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Paris Agreement — A Good Foundation for Meaningful Progress

The Paris Agreement, a truly landmark climate accord, which was gaveled through today, December 12, 2015, at 7:26 pm (Paris time) at the Twenty-First Conference of the Parties (COP-21), checks all the boxes in my five-point scorecard for a potentially effective Paris Agreement, described in my November 17^th blog essay, Paris Can Be a Key Step. The Agreement provides a broad foundation for meaningful progress on climate change, and represents a dramatic departure from the Kyoto Protocol and the past 20 years of climate negotiations.

Essential Background

Anyone who has read this blog over the past several years, or – even more so — my academic writing over the past twenty years on international climate change policy architecture, knows that I have viewed the dichotomous distinction between Annex I and non-Annex I countries as the major stumbling block to progress. That distinction was first introduced in the climate negotiations at COP-1 in Berlin in 1995. That was, in my view, an unfortunate and narrow interpretation of the sound equity principle in the United Nations Framework Convention on Climate Change (UNFCCC, 1992) – “common but differentiated responsibilities and respective capabilities.” It was codified two years later in the Kyoto Protocol.

The Kyoto Protocol, which has been the primary international agreement to reduce the greenhouse-gas emissions that cause global climate change, included mandatory emissions-reduction obligations only for developed countries. Developing countries had no emissions-reduction commitments. The dichotomous distinction between the developed and developing countries in the Kyoto Protocol has made progress on climate change impossible, because growth in emissions since the Protocol came into force in 2005 is entirely in the large developing countries—China, India, Brazil, Korea, South Africa, Mexico, and Indonesia. The big break came at the annual UNFCCC negotiating session in Durban, South Africa in 2011, where a decision was adopted by member countries to “develop [by December 2015, in Paris] a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties.” This “Durban Platform for Enhanced Action” broke with the Kyoto Protocol and signaled a new opening for innovative thinking (which we, at the Harvard Project on Climate Agreements, took to heart).

The Paris Agreement is a Departure from the Past

Today, in Paris, representatives of 195 countries adopted a new hybrid international climate policy architecture that includes: bottom-up elements in the form of “Intended Nationally Determined Contributions” (INDCs), which are national targets and actions that arise from national policies; and top-down elements for oversight, guidance, and coordination. Now, all countries will be involved in taking actions to reduce emissions.

Remarkably, 186 of the 195 members of the UNFCCC submitted INDCs by the end of the Paris talks, representing some 96% of global emissions. Contrast that with the Kyoto Protocol, which now covers countries (Europe and New Zealand) accounting for no more than 14% of global emissions (and 0% of global emissions growth).

This broad scope of participation under the new Paris Agreement is a necessary condition for meaningful action, but, of course, it is not a sufficient condition. Also required is adequate ambition of the individual contributions. But this is only the first step with this new approach. The INDCs will be assessed and revised every five years, with their collective ambition ratcheted up over time. That said, even this initial set of contributions could cut anticipated temperature increases this century to about 3.5 degrees Centigrade, more than the frequently-discussed aspirational goal of limiting temperature increases to 2 degrees C (or the new aspirational target from Paris of 1.5 degrees C), but much less than the 5-6 degrees C increase that would be expected without this action. (An amendment to the Montreal Protocol to address hydrofluorocarbons (HFCs) is likely to shave an addition 0.5 C of warming.)

The problem has not been solved, and it will not be for years to come, but the new approach brought about by the Paris Agreement can be a key step toward reducing the threat of global climate change.

The new climate agreement, despite being path-breaking and the result of what Coral Davenport writing in The New York Times rightly called “an extraordinary effort at international diplomacy,” is only a foundation for moving forward, but it is a sufficiently broad and sensible foundation to make increased ambition over time feasible for the first time. Whether the Agreement is truly successful, whether this foundation for progress is effectively exploited over the years ahead by the Parties to the Agreement, is something we will know only ten, twenty, or more years from now.

What is key in the Agreement is the following: the centrality of the INDC structure (through which 186 countries representing 96% of global emissions have made submissions); the most balanced transparency requirements ever promulgated; provision for heterogeneous linkage, including international carbon markets (through “internationally transferred mitigation outcomes” – ITMOs); explicit clarification in a decision that agreement on “loss and damage” does not provide a basis for liability of compensation; and 5-year periods for stocktaking and improvement of the INDCs.

