Tag: European Union

Low Prices a Problem? Making Sense of Misleading Talk about Cap-and-Trade in Europe and the USA

Some press accounts and various advocates have labeled the Regional Greenhouse Gas Initiative (RGGI) as near “the brink of failure” because of the recent trend of very low auction prices.  Likewise, commentators have recently characterized the European Union Emission Trading Scheme (EU ETS) as possibly “sinking into oblivion” because of low allowance prices.  Since when are low prices (which in this case reflect low marginal abatement costs) considered to be a problem?  To understand what’s going on, we need to remind ourselves of the purpose (and promise) of a cap-and-trade regime, and then look at what’s been happening in the respective markets.

The Purpose and Promise of Cap-and-Trade

A cap-and-trade system– if well designed, implemented, and enforced – will limit total emissions of the regulated pollutant to the desired level (the cap), and will do this (if the cap is binding) in a cost-effective manner, by leading regulated sources to each make reductions until they are all experiencing the same marginal abatement cost (the allowance price).  Thus, the sources that initially face the highest abatement costs, reduce less, and those sources that face the lowest abatement costs, reduce more, achieving system-wide minimum costs, that is, cost effectiveness.  So, the purpose and promise, in a nutshell, is to achieve the targeted level of aggregate pollution control, and – if the cap is binding – do this at the lowest possible cost.

RGGI Allowance Prices

The Regional Greenhouse Gas Initiative (RGGI) – a downstream cap-and-trade system for CO2 emissions from the power sector in 10 northeast states (Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont, with New Jersey now in the process of withdrawing from the coalition), was launched with relatively unambitious targets, principally in order to keep prices down to prevent severe leakage of electricity demand and hence leakage of CO2 emissions from the RGGI region to states and provinces outside of the region (mainly from New York to Pennsylvania).

Emissions are capped from 2012 to 2014, and then, starting in 2015, the cap decreases 2.5% per year until it is down by 10% in 2019.  This would represent a level of emissions 13% below the 1990 level of emissions.  It was originally thought that this would be some 35% below the Business-as-Usual (BAU) level in 2019.  Sounds good.  What happened is not that the system performed other than designed, but that “business was not as usual.”  That is, what happened is that unregulated power-sector (BAU) emissions in the northeast fell significantly.  (See the graph below of the RGGI cap and historical emissions.)


For source, please click here.

So, Why Did Emissions Fall in the RGGI States?

This happened for three reasons.  First, because of increasing supplies in the United States of low-cost, unconventional sources of natural gas, prices for this fuel have fallen dramatically since 2008. (See the graph below of natural gas and coal prices.)  That has meant greater dispatch of electricity from gas-fueled power plants (relative to coal-fired plants), more investment in new gas-fired generating plants, less investment in coal-fired generating capacity, and retirement of existing coal-fired capacity, all of which has contributed to lower CO2 emissions.


For source, please click here.

Second, the worst economic recession since the Great Depression hit the United States in 2008, causing dramatic reductions in electricity demand in the industrial and commercial sectors, reducing emissions.  (See the graph below of quarterly percentage change in U.S. GDP, 2007-2009.)

For source, please click here.

Third and finally, moderate northeast temperatures have kept down CO2 emissions linked with both heating and cooling.

Low Emissions, Low Allowance Demand, Low Allowance Prices

So, for the three reasons above, BAU CO2 emissions from the power sector in the RGGI states are dramatically below what was originally (and quite reasonably) anticipated.  The supply of RGGI CO2 allowances made available at auction is – by law – unchanged, but demand for these allowances has fallen dramatically, hence the fall in RGGI allowance prices.  (See the graph below of RGGI allowance prices, 2008-2010.)

For source, please click here.

Given that emissions are below the RGGI cap and – due to expectations regarding future natural gas prices – are likely to remain below the cap, there is no scarcity of allowances.  Shouldn’t the price fall to zero?  In theory, yes, except that the system has an auction reservation price of $1.86 per ton built in, thereby creating a price floor of precisely this amount.

