce emissions to the specified level. But the price of carbon under a tax is fixed, so if the costs of reducing emissions are unexpectedly high, more emitters will prefer to pay the tax and fewer emissions reductions will take place. Whereas the price mechanism guarantees the cost of carbon will not climb, the quantity mechanism guarantees that emissions reductions will be taken whatever the cost. Environmentalists will not be keen on the opportunity for firms to ‘pay their way out of reducing’, but governments will be more likely to ratify an agreement that eliminates the possibility of run-away costs. Given that there is no consensus on a threshold of emissions above which disaster will strike, proponents of taxes contend that specifying quotas is unnecessary. And if the tax is set at the estimated marginal damage of emissions, the costs of the tax will be exactly offset by the per tonne benefits of less climate change. But taxes will not in themselves attract additional developing country participation, and side payments are made more easily with fewer distortions under quota systems than price mechanisms. It is easier to grant excess allocations (hot air) than international tax concessions. In any event, effectively implementing an international carbon tax is a near impossibility (Eizenstat, 1998, p. 120; Wiener, 1999, pp. 735–780). National governments could easily negate the effect of an international carbon tax by reducing existing energy taxes or increasing energy subsidies. Moreover, the US does not support mandatory policies and measures, let alone international energy taxes. It is worth recalling President Clinton’s attempt in 1993 to introduce a ‘BTU tax’ on the energy content of fuels; it failed in Congress even after 13 exemptions were granted in the final proposed bill. 3.4. Hybrid approaches Hybrid approaches attempt to combine the virtues of quantity and price mechanisms. Two will be discussed here: the ‘resources for the future proposal’, and the ‘McKibbin–Wilcoxen proposal’ (Pizer, 1999; Kopp et al., 2000; Victor, 2001; McKibbin, 2001; McKibbin and Wilcoxen, 1999).
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The resources for the future proposal focuses on reducing the cost uncertainty associated with simple quantity mechanisms. The idea is to declare a maximum price for emissions permits.8 If emissions trading forces the price of permits up to the maximum price, otherwise known as the trigger price, governments will automatically sell additional permits at that price to prevent it from climbing further. This ‘safety valve’ will ensure that the maximum cost of meeting a commitment is known in advance, that emissions trading is limited, and that the market is sent a firm price signal. But the quantity target will only be met if mitigating emissions is cheaper than buying permits at the trigger price. The McKibbin–Wilcoxen proposal is more complex. According to the proposal, two types of emissions assets should be created in each country: permits and endowments. Permits would expire yearly and represent the right to emit a tonne of carbon. Endowments would never expire and give the holder a set number of permits each year, that is, the right to emit a set number of tonnes of carbon each year. National markets would be created for permits and endowments. The price of permits would reflect annual supply and demand for permits, and the price of endowments would reflect the present value of the expected supply and demand of permits this year and every year in the future. But as in the resources for the future proposal, the price of permits would be capped to ensure a maximum marginal abatement cost. If the price of permits were to rise to the trigger price, governments would issue additional permits at that price. This trigger price would be effective for each commitment period and would be relatively low to ensure that permit prices in all economies equal the target price. There would be no cap on the price of endowments, so they would act as futures, reflecting the known present value of permits in the current commitment period, and the unknown future value of permits in subsequent periods. There would be no global markets in either asset, since the permit price is equal in every country and endowments can only be redeemed in the issuing country. Hot air is thus eliminated because there is no international emissions trading, but economic efficiency is reduced: trading in national markets is less efficient than trading in an international market, and segregated national markets may introduce market distortions. The innovation of the McKibbin–Wilcoxen proposal is that it can provide a price signal to industry in developing countries without directly imposing short-run costs. Developing countries could be given endowments that exceed their current emissions. The permit price for the first commitment period would be set to zero, ensuring that firms face no immediate costs for emitting carbon. The endowment price would fluctuate in the open market as in developed economies, and would be non-zero in the anticipation of higher permit prices in subsequent commitment periods. The positive endowment price would encourage investment in low carbon development, and free emissions permits would prevent any short-run costs for emitting carbon. Both hybrid approaches cap costs, remove uncertainty, and limit hot air. But neither proposal will greatly facilitate developing country participation because neither proposal addresses the problem of allocating emissions permits. At best, a safety valve may marginally facilitate the initial allocation of permits by limiting the value of permits, and hence, the negotiating stakes (Victor, 2001, p. 104). The McKibbin–Wilcoxen Proposal, meanwhile, would be very difficult to negotiate: developing countries will demand endowments based on per capita emissions levels and developed countries will demand endowments based on historical emissions levels, just as they would when negotiating a pure quantity mechanism. A compromise in which one party gains and the other loses will be difficult, if not impossible to reach. 8
The Danish electricity sector, for instance, has a safety valve of 40 Danish Crowns in place for its domestic carbon dioxide trading system.
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3.5. Energy technology strategy Battelle has recommended states compliment the Kyoto Protocol with a global energy technology strategy (Battelle, 2000). By stimulating technological innovation, governments can increase the rate of improvement in fuel efficiency and in alternatives to carbon-emitting energy technologies (Edmonds et al., 2000, pp. 8–9). This promises to decrease emissions abatement costs, strengthen national negotiating positions, and even encourage developing country participation, which depends on technology transfer from developed parties (UNFCCC, 1992; Article 4.7). The more quickly alternative energy technologies are developed and deployed by industrialised countries, the greater opportunity there will be for developing country participation.9 Stimulating technological innovation is not a simple matter, however. The research, development and deployment process takes time. This is not just because of the speed with which new technologies are developed and tested. The existing energy capital stock is long-lived; some of the stock, like power plants, is often in use for over 50 years. Additionally, a new technology cannot be adopted until the energy infrastructure is adapted to its use. Special fuelling stations, for instance, will be required before alternative fuel powered cars become widespread. It has taken wood, coal, and oil an average of 100 years to rise from 1 to 50% of global consumption for precisely these reasons (Edmonds et al., 2000, p. 3). Emissions targets stimulate climate-friendly technological innovation by raising the cost of operating GHG inefficient technologies. This encourages substitution of low carbon-intensive fuels and non-fossil energy sources for carbon-intensive fuels, less energy-intensive goods for energy-intensive goods, non-energy inputs (like labour and capital) for energy inputs, and energy-conserving inputs for high energy-using inputs (Jorgenson and Goettle, 2000, p. 4). But proponents of a technology strategy note that plans to meet Kyoto’s emissions targets have yet to be implemented, and in any event, governments could further stimulate climate-friendly innovation on a global scale. Developed countries could accelerate technological innovation by increasing their energy research and development investments, co-ordinating them, and ensuring they have a climate focus (Battelle, 2000, pp. 49–51).10 Despite concerns about climate change, public expenditure on energy research and development is declining. Public sector investment by the nine OECD countries has fallen by 23% in real terms between 1985 and 1995. Japan and the US account for 75% of global energy research and development, and Japanese public sector energy investment has increased by only 1% between 1985 and 1998, while US investment fell by 23%. The public energy investment that does take place is uncoordinated, which limits its leverage, and lacks a climate focus. Fuel cells, hydrogen systems, and methane hydrates, for instance, receive less than 2.5% of global public energy investment. A global energy technology strategy would compliment the incentives for technology development and transfer already present in the Kyoto Protocol. But it would not reduce hot air or cost uncertainty (though it would reduce costs), and it would only encourage developing country participation in the (very) long-term as new technologies become globally available. Moreover, the US and many other countries will not agree to a technology strategy that infringes on their sovereignty, and it is unclear how successful the strategy could be without including mandatory measures. 9
