Weathervane: A Climate Policy Blog from Resources for the Future

Sep15

WikiLeaks Before Durban: Annoyance Or Game Changer?

Last year a WikiLeaks cable emerged during the United Nations Framework Convention on Climate Change (UNFCCC) talks in Cancun without much disturbance to the negotiating process.

The information included alleged bribery in Copenhagen and accusations that the BASIC group (Brazil, South Africa, India and China) were trying to block the negotiations. As I said then, some of this information was not really new, but did provide an interesting glimpse of

what happens behind the scenes.

(Image by: UN Climate Change)

WikiLeaks has released further cables since. A few stand out to those of us in the climate policy world and could very well have an impact on negotiations later this year in Durban, or at least shed light on the negotiating tactics of major emerging economies.

“[India’s] Deputy Planning Commissioner Montek Singh Ahluwalia told [United States climate envoy Todd] Stern that the developing countries' rhetoric regarding historical responsibility was a negotiating tool and while India publicly projected that it had no intention of reducing emissions, it was putting in place measures to deploy wind and solar energy that would reduce its emissions from business as usual.”

Once again, the cable reveals what some already know. It is clear that India is reducing its own carbon emissions. India is set to reduce GDP emission intensity 20 percent by 2020 and is starting a national market-based mechanism called Perform, Achieve and Trade (PAT) that will set efficiency levels for the country’s top polluters that account for 54 percent of the country’s energy consumption.

However, the biggest argument that developing countries use in the UNFCCC is the historic emissions issue. With the end of the Kyoto Protocol quickly approaching and countries deciding on targets in a post-Kyoto context, having this behind-the-scenes chatter aired out may make it difficult to further use it in climate talks.

Another interesting cable points out that India’s Environment Minister Jairam Ramesh was more than willing to submit domestic mitigation commitments. Still, he was unhappy with the way the Copenhagen Accord’s language was initially phrased, making targets legally binding and replacing the two-track process of the Kyoto Protocol and Bali Road Map, again leading back to the notion that developing countries want to reduce carbon emissions domestically without the legal implications of a global agreement.

These cables open the door to the often back room climate talks, but the November UNFCCC Conference of Parties in Durban will reveal whether WikiLeaks cables actually shake up diplomacy or make the atmosphere just a little awkward.

Lynann Butkiewicz is Managing Editor of Weathervane.

Published: Sep-15-11

Sep13

Will A Trans-Regional Carbon Market Go Global?

Australian Prime Minister Julia Gillard introduced plans for the country’s carbon tax today in Parliament. While Australia’s price on carbon is still struggling to gain public support domestically, elsewhere countries are optimistic about its adoption. The European Union has expressed interest in linking its Emissions Trading Scheme (ETS) with Australia and will meet to discuss the details.

''We have been reducing emissions - that is a reality - but also we believe that this kind of regulation and this kind of market is the

(Image via iStock)

most cost-effective way of promoting innovation and [promoting] new business in terms of green growth,'' European Commission President Jose Manuel Barroso said.

This possible first trans-regional carbon trading scheme may be part of a larger trend in climate policy that has been developing since the United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties (COP15) in Copenhagen. Instead of one grandiose global deal, countries are looking to lower emissions domestically first. Once this happens, they may be more inclined to then participate in other markets. Colleagues and I have written previously about building blocks at the international negotiations. This takes on the same step-by-step approach, negotiating on smaller deals before a global solution takes shape. While the EU ETS was designed to link up with other trading schemes, it has been alone thus far. The move with Australia can be the first step toward realizing its initial design. While it’s the first time two regions will have a linked carbon market, it is not surprising that it is the EU and Australia. Their renewables targets are similar and schemes are compatible.

Following this trend, it will be interesting to see if other countries join this linked market. China is starting pilot carbon markets in its provinces and should have a fully-fledged national carbon trading scheme by 2015. China has expressed interest in Australia’s carbon price, noting that it will watch and learn lessons for its own scheme.

“What happens in Australia is quite interesting. So we are looking at that and personally I strongly hope that Australia can go ahead fast and take the lead in the world. I think many other countries can really learn from this process,” said Dr. Jiang Kejun from China's Energy Research Institute.

In the past, China has shown restraint when it comes to international emissions monitoring. However, as Frank Jotzo said last week, pairing markets will reduce costs overall, creating more of an incentive for China to take part. Australia already has ties to China with coal and energy, so linking an emissions trading scheme might not be that far-fetched an idea.

As RFF Fellow Harrison Fell said previously , China’s carbon market may provide a boost to the United States to implement a national carbon trading scheme. Furthermore, if China combines its market with the EU and Australia then it is even more of an incentive for a carbon price in the United States. However, given the current political climate, the more probable outcome is California linking its scheme with the EU and Australia, and the EU has already stated interest.

"We told Governor [Jerry] Brown that we would very much like to co-operate with them so that no matter how California constructs their scheme, it is linkable to the way we do things in Europe. It doesn't have to be identical, just compatible,” said EU’s climate commissioner Connie Hedegaard.

If California joins the EU ETS, that is even more of an incentive for the rest of the U.S. to act. However, unlike Australia, the California scheme may not be compatible with the EU market.

Despite these concerns, officials in the EU are still looking into linking California and Australia’s carbon markets to the EU’s scheme. If this happens, it will create the first trans-regional market that could have a domino effect elsewhere.

