Kyoto2: how to manage the global greenhouse

| 1st December 2008
What can we expect of December’s meeting of the UN Framework Convention on Climate Change (UNFCCC) in Poznan, Poland? The main question will be how to follow the Kyoto Protocol’s first ‘commitment period’, which ends in 2012.

As yet nothing is in place, and Poznan will not deliver any firm answers: the UNFCCC process has become sclerotic. Every change to the status quo is interpreted in terms of marginal profit or loss to the national interest of member states – not in terms of the need to achieve an effective climate agreement. National delegations adhere rigidly to entrenched positions. And the negotiations have become so Byzantine in their complexity that it has become impossible for anyone truly to grasp what is going on, and why.

Yet the conference could still do one useful thing: provide a space, constructed since the Kyoto Protocol was agreed in 1997, for delegates to think ‘out of the box’. The treaty was certainly the best that could have been agreed at the time, but it has failed. Since it came into force in 2005, greenhouse gases have accumulated in the atmosphere at an accelerating rate. The ‘flexibility mechanisms’ that characterise the protocol may have created a dynamic global carbon market turning over $13,641 million in 2007 – and rising – but they have done little, if anything, to slow the rise in emissions.

Let’s look at how the Kyoto Protocol works, however. Developed, or ‘Annex 1’, countries were given targets to reduce their greenhouse gas emissions, to an average of 5.2 per cent below 1990 levels between 2008-2012. Other countries have no targets to meet at all, and most of the growth in greenhouse gas emissions have come from these ‘non-Annex 1’ developing countries, notably China, India, Indonesia, Brazil, Mexico and South Africa. A large part of their increase in emissions has come from industries moving from Annex 1 countries to other countries where emissions are unconstrained – while those industries mainly supply developed country markets.

Meanwhile, the ‘flexibility mechanisms’ allow Annex 1 countries to meet their emissions targets by buying into the carbon market, either taking up unused allocations from countries undershooting their targets, or from notional emissions reductions created  by projects. Most important is the Clean Development Mechanism (CDM), which produces Certified Emissions Reductions (CERs), which countries can buy and set against their excess emissions.

These CERs are meant to represent additional emissions reductions relative to what would have happened in the absence of the project. However, the CDM Executive Board (responsible for approving projects) has been more concerned to create liquidity in the carbon market than to guarantee the quality of CERs. For example, huge volumes of CERs – approximately a quarter of the total – arise from hydroelectric projects, based on the idea that without CDM funding coal-fired power stations would have been built instead. However, almost all these hydro plants would have been built anyway: a study by International Rivers found that 96 per cent of the Chinese hydropower projects accepted or submitted for CDM registration would have gone ahead regardless.


So what is to be done? Some reforms are under way, but the basic structures of the Kyoto Protocol are set to survive despite some serious attacks, notably that of Prins and Rayner in Nature in October 2007: ‘Kyoto has failed in several ways, not just in its lack of success in slowing global warming, but also because it has stifled discussion of alternative policy approaches that could both combat climate change and adapt to its unavoidable consequences… the rational thing to do in the face of a bad investment is to cut your losses and try something different’.

So what is this ‘something different’ that we should try? It was to answer this question that I developed the proposals set out in my book Kyoto2: How to Manage the Global Greenhouse (Zed Books, 2008). Rather than trying to reform the failed Kyoto Protocol system, it sets out a new path that would be effective, effi cient and equitable.

First, the most effi cient place to control industrial greenhouse gas emissions is not where they are emitted, but ‘upstream’ – at or close to where fossil fuels are produced, or the factories producing other greenhouse gases such as the CO² from calcinating lime to make cement. As Peter Barnes writes in his book Climate Solutions, it is far easier to control the fl ow from a garden sprinkler system by adjusting the tap than by blocking up the holes the water is squirting out of. This approach also reduces the possibility of fraud and carbon accounting errors.

Second, we need to drop the Kyoto Protocol system of ‘territorial accounting’. If you have a factory in China, owned by investors in the USA, using Swiss technology, burning Indonesian coal, producing goods for export to the EU, on Liberian registered ships owned by Greek shipping magnates, to which country should the emissions belong? The best answer is to make the question irrelevant by abandoning territorial accounting. This also offers another advantage. Climate negotiations invariably deadlock as governments bicker over their slice of the emissions ‘pie’ – which is understandable, as governments have to deliver any emissions reductions to which they agree. Drop national allocations and governments are only responsible for administering a system. Whew!