Benedick (2001) suggests this is one of the lessons to be learnt from the Montreal Protocol experience. US President Bush’s proposed national climate change technology initiative, which is similar to former President Clinton’s climate change technology initiative, does not go far enough in these respects (see White House, 11 June 2001). 10
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3.6. GHG intensity targets GHG intensity targets have been proposed as a way to enhance developing country participation in the second commitment period (Baumert et al., 1999).11 An economy’s GHG intensity equals its GHG emissions divided by its GDP. It is the amount of emissions produced per unit of output. Declining intensity indicates economic growth is outpacing emissions growth and is a better indication of climate policy performance than declining emissions, especially in developing countries. Whereas carbon emissions are closely correlated with economic growth, the carbon intensity of an economy can grow or decline when an economy grows.12 The reason is that the key determinants of carbon intensity are a country’s geography, economic structure, energy intensity, fuel mix, and power generation mix-not economic growth. Russia’s GDP, for instance, fell by about 50% between 1990 and 1995, resulting in a fall in gross carbon emissions of 26% (169 million tonnes carbon). But its carbon intensity climbed from 807 to 950 tonnes of carbon per million int. dollars of GDP. Similarly, the Ukraine’s carbon emissions fell 40% over the same period and its carbon intensity climbed 20%, from 994 to 1194 tonnes of carbon per million int. dollars of GDP. But Bulgaria, Poland and Hungary experienced declining carbon intensity when their GDPs fell over the same period. Carbon emissions in these countries fell faster than GDP because of policy reforms in the energy sector. China, meanwhile, has experienced significant economic growth between 1980 and 1997. Its annual gross emissions have increased by 500 million tonnes carbon over that period, but its carbon intensity fell 45% because coal and petroleum subsidies were removed. The economies of China, Bulgaria, Poland and Hungary cause less climate change per unit of output than they did previously, reflecting good climate policy performance; the economies of Russia and the Ukraine now cause more climate change per unit of output than they did previously, reflecting poor or non-existent climate policies (Baumert et al., 1999). Developing countries are unwilling to accept Kyoto-style quantity targets because these may limit their economic growth, and because emissions rights allocated according to historical emissions favour relatively developed countries with historically high emissions. Undifferentiated intensity targets are akin to allocating emissions rights according to historical emissions (Michaelowa et al., 2001). But since GHG intensity targets do not strictly limit gross emissions, they do not limit economic growth and they do not favour relatively developed countries with historically high emissions as much as equivalent gross emissions targets. The allowable emissions created by intensity targets are variable amounts equal to the intensity target multiplied by GDP at the end of the commitment period. Intensity targets thus permit unlimited emissions growth so long as it is sufficiently compensated by economic growth; or viewed alternately, intensity targets permit unlimited economic growth so long as it sufficiently outpaces emissions growth. Binding GHG intensity targets could give developing countries access to the emissions trading system without accidentally introducing additional hot air. A developing country’s tradable amount would equal its allowable emissions minus its actual emissions, where its allowable emissions equal its intensity target multiplied by its commitment period GDP. The calculation of credits available or required by a firm or country would demand an estimate of economic and emissions growth over the period in question, just as the calculation would require under emissions targets. And since GHG intensity is hardly correlated with 11
For additional quantitative work on GHG intensity targets, see Muller (2001). For data simplicity, carbon intensity is used as a proxy for GHG intensity. This is reasonable given the predominance of carbon dioxide in emissions profiles. Michaelowa et al. (2001) also proceed on this basis. 12
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Fig. 1.
economic growth, a stalling economy labouring under an intensity target would not introduce hot air into the trading system. Had Russia and the Ukraine’s Kyoto targets been expressed as carbon intensity targets, for instance, their continuing economic woes would not have ‘automatically’ increased the amount of credits they could sell. In fact, the recent increase in the carbon intensities of their economies implies that they would have to take policy action before they would be in a position to sell emissions credits.13 A technical requirement of a protocol based on intensity targets is to develop the capacity to track GHG intensity and GDP using agreed standards (Michaelowa et al., 2001). But the difficulty of meeting this requirement should not prevent states from discussing the merits of intensity targets. Intensity targets can prevent hot air and, because they allow for economic growth, allay concerns about uncertain compliance costs. Most importantly, if developing countries began considering them, the US would probably consider renegotiating its Kyoto target. Providing the US Administration and Senate’s concern about the impact of emissions targets on the economy is undiminished at this point, the US may even demand its own intensity target. 13 Michaelowa et al. (2001, p. 20) contend that, given the example of Russia, intensity targets can prove disastrous to countries in situations of economic collapse. But while Russia’s intensity increase between 1990 and 1999 has been 18%, the economies in transition countries improved their collective carbon efficiency by 12% over the same period. Given Russia all but completely lacks a climate change program and has numerous, inexpensive emissions reductions opportunities (see Moe and Tangen, 2000; Mastepanov et al., 2001), an emissions intensity target may not have proven overly burdensome.
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Fig. 2.
4. The feasibility of best practice intensity targets With the exception of GHG intensity targets, none of the discussed proposals can redress the Kyoto Protocol. They are ways to reduce cost uncertainty or hot air, but they are not also ways to enhance developing country and US participation. Assuming the US continues to insist on an international response that does not threaten ‘serious harm’ to its economy and that includes commitments for developing countries, discussions on developing country and even developed country GHG intensity targets may be the best way to further the climate change regime. The high variance of carbon intensity among countries with similar GDP per capita, especially at low levels of GDP per capita, indicates that intensity targets are suitable for countries at many stages of development (see Figs. 1–4).14 Among developing countries, Botswana and South Africa have similar GDP per capita and geography, but Botswana emits 70% more carbon dioxide per million int. dollars of GDP than South Africa. Similarly, among developed countries, Greece emits 73% more carbon dioxide per million int. dollars of GDP than Portugal, despite similar GDP per capita and geography. Finally, among CEIT countries, Estonia emits 185% more carbon dioxide per million int. dollars of GDP than Lithuania, despite similar GDP per capita and geography. In these circumstances, it should be possible to agree a protocol that specifies individualised, numeric carbon intensity targets roughly based on best 14
Data is from World Resources Institute (http://earthtrends.wri.org/) and include the author’s own calculations. All GDP figures are in 1987 purchasing power parity dollars.
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Fig. 3.
practice levels. For instance, Botswana, Greece and Estonia might accept carbon intensity targets similar to the actual carbon intensities of South Africa, Portugal and Lithuania, respectively. These latter countries indicate the feasibility of operating a less carbon-intense economy at the same level of GDP per capita. Of course, the relatively high carbon intensities observed in Botswana, Greece and Estonia are not necessarily due to poor climate policy performance, they may be due to energy-intensive economic structures. The Netherlands, for instance, possesses an energy-intensive economic structure due to a large chemicals sector. Even though this sector is energy efficient compared to chemical sectors in other economies, it is less efficient than most other sectors (Schipper et al., 2001, p. 675). It would be illogical for the Netherlands to aim to match the carbon intensity of another economy that simply has a proportionally smaller chemicals sector. Similarly, in so far as the relatively high carbon intensities observed in Botswana, Greece and Estonia are due to energy-intensive economic structures, targets demanding respective, perfect carbon intensity convergence with South Africa, Portugal and Lithuania would be unreasonable. But reasonable best practice targets could be calculated by normalising for economic structure. To the extent that the gap in carbon intensity between these countries is due to factors other than economic structure, like energy intensity, fuel mix, and power generation mix, it can be reduced with good climate policy.15 15
‘Mine-yours’ comparisons of developed economies indicate that differences in economic structure account for far less of the variability in carbon intensity than do differences in the energy intensity of the underlying sectors (Schipper et al., 2001, pp. 673–674; Murtishaw et al., 2001, p. 97).
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Fig. 4.
