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What is Climate Change?

To understand the concept of climate change, it is necessary to first understand the workings of the greenhouse effect. This basic mechanism was first described by the Swedish chemist Svante Arrhenius in 1896, when he explained how some of the sun’s radiation that is reflected off the Earth’s surface is trapped in the atmosphere by carbon dioxide and other so-called greenhouse gases (GHG). It is this natural greenhouse effect that essentially allows life to be sustained on Earth by trapping in the continuous flow of energy from the sun and warming the global average temperature to around 15 degrees Celsius.

In the long term though, the planet needs to get rid of its energy at the same rate at which it receives it from the sun. An increase in the concentration of greenhouse gases in the atmosphere will therefore lead to the climate changing in ways that the balance between incoming and outgoing energy is restored. One of the ways in which it will adjust is that of a global warming of the earth’s surface and lower atmosphere. Since the start of the industrial revolution 150 years ago, the temperature of the planet has risen by 0.6 degrees centigrade.

The major gases responsible for the greenhouse effect are methane (CH4), chlorofluorocarbons (CFC), nitrous oxide (N2O), ozone(O3) , water vapour and carbon dioxide (CO2). With the possible exception of water vapour, concentration levels of all these gases have risen during the past two centuries as a direct result of human activity. Concentration levels of carbon dioxide, in particular, have seen a substantial increase of 28 percent from their 1850 levels of 285 parts per million (ppm) to their present levels of 365 ppm. Consequently, seventy percent of the additional warming since the start of industrialisation can be attributed to the rise in concentration levels of this one gas. It is produced in a small part by land use changes such as the clearing of forests, but predominantly by the burning of fossil fuels, such as coal or oil to generate electricity and fuel automobiles.

Global warming is just the start of the problem though, precipitating a whole range of other climatic changes. Although scientists are still trying to understand the full complexity of the world’s climate system, what they can predict is that climate change will have negative impacts on human health, food security, economic activity, water resources and physical infrastructure.

How will the climate change?

Sea-Level Rise: One of the major effects of climate change will be that of an increase in the planet’s sea levels. Sea levels have already risen by 10 to 25 centimetres over the past century and a half. Although there is still uncertainty around the exact amount that the sea is expected to rise over this century, most estimates put it at around 50 centimetres by the year 2100. This increase would flood many millions of hectares of precious coastal ecosystems around the world and threaten island states on the low-lying coral atolls of the Pacific and Indian Oceans. This rise in ocean levels is also only calculated on the expansion of water from higher temperatures and does not take into account the melting of ice over Antarctica or Greenland. A particular worrying factor in this regard is the appearance of a large crack in the West Antarctic ice sheet. Although scientists claim that the possibility of it breaking off is still remote, that occurrence alone would see the ocean rise by at least six metres around the world and flood cities like Bangkok, Miami and New Orleans.

It should also be borne in mind that sea level rises are expected to continue for some hundreds of years after emissions are stabilised. This is due to the large time-scales at which deep ocean heat transport operates. Ice sheets will react over even longer periods, perhaps thousands of years.

Regional Variability: Climate Change does not have uniform effects around the globe, but rather shows immense regional variability. In the tropical and sub-tropical areas, increased heat stress, shifting monsoons and drier soils could all reduce agricultural yields, whereas Northern Canada and Europe could enjoy longer growing seasons. Europe, however, could also experience a climate flip-flop with all of the northern countries in fact freezing over. This would be due to the natural salt-water pumps that lie to the south of Greenland being desalinated by icebergs moving down from the North Pole. This in turn, would of shut down the Gulf Stream, an ocean current that cycles warm water up from the Caribbean past the coast of Ireland and, through the mechanism of these salt-water pumps, back down South again. It is this ocean current that keeps Northern Europe warm and allows agriculture to be sustained, something which in a matter of decades could be put under threat.

Temperature Increase: According to the Third Assessment Report (TAR), released by Working Group I of the Intergovernmental Panel on Climate Change (IPCC) (see box on IPCC) in January 2001, the temperature could increase by a maximum of 5.8 degrees Celsius over the course of this century. This increase would consequently represent the greatest rate of warming since the end of the last ice-age.

