Weathervane: A Climate Policy Blog from Resources for the Future

Jun24

Consensus on Changing Climate, Differences in Willingness to Pay

Negotiators likely have a long way to go in finding an international approach to addressing the woes of climate change. But, at least to some extent, there appears to be a degree of consensus among the citizens they represent on the scope of the problem—though interpretations of who should pay (and how much) are varied.

An international team of researchers—including some from RFF—recently finished its multi-national survey of ordinary citizen’s opinions on climate change and willingness to pay for reducing carbon dioxide emissions. In the midst of last December’s international climate negotiations, results for surveys from the United States and Sweden were released. Information from Chinese surveys has now been compiled and is included in this report.

From the abstract:

Unique survey data from a contingent valuation study conducted in three different countries (China, Sweden, and the United States) were used to investigate the ordinary citizen’s willingness to pay (WTP) for reducing CO2 emissions. We found that a large majority of the respondents in all three countries believe that the mean global temperature has increased over the last 100 years and that humans are responsible for the increase. A smaller share of Americans, however, believes these statements, when compared to the Chinese and Swedes. A larger share of Americans is also pessimistic and believes that nothing can be done to stop climate change. We also found that Sweden has the highest WTP for reductions of CO2, while China has the lowest. Thus, even though the Swedes and Chinese are similar to each other in their attitudes toward climate change, they differ considerably in their WTP. When WTP is measured as a share of household income, the willingness to pay is the same for Americans and Chinese, while again higher for the Swedes.

The survey asked respondents how much they’d be willing to pay to avoid each of the three following climate scenarios:

The results of the study show that Swedes, Americans, and Chinese are willing to pay 1.6 percent , 1.1 percent, and 0.9 percent, respectively, of their income to prevent a warming of more than 2°F. According to the authors:

A policy interpretation is that this is an estimate of the cost burden, as a percent of gross domestic product (GDP), of climate change mitigation that each country is willing to bear. Since the American respondents are more suspicious about climate change in general and more pessimistic about possibilities to reduce CO2 emissions, changing attitudes about the legitimacy of climate change and the threats it imposes may be key to unlocking public willingness to support major expenditures for mitigation. Perhaps the biggest surprise in our study was the willingness of the Chinese people to pay for CO2 mitigation as a fraction of income that was very similar to that in the United States.

Tiffany Clements is managing editor of Weathervane

Published: Jun-24-10 | 0 Comments

May27

Evaluating the 'Innovative' Options for International Climate Financing

Financing, International

As climate discussions under the United Nations move forward next week with the first substantive negotiations since Copenhagen, an important parallel process on climate finance continues to consider “innovative” approaches to achieving the global pledge of mobilizing $100 billion per year by 2020 for mitigation (clean energy and reducing deforestation) and adaptation. While it may not produce a definitive outcome, the report the Secretary General’s Advisory Group on Climate Change Financing delivers in Cancun in December 2010 will provide an important barometer for where key nations and the world as a whole stand on one of the most important issues for catalyzing international climate cooperation.

The most immediate task of the group may be finding a replacement for outgoing UK Prime Minister Gordon Brown to serve alongside fellow Co-Chair Meles Zenawi of Ethiopia. The rest of the group is composed of a mix of experts (such as Nicholas Stern of the London School of Economics), heads of state or government (such as Jens Stoltenberg of Norway), and national representatives (such as Larry Summers from the United States). Each of the options currently under consideration has its pros and cons, and there are several other options not as clearly on the table that attention may turn towards as the debate progresses.

Under primary consideration by the Advisory Group:

1) Allowance auction revenues. Countries could devote a certain percentage of allowances sold in domestic cap-and-trade or carbon tax regimes to international purposes, or a limited number of allowances could be auctioned by an international body. If major developed nations devoted 3-5% of auction revenues in 2020 to international purposes, $5-8 billion per year would be raised at a carbon price of $20 per ton. Getting carbon pricing schemes in place domestically seems to be the largest obstacle to securing this revenue, and the additional benefit of this revenue would be lower in the likely event that it crowds out existing climate-related foreign assistance. However, this is a straightforward, easy to understand mechanism that does not seem to be a huge political lift in the context of a comprehensive climate bill.

