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Defining Success for Climate Negotiations in Cancun

International climate negotiations will continue in Cancun, Mexico, during the first two weeks of December, 2010.  These will be the Sixteenth Conference of the Parties (COP-16) of the United Nations Framework Convention on Climate Change (UNFCCC).  The key challenge is to continue the process of constructing a sound foundation for meaningful, long-term global action, not necessarily some notion of immediate, highly-visible triumph.  Some of the gloom-and-doom predictions we’ve been hearing about these upcoming negotiations are therefore misguided, because they are based upon unreasonable – and fundamentally inappropriate – expectations (despite the fact that expectations have been lowered dramatically since COP-15 in Copenhagen last year).

Keeping Our Eyes on the Prize

Why do I say that the best goal for the Cancun climate talks is to make real progress on a sound foundation for meaningful, long-term global action, not some notion of immediate triumph?  This is because of some basic scientific and economic realities.

First, the focus of scientists (and policy makers) should be on stabilizing concentrations at acceptable levels by 2050 and beyond, because it is the accumulated stock of greenhouse gas emissions — not the flow of emissions in any year — that are linked with climate consequences.

Second, the cost-effective path for stabilizing concentrations involves a gradual ramp-up in target severity, to avoid rendering large parts of the capital stock prematurely obsolete.

Third, massive technological change is the key to the needed transition from reliance on carbon-intensive fossil fuels to more climate-friendly energy sources.  Long-term price signals (most likely from government policies) will be needed to inspire such technological change.

Fourth and finally, the creation of long-lasting international institutions is central to addressing this global challenge.

For all of these reasons, international climate negotiations will be an ongoing process, not a single task with a clear end-point.  Indeed, they may well proceed much as international trade talks have done, that is, with progress over many years, building the institutions (the GATT, the WTO), but moving forward in fits and starts, at times seeming to move backward, but making meaningful progress in the long term.

So, the bottom-line is that a sensible goal for the international negotiations in Cancun is progress on a sound foundation for meaningful long-term action, not some notion of immediate “success.”

Don’t Sacrifice Valuable Long-Term Achievements for Minor Short-Term Gains

It might be relatively easy, but actually quite unfortunate, for countries to achieve what some people might define as “success” in Cancun:  a signed international agreement, followed by glowing press releases.  I say it would be unfortunate, because such an agreement could only be the Kyoto Protocol on steroids: more stringent targets for the original list of industrialized countries (Annex I) and no meaningful commitments by the key rapidly-growing emerging economies, such as China, India, Brazil, Korea, Mexico, and South Africa.

Such an agreement could — in principle — be signed, but it would not reduce global emissions, and it would not be ratified by the U.S. Senate (just like Kyoto).  Hence, there would be no real progress on climate change.

What Would Constitute Real Progress in Cancun?

If it’s not reasonable to expect that a comprehensive post-Kyoto policy architecture will be identified and enacted in Cancun, what would constitute real progress?

1.  Embracing Parallel Processes

A significant step forward would be for the UNFCCC to embrace the parallel processes that are carrying out multilateral discussions (and in some cases, negotiations) on climate change policy:  the Major Economies Forum or MEF (a multilateral venue for discussions – but not negotiations – outside of the UNFCCC, initiated under a different name by the George W. Bush administration in the United States, and continued under a new name by the Obama administration, for the purpose of bringing together the most important emitting countries for candid and constructive discussion and debate); the G20 (periodic meetings of the finance ministers – and sometimes heads of government – of the twenty largest economies in the world); and various other multilateral and bilateral organizations and discussions.

By the way, the MEF includes Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, South Africa, the United Kingdom, and the United States. The membership of the G20 is the same as the membership of the MEF, plus Argentina, Saudi Arabia, and Turkey.

The previous leadership of the UNFCCC seemed to view the MEF, the G20, and most other non-UNFCCC forums as competition – indeed, as a threat.  Fortunately, the UNFCCC’s new leadership under Executive Secretary Christiana Figueres (appointed by UN Secretary-General Ban Ki-moon in May of this year) has displayed a considerably more positive and pragmatic attitude toward these parallel processes.

