Weathervane: A Climate Policy Blog from Resources for the Future

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 | 0 Comments

Mar15

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

COP-15, International, United States

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 | 1 Comment

Mar10

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

COP-15, International, United States

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 | 0 Comments

Mar04

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

COP-15, International, Congress

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 | 0 Comments

Mar02

U.S. Climate Policy and the Shape of International Agreements: Where the U.S. Stands and How it Got There

COP-15, Congress

There are many who believe the Copenhagen process was a complete failure. Others believe it was less than a great success, but a step in the right direction. Whether you see Copenhagen as an abject failure or a moderate success has a great deal to do with prior expectations. If you hoped for and expected Copenhagen to produce a successor to the Kyoto Protocol, you were very disappointed and rightly view the process as a grand failure. If, on the other hand, you viewed Copenhagen as an opportunity to begin crafting an emissions limitation agreement that is inclusive of the world’s largest emitters and one that sets up funding and technology transfers to aid the adaptation of the most vulnerable, you found Copenhagen as progress toward that goal.

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.

This series of Weathervane posts will provide a view of Copenhagen from a distinctly American perspective, blending global economics with domestic U.S. politics. In this post, I’ll focus on the evolution of current U.S. domestic policy and begin to examine the influence recent political developments may have on future policy in the U.S. and worldwide.

A Framework for Debate from the House of Representatives

The U.S. Congress has been considering policies to limit greenhouse gases (GHGs) for at least two decades. But it wasn’t until this past June that the U.S. House of Representatives passed comprehensive GHG legislation under the leadership of Congressmen Henry Waxman, D-Calif., and Edward Markey, D-Mass., (for whom the legislation is named) that the nation begun to take emission limitations seriously. While there is much to dislike in Waxman-Markey (W-M), there is no denying the breadth and depth of the legislation.

The regulations outlined in W-M cover 85 percent of all U.S. GHG emissions. The law requires the adoption of a cap-and-trade approach to GHG regulation with caps that would lower U.S. emissions 17 percent below 2005 levels in 2020 and 83 percent below 2005 levels in 2050.\

The breadth and the depth of the covered emissions mean the total dollar value of the emission allowances will be very large. The U.S. Energy Information Agency (EIA) estimates allowance prices in 2020 at $31.7/ton CO2e (in 2007 dollars) and the annual value of allowances in 2020 to be in excess of $160 billion (2007 dollars). The bulk of the allowances are used diminish the cost impacts on consumers, aid trade-exposed and energy-intensive industries and support technology development and deployment.

W-M allows up to 2 billion tons of offsets to be used for emission reduction compliance systemwide—1 billion from domestic sources and 1 billion from international sources. If domestic sources cannot generate the full 1 billion tons, international sources can fill the gap up to an additional 500 million tons for a maximum of 1.5 billion tons. EIA estimates 1.2 billion tons of offsets entering the U.S. market in 2020 (900 billion from international sources) and 1.8 billion entering in 2030 (1.3 billion from international sources).

The legislation also includes unlimited banking and some borrowing that would allow regulated entities to borrow up to five years in advance to meet 15 percent of its obligation. W-M also has a mechanism to limit allowance price spikes. The mechanism, termed the “Strategic Reserve”, is a bank of allowances established by skimming a small amount of allowances off each year’s allocation from 2012 to 2050. These allowances would then enter the allowance market through a minimum price auction if the price of allowances rose above a prespecified level.

W-M passed the House of Representatives with 211 Democrats in favor, 44 against and 8 Republicans in favor and 168 against.

A Different Body, a Different Landscape in the Senate

In the U.S., both houses of Congress—the House of Representatives and the Senate—must pass comparable legislation in order to enact law. The U.S. Senate produced a bill similar to W-M this past fall under the leadership of Sens. Barbara Boxer, D-Calif., and John Kerry, D-Mass., (B-K). However, unlike the House of Representatives, the Senate did not pass the legislation.

Unlike the House of Representatives where legislation can pass with a simple majority, in the Senate it takes 60 percent of the 100 senators to overcome a procedural hurdle before a vote can be taken on legislation, effectively requiring 60 senators to support any bill. At the current time there are 59 Democratic Senators and 41 Republicans. No Republicans are supporting the B-K legislation and likely no more that 40 Democrats.