Lynann Butkiewicz is Managing Editor of Weathervane.

Published: Sep-13-11

Apr11

One Step Closer (Two Steps Back) To Durban

The next United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties (COP) in Durban, South Africa may be many months away, but last week provided a glimpse into what may be expected.

The first meeting of the UNFCCC this year wrapped up in Bangkok, and while there was hope coming into the conference that agreements on an agenda could be reached, the bickering from COPs past re-emerged.

The same arguments were re-hashed. (Image by: UN Climate Talks)

Before Cancun – and even after –

everyone seemed to be on the same page about how things were to proceed in the UNFCCC process. The main issue that was agreed upon was to not tackle everything at once for a comprehensive agreement like the one that was attempted in Copenhagen in 2009. A building block approach was decided upon and because of that, there was some progress on certain issues like climate finance and technology transfer in Cancun.

However, it seems as though the conference in Bangkok was one step forward, two steps backward.

As we have said throughout the week, developing countries wanted to focus on the future of the Kyoto Protocol, while developed countries wanted to progress on the agreements made in Cancun.

United States climate envoy Todd Stern made the controversial comment that he didn’t think “it’s necessary that there be internationally binding emission caps as long as you’ve got national laws and regulations. What I am saying is it’s not doable.”

Weathervane and others have been talking and writing about this for some time –that climate change needs to be dealt with on multiple levels and in multiple forums. Still, this comment made in New York seemed to stir up the conference in Bangkok and held the attention of many delegates and the media.

This is all background noise to the real issue. Can the arguments regarding what needs to be discussed be settled before Durban?

All can agree that the next version of a Kyoto-type-Protocol will take some time. U.S. deputy climate envoy Jonathan Pershing talked about a symmetrical approach, where the U.S. and China (although China was never mentioned) have similar responsibilities. The U.S. doesn’t seem willing to budge on this issue. And the Republican-controlled House of Representatives in Congress will most certainly not sign off on a treaty where China doesn’t have similar responsibilities.

So, while those issues are being ironed out, the meetings in Bangkok should have continued where Cancun left off. If time is spent building upon the small agreements, it may be easier to agree on a larger deal.

But now, everything is back on the table again. Don’t forget to throw in issues that weren’t discussed from the Bali Road Map too. Everyone has different priorities for the agenda of the UNFCCC, but instead of talking about literally everything, delegates should realize that tackling the low-hanging fruit can then be followed by the outstanding issues, such as legal form and measurement, reporting, and verification (MRV).

On the road to Durban, the next stop is Bonn, Germany in June. As Stern said, there are other forums to discuss climate change in the meantime, so progress is coming, but only once the delegates start to think in a streamlined approach.

Lynann Butkiewicz is Managing Editor of Weathervane.

Published: Apr-11-11

Feb23

The Future Of The Kyoto Protocol: Part 3

In a four-part series, Raymond Kopp, Senior Fellow in RFF's Center for Climate Change and Electricity Policy, takes a look at the international negotiating process under the United Nations Framework Convention on Climate Change (UNFCCC), from where it started to where it’s going.

(Image by: Guardian Carbon Atlas)

When President Obama took office, evidence of climate change was rapidly accumulating and he wanted to show American leadership toward a global response. But most of the world’s governments had been toiling along for years in a United Nations process that was centered on the concept of a treaty legally binding each of the developed countries to cut greenhouse gas emissions.

The chance that the U.S. Senate would ratify that kind of a treaty was zero. The Senate had made that clear years before. Senators of both parties were focused on economic competition with China, and were not going to subject the United States to rules that did not apply equally to the Chinese. And China was adamantly opposed to any attempt by international authority to impose limits that would affect the growth of its economy.

Toward the end of his term, President George W. Bush began to experiment with the possibilities of circumventing the UN process by moving negotiations into a much smaller forum of major economic powers. One result was vehement objections from the smaller countries who feared being left out of the decisions altogether.

The solution that seems to be emerging under Obama is a straddle between the two approaches. The UN procedure continues, with nearly all of the General Assembly’s 192 members taking part, useful technical discussions under way, and the effort nominally directed toward extension of the present ineffectual treaty. But the biggest countries seem to have abandoned the idea of a legal treaty. Instead, they are moving to a process of pledge and review, under which each country will state its own goals for reducing greenhouse gas emissions, but with international reporting.

The clearest outline of the pledge and review process is the document known as the Copenhagen Accord, agreed among the United States and four leading developing countries - China, India, Brazil and South Africa - in the last hours of the UN’s 2009 Copenhagen conference. The key provision says that all countries, both developed and developing, have responsibilities to cut their greenhouse gas emissions. That’s a basic difference from the UN’s treaty, the Kyoto Protocol, which applies emissions limits only to developed countries. Also, unlike Kyoto, the accord allows each country to decide how much it will cut, and those cuts are to be posted in a UN registry.

Some of the developing countries had denounced Kyoto and the whole idea of emissions limits and verification as an invasion of their sovereignty. The accord steps carefully around that issue. It says that each developing country will measure, report and verify its own emissions. They are to make the results public, “with provisions for international consultations and analysis under clearly defined guidelines that will ensure that national sovereignty is respected.”

As the Copenhagen conference ended, the first reaction to the accord was pretty sour. Among all of the countries that had been left out of the small circle of authors, there was much resentment and a fear that only the big countries were going to be in on the decisions. That may well turn out to be the case.