Temperature increases are likely to be the greatest over land areas, particularly in the winter at high northern latitudes. Warming in northern Canada and Siberia could be as much as 40% above the average, with the possible melting of the permafrost in these regions releasing more carbon dioxide and methane and kicking off a climatic feedback loop that would further increase the rate of warming. Higher maximum temperatures and more hot days over nearly all land areas are very likely to occur, as are higher minimum temperatures, and fewer cold and frost days.

Biodiversity Decline: According to the IPCC, climate change will have a serious negative impact on ecosystems and species. Climate change will cause the disappearance or transformation of large areas of wildlife habitat, which will in turn require the migration of species at an extremely rapid rate. Rare, isolated or slow-moving species will come under increasing threat, whereas weeds and pests that can move, reproduce or adapt fast will be favoured under a climate change scenario.

According to the WorldWide Fund for Nature, a doubling of carbon dioxide levels in the atmosphere could eventually destroy at least a third of the world’s existing terrestrial habitats. The most vulnerable ecosystems are cloud forests, mountain ecosystems and coral reefs. The massive coral bleaching event of 1998, which was a direct result of the largest El Nino and La Nina climate changes ever recorded, saw 16 percent of the world’s coral reefs destroyed in only 9 months. The severity and frequency of these El Nino events are predicted to increase as a result of climate change.

Increase in Vector-borne Diseases: Global warming is already expanding the distribution of diseases that are carried by insects, like malaria and dengue fever. Malaria, which only occurs in places where the minimum winter temperature drops no lower than 16 degrees Celsius, has been reported in small outbreaks north and south of the tropical regions. This is a trend that is sure to grow as average temperatures increase around the globe.

As stated by the IPCC in their Third Assessment Report, "there is new and stronger evidence that most of the warming observed over the last 50 years is attributable to human activities." It is clear that we are changing the climate in some irreversible ways, and that the world we are creating through our emissions of greenhouse gases could be a fundamentally different one by the end of this century. Even if emissions stopped today, a quarter of the human-induced carbon dioxide in the atmosphere would remain several centuries into the future. Some of the HFC’s and PFC’s may persist for thousands of years. Therefore, climate change is a problem that will not go away even once we have depleted our fossil fuel reserves. Once greenhouse gas emissions are stabilised, global average surface temperatures will continue to rise, though only by fractions of degrees each century, rather than the several degrees that are predicted for the 21st century. It is therefore evident that action needs to be taken now, before we find ourselves in a completely powerless position to halt the expected great climatic changes.


A Brief History of the Climate Change Negotiations

The first time that high-level political debate was entered into on the subject of climate change, was at the 1988 conference in Toronto on the Changing Atmosphere: Implications for Global Security. This conference was held on the recommendations of the Brundtland Commission of a year earlier, which based on the findings of a series of previous scientific meetings, called on the United Nations Environment Programme (UNEP) and the World Meteorological Organisation (WMO) to take concrete action on this issue.

At the meeting in Toronto, it was agreed upon by participants that an international framework convention was required to tackle this issue. Although this was not a formal intergovernmental meeting, the attendance of senior policy makers did mark the start of governmental involvement in this debate. Also arising out of this conference was the establishment, later that year, of the Intergovernmental Panel on Climate Change (IPCC), the body entrusted with the task of reviewing the state of scientific knowledge on climate change. This meeting was followed by a ministerial conference in November of the following year in Noordwijk, the Netherlands, where representatives of 67 countries attended the first high-level political meeting on climate change. The Noordwijk Declaration that was adopted at this conference stated that climate change was a common concern of humankind and called for all countries to initiate action to control greenhouse gas emissions (GHGs). It further called for a framework convention on climate change that committed parties to addressing the needs of developing nations in obtaining access to clean technology.

It was at the Noordwijk Ministerial Conference that the first differences between industrialised countries over the issue of climate change became apparent. While the Europeans were arguing for hard targets and timetables for reductions of carbon dioxide emissions, the United States opposed the idea and instead argued that the primary emphasis should be placed on national strategies.