Is RGGI a Failure?

So, the cap put in place by the RGGI system is being achieved, but it is not binding.  RGGI may not be particularly relevant, but it is not thereby a flawed system; surely it is not a failure.  Rather, a great environmental success has been achieved by the “fortunate coincidence” of low natural gas prices, economic recession, and mild weather.  This is hardly something to be lamented.

True enough, the RGGI system does have flaws (such as its narrow scope limited to electricity generation, and its lack of a simple safety valve, as I have written about in the past).  But the low allowance prices are evidence of a success outside of the RGGI market, not evidence of failure within the RGGI market.

If the RGGI states have the desire and the political will to tighten the cap in the future, then the system can again become binding, environmentally relevant, and cost-effective.  That’s an ongoing political debate.

To be fair, I should note that the same outcome I have described here can be spun – perhaps for political purposes – quite differently.  Recently, a self-described “free-market energy blog” commentator claimed – not without some justification – that RGGI is irrelevant or worse:  “Bottom line, the program has raised electricity prices, created a slush fund for each of the member states, and has had virtually no impact on emissions or on global climate change.”

Phrased differently, due to exogenous circumstances (I’ve described above), the RGGI program is non-binding, and so has no direct effect on emissions, but its relatively low auction reservation price does lead to very small impacts on electricity prices, and produces revenues for participating states, revenues which those states would surely claim are of value for state-level energy-efficiency and other programs that indirectly do affect CO2 emissions.  So, the real bottom line is that low RGGI allowance prices are not a consequence of poor system design or a fatal flaw of cap-and-trade systems in general, but rather a consequence of what are in reality some exogenous coincidences that have turned out to be good news for the environment.

Now, let’s turn to the European Union Emissions Trading Scheme (EU ETS).

EU ETS Allowance Prices

Unlike RGGI, the EU ETS has not been irrelevant.  It has successfully capped European CO2 emissions, achieved significant emissions reductions, and it has done so — more or less — cost-effectively.  (More about this hedging on cost-effectiveness below).  Not surprisingly, like RGGI, the EU ETS has some design flaws (principally, its limited scope – electricity generation and large-scale manufacturing – and lack of a safety-valve), but as with RGGI, its low allowance prices should not be taken as bad news, but to some degree as good news, and certainly not as a sign of failure of the EU ETS.

Hand-wringing in Europe over Low Allowance Prices

There has been much hand-wringing in Europe over the “failure of the system” because of low allowance prices.  Indeed, Danish Energy Minister Martin Lidegaard said earlier this month that low carbon prices threaten the EU ETS.

Of course, he’s correct that EU ETS allowance prices are “low.”  They are down from their historic average of about $20 per ton of CO2 to about $9 per ton currently (having reached an all-time low of $7.88 in early April).  Here’s a graph of EU ETS allowance prices (EUAs) over the crucial period of change, January 2007 to January 2009.

For source, please click here.

At this point in this essay, I probably don’t need to say that this pattern is partly explained by the global recession, which has hit Europe particularly hard (and now threatens a double-dip recession in a number of European nations).  Lower European – and global – demand has meant decreased economic activity in Europe, hence lower energy demand, lower CO2 emissions, and therefore lower demand and lower prices for EU ETS allowances.

Even if we assume a growth rate of European CO2 emissions 1 percent less than the growth rate of GDP (represented by the dotted “counterfactual” BAU line in the graph below, which estimates what emissions would have been from 2005 to 2010 without the introduction of the EU’s Emissions Trading System), the evidence makes clear that the EU ETS has succeeded in reducing emissions significantly below what would be expected from the recession alone.

For source, please click here.

