The ultimate success and credibility of the Kyoto Protocol to the United Nations Framework Convention on Climate Change, or any future climate agreement, will depend on whether most, if not all, Parties meet their greenhouse gas emission reduction commitments. A critical factor in achieving this goal is having a system that is able to identify, sanction, and also deter non-compliance. Traditionally, international agreements have had weak or ineffective compliance systems because of sovereignty concerns. There are, however, means outside the compliance regime of the Protocol to work toward similar outcomes.

The Pew Center has commissioned this report to provide insights on several factors that are often overlooked in the debate on compliance: the role of national compliance systems; national and international monitoring and verification; and the willingness of Parties to participate in the climate change regime. These three factors can significantly contribute to achieving a meaningful and effective compliance system. The report concludes that:

• National compliance systems should be promoted as a means to ensure compliance with the Kyoto Protocol or any future climate change agreement and should seek to balance market-based instruments with strong enforcement;
• National compliance with international climate change agreements must be verifiable to ensure credibility, and monitoring and verifying compliance with the Kyoto Protocol can benefit significantly from integrating existing national compliance systems into the international system; and
• Broad participation in any climate change regime is as important as meeting the commitments of the agreements themselves; the Kyoto Mechanisms can play an important role in boosting both participation and compliance.

The importance of Parties actually complying with their targets cannot be overstated. While this report outlines benefits from having flexibility and balance in compliance regimes, the damage from non-compliance — even if later remedied — can be a loss of the trust and good faith that underpins international agreements. We prefer the approach to compliance described in this report rather than ensuring compliance by making the rules weaker.

The Pew Center and the authors appreciate the valuable input and thoughtful comments of Robert Nordhaus, Kyle Danish, Glenn Wiser, Alistair Lucas, and Thomas Husted. The authors would also like to thank Gabriela Donini, Adriana Faria, Maria Junco, and Tricia Choe for their research assistance.

Executive Summary

As Parties to the UN Framework Convention on Climate Change hammer out the details of Kyoto Protocol implementation, a central issue has been how to guarantee compliance with the commitments being made to reduce greenhouse gas (GHG) emissions. Clearly, the promises of the Framework Convention and the Protocol cannot produce desired results unless the pledges are met.

Yet meeting those pledges is a complex task because the economic and social behaviors that drive anthropogenic GHG emissions occur across a broad array of sectors and reach almost every facet of modern life. The ability to assure compliance with GHG emission reduction commitments is constrained by the inherent nature of the commitments — focused on environmental results rather than observable behaviors — and by the nature of multilateral environmental accords, where compliance is more often a matter of will than compulsion.

Despite these constraints, progress under multilateral climate change regimes requires that emission reduction commitments be fully met, at a domestic level, by the broadest number of Parties. In short, the success and credibility of the Kyoto Protocol, or any future climate accord, will depend upon meaningful compliance. This report explores the importance of meaningful compliance in the context of climate change and examines some of the principles and strategies that can help reach that goal.

Recognizing that the compliance regime under the Kyoto Protocol is still the subject of debate and that rules and institutions are still being designed internationally and domestically, the report does not speak expressly to this debate, nor offer guidance on underlying policies and measures to implement the Protocol. It focuses instead on three compliance concerns that the authors believe are fundamental to any meaningful regime and may have special priority for climate change. The report explores how meaningful compliance can be advanced where:

• National compliance systems are promoted, consistent with domestic priorities and legal tradition, as a core strategy to meet international commitments;
• Monitoring and verification are made routine and credible through cooperative effort and integration with national systems; and
• Participation in the Kyoto Protocol, and in efforts to meet broader climate change policy goals, is encouraged among the broadest possible range of states.

T hese factors may not be sufficient to guarantee the ultimate success of an international compliance climate change framework but, the authors suggest, they are necessary to make any real progress.

Examining the first of these concerns, the report looks to compliance regimes that begin at home — on the domestic policy front — albeit with cooperation and multilateral support where needed. The authors reason that the role of states as regulators — translating their international climate change commitments to domestic action — is critical. States are more capable than multilateral institutions of adapting policy choices to their national needs and priorities, and better able to claim jurisdiction over relevant entities where necessary to compel attention to those choices. Concerns about sovereignty that complicate international compliance and limit international institutions can be minimized when compliance efforts are undertaken in a national context under the rules of the prevailing legal system.

