Climate change is a global challenge and requires a global solution. Through analysis and dialogue, the Center for Climate and Energy Solutions is working with governments and stakeholders to identify practical and effective options for the post-2012 international climate framework. Read more
TESTIMONY OF ELLIOT DIRINGER
PEW CENTER ON GLOBAL CLIMATE CHANGE
COMMITTEE ON ENVIRONMENT AND SUSTAINABLE DEVELOPMENT
HOUSE OF COMMONS
MAY 31, 2005
Mr. Chairman, members of the Committee, thank you for the opportunity to contribute to the Committee’s consideration of the vital issue of climate change. My name is Elliot Diringer and I am director of international strategies at the Pew Center on Global Climate Change.
The Pew Center is a U.S.-based non-governmental organization dedicated to providing credible information, sound analysis and innovative solutions in the effort to address global climate change. Since our founding in 1998 the Center has published more than 50 peer-reviewed reports on climate science, economics, policy and solutions. In addition, through the Center’s Business Environmental Leadership Council (BELC), we work closely with 39 major corporations to develop and promote practical and effective climate change policies. The BELC includes two Canadian firms, TransAlta and Ontario Power. The BELC companies do not contribute financially to the Center.
My aim today is to provide you with our perspective on the options for advancing the international climate change effort beyond 2012. Allow me to begin by noting that the Pew Center welcomes the Kyoto Protocol’s entry into force. We commend the Canadian government for its commitment to the Protocol, and for its efforts toward a workable and effective implementation strategy. We believe, however, that in looking beyond 2012 it is important to look beyond the Kyoto Protocol at the full array of options.
The challenge before us is to engage all the world’s major greenhouse gas-emitting countries in a long-term effort that fairly and effectively mobilizes the technology and resources needed to stabilize the global climate. Over the past three years, the Pew Center has led an initiative to facilitate constructive thinking and dialogue on options for advancing the international climate effort. As part of that effort, the Center has convened the Climate Dialogue at Pocantico, which brings together senior policymakers and stakeholders from around the world for a series of off-line discussions exploring options beyond 2012. The 25 participants include policymakers from Australia, Brazil, Canada, China, Germany, Japan, Mexico, Tuvalu, the United Kingdom, and the United States; executives of companies such as Alcoa, BP, DuPont, Rio Tinto, and Toyota; and NGO representatives from India, Switzerland, and the United States. The group has met three times and will convene for a final session this September. In a moment, I would like to describe the options presently under consideration.
First, however, I would like to introduce some of the broad insights that emerged from our initial work on these issues and served as an important foundation for our dialogue discussions. Four brief points:
- First, while the climate challenge is ultimately one of mobilizing technology, it is in the first instance one of mustering political will. Some approaches to international action can better assist in that than others.
- Second, scientific and economic uncertainty is not a justification for inaction, but rather an additional rationale for acting now.
- Third, while climate change is a common challenge, countries will engage in collective action only if they perceive it to be in their national interest. A multilateral approach must therefore recognize and accommodate domestic concerns such as development and competitiveness.
- Fourth, bridging diverse national interests requires a flexible architecture that allows different types of commitments for different countries.
As further input to our dialogue process, we also examined a broad array of emissions, energy, economic, and socio-economic data, focusing primarily on the 25 largest emitting countries. [See Climate Data: Insights and Observations.] These 25 countries account for 83 percent of global greenhouse gas emissions. Seventeen of them are also among the world’s most populous countries, and twenty-two are among those with the highest GDPs. The group of top emitters varies little whether considering only carbon dioxide (CO2) emissions from fossil fuel combustion, or CO2 from land use change as well, or other greenhouse gases; or whether looking at present, cumulative, or projected emissions. These data strongly support the view that to be effective in the long term the international climate effort should at a minimum include these larger emitters. The data also show, however, the tremendous diversity within this group; it includes almost an equal number of developed and developing countries, as well as economies in transition. Their per capita emissions and per capita incomes vary widely, with important implications in understanding both responsibility for climate change and capacity to address it.