2) International offsets. Also under domestic carbon pricing schemes, countries could allow regulated entities to achieve a certain percentage of their compliance obligation by investing in emissions reductions in developing nations. If 25% of a company’s compliance obligation could be achieved in this way in all major developed nations, it could generate up to $32 billion in 2020 at a carbon price of $20 per ton. Again, the major obstacle appears to be implementing the broader domestic policies that would mobilize this financing. The primary benefit of this mechanism is that under a carbon pricing scheme it actually reduces domestic costs for developed nations. In addition, since funding comes directly from the private sector, it may be less likely to crowd out existing foreign aid and cannot get cut in an annual appropriations process.

3) Redirecting fossil fuel subsidies. Countries could redirect some of the revenue raised from removing preferential tax treatment of fossil fuel industries towards international climate financing. In the United States, making the subsidy removals proposed by the Obama Administration in its FY2011 budget would generate an additional $4.5 billion per year over the next decade. While removing certain subsidies received support during the 2007 energy debate – a bill eliminating the domestic manufacturing tax credit and certain foreign tax preferences for large, integrated oil companies was reported out of the Senate Finance Committee on a bipartisan basis – it failed by one vote to achieve cloture on the floor. Removing some of these tax preferences has also been floated as a way to help pay for various jobs bills in Congress that have some domestic energy provisions. Overall, while this mechanism could be used in absence of a carbon pricing policy, these revenues will face stiff competition in a world of large fiscal deficits and competing spending priorities. The main benefit of removing these subsidies could be if it persuades large developing countries to remove their own subsidies – as they agreed to at last year’s G20 summit – and thus begin to shift their domestic energy consumption patterns.

4) Levy on fuels used in international shipping and aviation. Countries could apply a domestic or international fee on fuels burned during international shipping and aviation, which are currently not covered by Kyoto Protocol inventories. Based on business-as-usual emissions trends in these sectors, a carbon price of $20 per ton could raise about $30 billion per year by 2020. One of the primary challenges of this mechanism is that in order to be effective on globally competitive industries, it would have to apply to both developing and developed countries. In addition, industry groups argue that they are a small part of the climate problem and should not be expected to provide such a large percentage of the climate financing solution. Instead, they would like to see most funding raised be invested in technologies to help reduce their emissions. Countries may also insist on some control over funds raised from within their borders, once again introducing the possibility of crowding out existing foreign aid or falling victim to the annual appropriations process. Despite these challenges, however, the clear need to address this source of emissions and the benefits of international coordination indicate that this mechanism is likely to be implemented at some point in the future.

5) International Monetary Fund (IMF) Special Drawing Rights (SDRs). Countries could exchange their Special Drawing Rights – a reserve asset created by the International Monetary Fund – or other reserve assets for an equity stake in an international fund that would make below-market loans and some grants to developing countries, or SDRs could be lent or sold directly or indirectly to raise capital for an international fund or developing country budgets. Various iterations of this proposal could mobilize from less than $10 billion per year by 2020 to over $100 billion, depending on how loans are counted and what mechanism is used. Analyzing U.S. and international authorities governing SDRs reveals that this proposal could face substantial legal obstacles, albeit ones that could be overcome with an infusion of high-level political will. If this political will exists, it may be easier to create a similar international fund using an appropriated capital and callable capital model similar to the World Bank that avoids reserve assets altogether. However, in light of this proposal it is at least worth re-examining the future role of the IMF in the climate crisis, which could cause macroeconomic stabilization issues in developing countries that need to devote substantial fiscal resources to domestic adaptation or other climate purposes.

6) Financial industry taxes. Countries could redirect revenue from fees on international currency transactions or other aspects of the financial industry towards international climate purposes. While specific amounts vary based on different proposals, most fall in the range of tens of billions annually by 2020. Overall, the proposal could face similar issues to a bunker fuel levy in terms of applying to all developed and developing countries, industry opposition and domestic implementation leading to crowding out or a yearly budgetary fight. In addition, there is also a less clear link between the financial industry and climate change that will make selling financial fees to the general public a greater challenge.