But the big countries have devoted a good deal of effort to keep everyone at the table. In the most recent of the UN’s annual climate change conferences, last December in Cancun, one notable result

(Image by: David McCandless)

emerged that gave shape to a vague reference in the accord of $100 billion a year in aid from the developed countries to developing countries, to cut emissions and to adapt to global warming. Basic questions about this fund remain to be answered. There’s no explicit understanding yet regarding who will pay how much, or exactly how the money will be distributed. But the work so far seems to have gone a long way to reassure the developing countries that they have not been forgotten.

At this point, the focus of policymaking is no longer a legally-binding treaty like Kyoto, but rather a much less formal, more flexible system of unilateral commitments. As the critics point out, the new method provides less assurance than, in theory, a binding treaty. But since a treaty won’t get through the U.S. Senate, pledge and review seems, as a practical matter, to promise greater benefits in dealing with an increasingly urgent threat.

Raymond Kopp is a Senior Fellow at Resources for the Future.

Published: Feb-23-11

Jan20

Hu’s Going To Lead? Two New Agendas For Climate Diplomacy

Chinese President Hu Jintao is in Washington, D.C. this week and most observers expect some progress on clean energy, including the announcement of several private sector deals and calls for expanded cooperation through fora such as the U.S.-China Clean Energy Research Center (CERC). The debate is raging about whether this is a “Sputnik” moment in the U.S.-China clean energy race, whether it represents a next step in a process of modest but meaningful collaboration, or perhaps both. Either way, the visit provides a good opportunity to examine the nature of U.S. climate diplomacy with China, and global climate cooperation more broadly, especially given recent progress in Cancun.

Much of U.S. climate and energy diplomacy over the last several years has been focused on China – with the complementary and overlapping objectives of persuading China - seen as key to a global agreement - to accept the American vision for global climate cooperation (parallel legal form, differentiated levels of ambition) and seeking to remove China’s perceived lack of action that has imposed a barrier to U.S. domestic progress – seen as one of the key obstacles in that battle.

The U.S. pursued the first objective through high-level bilateral outreach, smaller meetings such as the Major Economies Forum (MEF), being periodically tough on China in public diplomacy efforts, and key concessions in climate negotiations – mostly on financing – to increase pressure from other developing nations on China and give China the political breathing room to agree.

These efforts, while torturous at times, have mostly succeeded. They have persuaded China to accept a degree of parallelism in an international regime, high enough to satisfy most policy makers in Congress, if not yet producing an international ratifiable agreement. Along with cooperation initiatives – which were, of course, for both substantive and political goals –and periodic saber-rattling about jobs and “Sputnik,” these efforts have arguably made the China issue at least neutral and even, for some, a primary reason for the U.S. to take ambitious domestic action (although that has not yet happened).

Some, of course, were not as successful. The MEF essentially became a pre-negotiation to the United Nations process at Conference of the Parties 15 (COP15) in Copenhagen and COP16 in Cancun. Actual progress in Cancun proved that the major-emitters-only solution some were promoting before and after Copenhagen is probably not possible, at least in the current political situation. The U.S. needed the strength of more than 100 developing countries that supported their vision – or at least their financing – to finally move the 800-pound gorillas.

Essentially, though, the U.S. got what it wanted (given tight political constraints) and what other countries could live with – the U.N. process is alive and is moving slowly towards a destination consistent with their vision. This begs the essential question, now what?

While there is a range of views in climate policy land after Cancun and Copenhagen, there appears to be a general consensus that while the U.N. will remain a primary part of the solution, other pieces are needed to complete the international climate cooperation puzzle. Which begs the essential questions: what are those pieces, how can their development be encouraged, and how (if at all) does the U.N. process need to be reformed to permit them to emerge?

At least two pieces are worth further consideration: an action piece and a developing country leadership piece.

The Action (not Commitments) Agenda

The broad “status quo” of U.N. climate diplomacy appears similar to that articulated in two recent papers published with the German Marshall Fund of the United States. The U.S. will commit (if China does) but will likely not act in a serious way for at least several years. China will act but will not commit. The U.N. is likely to continue proceeding slowly, but will remain neither the true problem nor an adequate solution for climate cooperation.

As a whole, this context led my co-author Nigel Purvis and I to argue that developed country-climate diplomats need to achieve a fundamental shift from incentivizing commitments to directly incentivizing action by developing countries. Delivering on climate finance pledges – with less conditioning based on progress in the U.N. – and supporting “green growth” policies, which developing countries are taking mainly for domestic reasons, were the primary strategies we recommended.

However, moving in this direction is seen as problematic for several reasons. It risks disturbing the comfortable, methodical U.N. process – partly by removing financing, U.S. leverage within that process – and increasing the pressure for the U.S. to develop concrete initiatives and come up with the money to deliver on them. Perhaps our diplomatic goals remain the same – making progress internationally where possible, but ensuring a net positive for domestic action – or are too constrained by domestic politics to permit more innovative or ambitious approaches. If this is the conclusion of policy makers, existing strategies of moving the world towards the American vision for international cooperation with financing as a carrot – but no real pressure for innovative approaches – and playing good cop/bad cop with China where possible may be a preferable strategy.

