Approaching Copenhagen with a Portfolio of Domestic Commitments

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As we approach the beginning of the Fifteenth Conference of the Parties of the United Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen in December, international negotiations are focused on developing a climate policy framework for the post-2012 period, when the Kyoto Protocol’s first commitment period will have ended.  In addition to negotiations under the UNFCCC, other intergovernmental outlets, including the G8(+5) and the Major Economies Forum, are trying to reach common ground among the world’s major emitters of greenhouse gases.  To date, these efforts have not produced a politically, economically, and environmentally viable structure for a future climate agreement.

In the Harvard Project on International Climate Agreements (a global effort which now includes 35 research initiatives in Australia, China, Europe, India, Japan, and the United States), we continue to investigate promising post-2012 international policy architectures, as part of our on-going effort to help the countries of the world identify the key design elements of a post-2012 architecture that is scientifically sound, economically rational, and politically pragmatic.

One approach we have recently examined is a “portfolio of domestic commitments,” an approach which could be effective, but more flexible and politically palatable than other international arrangements.  Under such a scheme, nations would agree to honor commitments to greenhouse gas emission reductions laid out in their own domestic laws and regulations.  A portfolio of commitments might emerge from a global meeting such as the UNFCCC Conference of the Parties, or a smaller number of major economies could negotiate an agreement among themselves, and then invite other countries to join.

Despite the obvious differences between such a system and the conventional “targets and time tables” approach embodied in the Kyoto Protocol, negotiators should not dismiss this new approach out of hand.  There are several ways to construct a portfolio of domestic commitments, and negotiators have numerous levers available to tailor an agreement to meet their political, economic, and environmental goals.  In a recent Harvard Project Viewpoint, I outlined some basic features of a portfolio approach, highlighted a few major issues and concerns, and discussed the potential feasibility of this approach.

The Portfolio of Domestic Commitments Approach

The core of a portfolio of domestic commitments is agreement among a set of member countries to conform to the climate change mitigation requirements specified by their respective domestic laws, regulations, and official planning documents (the last being domestically binding in centrally planned economies).  The portfolio approach gives member countries free rein to dictate the precise form their domestic commitments will take, whether those be greenhouse gas cap-and-trade systems, carbon taxes, intensity targets, performance or technology standards, or other instruments.  A portfolio agreement should be highly credible, given that it is grounded in domestic commitments, binding in and enforceable by law previously made by the very governments signing on to the international agreement.

Domestic commitments might take the form of specified greenhouse gas emission targets or the form of particular actions that could be taken to reduce emissions, both envisioned in the Bali Action Plan as “nationally-appropriate mitigation actions” (NAMAs).  A target-based approach has the advantage of being transparent and relatively simple to aggregate across countries to reach a global target.  On the other hand, action-oriented goals can be more concrete and may be easier for many governments to implement in the short term.  There is no reason why both targets and actions could not be pursued simultaneously.  Coexistence of multiple approaches is not uncommon in environmental policy.

Ongoing commitments for several years into the future are necessary to stabilize and eventually reduce atmospheric greenhouse gas concentrations to combat climate change.  Under a portfolio approach, these domestic commitments could be represented in a table of national schedules attached to an agreement.  Australia has proposed a model agreement that includes such schedules. The schedules would signal a continuing commitment to the international community, and their inclusion in an international agreement would provide a disincentive for member nations to deviate from them in the future.

Countries would not be limited to acting unilaterally to meet their domestic commitments.  They could choose to submit joint goals or targets — for example, on a regional level — or link with other countries through a multinational carbon trading regime to reduce costs.  (Such linkage is the subject of another Harvard Project paper — by Judson Jaffe and myself.)  The portfolio approach would not be a bar to international cooperation.

A primary consideration for a portfolio agreement is the well-established principle of “common but differentiated responsibilities.”  This principle acknowledges that responsibility is shared for solving the climate change challenge, but suggests that historical differences in contribution to the problem and economic and technical disparities be reflected in varying national commitments.  A portfolio of domestic commitments may be particularly well-suited to implement this principle because it allows for countries to make commitments along a continuum of stringency, rather than dividing nations into two groups as did the Kyoto Protocol.  The placement of each country upon the continuum would depend on an array of political, economic, and environmental concerns.  (On this, see recent Harvard Project papers by Jeffrey Frankel and Valentina Bosetti, and by Sheila Olmstead and myself.)

Key Issues for Negotiators

Negotiators will inevitably need to tackle a number of key issues in crafting a portfolio agreement, three of which we highlight here.  The first is the extent to which domestic commitments could be relaxed in later years to reflect changed circumstances.  The second is the formal status such an agreement would have under international law.  Third is the necessity to monitor conformance to domestic commitments.

Rigidity of Commitments

One approach would be for a portfolio agreement to log domestic commitments and allow countries to relax those commitments in response to changes in political or economic climate or advances in the understanding of the threat of climate change.  In essence, such an agreement would function as a depository for current domestic legislation, serving the dual roles of information-gathering and diplomatic recognition of shared commitment to the climate problem.  It is difficult to imagine countries registering objections to such an agreement, given that they would not be binding themselves to future commitments.

For precisely this reason, however, climate negotiators may wish to stay the hand of future governments by barring relaxation or abandonment of preexisting climate commitments.  In other words, the agreement could set minimum commitments on a country-specific basis.  Amendments would be allowed only if they maintained or strengthened domestic commitments to climate change mitigation.  Such a precommitment strategy is not generally included in domestic legislation or plans, and it is likely to require careful wording and additional domestic legislation to become effective in some countries.