A protocol based on best practice GHG intensity targets would not accord with a mechanical view of nature in which the world economy must labour under a fixed ecological constraint. It would not establish a clear ceiling on GHG emissions. But it would ensure that less warming is associated with larger world GDP than would otherwise be the case. The risks associated with a 1 ◦ C temperature increase over the next couple of decades might be unacceptable if world economic growth were to stop, but perfectly acceptable if world economic output were to quadruple. Economic growth can facilitate climate change adaptation while alleviating poverty and improving health care and education. Moreover, a protocol based on best practice intensity targets would reduce the variance in emissions per capita among countries of similar economic development. Since emissions per capita equals the product of carbon intensity and GDP per capita,16 a country that reduces its carbon intensity to approximate the intensity of another country with the same or very similar GDP per capita will be simultaneously reducing its emissions per capita to approximate those of the other country. Thus, if a protocol based on best practice intensity targets were fully implemented, countries’ carbon intensity and emissions per capita would tend to converge to best practice levels at every stage of development, and the remaining dispersion in carbon intensity and emissions per capita would be due to economic structure. To the extent that these results are considered reasonable and fair, a protocol based on best practice intensity targets will be attractive to many countries. But those particularly threatened by climate change and the EU might still need to be convinced of its merits. First, given current GDP projections, a protocol 16
Emissions/population = emissions/GDP × GDP/population.
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mandating intensity targets does cap emissions. Assuming a projected annual GDP growth rate of 3%, for instance, the US Kyoto target of a 7% reduction in GHG emissions from 1990 levels is equivalent to a carbon intensity target of 144 tonnes of carbon per million int. dollars GDP (Baumert et al., 1999, p. 9). Allowable emissions under the intensity target would only exceed the Kyoto reduction in the unlikely event of unexpected economic growth. Second, regardless of economic growth, a state must improve the carbon intensity of its economy to comply with its intensity target. So, at worst, intensity targets may require a less substantial decrease in gross emissions than expected, but will always require the expected efficiency improvement. Third and finally, if the US and key developing countries were to support a modest protocol based on best practice intensity targets, its environmental effectiveness could easily exceed that of the Kyoto Protocol. Intensity targets for the US and some developing countries will certainly prompt more emissions reductions in these countries than no targets at all. 5. Conclusion For the time being, neither the US nor developing countries will accept targets that threaten harm to their economies. Moreover, US participation depends on developing country participation, and developing country participation depends on developed countries including the US taking the lead on climate change. Differentiated intensity targets for the US and a few other key countries may be a way to square the circle, especially if developing country targets are linked to technology transfer and a commitment to promote technological innovation. Indeed, a global energy technology strategy could be the side-payment developing countries demand before accepting emissions targets of any kind. Differentiated GHG intensity targets and a global energy technology strategy could improve the trade-off between emissions abatement and economic growth, ultimately de-coupling emissions growth from economic growth. The stage would then be set for measures that would stabilise the atmospheric concentration of GHGs at a safe level. Acknowledgements The author is grateful to John Forsyth for his helpful suggestions, and to two obliging referees whose comments improved the paper. References Battelle, 2000. Global Energy Technology Strategy: Addressing Climate Change, Battelle. Battjes, J., Jansen, J., Sijm, J., Volkers, C., Ybema, J., 2001. The Multi-Sector Convergence Approach: A Flexible Framework for Negotiating Global Rules of National Greenhouse Gas Emissions Targets. CICERO Working Paper 4. Baumert, K., Kete, N., 2001. The US, Developing Countries, and Climate Protection: Leadership or Stalemate? WRI Issue Brief, World Resources Institute. Baumert, K., Bhandari, R., Kete, N., 1999. What Might a Developing Country Climate Commitment Look Like? WRI Issue Brief, World Resources Institute. Benedick, R., 1991. Building on the Vienna convention: lessons from the ozone hole. In: Benedick, R. (Ed.), Greenhouse Warming: Negotiating A Global Regime. WRI Publications. Benedick, R., 1998. Ozone Diplomacy: New Directions in Safeguarding the Planet, Enlarged Edition. Harvard University Press, Harvard.
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Benedick, R., 2001. Contrasting approaches: the ozone layer, climate change, and resolving the Kyoto dilemma. In: Schulze, E., et al. (Eds.), Global Biogeochemical Cycles in the Climate System. Max-Planck-Institute for Biogeochemics. Berman, M., Zartman, I., 1982. The Practical Negotiator. Yale University Press, New Haven, CT. Bode, J., Blok, K., Phylipsen, G., Merkus, H., Metz, B., 1998. A triptych sectoral approach to burden differentiation GHG emissions in the European bubble. Energy Policy 26 (12), 929–943. Cooper, R., 1998. Toward a real global warming treaty. Foreign Affairs 77 (2), 66–79. Edmonds, W., Wise, M., 1999. Exploring a technology strategy for stabilising atmospheric CO2 . In: Carraro, C. (Ed.), International Environmental Agreements on Climate Change. Kluwer Academic Publishers, Dordrecht. Edmonds, J., Roop, J., Scott, M., 2000. Technology and the economics of climate change policy. Pew Centre on Global Climate Change. Eizenstat, S., 1998. Stick with Kyoto: a sound start on global warming. Foreign Affairs 77 (3), 119–121. Flavin, C., 1988. Last tango in Buenos Aires. World Watch, 11–18. Grubb, M., 1995. Seeking fair weather: ethics and the international debate on climate change. Int. Affairs 71 (3), 463–496. Grubb, M., Gupta, J. (Eds.), 2000. Climate Change and European Leadership: A Role for Europe? Kluwer Academic Publishers, Dordrecht. Grubb, M., Christiaan, V., Brack, D., 1999. The Kyoto Protocol: A Guide and Assessment. Royal Institute of International Affairs. Grubb, M., Hourcade, J., Oberthur, S., 2001. Keeping Kyoto: a study of approaches to maintaining the Kyoto Protocol on climate change, climate strategies. Haas, P., 1983. Words can hurt you or, who said what to whom about regimes. In: Krasner, S. (Ed.), International Regimes. Cornell University Press, Cornell. Hagen, C., Holtsmark, B., 2001. From small to insignificant: climate impact of the Kyoto Protocol with and without US. CICERO Policy Note no. 1. IEA, 2000. World Energy Outlook 2000. IEA. IPCC, 2001. Summary for policymakers: a report of working group III of the IPCC. Jorgenson, D., Goettle, R., 2000. The role of substitution in understanding the costs of climate change policy. Pew Centre on Global Climate Change. Kopp, R., Morgenstern, R., Pizer, W., 2000. Limiting cost, assuring effort, and encouraging ratification compliance under the Kyoto Protocol. Report of RFF/CIRED Workshop, Washington. Krasner, S., 1983. Structural causes and regime consequences: regimes as intervening variables. In: Krasner, S. (Ed.), International Regimes. Cornell University Press, Cornell. Mastepanov, A., Pluzhnikov, O., Berdin, V., Gavrilov, V., 2001. Post-Kyoto energy strategy of the Russian federation: outlooks and prerequisites of the Kyoto mechanisms implementation in the country. Climate Policy 1 (1), 125–133. McKibbin, W., Wilcoxen, P., 1999. Designing a realistic climate change policy that includes developing countries. In: Proceedings of the Paper Presented at United Nations Symposium. Tokyo, 24–25 August 1999. McKibbin, W., 2001. Moving beyond Kyoto. Energy Environ. 12 (1), 1–6. Meyer, A., 2000 Contraction and Convergence: The Global Solution to Climate Change. Green Books Ltd. Michaelowa, A., Muller, B., Vrolijk, C., 2001. Rejecting Kyoto: a study of proposed alternatives to the Kyoto Protocol, climate strategies. Moe, A., Tangen, K., 2000. The Kyoto mechanisms and Russian climate politics. Royal Institute for International Affairs. MSNBC, 12 June 2001. Bush out to sway European skeptics: he faces tough questions. Protests on first overseas trip. Muller, B., 2001. Fair compromise in a morally complex world. In: Proceedings of the Paper Presented at Pew Centre Equity and Global Climate Change Conference. Washington, 17–18 April 2001. Murtishaw, S., Schipper, L., Unander, F., Karbuz, S., Khrushch, M, 2001. Lost carbon emissions: the role of non-manufacturing other industries and refining in industrial energy use and carbon emissions in IEA countries. Energy Policy 29 (2), 83–102. New York Times, 12 June 2001. Bush will continue to oppose Kyoto pact on global warming. Oberthur, S., Ott, H., 1999. The Kyoto Protocol: International Climate Policy for the 21st Century. Springer, Berlin. Ott, H., 2001. Climate change: an important foreign policy issue. Int. Affairs 77 (2), 277–296. Parson, E., 1993. Protecting the ozone layer. In: Haas, P., Keohane, R, Levy, M. (Eds.), Institutions for the Earth: Sources of Effective International Environmental Protection. MIT Press, Cambridge, MA. Pershing, J., Philibert, C., 2001. Considering the options: climate targets for all countries. Climate Policy 1 (2), 211–217. Pianin, E., 2 August 2001. Bush urged to negotiate global warming treaty. Washington Post A-14.