This is where an important caveat needs to be introduced.  Also feeding into this allowance price depression has been a set of national and regional energy policies, such as those promoting use of renewables, which have served to reduce emissions, demand for allowances, and hence allowance prices (while rendering the overall CO2 program less cost-effective by ensuring that marginal abatement costs remain heterogeneous).  So, to the degree that the low allowance prices are due to so-called complimentary policies, the low prices are bad news about public policy (in cost-effectiveness terms), not good news.  But this refers to misguided complimentary policies (which fail to bring about any incremental emissions reductions — under the cap-and-trade umbrella — and drive up aggregate cost), not to any design flaw in the EU ETS itself.

Multiple Goals Typically Require Multiple Policy Instruments

No doubt, Minister Lidegaard is aware of the allowance price impacts of the recession, and I hope he’s aware of the allowance price consequences of these other energy and environmental policies.  The problem arises, however, because he sees the fundamental purpose of the EU ETS as somewhat broader than what I described at the beginning of this essay (namely, achieving emissions consistent with some cap, and doing so cost-effectively – if the cap is binding).  For him – and many other European observers – “the purpose of the ETS was to cap CO2 emissions in the E.U. and ensure clear economic incentives for investment in renewables.”  So, the hand-wringing is not about a failure to achieve emissions reductions cost-effectively, but to have prices high enough to achieve other goals – in this case, greater use of renewable sources of energy.  For others, the “other goals” have involved allowance prices high enough to bring about some targeted amount of technology innovation.

As I have written at this blog in the past, having multiple policy goals typically necessitates multiple policy instruments.  For example, if the goal is a combination of reducing emissions cost-effectively and having prices maintained at some minimum (whether to bring about greater use of renewable energy sources or to inspire more technology innovation), then two policy instruments are needed to do the job:  a cap-and-trade system for the first goal in combination with a carbon tax in the form of a price floor (as in RGGI) for the second goal.

Don’t Throw Out the Baby with the Bath Water

In other words, the EU ETS has not failed, but the design was inadequate (that is, incomplete) for what politicians now seem to want.  If the Europeans want a price floor in their system (or better yet, a price collar, which would combine a price floor with a safety valve, i.e., price ceiling), then this is certainly feasible technically and economically.  Likewise, if the EU member states have the desire and the political will to tighten the cap in the future, there are a variety of ways in which they can accomplish this, rendering the program more stringent and increasing allowances prices.  But, in any event, the European Commission’s Energy division, Environment division, and Climate division should sort out the real effects of the “complimentary policies” that have contaminated the EU ETS, and which fail to bring about additional emissions reductions but drive up costs.  Whether any of this is feasible politically is a question that my European colleagues and friends can best address.

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Economics of the Environment

The Sixth Edition of Economics of the Environment: Selected Readings has just been published by W. W. Norton & Company of New York and London.  Through five previous editions, Economics of the Environment has served as a valuable supplement to environmental economics texts and as a stand-alone book of original readings in the field of environmental economics.  Nearly seven years have passed since the previous edition of this volume was published, and it is now more than three decades since the first edition appeared, edited by Robert and Nancy Dorfman.  The Sixth Edition continues this tradition.

Motivation and Audience

Environmental economics continues to evolve from its origins as an obscure application of welfare economics to a prominent field in its own right, which combines elements from public finance, industrial organization, microeconomic theory, and many other areas of economics.  The number of articles on the environment appearing in mainstream economics periodicals continues to increase, and more and more economics journals are dedicated exclusively to environmental and resource topics.

There has also been a proliferation of environmental economics textbooks for college courses.  Many are excellent, but none can be expected to provide direct access to timely and original contributions by the field’s leading scholars.  As most teachers of economics recognize, it is valuable to supplement the structure and rigor of a text with original readings from the literature.

