Kyoto Protocol: A history

1. Kyoto Protocol: A history • UNFCC elaborated in Rio in 1992 • One obligation: report national greenhouse gas emissions • Mostly recommendations: stabilize greenhouse gas concentrations in for industrialized countries at 1990 levels • The Conferences of the Parties following Rio: tighten Rio framework • In context of U.S.-E.U opposition about binding targets and taxes versus tradable permits

2. The path to Kyoto • Berlin 1995: • Initial effort in greenhouse gas mitigation had to be done by industrialized countries • Geneva 1996: • U.S. Undersecretary of State Timothy Wirth expresses support for binding reduction targets in exchange for emission trading: The road to Kyoto 3rd meeting of UNFCCC parties in 1997 is open

3. The Kyoto Protocol (1997) • 5.2 % reduction of emissions below 1990 levels by 2008-2012 for all industrialized countries • Specific targets for various countries: • US -7% • EU -8% • Japan -6% • Switzerland -8% • but Australia + 8%, Norway +1%, Iceland +10%! • 6 greenhouse gases are considered: CO2, CH4, N2O, HFC (hexafluorocarbon), PFC (perfluocarbon), SF6 (sulphur hexafluoride)

4. The Kyoto flexible mechanisms • Within each country • Emission reductions • Carbon sinks • Among countries: Kyoto flexible mechanisms • Emissions trading between industrialized countries • Process started within Europe • Joint implementation between industrialized countries • The Clean Development Mechanism between industrialized and developing countries

5. Implications of Kyoto targets • 5.2 % reduction relatively small • 1990 base year means reduction surplus for Eastern countries such as Russia and the Ukraine: "Hot Air" • EU is a bubble • 6 Greenhouse gases = more flexibility

6. Particular problem: initial allocations • Equity issues • Effectiveness/efficiency issues: Example of European system • Too many permits distributed • Industries had little incentive to reduce emissions

9. Equity issues in the FCCC process • Goal of FCCC: meet developmental and environmental needs of present and future • Developed countries • Bear the greatest burden in mitigation ("polluter pays principle") • Taking into account capacity to do so ("common but differentiated responsibilities") • Developing countries • Neither the responsibility • Nor the means to take on obligations but should be encouraged to join the process progressively

10. Opposition to principles • The Byrd-Hagel resolution • Passed unanimously in the United States Senate in July 1997, before Kyoto • United States would not accept an agreement that would impose too large costs on the US economy and one that did not include developing countries.

11. North-south issues • Causes and responsibilities of climate change • Benefits of reducing warming • Evaluation of impacts of and vulnerability to the potential consequences of climate change

12. Equity considerations in climate change negotiations • Allocation of what • Allocation to whom • Allocation according to what rules

13. Allocation of whatAllocation to whomAllocation according to what rules • Future emissions • Which gases? • How to allocate baselines? • Past emissions • Current emissions

14. Allocation of whatAllocation to whomAllocation according to what rules • Assign responsibility to those most responsible for current situation: “polluter pays” • Benefits will accrue to all • Free-riding by developing countries • Population growth and economic development: changing per capita and total emissions

16. Allocation of whatAllocation to whomAllocation according to what rules • Assign responsibility to those most responsible for current situation: “polluter pays” • Benefits will accrue to all • Free-riding by developing countries • Population growth and economic development: changing per capita and total emissions • Costs of climate change unevenly distributed • Greater burden on developing countries

17. Other "population" issues • Future/past efforts • Arbitrariness of 1990 baseline • Impact on CDM • Present/future generations: intergenerational equity

18. Allocation of whatAllocation to whomAllocation according to what rules • Possible criteria • Parity • Proportionality

19. Ongoing oppositions and equity • When to undertake abatement • Now • Stern Review: Limit future damages about which we are uncertain • Future • Nordhaus: Greater returns generated by investment in human capital now and, because future generations will be better off, they will be able to slow emissions at lesser cost.

20. Factors influencing choice of discount rates • Climate change trajectories • Regional variations in time preferences

21. Time preferences and mitigation • Consumption discount rate δ = ρ + gη  ρ =    social rate  of  time  preference  g = projected growth  rate  of average consumption η =   elasticity  of  the  social  weight attributed to a change in consumption Arrow, Kenneth (2007), Global Climate Change: A Challenge to Policy, The Economists’ Voice, 4,3, Article 2. http.//www.bepress.com/ev/vol4/iss3/art2

22. Final North-South issue: distribution of rights • Emissions are privately produced public goods • Therefore emissions reductions should take place in countries with higher incomes • Efficient • Equitable

23. The problem at the European Level • The Kyoto Protocol imposes an 8% reduction in green house gas emissions in the EU with respect to 1990 • This to be distributed across countries

24. EU (15) burden sharing and achievements

25. Arguments against Kyoto • Kyoto will not achieve much • Kyoto is very costly, especially for the U.S. • It will result in large transfers to Russia and Ukraine • Kyoto is unfair especially for the US because potentially big polluters (China, India) will have no reduction obligations • No compliance mechanism

26. These arguments are questionable • Kyoto is beginning of a process. • Expectation that more constraints will be negotiated later • Importance of the signaling effect of the accord. • Shows industry that a departure from fossil fuels is taken seriously and that possibly more will be done in the future • It also signals to governments that large scale research efforts to develop new energy technologies are necessary

27. Cost Argument • U.S. emission rate twice Europe’s; 3 times Switzerland’s • Marginal cost of reduction relatively lower • Calculations do not take into account large scale price and balance of payment benefits or political benefits

28. Counter arguments, Russian hot air • Difficult for Russia and Ukraine to set up a permit market. • Russia and to some extent the Ukraine are big energy exporters • Potential users of energy resources. • Politically, some additional transfers to them are not that bad.

29. Fairness and compliance argument • CDM's should draw developing countries into Kyoto process • Exclusionary process assures that non- participants will not benefit • Surveillance mechanism can make CDM market work efficiently