Climate Negotiations after COP-21

Joseph E. AldyHarvard Kennedy School

5to Congreso Nacional de Investigación en Cambio ClimáticoOctober 12, 2015

[Shared Vision]

The “Success” of Kyoto

Kyoto Protocol

· Developed nations legally binding emission targets Country targets ranged from -8% to +10% vs. 1990

level Aggregate target of -5% vs. 1990 level

· Political revealed preference Ratified by 192 nations Entered into force in 2005

· Opportunities for cost-effective implementation4

Greenhouse Gas Emissions, 1990-2012

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2012

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101520253035404550

GtCO2e

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Global

Annex I

Source: WRI CAIT database.

Round 2 of Kyoto Protocol

· Second commitment period (2013-2020) US never ratified Canada withdrew in 2012 Japan, New Zealand, Russia opted out of second period Represents < 15% of annual global emissions

· Structure deters participation

· Narrow focus on emission mitigation

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The “Failure” of Copenhagen

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Copenhagen Conference Press Reports

“Failure in Copenhagen: Gunning Full Throttle into the Greenhouse”

– Der Spiegel, 19 Dec 2009

“EU Blames Others for ‘Great Failure’ on Climate”– New York Times, 22 Dec 22 2009

“Copenhagen Climate Deal: Spectacular Failure or a Few Important Steps?”

– The Guardian, 22 Dec 2009

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Copenhagen Accord

· Mitigation pledges Economy-wide targets for developed countries Emission goals and policies for developing countries >80 countries representing >85% of global emissions

· Finance Green Climate Fund Finance goals: 2010-2012 and 2020

· Transparency10

Emergence of Post-Kyoto Architecture

· Developed/developing dichotomy blurring

· More comprehensive approach to mitigating climate risks

· Grand bargain: mitigation + finance + transparency

· “Political” agreement Foundation for 2010 Cancun Agreements

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The Road through Paris

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Durban Platform for Enhanced Action

“launch a process to develop a protocol, another legal instrument, or an agreed outcome with legal force under the Convention applicable to all Parties”

“explore options of a range of actions that can close the ambition gap with a view to ensuring the highest possible mitigation efforts by all Parties”

Objective: complete work no later than 2015

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Evolution of Pledge and Review

· “Intended Nationally Determined Contributions” Mitigation pledges ~110 submissions representing 148 nations Represent 86% of global emissions

· INDC information

· Review of INDCs?

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Opportunities for Scholars to Inform and Evaluate the Negotiations

· Opportunities in voluntary information provision Variation in INDCs could facilitate learning Non-governmental experts can assess INDCs

· How do we transition to a rigorous, systematic approach to transparency? Integration of ex ante/ex post analysis over time?

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Transparency

Uncertainty

· Uncertainty in credibility of commitments Will countries implement policies to deliver on

commitments? Can a country’s performance be observed?

· Exogenous Shocks Economic growth shocks, energy system shocks may

affect incentives for participation/compliance

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Signaling

· Transparency and publicity of a commitment and outcomes enhances credibility (Schelling 1956)

· Publicity requires information systems created by rules of international institutions (Keohane 1994)

· “Naming and shaming” and prospect of adverse reputational consequences may promote compliance (Chayes and Chayes 1991)

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Incentives to Monitor

· Incentives for countries to defect from an agreement (free-ride) creates incentives for others to monitor (Levy et al. 1993)

· Probability of detecting defection increases with transparency of regime (Chayes et al. 1998) Reassure those predisposed to comply Deter those considering defection

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Building Credibility and Trust

· Repeated nature of climate negotiations allows for transparency to inform future talks (Barrett 2003) Countries unlikely to agree on subsequent round if they

differ in understanding of previous round

· Sustaining cooperation requires effective monitoring

· Facilitates reciprocity that can accelerate ambition over time

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Lessons from Policy Surveillance in Non-Climate Agreements

· Transparency in IMF, WTO, OECD, Montreal Protocol, CITES, and arms control agreements

· Key lessons Credibility of information Engaging peers Learning Implementing surveillance Role of civil society

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Comparability

Why Compare Mitigation Effort?

· Normative / ethical approaches for burden-sharing

· Facilitative—supporting cooperation and future ambition “Individuals tend to react to the positive actions of

others with positive responses and the negative actions of others with negative responses.” Ostrom (1998)

How might parties judge positive or negative action? Different parties and constituents judge differently?