With that background, I would like to turn now to the options presently under consideration within our Pocantico dialogue. As I noted a moment ago, we believe the aim in the next stage of the international climate effort must be a flexible architecture able to accommodate different strategies and commitments. In assessing the options, we began by looking at a range of approaches, not as alternatives per se, but rather as potential elements in such a framework. Through the course of discussion, the group has more or less settled on six such elements:
The first element is what we call an aspirational long-term goal. Addressing climate change is a long-term effort, and in undertaking it, it is important to know what we are aiming for. However, trying to negotiate a specific quantified long-term target would likely be futile, and possibly even counterproductive. As an alternative, governments, businesses, or expert communities – acting individually or in groups – can put forward “aspirational” goals consistent with the ultimate objective of stabilizing greenhouse gas concentrations at a level that avoids dangerous anthropogenic interference. Several governments and some businesses have already done so. Such goals, expressed in terms of temperature and/or concentrations, can serve to spur and guide future climate efforts, without serving as a formal basis for negotiating commitments.
The second element is targets and trading. The principal virtue of this approach is cost-effectiveness. In addition, it builds on the existing Kyoto architecture, the European Union’s emissions trading systems, and the other trading systems now emerging. The Kyoto approach, however, relies on a particular type of target – it is binding and focused on absolute emission levels. A future approach could incorporate different types of targets. Two possibilities are emissions intensity targets, or no-lose targets, which would provide incentive for developing countries to undertake reductions by allowing them to market any reductions below their targets without imposing penalties if their targets are exceeded. Different groups of countries could take on different types of targets, with further differentiation within groups in order to reflect particular national circumstances.
Our third element is sectoral. Rather than economy-wide targets, the idea here is to structure commitments around some of the key emissions-generating sectors, such as power, transport, land use, or energy-intensive manufacturing. Such an approach can help ease competitiveness concerns by ensuring a level playing field across a given sector. Commitments could take the form of emission targets; performance-based standards (for instance, regulating carbon emissions from autos); or technology-based standards (for instance, in the power sector, requiring the phase-in of advanced combustion and carbon capture-and-storage technology for new coal-burning power plants).
A fourth element is sustainable development policies. The objective here is to capitalize on natural synergies between climate and development objectives by promoting measures that simultaneously advance both. These could include energy policies such as cost-based pricing, transportation measures to promote mass transit and cleaner fuels, or agricultural policies supporting sequestration-promoting practices. One approach would be for countries to commit to broad policy objectives, then pledge specific national measures to achieve them, with periodic reporting subject to international review. Verified emission reductions achieved through these measures could be marketed through a mechanism similar to the Clean Development Mechanism, which would certify credits on a “programmatic” or sectoral basis, rather than project by project. These approaches may better engage developing countries by speaking directly to core development concerns, and by not imposing a quantified emissions limit.
A fifth element is technology approaches. All of the earlier elements seek in some way to drive technology into the marketplace. But there is also a role for approaches that seek to directly drive technology – in particular, the breakthrough technologies we will need to achieve reductions on a much larger scale over the long term. One possibility is that countries set a long-term goal of zero-net emissions in the power or auto sectors. Another possibility is stronger international cooperation and funding for the research and development of potential breakthrough technologies such as hydrogen, biomass fuels, or carbon capture-and-storage.
The sixth and final element is adaptation. All the approaches I’ve described thus far focus on mitigation – reducing emissions. But if we are to achieve agreement on a new framework, particularly if it is to include some form of commitment for developing countries, it must deliver more on adaptation. One possibility is to establish climate disaster funds to provide relief to poor countries suffering climate-related losses, whether the result of climate change or climate variability, and to offer subsidized climate disaster “insurance” to middle-income developing countries. Proactive adaptation might be better promoted by mainstreaming adaptation across the full range of development assistance, rather than through climate regime. For instance, multilateral development banks could adopt new lending guidelines to routinely incorporate climate risk assessments and adaptation measures in project design, review, and approval.
As I noted, we view these elements not as alternatives but as potential building blocks for a broader international framework. In our dialogue discussions, we have only begun to consider ways the elements might be linked, so I cannot offer specific ideas at this time. However, we look forward to sharing the final outcomes of the dialogue following our concluding session in September.
Our aim in the dialogue is to offer some vision of where the international climate effort might go in the future. An immediate question, however, is whether and how to launch a more formal process among governments to begin considering post-2012 options. In offering to host the upcoming climate talks in Montreal, the Canadian government has taken on a very significant challenge. The conference will take the final steps to put the Kyoto Protocol fully into motion. It will be more successful still if parties also are able to take the first steps toward further broadening and strengthening the international effort. Many governments have signaled their willingness to start, and we wish the Canadian government every success in this endeavor.
Thank you for the opportunity to provide this input. We would be pleased to contribute further to the Committee’s consideration of these issues and to the Government’s efforts to strengthen the international climate effort.