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The emperor’s new clothes: redressing the Kyoto Protocol Michael Lisowski∗ University of Cambridge, Wolfson College, Barton Road, Cambridge, Cambridgeshire CB3 9BB, UK Received 19 November 2001; received in revised form 31 January 2002; accepted 6 February 2002
Abstract US President Bush repudiated the Kyoto Protocol because, in his view, it is ‘fatally flawed in fundamental ways’. This paper evaluates seven proposals to redress the protocol according to their potential to deal with three key issues that have reinforced US intransigence: hot air, cost uncertainty and developing country participation. It argues that negotiations on intensity targets hold the most promise. Because intensity targets limit hot air, but do not limit economic growth, and a high variance of carbon intensity exists among countries with similar GDP per capita, intensity targets based on best practice levels might be agreeable to developing countries and the US. If a protocol specifying such targets were implemented, less warming would be associated with larger world GDP than would otherwise be the case, and countries’ carbon intensity and emissions per capita would tend to converge to best practice levels at every stage of development. © 2002 Elsevier Science Ltd. All rights reserved. Keywords: Intensity targets; Developing country participation; Best practice; US participation; Emissions per capita; Carbon intensity
The emperor of Kyoto was running around the stage for a long time naked and it took President Bush to say, ‘he doesn’t have any clothes on’. —Andrew Card, US President Bush’s Chief of Staff (New York Times, 12 June 2001). 1. Introduction US President Bush’s decision to repudiate the Kyoto Protocol shocked the world. The Clinton administration had worked constructively within the Kyoto process despite the intransigence of the US Senate. Many hoped the Bush administration would do the same. Instead, to the dismay of environmentalists world-wide, the new administration aligned itself with the US Senate, and acknowledged the logic of the Byrd-Hagel Senate resolution. The non-binding resolution, passed unanimously in 1997, clearly ∗
Tel.: +44-7779-158-117. E-mail address: [email protected] (M. Lisowski). 1469-3062/02/$ – see front matter © 2002 Elsevier Science Ltd. All rights reserved. PII: S 1 4 6 9 - 3 0 6 2 ( 0 2 ) 0 0 0 2 9 - 3
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indicates Senate opposition to any protocol that threatens serious harm to the US economy, or that commits Annex I Parties to emissions reductions but exempts developing countries from similar emissions limits or reductions (S. Res. 98, 12 June 1997). Fortunately, all is not lost. Though the US administration proclaimed the death of the Kyoto Protocol, it considers climate change to be a real problem and remains engaged in the UNFCCC process; as President Bush explains, “the Kyoto Protocol was fatally flawed in fundamental ways. But the process used to bring nations together to discuss our joint response to climate change is an important one” (MSNBC, 12 June 2001). Given a recent resolution unanimously approved by the Senate Foreign Relations Committee re-affirming the Byrd-Hagel resolution and calling on the administration to negotiate a new international response to climate change, it is fair to conclude that this stance has the support of the Senate (Pianin, 2 August 2001). For the time being, the EU will stand by the Kyoto Protocol in the hope that it can be brought into force in 2002. The protocol took years to negotiate and could guide a decade of climate policy in those states that ratify it. The Emperor of Kyoto is not naked. But he will need new clothes. Given the US accounts for about a quarter of world greenhouse gas (GHG) emissions and a reversal of the anti-Kyoto opinion so common in the US Senate and administration is unlikely, discussions on redressing the Kyoto Protocol are required if an environmentally effective regime is to emerge. These discussions are scheduled to begin in 2005 if the protocol enters into force (Kyoto Protocol, 1997; Article 3.9), but may begin earlier if it does not. After considering the Kyoto Protocol’s prospects under EU leadership, seven proposals for developing the climate change regime are surveyed.1 These are judged on their potential to deal with three key issues that have reinforced US intransigence: hot air, cost uncertainty and developing country participation.2 It is argued that, with the possible exception of GHG intensity targets for developing countries, none of the alternatives would greatly encourage US reengagement. Assuming the US continues to insist on an international response that does not threaten ‘serious harm’ to its economy and that includes commitments for developing countries, discussions on developing country and even developed country GHG intensity targets may be the best way to further the climate change regime. 2. Leveraging EU leadership to create a comprehensive regime Several observers have bemoaned the lack of leadership exhibited by the EU and US in the climate change negotiations (Oberthur and Ott, 1999, p. 301; Benedick, 1991, p. 10; Flavin, 1998; Baumert and Kete, 2001). The principles, norms, rules and decision-making procedures that might comprise an effective climate change regime can be difficult to create and uphold in the absence of leadership (Krasner, 1983, p. 15). Leaders can build trust and demonstrate the technical viability of emissions reductions by taking unilateral measures; they can develop technologies that make arguments to delay regulation implausible; they can build pro-regulatory coalitions; and they can apply moral suasion in finely balanced situations. Hegemonic leaders can even supply the public good themselves and influence the choices of other states by altering payoffs with side payments. US leadership was crucial to the Montreal Protocol’s negotiation (Benedick, 1998; Parson, 1993, p. 69). 1 Burden-sharing rules like the triptych approach and multi-sector convergence approach (see Bode et al., 1998; Battjes et al., 2001) will not be explored here. These rules are designed to facilitate negotiations on quota allocations and do not represent fundamentally alternative ways of approaching the negotiations. 2 For an alternative analysis of similar proposals, see Pershing and Philibert (2001).
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An ‘EU leadership initiative’ is now underway to move the climate change negotiations forward without the US, thereby creating a multi-track regime (see Oberthur and Ott, 1999, pp. 301–311; Ott, 2001, pp. 290–291; Grubb and Gupta, 2000). The EU is encouraging states to ratify the Kyoto Protocol and to use it as a framework for substantial action beyond ‘no regrets’ measures. Though the immediate environmental impact of implementing the protocol without the US would be negligible,3 if the majority of developed countries fulfil their Kyoto commitments, developing countries will be more likely to consider emissions limits for the second commitment period. The US, which has made its participation contingent on the ‘meaningful participation’ of developing countries, might then be brought on board. Certainly, the EU will improve its credibility with developing countries by ratifying and implementing the protocol, by sponsoring adaptation projects in developing countries and by promoting the clean development mechanism (CDM). But engaging developing countries on the issue of targets will remain extremely difficult without US participation in the protocol. The US is the wealthiest country and largest GHG emitter in the world, and the UNFCCC decrees that all developed country parties “should take the lead in combating climate change and the adverse effects thereof” (Article 3.1). The US refusal to commit to a target unless developing countries do likewise strengthens the resolve of developing countries against targets. The EU will have to face this dilemma head-on and hold concurrent discussions with developing countries and the US if its leadership is to be ultimately successful. Assuming the protocol is brought into force, how might these discussions be framed? If the protocol is not brought into force, on what basis might negotiations continue? 3. Redressing the protocol: evaluating the options A liberal frame of reference has dominated the climate change negotiations. Liberalism draws on a mechanical view of nature in which humanity must learn to live in a finite system (see Haas, 1983). The prevailing image is of the market facing a permanent ecological constraint. Should the constraint be transgressed, ecological and human systems will be doomed to entropy and will run down. Thus, the objective of the UNFCCC is to ensure that the atmospheric concentrations of GHGs do not cross the line from ‘safe’ to ‘dangerous’ levels, and the Kyoto Protocol uses a quantity mechanism to prompt emissions reductions. The protocol sets emissions limits and uses market mechanisms like emissions trading to preserve the market’s efficiency while operating under these limits. Various alternatives have been proposed for developing the climate change regime, many of which challenge the Kyoto Protocol’s implicit liberal assumptions. Contraction and convergence, for instance, seeks to place equity in efficiency’s stead as the focal point of the climate change regime. It is argued that governments should be guided by egalitarianism when prescribing emissions targets. Command and control measures, meanwhile, sacrifice economic efficiency for simplicity and political control. Price mechanisms offer efficiency, but dispense with the mechanical view of a threshold, instead preferring to tax each tonne of emissions on the assumption that each tonne will cause a fixed increment of climate change. Like the Kyoto Protocol, these proposals are each based on a particular perception of the problem, and hence, its solution; they rely on certain referent structures, such as particular scientific or economic 3
The Kyoto Protocol requires a 5.2% reduction in Annex I emissions from 1990 levels, which implies a 5.5% reduction of global emissions relative to business as usual estimates. Implementing the protocol without the US, which is the largest emitter and possesses a relatively high target and a relatively high business as usual emissions estimate, will lead to a mere 0.9% reduction in global emissions from business as usual projections (Hagen and Holtsmark, 2001, pp. 2–3).