Why so little support in the Senate for efforts to limit GHG emissions? Unlike the House where representatives have comparably-sized constituencies, meaning most come from densely-populated states, each state gets the same representation in the Senate. So, a state with vast urban population of say 15 million residents gets two senators, but so does a rural state with ½ million total residents. Many low population rural states rely heavily on fossil fuels—predominately coal—for their electricity generation. They fear cutting GHG emissions will lead to significant energy price increases and negative impacts on local business and employment. In these states where the fear of GHG regulation is high, it doesn’t matter if their senator is a Democrat or Republican; if a vote were held to today a good many senators from both parties would vote no on B-K.

The current economic recession makes matters worse and while there is support among the American people to address climate change, it has a very low priority when compared to bread and butter economic issues.

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

Published: Mar-02-10 | 0 Comments

Feb10

A 'Stern' Assessment of Copenhagen

China, COP-15, Congress, International

Top U.S. climate negotiator Todd Stern didn’t mince words Tuesday when urging a group of key international players to sign on to the Copenhagen Accord, suggesting that not doing so would risk turning the nascent text into a “stillborn.”

In remarks delivered at Center for American Progress (video here), Stern said he’s confident the negotiating bloc known as BASIC—Brazil, China, India and South Africa—will come around to the Accord, given “the clear assent their leaders gave to the Accord in Copenhagen.”

The 194 nations party to the United Nations’ climate change negotiations had until (roughly) January 31 to submit their emissions reductions plans. According to the U.S. Climate Action Network, some 95 countries representing 80 percent of the world’s emissions—including the members of the BASIC bloc—have associated themselves with the Accord.

But as Andrew shrewdly pointed a few weeks back, a joint statement issued by the BASIC nations certainly isn’t making the Copenhagen Accord negotiating process any easier:

It appears that these countries are willing to submit their actions, as pledged in the Accord, but do not view this submission as implying any “association”—at least in the sense likely envisioned by the UN secretariat and most developed countries. Even if China, India, Brazil and South Africa technically “associate”, they do not see this as creating any obligations under the UNFCCC (such as the submission of targets, which they claim to do voluntarily), and certainly not as giving the Accord legitimacy as a negotiating text. It seems that in their view, they made a political pledge in Copenhagen to submit their actions—which just happened to be included in the Accord—and they will do so in order to uphold that pledge, but they will not do so because it is an obligation created by the Accord.

Despite his pointed remarks, Stern didn’t turn a blind eye to the U.S. domestic climate policy landscape. He urged Congress to pass strong energy and climate legislation this year saying doing so would provide negotiators “a foundation of both leverage and credibility.” He quick to emphasize, however, that he believed further progress on the Copenhagen Accord was possible—and indeed critical—absent U.S. legislation.

He drew two key contrasts between using the Accord and returning to the two tracks of the Copenhagen process. The first was the past versus the future—that returning to the two track Copenhagen process negotiations means continuing to live in a world where development and emissions levels in 1992 are all that matter. This should not be the case, and the Copenhagen Accord reflects both how the world has changed since then—a “developing” country is now the world’s largest polluter—and how it will change in the future—by covering the countries that will be responsible for 97 percent of the world’s emissions growth through 2030.

Stern also drew a sharp divide between negotiations in the UNFCCC—carried out by career negotiators and going nowhere—and the Copenhagen Accord—carried out by heads of state and able to crack a few key issues in a short time. Given this experience, why should the former continue to be more important than the latter? If the goal is progress, why not stick with how progress was actually achieved? Of course, the implication is that some nations prefer delay.

The critical point here is that, perhaps partly because of the uncertainty in Congress, Stern is trying to paint the BASIC nations into a corner in an effort to secure a more pragmatic approach to negotiations in 2010. By arguing that the Accord represents science and progress, and that the two track negotiations represent favoring procedure and living in the past, he is setting up a more fundamental choice that should not inherently depend on one country or another’s mitigation plans (even one as important as the United States). Ultimately, because this is not just a negotiating tactic but also the right thing to do from a scientific perspective, the United States may succeed after all. There is no doubt, however, that there will be plenty of diplomatic fireworks first.

