Can the Durban Climate Negotiations Succeed?

Two weeks of international climate negotiations begin today in Durban, South Africa.  These are the Seventeenth Conference of the Parties (COP-17) of the United Nations Framework Convention on Climate Change (UNFCCC).  The key challenge at this point is to maintain the process of building a sound foundation for meaningful, long-term global action, not necessarily some notion of immediate, highly-visible triumph. In other words, the answer to the question of whether the Durban climate negotiations can succeed depends — not surprisingly — on how one defines “success.”

Let’s Place the Climate Negotiations in Perspective

Why do I say (repeatedly, year after year) that the best goal for the climate talks is to make progress on a sound foundation for meaningful, long-term global action, not some notion of immediate triumph?  The reason is that the often-stated cliche about the American baseball season — that it’s a marathon, not a sprint — applies even more so to international climate change policy.  Why?

First, the focus of scientists (and policy makers) should be on stabilizing concentrations at acceptable levels by 2050 and beyond, because it is the accumulated stock of greenhouse gas emissions — not the flow of emissions in any year — that are linked with climate consequences.

Second, the cost-effective path for stabilizing concentrations involves a gradual ramp-up in target severity, to avoid rendering large parts of the capital stock prematurely obsolete.

Third, massive technological change is the key to the needed transition from reliance on carbon-intensive fossil fuels to more climate-friendly energy sources.  Long-term price signals (most likely from government policies) will be needed to inspire such technological change.

Fourth and finally, the creation of long-lasting international institutions is central to addressing this global challenge.

For all of these reasons, international climate negotiations will be an ongoing process, not a single task with a clear end-point.  Indeed, we should not be surprised that they proceed much as international trade talks do, that is, with progress only over the long term, building institutions (the GATT, the WTO), yet moving forward in fits and starts, at times seeming to move backward, but with progress in the long term.

So, the bottom-line is that a sensible goal for the international negotiations in Durban is progress on a sound foundation for meaningful long-term action, not some notion of immediate “success.”  This does not mean that there should be anything other than a sense of urgency associated with the work at hand, because it is important.  But it does mean that we should keep our eyes on the prize.

How Can the Durban Negotiators Keep their Eyes on the Prize?

The keys to success — real, as opposed to symbolic success — in Durban depend upon four imperatives.

1.  Embrace Parallel Processes

The UNFCCC process must embrace the parallel processes that are carrying out multilateral discussions (and in some cases, negotiations) on climate change policy:  the Major Economies Forum or MEF (a multilateral venue for discussions – but not negotiations – outside of the UNFCCC, initiated under a different name by the George W. Bush administration in the United States, and continued under a new name by the Obama administration, for the purpose of bringing together the most important emitting countries for candid and constructive discussion and debate); the G20 (periodic meetings of the finance ministers – and sometimes heads of government – of the twenty largest economies in the world); and various other multilateral and bilateral organizations and discussions.

The previous leadership of the UNFCCC seemed to view the MEF, the G20, and most other non-UNFCCC forums as competition – indeed, as a threat.  Fortunately, the UNFCCC’s new leadership under Executive Secretary Christiana Figueres (appointed by UN Secretary-General Ban Ki-moon in May of 2010) has displayed a considerably more positive and pragmatic attitude toward these parallel processes.  That’s a positive sign.

2.  Consolidate Negotiation Tracks

There are now three major, parallel processes operative:  first, the UNFCCC’s KP track (negotiating national targets for a possible second commitment period – post-2012 – for the Kyoto Protocol); second, the LCA track (the UNFCCC’s negotiation track for Long-term Cooperative Action, that is, a future international agreement of undefined nature); and third, the Cancun Agreements from COP-16 a year ago (based upon the Copenhagen Accord, negotiated and noted at COP-15 in Copenhagen, Denmark, in December, 2009).  Consolidating these three tracks into two tracks (or better yet, one track) would be another significant step forward.