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knowledge; and at times they include implicit or explicit reference to an idea of justice (see Berman and Zartman, 1982, pp. 87–143). Many of these alternative proposals have already been compared in broad categories on the basis of their likely environmental effectiveness, cost-effectiveness, contribution to economic growth and sustainable development, and implications for equity (see Pershing and Philibert, 2001). They will be compared here on the extent to which they encourage US reengagement. If a proposal is to redress the Kyoto Protocol, it must deal with three key issues that have reinforced US intransigence: hot air, cost uncertainty, and developing country participation. ‘Hot air’ refers to the excess emissions allowances contained in some states’ Kyoto targets. They were granted to countries with economies in transition to encourage them to accept targets and to make it cheaper for non-EU Annex I countries, and especially the US, to meet their targets. Russia’s target, for instance, now exceeds its business as usual emissions projections by 31–42% (Moe and Tangen, 2000, pp. 40–41).4 The Ukraine’s target presently exceeds its emissions by about 100% (Grubb et al., 1999, p. 170). Since hot air emissions credits were granted in negotiations instead of created through costly mitigation projects, these states will be happy to sell them at almost any price. The consequent availability of cheap hot air credits will undermine incentives to make real, costly emissions reductions. Perhaps more importantly, countries like the US that need to buy hot air to meet their targets will find ratifying the protocol difficult to justify. These states will be “dangerously dependent on other countries to meet [their] emissions targets” (White House, 11 June 2001, p. 13), and will enrich Russia and the Ukraine without causing a great number of additional emissions reductions (Victor, 2001, p. 10).5 The problem of cost uncertainty arises because the Kyoto Protocol’s quantitative targets will raise the price of carbon by an unknown amount. The price will depend on, among other factors, the prevalence of hot air and the marginal cost of emissions abatement. The IPCC currently reports a wide range of estimates: US$ 15 –150 per tonne carbon. The IPCC further estimates the total cost of implementing the protocol to be between 0.1 and 1.1% of projected GDP (IPCC, 2001, p. 8). The magnitude of these estimates, the potential that they may be low estimates, and the range of uncertainty discourages lawmakers from ratifying and implementing the protocol, particularly in the US. In the context of so much cost uncertainty, it easy to claim that the Kyoto targets are ‘precipitous’ and risk “significantly harming the US and global economies” (White House, 11 June 2001, pp. 13–14). Developing country participation is the most controversial issue addressed by negotiators to date. President Bush justified repudiating the protocol by noting how it exempts developing countries from emissions controls (White House, 11 June 2001, p. 13), and the Senate Foreign Relations Committee recently called for a new international response that conforms to the Byrd-Hagel resolution (Pianin, 2 August 2001). Developing country emissions are already significant, and they are growing fast. China, for instance, is the world’s second largest GHG emitter, and its emissions are expected to rival those of the US by 2010 (IEA, 2000). But limits on emissions growth are presently unacceptable to developing countries. Developing countries are concerned that limiting their emissions growth may limit their eco4
Emissions are currently more than 40% below 1990 levels and show no sign of recovery. Russian estimates of emissions growth have been revised downwards three times since 1995 (see Grubb et al., 2001, p. 26). 5 In principle, the hot air problem could be resolved within the Kyoto framework if each country holding hot air pledged to reinvest the income received from emissions trading into emissions reduction projects. Russia has already made a proposal in this regard, and the EU has indicated its preference to buy only from states with such a mechanism in place (see Mastepanov et al., 2001). But a series of ad hoc pledges will not address the potential problem of developing country hot air in future commitment periods, nor will limiting hot air in such a manner, which will raise the cost of compliance, encourage US re-engagement.
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nomic growth, and note that emissions limits based on historical emissions allocate far more emissions permits or rights to developed countries than to developing countries, despite the historic responsibility of developed countries for climate change.6 While their concerns are justified, their unwillingness to accept targets, coupled with that of the US, threatens the environmental effectiveness of the emerging climate change regime. None of the proposals for developing the climate change regime are perfect. But to the extent that they address hot air, cost uncertainty and developing country participation, framing the negotiations in their light may lead to a new or adapted protocol capable of garnering US participation. 3.1. Contraction and convergence The Global Commons Institute has offered ‘contraction and convergence’ as an ethical solution to the problem of climate change (Meyer, 2000).7 The proposal is to negotiate a date by which a target atmospheric carbon dioxide concentration is to be reached, calculate the corresponding permissible global emissions levels and distribute emissions rights to states on a per capita basis. Since developed countries currently emit approximately 3.3 tonnes per capita and developing countries emit about 0.5 tonnes per capita, developed country per capita emissions would have to contract as developing countries pursue economic development and their per capita emissions expand. Ultimately, per capita emissions would converge. Until then, emissions trading would provide a revenue stream for developing countries. At first glance, contraction and convergence seems like a reasonable approach. It would allow for economic growth and emissions growth in developing countries, but require emissions reductions in countries that have grown rich by over-emitting in the past. Though costs would remain uncertain, there would be no hot air in this scheme, and developing countries would have a financial incentive to participate. But implementing contraction and convergence is problematic because emissions rights are to be allocated to governments on a per capita basis, not to the word’s citizens. Autocrats could quickly pervert the egalitarianism underpinning contraction and convergence by using their countries’ allocations to enrich themselves, instead of using them to develop their countries’ economies. There is no sense in distributing equal per capita emissions rights to governments if a significant number of them are unlikely to act in their people’s best interests. Moreover, if one of the reasons for increasing developing country participation in the climate change regime is to encourage US participation, it is important to recognise that the financial incentive for developing countries to participate in this scheme comes at the expense of developed countries, and would discourage developed countries from participating in it. While equal per capita rights are ideal for developing countries with large populations, high demographic growth rates and low per capita emissions, they are an anathema to developed countries with small populations, low demographic growth rates and high per capita emissions. Equal per capita rights would give the US 5% of world emissions rights, China 21% and India 16%. Given the US produces 22% of world carbon dioxide emissions, per 6
The historic responsibility for climate change rests squarely on industrialised countries. Between 1900 and 1999, the US produced 77 billion tonnes of carbon, the EU 56 billion, and Russia 22 billion, accounting for 30.3, 22.1 and 8.9% of total world emissions, respectively. China and India combined produced a mere 22 billion tonnes of carbon over this same period, accounting for 9% of the world total (World Resources Institute, 2001). 7 For a survey of similar approaches, see Grubb (1995, pp. 485–486). Battjes et al. (2001) propose a multi-sector convergence approach to burden sharing. The proposal is to determine national targets on the basis of convergence of national sector per capita emissions to global sector emissions norms.