Scope and Style

With that in mind, this new edition of Economics of the Environment consists of thirty-four chapters that instructors will find to be of great value as a complement to their chosen text and their lectures.  The scope is comprehensive, and the list of authors is a veritable “who’s who” of environmental economics, including:  Joseph Aldy, Kenneth Arrow, Trudy Cameron, Ronald Coase, Maureen Cropper, Peter Diamond, George Eads, Jeffrey Frankel, Rick Freeman, Don Fullerton, Lawrence Goulder, John Graham, Robert Hahn, Michael Hanemann, Jerry Hausman, Steven Kelman, Nathaniel Keohane, Alan Krupnick, Lester Lave, John Livernois, Eric Maskin, Leonardo Maugeri, Gilbert Metcalf, Richard Newell, Roger Noll, William Nordhaus, Wallace Oates, Sheila Olmstead, Elinor Ostrom, Karen Palmer, Ian Parry, Carl Pasurka, Robert Pindyck, William Pizer, Michael Porter, Paul Portney, Forest Reinhardt, Richard Revesz, Milton Russell, Michael Sandel, Richard Schmalensee, Steven Shavell, Jason Shogren, Kerry Smith, Robert Solow, Nicholas Stern, Laura Taylor, Richard Vietor, and myself.

The articles are timely, with more than 90 percent published since 1990, and half since 2005.  There are two completely new sections of the book, “Economics of Natural Resources” and “Corporate Social Responsibility,” and all of the chapters in the section on global climate change are new to the sixth edition.

In order to make the readings in Economics of the Environment accessible to students at all levels, one criterion I use in the selection process is that articles should not only be original and well written — and meet the highest standards of economic scholarship — but also be non-technical in their presentations.  Hence, readers will find virtually no formal mathematics in any of the book’s 34 chapters throughout its 733 pages.

The Path Ahead

Environmental economics is a rapidly evolving field.  Not only do new theoretical models and improved empirical methods appear on a regular basis, but entirely new areas of investigation open up when the natural sciences indicate new concerns or the policy world turns to new issues.  Therefore, this book remains a work in progress.  I owe a great debt to the teachers and students of previous editions who have sent their comments and suggestions for revisions.  Looking to future editions, I invite all readers — whether teachers, students, or practitioners — to send me any thoughts or suggestions for improvement.

In the meantime, if you’re interested finding out more about the book, immediately below is a chapter-by-chapter summary of the book.  Alternatively, you can check out the W. W. Norton or Amazon web sites.

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Appendix:  A Summary of Economics of the Environment, Sixth Edition

Part I of the volume provides an overview of the field and a review of its foundations.  Don Fullerton and I start things off with a brief essay about how economists think about the environment (Nature 1998).  This is followed by the classic treatment of social costs and bargaining by Ronald Coase (Journal of Law and Economics 1960), and a new article by Jason Shogren and Laura Taylor on the important, emerging field of behavioral environmental economics (Review of Environmental Economics and Policy 2008).

The Costs of Environmental Protection

Part II examines the costs of environmental protection, which might seem to be without controversy or current analytical interest.  This is not, however, the case.  This section begins with a survey article by Carl Pasurka that reviews the theory and empirical evidence on the relationship between environmental regulation and so-called “competitiveness” (Review of Environmental Economics and Policy 2008).

A somewhat revisionist view is provided by Michael Porter and Class van der Linde, who suggest that the conventional approach to thinking about the costs of environmental protection is fundamentally flawed (Journal of Economic Perspectives 1995).  Karen Palmer, Wallace Oates, and Paul Portney provide a careful response (Journal of Economic Perspectives 1995).

The Benefits of Environmental Protection

In Part III, the focus turns to the other side of the analytic ledger — the benefits of environmental protection.  This is an area that has been even more contentious — both in the policy world and among scholars.  Here the core question is whether and how environmental amenities can be valued in economic terms for analytical purposes.

The book features a provocative debate on the stated-preference method known as “contingent valuation.”  Paul Portney outlines the structure and importance of the debate, Michael Hanemann makes the affirmative case, and Peter Diamond and Jerry Hausman provide the critique (all three articles are from the Journal of Economic Perspectives 1994).