The primary way for this to happen would be for the LCA negotiations to focus on the ongoing work of putting more meat on the bones of the Cancun Agreements, which — along with the Copenhagen Accord — marked an important step forward by blurring for the first time (although not eliminating) the unproductive and utterly obsolete distinction in the Kyoto Protocol between Annex I and non-Annex I countries.  (Note that more than 50 non-Annex I countries have greater per capita income than the poorest of the Annex I countries.)

In particular, the UNFCCC principle of  “common but differentiated responsibilities” could be made meaningful through the dual principles that:  all countries recognize their historic emissions (read, the industrialized world); and all countries are responsible for their future emissions (think of the rapidly-growing, large, emerging economies of China, India, Brazil, Korea, Mexico, and South Africa).

As I’ve said before, this would represent a great leap beyond what has become the “QWERTY keyboard” (that is, unproductive path dependence) of international climate policy:  the distinction in the Kyoto Protocol between the small set of Annex I countries with quantitative targets, and the majority of countries in the world with no responsibilities.  A variety of policy architectures — including but not limited to the Cancun Agreements — could build on these dual principles and make them operational, beginning to bridge the massive political divide that exists between the industrialized and the developing world.

At the Harvard Project on Climate Agreements — a multi-national initiative with some 35 research projects in Australia, China, Europe, India, Japan, and the United States — we have developed a variety of architectural proposals that could make these dual principles operational.  (See, for example:  “Global Climate Policy Architecture and Political Feasibility: Specific Formulas and Emission Targets to Attain 460 PPM CO2 Concentrations” by Valentina Bosetti and Jeffrey Frankel; and “Three Key Elements of Post-2012 International Climate Policy Architecture” by Sheila M. Olmstead and Robert N. Stavins.)

3.  Make Progress on Narrow, Focused Agreements

A third area of success at the Durban negotiations could be realized by some productive steps with specific, narrow agreements, such as on REDD+ (Reduced Deforestation and Forest Degradation, plus enhancement of forest carbon stocks).  Other areas where talks are moving forward, although somewhat more slowly, are finance and technology, particularly in the context of adding meat to the bones of the Cancun Agreements.

4.  Maintain Sensible Expectations

Finally, it is important to go into these annual negotiations with sensible expectations and thereby effective plans.  As I said at the outset, negotiations in this domain are an ongoing process, not a single task with a clear end-point.  The most sensible goal for Durban is progress on a sound foundation for meaningful long-term action, not some notion of immediate triumph.  The key question is not what Durban accomplishes in the short-term, but whether it helps put the world in a better position five, ten, and twenty years from now in regard to an effective long-term path of action to address the threat of global climate change.

Wait, What About the Kyoto Protocol?

Those who follow these international negotiations closely — including my colleagues on the ground in Durban — are no doubt wondering why I haven’t said something about the 900-pound gorilla in the closet:  the fact that the Kyoto Protocol’s first (and so far only) commitment period runs from 2008 through 2012, and so a decision needs to be reached on a possible second (post-2012) commitment period for the Protocol.

Yes, in addition to the LCA (Cancun) track, the Kyoto Protocol (KP) track of negotiations remains.  A decision regarding a possible extension (and presumably an enhancement) of the Kyoto Protocol’s emission-reduction targets for the industrialized (Annex I) countries has been punted annually to the next set of negotiations — from Bali in 2007, to Poznan in 2008, to Copenhagen in 2009, to Cancun in 2010, and now to Durban in 2011.  It can’t be delayed any longer, because the necessary process of ratification by individual nations would itself take at least a year to complete.

Keeping the Kyoto Protocol going (and with more stringent targets for the Annex I countries) is very important to the non-Annex I countries, sometimes referred to — inaccurately — as the developing countries.  I don’t blame them.  An approach that provides benefits (reduced climate damages, as well as financial transfers) for the non-Annex I countries without their incurring any costs is surely an attractive route for those nations.

Is a Second Commitment Period for the Kyoto Protocol Feasible?

Putting aside the possible merits of a second commitment period for the Kyoto Protocol, we can ask simply whether it’s in the cards:  is it feasible?