But in some countries the political space may be slightly open, or policy makers may decide that the urgency of the climate problem is great enough to accept the risks of a fundamental – but gradual – change in strategy. As a start, the U.S. and other countries could continue testing an action-centric approach by expanding the scope of innovative financing sources and partnerships not contingent on or linked to the U.N. negotiations. This means being more proactive, aggressive and opportunistic in opening up a parallel group of activities – exemplified by 2010’s billion-dollar Norway-Indonesia partnership – focused on financing action and supporting green growth regardless of outcomes within the U.N. process (while of course emphasizing that these activities are not intended to replace or undermine it).

The Developing Country Leadership Agenda

Given the difficult political environment in many developed nations for mandatory climate programs – especially the U.S. – analyses showing that many of the largest opportunities for closing the emissions reduction “gap” are in developing nations, and less-entrenched interests in favor of traditional fuels, there is increasing awareness of the need to explore opportunities for developing countries to be more ambitious in their leadership and domestic actions. Indeed, this may be the biggest possibility of – perhaps even the only opportunity for – a climate policy “game changer” over the next several years.

However, the U.N. process could stifle opportunities for developing countries, including China, to lead or even play a constructive role in international climate cooperation.

It could do this for two reasons:

First, after the Copenhagen and Cancun agreements the U.N. continues to be centered on the need for developing countries to make concessions on the nature of their commitments, not the scale, even though developing countries are more willing to act than they are to commit (this is the “parallelism” most actively pushed by the United States). Thus, developing countries view any progress in the negotiations as moving them closer to commitments they do not want to make, not as moving them closer to more ambitious actions that produce benefits they are, in some cases, excited about.

Secondly, the negotiations are inherently structured as a developed versus developing countries (especially China) standoff. The Chinese people do not like the perception that their government is pushed around by the U.S. Nearly every concession China makes in the negotiations, however, is seen as giving in to the U.S., and vice versa. This makes it much more difficult for China to play a constructive role and forces it to delay while it can build political support domestically for transparency or other concessions.

So what does this mean for the developing country leadership agenda? Above all, developing countries need a new forum where they can define the climate agenda and explore opportunities for leadership. While this probably needs to be a truly “bottom-up” approach from developing countries, developed countries should explore opportunities to help by removing barriers to leadership where possible, making this a priority of bilateral diplomatic outreach and providing technical support for domestic best-practice “green growth” policies. Ultimately, however, innovative leaders in developing countries must see the opportunities and benefits provided by climate leadership, and take the initiative to chart their own path forward to solving the climate problem.

Perhaps the most exciting – and indeed surprising – outcome of President Hu’s visit to D.C., therefore, would not be a “Sputnik”-type race between the U.S. and China, but the encouragement for China, India, Indonesia, Brazil and other emerging economies to launch a “Sputnik” race of their own – which many believe they have already started – and to make climate leadership a truly defining part of their national agendas.

Andrew Stevenson is a Research Assistant at Resources for the Future.

Published: Jan-20-11

Jan14

What Came First, Climate Policy Advancements Or The Media’s Attention?

(Image by: Max Boykoff and Maria Mansfield)

The media in North America has turned its attention away from climate change. A monthly chart released from the Center for Science and Technology Policy Research at the University of Colorado represents the media’s mention of climate change in newspaper articles, and North America comes in second to last, just above Africa and South America.

According to a story in the Guardian, regarding the latest news of 2010 tying 2005 as the hottest year on record, “most of the news agencies in the U.S. and elsewhere picked it up: the New York Times, Washington Post, Wall Street Journal, USA Today and Christian Science Monitor all ran stories.”

However, overall, North America seems to be lagging.

Let’s look at a timeline of events that peaked the media’s interest.

2006: The first spike comes in October 2006. That date corresponds with the release of the Stern Review on the Economics of Climate Change where Nicholas Stern, the chair of the Grantham Research Institute on Climate Change and Environment at the London School of Economics (LSE), presented findings on the effect of climate change on the economy.

2007: It spiked again in December 2007 during COP13 in Bali, where countries introduced the Bali Road Map and Bali Action Plan, a step that launched the Adaptation Fund.

2009: In 2009, the Deepwater Horizon oil spill can be the assumed reason for a drop in coverage since it likely grabbed most of the environmental reporters’ attention. June 2009 started an upward trend with the passing of the Waxman-Markey Bill in the U.S. House of Representatives. It continued until COP15 in Copenhagen in December 2009 where it saw a downward trend to the current low levels. COP16 in Cancun barely made them blink an eye.

Two interesting points can come out of this.

First, does media coverage influence policy, or does the increase in climate change policy grab the media’s attention? It’s hard to say. An informed citizenry is the basis of any democracy and when the public makes noise about an issue, the government listens. So, if the North American media does not cover climate change, it may lose attention of the public and therefore be put on the backburner of priorities in legislation. Conversely, the media may only cover climate change issues when there is news to cover.

Secondly, Robert Falkner, Associate at the Grantham Research Institute at LSE and Associate Fellow of the Energy, Environment and Development Programme at Chatham House, made an interesting comment at a small roundtable discussion at the Centre of Global Governance at LSE last January. He said that the U.S. public overall was generally less informed on climate change issues than the Chinese public. After consideration of the First Amendment and the openness of the American media, there is room to question this statement. But, Asia in general, according to this chart, does indeed seem to be more informed of the issues since June 2009.