Andrew Stevenson, a research assistant at Resources for the Future and regular contributor to Common Tragedies, contributed to this post.

Tiffany Clements is managing editor of Weathervane.

Published: Feb-10-10 | 0 Comments

Jan28

Guilty by Voluntary Association

COP-15, International

Negotiation image courtesy dwonderwall via Flickr The first deliverable in the Copenhagen Accord was a pledge by all nations to submit their planned mitigation actions or targets to the United Nations Framework Convention on Climate Change (UNFCCC) secretariat by January 31, 2010. Since nations “took note” of the Accord instead of adopting it, in the weeks after Copenhagen there was uncertainty about whether some countries would ignore this quasi-commitment. Even UNFCCC head honcho Yvo de Boer was concerned, calling the deadline “soft” while imploring nations to “associate” themselves with the Accord. “Association” was likely understood to mean acknowledgement of some formal status for the Accord within the UNFCCC, giving the secretariat greater authority to convene official negotiating sessions around the document.

In any case, from the perspective of developed nations the central task for 2010 was to merge any new discussions around the Copenhagen Accord with the Kyoto Protocol (KP) and long-term cooperative action (LCA) negotiating tracks that were created by the Bali Action Plan in 2007 and intended to be the fundamental basis for negotiating an agreement in Copenhagen. While countries made progress on these tracks in Copenhagen—including things like forestry and adaptation—when they “took note” of the Accord on the last night of COP-15 they essentially left all that progress on the table to be taken up in 2010. Many developing countries wanted, and still want, to just pick up where they left off on these texts and pretend the Accord never happened.

If all key countries “associated” themselves with the Accord, one theory was that this would streamline the process of merging the Accord with KP and LCA by giving it at least some level of official status. For many developed countries, it was hoped that this would lead to the dissolution of these tracks and the use of the Accord as the new basis for negotiating a comprehensive global agreement. The fundamental developed-developing distinction of Kyoto would fall by the wayside, and the new starting point could eventually lead to the only kind of agreement the United States might be able to ratify. This is why some international policy wonks in the United States were so excited about Copenhagen.

However, one assumption implicit in this was that submission of targets or actions would necessarily go hand-in-hand with association, and vice versa. If a country wanted to “associate” itself with the Accord, it would entail accepting the Accord’s obligations, including the submission of a target. If a country submitted a target that would also imply acceptance of the Accord’s obligations and indicate that a country wished to be “associated” with the Accord going forward. In turn, it was thought that a country could not “associate” itself with the Accord without acknowledging it had some kind of official status.

As expected, by Monday nearly all developed countries, including the United States, will have both submitted their target and expressed their willingness to be associated with the Accord. Many of these targets are on the lower end of what was conditionally proposed (Europe 20 percent instead of 30 percent below 1990 levels by 2020, Australia 5 percent below 2000 levels by 2020) and come with numerous strings attached (Japan 25 percent below 1990 levels by 2020 with a global agreement), but they are on the table and show a commitment both to the Accord’s obligations and using it as a primary focus of negotiations in 2010.

However, a recent joint statement from the BASIC countries (Brazil, China, India and South Africa) presents a more complicated situation, and reveals that the association-with-action-implies-acceptance-of-some-official-status assumption is highly suspect, if not outright false. It appears that these countries are willing to submit their actions, as pledged in the Accord, but do not view this submission as implying any “association”—at least in the sense likely envisioned by the UN secretariat and most developed countries. Even if China, India, Brazil and South Africa technically “associate”, they do not see this as creating any obligations under the UNFCCC (such as the submission of targets, which they claim to do voluntarily), and certainly not as giving the Accord legitimacy as a negotiating text. It seems that in their view, they made a political pledge in Copenhagen to submit their actions—which just happened to be included in the Accord—and they will do so in order to uphold that pledge, but they will not do so because it is an obligation created by the Accord.

While this does not mean the Accord is “dead”, it does have implications for the negotiating process in 2010. For starters, it would be a heck of a lot easier to negotiate a binding agreement in Cancun, at least one that would be preferable to the United States, if all countries formally “associated” themselves and understood that “association” to create legitimacy and obligations. The reality of the BASIC position makes Mexico’s already delicate task—massaging the two-track UNFCCC process and Copenhagen Accord process together in a way that satisfies 190+ countries—that much more difficult. As a positive sign, they appear to understand the difficulty of this task and be up to taking it on. It will require delicate diplomacy that escaped the Danes, but the fact that Mexico is a “developing” country and OECD member could give it the needed climate cred to make it happen.