A further division arose at the second World Climate Conference in Geneva in 1990, this time between industrialised and developing countries over the issue of responsibility for climate change mitigation. Developing countries argued that the primary responsibility for reducing GHG emissions should rest with the industrialised countries, which both historically and in the present period account for the majority of emissions.

In December of 1990 a resolution was adopted by the UN General Assembly that established an intergovernmental negotiating process for the climate change convention. According to the resolution, the negotiations were to be conducted by an Intergovernmental Negotiating Committee (INC), with a convention having to be drafted and ready for signing at the Rio Earth Summit in 1992. Five of these INC’s took place between then and June 1992, with agreement on a convention text proving an elusive and arduous task. Divisions started to set in both within and between the developing and industrialised country blocs. The final compromise text that was hastily agreed upon barely a month before the Rio Summit ended up being a weak document satisfying US demands for no specific targets on GHG emission reductions. Besides outlining basic principles and obligations, the United Nations Framework Convention on Climate Change (UNFCCC) did, however, also provide an overarching objective in the form of : "stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. "

In addition, procedures and institutions were established by the convention, such as the Subsidiary Body for Scientific and Technological Advice (SBSTA) and the Subsidiary Body for Implementation (SBI). In effect, the UNFCCC put in place the foundation upon which future negotiations over concrete action could take place. The convention was signed by 154 countries at the Earth Summit, and entered into force on 21 March 1994 after fifty countries had ratified it.

Six meetings of the INC took place after the Rio Summit in preparation for the first Conference of the Parties (COP) to the UNFCCC. These INC sessions mainly revolved around finding the most cost-effective method of achieving emission reductions. In this regard, the concept of joint implementation (JI) was proposed, whereby industrialised countries could offset their emission reduction targets by funding projects in other parts of the world. It was eventually agreed that these JI projects would be limited to the Annex 1 industrialised countries and countries with economies in transition, with an agreed to pilot phase of projects in developing countries under the term Activities Implemented Jointly (AIJ).

A potentially divisive issue that reared its head at INC-11 and then again at COP-1 in Berlin 1995, was that of developing country commitments on emission reductions. This demand was put forward at COP-1 by the new political grouping of JUSCANZ (Japan, US, Canada, Australia and New Zealand), who stated that no action would be taken by them if this condition was not met. In the end, however, a new "Green Group" coalition of developing countries and the European Union managed to pressure the other parties into accepting the Berlin Mandate. Apart from stating that no new commitments would be introduced for developing countries, it also set up an ad hoc group on the Berlin Mandate (AGBM) that was invested with the task of negotiating a protocol that included legally binding targets for industrialised countries. It was further agreed that this protocol would be adopted by COP-3 in 1997.

The process towards reaching agreement on a legally binding protocol was given a renewed sense of urgency with the release of the 1995 IPCC’s second assessment report that stated for the first time that there was a discernible human influence on climate change. Even the US seemed to be jolted into action, with their call at COP-2 in Geneva in 1996 for intensified international negotiations on a "realistic, verifiable and binding medium-term emission target". This then opened the way for the adoption of the Geneva Declaration that emphasised that the AGBM process couldn’t culminate in vague commitment targets, but rather legally binding ones that resulted in "significant overall reductions".

The Kyoto Protocol

In the run-up to the December 1997 COP-3 in Kyoto, it was clear that the US was planning on shirking its climate change responsibilities under the guise of demanding meaningful participation from the developing world. In July 1997, the Byrd-Hagel resolution was passed unanimously by the US Senate that explicitly stated that Congress would not ratify a climate treaty that excluded developing countries from any emission reduction commitments. This was a refrain that was often heard by the umbrella grouping of JUSSCANNZ (now expanded to include Switzerland and Norway) at COP-3 as the negotiations teetered on the brink of collapse until the very end. The morning after the conference was due to end though, an agreement was finally reached with the acceptance by all parties of the Kyoto Protocol. Some of the major elements of the agreed protocol were:

