Kyoto and Post-2012 Options

Transcription

1 Kyoto and Post-2012 Options The concept of agreement architecture Review FCCC and Kyoto Were we are now Alternative approaches Venue and process

2 The Challenge: Per Capita Emissions 4.0 to Meet a 550 ppmv Target Emissions Intensity (tc/ca OECD Economies in Transition No Policy 550 ppm target China & India

3 Needed: An Architecture for Managing a Global Commons A unifying structure that restricts potential agreements in ways that simplify negotiations and point them toward common goals. Why? Criteria Effective Cost efficient Equitable (gain participation) Flex to new info Verification & compliance Simple Continuity with Kyoto (?)

4 UN General Assembly Framework Convention on Climate Change COP Conference of Parties Treaty Bureaucracy First Try at a Comprehensive Architecture st commitment period MOP Kyoto Protocol Ratif n by 55% Legal Force 2d commitment period Tightening Accession Annex B (OECD, Econs. In Transition) Non-Annex B (Developing Countries)

5 Review of Kyoto Terms Targets for Annex B only (average = 5.2%) Reductions by , 1 st commitment period From 1990 base (implications for FSU) Six gases and carbon sinks Flexibility mechanisms International emissions trading Joint implementation (JI) Clean development mechanism (CDM) Carbon sinks (limited) Compliance Stringency with & without the U.S.

6 Review of Prospects for the Kyoto Targets Key parties EU and its individual members Japan Canada Russia Important influences CDM Russia trade Economic growth

7 Internal target Limited Credits EU Trading System Heavy industry (dn) Electric power /11/06 19/12/06 19/1/07 19/2/07 19/3/07 EUA 2007 Historical Closing Prices Image by MIT OCW /t (dn) Credits Transport, commercial, household, gov ment Kyoto target Trial period Coverage Target Allocation Banking Price history 1 st Kyoto Coverage Target Allocation Future price

8 Recent Action in the COP/MOP Settling final Kyoto details Sinks (e.g., credit for stopping deforestation?) CDM bureaucracy (lower transactions cost) 2d period (post 2012) commitments Many details (e.g., length of period) No serious discussion yet No deadline but COP-15 (2009) is a crucial point Continuation not certain Dialog on long-term cooperative action US participating

9 Allowance Allocation: Congressional Bills Leading U.S. Policy Proposal: Cap-&-Trade 9,000 8,000 Emissions, mmt of CO2-e. 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Also likely: CAFE, portfolio standards, other regulatory Year Bingaman-Specter Draft 2007 Lieberman-McCain 2007* Udall-Petri 2006 Waxman 2007 Sanders-Boxer 2007 Kerry-Snow e 2007 Feinstein August 2006

10 Unfortunate Timing The US 2007 & spring 2008: completed bill (20%) Spring 2009: Bill with Presidential support (70%) In 2010: Congress passes a bill (65%) By : New policy goes into effect China, India and others (?) Kyoto parties Key negotiations at COP-15 in Nov The gap What could lead the U.S. to move faster What assurance could new president send ahead of Congress?

11 Prices Instruments in Use Cap-and-trade systems EU CO 2 & fuel taxes EU & Japan Regulations and standards Everybody Subsidies to low CO 2 energy Everybody Controls on non-co 2 gases Some R&D and technology demonstration US, others Flows to non-annex B countries Development assistance A Few Technology transfer programs A Few Voluntary programs Everybody

12 Architectural Options Quantity targets and timetables Linked trading systems Common policies and measures Trade restrictions R&D, standards & network effects Sector agreements Aid-based proposals Other?? Not mutually exclusive: the solution may involve a mix

13 Quantity Targets and Timetables Target definition % below base-year emissions (Kyoto) Growth linked (CO 2 intensity) Wealth trigger or other simple equity rule Emissions Safety valve Growth/yr +2% Compliance Legally binding $12,000 0% $4,000 Pledge and review Loose guide only 2% Historical basis vs. per capita target GDP/Cap

14 Accession by Trade Linkage Organic market growth (vs. one-time deal) Arbitrage through CDM Mutual recognition of individual systems Challenges Non-Annex B accession & headroom Difficulties in coordination & limits on $$ flows Complications added by a safety valve Current evolution Financial market actors Role of the World Bank Russian deals (Gasprom use of JI & CDM)

15 Common Policies and Measures (PAMs) Carbon or fuel taxes Issues in implementation Regulatory measures Auto design regulations (e.g., US CAFE) Portfolio standards Electric power Others? Appliance standards Compliance?

16 Trade Restriction Use of countervailing tariffs How calculated Rules under the WTO Override by other international agreement (e.g., Montreal Protocol) Difficulties Complex set of winners and losers Retaliation Recent proposals... & likely use

17 R&D, Standards & Network Effects R&D to on low-co 2 technologies, seeking Economies of scale Domestic-related benefits Network externalities Strategic plan for diffusion Cost reduction by scale and network effects The goods themselves (e.g., car type) Standards enforced by leader countries Manufacturing methods used in producing imports (e.g., emissions of industrial gases)

18 Sector Agreements Agreements by industrial sector World Semiconductor Council PFC target US SF 6 Emissions Reduction Partnership Others Agreement on methane Methane to Markets Partnership A possible protocol?

19 Aid-Based Proposals Re-directed Overseas Direct Assistance (ODA) and private investment incentives Global emissions reduction fund Direct finance by wealthy countries, used to buy reductions in poor countries Adaptation aid Existing funds under the FCCC and GEF A broader agreement Liability law suits Aid for capacity development

20 Post-2012: A Personal View FCCC and the COP Continued support from current Kyoto parties But simultaneous negotiation in other venues Kyoto Protocol Handling of likely non-compliance?? Survives post-2012 as a softer commitment National measures (e.g., ETS) are maintained CDM Transactions costs keep CER quantities small (attempts to loosen threaten credibility) Post-2012 uncertainty weakens projects Maintained by demand from ETS & national systems and World Bank caretaking

21 Venue and Process: What Next? Venue FCCC (UN context and rules) G-8 (summit of heads of state Informal settings (e.g., Greenland dialog, L-20) Bilateral and multilateral deals Build on existing agreements US (and/or EU) with China and/or India Complexities Interaction with other treaties? Calculation of relative burdens Likely outcome: gradual harmonization of Kyoto & domestic policies (climate favela )