Japan, Russia, and Canada have formally announced that they will not take up targets in a second commitment period.  Australia, despite its recent domestic climate policy action, seems unlikely to make a significant commitment.  Is Europe (plus New Zealand) on its own credible or feasible?  Maybe yes, maybe no.

The “yes” part of the answer comes from the fact that Europe has already committed itself to serious emissions reductions through the year 2020 under the European Union Emission Trading Scheme (EU ETS).  This will go forward — barring a change of heart by the EU — with or without a second commitment period for the Kyoto Protocol.  That said, Europe’s compliance costs under the EU ETS will be much less than otherwise if offsets continue to be made available from non-Annex I countries under the Kyoto Protocol’s Clean Development Mechanism (CDM).  This might suggest that the EU has a significant motivation to keep the Kyoto Protocol going.

But international law scholars — such as Professor Daniel Bodansky of Arizona State University‘s Sandra Day O’Connor College of Law — maintain that the Kyoto Protocol (and its CDM) continues as an institution of law whether or not a second commitment period is put in place.  Hence, it’s conceivable that the EU could have its cake and eat it too:  an ongoing Kyoto Protocol without a second commitment period.  And the political pressure on Brussels from the EU’s member states — and from European businesses — might make it difficult for the EU to sign up for a new series of commitments given the obvious absence in such an arrangement of the United States, Russia, Japan, Canada, and — of course — China and the other emerging economies.

A Forecast

This highly contentious issue of a possible second commitment period for the Kyoto Protocol may come to dominate the talks in Durban.  This would be unfortunate, because it would simultaneously reduce the likelihood of the negotiators making progress on a sound foundation for meaningful, long-term global action.  It would probably also have the effect of producing some drama in the form of highly-charged debates, and possible threats by some delegations to walk out of the negotiations.  For this reason, despite the weather, Durban may come to resemble Copenhagen more than Cancun.

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Further Reading

The Harvard Project on Climate Agreements has pulled together an archive of relevant publications, which we call “The Durban Branch” of our climate library.  We hope it will be helpful for those gathered in Durban or watching from afar.

Also, a number of previous essays I have written and posted at this blog will be of interest to those who wish to follow developments at the Seventeenth Conference of the Parties of the UN Framework Convention on Climate Change in Durban.  Here are links, in reverse chronological order:

Canada’s Step Away From the Kyoto Protocol Can Be a Constructive Step Forward

A Wave of the Future: International Linkage of National Climate Change Policies

Why Cancun Trumped Copenhagen

What Happened (and Why): An Assessment of the Cancun Agreements

Defining Success for Climate Negotiations in Cancun

Three Pillars of a New Climate Pact

Can Countries Cut Carbon Emissions Without Hurting Economic Growth?

Approaching Copenhagen with a Portfolio of Domestic Commitments

Defining Success for Climate Negotiations in Copenhagen

Only Private Sector Can Meet Finance Demands of Developing Countries

Chaos and Uncertainty in Copenhagen?

What Hath Copenhagen Wrought? A Preliminary Assessment of the Copenhagen Accord

Another Copenhagen Outcome: Serious Questions About the Best Institutional Path Forward

Opportunities and Ironies: Climate Policy in Tokyo, Seoul, Brussels, and Washington

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Canada’s Step Away From the Kyoto Protocol Can Be a Constructive Step Forward

Canada confirmed this week that it will not take on a target under an extension of the Kyoto Protocol following the completion of the first commitment period, 2008-2012.  Given that Canada is likely to miss by a wide margin its current target under the first commitment period, this decision may not be surprising, but it is nevertheless important.  More striking, it may actually turn out to be a positive and constructive step forward in the drive to address global climate change through meaningful international cooperation.  Why do I say that?

