The Future of the Climate Regime in the Aftermath of the Bonn Agreement

1. The Future of the Climate Regime in the Aftermath of the Bonn Agreement Presentation at the Open Meeting of the Global Environmental Change Community Rio de Janeiro, 6 - 8 October 2001 by Dr. Hermann E. Ott Director, Climate Policy Division Wuppertal Institute for Climate, Environment and Energy

2. Before talking about the future we have to ask: What is the climate regime and is it working? Sorry, but this is not an academic question!

3. What have we got?

4. Institutionally? • step-by-step approach • umbrella convention • UNFCCC (United Nations Framework Convention on Climate Change) • protocol with quantified targets • Kyoto Protocol to the UNFCCC • universal regime: • FCCC: 186 ratifications • Kyoto Protocol: 39 ratifications, 84 signatures

5. ...more on institutions: • differentiated obligations for industrialised countries (5.17 % globally) • modified by Bonn Agreement: • reduced to 2.49 % by additional LULUCF activities (Article 3.4) • negotiations on further commitment periods scheduled to start in 2005

6. ...and even more on institutions: • a functioning system for inventories • = reporting and monitoring • basis for compliance regime in KP, elaborated in Bonn Agreement • “Kyoto Mechanisms” • Emissions Trading, Joint Implementation, Clean Development Mechanism

8. Impacts?Behavioural Change? • not really quantifiable or discernible • considerable reductions in UK and Germany in anticipation of entry into force • industry has caught on but is not yet won • “impacts” so far largely psychological

9. Conclusion: All we’ve got is institutions!

10. This is no small progress, but difficulties in the process (like after The Hague) immediately threaten the regime as such! ...and of course: in troubled waters, proposals for alternative routes abound!

11. Proposals include: • abandon Kyoto process altogether! • 10 years of effort wasted...no alternatives put forward really • strictly voluntary measures • unfortunately did not work • global CO2 tax • mostly from US scientists - whose Govt fiercely opposes idea • policies and measures • great idea, but maybe not solely • intensity targets • petrify emission profiles, maybe good for developing countries • price caps • interesting, but environmentally flawed

12. Something to Remember:The Challenges of Climate Change • a most complex problem - diffuse, multi-layered, dispersed in time and space etc. etc.... • fundamental change in production & consumption • from the fossil/atomic age to solar age • from waste/abundance to efficiency/sufficiency • redistribution of wealth (nations/individuals) • new systemic body of international law • ...in a nutshell: • climate change is at heart of the sustainability agenda...

13. To remember as well: marvellous institutional novelties! • establishment of three complex international market mechanisms • strongest non-compliance procedure in international environmental law • first levy on international market transactions • first acknowledgement of principle of contraction and convergence

14. So what might be done???

15. Kyoto should remain main show in town • indispensable as global framework • catalyst of political and industrial action • forum for creation of new international norms • let a thousand flowers blossom! • why not more regional approaches? • “IRENA”, “EREA” etc. for pushing renewables • liability: is there a case against oil companies? • international aviation fuel tax should be on agenda, inside or outside climate regime

16. ...inside the climate regime: • short term issues: • COP 7 is not yet done... • first priority: ratification asap • European leadership will have to remain strong (even after September 11)

17. Longer Term Issues • improve the regime structure! • co-ordinate PAMs! • address equity! • co-operate with OPEC!

18. Improve regime structure: • reduction of issues • regime has become overloaded, KISS principle • reduction of complexity • majority voting urgently required • allow for different speeds (Arts 43/44 TEU) • improve institutional structure • continuous process of communication required

19. Co-ordination of PAMs • domestic implementation of policies and measures has been slow in most countries • fear of comparative disadvantages requires a co-ordinated approach • some prime candidates: • fiscal policy: co-ordinate carbon/energy taxes • dismantle climate adverse subsidies • harmonise efficiency standards • foster climate friendly public procurement

20. Equity: the key • the challenge: fair and equitable allocation • simple “grandfathering” will not do • process as well as substance are important • substance: a formula for allocation, based on transparent and sensible criteria • process: must be non-confrontational, without undue demands for “meaningful participation”

21. Co-operation with OPEC • oil price fluctuations between $20 and $40 per barrel severely obstruct rational climate policy • prices too low: no incentive to save energy • prices too high: deligitimize energy taxes etc. • revenues under CO2/energy taxes go exclusively to Northern governments • many forms of co-operation possible • from simple price control to • producer - consumer cartels • options should be explored

22. The Sky Trust Idea(from Peter Barnes: Who Owns the Sky?) • carbon emissions cap for country/region • upstream emissions trading (energy comp.) • revenues from permit sales go into trust • trust pays equal annual dividends to all citizens • problem: rather nation-based idea, difficult to implement at global level

23. Thank you / Obrigado! For more information go to http://www.wupperinst.org or mail to Hermann.Ott@wupperinst.org