Judith M. Greenwald, Director of Innovative Solutions at the Pew Center, Discusses Keeping the Nuclear Power Option Open
(This article appeared in Oxford Energy Forum, May 2005)
Addressing the challenge of global climate change will require a sustained and comprehensive commitment to climate-friendly policies and investments throughout the world. Such policies and investments must be focused on enabling a transition to a low-carbon economy through a significant reduction in annual greenhouse gas (GHG) emissions by 2050. A commonly stated goal is to stabilize the atmospheric concentration of carbon dioxide (CO2) at twice its pre-industrial level. Such a “decarbonization” in the context of increasing global demand for energy would necessitate an increase of roughly 100 to 300 percent of present-day worldwide “primary power” consumption from non-CO2-emitting sources such as renewables, nuclear power, the use of fossil fuels with carbon capture and sequestration, and energy efficiency improvements.
Achieving this transition depends on both near-term and long-term actions...
Congressional Testimony of Eileen Claussen: Regarding the Climate Change Technology Deployment in Developing Countries Act of 2005 (S.883)
STATEMENT BY EILEEN CLAUSSEN, PRESIDENT
PEW CENTER ON GLOBAL CLIMATE CHANGE
REGARDING THE CLIMATE CHANGE TECHNOLOGY DEPLOYMENT
IN DEVELOPING COUNTRIES ACT OF 2005 (S.883)
Before the International Economic Policy, Export and
Trade Promotion Subcommittee, The Foreign Relations Committee
United States Senate
May 19, 2005
Mr. Chairman and members of the subcommittee, thank you for the opportunity to testify on the Climate Change Technology Deployment in Developing Countries Act of 2005 (S.883) introduced by the chairman. My name is Eileen Claussen, and I am the President of the Pew Center on Global Climate Change.
The Pew Center on Global Climate Change is a non-profit, non-partisan and independent organization dedicated to providing credible information, straight answers and innovative solutions in the effort to address global climate change. Thirty-nine major companies in the Pew Center’s Business Environmental Leadership Council (BELC), most included in the Fortune 500, work with the Center to educate the public on the risks, challenges and solutions to climate change.
Global climate change is real and likely caused mostly by human activities. While uncertainties remain, they cannot be used as an excuse for inaction. Temperatures at the Earth’s surface increased by an estimated 1oF over the 20th century. The 1990s were the hottest decade of the entire century; perhaps even the millennium, and 1998, 2001, and 2002 were three of the hottest years ever recorded. The growing scientific consensus is that this warming is largely the result of emissions of carbon dioxide and other greenhouse gases from human activities including industrial processes, fossil fuel combustion, and changes in land use, such as deforestation. Projections of future warming suggest a global increase of 2.5oF to 10.4oF by 2100, with warming in the United States expected to be even higher. This warming, along with the associated changes in precipitation and sea-level rise, will have important consequences for the U.S. environment, economy and security.
I believe there are three things we in the United States must do to reduce the real and growing risks posed by global climate change: First, we must enact and implement a comprehensive national program to progressively and significantly reduce U.S. emissions of greenhouse gas emissions in a manner that contributes to sustained economic growth. While I am happy to elaborate on this point, that is not my intent today. Second, we must strengthen our efforts to develop and deploy climate-friendly technologies and to diffuse those technologies on a global scale. That is the primary thrust of the bill before you today. And third, the United States must work with other countries to establish an international framework that engages all the major greenhouse gas-emitting nations in a fair and effective long-term effort to protect our global climate. I would like to return to this point later in my testimony and offer specific ideas on how this third critical challenge can best be met. First, though, let me discuss the specifics of the Hagel bill.
We must strengthen efforts to develop and deploy climate-friendly technologies on a global scale. Standards of living are expected to rise in developing countries over the next few decades, and, as they do, energy demand will rise. China, for example, expects to build 544 gigawatts of new coal capacity between 2003 and 2030, far more than current coal capacity in the United States. Shanghai predicts a quadrupling of cars and trucks by 2020, and car sales in Delhi have risen 10% per year since the mid-1970s. If we are going to address the climate change problem, the huge growth in energy demand in developing countries has to be as climate-friendly as possible.
Sen. Hagel’s bill is intended to address exactly that challenge. The bill would have the Department of State identify the top 25 energy users among developing countries, describing among other things the quantities and types of energy they use, and the greenhouse gas intensity of their energy, manufacturing, agricultural and transportation sectors. The bill would require the development of a technology strategic plan, and provide for at least ten demonstration projects to promote the adoption of technologies and practices that reduce greenhouse gas intensity in developing countries. The bill would identify potential barriers to the export and adoption of climate-friendly technologies. All of these would be useful activities.