The Key Elements of the Paris Agreement

Here are some of the highlights of what stands out to me in the Paris Agreement.

Article 2 of the Agreement reaffirms the goal of limiting the global average temperature increase above the pre-industrial level to 2 degrees C, and adds 1.5 degrees C as something even more aspirational. In my opinion, these aspirational goals – which come not from science (although endorsed by most scientists) nor economics, and may not even be feasible – are much less important than the critical components of the agreement: the scope of participation through the INDC structure, and the mechanisms for implementation (see below).

Article 3 makes it clear that the INDC structure is central and universal for all parties, although Article 4 blurs this a bit with references to the circumstances of developing country Parties. But throughout the Agreement, it is abundantly clear that the firewall from the 1995 Berlin Mandate has finally been breached. In addition, five-year periods for the submission of revised INDCs (and global stocktaking of the impact of the Paris Agreement) are included in Article 14. The first stocktaking review will be in 2018, with the start date for new INDCs set for 2020.

Article 4 importantly describes transparency requirements (domestic monitoring, reporting, and verification). This is crucial, and represents a striking compromise between the U.S. and Europe, on the one hand, and China and India, on the other hand. All countries must eventually face the same monitoring and reporting requirements, regardless of their status as developed or developing.

Article 6 provides for international policy linkage, and is thereby exceptionally important for the successful exploitation of the foundation provided by the Paris Agreement. The necessary language for heterogeneous international policy linkage (not only international carbon markets, but international linkage of other national policy instruments) is included. I have written about this key issue many times over the past ten years. It can bring down compliance costs greatly, and thereby facilitate greater ambition over time. (See our paper on this from the Harvard Project on Climate Agreements: “Facilitating Linkage of Heterogeneous Regional, National, and Sub-National Climate Policies Through a Future International Agreement” By Daniel Bodansky, Seth Hoedl, Gilbert E. Metcalf and Robert N. Stavins, November 2014.) The Paris Agreement accomplishes this through provision for “internationally transferred mitigation outcomes.” With this provision, we have a new climate policy acronym – ITMOs – about which I suspect I will be writing in the future.

There is considerable discussion of “finance” in Article 9, but the numbers do not appear in the Agreement, only in the accompanying Decision, where item 54 states that by 2025, the Parties will revisit the total quantity of funding, using the current $100 billion target as a “floor.”

Finally, the Agreement’s Article 8 on Loss and Damage was necessary from the point of view of the most vulnerable countries, but the most contentious issue is settled in Decision 52, where the Parties agree that this “does not involve or provide a basis for any liability of compensation.” That decision was absolutely essential from the perspective of the largest emitters.

Anticipated Impacts of the Paris Agreement

Before I turn to my assessment of the Agreement, I should comment briefly on a topic that seems to be of considerable interest to many people (based on the questions I received from the press during my 10 days in Paris), namely what effect will the Agreement have on business, what signals will it send to the private sector?

My answer is that impacts on businesses will come largely not directly from the Paris Agreement, but from the policy actions that the various Parties undertake domestically in their respective jurisdictions to comply with the Paris Agreement. I am again referring to the 186 countries which submitted Intended Nationally Determined Contributions – INDCs – under the Agreement.

So, in the case of the United States, for example, those policies that will enable the country to achieve its submitted INDC are: the Clean Power Plan (which will accelerate the shift in many states from coal to natural gas for electricity generation, as well as provide incentives in some states for renewable electricity generation); CAFE (motor vehicle fuel efficiency) standards increasing over time (as already enacted by Congress); appliance efficiency standards moving up over time (as also already enacted by Congress); California’s very aggressive climate policy (AB-32); and the northeast states’ Regional Greenhouse Gas Initiative.

These various policies are credible, and they will send price signals that affect business decisions (but not across the board nor with ideal efficiency, as would a national carbon tax or a national carbon cap-and-trade system). In terms of impacts on specific companies, impacts will continue to vary greatly. But a useful generalization is that a major effect of most climate policies is to raise energy costs, which tends to be good news for producers of energy-consuming durable goods (for example, the Boeing Company) and bad news for consumers of those same energy-consuming durable goods (for example, United Airlines).