2.  Consolidating Negotiations Tracks

There are now three major, parallel processes operative:  first, the UNFCCC’s KP track (negotiating national targets for a possible second commitment period – post-2012 – for the Kyoto Protocol); second, the LCA track (the UNFCCC’s negotiation track for Long-term Cooperative Action, that is, a future international agreement of undefined nature); and third, the Copenhagen Accord, negotiated and noted at COP-15 in Copenhagen, Denmark, in December, 2009.  Consolidating these three tracks into two tracks (or better yet, one track) would be another significant step forward.

One way this could happen would be for the LCA negotiations to take as their point of departure the existing Copenhagen Accord, which itself marked an important step forward by blurring for the first time (although not eliminating) the unproductive and utterly obsolete distinction in the Kyoto Protocol between Annex I and non-Annex I countries.  (Note that more than 50 non-Annex I countries now have greater per capita income than the poorest of the Annex I countries.)

In particular, the UNFCCC principle of  “common but differentiated responsibilities” could be made meaningful through the dual principles that:  all countries recognize their historic emissions (read, the industrialized world); and all countries are responsible for their future emissions (think of those rapidly-growing emerging economies).

This would represent a great leap beyond what has become the “QWERTY keyboard” (that is, unproductive path dependence) of international climate policy:  the distinction in the Kyoto Protocol between the small set of Annex I countries with quantitative targets, and the majority of countries in the world with no responsibilities.  Various policy architectures could subsequently build on these dual principles and make them operational, beginning to bridge the massive political divide which exists between the industrialized and the developing world.

At the Harvard Project on Climate Agreements — a multi-national initiative with some 35 research projects in Australia, China, Europe, India, Japan, and the United States — we have developed a variety of architectural proposals that could make these dual principles operational.  (See, for example:  “Global Climate Policy Architecture and Political Feasibility: Specific Formulas and Emission Targets to Attain 460 PPM CO2 Concentrations” by Valentina Bosetti and Jeffrey Frankel; and “Three Key Elements of Post-2012 International Climate Policy Architecture” by Sheila M. Olmstead and Robert N. Stavins.)

3.  Productive Steps in Narrow, Focused Agreements, such as REDD+

A third area of success at the Cancun negotiations could be realized by some productive steps with specific, narrow agreements, such as on REDD+ (Reduced Deforestation and Forest Degradation, plus enhancement of forest carbon stocks).  Other areas where talks are moving forward, although somewhat more slowly, are finance and technology.

4.  Maintaining Sensible Expectations and Developing Effective Plans

Finally, it is important to go into the Cancun meetings with sensible expectations and thereby effective plans.  Again, negotiations in this domain are an ongoing process, not a single task with a clear end-point.  The most sensible goal for Cancun is progress on a sound foundation for meaningful long-term action, not some notion of immediate triumph.  The key question is not what Cancun accomplishes in the short-term, but whether it helps put the world in a better position five, ten, and twenty years from now in regard to an effective long-term path of action to address the threat of global climate change.

Further Reading

A number of previous essays I have written and posted at this blog will be of interest to those who wishe to follow developments at the Sixteenth Conference of the Parties of the UN Framework Convention on Climate Change in Cancun.  Here are links, in chronological order:

Three Pillars of a New Climate Pact

Can Countries Cut Carbon Emissions Without Hurting Economic Growth?

Approaching Copenhagen with a Portfolio of Domestic Commitments

Defining Success for Climate Negotiations in Copenhagen

Only Private Sector Can Meet Finance Demands of Developing Countries

Chaos and Uncertainty in Copenhagen?

What Hath Copenhagen Wrought? A Preliminary Assessment of the Copenhagen Accord

Another Copenhagen Outcome: Serious Questions About the Best Institutional Path Forward

Opportunities and Ironies: Climate Policy in Tokyo, Seoul, Brussels, and Washington

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Who Killed Cap-and-Trade?

In a recent article in the New York Times, John Broder asks “Why did cap-and-trade die?” and responds that “it was done in by the weak economy, the Wall Street meltdown, determined industry opposition and its own complexity.”  Mr. Broder’s analysis is concise and insightful, and I recommend it to readers.  But I think there’s one factor that is more important than all those mentioned above in causing cap-and-trade to have changed from politically correct to politically anathema in just nine months.  Before turning to that, however, I would like to question the premise of my own essay.