I would, of course, like to offer a few suggestions.
First, we should tailor the assistance provided to developing countries to their needs. It is in the interest of the United States for developing countries to develop, and thereby to increase the health and well-being of their people, and it is important to recognize that the path each country takes in its development will vary. Our efforts to promote the deployment of climate-friendly technologies will occur in the context of these varying paths to development. Rather than viewing climate-friendly technology deployment as an exercise in funding demonstration projects or increasing technology exports, our objective should be to integrate climate-friendly activities into national strategies for economic growth, poverty reduction, and sustainable development. We should be helping developing countries build their capacity to assess clean energy options and establish policy frameworks that will favor such options even after our funding assistance is gone.
The reality is that the highest priority for most developing countries is economic growth and development. Energy policies and plans are critical to achieving those priorities. Making climate change one of the drivers of energy policy, as the United Kingdom has done, will move us toward meeting our goal of a stable climate. It is in this context that we should support and promote efforts by the largest developing countries to identify specific goals for limiting their emissions of greenhouse gases – recognizing that their goals may vary in form, content and timing. One way to do that would be to require that the largest developing countries, in agreeing to receive assistance under this bill, would establish goals consistent with their development strategies, and periodically report progress towards meeting them.
Second, we would recommend tracking progress under this bill not only in terms of greenhouse gas intensity, but in terms of actual greenhouse gas emissions. Measuring intensity is useful in that it allows us to distinguish a reduction in emissions that results from a genuine improvement in the technology from a reduction due to reduced production. Intensity reduction, however, is not a surrogate for emission reduction, and our objective of achieving a stable climate must entail actual emission reductions. We therefore should be tracking our progress in those terms.
I would respectfully suggest that Senator Byrd’s International Clean Energy Deployment and Global Energy Markets Investment Act of 2005 (S.745) takes a useful approach to the issues I have just mentioned. It might be beneficial to merge these aspects of the Byrd bill with the Hagel bill.
An international technology deployment program, such as the Hagel bill, can only be effective in the context of an international framework that engages all major emitting countries in the effort against climate change. So even more critical, I believe, is the third challenge I identified at the outset: establishing a fair and effective international framework to engage all major emitting countries in the effort against climate change.
Through an initiative called the Climate Dialogue at Pocantico, the Pew Center has engaged with policymakers and stakeholders from around the world in a wide-ranging examination of specific options for advancing the international climate effort. I would like to share with you some of the insights and observations emerging from this ongoing dialogue.
First, there is no getting around national interest. Climate change is a collective challenge. However, the political reality is that nations will join in meeting this collective challenge only if they perceive it to be in their national interests. A multilateral framework must therefore recognize and accommodate the very real and significant differences among nations. The key here is flexibility. We need a framework flexible enough to allow different countries to undertake the different types of strategies best suited to their national circumstances. To accommodate different types of strategies, we must allow for different types of commitments. For instance, a quantified emissions limit may be appropriate for some countries, while for others some form of non-quantified policy commitment may be more feasible and effective. Also, commitments could apply economy-wide, or they could be structured around specific sectors.
There are many possibilities and the time to begin considering them is right now. In its present form, the Kyoto Protocol extends only to 2012. Under the terms of the Protocol, parties must begin consideration of new commitments this year. This process will begin when climate negotiators meet later this year in Montreal. While the United States is not a party to the Protocol, it can, if it so chooses, exert great influence on the pace and direction of these discussions. Other countries would very much welcome the United States’ engagement. Most have come to accept that the United States will never be a party to the Kyoto Protocol. And they understand that a truly effective international approach – one with the full engagement of the United States and the major developing countries – will require moving beyond Kyoto. The Administration has thus far taken the position that it is premature to discuss post-2012 options. Quite to the contrary, it is essential that we begin now, with the United States fully and constructively engaged.
Toward that end, I believe the most powerful step the Senate could take to reestablish U.S. leadership on this vital global issue would be to revisit and update the sense of the Senate on the future of the international climate effort. As we all know, Senate Resolution 98 of the One Hundred Fifth Congress – the Byrd-Hagel resolution – has had a profound influence on the climate debate here and abroad. As the international climate effort enters a new stage, a new Senate resolution can again shape the debate. It can help ensure that the United States is at the table and define the terms of U.S. engagement; and, in so doing, it can help achieve the best possible outcome.