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capita rights would require dramatic emissions reductions and massive transfers of wealth from the US to developing countries in the form of emissions trading (see Rose et al., 1998 for quantitative work). Developed countries, and particularly the US, will not agree to equal per capita rights as a result; they prevented reference to ‘global equitable allocations’ in the Kyoto Protocol to avoid even discussing the matter. Contraction and convergence is more likely to comprise the negotiating stance of developing countries than the solution to current negotiating difficulties. As Ernst Haas notes more generally: If equity is to define a regime there must be consensus on what constitutes a just social order, on its beneficiaries, on its place in time and in space. In the absence of such a consensus the affirmation of a specific egalitarian view is merely another input into a process of international negotiation, not an objective yardstick of diagnosis and prescription (Haas, 1983, p. 4). A compromise between per capita emissions rights and emissions rights based on historical emissions, which favour developed countries with high historical emissions, may be possible (for an exposition of a ‘fair compromise’, see Muller, 2001). But a weighted average of per capita and historical rights will be difficult to agree without large side-payments because the bargaining will be essentially zero-sum: the more weight placed on population than historical emissions, the more developing countries will benefit at the expense of developed countries and vice versa. 3.2. Command and control measures Command and control measures are mandatory policies and measures. Edmonds and Wise investigate a hypothetical technology protocol requiring new fossil fuel electric power plants installed after 2020 to remove all carbon from their exhaust stream and to use new synthetic fuels capacity to capture and dispose of carbon released in the conversion process. The protocol would also require non-Annex I nations to accept the same obligations as Annex I nations when their per capita income equals the average for Annex I nations in 2020 (Edmonds and Wise, 1999). Although a protocol based on command and control measures would do little to encourage additional developing country participation, proponents highlight various advantages to such an approach: command and control measures are relatively easy to implement and verify, they eliminate large financial flows from emissions trading and hot air, their costs are reasonably known, and the difficulty of allocating permits is avoided. Additionally, as the IPCC notes, “co-ordinated actions among countries and sectors may help to reduce mitigation cost, address competitiveness concerns, potential conflicts with international trade rules, and carbon leakage” (IPCC, 2001, p. 11). But these advantages come at the price of economic efficiency. Edmonds and Wise estimate their hypothetical technology protocol would be 30% more expensive than corresponding efficient alternatives (Edmonds and Wise, 1999, p. 151). Command and control measures are inherently less efficient than taxes and tradable permits because they do not allow for differences in the marginal cost of carbon control across sectors and between countries. These differences imply that some firms and countries can reduce emissions more cheaply than others and that forcing all firms and countries to take the same action will be needlessly expensive. Few states could support command and control measures because they are so inefficient, and because they violate their sovereign right to implement international treaties however they see fit. The US in particular has fought against co-ordinated policies and measures, let alone mandatory ones.
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3.3. Price mechanisms Like command and control measures, co-ordinated taxes have been proposed because they eliminate hot air and the need to allocate permits (Cooper, 1998). But unlike command and control measures, taxes are as economically efficient as quotas with emissions trading. Although all emitters face the same fixed fee or tax, only those who can reduce emissions at a cost that is less than the tax will do so. Emitters whose reductions are more costly than the tax will pay the tax instead of reducing. The resulting emissions level is achieved at the lowest possible cost because only the cheapest reductions are undertaken. A tax can provide additional economic advantages if revenue recycling leads to a ‘double dividend’ (Jorgenson and Goettle, 2000, pp. 28–33). A double dividend can occur when the revenue from a revenueneutral environmental tax is used to reduce an existing tax that is more distorting than the environmental tax. The environmental tax can thus encourage the behavioural change necessary to benefit the environment, while simultaneously improving the efficiency of the tax system. But the potential for a double dividend must be confirmed by empirical analysis and may not be present in all economies. Moreover, revenue recycling can take place under an emissions trading system: the government can use the revenues accrued from auctioning the permits to reduce existing taxes. Besides eliminating hot air and the need to allocate permits, the most important advantage to using a tax instead of a quantity mechanism is cost certainty. If the costs of reducing emissions are unexpectedly high, the price of carbon under a quantity mechanism will rise until there is sufficient incentive to reduce emissions to the specified level. But the price of carbon under a tax is fixed, so if the costs of reducing emissions are unexpectedly high, more emitters will prefer to pay the tax and fewer emissions reductions will take place. Whereas the price mechanism guarantees the cost of carbon will not climb, the quantity mechanism guarantees that emissions reductions will be taken whatever the cost. Environmentalists will not be keen on the opportunity for firms to ‘pay their way out of reducing’, but governments will be more likely to ratify an agreement that eliminates the possibility of run-away costs. Given that there is no consensus on a threshold of emissions above which disaster will strike, proponents of taxes contend that specifying quotas is unnecessary. And if the tax is set at the estimated marginal damage of emissions, the costs of the tax will be exactly offset by the per tonne benefits of less climate change. But taxes will not in themselves attract additional developing country participation, and side payments are made more easily with fewer distortions under quota systems than price mechanisms. It is easier to grant excess allocations (hot air) than international tax concessions. In any event, effectively implementing an international carbon tax is a near impossibility (Eizenstat, 1998, p. 120; Wiener, 1999, pp. 735–780). National governments could easily negate the effect of an international carbon tax by reducing existing energy taxes or increasing energy subsidies. Moreover, the US does not support mandatory policies and measures, let alone international energy taxes. It is worth recalling President Clinton’s attempt in 1993 to introduce a ‘BTU tax’ on the energy content of fuels; it failed in Congress even after 13 exemptions were granted in the final proposed bill. 3.4. Hybrid approaches Hybrid approaches attempt to combine the virtues of quantity and price mechanisms. Two will be discussed here: the ‘resources for the future proposal’, and the ‘McKibbin–Wilcoxen proposal’ (Pizer, 1999; Kopp et al., 2000; Victor, 2001; McKibbin, 2001; McKibbin and Wilcoxen, 1999).
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The resources for the future proposal focuses on reducing the cost uncertainty associated with simple quantity mechanisms. The idea is to declare a maximum price for emissions permits.8 If emissions trading forces the price of permits up to the maximum price, otherwise known as the trigger price, governments will automatically sell additional permits at that price to prevent it from climbing further. This ‘safety valve’ will ensure that the maximum cost of meeting a commitment is known in advance, that emissions trading is limited, and that the market is sent a firm price signal. But the quantity target will only be met if mitigating emissions is cheaper than buying permits at the trigger price. The McKibbin–Wilcoxen proposal is more complex. According to the proposal, two types of emissions assets should be created in each country: permits and endowments. Permits would expire yearly and represent the right to emit a tonne of carbon. Endowments would never expire and give the holder a set number of permits each year, that is, the right to emit a set number of tonnes of carbon each year. National markets would be created for permits and endowments. The price of permits would reflect annual supply and demand for permits, and the price of endowments would reflect the present value of the expected supply and demand of permits this year and every year in the future. But as in the resources for the future proposal, the price of permits would be capped to ensure a maximum marginal abatement cost. If the price of permits were to rise to the trigger price, governments would issue additional permits at that price. This trigger price would be effective for each commitment period and would be relatively low to ensure that permit prices in all economies equal the target price. There would be no cap on the price of endowments, so they would act as futures, reflecting the known present value of permits in the current commitment period, and the unknown future value of permits in subsequent periods. There would be no global markets in either asset, since the permit price is equal in every country and endowments can only be redeemed in the issuing country. Hot air is thus eliminated because there is no international emissions trading, but economic efficiency is reduced: trading in national markets is less efficient than trading in an international market, and segregated national markets may introduce market distortions. The innovation of the McKibbin–Wilcoxen proposal is that it can provide a price signal to industry in developing countries without directly imposing short-run costs. Developing countries could be given endowments that exceed their current emissions. The permit price for the first commitment period would be set to zero, ensuring that firms face no immediate costs for emitting carbon. The endowment price would fluctuate in the open market as in developed economies, and would be non-zero in the anticipation of higher permit prices in subsequent commitment periods. The positive endowment price would encourage investment in low carbon development, and free emissions permits would prevent any short-run costs for emitting carbon. Both hybrid approaches cap costs, remove uncertainty, and limit hot air. But neither proposal will greatly facilitate developing country participation because neither proposal addresses the problem of allocating emissions permits. At best, a safety valve may marginally facilitate the initial allocation of permits by limiting the value of permits, and hence, the negotiating stakes (Victor, 2001, p. 104). The McKibbin–Wilcoxen Proposal, meanwhile, would be very difficult to negotiate: developing countries will demand endowments based on per capita emissions levels and developed countries will demand endowments based on historical emissions levels, just as they would when negotiating a pure quantity mechanism. A compromise in which one party gains and the other loses will be difficult, if not impossible to reach. 8
The Danish electricity sector, for instance, has a safety valve of 40 Danish Crowns in place for its domestic carbon dioxide trading system.