Is Cap-and-Trade Really Dead?

Although cap-and-trade has fallen dramatically in political favor in Washington as the U.S. answer to climate change, this approach to reducing carbon dioxide (CO2) emissions is by no means “dead.”

The evolving Kerry-Graham-Lieberman legislation has a cap-and-trade system at its heart for the electricity-generation sector, with other sectors to be phased in later (and it employs another market-based approach, a series of fuel taxes for the transportation sector linked to the market price for allowances).  Of course, due to the evolving political climate, the three Senators will probably not call their system “cap-and-trade,” but will give it some other creative label.

The competitor proposal from Senators Cantwell and Collins — the CLEAR Act — has been labeled by those Senators as a “cap-and-dividend” approach, but it is nothing more nor less than a cap-and-trade system with a particular allocation mechanism (100% auction) and a particular use of revenues (75% directly rebated to households) — and, it should be mentioned, some unfortunate and unnecessary restrictions on allowance trading.

And we should not forget that cap-and-trade continues to emerge as the preferred policy instrument to address climate change emissions throughout the industrialized world — in Europe, Australia, New Zealand, and Japan (as I wrote about in a recent post).

But back to the main story — the dramatic change in the political reception given in Washington to this cost-effective approach to environmental protection.

A Rapid Descent From Politically Correct to Politically Anathema

Among factors causing this change were:  the economic recession; the financial crisis (linked, in part, with real and perceived abuses in financial markets) which thereby caused great suspicion about markets in general and in particular about trading in intangible assets such as emission allowances; and the complex nature of the Waxman-Markey legislation (which is mainly not about cap-and-trade, but various regulatory approaches).

But the most important factor — by far — which led to the change from politically correct to politically anathema was the simple fact that cap-and-trade was the approach that was receiving the most serious consideration, indeed the approach that had been passed by one of the houses of Congress.  This brought not only great scrutiny of the approach, but — more important — it meant that all of the hostility to action on climate change, mainly but not exclusively from Republicans and coal-state Democrats, was targeted at the policy du jour — cap-and-trade.

The same fate would have befallen any front-running climate policy.

Does anyone really believe that if a carbon tax had been the major policy being considered in the House and Senate that it would have received a more favorable rating from climate-action skeptics on the right?  If there’s any doubt about that, take note that Republicans in the Congress were unified and successful in demonizing cap-and-trade as “cap-and-tax.”

Likewise, if a multi-faceted regulatory approach (that would have been vastly more costly for what would be achieved) had been the policy under consideration, would it have garnered greater political support?  Of course not.  If there is doubt about that, just observe the solid Republican Congressional hostility (and some announced Democratic opposition) to the CO2 regulatory pathway that EPA has announced under its endangerment finding in response to the U.S. Supreme Court decision in Massachusetts vs. EPA.

(There’s a minor caveat, namely, that environmental policy approaches that hide their costs frequently are politically favored over policies that make their costs visible, even if the former policy is actually more costly.  A prime example is the broad political support for Corporate Average Fuel Economy (CAFE) standards, relative to the more effective and less costly option of gasoline taxes.  Of course, cap-and-trade can be said to obscure its costs relative to a carbon tax, but that hardly made much difference once opponents succeeded in labeling it “cap-and-tax.”)

In general, any climate policy approach — if it was meaningful in its objectives and had any chance of being enacted — would have become the prime target of political skepticism and scorn.  This has been the fate of cap-and-trade over the past nine months.

Why is Political Support for Climate Policy Action So Low in the United States?

If much of the political hostility directed at cap-and-trade proposals in Washington has largely been due to hostility towards climate policy in general, this raises a further question, namely, why has there been so little political support in Washington for climate policy in general.  Several reasons can be identified.

For one thing, U.S. public support on this issue has decreased significantly, as has been validated by a number of reliable polls, including from the Gallup Organization.  Indeed, in January of this year, a Pew Research Center poll found that “dealing with global warming” was ranked 21st among 21 possible priorities for the President and Congress.  (It should be noted some polls are not consistent with these.)  This drop in public support is itself at least partly due to the state of the national economy, as public enthusiasm about environmental action has — for many decades — been found to be inversely correlated with various measures of national economic well-being.