In the final article in Part III, the book turns to a concept that is both very important in assessments of the benefits of environmental regulations and is also very widely misunderstood — the value of a statistical life.  In an insightful essay, Trudy Cameron seeks to set the record straight (Review of Environmental Economics and Policy 2010).

There are two principal policy questions that need to be addressed in the environmental realm:  how much environmental protection is desirable; and how should that degree of environmental protection be achieved.  The first of these questions is addressed in Part IV and the second in Part V.

The Goals of Environmental Policy:  Economic Efficiency and Benefit-Cost Analysis

In an introductory essay, Kenneth Arrow, Maureen Cropper, George Eads, Robert Hahn, Lester Lave, Roger Noll, Paul Portney, Milton Russell, Richard Schmalensee, Kerry Smith, and I ask whether there is a role for benefit-cost analysis to play in environmental, health, and safety regulation (Science 1996).

Then, Lawrence Goulder and I focus on an ingredient of benefit-cost analysis that non-economists seem to find particularly confusing, or even troubling — intertemporal discounting (Nature 2002).  Next, Robert Pindyck examines a subject of fundamental importance — the role of uncertainty in environmental economics (Review of Environmental Economics and Policy 2007).  Steven Kelman provides an ethically-based critique of benefit-cost analysis, which is followed by a set of responses (Regulation 1981).

Part IV concludes with an up-to-date essay by John Graham on the critical role of the U.S. Office of Management and Budget in federal regulatory impact analysis (Review of Environmental Economics and Policy 2008).

The Means of Environmental Policy:  Cost Effectiveness and Market-Based Instruments

Part V examines the policy instruments — the means — that can be employed to achieve environmental targets or goals.  This is an area where economists have made their greatest inroads of influence in the policy world, with tremendous changes having taken place over the past twenty  years in the reception given by politicians and policy makers to so-called market-based or economic-incentive instruments for environmental protection.

Lawrence Goulder and Ian Parry start things off with a broad-ranging essay on instrument choice in environmental policy (Review of Environmental Economics and Policy 2008).  Following this, I examine lessons that can be learned from the innovative sulfur dioxide allowance trading program, set up by the Clean Air Act Amendments of 1990 (Journal of Economic Perspectives 1998).  Finally, Michael Sandel provides a critique of market-based instruments, with responses offered by Eric Maskin, Steven Shavell, and others (New York Times 1997).

Economics of Natural Resources

Part VI consists of three essays on a new topic for this book — the economics of natural resources.  First, John Livernois examines the empirical significance of a central tenet in natural resource economics, namely the Hotelling Rule — the proposition that under conditions of efficiency, the scarcity rent (price minus marginal extraction cost) of natural resources will rise over time at the rate of interest (Review of Environmental Economics and Policy 2009).

Essays by Leonardo Maugeri (Review of Environmental Economics and Policy 2009) and Sheila Olmstead (Review of Environmental Economics and Policy 2010), respectively, examine two particularly important resources:  petroleum and water.

The next four sections of the book treat some timely and important topics and problems.

Corporate Social Responsibility and the Environment

Part VII examines corporate social responsibility and the environment, discussion of which has too often been characterized by more heat than light.  Forest Reinhardt, Richard Vietor, and I provide an overview of this realm from the perspective of economics, examining the notion of firms voluntarily sacrificing profits in the social interest.  In a second essay, Paul Portney provides a valuable empirical perspective (both are from the Review of Environmental Economics and Policy 2008).

Global Climate Change

Part VIII is dedicated to investigations of economic dimensions of global climate change, which may in the long term prove to be the most significant environmental problem that has arisen, both in terms of its potential damages and in terms of the costs of addressing it.  First, a broad overview of the topic is provided in a survey article by Joseph Aldy, Alan Krupnick, Richard Newell, Ian Parry, and William Pizer (Journal of Economic Literature 2010).