An Assessment with my Paris Scorecard

Lastly, here is my November 17^th scorecard and my assessment of the five key elements I said would constitute a successful 21^st Conference of the Parties:

Include approximately 90% of global emissions in the set of INDCs that are submitted and part of the Paris Agreement (compared with 14% in the current commitment period of the Kyoto Protocol). This was obviously achieved, with total coverage reaching 96% of global emissions.

Establish credible reporting and transparency requirements. This was achieved, through long negotiations between China and India, on the one hand, and Europe and the United States, on the other.

Move forward with finance for climate adaptation (and mitigation) B the famous $100 billion commitment. This was achieved.

Agree to return to negotiations periodically, such as every 5 years, to revisit the ambition and structure of the INDCs. This was achieved.

Put aside unproductive disagreements, such as on so-called “loss and damage,” which appears to rich countries like unlimited liability for bad weather events in developing countries, and the insistence by some parties that the INDCs themselves be binding under international law. This would have required Senate ratification of the Agreement in the United States, which would have meant that the United States would not be a party to the Agreement. There was success on both of these.

Final Words

So, my fundamental assessment of the Paris climate talks is that they were a great success. Unfortunately, as I have said before, some advocates and some members of the press will likely characterize the outcome as a “failure,” because the 2 degree C target has not been achieved immediately.

Let me conclude where I started. The Paris Agreement provides an important new foundation for meaningful progress on climate change, and represents a dramatic departure from the past 20 years of international climate negotiations. Of course, the problem has not been solved, and it will not be for many years to come. But the new approach brought about by the Paris Agreement can be a key step toward reducing the threat of global climate change. In truth, only time will tell.

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As many of you know, over a period of ten days, we (the Harvard Project on Climate Agreements) were hard at work at COP-21 in Paris. I made a dozen presentations and we held bilateral meetings on a daily basis with national negotiating teams and and others. You will find videos, photos, and numerous stories about our activities in Paris at our Tumblr page. Thanks are due to the entire team who were with me in Paris – Robert Stowe, executive director, Jason Chapman, program manager, and Doug Gavel, director of media relations — as well as Bryan Galcik, communications coordinator, back in Cambridge.

When Reasonable Policy Discussions Become Unreasonable Personal Attacks

Recently I was reminded of the controversy that erupted late in 2014 about remarks made by the distinguished health economist, Jonathan Gruber, professor at MIT for two decades. Professor Gruber, one of the country’s leading experts on health policy, had played an important role in the construction of the Obama administration’s Patient Protection and Affordable Care Act, subsequently derided by its political opponents as “Obamacare.”

A brief but intense political controversy and media feeding-frenzy erupted when videos surfaced in which Professor Gruber – largely in a series of academic seminars and conferences – explained how the Act was crafted and marketed in ways that would make it easier to develop political support. For example, he noted that insurance companies were taxed instead of patients, fundamentally the same thing economically, but vastly more palatable politically. He went on to note that this was possible because of “the lack of economic understanding of the American voter.” His key point was that the program’s “lack of transparency is a huge political advantage.” Is that a controversial or even unique observation?

A Truism of Political Economy

Any economist who has worked on the development or analysis of public policy – in areas ranging from health care policy to environmental policy to financial regulation – recognizes the truth of the key insight Gruber was communicating to his audiences. It is inevitably in the interests of the advocates of a policy to make the policy’s benefits transparent and to make its costs vague, even unobservable; just as it is in the interests of the opponents of a policy to make that policy’s benefits obscure and its costs as clear as the light of day.

The specific construction of hundreds of public policies are explained by this truism. In the United States, Corporate Average Fuel Economy Standards (or “CAFE standards”) have been a bipartisan Congressional success, despite the fact that the costs they place on the American public per unit of fuel savings are vastly greater than the costs of a commensurate increase in gasoline taxes. Likewise, when conservative opponents of CO₂ cap-and-trade wanted to stop the House-passed bill in its tracks, they resorted to demonizing it as “cap-and-tax.”