As was reported earlier this week , China is spending more on clean energy technology while spending an eighth of the U.S. budget figures on military. China is now not only scaling up its efforts to compete in clean energy technology, but also has a better-informed public when it comes to climate change in general. Is the government stepping up its game in response to a greater demand, or is the country generally putting more resources toward the issues? Regardless of the reason, in order for comprehensive climate change policy to gain greater traction in North America, mainly the U.S., the public needs to be aware of it.

Lynann Butkiewicz is Managing Editor of Weathervane.

Published: Jan-14-11

Apr21

International Financing Under a Hybrid Climate Bill

Without financing, there would have been no deal in Copenhagen has become a familiar refrain in climate policy circles over the past several months. Pledges from last December’s conference included $30 billion in “fast start” financing from 2010 to 2012 (public funding from developed countries divided between mitigation and adaptation), and the mobilization of $100 billion annually by 2020 (public and private financing, again for both mitigation and adaptation). These funds are critical to addressing the climate problem in a cost-effective manner by helping developing countries reduce deforestation rates, shift towards cleaner sources of energy and adapt to the impacts of climate change. In most cases developing nations have the will to act but are lacking technical expertise and financial support for the incremental costs of growing in a more sustainable manner.

While the United States will approach its share of the $30 billion solely through increased foreign assistance appropriations, the pathway to its contribution to of the $100 billion—expected to be in the range of $20 billion based on other international programs—remains uncertain. While a high-level panel on financing recently convened by the UN secretary-general is exploring innovative ideas that could be implemented at the international level, the clearest path still appears to be through a new comprehensive climate and energy bill.

The Waxman-Markey bill passed by the House of Representatives “set-aside” 7 percent of allowance auction revenues in early years of a cap-and-trade program for international activities and allowed companies to use international offsets for compliance purposes, generating tens of billions annually by 2020 for reducing deforestation, clean technology and adaptation. Since “cap-and-trade” has been declared dead, we examined what types of mechanisms policymakers could consider in a “hybrid” bill that takes a sectoral approach to greenhouse gas regulation.

We analyzed five different policy mechanisms (PDF) under three scenarios that ranged from limited deployment of the most politically feasible mechanisms to more robust deployment of all five mechanisms. The five mechanisms analyzed were:

1) International offsets in a utility and manufacturing cap-and-trade program (private sector funding). Similar to previous climate bills, policy makers could allow regulated entities to submit verified international emissions reductions in lieu of purchasing emission allowances.

2) International set-asides in a utility and manufacturing cap-and-trade program (public funding). Also as in previous climate bills, policy makers could reserve a portion of emission allowance auction revenues for specific international activities.

3) A “strategic reserve” or “safety valve” in a utility and manufacturing cap-and-trade program (public funding). As in previous climate bills, policy makers could use revenues raised from the sale of allowances from a strategic reserve or safety valve to finance international emissions reductions, either re-filling the strategic reserve or closing the gap between actual U.S. emissions and emissions targets in a given year.

4) Tax credits for transportation and other sectors (private sector funding). Analogous to “offsets”, policy makers could reduce a regulated companies’ tax burden for each dollar they invest in international climate activities or each verified emissions reduction they purchase.

5) Tax revenue set-asides from a carbon fee on the transportation and possibly other sectors (public funding). Analogous to cap-and-trade set-asides, policy makers could reserve a portion of tax revenues for specific international activities.

Overall, we found that assuming a carbon price of $22 per ton, allowing international offsets in a utility and manufacturing sector cap-and-trade program at a level consistent with previous legislation could yield $12 billion annually in 2020 for international activities while making the legislation’s emissions reductions more cost-effective. Most of this funding will likely be directed towards tropical forest conservation because it is expected to be the largest source of international offsets or verified emissions reductions.

Under a similar policy scenario, set-asides of revenue from emissions allowance auctions or fees on the transport sector could generate an additional $3 billion annually by 2020 (assuming 3 percent of total revenues are set-aside). Some of this funding will likely also be directed towards tropical forest conservation in order to help countries build capacity to participate in U.S. carbon markets (and ensure a steady supply of cost saving international offsets), with some available for adaptation and clean technology.

Other mechanisms could raise $6-12 billion annually by 2020, including tax credits for international climate investments by the transport fuels sector and using strategic reserve auction revenues for international activities, but depending on overall offset limits and policy scenarios they may compete with rather than supplement revenue for international offsets. This funding would also likely be directed primarily to tropical forest conservation because it is expected to be the largest source of international offsets or verified emissions reductions.

Based on this analysis, in order to meet its projected $20 billion contribution to international funding by 2020 the United States will also need to explore other domestic and international alternatives—such as foreign assistance appropriations, aviation taxes and/or the use of International Monetary Fund Special Drawing Rights—with the largest gaps coming in funding for clean technology and adaptation.

Andrew Stevenson is a research assistant at Resources for the Future and regular contributor to Common Tragedies.

Published: Apr-21-10

Mar15

U.S. Climate Policy and the Shape of International Agreements, Part 4

What’s Next for U.S. and International Climate Policy

The nations of the world came together in Copenhagen this past December to continue a process begun in 1992 at the Rio Summit to address the causes and consequences of climate change. The ultimate goal of that process is to reach an international agreement that will limit global greenhouse gas (GHG) emissions to “safe” levels while at the same time ensuring the nations most vulnerable to the impacts of climate change are provided the financial and technical means to adapt to a changed climate.