So how should emissions rights be allocated if not by country? One approach is to give them out on a per person basis. This underlies the ‘contraction and convergence’ (C&C) approach promoted by the Global Commons Institute, for example – except that under C&C the rights would then be handed over to governments (coming back to national allocations). Other interpretations of this approach include ‘cap and share’ (C&S), promoted by Ireland’s Feasta (Foundation for the Economics of Sustainability), and ‘cap and dividend’ (C&D), advocated by Peter Barnes in the USA). Under C&S, permits are given out to individuals to trade, and under C&D, the permits are auctioned by government and the revenues returned to citizens.

But this has an opportunity cost. We need substantial funding to address both causes and consequences. My rough costing concludes that a full package, taking in everything from researching and deploying renewable energy on a vast scale, to conserving tropical forests and peatlands, to financing research into geoengineering solutions (in case they’re needed to stave off runaway warming processes), could be financed with some $1 trillion a year. With 33Gt (as CO² equivalent) of emissions amenable to upstream control, this sum can be raised on the basis of a carbon price of $30 per tonne of CO² – around the current carbon price in the EU Emission Trading Scheme. Give this money away, whether to governments (as under C&C) or as tax rebates (C&D) and you no longer have it to spend.

So Kyoto2 proposes to sell the carbon permits by auction (in order to raise the best possible price), with a reserve price of $30 or so, and use them to finance climate solutions. At first the cap would be relatively loose, but would progressively tighten to reach zero net emissions by 2050, in line with the target to stabilise greenhouse gas concentrations at 350ppm, first advocated by NASA’s Jim Hansen (see also The investments made in renewable energy and energy efficiency, backed up by demanding worldwide energy efficiency standards, would progressively wean the world off fossil fuels, so that, as the cap tightened and the price of permits at auction increased, the pain caused by a rising carbon price would diminish.

If carbon prices at auction rose much higher than $30, it would have the effect of proving additional funds for even more rapid deployment of renewable energy technologies, and energy efficiency measures worldwide. It would be economically undesirable for permit prices to rise too high, too quickly, of course, as that would cause economic damage and real hardship.

So we would also put in place a ‘ceiling’ price or ‘safety valve’ at which any number of permits would be sold. This would also have the effect of bringing in huge additional sums for investment in our low-carbon future, enabling extra permits sold at the ceiling price to be clawed back in future years.

The biggest problems arising are not so much in the system itself, but in how to spend the money fairly and effectively, while minimising waste and corruption, and creating the necessary institutions. The UNFCCC must stand at the centre as the treaty organisation, but most operational tasks can be devolved to implementing agencies, such as UN agencies, development charities, national and local government, community organisations and private companies. All these agencies would ultimately be accountable to the UNFCCC, and would have to conduct their operations in an open and transparent way.

But how practical is it to consider launching such a scheme on a recession-hit world? In my view, Kyoto2 would be an important way to help lead the world into a more prosperous future, as well as a cleaner one. An important ingredient of the current global economic crisis is high energy prices, and these high prices are caused in part by declining supplies of the high-quality and accessible fossil fuels – oil, gas and coal – on which the world now depends. If the global economy maintains its dependence on fossil fuels, energy costs are only going to increase over the long term as the scarcity of fossil fuels intensifies.

To move away from these fuels is ultimately inevitable – after all, they are finite resources – and if we move away from fossil fuels before they actually run out, creating an alternative energy infrastructure to take their place, it will save considerable economic pain, and actual hardship. Raising the efficiency of our economies in using energy will also prove hugely economically beneficial. The money we save in having to dig ever more holes in the ground to get at fossil fuels – and ever deeper holes at that – will be money that we can spend on better things that will give us greater pleasure. There will also be a great many jobs to be had in making our low-carbon future a reality: the $1 trillion per year is not going to disappear, but recirculate into the global economy in highly productive ways.

There remains a big question, though: how to get from where we are now, to where we want to be? There I have no easy answers. It will need the active engagement of business, of governments, social movements and, above all, of a committed and vociferous citizenry around the world to bring about the changes we need and make an effective global climate agreement happen. With your support, and your well-targeted clamour for change, perhaps Poznan could be the beginning of something, after all.

Oliver Tickell is the author of Kyoto2: How to Manage the Global Greenhouse and a longstanding contributor to the Ecologist

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This article first appeared in the Ecologist December 2008


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