So, the central lesson Professor Gruber was offering is hardly controversial, and its enunciation ought not lead to the terrible attacks that he suffered. He doesn’t need me to defend him, but he was unfairly demonized, simply because people disagreed with him politically regarding the merits of the public policy he had helped develop and support.

Unfortunately, I was reminded of this recently when I found myself subject to attempted demonization, because someone did not agree with a policy I supported. What happened to me is trivial compared with what Professor Gruber has gone through, but it prompts me to write about it today.

Can We Agree to Disagree?

I have written before at this blog about the reasons why I support my university’s decision not to divest its endowment of its fossil-fuel company holdings. I won’t repeat those arguments here, but will note that I have gone out of my way not to draw conclusions or make recommendations about what other universities or other institutions ought to do in this regard, including when I agreed to write an essay on the subject for Yale Environment 360. My analysis and conclusions were not developed in spite of my decades of research, teaching, and outreach on global climate change policy; rather, they were developed because of my years of work in this area.

There are people, some of whom I greatly respect, who have different perspectives on this issue, and have come to very different conclusions than have I. We have essentially agreed to disagree. They haven’t cast aspersions on me, nor I on them. As my writings on this topic have illustrated, there are many facets to the issue, including economics, politics, ethics, and even religion. No one has cornered the market on wisdom.

And What About the Keystone XL Pipeline?

Likewise, on a quite different topic, on January 8, 2015, Coral Davenport wrote a story in the New York Times about the political debates in Washington regarding the proposed Keystone XL pipeline, and stated that “… most energy and policy experts say the battle over Keystone overshadows the importance of the project as an environmental threat or an engine of the economy. The pipeline will have little effect, they say, on climate change, production of the Canadian oil sands, gasoline prices and the overall job market in the United States.” She went on to quote me (accurately) as having said, “The political fight about Keystone is vastly greater than the economic, environmental or energy impact of the pipeline itself. It doesn’t make a big difference in energy prices, employment or climate change either way.” What I said was consistent with the evidence at the time (note, however, that as oil prices fall, the possibility increases that the Canadian oil sands would be uneconomic to develop without the pipeline). Once again, the analysis is not one-dimensional, and reasonable people can respectfully disagree.

When Policy Debates Become Personal Attacks

But these two topics – the Keystone XL pipeline and fossil-fuel divestment – have increasingly become engulfed in highly-charged campaigns and exceptionally heated political debates. As part of this, my integrity was recently attacked, because of my views. A young and – I’m sure – well-intentioned climate activist and journalist, writing in the Huffington Post, implied that my assessment in the New York Times of the Washington political debates regarding Keystone XL and my support for Harvard’s divestment policy, are because “Stavins has done consulting work for Chevron, Exelon, Duke Energy and the Western States Petroleum Association.”

The author of the Huffington Post piece selected those three companies and one trade association from a list of 92 “Outside Activities” that I voluntarily provide as a means of public disclosure. The author chose not to note that the vast majority of my outside engagements are with universities, think tanks, environmental advocacy NGOs, foundations, the U.S. Environmental Protection Agency, other federal agencies and departments, international organizations, and environment ministries around the world (not to mention a set of Major League Baseball teams, but that’s another story altogether).

But what about the four he did choose to highlight? First, I am very proud of my work supported by Chevron and the closely-related Western States Petroleum Association, in which I have carried out a series of analyses studying how to strengthen and improve California’s climate policy under AB-32. That’s right – developing and assessing ways to make the AB-32 cap-and-trade system and the related suite of “complementary policies” more environmentally effective, more cost-effective, and more equitable (I’ve written about this work several times at this blog).

Likewise, my work supported by Duke Energy began a decade ago when I helped the former CEO bring home to his senior management the importance of climate change and the importance of well-designed public policies (in particular, carbon cap-and-trade) to address it. All of my subsequent work supported by Duke Energy likewise has focused on the design of better market-based instruments – cap-and-trade – to reduce CO₂ emissions.