Although the lagging economy (and consequent unemployment) is likely the major factor explaining the fall in public support for climate policy action, other contributing factors have been the so-called Climategate episode of leaked e-mails from the University of East Anglia and the damaged credibility of the Intergovernmental Panel on Climate Change (IPCC) due to several errors in recent reports.

Furthermore, the nature of the climate change problem itself helps to explain the relative apathy among the U.S. public.  Nearly all of our major environmental laws have been passed in the wake of highly-publicized environmental events or “disasters,” ranging from Love Canal to the Cuyahoga River.

But the day after Cleveland’s Cuyahoga River caught on fire in 1969, no article in The Cleveland Plain Dealer commented that “the cause was uncertain, because rivers periodically catch on fire from natural causes.”  On the contrary, it was immediately apparent that the cause was waste dumped into the river by adjacent industries.  A direct consequence of the “disaster” was, of course, the Clean Water Act of 1972.

But climate change is distinctly different.  Unlike the environmental threats addressed successfully in past legislation, climate change is essentially unobservable.  You and I observe the weather, not the climate (note the dramatic difference of opinion about the reality of climate change between climatologists and television weathercasters).  Until there is an obvious and sudden event — such as a loss of part of the Antarctic ice sheet leading to a disastrous sea-level rise — it’s unlikely that public opinion in the United States will provide the bottom-up demand for action that has inspired previous Congressional action on the environment over the past forty years.

Finally, it should be acknowledged that the fiercely partisan political climate in Washington has completed the gradual erosion of the bi-partisan coalitions that had enacted key environmental laws over four decades.  Add to this the commitment by the opposition party to deny the President any (more) political victories in this year of mid-term Congressional elections, and the possibility of progressive climate policy action appears unlikely in the short term.

An Open-Ended Question

There are probably other factors that help explain the fall in public and political support for climate policy action, as well as the changed politics of cap-and-trade.  I suspect that readers will tell me about these.

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Opportunities and Ironies: Climate Policy in Tokyo, Seoul, Brussels, and Washington

As I write this, I’m on board a flight from Seoul, South Korea, to San Francisco, California, on my way home to Boston, having spent the week of Harvard spring break meeting with senior government officials, academics, and leaders of civil society in Tokyo and Seoul on behalf of the Harvard Project on International Climate Agreements.  Reflecting on these meetings in Asia and recalling meetings I’ve previously had in Brussels and Washington, some important opportunities and ironies about national and international climate policy come to mind.

Opportunities

The 15th Conference of the Parties (COP-15) of the United Nations Framework Convention on Climate Change (UNFCCC), which met in Copenhagen, Denmark, in December, 2009, produced two significant outcomes.  The key substantive outcome, of course, was the Copenhagen Accord, about which I’ve written in detail in a previous blog post.  The key institutional outcome was speculation that the UNFCCC may not be the best venue going forward for productive negotiations on climate change.   (This is also a topic about which I’ve recently written at this blog.)

These dual outcomes of the Copenhagen conference point to the special importance of two key nations in international climate policy developments this year.  I’m not referring to China and the United States (despite the fact that they are, of course, the world’s two leading emitters of carbon dioxide).  Rather, I am referring to Korea and Mexico.  Why?

First, these two nations are unique in being both long-time members (Korea since 1996, Mexico since 1994) of the Organization of Economic Cooperation and Development (OECD) and members of the group of non-Annex I countries under the Kyoto Protocol, which have no direct commitments under that international agreement.  The OECD comes as close as anything to defining the set of industrialized nations of the developed world.  Thus, Korea and Mexico have their feet planted firmly both in the developed world and the developing world (a fact that is readily apparent on even brief visits to these nations).  This gives Korea and Mexico remarkable credibility with the two key blocks in international climate negotiations.  That, on its own, would be of considerable importance, but there is another reality that makes this of even greater significance (and opportunity) in this year of 2010.

Coming out of Copenhagen, many participants in the international climate negotiations (as well as informed observers), noted that the UNFCCC has real limitations as the sole venue for future climate negotiations:  too many countries – 192, excessively stringent requirements for agreement – unanimity, and a distinct tendency to polarize debates between developed and developing countries.  Two other, potentially supplementary venues stand out as promising:  the Major Economies Forum (MEF) and the G20.