I would strongly encourage the Foreign Relations Committee to consider, and to report to the full Senate, a resolution advising the Executive Branch to work with other nations, both under the Framework Convention and in other international fora, with the aim of securing U.S. participation in agreements consistent with the following four objectives:
First, to advance and protect the economic and national security interests of the United States. Potential climate change impacts such as chronic drought, famine, mass migration, and abrupt climatic shifts may trigger regional instabilities and pose a growing threat to our national security interests. Addressing climate change, on the other hand, can greatly strengthen U.S. security by reducing our reliance on energy imports. Sea-level rise and other climate impacts pose a direct economic threat as well, to U.S. communities and to U.S. businesses. On the other hand, our response to climate change, if not well conceived, could pose a different sort of economic burden. It is imperative that we both avoid the economic consequences of climate change, and minimize the costs of addressing climate change.
Second, to establish mitigation commitments by all countries that are major emitters of greenhouse gases. Ideally, a global challenge such as climate change should be met with a full global response. What is most critical at this stage, however, is getting the largest emitters on board. Twenty-five countries account for 83 percent of global greenhouse gas emissions. Seventeen of them are also among the world’s most populous countries, and twenty-two are among those with the highest GDPs. To be truly effective, these major emitters must be part of the solution. While we cannot expect all these countries to act in the same way, or necessarily in the same timeframe, we believe that all must commit to take action.
Third, to establish flexible international mechanisms to minimize the cost of efforts by participating countries. The United States has led the world in demonstrating that well-designed market-based approaches can achieve the greatest environmental benefit at the lowest cost. U.S. negotiators fought rightly and successfully to build market mechanisms into the Kyoto architecture. U.S. economic and business interests will be best served by an international climate strategy that uses emissions trading and other mechanisms to ensure that our efforts are as cost-effective as possible.
And, fourth, to achieve a significant long-term reduction in global greenhouse gas emissions. Our initial efforts to address climate change, both domestically and internationally, can be at best first steps. But in taking these steps, we must remain cognizant of our ultimate objective – stabilizing the global climate – and we should craft policies and agreements robust enough to drive and sustain the long-term efforts needed to achieve it.
I believe these four principles form a solid foundation for constructive U.S. engagement and urge that they be incorporated in a new Sense of the Senate resolution. Moreover, such a resolution strikes me as being very much within the spirit of the Hagel bill and could well be taken up as an amendment to it.
In closing, the most important thing Sen. Hagel has done in writing S.883, and that the subcommittee has done in holding this hearing, is to join the question of how best to address climate change. As Senator Hagel has said, “Achieving reductions in greenhouse gas emissions is one of the important challenges of our time.” And: “We all agree on the need for a clean environment and stable climate. The debate is about solutions. The question we face is not whether we should take action, but what kind of action we should take.” I thank and commend Sen. Hagel for placing these issues before you, and thank the subcommittee for the opportunity to testify. The Pew Center looks forward to working with the committee and Sen. Hagel on S.883 and on any future climate change legislation.
Full Article (PDF) in French
Press Advisory: Pew to Convene Australia-New Zealand Forum on Future of International Climate Change Effort
For Immediate Release: March 10, 2005
Contact: Katie Mandes, +1 703.516-0606
PEW CENTER TO CONVENE AUSTRALIA-NEW ZEALAND FORUM ON FUTURE OF INTERNATIONAL CLIMATE CHANGE EFFORT
Minister Ian Campbell, Minister Pete Hodgson Will Address April 8 Event in Sydney
Washington, DC – The Pew Center on Global Climate Change today announced that it will convene the Australia-New Zealand Climate Forum, a gathering of policymakers, stakeholders, and experts to explore options for advancing the international climate change effort beyond 2012. The event, to be held April 8 in Sydney, is being organized in cooperation with the Australia and New Zealand governments.
The forum is part of a broader initiative by the Pew Center, an independent U.S.-based think tank, to promote constructive thinking and dialogue on next steps in the international climate effort. Over the past year, the Center’s Climate Dialogue at Pocantico has brought together senior policymakers and stakeholders from 15 countries to discuss post-2012 options. The Sydney forum provides an opportunity for the region’s leading climate figures to learn about and contribute to this ongoing dialogue.
Speakers at the forum will include Ian Campbell, Minister for the Environment and Heritage in Australia, and Pete Hodgson, Minister of Transport and Convenor of the Ministerial Group on Climate Change in New Zealand.