The Current Situation

The Kyoto Protocol, which essentially expires at the end of 2012, divides the world into two competing economic camps.  Emission reductions are required for only the small set of “Annex I countries” (essentially those nations that used to be thought of as comprising the industrialized world).  Such reductions will not reduce global emissions, and whatever is achieved would be at excessive cost, because of having left so many countries and so many low-cost emissions-reduction opportunities off the table.  Furthermore, that dichotomous distinction is by no means fair:  more than 50 non-Annex I countries now have higher per capita incomes than the poorest of the Annex I countries.  (I have written about this and other issues surrounding the Kyoto Protocol in the past:  Defining Success for Climate Negotiations in Cancun; Defining Success for Climate Negotiations in Copenhagen; Three Pillars of a New Climate Pact).

The United States did not ratify the Kyoto Protocol, and has made it clear that it will not take on a target under a second commitment period.  The U.S. position continues to be that a considerably broader agreement is necessary – one that includes commitments not only from the Annex I (industrialized) countries, but also from the key emerging economies, such as China, India, Brazil, Korea, Mexico, and South Africa.

For much the same reason, Russia and Japan announced last year that they would not take on post-2012 commitments under the Kyoto Protocol.  Further, it is unlikely that Australia will take on such a commitment under Kyoto, essentially leaving the European Union on its own.

On the other hand, the Kyoto Protocol is enthusiastically embraced by the non-Annex I countries (sometimes inaccurately characterized as the “developing countries”), because it holds out the promise of emissions reductions by the wealthiest nations without any responsibilities (costs) borne by others, including the emerging economies.

The Path from Copenhagen to Cancun to Durban

Year after year, the Conference of the Parties to the United Nations Framework Convention on Climate Change has failed to reach agreement on a second commitment period for the Kyoto Protocol.  Most recently, in December, 2010, the issue was punted from the annual conference held in Cancun, Mexico, to the next conference, scheduled for December, 2011, in Durban, South Africa.

Because Durban provides the last opportunity to set up post-2012 targets (with time remaining for national ratification actions), it has been anticipated that the negotiations in Durban will re-ignite the divisiveness and recriminations that highlighted the Copenhagen negotiations in 2009 – with verbal hostilities between Annex I countries and non-Annex I countries dominating the discussions at the expense of any other considerations or meaningful actions.

A Positive and Constructive Step Forward

 

The decision just announced at meetings in Bonn, Germany, by the Canadian delegation that Canada will not take on a target in a second commitment period of the Kyoto Protocol can be a very constructive step forward.  This is because it greatly reduces the risk that this year’s annual meeting of the Conference of the Parties in Durban will be dominated by acrimonious debates about a second commitment period for the Kyoto Protocol.

On the contrary, this announcement should encourage the non-Annex I (“developing”) countries, which have been insisting on a second commitment period, to begin to accept the reality that with the United States, Japan, Russia, and now Canada on record as not endorsing a second commitment period for the Kyoto Protocol, it is infeasible for the European Union to go it alone.  (Indeed, one might suspect that Australia and most European nations are privately pleased by Canada’s announcement.)

The reality is that the world will be better off by focusing on sensible alternatives under the Long-Term Cooperative Action track of the UN negotiations and by “getting real” about post-Kyoto international climate policy architecture for the long term, such as by putting some additional meat on the Cancun Agreements and by considering any supplemental and sensible architectures the various parties wish to discuss.  (For previous posts on the Cancun Agreements, see:  Why Cancun Trumped Copenhagen; What Happened (and Why):  An Assessment of the Cancun Agreements; Defining Success for Climate Negotiations in Cancun.  For descriptions of a wide range of potential global climate policy architectures — ranging from top-down to bottom-up — see the diverse publications of the Harvard Project on Climate Agreements.)

Next Steps

At Cancun, it was encouraging to hear fewer people holding out for a commitment to another phase of the Kyoto Protocol, but it was politically impossible to spike the idea of extending the Kyoto agreement entirely.  Instead, it was punted to the next gathering in Durban.  Otherwise, the Cancun meeting could have collapsed amid acrimony and recriminations reminiscent of Copenhagen.

Usefully, the Cancun Agreements recognize directly and explicitly two key principles:  (1) all countries must recognize their historic emissions (read, the industrialized world); and (2) all countries are responsible for their future emissions (think of those with fast-growing emerging economies).  In important ways, this helps move beyond the old Kyoto divide.

