Post-Kyoto International Climate Policy: Implementing Architectures for Agreement

Half-title......Page 3
Title......Page 5
Copyright......Page 6
Contents......Page 7
Harvard Environmental Economics Program: International Advisory Board......Page 11
Harvard Project on International Climate Agreements Faculty Steering Committee......Page 13
Harvard Project on International Climate Agreements: Project Management......Page 15
Figures......Page 16
Tables......Page 20
Contributors......Page 23
Foreword......Page 35
1 Introduction......Page 41
Learning from experience: the Kyoto Protocol......Page 44
Alternative policy architectures for the post-kyoto period......Page 48
The Bali road map and the path ahead......Page 50
Part I—alternative international policy architectures......Page 53
Part II—negotiation, assessment, and compliance......Page 56
Part III—the role and means of technology transfer......Page 58
Part IV—global climate policy and international trade......Page 60
Part V—economic development, adaptation, and deforestation......Page 61
Part VI—modeling impacts of alternative allocations of responsibility......Page 63
Part VII—synthesis and conclusion......Page 66
References......Page 68
Part I Alternative international policy architectures......Page 69
2 An elaborated proposal for a global climate policy architecture: specific formulas and emission targets for all countries in all decades......Page 71
The problem......Page 73
Necessary aspects of a workable successor to Kyoto......Page 75
Political constraints......Page 77
Squaring the circle......Page 78
Emission targets for all countries: rules to guide the formulas......Page 80
The European Union......Page 92
The United States......Page 93
Korea and South Africa......Page 96
China......Page 97
Guidelines for formulas that ask developing countries to accept “fair” targets, analogous to those who have gone before......Page 98
The numerical emission target: paths that follow from the formulas......Page 102
Economic and environmental consequences of the proposed targets, according to the WITCH model......Page 114
Economic effects......Page 115
Environmental effects......Page 118
Directions for future research......Page 120
A politically credible framework......Page 123
References......Page 124
Two important similarities......Page 128
A brief recap of the EU ETS......Page 130
The trial period approach......Page 132
Defining the center......Page 135
The Commission’s role in the trial period......Page 136
The evolution of the Commission’s role......Page 138
Questions for a global system......Page 139
Importance of club benefits......Page 141
Stringency, differentiation, and harmonization......Page 143
Differentiation and harmonization defined......Page 144
The current evolution of differentiation and harmonization in the EU ETS......Page 145
Financial flows......Page 151
Conclusion......Page 154
References......Page 156
4 Linkage of tradable permit systems in international climate policy architecture......Page 159
Cap-and-trade systems......Page 161
Greenhouse gas tradable permit systems......Page 163
Japan’s emission trading system......Page 164
Regional Greenhouse Gas Initiative and other regional efforts in the United States......Page 165
Clean Development Mechanism (CDM)......Page 166
Joint Implementation (JI)......Page 167
Direct link between a cap-and-trade system and credit system......Page 168
Indirect linkages......Page 169
One-way linkages......Page 170
The EU ETS as an example of multilateral two-way linkage......Page 171
Benefits of linkage......Page 172
Concerns about linkage......Page 173
Implications of different types of linkage......Page 175
The potential role of linkage in an international climate policy architecture......Page 176
Near-term role......Page 177
Evaluating the role of linkage in an international policy architecture......Page 178
Linkage as a bottom-up international policy architecture......Page 179
Bottom-up linkage as a step toward a top-down architecture......Page 182
How will near-term climate negotiations affect bottom-up linkages?......Page 184
Conclusions......Page 185
References......Page 187
Motivation......Page 191
Implementation issues for a carbon charge......Page 194
Emission reductions......Page 199
Revenues......Page 202
Growth Effects......Page 204
Distributional effects......Page 207
Uncertainty......Page 209
Equity......Page 211
Mixed Systems......Page 213
Negotiability......Page 215
References......Page 217
6 Towards a global compact for managing climate change......Page 219
Factors behind slow progress in climate change negotiations......Page 222
Necessary criteria for a credible global compact......Page 224
Limitations of the Kyoto Protocol approach......Page 226
Defining targets for CO emissions that are comprehensive and equitable......Page 229
Getting carbon prices right for efficiency......Page 233
Development and dissemination of carbon-saving technologies......Page 234
A global institutional framework for effective implementation......Page 236
Mobilizing funding for carbon reduction efforts......Page 237
Concluding remarks......Page 238
References......Page 239
Introduction (Background)......Page 241
Studies on sectoral approaches to date......Page 242