“There is a critical debate emerging over the future of the international climate effort. Our aim in Sydney will be to help ensure that the region’s key players are fully informed and engaged as this debate moves forward,” said Pew Center President Eileen Claussen, former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.
“It is clear to all involved that the Kyoto Protocol is at best a start in the international climate effort. We think it’s important to look beyond Kyoto. We need new approaches that will engage all the large greenhouse gas emitters in a serious long-term effort that protects both the global climate and the global economy. That will be the focus of our discussions in Sydney, and we are grateful to the governments of Australia and New Zealand, and in particular to Minister Campbell and Minister Hodgson, for hosting this timely discussion,” Claussen said.
The day-long forum will have two segments – a Leaders Roundtable in the morning with Ministers, CEOs, and other senior officials and executives; and a larger gathering in the afternoon with a broader group of policymakers, stakeholders, and experts. Participation in both segments is by invitation only. A briefing for interested press will be held the day before the forum (see note below).
Each session will feature presentation of analysis and post-2012 options developed in connection with the Pocantico dialogue. The afternoon session also will include responses from experts and stakeholders in the region, including: Catherine Beard of the Greenhouse Policy Coalition; Gregg Bourne of the World Wildlife Fund; Mitchell Hooke of the Minerals Council of Australia; Heather Ridout of the Australian Industry Group, and Ralph Sims of Massey University.
The Pew Center, based in Arlington, Virginia, was founded in 1998 by the Pew Charitable Trusts, a U.S. philanthropy, to promote pragmatic and effective U.S. and international climate change policies. The Center publishes peer-reviewed analysis of climate science, economics, policy, and solutions; consults on policy development with the 38 major corporations in its Business Environmental Leadership Council; and facilitates dialogue among experts, policymakers, and stakeholders. It is funded entirely by charitable donors. (For more on the Center, see www.c2es.org)
The Center’s Climate Dialogue at Pocantico began in July 2004 and will conclude later this year. Its 25 participants include policymakers from Argentina, Australia, Brazil, Canada, China, Germany, Japan, Mexico, the United Kingdom, and the United States; NGO representatives from India, Switzerland, and the United States; and senior executives from Alcoa, BP, DuPont, Eskom, Exelon, Rio Tinto, and Toyota. The participants include Howard Bamsey, Chief Executive of the Australian Greenhouse Office, and Meg McDonald, General Manager, Corporate Affairs, for Aloca World Alumina in Australia. Additional background, including the full list of participants and options under consideration, is available at www.c2es.org/pocantico.cfm.
The Pocantico dialogue is supported by The Pew Charitable Trusts, the United Nations Foundation, the Wallace Global Fund, and the Rockefeller Brothers Fund. The Australia-New Zealand Climate Forum is supported by the Australia and New Zealand governments through the Australia-New Zealand Climate Change Partnership.
NOTE TO EDITORS AND REPORTERS: Eileen Claussen and other participants in the Pocantico dialogue will brief interested press on Thursday, April 7 (time and location to be determined), on analysis and options to be presented at the forum. Those interested in participating in the briefing should contact Katie Mandes (+1 703 516 0606; firstname.lastname@example.org). Both the morning and afternoon segments of the April 8 forum will be closed to press.
Download the full White Paper here (PDF Format).
The European Union Emissions Trading System (EU-ETS) is a landmark environmental policy, representing the world’s first large-scale greenhouse gas (GHG) trading program, covering around 12,000 installations in 25 countries and 6 major industrial sectors. The EU-ETS offers an opportunity for critical insights into the design and implementation of a market-based environmental program of such size and complexity. In addition, key lessons based on actual experiences of emissions trading will include the cost of emissions reductions, the implications on competitiveness of sectors and firms, and the development of new technologies and efficiency opportunities.
This analysis discusses the background to the EU-ETS in the context of ongoing emission abatement efforts and policy initiatives to meet EU-25 member state targets under the Kyoto Protocol. The key elements of the EU-ETS are detailed, focusing on its timetable, sectoral coverage, methodology for distributing emission allowances, provisions for banking, opt-outs, opt-ins and pooling mechanisms, the procedures for monitoring and verification, and the compliance mechanisms.
The paper then turns to the current status of the EU-ETS, focusing on the ongoing national allocation plans, and discussing key remaining uncertainties, namely the readiness of all parties to trade, linkages to other trading programs, availability and use of project-based allowances, the impact of Russian emission credits, strategies of new Central and Eastern European member states, the compliance role of governments, progress in emissions reductions from sectors outside the EU-ETS, and finally the importance of expectations of future targets and prices.