Next, William Nordhaus critiques the well-known Stern Review on the Economics of Climate Change, and Nicholas Stern and Chris Taylor respond (both are from Science 2007).  In the final essay in this section, Gilbert Metcalf examines market-based policy instruments that can be used to address greenhouse gas emissions (Journal of Economic Perspectives 2009).

Sustainability, the Commons, and Globalization

Part IX begins with Robert Solow’s economic perspective on the concept of sustainability.  This is followed by Elinor Ostrom’s development of a general framework for analyzing sustainability (Science 2009), and my own historical view of economic analysis of problems associated with open-access resources (American Economic Review 2011).  Then, Jeffrey Frankel draws on diverse sources of empirical evidence to examine whether globalization is good or bad for the environment (Council on Foreign Relations 2004).

Economics and Environmental Policy Making

The final section of the book, Part X, departs from the normative concerns of much of the volume to examine some interesting and important questions of political economy.  It turns out that an economic perspective can provide useful insights into questions that might at first seem to be fundamentally political.

Nathaniel Keohane, Richard Revesz, and I utilize an economic framework to ask why our political system has produced the particular set of environmental policy instruments it has (Harvard Environmental Law Review 1998).  Myrick Freeman reflects on the benefits that U.S. environmental policies have brought about since the first Earth Day in 1970 (Journal of Economic Perspectives 2002).  Lastly, Robert Hahn addresses the question that many of the articles in this volume raise:  what impact has economics actually had on environmental policy (Journal of Environmental Economics and Management 2000)?

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Assessing the Climate Talks — Did Durban Succeed?

The 17th Conference of the Parties (COP-17) of the United Nations Framework Convention on Climate Change (UNFCCC) adjourned on Sunday, a day and a half after its scheduled close, and in the process once again pulled a rabbit out of the hat by saving the talks from complete collapse (which appeared possible just a few days earlier).  But was this a success?

The Durban Outcome in a Nutshell

The outcome of COP-17 includes three major elements:  some potentially important elaborations on various components of the Cancun Agreements; a second five-year commitment period for the Kyoto Protocol; and (read this carefully) a non-binding agreement to reach an agreement by 2015 that will bring all countries under the same legal regime by 2020.

Is This a Success?

If by “success” in Durban, one means solving the climate problem, the answer is obviously “not close.”

Indeed, if by “success” one meant just putting the world on a path to solve the climate problem, the answer would still have to be “no.”

But, I’ve argued previously – including in my pre-Durban essay last month – that such definitions of success are fundamentally inappropriate for judging the international negotiations on the exceptionally challenging, long-term problem of global climate change.

The key question, at this point, is whether the Durban outcome has put the world in a place and on a trajectory whereby it is more likely than it was previously to establish a sound foundation for meaningful long-term action.

I don’t think the answer to that question is at all obvious, but having read carefully the agreements that were reached in Durban, and having reflected on their collective implications for meaningful long-term action, I am inclined to focus on “the half-full glass of water.”  My conclusion is that the talks – as a result of last-minute negotiations – advanced international discussions in a positive direction and have increased the likelihood of meaningful long-term action.  Why do I say this?

The Significance of Durban

Let’s look at the three major elements of the Durban outcome.

     1.  Putting More Flesh on the Bones of the Cancun Agreements

First, the delegates agreed to a set of potentially important details on various components of the Cancun Agreements.  This progress may turn out to be very important indeed, and helps advance – at least for the interim – a workable bottom-up, pledge-and-review approach to international climate cooperation.  The progress on this front includes work done on the Green Climate Fund to help mobilize public and private funding of climate change mitigation and adaptation in developing countries; more specifics on technology transfer mechanisms; mechanisms to enhance the transparency of national commitments under the Cancun Agreements; and an international scheme to reduce deforestation, which – importantly – includes market mechanisms.

     2.  A Second Commitment Period for the Kyoto Protocol

Second, the delegates agreed to a second five-year commitment period for the Kyoto Protocol.  Without this element, the talks would have collapsed, because the key emerging economies of China, India, Brazil, South Africa, Korea, and Mexico (not to mention the much larger number of truly poor, developing countries) would have walked out.  Would this have been so bad?