The MEF, which has hosted productive discussions among 17 key countries and regions that together account for nearly 90 percent of global carbon dioxide (CO2) emissions, may be somewhat limited by the fact that is was created by and is chaired by the United States, a nation with constrained credibility on climate issues among some countries, particularly in the developing world.  The G20, which brings together twenty of the world’s largest economies, focuses on economic as well as other global issues and consists of almost the same set of nations as the MEF, likewise accounting for about 90 percent of global emissions.  The G20 could thus be an exceptionally promising supplementary venue for meaningful and realistic climate discussions.  And in November of this year, the G20 will be hosted by Korea, when it convenes in Seoul.  This gives the Korean government a special role in setting the agenda for the discussions and presiding at the sessions.

The G20 meetings in Seoul will come just two weeks before the Sixteenth Conference of the Parties of the UNFCCC, which will take place in Cancún, Mexico.  Thus, the Mexican government is also in a key position this year, because it will hold the Presidency of COP-16.

Add to this the fact that both Korea and Mexico have been particularly creative in their domestic climate policy initiatives and international proposals over the past year.   Harvard Kennedy School Professor Jeffrey Frankel notes at his blog — Views on the Economy and the World — that Korea and Mexico were particularly ambitious with their submissions to the Copenhagen Accord, when comparing the submissions of all countries in terms of 2020 emissions targets relative to business-as-usual, controlling for per capita income.

Together, Korea and Mexico, share credibility in the developing and developed worlds, and likewise share unique international legitimacy as the hosts and presidents of the G20 and COP-16 in 2010.  This is why these two countries have a remarkable opportunity this year to provide leadership of the international community, and make real progress on negotiations to address the threat of global climate change.  Those are the opportunities.   Now, let me turn to the ironies that have come to the fore.

Ironies

More than a decade ago, it was the United States, as the leader of the so-called “Umbrella Group,” that successfully fought for the inclusion in the Kyoto Protocol – over the objections of the European Union – of three “flexibility mechanisms” to bring down the costs of meeting the Protocol’s objectives:  joint implementation (Article 4), a global emissions reduction credit system, the Clean Development Mechanism (the CDM, Article 12), and emissions trading among countries (Article 17).  Ironically, once the George W. Bush administration officially pulled the United States out of the Kyoto Protocol process, it was the European Union that implemented the world’s first CO2 emissions trading program, the European Union Emission Trading Scheme (EU ETS).

Beyond this, the United States was a pioneer with the use of national cap-and-trade systems, including lead trading in the 1980s and the SO2 allowance trading program beginning in 1995 under the Clean Air Act Amendments of 1990.  In addition, despite its lack of ratification of the Kyoto Protocol, the U.S. government very early on began to give serious consideration to the development of an economy-wide cap-and-trade system for CO2 with the McCain-Lieberman legislation in the U.S. Senate (followed later by the Lieberman-Warner bill).  More recently, of course, the U.S. House of Representatives passed the Waxman-Markey bill in June of 2009, including a significant economy-wide cap-and-trade system.

Over the past nine months, however, the very phrase, “cap-and-trade,” has evolved from being politically correct in Washington to nothing less than politically anathema.  (How and why this happened is a topic for a future essay at this blog.)  The great irony is that just when cap-and-trade has been under such vociferous attack in Washington, countries throughout the world are embracing this instrument, recognizing its great potential to address climate change cost-effectively and equitably.

In addition to the EU ETS, already in force, Australia is primed to put its cap-and-trade system in place, as is New Zealand.  And just a few days before I arrived in Tokyo, the Japanese cabinet announced that the government will move forward with a cap-and-trade system (in contrast with Japan’s previously proposed sectoral approach).  And, not to be outdone, Korea is considering the use of cap-and-trade as an element of its own domestic climate policy.

This irony is striking.  Of course, it could be reduced or eliminated if Senators Kerry, Graham, and Lieberman can use their much-anticipated new climate proposal to pull victory from the jaws of anticipated defeat.   Only time will tell.

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