A sectoral approach mitigates competitiveness issues......Page 243
A sectoral approach promotes consensus by contributing to the establishment of equitable economy-wide reduction targets......Page 244
A sectoral approach reduces cost-effectiveness......Page 246
A sectoral approach entails government intervention......Page 247
A sectoral approach faces challenges with antitrust laws......Page 248
Practical application of sectoral approaches......Page 249
A post-Kyoto framework based on a sectoral approach......Page 250
Policy-based sectoral approach......Page 251
Basic structure of a policy-based sectoral approach......Page 252
Deriving reference values for the negotiation of reduction targets......Page 255
Measures to ensure compliance......Page 257
Group I......Page 264
Group II......Page 265
Sectoral crediting mechanism......Page 267
Trade and investment related measures......Page 271
Measures to ensure cost-effectiveness......Page 272
Challenges for a policy-based sectoral approach to a post-Kyoto framework......Page 273
References......Page 275
Introduction......Page 280
Overview......Page 282
Kyoto’s enforcement challenge......Page 283
Trade restrictions in a post-2012 agreement?......Page 286
The logic of sectoral agreements......Page 288
Separate agreements for different gases......Page 293
Sectoral agreements again......Page 295
R&D......Page 298
Adaptation......Page 301
Geoengineering......Page 304
Air capture......Page 306
Conclusions......Page 308
References......Page 309
Part II Negotiation, assessment, and compliance......Page 311
Executive summary......Page 313
Introduction......Page 314
Why update in the first place?......Page 317
The costs of bargaining......Page 319
Delay and reluctance in negotiations......Page 320
Rules for negotiating and updating treaties......Page 321
Harmonization and formulas......Page 322
A longer time horizon......Page 323
What if negotiations fail?......Page 325
Majority rules......Page 326
Minimum participation rules......Page 328
Rules for entry and exit......Page 329
Enforcing patents and subsidizing technology......Page 331
Trade linkages and participation......Page 332
Trade sanctions and compliance......Page 334
Conclusions......Page 335
Appendix: The need for updating and economic instruments......Page 336
References......Page 338
Executive summary......Page 340
Introduction......Page 342
Background......Page 345
Evaluating equity......Page 347
Emissions performance......Page 348
Emissions reductions......Page 349
Marginal costs......Page 350
Evaluating integrity......Page 352
Credibility of commitments......Page 353
Credibility of claims regarding environmental effectiveness......Page 356
Current UNFCCC practices......Page 358
Other practices......Page 376
Conclusion......Page 378
References......Page 381
Introduction......Page 383
Aggregate emissions vs. per capita emissions......Page 387
A simple example......Page 388
Alternative approaches......Page 390
A note on ex post efficiency......Page 391
Distribution......Page 393
The case for the per capita approach......Page 395
Objections and Concerns......Page 397
Fairness and the veil of ignorance......Page 401
The atmosphere as common property......Page 403
State consent and International Paretianism......Page 404
Defective government and alternative means to redistribute......Page 406
Conclusion......Page 407
References......Page 409
12 Toward a post-Kyoto climate change architecture: a political analysis......Page 412
The attractions of a cap-and-trade architecture for participation......Page 414
The political logic of a buyer liability system......Page 418
The roles of states and enterprises......Page 421
Buyers and incentives for prudence......Page 424
Sellers and incentives for validity......Page 426
The problem of assessment......Page 428
Jurisdiction-equality and assessment......Page 429
Potential weaknesses of buyer liability......Page 431
Information and sudden changes in expectations......Page 432
Negative cascades......Page 433
Moral hazard and seller default......Page 434
Conclusion......Page 436
References......Page 437
Part III The role and means of technology transfer......Page 441
Introduction......Page 443
The climate change technology challenge......Page 445
Economic scale of the technology challenge......Page 446
Importance of advanced technology for lowering costs and expanding options......Page 447
The global innovation system......Page 448
Patterns of global innovative effort......Page 449
Innovation market problems and policy strategies......Page 452
GHG emission pricing through domestic emission commitments......Page 453
Technology transfer through international trade and development assistance......Page 458
International coordination and augmentation of climate mitigation R&D......Page 461
International agreement on R&D knowledge sharing, coordination, and joint collaboration and funding......Page 464
International agreement on domestic climate technology R&D funding......Page 469
Knowledge transfer through intellectual property......Page 470
Conclusion......Page 472
References......Page 474
Introduction......Page 479
The efficient and the possible......Page 482
Priorities for self-interested action......Page 484