In addition, there are two other mechanisms that are receiving serious attention from some governments and the broader environmental community:

1) Increasing funding for and “greening” existing institutions. Countries could increase capital for existing institutions, especially the World Bank Group and other development banks, with the expectation that their lending for fossil fuels phases out and funding for alternative energy and efficiency projects increases. Combined, these institutions provide billions in energy and transportation funding each year in the form of grants, concessional loans and below-market rate loans to developing nations. This appears to be a clear victory as it would require limited additional capital outlays from developed country budgets and force key international financial institutions to develop expertise in climate financing. However, developing countries will no doubt have concerns about access, governance, and the ability to meet their development objectives if enough additional financing is not provided to meet the higher capital costs of clean energy projects. If these concerns can be managed, which appears likely, this mechanism should move forward successfully.

2) Friendly accounting practices. Emboldened by the word “mobilizing” in the Copenhagen pledge, countries will take credit for loans, programs that produce climate “co-benefits” (such as those for water or agriculture), and the full value of investment in projects where public financing is only a small component. While these efforts are all helpful in a world of limited resources, the international community and national governments would benefit from clearer guidelines about what “counts” as climate financing. For example, while offsets and some multilateral funds both “mobilize” private sector resources, countries generally do not count the full value of entire offset projects as the amount of funding mobilized (they focus on the value of carbon credits generated). It is important to consider these issues to ensure resources are being directed in the most effective manner, and are adequate to address the scale of the problem.

Overall, reaching the $100 billion commitment is highly unlikely without deploying a range of these mechanisms over a period of several decades, and indeed engaging new ones that have not yet been considered by the international community. In the end, success is not likely to hinge on a lack of ideas but rather the political will to see them through.

Andrew Stevenson is a research assistant at Resources for the Future.

Published: May-27-10 | 0 Comments

May14

Climate Change and American Power

International

As the chairman of the Senate Foreign Relations Committee, no one knows better than Sen. John Kerry (D-Mass.) all the intricacies of American power. As evidenced by the last several decades of climate diplomacy, including the 2009 Copenhagen conference, negotiations for an international agreement are wrapped up in complex global power relationships with core national interests at stake. The interaction between industrialized nations and emerging economies, debates over capability and responsibility and the tension between poverty alleviation, economic growth and environmental protection has provided a fascinating window into how the changing world can work together (or not) in dealing with global issues.

In this context, the "Power" in Senator Kerry and Lieberman’s (I-Conn.) American Power Act is about a lot more than coal plants and gas pumps. It is about changing the global geopolitics of oil that have fueled repressive regimes. It is about lessening the threat that climate change will further destabilize vulnerable states. It is about launching new domestic industries that will help rebalance global trade. And, most relevant for international climate negotiations, it is about restoring America’s role as a good actor through mandatory domestic emissions reductions and international financing for adaptation, reducing deforestation and clean technology.

That is a lot to ask of one bill, even if it is 987 pages long. Viewed through this broader lens, perhaps the most important international provisions of the bill are incentives for domestic manufacturing and clean transportation. However, a number of provisions will have a clearer and more direct impact on how the bill is viewed internationally.

1) The overanalyzed numbers game. No surprises here. The targets in Kerry-Lieberman are consistent with recent legislation and President Obama's international pledges–17 percent below 2005 levels by 2020 and 83 percent below 2005 levels by 2050. It should also be no surprise that most countries will believe that these targets are not strong enough based on what science requires or the United States' historical responsibility in addressing the climate problem. However, since by passing the bill the United States would be the first and only country with a mandatory cap to 2050, it is impossible to make a credible case that this would not be an enormous step forward.