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3.5. Energy technology strategy Battelle has recommended states compliment the Kyoto Protocol with a global energy technology strategy (Battelle, 2000). By stimulating technological innovation, governments can increase the rate of improvement in fuel efficiency and in alternatives to carbon-emitting energy technologies (Edmonds et al., 2000, pp. 8–9). This promises to decrease emissions abatement costs, strengthen national negotiating positions, and even encourage developing country participation, which depends on technology transfer from developed parties (UNFCCC, 1992; Article 4.7). The more quickly alternative energy technologies are developed and deployed by industrialised countries, the greater opportunity there will be for developing country participation.9 Stimulating technological innovation is not a simple matter, however. The research, development and deployment process takes time. This is not just because of the speed with which new technologies are developed and tested. The existing energy capital stock is long-lived; some of the stock, like power plants, is often in use for over 50 years. Additionally, a new technology cannot be adopted until the energy infrastructure is adapted to its use. Special fuelling stations, for instance, will be required before alternative fuel powered cars become widespread. It has taken wood, coal, and oil an average of 100 years to rise from 1 to 50% of global consumption for precisely these reasons (Edmonds et al., 2000, p. 3). Emissions targets stimulate climate-friendly technological innovation by raising the cost of operating GHG inefficient technologies. This encourages substitution of low carbon-intensive fuels and non-fossil energy sources for carbon-intensive fuels, less energy-intensive goods for energy-intensive goods, non-energy inputs (like labour and capital) for energy inputs, and energy-conserving inputs for high energy-using inputs (Jorgenson and Goettle, 2000, p. 4). But proponents of a technology strategy note that plans to meet Kyoto’s emissions targets have yet to be implemented, and in any event, governments could further stimulate climate-friendly innovation on a global scale. Developed countries could accelerate technological innovation by increasing their energy research and development investments, co-ordinating them, and ensuring they have a climate focus (Battelle, 2000, pp. 49–51).10 Despite concerns about climate change, public expenditure on energy research and development is declining. Public sector investment by the nine OECD countries has fallen by 23% in real terms between 1985 and 1995. Japan and the US account for 75% of global energy research and development, and Japanese public sector energy investment has increased by only 1% between 1985 and 1998, while US investment fell by 23%. The public energy investment that does take place is uncoordinated, which limits its leverage, and lacks a climate focus. Fuel cells, hydrogen systems, and methane hydrates, for instance, receive less than 2.5% of global public energy investment. A global energy technology strategy would compliment the incentives for technology development and transfer already present in the Kyoto Protocol. But it would not reduce hot air or cost uncertainty (though it would reduce costs), and it would only encourage developing country participation in the (very) long-term as new technologies become globally available. Moreover, the US and many other countries will not agree to a technology strategy that infringes on their sovereignty, and it is unclear how successful the strategy could be without including mandatory measures. 9
Benedick (2001) suggests this is one of the lessons to be learnt from the Montreal Protocol experience. US President Bush’s proposed national climate change technology initiative, which is similar to former President Clinton’s climate change technology initiative, does not go far enough in these respects (see White House, 11 June 2001). 10
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3.6. GHG intensity targets GHG intensity targets have been proposed as a way to enhance developing country participation in the second commitment period (Baumert et al., 1999).11 An economy’s GHG intensity equals its GHG emissions divided by its GDP. It is the amount of emissions produced per unit of output. Declining intensity indicates economic growth is outpacing emissions growth and is a better indication of climate policy performance than declining emissions, especially in developing countries. Whereas carbon emissions are closely correlated with economic growth, the carbon intensity of an economy can grow or decline when an economy grows.12 The reason is that the key determinants of carbon intensity are a country’s geography, economic structure, energy intensity, fuel mix, and power generation mix-not economic growth. Russia’s GDP, for instance, fell by about 50% between 1990 and 1995, resulting in a fall in gross carbon emissions of 26% (169 million tonnes carbon). But its carbon intensity climbed from 807 to 950 tonnes of carbon per million int. dollars of GDP. Similarly, the Ukraine’s carbon emissions fell 40% over the same period and its carbon intensity climbed 20%, from 994 to 1194 tonnes of carbon per million int. dollars of GDP. But Bulgaria, Poland and Hungary experienced declining carbon intensity when their GDPs fell over the same period. Carbon emissions in these countries fell faster than GDP because of policy reforms in the energy sector. China, meanwhile, has experienced significant economic growth between 1980 and 1997. Its annual gross emissions have increased by 500 million tonnes carbon over that period, but its carbon intensity fell 45% because coal and petroleum subsidies were removed. The economies of China, Bulgaria, Poland and Hungary cause less climate change per unit of output than they did previously, reflecting good climate policy performance; the economies of Russia and the Ukraine now cause more climate change per unit of output than they did previously, reflecting poor or non-existent climate policies (Baumert et al., 1999). Developing countries are unwilling to accept Kyoto-style quantity targets because these may limit their economic growth, and because emissions rights allocated according to historical emissions favour relatively developed countries with historically high emissions. Undifferentiated intensity targets are akin to allocating emissions rights according to historical emissions (Michaelowa et al., 2001). But since GHG intensity targets do not strictly limit gross emissions, they do not limit economic growth and they do not favour relatively developed countries with historically high emissions as much as equivalent gross emissions targets. The allowable emissions created by intensity targets are variable amounts equal to the intensity target multiplied by GDP at the end of the commitment period. Intensity targets thus permit unlimited emissions growth so long as it is sufficiently compensated by economic growth; or viewed alternately, intensity targets permit unlimited economic growth so long as it sufficiently outpaces emissions growth. Binding GHG intensity targets could give developing countries access to the emissions trading system without accidentally introducing additional hot air. A developing country’s tradable amount would equal its allowable emissions minus its actual emissions, where its allowable emissions equal its intensity target multiplied by its commitment period GDP. The calculation of credits available or required by a firm or country would demand an estimate of economic and emissions growth over the period in question, just as the calculation would require under emissions targets. And since GHG intensity is hardly correlated with 11
For additional quantitative work on GHG intensity targets, see Muller (2001). For data simplicity, carbon intensity is used as a proxy for GHG intensity. This is reasonable given the predominance of carbon dioxide in emissions profiles. Michaelowa et al. (2001) also proceed on this basis. 12
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Fig. 1.
economic growth, a stalling economy labouring under an intensity target would not introduce hot air into the trading system. Had Russia and the Ukraine’s Kyoto targets been expressed as carbon intensity targets, for instance, their continuing economic woes would not have ‘automatically’ increased the amount of credits they could sell. In fact, the recent increase in the carbon intensities of their economies implies that they would have to take policy action before they would be in a position to sell emissions credits.13 A technical requirement of a protocol based on intensity targets is to develop the capacity to track GHG intensity and GDP using agreed standards (Michaelowa et al., 2001). But the difficulty of meeting this requirement should not prevent states from discussing the merits of intensity targets. Intensity targets can prevent hot air and, because they allow for economic growth, allay concerns about uncertain compliance costs. Most importantly, if developing countries began considering them, the US would probably consider renegotiating its Kyoto target. Providing the US Administration and Senate’s concern about the impact of emissions targets on the economy is undiminished at this point, the US may even demand its own intensity target. 13 Michaelowa et al. (2001, p. 20) contend that, given the example of Russia, intensity targets can prove disastrous to countries in situations of economic collapse. But while Russia’s intensity increase between 1990 and 1999 has been 18%, the economies in transition countries improved their collective carbon efficiency by 12% over the same period. Given Russia all but completely lacks a climate change program and has numerous, inexpensive emissions reductions opportunities (see Moe and Tangen, 2000; Mastepanov et al., 2001), an emissions intensity target may not have proven overly burdensome.