The acceptance of the Cancun Agreements last December suggested that the international community may have begun to recognize that incremental steps in the right direction are better than acrimonious debates over unachievable targets.  Canada’s announcement should help advance that recognition, and can thereby lead to vastly more productive talks this year in Durban.

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A Wave of the Future: International Linkage of National Climate Change Policies

The latest rage in Washington policy discussions these days (that’s relevant to climate change) is renewed interest in renewable electricity standards, this time in the form of so-called “clean energy standards.”  I’ve written about this policy approach recently at this blog (Renewable Energy Standards: Less Effective, More Costly, but Politically Preferred to Cap-and-Trade?, January 11, 2011), and will do so again in the near future, but for today I want to turn to an important issue – for the long term – on the related topic of the international dimensions of climate change policy.

The Current State of Affairs

Despite the death in the U.S. Senate last year of serious consideration of an economy-wide cap-and-trade system for carbon dioxide (CO2) emissions – and the apparent political hiatus of such consideration at least until after the November 2012 elections – a major cap-and-trade system for greenhouse gas (GHG) emissions is in place in the European Union; similar systems are in place or under development in New Zealand, California, and several Canadian provinces; systems are being considered at the national level in Australia, Canada, and Japan; and a global emission reduction credit scheme – the Clean Development Mechanism (CDM) – has an enthusiastic and important constituency of supporters in the form of the world’s developing countries.

So, despite the fact that there has been an undeniable loss of momentum due to recent political developments in Australia, Japan, and the United States, it remains true that cap-and-trade is still the most likely domestic policy approach for CO2 emissions reductions throughout the industrialized world, given the rather unattractive set of available alternative approaches.  This makes it important to think about the possibility of linking these national and regional cap-and-trade systems in the future.  Such linking occurs when the government that maintains one system allows regulated entities to use allowances or credits from other systems to meet compliance obligations.

Thinking About Linkage

In 2007, with support from the International Emissions Trading Association (IETA) and the Electric Power Research Institute (EPRI), Judson Jaffe and I analyzed the opportunities and challenges presented by linking tradable permit systems.  Jaffe was then at Analysis Group in Boston, and is now at the U.S. Department of the Treasury.  We presented our findings at the thirteenth Conference of the Parties of the U.N. Framework Convention on Climate Change in Bali, Indonesia, in December, 2007.  In 2010, Matthew Ranson (a Ph.D. student in Public Policy at Harvard), Jaffe, and I expanded on these ideas in an article that was published in Ecology Law Quarterly, “Linking Tradable Permit Systems:  A Key Element of Emerging International Climate Policy.” In today’s blog post, I summarize the highlights of this complex, yet important topic.

First, for anyone new to this territory, let me review the basic facts.  Tradable permit systems fall into two categories:  cap-and-trade and emission reduction credits.  Under cap-and-trade (CAT), the total emissions of regulated sources are capped and the sources are required to hold allowances equal to their emissions.  Under a credit system, entities that voluntarily undertake emission reduction projects are awarded credits that can be sold to participants in cap-and-trade systems.

The Merits of Linking

By broadening markets for allowances and credits, linking increases the liquidity and improves the functioning of markets.  Linking can reduce the costs of the linked systems by making it possible to shift emission reductions across systems.  Just as allowance trading within a system allows higher-cost emission reductions to be replaced by lower-cost reductions, trading across systems allows higher-cost reductions in one system to be replaced by lower-cost reductions in another system.

Other Implications

Along with the cost savings it can offer, linking has other implications that warrant serious consideration.  Under some circumstances, linked systems collectively will not achieve the same level of emission reductions as they would absent linking.  This can result either from a link’s impact on emissions under the linked systems, or from its impact on emissions leakage from those systems.  Linking also has distributional impacts across and within systems.  And linking can reduce the control that a country has over the impacts of its tradable permit system.  In particular, when a domestic CAT system is linked with another CAT system, decisions by the government overseeing the other system can influence the domestic system’s allowance price, distributional impacts, and emissions.