There is surely the possibility of domestic commitments being ignored by future leaders, but note that this concern is not unique to the portfolio approach.  All climate policy architectures — indeed, all international agreements — face this problem, and the question is whether the precommitment challenge is greater under this approach than it would be under others.  One possible compromise position would be to allow revision of domestic commitments, but only at specified intervals, in order to account for dramatic shifts in economic or environmental situations and expectations.

Type of Legal Instrument

Another key issue is the official legal status of a portfolio of domestic commitments.  There are a number of possible structures for such an agreement, each with different implications under international law.  A treaty is the most formal option and would be the most binding on participating nations.  Treaty law is relatively well-developed, as compared with the law governing other international instruments, and the law of treaties provides a framework for enforcement and dispute resolution.  But treaties are difficult to craft and face the perils of national ratification.

Outside of a treaty, there are various other instruments of international law that could be used in the portfolio approach.  For example, in the United States, congressional-executive and sole-executive agreements can be entered into by the President and do not require the approval of two-thirds of the Senate, as do treaties.  (See, for example, Nigel Purvis’s work on executive agreements.)   Other “soft law” instruments, such as explicitly nonbinding agreements, political declarations, and U.N. declarations, are fallback options which merit consideration for implementing a portfolio approach.  Ultimately, negotiators will choose the best instrument, based on how open countries are to the agreement and what obligations the agreement imposes.

Monitoring and MRV

Throughout the industrialized countries — and increasingly in the emerging economies — domestic environmental regulations include internal mechanisms for monitoring and enforcement.  A portfolio agreement could rely on countries to be prompted by international pressure to enforce their commitments, or an agreement could take a more active role.  The agreement could, for example, put in place an international monitoring body, license domestic entities in each country to monitor national commitments, or suggest model codes for enforcement.  International assistance may be necessary to aid countries lagging in technical or administrative capacity to monitor greenhouse gas emissions and enforce domestic policies.  More broadly, the agreement would need to define—to the extent possible—uniform measurement, reporting, and verification (MRV) procedures and assure that all countries could implement these procedures.

Feasibility of a Portfolio of Domestic Commitments

A portfolio of domestic commitments has several advantages as the foundation of a future international climate policy architecture.  The agreement could be flexible enough to allow countries to implement the mitigation instruments of their choice and link those instruments with domestic instruments in other nations if they so chose.  It could also allow for countries to accede at various times, thus giving them adequate time to prepare to participate.  (See David Victor’s Harvard Project paper on climate accession deals.)   This approach could also be an ideal vehicle for implementing the principle of common but differentiated responsibilities, since member countries would not need to be lumped together into rigid tiers of commitment (as they are under the dichotomous Annex I approach of the Kyoto Protocol).

Perhaps most crucial is the political feasibility of the portfolio approach.  In recent months, several major economies have expressed willingness to consider a climate policy architecture along these lines, including Australia, India, and the United States.  For this reason alone, the portfolio approach merits serious consideration, despite the significant hurdles to negotiating an effective portfolio agreement.

The concerns regarding this approach to a future global climate policy architecture are significant, but so are its potential advantages.  In general, there are real challenges to developing any post-2012 international climate policy architecture that is scientifically sound, economically rational, and politically pragmatic.  The challenges facing this approach are no greater – and may be less – than those facing other means of addressing the threat of global climate change.

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9 Responses to Approaching Copenhagen with a Portfolio of Domestic Commitments

  1. Phil Kithil says:

    Further to this post, a country could generate offsets up to its level of emissions, then if it generated additional offsets, sell the excess to other countries. If the internally-generated offsets provided competitive advantages (tangible such as jobs, or intangible i.e. bragging rights), over time the selling country’s economy would outperform the slow-to-adopt country. This would become an economic motivator, similar to cap-and-trade theory. By creating a rush to produce offsets, everyone is better off.

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  3. This approach makes lots of sense. Somehow, many here and around the world have let the absence of an international agreement be elevated to a reason not to take politically feasible domestic actions. It seems to have been assumed that the existence of an international agreement would substantially change domestic politics and lead to more aggressive legislative actions. That notion is at odds with Congressional politics as I understand them–I doubt that a single Senator now against climate change legislation would flip if the US cedes some of its sovereignty to an international regime–just the opposite, I suspect. I suggest that the quest for a perfect international agreement has become the enemy of good enough domestic actions and played into the hands of the resisters like Senator Inhoffe.

    It may be that an international agreement was a good idea that has outlived its time. Recall that we started this process two decades ago when awareness of a climate-threatening problem was minimal. The awareness level, concern, and political support for change is now orders of magnitude greater, and in parts of the US the people, State legislatures, and important parts of the business community are out ahead of Congress.

    No doubt a “weak” international agreement will result in some nations doing too little, but some of them will later yield to shaming and other pressures from nations that are setting good examples. Meanwhile, the list of committed actions in a weak agreement can be used to overcome domestic objections that it is unfair for us to impose economic costs on ourselves on behalf of the whole world. We can use shaming on ourselves if we are not keeping up. Having current and reliable information about what others are actually doing and actually accomplishing as the years go by would be, as you suggest, very helpful in that regard.

    I think I once suggested in comments here that you seemed more committed to cap/trade methodology than to reducing greenhouse gases. I hereby retract that and commend you on your pragmatism.

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  8. This approach makes lots of sense. Somehow, many here and around the world have let the absence of an international agreement be elevated to a reason not to take politically feasible domestic actions.

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