And, finally, what about Exelon? This was interesting and important work I carried out with my friend and colleague, MIT Professor Richard Schmalensee, Dean Emeritus of the Sloan School of Management (I wrote about this work at this blog and at the Huffington Post). In 2011, with support from Exelon, Professor Schmalensee and I analyzed EPA’s proposals for new rules to regulate the interstate transport of sulfur dioxide and nitrogen oxides emitted from electric power generation facilities. You can read in detail about our multi-faceted assessment, but the bottom-line is that we provided strong support for a stringent rule. Our brief summary at the University of Pennsylvania’s RegBlog concludes: “In sum, while imposing incremental costs to achieve reductions in SO2 and NOX emissions, the Transport Rule would produce significant benefits in terms of improved health outcomes, and better environmental amenities and services, which studies estimate significantly outweigh the costs.”

Sadness and Empathy

It is nothing less than absurd – and, frankly, quite sad – that someone would suggest that my views on divestment and my New York Times quote on the politics of Keystone XL were somehow due to my having received previous support for analytical work for an oil company, a trade association, and two electric utilities. This was an unfortunate move to question my credibility and damage my reputation in a misguided attempt to demonize me, rather than engage in reasonable discussion and debate. Unfortunately, most of those who have read the activist/journalist’s original commentary and have possibly repeated his claims to others will not see the essay you have just read.

This is surely nothing compared with what Professor Gruber has gone through, but it has certainly increased my empathy for him, as well as my admiration.

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Personal Attacks: An Even Sadder Epilogue

It’s nearly two months since I wrote the essay above, but a series of recent events prompts me to add this sad epilogue. My family and I have recently been subject to cyber-bullying, harassment, and threats, because of my public stance in support of Harvard’s decision not to divest from its endowment portfolio its holdings of fossil-fuel company stocks.

In particular, the most recent message sent to me said in part: “You may be assured that I will have a lot to say about your vocal public support of Harvard’s fossil fuel investments, … and that I have a particular interest in making sure that [your] financial connections to the fossil fuel industry are made fully public …” This threat to tarnish my reputation by publicizing a supposed conflict of interest is striking for a number of reasons:

In several essays at this blog and elsewhere, I have carefully explained my reasons for supporting Harvard’s decision not to divest;
In several essays at this blog and elsewhere, I have been completely up front about receiving support for (publically available) analytical work I’ve carried out for private-sector companies (and have long provided a list of all outside engagements at my website);
In the essay above, I documented the fundamentally pro-environment, policy-analytic work I had done for the specific companies mentioned; and
The claim that my position regarding Harvard divestment has somehow been influenced by my work with an oil company and an industry trade association defies logic.

The last item on this list – the fundamental illogic of such a claim – merits explanation. People on all sides of the divestment issue (including leaders of the student movement, and including the person who wrote the threat I quoted above) acknowledge that divestment will have no direct financial impacts on the respective companies. Rather, the merit of divestment that is most frequently cited by supporters is its symbolic value. Because divestment has no financial impacts on the fossil-fuel companies, those companies don’t care much about it. They would not care one way or the other what I might have to say on the topic. Hence, even if I did want to curry favor with those companies, that would not lead me (or anyone else) to take a particular position on the divestment issue.

The more important question to ask is whether my research, teaching, and outreach initiatives on climate change economics and policy have been biased by my having carried out consulting assignments for an oil company and trade association (two of a hundred outside engagements over the past several years)? That is, if there really was a conflict of interest, then in an effort to make those companies happy, I would presumably pull my punches regarding recommendations of what does matter to those companies – public policies that will reduce their profits by increasing their costs of doing business and/or by reducing demand for their products. But nothing could be further from the truth!

For a decade or more, my research, teaching, and outreach have focused on more enlightened, stronger, and better climate change policies. I have been outspoken in regard to the pressing need for well-designed carbon-price instruments at the national and sub-national levels, and for the need for better, more effective international climate policies, both under the United Nations Framework Convention on Climate Change and through other venues. This is reflected in my published research, my teaching, and my outreach efforts, including through this blog.

It is ironic, offensive, and sad that anyone would suggest that my support of Harvard’s divestment position is somehow tied to my outside engagements. That suggestion – and the recent threats I have received – defies logic and is contradicted by the record.