Examining relevant national models, the authors find that legal frameworks that balance supportive and adaptive tools with corrective measures can promote compliance domestically. The report highlights successful frameworks that have achieved this balance while establishing a regulatory baseline of minimum standards and giving compliance institutions the flexibility to obtain environmentally sound results. The report also examines how the choice of consequences other than penalties can be used to promote compliance, and how the allocation of penalties, when collected, can be shaped to serve the objectives of GHG emissions reductions more directly.

The authors review the role of voluntary compliance programs and conclude that they may be important supplements to, but not substitutes for, enforceable targets and government oversight. They also conclude that self-assessment and reporting can significantly increase cost-efficiency, and that incentives, including steps to minimize liability for self-reported problems, might be useful in promoting a greater use of self-auditing programs.

The authors also review the fundamental role that civil society can play in promoting effective compliance at a national level, and explore how expanding this role through access to information, policy formulation, and compliance proceedings can help achieve GHG emissions reduction goals.

Taking their analysis of national strategies back into the context of the Framework Convention and the Kyoto Protocol, the authors argue that monitoring and verifying compliance with climate change commitments are critical to assuring the integration of climate commitments into national systems. Yet they note that such oversight will be uniquely challenging because emissions will be estimated, not directly measured, and because implementation strategies will vary greatly.

In light of these challenges, the report outlines principles and strategies for effective monitoring and verification and discusses their relevance in the climate change context. The report examines how direct inspections and monitoring, transparency and openness, independent study and verification, redundancy, and false-reporting deterrence can serve as oversight tools, adding certainty and credibility to compliance assurance.

The authors also highlight reliance on international and regional cooperation — already at the heart of the Framework Convention and the Kyoto Protocol — as a basis for collecting and verifying credible data. Research, information exchange, data gathering, and scientific exchanges envisioned by the Parties to promote the general goals of the accords can also be used to support performance monitoring and verification by building trust and allowing access to compliance data and performance issues on a real-time basis. This cooperative approach may also help uncover concerns before they lead to systemic failures, and thus promote corrective action even as performance is monitored.

The report explores the importance of using national compliance systems as data sources for multilateral monitoring, and integrating the work of national agencies with international compliance and verification institutions. The authors suggest that the international emissions reporting process will gain credibility where estimations are drawn as directly as possible from domestic systems rather than a separate process designed solely for the purposes of the Kyoto Protocol. Efficiencies and accuracy can also be realized where domestic compliance institutions play a direct role as national focal points for GHG emissions reporting and verification.

Finally, the authors examine an issue not always tied to the compliance debate — the question of how to promote participation of Parties in the climate change regime. If meaningful compliance is to achieve real environmental results, some attention must be paid to the number of countries actually willing to pursue those results. This is particularly true of the Kyoto Protocol Annex B commitments, where success is defined as an aggregate average of emissions reductions. The Protocol, almost by definition, cannot be effective if only a handful of states accept and observe its conditions. In essence, a regime that promotes national participation as well as national performance can help assure the Protocol’s long-term success.

Thus, the authors examine how a climate change compliance regime might be designed to be compelling to participants even as it compels performance. They suggest that nationally distinct compliance systems, tied to an integrated and cooperative international monitoring effort, can promote greater participation of Parties in the climate change regime — through the Framework Convention, the Kyoto Protocol and beyond.

In sum, the authors’ analysis of these three separate but related themes of national compliance systems, monitoring and verification, and participation lead to the following principal findings:

1. Meaningful compliance with climate change commitments can best be achieved where promises made internationally are embraced domestically (promoting behavioral change within communities whose actions are most likely to achieve results), and where participation is maximized across the broadest possible range of states.
2. National compliance systems should be promoted as a core strategy for assuring compliance with the international climate change regime because states are more capable of making policy choices suited to their national needs and priorities, and better able to claim jurisdiction over relevant entities where necessary to compel attention to those choices.
3. Effective national compliance systems tend to balance and combine market-based mechanisms and incentives with regulatory models suited to domestic priorities — emphasizing supportive and adaptive measures, but leading to corrective and punitive responses where necessary.
4. Monitoring and verifying compliance will be substantially aided by using the cooperative mechanisms of the Framework Convention and the Kyoto Protocol in part to oversee and complement national data gathering and emissions estimation, and by integrating existing national compliance mechanisms and institutions into the international system.
5. Broad state participation in climate change regimes may be as important as national performance, and any meaningful compliance system should seek to encourage participation even as it discourages non-compliance.