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Fig. 2.
4. The feasibility of best practice intensity targets With the exception of GHG intensity targets, none of the discussed proposals can redress the Kyoto Protocol. They are ways to reduce cost uncertainty or hot air, but they are not also ways to enhance developing country and US participation. Assuming the US continues to insist on an international response that does not threaten ‘serious harm’ to its economy and that includes commitments for developing countries, discussions on developing country and even developed country GHG intensity targets may be the best way to further the climate change regime. The high variance of carbon intensity among countries with similar GDP per capita, especially at low levels of GDP per capita, indicates that intensity targets are suitable for countries at many stages of development (see Figs. 1–4).14 Among developing countries, Botswana and South Africa have similar GDP per capita and geography, but Botswana emits 70% more carbon dioxide per million int. dollars of GDP than South Africa. Similarly, among developed countries, Greece emits 73% more carbon dioxide per million int. dollars of GDP than Portugal, despite similar GDP per capita and geography. Finally, among CEIT countries, Estonia emits 185% more carbon dioxide per million int. dollars of GDP than Lithuania, despite similar GDP per capita and geography. In these circumstances, it should be possible to agree a protocol that specifies individualised, numeric carbon intensity targets roughly based on best 14
Data is from World Resources Institute (http://earthtrends.wri.org/) and include the author’s own calculations. All GDP figures are in 1987 purchasing power parity dollars.
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Fig. 3.
practice levels. For instance, Botswana, Greece and Estonia might accept carbon intensity targets similar to the actual carbon intensities of South Africa, Portugal and Lithuania, respectively. These latter countries indicate the feasibility of operating a less carbon-intense economy at the same level of GDP per capita. Of course, the relatively high carbon intensities observed in Botswana, Greece and Estonia are not necessarily due to poor climate policy performance, they may be due to energy-intensive economic structures. The Netherlands, for instance, possesses an energy-intensive economic structure due to a large chemicals sector. Even though this sector is energy efficient compared to chemical sectors in other economies, it is less efficient than most other sectors (Schipper et al., 2001, p. 675). It would be illogical for the Netherlands to aim to match the carbon intensity of another economy that simply has a proportionally smaller chemicals sector. Similarly, in so far as the relatively high carbon intensities observed in Botswana, Greece and Estonia are due to energy-intensive economic structures, targets demanding respective, perfect carbon intensity convergence with South Africa, Portugal and Lithuania would be unreasonable. But reasonable best practice targets could be calculated by normalising for economic structure. To the extent that the gap in carbon intensity between these countries is due to factors other than economic structure, like energy intensity, fuel mix, and power generation mix, it can be reduced with good climate policy.15 15
‘Mine-yours’ comparisons of developed economies indicate that differences in economic structure account for far less of the variability in carbon intensity than do differences in the energy intensity of the underlying sectors (Schipper et al., 2001, pp. 673–674; Murtishaw et al., 2001, p. 97).
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Fig. 4.
A protocol based on best practice GHG intensity targets would not accord with a mechanical view of nature in which the world economy must labour under a fixed ecological constraint. It would not establish a clear ceiling on GHG emissions. But it would ensure that less warming is associated with larger world GDP than would otherwise be the case. The risks associated with a 1 ◦ C temperature increase over the next couple of decades might be unacceptable if world economic growth were to stop, but perfectly acceptable if world economic output were to quadruple. Economic growth can facilitate climate change adaptation while alleviating poverty and improving health care and education. Moreover, a protocol based on best practice intensity targets would reduce the variance in emissions per capita among countries of similar economic development. Since emissions per capita equals the product of carbon intensity and GDP per capita,16 a country that reduces its carbon intensity to approximate the intensity of another country with the same or very similar GDP per capita will be simultaneously reducing its emissions per capita to approximate those of the other country. Thus, if a protocol based on best practice intensity targets were fully implemented, countries’ carbon intensity and emissions per capita would tend to converge to best practice levels at every stage of development, and the remaining dispersion in carbon intensity and emissions per capita would be due to economic structure. To the extent that these results are considered reasonable and fair, a protocol based on best practice intensity targets will be attractive to many countries. But those particularly threatened by climate change and the EU might still need to be convinced of its merits. First, given current GDP projections, a protocol 16
Emissions/population = emissions/GDP × GDP/population.
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mandating intensity targets does cap emissions. Assuming a projected annual GDP growth rate of 3%, for instance, the US Kyoto target of a 7% reduction in GHG emissions from 1990 levels is equivalent to a carbon intensity target of 144 tonnes of carbon per million int. dollars GDP (Baumert et al., 1999, p. 9). Allowable emissions under the intensity target would only exceed the Kyoto reduction in the unlikely event of unexpected economic growth. Second, regardless of economic growth, a state must improve the carbon intensity of its economy to comply with its intensity target. So, at worst, intensity targets may require a less substantial decrease in gross emissions than expected, but will always require the expected efficiency improvement. Third and finally, if the US and key developing countries were to support a modest protocol based on best practice intensity targets, its environmental effectiveness could easily exceed that of the Kyoto Protocol. Intensity targets for the US and some developing countries will certainly prompt more emissions reductions in these countries than no targets at all. 5. Conclusion For the time being, neither the US nor developing countries will accept targets that threaten harm to their economies. Moreover, US participation depends on developing country participation, and developing country participation depends on developed countries including the US taking the lead on climate change. Differentiated intensity targets for the US and a few other key countries may be a way to square the circle, especially if developing country targets are linked to technology transfer and a commitment to promote technological innovation. Indeed, a global energy technology strategy could be the side-payment developing countries demand before accepting emissions targets of any kind. Differentiated GHG intensity targets and a global energy technology strategy could improve the trade-off between emissions abatement and economic growth, ultimately de-coupling emissions growth from economic growth. The stage would then be set for measures that would stabilise the atmospheric concentration of GHGs at a safe level. Acknowledgements The author is grateful to John Forsyth for his helpful suggestions, and to two obliging referees whose comments improved the paper. References Battelle, 2000. Global Energy Technology Strategy: Addressing Climate Change, Battelle. Battjes, J., Jansen, J., Sijm, J., Volkers, C., Ybema, J., 2001. The Multi-Sector Convergence Approach: A Flexible Framework for Negotiating Global Rules of National Greenhouse Gas Emissions Targets. CICERO Working Paper 4. Baumert, K., Kete, N., 2001. The US, Developing Countries, and Climate Protection: Leadership or Stalemate? WRI Issue Brief, World Resources Institute. Baumert, K., Bhandari, R., Kete, N., 1999. What Might a Developing Country Climate Commitment Look Like? WRI Issue Brief, World Resources Institute. Benedick, R., 1991. Building on the Vienna convention: lessons from the ozone hole. In: Benedick, R. (Ed.), Greenhouse Warming: Negotiating A Global Regime. WRI Publications. Benedick, R., 1998. Ozone Diplomacy: New Directions in Safeguarding the Planet, Enlarged Edition. Harvard University Press, Harvard.
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