Volume 4 Issue 3 (December, 2007)
International Climate Change Policy Update
Brent Sohngen, AED Economics, Ohio State University (Sohngen.1
at osu.edu)
The topic of climate change got a lot of press in 2007. Early in the year it was the release of the three reports by the Intergovernmental Panel on Climate Change combined with the Oscar Al Gore won for his movie. By fall, the former Vice President and the members of the Intergovernmental Panel on Climate Change had won the Nobel Peace Prize for their efforts. In December, the world turned its attention to Bali, where negotiators from nearly all countries of the world discussed efforts to combat climate change and/or to adapt to its impacts.
If the science of climate change generates some debate (and despite general agreement on some issues – the scientists really do debate lots of issues), the policy discussions create heated conversations, sometimes acrimonious press statements, and emotional displays of bliss or gloom. The recent United Nations meetings in Bali are a perfect example of the stakes of climate change policy for Ohio, the U.S., and the world.
Let's consider what was going on in Bali. The meeting in Bali was 13th annual meeting of parties who ratified the United Nations Framework Convention on Climate Change (UNFCCC). The UNFCCC, negotiated at the Earth Summit in Brazil in 1992, has been in force since 1994. The United States signed that treaty and the Senate ratified it. The UNFCCC called for developed countries to reduce their greenhouse gas emissions voluntarily, and to meet annually to discuss progress towards reducing emissions.
Since that treaty was ratified, greenhouse gas emissions have risen in all regions of the world (Figure 1). The largest growth since 1990 has occurred in China (5.8%/yr), India (4.7%/yr), and Brazil (3.3%/yr). U.S. emissions have grown 1.2%/yr since 1990, while emissions in Europe have grown only 0.2%/yr since 1990. One reason for the very slow growth in Europe was the collapse of the Soviet Union in 1990, and the subsequent reduction in economic growth in Eastern Europe during the 1990s. Since 2000, emission growth in Europe has actually exceeded that in the United States. European emissions have grown 1.0%/yr since 2000, while U.S. emissions have grown 0.5%/yr. When reviewing this data, it becomes abundantly clear that the voluntary emission restrictions called for in the UNFCCC are not likely to avert climate change.
At the 3rd meeting of parties to the UNFCCC in Kyoto, Japan (1997), countries finalized and signed a new treaty that went well beyond the original UNFCCC treaty. The so-called Kyoto Protocol required developed countries to reduce their emissions of greenhouse gases. The U.S. originally signed this treaty, which required us to reduce our carbon emissions by 7% below 1990 emission levels. Despite the fact that the Clinton administration negotiated and signed the treaty, they never submitted it to the Senate for ratification. One important reason the treaty was never submitted was that well before the Clinton administration agreed to the Kyoto Protocol, the U.S. Senate passed a resolution by a margin of 95-0 suggesting that they would not ratify a treaty that looked like what the Kyoto Protocol ultimately looked like. When the Bush administration took over in 2001, they withdrew the U.S. signature on the Kyoto Protocol.
Figure 1: Carbon dioxide emissions from fossil fuel consumption (1990 – 2005). Source: US Energy Information Administration
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The Kyoto Protocol, however, lives on because enough other countries (over 174) have ratified the treaty. The Kyoto Protocol has been in force since February 2005. The U.S. and Australia were the lone hold-outs among developed countries, although with a recent change in government in Australia, that country has now decided to ratify and adhere to the Kyoto Protocol.
Importantly, the Kyoto Protocol only governs greenhouse gas emissions in the period 2008-2012. It requires that developing countries reduce emissions in that period by 6-7% relative to 1990 levels. Looking at Figure 1, it is hard to see how many developed countries could achieve this, although we will certainly find out if they can in the next few years.
Once we are beyond 2012, the Kyoto Protocol will no longer be in force. If an international treaty is to be negotiated and signed for periods beyond 2012, then a new treaty will have to written, signed, and ratified. The conference in Bali was mainly about setting the framework for what is called a post-2012 agreement on greenhouse gas emissions.
What were the key issues that were discussed and negotiated in Bali? There are lots of them, and here I'll just give you my perspective on the most important issues.
The main question addressed at Bali was whether the parties to the UNFCCC would agree to negotiate over the next two years on a potential successor agreement to the Kyoto Protocol. The architects of the Bali meeting wanted a commitment to negotiate an agreement that would be finalized in Copenhagen in 2009. By the end of the Bali conference, this agreement was struck.
The language of this agreement indicates a commitment to negotiate the following points (among others) in the coming years:
· National commitments to quantifiable emission reductions by developed countries.
· Mitigation actions by developing countries, supported by technology, financing, and capacity building.
· Policy approaches to reduce emissions from deforestation.
· Use of markets and other cost-effective incentives to reduce the costs of achieving emission reductions.