Priorities of industrialized countries......Page 485
Priorities of developing countries......Page 486
Accountability and effectiveness in reducing GHG risks......Page 487
Developing countries......Page 488
Assessing environmental effectiveness......Page 489
Offsets and targets—a means, not an end......Page 490
A proposal for enhancing offsets......Page 493
Institutional framework......Page 500
Ex post accountability......Page 502
Conclusion......Page 504
References......Page 505
Introduction......Page 509
Possible development of the CDM......Page 510
Programmatic CDM......Page 511
Policy-based CDM......Page 512
Sectoral CDM......Page 514
Technology transfer and CDM......Page 515
Technology-oriented CDM......Page 518
The case of natural gas combined-cycle (NGCC) technology transfer to China......Page 519
The idea of a technology CDM......Page 521
Best available technology......Page 523
Less risk for low-carbon investment......Page 524
Additionality......Page 525
Defining the technology list......Page 527
Conclusion......Page 528
References......Page 529
Part IV Global climate policy and international trade......Page 531
16 Global environment and trade policy......Page 533
The environmental Kuznets curve......Page 534
Effects of openness to trade......Page 536
Race to the bottom......Page 537
Gains from trade......Page 538
Evaluating the overall effects of trade on the environment......Page 539
Cross-border institutions for cross-border problems......Page 540
Processes and production methods......Page 541
WTO panel cases......Page 542
Canadian asbestos......Page 543
Shrimp–turtle......Page 544
Tuna–dolphin......Page 545
The issues of leakage and competitiveness......Page 546
Developing countries......Page 547
Measures in climate change legislation to address competitiveness and leakage......Page 549
What is the right name for measures against imports from unregulated countries?......Page 550
Possible application of trade barriers by the United States......Page 551
Possible application of trade barriers by the European Union......Page 552
Would trade controls or sanctions be compatible with the WTO?......Page 554
Some principles for designing legitimate penalties on carbon-intensive imports......Page 557
The big danger......Page 559
Why take multilateralism seriously?......Page 560
Concluding recommendations......Page 561
References......Page 563
Introduction......Page 570
Mandatory ceilings......Page 572
The length of the agreement: response to new information......Page 573
Fairness and distributional equity......Page 575
Participation and compliance......Page 578
The basic proposal......Page 579
Trade sanctions as an alternative to the fine......Page 582
Other considerations......Page 584
Extending the role of trade policy......Page 585
Tradable emissions......Page 589
Emissions trade as an indirect side payment......Page 590
Emissions trade to account for cost uncertainty......Page 592
The effect of emissions trade on the incentive to abate......Page 593
The optimal form of regulation......Page 595
Conclusion......Page 596
References......Page 597
Part V Economic development, adaptation, and deforestation......Page 601
Introduction......Page 603
A multistage hybrid climate policy architecture: an overview picture......Page 605
A multistage approach......Page 606
The top level—a global climate agency......Page 609
The middle level—clubs of countries......Page 610
Burden sharing: reconciling human development and climate protection......Page 612
A portfolio of policy instruments to achieve cost-effective mitigation......Page 622
Financial mechanisms and technology transfer......Page 623
Issues regarding adaptation......Page 624
In summary: advantages and challenges......Page 625
The case of China......Page 626
Renewable energy policies......Page 628
Conclusion......Page 632
References......Page 633
The non-marginal nature of the climate problem and the importance of technological change......Page 639
The logic of international emissions trading......Page 641
Global cap and trade and human welfare......Page 643
What should an agreement aim for?......Page 649
References......Page 655
20 Climate accession deals: new strategies for taming growth of greenhouse gases in developing countries......Page 658
Climate accession deals......Page 664
China......Page 665
India......Page 667
Indonesia......Page 670
Gulf states......Page 671
Institutions for engagement......Page 672
Bidding......Page 673
Assessment and Monitoring......Page 678
Converging to global norms......Page 681
Conclusions......Page 685
References......Page 686
Introduction......Page 689
Reforming energy subsidies......Page 691
Enhancing energy efficiency......Page 694
Promoting technology diffusion and deployment......Page 696
International financial mechanisms......Page 697
Offset mechanisms......Page 699
Changing the rules for project credit......Page 702
Offsets for programs, policies, and sectoral targets......Page 703
International public funds......Page 705
Private and public diplomacy......Page 708
Energy security as a lever......Page 709
Financial penalties......Page 710
Support for adaptation efforts......Page 711
Broader issue linkage......Page 712
United Nations Framework Convention on Climate Change......Page 713