This paper concludes with early conclusions from this first large-scale GHG emissions trading program. The EU-ETS is up and running with significant trading volumes; it looks set to deliver real (vs. BAU) but modest reductions; these reductions are focused on the power sector; and ongoing concerns remain regarding detrimental impacts on industry competitiveness and the impact of higher electricity prices. Key remaining challenges include the remaining implementation issues of this novel trading system, and to retain political support for the EU-ETS in the years ahead. Key insights from the EU-ETS will include the price, traded volume and cost-savings from GHG trading, the longer term implications of the EU-ETS for technology development and the progression of global climate change policies, and direct lessons for U.S. policy makers as they debate domestic GHG trading proposals.
Why is the Kyoto Protocol entering into force now?
The Protocol enters into force when ratified by at least 55 countries accounting for at least 55 percent of developed country emissions in 1990. The first threshold was met in 2001 (128 countries have now ratified the Protocol). With Russian ratification, the second threshold was met. The Protocol enters into force, or takes effect, 90 days after the Russian government deposits its instrument of ratification with the United Nations. That happened on Feb 16, 2005. With entry into force, Kyoto’s emission targets become binding legal commitments for those industrialized countries that have ratified it (the United States and Australia have not). Also, the market-based mechanisms established under Kyoto, including international emissions trading and the Clean Development Mechanism, became fully operational.
Without the United States on board, how much impact will Kyoto have?
Kyoto sets emission targets for industrialized countries for the years 2008-2012, with the expectation of more stringent targets in the future. Kyoto’s initial targets aim to reduce industrialized country emissions about 5 percent below 1990 levels. Industrialized countries account for roughly half of global greenhouse gas emissions. Without the United States (the world’s largest emitter) and Australia, Kyoto’s limits apply to countries accounting for 32 percent of global emissions. Most experts and governments believe that much steeper emission reductions, 60 percent or greater, will ultimately be needed to avert serious climate change impacts.
Do countries plan to negotiate further emission reductions?
Kyoto requires that parties to the Protocol begin negotiating in 2005 toward a second round of commitments. It is unlikely that the industrialized countries that have ratified Kyoto will agree to more stringent targets post-2012 unless there is also stronger action by the United States and by major developing countries. One possibility is that the new round of talks will focus more broadly on ways to modify Kyoto or structure a successor agreement acceptable to all the major emitting countries.
What does this mean for U.S. business, particularly those corporations that have operations in Kyoto countries?
It is not clear what the effects of Kyoto ratification will be on U.S. businesses. International businesses operating in Europe, Canada, and Japan are already beginning to grapple with Kyoto policy environments. Many U.S. companies already believe that the United States will eventually regulate greenhouse gas emissions, and are taking actions to reduce their own emissions, to develop technologies that would help others reduce their emissions, and to help shape future U.S. climate policy. These activities are likely to continue, and perhaps accelerate, in light of Kyoto ratification.
What is the current Administration's climate change strategy and will it reduce the nation's greenhouse gas emissions?
On February 14, 2002, President Bush announced a new climate change strategy for the United States that sets a voluntary "greenhouse gas intensity" target for the nation, expands existing programs encouraging companies to voluntarily report and reduce their greenhouse gas emissions, and proposes increased federal funding for climate change science and technology development. Some elements of the Administration's strategy may provide additional incentive to companies to voluntarily reduce greenhouse gas emissions. However, the Administration's target - an 18 percent reduction in emissions intensity between now and 2012 - will allow actual emissions to increase 12 percent over the same period. Emissions will continue to grow at nearly the same rate as at present. What are the key elements of a prospective U.S. climate change program?
A number of policy options are available to secure emissions reductions, but to be effective and affordable, a long-term emissions reduction program must couple mandatory GHG reductions with technology development and market mechanisms. A comprehensive domestic strategy would couple short- and long-term measures that aim to (1) improve the tracking and reporting of GHG emissions; (2) promote new technologies and practices; and (3) provide a foundation upon which to secure both short-term and long-term emissions reductions. While each of these objectives can be pursued in a number of different ways, an effective strategy must address all three.
What actions has Congress taken to address climate change in the United States?