Observing this dance will require tracking both any “friends of the Accord” processes that occur outside or on the sidelines of the UNFCCC (and seeing who shows up, what they say and how), and tracking how key elements of the Accord are discreetly worked into the two official tracks. If anything, it will be fascinating to watch.

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

Published: Jan-28-10 | 0 Comments

Jan27

What I’m Watching for in the State of the Union

Obama Administration, Cap and Trade, COP-15, Congress, Green Jobs

Everybody with a keyboard and opinion seems to know exactly what President Obama needs to say tonight for his State of the Union address to be successful. With more than enough pontification and prognostication to go around, I humbly offer a simple snapshot of some climate and energy talking points I’ll be watching for tonight:

J-O-B-S: Taking a cue from recent polling data that suggests climate can go farther when paired with employment it’s safe to say the president will connect clean energy development and jobs creation. The likely depth and tone of the president's jobs and energy messages are tougher to pin down, leaving some to hope for the best-case scenario, while others consider the worst.

A nod to the global climate community: While President Obama probably won’t bring up this new study ranking the U.S. 61^st in the world in terms of environmental performance, a mention of ongoing work on international climate mitigation plans may be in the cards. With the—apparently soft—deadline for countries to submit their emissions mitigation plans coming Sunday, the State of the Union is a good opportunity for the president to reassert his commitment to U.S. leadership on climate change and creating an international deal.

A presidential assessment of cap and trade’s prospects: If comments in today’s New York Times from the lone Republican sticking his neck out on climate legislation are any indicator, the Senate may be throwing in the towel—and is at least dialing back expectations—on cap and trade.

“Realistically, the cap-and-trade bills in the House and the Senate are going nowhere,” said Senator Lindsey Graham, Republican of South Carolina, who is trying to fashion a bipartisan package of climate and energy measures. “They’re not business-friendly enough, and they don’t lead to meaningful energy independence.”

Mr. Graham said the public was demanding that any energy legislation from Washington focus on creating jobs, whether by drilling for offshore oil or building wind turbines.

“What is dead is some massive cap-and-trade system that regulates carbon in a fashion that drives up energy costs,” he said.

But Sen. John Kerry says he’s not ready to scale back the Senate’s climate bill and a top White House aide is backing his statements, despite numerous suggestions a “plan B” energy-only bill is more politically feasible and likely to garner more support.

Given his deference to Congress thus far and the ebb and flow of public attention to the legislation, it seems unlikely that the president would wade too far into this hubbub. Still, in the wake of a move by Alaska Sen. Lisa Murkowski to cut off the Environmental Protection Agency’s authority to regulate greenhouse gas emissions if Congress fails to come up with its own plan, the president may have to say something about the state of play for one of his key issues.

What else should we be watching for tonight? What do you expect to hear the president say about climate and energy?

Tiffany Clements is managing editor of Weathervane.

Published: Jan-27-10 | 1 Comment

Jan25

Join the Climate Conversation with RFF and Earthscan

COP-15, Risk

While the outcome of its policy discussions is uncertain, 2010 is shaping up to be a year full of thought-provoking climate policy debates. Check out a couple on the horizon from Resources for the Future and Earthscan.

The latest installment in Earthscan’s Earthcast series will take a closer look at the outcome of December’s United Nations climate change summit:

In the wake of the COP-15 summit in Copenhagen, the first Earthcast of 2010 will examine the treaty that emerged, the negotiating tactics behind it, and what the next steps are likely to be.
Experts Michael Grubb, David Satterthwaite and Richard Smith will be dissecting the agreement and asking whether future negotiations can establish a binding treaty that sets ambitious limits for the large emitters while supporting developing nations financially and technologically.

Click here for more information and to reserve your space in the online forum.