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Principles for Metrics of Comparability

· Comprehensive: captures the notion of “effort” in the widest possible sense. Similar countries ought to exhibit similar values in a “fair” agreement

· Measurable and replicable: directly observable or based on transparent analysis

· Universal: can be applied to efforts by a broad set of countries

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Metrics I: Emissions (and other physical measures)

· Potential metrics Relative to base year or forecast level Relative to population or economic activity, absolute or

change over time

· Pros/Cons Associated with environmental outcome (+) Measurable relative to history (+) Choice of base year / index will give different

countries an advantage (+/-) Relative to forecast may be best notion of “effort” but

less measurable (-) 26

Metrics II: Prices

· Potential metrics Carbon dioxide or energy prices Taxes / carbon price or net price of energy Absolute levels or change over time

· Pros/Cons Carbon price reflects policy effort (+) Market prices are observable (+) Reflect long-term investment incentives (+) Exchange rates can be problematic (-) Does not easily capture non-price policies (-)

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Metrics III: Costs

· Potential metrics Absolute or relative to GDP Estimate for actual policies or least cost alternative

· Pros/Cons Most closely reflects “effort” (+) Not observed; requires modeling (-) Actual policy costs could reward costly but ineffective

policies (-)

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Conclusions Regarding Metrics

· No single metric satisfies all three criteria

· Individual countries may prefer specific metrics that reflect their interests, resulting in lack of consensus among all parties to UNFCCC

· Recommend consideration of a suite of metrics Analogous to use of a set of economic indicators for

evaluating macroeconomic health

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Illustration of Metrics, Ex Ante Review China

2030 emission peakMexico

BAU -25% by 2030United States

2005 -26 to -28% by 2025

Emissions versus historic base year <requires modeling> <requires forecast> <directly observed>

versus BAU future year <requires modeling> <requires forecast> <requires forecast>

Target year GHG/GDP <requires modeling> <requires forecast> <requires forecast>

Δ(GHG/GDP) 2015-2025 <requires modeling> <requires forecast> <requires forecast>

Δ(GHG/GDP) 2015-2030 <requires modeling> <requires forecast> <requires forecast>

Price CO2 <requires modeling> <requires modeling> <requires modeling>

Fossil energy <requires modeling> <requires modeling> <requires modeling>

Electricity <requires modeling> <requires modeling> <requires modeling>

Cost cost versus BAU <requires modeling> <requires modeling> <requires modeling>

cost/GDP <requires modeling> <requires modeling> <requires modeling>

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Illustration of Metrics, Ex Post Review China

2030 emission peakMexico

BAU -25% by 2030United States

2005 -26 to -28% by 2025

Emissions versus historic base year <directly observed>

versus BAU future year <requires modeling>

Target year GHG/GDP <directly observed>

Δ(GHG/GDP) 2015-2025 <directly observed>

Δ(GHG/GDP) 2015-2030 <directly observed>

Price CO2 <requires modeling>

Fossil energy <directly observed>

Electricity <directly observed>

Cost cost versus BAU <requires modeling>

cost/GDP <requires modeling>

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Planning for Ex Post Review

· Identify ex ante the data and analytic needs for ex post review Implement data collection protocols

· Promote advanced transparency of ex post review process so that countries and stakeholders can assess interim progress

· Identify ways to implement policies that facilitate causal inference 32

Shared Vision

Papers and Contact InformationComparability of Effort in International Climate Policy Architecture, with W.A. Pizer, forthcoming, Review of Environmental Economics and Policy

http://tinyurl.com/py2nuzr

Comparing Emissions Mitigation Efforts across Countries, with W.A. Pizer and K. Akimoto, RFF Discussion paper, 2015, http://tinyurl.com/pexqpk3

The Crucial Role of Policy Surveillance in International Climate Policy. Climatic Change 126(3-4): 279-292, 2014, http://tinyurl.com/p57avgx

Policy Surveillance in the G-20 Fossil Fuel Subsidies Agreement: Lessons for Climate Policy, forthcoming, Climatic Change, http://tinyurl.com/qd2olo3

Joe Aldy

joseph_aldy@hks.harvard.edu

http://www.hks.harvard.edu/fs/jaldy/index.html 34