The IPCC at a Crossroads

Love it or hate it, the Intergovernmental Panel on Climate Change (IPCC) plays a very important role in global climate change policy around the world. This is because its reports enjoy a degree of credibility that renders them influential for public opinion, and – more important – it is because the reports are accepted as the definitive source on all matters climate change by international negotiators working under the United Nations Framework Convention on Climate Change (UNFCCC). In previous essays at this blog, I have written both about problems with the IPCC process (Is the IPCC Government Approval Process Broken?, April 25, 2014) and about its significant merits (Understanding the IPCC: An Important Follow-Up, May 3, 2014; The Final Stage of IPCC AR5 – Last Week’s Outcome in Copenhagen, November 4, 2014).

The IPCC is now at a crossroads. Its Fifth Assessment Report (AR5) is now complete and largely successful (see my previous essays cited above). But, like many large institutions, the IPCC has experienced severe growing pains. Its size has increased to the point that it has become cumbersome, it sometimes fails to address the most important issues, and – most striking of all – it is now at risk of losing the participation of the world’s best scientists, due to the massive burdens that participation entails.

The good news is that this is a moment of considerable opportunity for addressing these and other challenges, because the direction of future assessments is now open for discussion and debate. Indeed, as I write this, the 195 member countries of the IPCC are meeting in plenary in Nairobi, Kenya, to discuss – among other topics –the future of the IPCC.

A Potentially Important Meeting on Another Continent

Just one week before the Kenya IPCC sessions commenced, another, much smaller meeting took place about 4,000 miles northwest of Nairobi – in Berlin, Germany. Twenty-four participants with experience with the IPCC met in Berlin for a three-day workshop on the future of international climate-assessment processes, from February 18^th through 20^th. The aim of the workshop was to take stock and reflect on lessons learned in past assessments – including those of the IPCC – in order to identify options for improving future assessment processes.

Participants included social scientists who contributed in various capacities to AR5 and earlier IPCC assessments, users of IPCC reports (from national governments and intergovernmental organizations), and representatives of other stakeholder groups. Participants came from both developed and developing countries, and discussions were held under Chatham House rules, with no public attribution of any comments to individuals.

The workshop (titled “Assessment and Communication of the Social Science of Climate Change: Bridging Research and Policy”) was co-organized by four academic and research organizations based in Europe and the United States: Fondazione Eni Enrico Mattei (FEEM, Italy), the Harvard Project on Climate Agreements (USA), the Mercator Research Institute on Global Commons and Climate Change (MCC, Germany), and the Stanford Environmental and Energy Policy Analysis Center (USA). FEEM, the Mercator Institute, and the Alfred P. Sloan Foundation provided financial support for the workshop.

Possible Ways Forward for the IPCC

As I noted above, now is a moment of considerable opportunity, because the future of the IPCC is open for discussion and debate, including at the meeting taking place this week in Nairobi. In this context, two of my co-organizers – Carlo Carraro of FEEM and Charles Kolstad of Stanford – and I have written a brief memorandum, based on our reflections on the Berlin workshop discussion. We describe a set of specific challenges and opportunities facing the IPCC, and provide options for improving the IPCC’s process of assessing scientific research on climate change. The complete memorandum is available here for your reading, and so I won’t attempt to summarize the highlights in this blog post, but simply note that our analysis focuses on five areas:

Improving integration and coordination across IPCC working groups, and enhancing the interface between scientists and governments;
Enhancing the interface between the IPCC and various social scientific disciplines and communities;
Increasing efforts – in innovative ways – to facilitate contributions of expertise from developing countries;
Increasing the efficiency of IPCC operations and ensuring the scientific integrity of its work products through targeted organizational improvements; and
Strengthening outreach and communications.

I should also note that Carraro served as Vice-Chair, and Kolstad and I served as Coordinating Lead Authors, all of Working Group III of the IPCC’s Fifth Assessment Report, but our organizing of the workshop and our authoring of this new memorandum were carried out in our roles as researchers, and completely independently of our former official capacities with the IPCC.

The Path Ahead

The memorandum is only the first of several products that will be forthcoming from this initiative. Over the coming months, we will produce a comprehensive report from the workshop (in time for the IPCC’s next meeting in October of this year, as well as the subsequent UNFCCC meeting in Paris in December). When that report is available, I will be pleased to bring it to the attention of readers of this blog.