2) Show me the money. Hillary Clinton's "Hail Mary" in Copenhagen was throwing the United States' weight behind a UK-French-Ethiopia brokered deal to mobilize $100 billion globally per year in climate finance by 2020. In meeting this pledge, the Kerry-Lieberman bill relies almost solely on private sector purchases of international offsets rather than setting aside new public revenues. The bill allows companies to purchase 500 million tons of international offsets per year for compliance purposes, up to 1 billion if adequate domestic offsets are not available. At prices of $12-20 per ton over the first decade of the program, funding from offsets could reach upwards of $20 billion per year (but could also be nothing if offset supply is low or domestic reductions prove cheaper than expected). However, while the Waxman-Markey bill allocated 7 percent of emissions allowance auction revenues to international purposes in its early years, the Kerry-Lieberman bill only allocates allowance to international adaptation, with none for reducing deforestation or clean technology deployment. International adaptation allocations start at 0.75 percent in 2019 and increase to 3.0 percent in 2034, or roughly $750 million to $3 billion per year. As discussed in a previous post, not setting aside revenues for capacity building to reduce emissions from deforestation could have substantial negative economic consequences for households and the U.S. economy.

3) Secure the border. As expected, the Kerry-Lieberman bill includes border measures that seek to prevent carbon leakage to countries that do not adopt similar climate policies. The section is similar to previous climate bills in its call for negotiating international climate agreements as the primary strategy of the United States. While critical to the vote of many moderates in the Senate, border measures are likely to incite significant backlash from China and other major emerging economies that seem them as an unfair threat to global trade and their domestic economic development. It is one of the few “sticks” the United States has to incentivize other countries to adopt stronger climate policies, but will likely make negotiating an international agreement more difficult (although more likely to be ratifiable at home).

4) A new foreign assistance framework. While the American Power Act does not allocate substantial new revenues for international—at least compared to previous climate bills—it does call for the creation of several new U.S. government programs to deal with different aspects of the climate problem. The bill creates a new “Strategic Interagency Board on International Climate Investment” chaired by the Secretary of State, a new program to reduce emissions from deforestation and a new international climate adaptation and global security program. The bill authorizes funds as necessary to carry out these programs, but only provides new public funding for international adaptation (as discussed previously).　　

5) Supplemental reductions? One of the most attractive features in the House bill for the international community was the inclusion of 5 percent of allowance auction revenues for supplemental reductions from reducing deforestation in developing nations. While the Kerry-Lieberman bill includes a similar mandate to the House bill, calling for a reduction of 720 million tons per year in 2020 and a total of 6 billion by 2025, the bill provides no new public funding for achieving these goals.　 Thus, existing appropriations will need to be redirected or new appropriations will need to take place through the traditional foreign assistance process in order to achieve these objectives. If the Kerry-Lieberman bill goes to conference with the House-passed bill, another allocation fight is likely to take place that could re-introduce some of this funding.

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

Published: May-14-10 | 1 Comment

Apr21

International Financing Under a Hybrid Climate Bill

International, Offsets, COP-15

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

Mar23

Will Waning Environmental Interest Hamper Climate Change Action?

International, Congress

The pantheon of gurus over at the National Journal’s Energy and Environment Expert Blog were tasked this week with unpacking a recent Gallup poll that found Americans to be less concerned about the environment than they have been at any other time in the last 20 years. Editor Amy Harder asked the panel what can be made of the numbers and what the polling may mean for a federal response to climate change. RFF Vice President for Research and Senior Fellow Mark Cohen weighed in with his thoughts on the poll in a response titled, Be Wary of Raw Rankings.

According to Cohen, present interest levels don’t necessarily correlate to the public’s willingness to pay to avoid the adverse consequences of climate change:

Only two percent of respondents list the environment as a major concern. Yet, this is the same number that mentioned the war in Iraq, and twice the number that mention crime! Putting the public’s mixed feelings about the war aside, research clearly indicates that the public is willing to pay for programs that have been shown to reduce crime, such as early childhood education, drug treatment, or more police. Thus, be wary of interpreting these raw rankings and poll numbers. They might tell us what is top of mind and of highest priority, but they don’t tell us what the public is willing to pay for.

Highlighting a recent international survey of willingness to pay to avoid various levels of global temperature rise, Cohen went on to explain that some 92 percent of Swedes and 71 percent of Americans are willing to pay:

The average amount people are willing to pay to avoid a 4^oF temperature rise was $306/year in Sweden and $204/year in the U.S. —amounting to between 2-3% of the respondent’s per-capita income. They were willing to pay even more if temperature increases could be held to 3^oF: $330 per year in the U.S. and $552 per in Sweden. These levels of expenditure are in line with most of the economic estimates of the cost of climate change mitigation—generally thought to be between 1-3 percent of GDP.