As I mentioned in my previous posts (here, here and here), this series will provide a view of Copenhagen from a distinctly American perspective, blending global economics with domestic U.S. politics. The outcome of Copenhagen and the international process that now follows is shaped largely by the domestic politics of all the major emitting countries with U.S. domestic politics playing a particularly large role.

In this post, I’ll take a look at where international negotiations are likely to go after Copenhagen and what role the U.S. will play on the international stage going forward.

International Negotiations Post Copenhagen

One can argue that Copenhagen marked a substantial shift in the dynamics of global climate policy development. A good deal of that shift is due to the renewed presence of the U.S. in international negotiations. Copenhagen moved the development of global policy further away from a Kyoto-like agreement, not closer. And, Copenhagen perhaps signaled a move further from the UN 190+ nation process and closer to a process taking place at venues like the Major Economies Forum (MEF). Certainly, this is the desire of the U.S.; however, it remains to be seen whether the BASIC countries (Brazil, South Africa, India and China) will agree to this radical shift in negotiating venue. Regardless, it seems almost certain issues like the Clean Development Mechanism (CDM), sectoral offsets, Reducing Emissions from Deforestation and Degradation (REDD), adaptation, and finance will likely remain within the UNFCCC negotiating structure.

Copenhagen made clear the goal of a comprehensive, legally binding agreement setting emission reduction targets for developed countries while requiring no action on the part of major developing economies ala the Kyoto Protocol, is not achievable. What is achievable is a process of bottom-up pledge and review where the major developed and developing countries agree to take domestic actions to limit their emissions, agree to some form of monitoring, reporting and verification (MRV), review these actions after a suitable period of time to see if everyone is abiding by their pledges, then pledge again. Pledge and review is not as elegant as Kyoto, but is a whole lot more practical.

While the Copenhagen Accord does include language setting an aspirational goal limiting emissions to 2 degrees C, one doubts whether anyone with a sense of politics finds that fact comforting. The GHG concentration at which we will eventually stabilize—and therefore the temperature rise that will be achieved—will not be predetermined neatly by science, but rather, by the messy business of politics and the reality of economics.

Adapting to New Negotiating Framework

As the major economies take the lead in forging agreements, and to the extent the venue for those negotiations moves beyond the UNFCCC to other processes, the interests of poor nations in issues of adaptation can become overlooked. The primary concern of the major economies in international negotiations is their emissions, not adaptation. Interest in adaptation and other issues particularly salient to developing countries are secondary concerns, largely due to the fact that most of the major economies (emitters) are reasonably developed (or well on their way) and will be able to adapt. Once the major economies take their mitigation negotiations out of the UNFCCC, the poor countries who will suffer climate impacts might end up talking to themselves about adaptation.

If the U.S. does not pass comprehensive legislation establishing a domestic cap-and-trade program that admits international offsets, a broad and deep global carbon market may fail to materialize. Absent such a market, the amount of wealth that will be transferred from the north to the south will be small and will get smaller over time. Without private sector money flowing to developing countries to purchase offsets the transfer of wealth will have to come from government tax revenues. In the U.S., and I expect elsewhere, it will be a very difficult political challenge to get these flows up to the levels needed and even more difficult to maintain those flows over time.

Long-term funding for adaptation will be particularly difficult to amass. While mitigation lends itself to a carbon market, there is not a private market analog for adaptation. Many adaptation projects look to the financier as straightforward economic development projects, where the risk tends to be high and rate of return low. Without private capital interest in these projects poor countries are left relying on highly uncertain developed country government funds.

U.S. Negotiating Position Post Copenhagen

If, as I believe, Copenhagen signals a very different process for reaching global climate agreements, the roles of the major economies will grow and the U.S. will have more opportunity to exercise leadership. Understanding the U.S. negotiating position going forward is aided by the simple fact that domestic climate policy and politics will form the proper foundation for foreign policy with respect to climate change. The Clinton administration let the formulation of climate foreign policy precede the development of domestic climate policy. Those actions angered the U.S. Senate and doomed the Kyoto Protocol in the U.S. The Obama administration will not make that mistake.

The U.S. negotiating stance going forward can be summed up with a few short sentences. The U.S. will attempt to establish the MEF as the venue for future mitigation agreement negotiations. The general form of the agreement sought will be pledge and review of Nationally Appropriate Mitigation Actions (NAMAs) by all MEF members with suitably strong MRV requirements. The Kyoto track within the UNFCCC will not be supported. Mitigation NAMAs for the U.S. will be identical to those passed by the U.S. Congress (whatever those actions might be). Since the U.S. NAMAs will be written into domestic law, the U.S. will hold these are legally binding on their own and therefore do not need to be included in a treaty; however, the U.S. would not block such a treaty should one be developed. If the U.S. Congress passes cap-and-trade legislation with international offsets, the U.S. will be able to deliver funds to developing countries for mitigation. REDD+ and sectoral offsets will be supported by the U.S. If domestic cap-and-trade legislation with international offsets is passed, REDD+ will be high on the negotiating priority list.

Raymond J. Kopp is a senior fellow and director of Resources for the Future’s Center for Climate and Electricity Policy.

Published: Mar-15-10

Mar10

U.S. Climate Policy and the Shape of International Agreements, Part 3

How the U.S. Approached Copenhagen and What Came of it

As I mentioned in my previous posts (here and here), this series will provide a view of Copenhagen from a distinctly American perspective, blending global economics with domestic U.S. politics. The outcome of Copenhagen and the international process that now follows is shaped largely by the domestic politics of all the major emitting countries with U.S. domestic politics playing a particularly large role.