As the scientific evidence of climate change has mounted, so has congressional activity. The number of climate change-related legislative proposals increased from seven introduced in the 105th Congress (1997-1998) to 25 in the 106th Congress (1999-2000) to over 80 in the 107th Congress (2001-2002) to nearly 100 in the 108th Congress (2003-2004). Legislation to have the largest emitters of greenhouse gases (GHGs) disclose their emissions has passed the Senate twice. And in October 2003, the bipartisan team of Senators Joseph I. Lieberman (D-CT) and John McCain (R-AZ) won the support of 44 Senators in the first vote on their bill to cap U.S. greenhouse gas emissions.
The growing activity suggests that a bipartisan consensus is developing around certain legislative proposals, including measures to require the disclosure of GHG emissions, protect companies reducing GHG emissions from being penalized under a future GHG reduction program, and promote carbon sequestration. Addressing the challenge of climate change will ultimately require a more comprehensive set of approaches, however, including a mandatory program to reduce GHG emissions (such as the Lieberman-McCain bill), and efficiency standards to promote the use of efficient products and technologies. Enactment of such policy will no doubt be a longer-term proposition.
Are voluntary GHG reduction programs sufficient to control U.S. GHG emissions, or is a mandatory program necessary?
In response to the goal of the U.N. Framework Convention on Climate Change to stabilize GHG concentrations at a level that would prevent dangerous human interference with the climate system, the United States has instituted a number of programs since 1992. These include voluntary GHG mitigation programs, research and development, and a subset of energy policies that focus on energy efficiency and renewable energy. More than a decade of experience with these programs shows that while they have at times inspired significant action on the part of individual companies, these measures have not succeeded in reducing, or even stabilizing, total U.S. emissions. U.S. greenhouse gas emissions increased roughly 12 percent between 1990 and 2001, and are projected to increase another 12 percent by 2012. Voluntary programs can provide important experience for designing future efforts, but they cannot stimulate the broad engagement that will be necessary to achieve the level of emissions reductions that ultimately will be required. In order for the United States to achieve the significant GHG reductions necessary to address climate change, it must implement a mandatory GHG reduction program.
Why is it important for businesses to have a global climate change regime in place sooner than later?
In the absence of a global climate change regime, most companies will forge ahead with existing programs to reduce their emissions, encourage greater energy efficiency, begin a switch to less carbon intensive fuels, and continue to develop alternative energy technologies.
Now that Kyoto has entered into force, attention must turn to strengthening the international framework for the years following Kyoto’s initial commitment period (2008-2012). The overriding challenge is to forge an agreement that includes all the major emitting countries – both developed and developing – and begins significant long-term reductions in global emissions. Among the core issues to be addressed are the nature of future climate commitments and whether they must be guided by a more specific long-term target. Other central issues are equity, cost, the interaction between climate efforts and international trade, and how best to integrate climate concerns with the development needs of developing countries.
With a team of authors from developed and developing countries, we produced a series of “think pieces” examining these core issues in 2003. The draft papers were presented for discussion at workshops in China, Germany, and Mexico. The process engaged more than 100 experts, policymakers, and stakeholders from nearly three dozen countries. The final report, Beyond Kyoto: Advancing the International Effort Against Climate Change, was released at COP 9 in Milan, where it served as the foundation for a high-level forum with ministers and business and NGO leaders.
This initiative continued with the Climate Dialogue at Pocantico, a series of off-line discussions among 25 senior policymakers and stakeholders from 15 countries exploring options for next steps in the international climate effort. The dialogue provided an off-line opportunity for participants to consider specific options with the objective of identifying a set of options to be recommended for consideration by the broader policy community.
The international response to climate change was launched in 1992, at the Earth Summit in Rio de Janeiro, with the signing of the U.N. Framework Convention on Climate Change. The Convention established a long-term objective of stabilizing greenhouse concentrations in the atmosphere “at a level that would prevent dangerous anthropogenic interference with the climate system.” It also set a voluntary goal of reducing emissions from developed counties to 1990 levels by 2000 – a goal that most did not meet.
Recognizing that stronger action was needed, countries negotiated the 1997 Kyoto Protocol, which sets binding targets to reduce emissions 5.2 percent below 1990 levels by 2012. Although the United States has not signed on to Kyoto, more than 100 other nations have ratified it and many of the developed countries have begun efforts to meet their emissions targets. The Protocol legally entered into force on February 16, 2005.
The Kyoto Protocol, an international agreement adopted in December 1997 in Japan, entered into force on February 16, 2005. The Protocol sets binding targets for developed countries to reduce greenhouse gas emissions on average 5.2 percent below 1990 levels, in order to address global warming.
Events Highlighting Kyoto's Entry Into Force
For a quick reference and comparison, view the international, national, and state emissions targets the Center compiled.