Read Cohen’s entire response on the National Journal’s Energy and Environment Expert Blog here.

Published: Mar-23-10 | 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

Mar09

International Climate Progress May Require Modified Focus

International

It will take strong leadership from all corners of the globe to pull together political will to move forward on an international climate treaty. According to a new German Marshall Fund report from RFF’s Nigel Purvis and Andrew Stevenson, ignoring the negotiating lessons learned in Copenhagen and falling back on the status quo could be the most dangerous course of action for the United States and Europe:

To protect the climate, a fundamental shift in thinking is essential. The most effective strategy would begin focusing, country-by-country, on advancing concrete mitigation actions that further broader sustainable development objectives. The keys to success for Europe and the United States in this new approach will be offering financial support on a pay-for-performance basis and aligning international trade policy with climate objectives.

Negotiating formal climate commitments via global talks must turn into an important but lesser priority, informed by realistic expectations about the extent and pace of likely progress. Moving from climate commitments to climate action is not without risk. Developing nations have opened the door, but this approach is untested.

Read Purvis and Stevenson’s Rethinking Climate Diplomacy: New Ideas for Transatlantic Cooperation post-Copenhagen here.

Published: Mar-09-10 | 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

Feb22

Will Bolivia Lead a New Climate Diplomacy?

International

On February 10, the European Union Parliament called for a “new climate diplomacy” where a coordinated EU strategy will work closely with progressive developing and emerging economies. Bolivia’s leadership thinks it's about time.

In January, populist Bolivian President Evo Morales announced a three-day conference on climate change to serve as an alternative to Copenhagen. The meeting will focus on the rights of indigenous peoples and climate debt—something major, developed emitters owe the rest of the world. Bolivia, one of the poorest countries in South America, will host the climate forum in April in Cochabamba, the city famous for the 2000 “Water Wars” against the privatization of municipal water supply. David Choquehuanca, Bolivia's foreign minister, expects around 5,000 foreigners to attend the April event including activists, scientists, and public servants.

“Bolivia was one of the very few delegations that brought indigenous people to Copenhagen in order to show that talks shouldn't be top-down," says Claudia Aßmann, a consultant with the Bolivian government who joined the delegation in Copenhagen. Aßmann emphasizes that climate debt is a crucial part of Bolivia’s climate change policy strategy as outlined by their chief climate negotiator Angelica Navarro. Navarro defines Bolivia's goals as persuading developed nations to establish and fulfill domestic emissions reductions, finance large-scale adaptation projects, and technological transfer to developing countries. Migration and climate refugees are also among the topics to be discussed in April.

What Brought Bolivia Here

Politics and financial motives aside, Bolivia has already documented the negative side-effects of changing global temperatures.

As this New York Times video from last December shows, Bolivia’s 18,000-year-old Chacaltaya glacier, which once boasted the world’s highest ski resort, melted in 2009 ten years earlier than scientists predicted. Glaciers are an important source of water for nearby cities which already face supply issues. Rapid growth in cities, municipal mismanagement, and glaciers melting because of climate change creates more stress on this developing country's infrastructure.

Last year, the Guardian profiled Bolivia’s Uru Chipaya, a native tribe that lived through the Spanish conquest, but might not survive climate change. While some members of the Uru Chipaya blame the deities for the recent droughts that devastated their population, President Morales is channeling that frustration toward the developed world.

In November, CNN also reported on Bolivia adding that it is elderly women in the rural areas who bear the greatest burden of climate change as men and young women migrate to the cities. UNFPA Executive Director Thoraya Ahmed Obaid writes in a UNFPA 2009 report that "poor women in poor countries are among the hardest hit by climate change even though they contributed the least to it."

Whether the EU or Bolivia can truly create a new climate diplomacy is to be seen. In the meantime, many indigenous populations in developing countries must find a way to cope with climate change with or without international assistance.

Aysha Ghadiali is a Research Associate at Resources for the Future.

Published: Feb-22-10 | 2 Comments

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