In this post, I’ll take a closer look at where the U.S. stood in the run up to Copenhagen and how that led to some positive and negative outcomes from the conference.

Copenhagen Accord: The U.S Position going into Copenhagen

The U.S. negotiating position at Copenhagen reflected domestic political concerns. The foundation for the position was the constraint imposed by the White House that under no circumstances could the negotiating team appear to be pre-empting the U.S. Congress in setting emission reduction goals. The negotiators were free to utilize the reduction goals in Waxman-Markey (17 percent below 2005 levels in 2020, and 83 percent below 2005 levels in 2050), but they could not enter into negotiations over more stringent the goals. Thus, the U.S. team did not go to Copenhagen prepared to negotiate targets nor was it authorized to do so.

If the U.S. is to be a signatory to a new treaty serving as the successor to the Kyoto Protocol the new treaty would have to be ratified by the U.S. Senate. Ratification of international treaties requires 67 senators to vote in favor. As I said in my previous post, it is politically challenging to amass 60 votes to pass domestic climate legislation; clearly, it’s more difficult to amass 67 votes. Therefore, the negotiating team was prepared to make it clear that U.S. ratification of a Kyoto successor was highly unlikely. The U.S. negotiating position, developed over the past several years, sought the abandonment of the Berlin Mandate (the Mandate serves to exempt non-Annex 1 countries from any responsibility to reduce GHG emissions) and an agreement requiring all countries, and particularly countries participating in the Major Economies Forum (MEF), to agree to undertake a series of domestic mitigation actions and bind themselves legally to execute those actions. These actions, termed “Nationally Appropriate Mitigation Actions” (NAMAs) are of the countries’ own choosing. The binding international commitment would be reflected in the domestic enforcement of these actions under a country’s own laws. In addition, some sort of agreed to monitoring, reporting and verification (MRV) of the NAMAs would be required as part of the agreement.

Given the U.S. interest and focus on an agreement built around NAMAs, combined with the fact the U.S. is not a party to the Kyoto Protocol, progress along the Kyoto track (Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP)) was not a part of the U.S. negotiating objectives. The U.S. was and is placing all its effort on the Ad Hoc Working Group on Long-Term Cooperative Action (AWG-LCA).

Since a handful of nations can block a UNFCCC agreement—as we saw at the end of COP-15 negotiations—the U.S. sees the process as severely dysfunctional with respect to global agreements to limit GHG emissions. The U.S. much prefers the MEF as the venue for collaboration and cooperation on international climate policy. Indeed, a “MEF Plus” that includes an additional half dozen or so representative developing countries giving the MEF a bit more international credibility would likely be welcomed by the U.S.

U.S. negotiators were supportive of policies to incentivize the conservation of forests to reduce emissions, known as REDD+, the establishment of a credible and efficient sectoral offset policy to accompany the Clean Development Mechanism (CDM), funds for developing countries to finance GHG mitigation and adaptation, and a robust global carbon market. Indeed, the carbon market is the primary mechanism by which U.S. funds (private sector dollars) would flow to developing countries for mitigation efforts. The U.S. was also supportive of the flow of government funds to aid mitigation and adaptation efforts; however, it is unlikely the U.S. would agree to the distribution of these funds via a process solely administered by the UN.

The Copenhagen Accord: What Went Well

From the U.S. perspective the Copenhagen Accord produced many good results. Perhaps the most important outcome was the agreement hammered out by the U.S. and the BASIC countries (Brazil, South Africa, India and China) to put forward NAMAs, enter those into an agreed upon registry, and the inclusion of some MRV language in the final agreement. While the actions contained in the registry at the current time are not enough to solve the climate problem, they are a step forward.

A 2 degree C maximum mean global temperature increase goal was agreed upon, providing an important long-term objective. Importantly, significant pledges of near and longer-term finance for mitigation and adaptation were made, even approaching the lower end of what is generally believed to be necessary. Pledged near-term finance (2010-2012) amounted to $30 billion while longer term pledges (2012-2020) were $100 billion.

What Went Poorly

On the negative side of the ledger six countries (out of the 190+ participating in the negotiations)—Sudan, Venezuela, Bolivia, Nicaragua, Cuba and Tuvalu—rejected the Accord and prevented it from being adopted as an official decision of the Conference of the Parties (COP). Parties agreeing to the Accord could only officially “take note.” This leaves a great deal of ambiguity with respect to the manner in which progress toward further development of the Accord can take place with the context of the UNFCCC.

Perhaps more worrisome, the negotiations almost certainly would have failed without direct intervention from heads of state. The severe dysfunctionality of the UNFCCC/COP process was clear, as ministers and countries’ representatives failed to make any progress in advance of the COP and the arrival of heads of state.

From a U.S. perspective key elements were missing from the text, specifically, 80 percent reduction target by developed countries by 2050, 50 percent global reduction by 2050, due primarily to developing country resistance, specifically China. Moreover, developing countries were unwilling to make the outcomes (NAMAs) legally binding and it is unclear whether they would ever do so.