By the way, linkage can also occur among a heterogeneous set of domestic policy instruments, including carbon taxes and various types of regulation, although the linking is more challenging under such circumstances.  On this, see “Linking Policies When Tastes Differ: Global Climate Policy in a Heterogeneous World,” a discussion paper by Gilbert Metcalf, Department of Economics, Tufts University,  and David Weisbach, University of Chicago Law School, for the Harvard Project on Climate Agreements.

Concerns About Linking

Importantly, trading brought about by unrestricted links between CAT systems will lead to the automatic propagation of certain design elements, including:  offset provisions and linkages with other systems; banking and borrowing of allowances across time; and safety-valve provisions.  If these provisions, sometimes characterized as cost-containment measures, are present in one of the linked systems, they will automatically be made available to participants in the other system.

In the near-term, some links will be more attractive and easier to establish than others.  Given the design-element propagation implications of two-way links between cap-and-trade systems, to facilitate such links it may be necessary to harmonize some design elements.  And in some cases, it may be necessary to establish broader international agreements governing aspects of the design of linked cap-and-trade systems beyond mutual recognition of allowances.

An Emerging De Facto International Climate Policy Architecture?

Whereas some two-way links between cap-and-trade systems may thus take more time to establish, in the near-term one-way links between cap-and-trade and credit systems likely will be more attractive and easier to establish.  A one-way link with a credit system may offer a cap-and-trade system greater cost savings than a two-way link with another cap-and-trade system.  Also, such one-way links can only reduce allowance prices in the cap-and-trade system, giving a government greater control over its system than if it established a two-way link with another cap-and-trade system.  The additionality problem is an important concern associated with such links, but it can be managed – to some degree – through the criteria established for awarding or recognizing credits.

Most important, if emerging cap-and-trade systems link with a common credit system, such as the CDM, this will create indirect links among the cap-and-trade systems.  Through the indirect links that they create, such one-way linkages can achieve much of the near-term cost savings and risk diversification that direct two-way links among cap-and-trade systems would achieve.  And they can do this without requiring the same foundation that likely would be needed to establish direct two-way links, such as harmonization of cost-containment measures.  Such linkage may well emerge as part of the de facto post-Kyoto international climate policy architecture, and is fully consistent with the bottom-up, decentralized approach of the Cancun Agreements.

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For much more detailed discussions, here are some publications available on the web that describe various aspects of linkage:

Jaffe, Judson, Matthew Ranson, and Robert Stavins.  “Linking Tradable Permit Systems:  A Key Element of Emerging International Climate Policy Architecture.” Ecology Law Quarterly 36(2010):789-808.

Jaffe, Judson, and Robert Stavins.  “Linkage of Tradable Permit Systems in International Climate Policy Architecture.” The Harvard Project on International Climate Agreements, Discussion Paper 08-07, Cambridge, Massachusetts, September, 2008.

Jaffe, Judson, and Robert Stavins. Linking a U.S. Cap-and-Trade System for Greenhouse Gas Emissions: Opportunities, Implications, and Challenges. Washington, D.C.: AEI-Brookings Joint Center for Regulatory Studies, January 2008.

Jaffe, Judson, and Robert Stavins.  Linking Tradable Permit Systems for Greenhouse Gas Emissions: Opportunities, Implications, and Challenges. Prepared for the International Emissions Trading Association, Geneva, Switzerland. November, 2007.

Also, this issue of linkage among tradable permit systems has come up previously in a number of my essays at this blog:

AB 32, RGGI, and Climate Change: The National Context of State Policies for a Global Commons Problem

The Real Options for U.S. Climate Policy

What Hath Copenhagen Wrought? A Preliminary Assessment of the Copenhagen Accord

Only Private Sector Can Meet Finance Demands of Developing Countries

Approaching Copenhagen with a Portfolio of Domestic Commitments

Worried About International Competitiveness? Another Look at the Waxman-Markey Cap-and-Trade Proposal

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