The first bullet point was one of the most contentious issues. While most of the rest of the developed world has already agreed to set specific targets for reducing greenhouse gas emissions, the U.S. of course, has refrained from setting any such targets. It is worth noting that there are now a number of bills before the Senate that would impose greenhouse gas emission caps within the U.S., and several states, including California and a number of northeastern states, have set greenhouse gas emission limits. Despite this activity within the U.S. borders, the U.S. international negotiating position generally has been against agreeing to a treaty that would impose such caps externally. At the Bali conference, however, the U.S. ultimately agreed to move forward with negotiations on a future treaty that potentially would include quantifiable greenhouse gas emission caps.
The second bullet point was also contentious, and will have important implications for the future inclusion of the U.S. in any international treaty. Since the senate resolution of 1995 described above, the U.S. position has been founded on the principle that developing countries like China, India, and Brazil have to come aboard with meaningful action. The U.S. Presidency will certainly change in January of 2009, but I do not think this issue will go away.
The third bullet point relates to a new set of actions that could provide low cost opportunities to reduce carbon emissions – reducing deforestation in tropical countries. Currently, emissions from deforestation constitute about 20% of greenhouse gas emissions globally. When forests are converted to agriculture, most of the carbon in biomass is emitted into the atmosphere either through active burning of the biomass, or through decay processes that occur over time. Deforestation in tropical regions (Brazil, Africa, Southeast Asia) is essentially caused by expansion of agricultural land.
Reductions in deforestation could have important near-term impacts on the atmosphere and on the overall costs of avoiding climate change. A recent study by Tavoni et al. (2007) indicates that reductions in deforestation could reduce the costs of mitigating climate change by up to 50%. Such large cost-savings relative to other actions (like carbon taxes, emission controls on the energy sector, or energy conservation) are a strong motivating force for consideration.
Consideration of reductions in deforestation as a valid action for climate change mitigation is contentious for many reasons. First, governments like Brazil see expansion of their agricultural base as an important driver of prosperity in the future. Furthermore, they would like to see high payments for these activities. They will continue to slow down discussions on deforestation as a climate mitigation option until they see fairly large payments for the services they provide (which in turn would require U.S. involvement and/or substantially more stringent carbon caps than the Kyoto Protocol).
Second, many governments and non-governmental organizations in the developed world are concerned about reductions in deforestation because they may be difficult to measure and monitor. Despite all the advances in satellite and other technologies, it remains no small task to build measurement systems that track land-use, and more importantly, the carbon content on land. Furthermore, even if tracking systems can be put in place, designing incentives that affect land use is a complicated matter. Consider for example all the discussion about controlling land use that has occurred in the U.S. in the last decade with the issue of "urban sprawl." Precious few new incentives were actually undertaken, and even when they were undertaken, the results are not clear.
Third, many environmental groups are concerned that allowing credits for reductions in deforestation could reduce carbon prices in markets. If carbon prices fall, then incentives to invest in energy saving technologies would also be reduced. Thus, while reductions in deforestation clearly would benefit the atmosphere and mitigate climate change, they would cause us to put off some other investments.
Despite the concerns, the agreements in Bali lead to more research to develop verifiable systems that would allow reductions in deforestation to be utilized as a carbon mitigation option. I would argue this is a good thing because it ultimately can reduce our costs for mitigating climate change.
The next couple of years will be interesting for those involved in climate change policy. During all of the discussions internationally, quite a bit will happen within the U.S. California will continue to implement its new laws that cap carbon emissions, and some of the steps they take will have implications for the entire country. For example, there is currently a battle over whether or not California can institute tougher automobile emission standards than the rest of the U.S. The U.S. Environmental Protection Agency recently rejected California's request for a waiver to implement tougher restrictions than national law, and California and other states are engaging in a lawsuit to overturn that ruling.
In addition to this state action, a number of bills before the Senate would begin to move the U.S. down a path towards capping carbon emissions. A number of observers believe that one of these bills could emerge from committee in 2008. The new energy bill just signed by the President also moves the U.S. in the direction of abating climate change. Although the climate benefits of some biofuels grown in the U.S. are debated, the new energy bill requires substantially more biofuels to be used by 2022. The bill also requires improvements in fuel efficiency standards for automobiles nationally, and improvements in the efficiency of electrical appliances and lightbulbs. These actions arguably could influence carbon emissions.
Perhaps the most interesting development over the next two years in the U.S. will be the change in presidential administration in 2009. Because the president negotiates international treaties, the new president, whoever it is, will have the ultimate say in how the U.S. negotiates a potential successor agreement to the Kyoto Protocol. It will be interesting to watch the campaign in 2008 to see how the two major party candidates address this issue.
Websites of Interest
United Nations Climate
Conference
http://unfccc.int/meetings/cop_13/items/4049.php
IISD Reporting Service
(Reports on the negotiations)
http://www.iisd.ca/climate/cop13/
Pew Center on Climate
Change Policy Pages
http://www.pewclimate.org/policy_center/
Resources For the Future –
US Climate Policy Page
http://www.weathervane.rff.org/solutions_and_actions/united_states.cfm
World Resources Institute
Climate Page
http://www.wri.org/climate#
Environmental Defense
Climate Page
http://www.environmentaldefense.org/page.cfm?tagID=65
The Heritage Foundation on
the results of the Bali Conference
http://www.heritage.org/Research/EnergyandEnvironment/wm1759.cfm