Lots of discussions moved forward without having text adopted, including forestry, technology, adaptation and finance. These tracts needed more time and high-level engagement to be completed. Forestry seemed to move the furthest along; technology and intellectual property issues still need more development and thought, and the Copenhagen Green Climate Fund needs a good deal more elaboration prior to COP-16 in Mexico.

Raymond J. Kopp is a senior fellow and director of Resources for the Future’s Center for Climate and Electricity Policy.

Published: Mar-10-10

Mar04

U.S. Climate Policy and the Shape of International Agreements, Part 2

Where Can the U.S. Go From Here?

As I mentioned in my previous post, this series will provide a view of Copenhagen from a distinctly American perspective, blending global economics with domestic U.S. politics. The outcome of Copenhagen and the international process that now follows is shaped largely by the domestic politics of all the major emitting countries with U.S. domestic politics playing a particularly large role.

In this post, I’ll examine the suite of climate policy options before the U.S. and the circumstances that may influence the choices made by policymakers.

Plan A: President Obama exercises leadership and plays an active role in moving the stalled Senate negotiations forward.

Recognizing that regional differences will mean some Democrats will likely not support comprehensive GHG legislation, the president will have to form a bipartisan coalition of Democrats and Republicans to pass legislation in the Senate.

One legislative path forward for the president could be the new comprehensive climate bill being developed by Sens. John Kerry (Democrat), Joseph Lieberman (Independent), and Lindsey Graham (Republican). The trio of senators has released very little descriptive information regarding the structure of the climate legislation it would propose, but the senators have acknowledged the importance of an economy-wide price on GHG emissions (favored by the president), strengthened incentives for nuclear power and coal-fired electricity generation with carbon capture and storage technology, widely-known as “clean coal”, perhaps putting nuclear power on an equal footing with zero-carbon generation technologies like wind and solar, and expanded domestic oil and gas exploration and extraction.

A second path forward for the president is recent interest in the legislation co-sponsored by Sens. Maria Cantwell (Democrat) and Susan Collins (Republican). A scant 39 pages compared, to the 1500-page heft of the House’s Waxman-Markey (W-M) bill, the Cantwell-Collins legislation is considerably more straightforward and less complex. It would establish a comprehensive cap-and-trade program like W-M, but all allowances would be auctioned and the allowance trading provisions are quite restrictive compared to W-M. Three-quarters of the auction revenue would be distributed to legal residents on the basis of equal per capita shares. The remaining quarter would fund a variety of research programs and help heavily impacted industries. Importantly, the legislation would have a very robust price collar initially limiting allowance price movements to the $7 to $21 range.

Plan B: It becomes too difficult politically to pass a comprehensive climate bill that includes a price on carbon as one of the core components and some combination of policies, excluding an economy-wide cap on GHG emissions is put in place.

Many moderate senators in both parties want to pass an energy bill that would have some impact on GHGs, but avoids politically unacceptable increases in energy prices that would come about from a cap-and-trade policy.

Energy legislation consistent with these desires has already been crafted by the Senate Energy and Natural Resources Committee and would likely be one major component of Plan B. That legislation would, in part, significantly increase government funding to energy research and development, establish a national renewable portfolio standard for electricity at 15 percent of all generation capacity by 2021, establish federal authority over new transmission capacity perhaps over-riding state authority, deploy many new energy efficiency policies, and open the Eastern Gulf of Mexico to oil and gas production. While the emissions analysis of this legislation has not been undertaken, there is reason to believe the legislation would have a significant impact on U.S. GHG emissions.

The second component of Plan B involves the regulation of transport emissions under the nation’s Clean Air Act using tailpipe standards. The U.S. Supreme Court ruled in 2007 the Environmental Protection Agency (EPA) has the authority to regulate carbon dioxide emissions from transport under the Clean Air Act and EPA is developing regulations now.

The final component of the Plan B concerns the emissions from electricity generation. A separate piece of legislation could be developed to set up a cap-and-trade program for carbon dioxide emissions from just the electric power sector. Alternatively, the president may choose to use the existing authority of the Clean Air Act to regulate power plant emissions through technology standards, or it may be possible to establish a workable electricity sector cap-and-trade program within the existing Clean Air Act structure.

Plan B would be a piecemeal approach, likely inefficient when compared to a comprehensive cap-and-trade approach, and producing unknown emission reductions. But, if electric power generation were included via its own cap-and-trade program, Plan B would target the major emitting sectors and could have quite meaningful impact on U.S. emissions.

Plan C: Continue on a largely business-as-usual course for the near term.

Plan C is the path of least political resistance and the path of least emission reduction. Since it requires little economic or political sacrifice, the energy legislation of Plan B passes into law under Plan C. Legislative action of one form or another to pre-empt the authority of the Clean Air Act to regulate carbon dioxide emissions moves forward and is successful. Such action is planned, but the odds it will be successful are long. With the energy legislation passed and the Clean Air Act pre-empted, an argument can be made there are no remaining viable political paths and the U.S. takes no substantive action on climate change in the near term.

However, there may be a Plan D. President Obama has created by executive order the National Commission on Fiscal Responsibility and Reform to examine the huge federal deficit and likely make recommendations for tax reform to address the deficit. There is a chance GHG control policy could be recast in the next Congress as deficit reduction policy where revenues from carbon taxes or auctioned allowances are used to reduce the deficit.

Raymond J. Kopp is a senior fellow and director of Resources for the Future’s Center for Climate and Electricity Policy.

Published: Mar-04-10

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