Minilateral forums......Page 715
Conclusions......Page 716
References......Page 717
Introduction......Page 722
Assumptions about policy context......Page 724
Range of forestry activities involved......Page 725
Broad issues for program design......Page 728
Measurement issues and linkage......Page 729
Baseline......Page 730
Summary of design issues......Page 731
National inventory approach......Page 732
Defining the national inventory approach......Page 733
Performance of the NI approach relative to the PBP approach......Page 737
Measurement technologies......Page 740
Domestic implementation......Page 742
Input-based approaches......Page 744
Conclusions......Page 745
References......Page 748
Part VI Modeling impacts of alternative allocations of responsibility......Page 753
Introduction......Page 755
A tool to compare architectures for agreement: the WITCH model......Page 758
Architectures for agreement......Page 760
Cap-and-Trade (CAT) policy with redistribution......Page 761
Global tax recycled domestically......Page 762
Reducing Emissions from Deforestation and Degradation (REDD)......Page 763
Climate clubs......Page 764
Graduation......Page 765
Dynamic targets......Page 766
Climate effectiveness......Page 767
Economic efficiency......Page 771
Equity and distributional impacts......Page 774
Enforceability and feasibility......Page 775
Summary of the comparison analysis......Page 778
Conclusions and policy implications......Page 780
References......Page 782
Overall model structure......Page 784
Endogenous Technical Change (ETC) in the WITCH model......Page 785
Breakthrough technologies......Page 787
Spillovers in knowledge and experience......Page 790
Appendix References......Page 791
Introduction......Page 793
The EPPA model......Page 796
Endogenous instruments for policy targets and distributional goals......Page 797
A reference projection......Page 801
Scenarios of allocation and compensation......Page 803
Simple allocation rules......Page 805
Allocations that fully compensate developing countries......Page 813
Allocations that partly compensate developing countries......Page 817
Conclusions......Page 819
References......Page 823
Introduction......Page 826
Approach......Page 829
MiniCAM......Page 830
Technology suites......Page 831
Hypothetical international policy architectures......Page 834
Summary of the scenarios......Page 836
A brief overview of the implications of overshoot......Page 837
Overshoot, technology, and global emissions and concentrations......Page 838
Delayed participation, technology, and regional emissions mitigation......Page 842
Long-term technology evolution......Page 845
Near-term technology deployment in a long-term context......Page 847
The global benefits of technology......Page 851
The regional benefits of technology......Page 852
Concluding thoughts......Page 857
References......Page 859
Introduction......Page 862
Model calibration......Page 865
Historical comparison......Page 870
Policy implications......Page 873
Optimal stabilization......Page 876
Graduated accession......Page 878
Progressive targets......Page 881
Costs of alternative proposals......Page 883
Abatement costs......Page 885
Environmental outcomes......Page 887
References......Page 891
Appendix A. Technology in MERGE......Page 893
Appendix B. Scenario Descriptions......Page 894
Introduction......Page 897
Alternative climate policy regimes......Page 901
Sources of uncertainty and shocks......Page 903
Methodology and results......Page 906
Growth shock in developing countries......Page 909
Rise in global risk: a financial crisis......Page 915
Summary......Page 919
Summary and conclusions for policy......Page 920
Appendix A: The G-Cubed Model......Page 921
References......Page 923
Part VII Synthesis and conclusion......Page 927
The international dimension......Page 929
Some (discouraging) history......Page 931
Thoughts on architecture......Page 933
References......Page 937
29 Lessons for the international policy community......Page 939
Principles for an international agreement......Page 940
Promising international climate policy architectures......Page 943
Targets and timetables: formulas for evolving emission targets for all countries......Page 944
Harmonized domestic policies: a portfolio of international treaties......Page 946
Harmonized domestic policies: a system of national carbon taxes......Page 949
Coordinated national policies: linkage of national and regional tradable permit systems......Page 951
Key design issues in international policy architecture......Page 954
Burden sharing in an international climate agreement......Page 955
International carbon markets and technology transfer......Page 956
Additional technology policy in post-2012 international climate agreements......Page 958
Improved, expanded, and focused ghg offsets......Page 960
Climate accession deals......Page 962
Addressing deforestation in an international climate agreement......Page 963
Making global climate policy compatible with global trade policy......Page 965
Conclusion......Page 967
References......Page 969
Appendix A: selected list of individuals consulted......Page 970
Appendix B: workshops and conferences......Page 975
Glossary and abbreviations......Page 979
Index......Page 987