I have long argued that the Kyoto Protocol – with its structure of relatively ambitious targets for a small set of industrialized countries (the Annex I countries) and no targets whatsoever for the much larger set of other nations in the world (the non-Annex I countries) – is fundamentally flawed as a basis for addressing the climate change problem in a meaningful way, that is, in a way that can eventually limit global temperature increases to no more than 2 or 3 degrees Centigrade above pre-industrial levels.  In the past, some observers have gone so far as to argue that such a collapse of the talks would be necessary to free the world to consider alternative and ultimately more productive routes going forward.  Eventually, that may turn out to be true, but extending the Kyoto Protocol at this time for another period does little mischief.

The major effect – in addition to keeping the emerging economies (and developing countries) from walking out of the room – was to place the European Union in a position of accepting a target (for a second five-year period) that is no more stringent than what it has already committed to do under the European Union Emission Trading Scheme (EU ETS).  The United States is not a party to the Kyoto Protocol, and Canada, Japan, and Russia have indicated that they will not take up targets in a second commitment period.  Europe (and New Zealand, and possibly Australia) will be doing what they would have done anyway.  In exchange for this, the major emerging economies agreed to the third key element.

     3.  The Durban Platform for Enhanced Action

Third and finally, the delegates reached a non-binding agreement to reach an agreement by 2015 that will bring all countries under the same legal regime by 2020.  That’s a strange and confusing sentence, but it’s what happened, and – in my opinion – it’s potentially important, although it’s much too soon to say for sure.

The anchor that has been preventing real progress in the international climate negotiations for the past fifteen years has been the Kyoto Protocol’s dichotomous distinction between Annex I and non-Annex I countries.  With 50 non-Annex I countries now having greater per capita income than the poorest of the Annex I countries, it is clearly out of whack.  But, much more than that, this dichotomous distinction means that the world’s largest emitter – China – is unconstrained, that half of global emissions soon will be from nations without constraints, it drives up costs to four times their cost-effective level, and it creates a structure that makes change and progress virtually impossible.

Fortunately, the Copenhagen Accord and the Cancun Agreements began the process of blurring the Annex I/non-Annex I distinction, which was an important accomplishment, although it was only in the context of the interim pledge-and-review system, not in the context of an eventual successor to Kyoto.  Now, the COP-17 decision for “Enhanced Action” completely eliminates the Annex I/non-Annex I (or industrialized/developing country) distinction.  It focuses instead on the (admittedly non-binding) pledge to create a system of greenhouse gas reductions including all Parties (that is, all key countries) by 2015 that will come into force (after ratification) by 2020.  Nowhere in the text of the decision will one find phrases such as “Annex I,” “common but differentiated responsibilities,” or “distributional equity,” which have – in recent years – become code words for targets for the richest countries and a blank check for all others.

We should not over-estimate the importance of a “non-binding agreement to reach a future agreement,” but this is a real departure from the past, and marks a significant advance along the treacherous, uphill path of climate negotiations.

The Path Ahead

In my previous essay at this blog, I expressed the fear that contentious debates over a possible second commitment period for the Kyoto Protocol might disrupt the Durban talks, divert them from making sound progress on the Cancun structure, and keep the delegates from moving toward a sound foundation for meaningful long-term action.  I worried, in essence, that Durban – despite the weather – might resemble Copenhagen more than Cancun.

My conclusion is that this did not happen.  Not only did Durban not undo the progress made in Cancun, it built upon it, and moved forward.  This won’t satisfy the 350.org crowd, and it must greatly annoy the opponents of sensible climate policy, but in the real world of international negotiations on this exceptionally difficult global commons problem, this is what success looks like.

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For an interesting and helpful assessment of “The Legal Aspects of the Durban Platform Text,” I recommend an insightful Q&A by Jacob Werksman of the World Resources Institute.

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