And, if you’re in the Washington D.C. area, join Resources for the Future for “Managing the Risk of Extreme Weather Events in a Changing Climate” Wednesday, February 3, 2010 from 12:45 p.m. - 2 p.m.:

In future years, climate changes may significantly boost both the frequency and severity of storms, hurricanes, and other extreme weather events. Damages from such weather phenomena have been shown to be catastrophic – and climate change could further exacerbate the risks. Moreover, historical data for such risks may be unreliable, loss projections may actually be underestimated, and traditional diversification strategies may fail.

The recent financial crisis, Hurricane Katrina, and major floods point to the need to improve our detection, measurement, and analysis of catastrophic and dependent risks. At this seminar, discussions will focus on how climate change may enhance extreme events, how mitigation can help manage extreme events, how to ensure proper functioning of insurance markets in these situations, and the proper role of the federal government in addressing these risks.

Moderator:
Roger Cooke, Senior Fellow, Resources for the Future

Panelists:
Gordon Woo, Risk Management Solutions
Paul Embrechts, ETH Zurich
Michael Cohen, RenaissanceRe
Debra Ballen, Institute for Business & Home Safety

For more information and to register for the event, click here.

Tiffany Clements is managing editor of Weathervane.

Published: Jan-25-10 | 0 Comments

Jan19

Show me the Money (in the Context of Meaningful Mitigation Actions and Transparency on Implementation)

COP-15, Congress, International, United States

Money image courtesy lillit via Flickr Post-Copenhagen, securing and managing financing for adaptation, mitigation and technology transfer could well become the most prominent issue in international climate negotiations in 2010, and become a much bigger issue domestically than it was in 2009 legislative discussions.

Internationally, financing is likely to be one of the issues that sees the most action in 2010 climate negotiations for several reasons. First, the Copenhagen Accord calls for immediate activity on structuring and distributing funds, and work may be able to proceed on this front while talks are stalled on broader issues. Second, making good on the $30 billion short-term fund will be critical to rebuilding global cooperation that has been threatened by the divisive Copenhagen conference. Third, the host of this year’s main climate summit, Mexico, has always been a leader on financing. They are likely to want a deliverable from the conference on their flagship issue.

At home, President Obama now has to ask Congress to help make good on their part of the $30 billion commitment—likely to be $6-7.5 billion from 2010-2012—with a substantial portion dedicated toward a $1 billion 2010-2012 pledge for reducing deforestation. He will also need to ensure that any comprehensive domestic effort includes enough long-term financing to support the $100 billion Secretary of State Hillary Clinton pledged to help mobilize in the context of a global agreement (with a likely U.S. share of about $20 billion). This will require action on two fronts: substantially ramping-up appropriations for international climate activities from their current level of approximately $1 billion, and, more importantly, placing one of his biggest bets yet on cap and trade.

Indeed, if legislation similar to Waxman-Markey or Kerry-Boxer were enacted, the private financing mobilized through offsets would easily allow the president to reach his financing goals. However, under various “Plan B” scenarios being discussed, financing will be the loser. While it is likely that a more limited climate bill, a so-called “energy only” bill or even the Clean Air Act would allow the United States to meet its 2020 mitigation pledge, it is unclear how these mechanisms would mobilize dedicated streams of international climate financing on the scale of economy-wide cap and trade.

While the appropriations process may be able to handle a short-term bump over three years for the Copenhagen prompt-start funding, it is likely to buckle under the strain of an attempt to double the U.S. foreign assistance budget solely for international climate activities. Under these “Plan B” domestic policy scenarios, this could lead to three outcomes: 1) Robbing from Peter to pay Paul (i.e. diverting large amounts of foreign assistance from some other activity to climate), 2) Failure to secure a binding international agreement (the fragile Accord would never have been reached without Clinton’s $100 billion pledge), or 3) The introduction of a new mechanism to raise dedicated public or private financing under an alternative U.S. climate policy scenario.

Since the first two outcomes are clearly unsuitable for those looking to pursue international climate agreements, this should create a major push among supporters for the international aspects of economy-wide cap and trade, specifically the set-asides and offsets that have taken a backseat thus far to domestic economic concerns. Either that, or policymakers need to begin the process of thinking through alternative mechanisms to raise funds under other possible comprehensive climate and energy policies. Given the likely increased focus on financing internationally in the immediate future, time for both is short.

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

Published: Jan-19-10 | 0 Comments

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