  1. An overall reduction in industrialised countries greenhouse gas emissions of 5.2 percent below 1990 levels in the first commitment period 2008 – 2012. Within this target, each of the industrialised countries were allocated a specific legally binding emission target that they would have to adhere to in the same period. Germany and the UK for instance, took on a target of a 20 percent reduction, while Australia managed to negotiate a limitation target of an eight percent increase as opposed to a reduction in emissions.
  2. In complying with their emission targets, industrialised countries would be able to count changes in emissions that have resulted from human induced land use change and forestry activities, limited to afforestation, reforestation and deforestation since 1990. These amounts would, however, have to be verifiable changes in "carbon stocks" to qualify.
  3. The mechanism of Joint Implementation (JI) was accepted, whereby industrialised countries can trade emission reduction units between each other based on projects that are undertaken to reduce emissions.
  4. Emissions trading was also allowed in terms of the protocol, allowing industrialised countries to fulfil part of their commitments through buying the reductions of other countries that are in excess of their targets. (See article on Emissions Trading)
  5. The protocol made provision for the setting up of an entity called the Clean Development Mechanism (CDM), which basically allows industrialised countries to earn credits towards their emission targets by sponsoring projects in the developing world that reduce global emissions. (See box on CDM)

Although the Kyoto Protocol was agreed to in 1997, it was not yet ready for most countries to take back to their respective parliaments for ratification and entry into force. The rules governing the details of the protocol still needed to be negotiated, such as the issue of penalties for non-compliance to the targets as well as the structure and operation of the mechanisms like the CDM, emissions trading and JI.

At COP-4 in Buenos Aires in 1998, a plan of action was therefore agreed upon, whereby all the finer details of the Kyoto Protocol would have to be decided upon by the deadline of COP-6 in the year 2000. Subsequent to that COP a number of formal and informal meetings were held in the lead-up to the decisive COP-6. These meetings included the COP-5 in Bonn in 1999, as well as a number of subsidiary body meetings of the convention, where delegates discussed texts for decisions on wide-ranging political and technical matters. As these meetings progressed, it became clear that agreement on all the issues under negotiation was going prove to be an extremely difficult task.

COP-6 and its Outcome

Delegates arrived at COP-6 with high hopes of reaching an agreement on the operational details of the Kyoto Protocol that would allow ratification and an entry into force by the Earth Summit in 2002. The pressure was certainly felt by all parties, but unfortunately at the end of the two weeks this pressure did not translate into consensus being reached on a number of key issues.

The major sticking point of the negotiations revolved around the concept of "sinks", or in other words Land Use, Land Use Change and Forestry (LULUCF). The umbrella group led by the US wanted to offset its emission reduction targets by including activities that sequestered carbon from the atmosphere such as afforestation, reforestation and revegetation. The EU and G77/China groups refused to accept this on the grounds that it would threaten the environmental integrity of the protocol, by allowing countries in some instances to actually increase their emissions as opposed to reducing them. The science around the sequestering of carbon by trees and vegetation is also very uncertain, with many environmental organisations claiming that it is not permanent as it could all be released again at some later stage by either decomposition or fires. It is also for this reason that the G77/China and EU opposed the inclusion of sinks in the CDM, a further demand of the umbrella group.

The other point where agreement could not be reached was that of the operational details of the so-called flexibility mechanisms of emissions trading, the CDM and JI. The umbrella group was hoping to use these mechanisms to achieve as much of their emission reduction targets as possible, whereas the EU and the G77/China claimed that there should be a cap on their use. They believed that this would ensure that concrete domestic action was taken in reaching reduction targets, as opposed to simply finding the most cost-effective alternatives abroad.

Other stumbling blocks in the negotiations occurred over the operations and amount of money available to the financing mechanisms, as well as the structure of the compliance regime. In the end, all of these issues were not able to be resolved at this COP and the delegates had to leave with the disappointing result of a non-agreement. A resumed session of COP-6 has now been called for sometime in May / June 2001, where all Parties will continue their negotiations and hopefully settle on a text that all countries will be able to ratify.


Intergovernmental Panel on Climate Change (IPCC)

The Intergovernmental Panel on Climate Change (IPCC) was set up in 1988 by the World Meteorological Organisation and the United Nations Environment Programme (UNEP), to provide governments with regular assessments on the state of scientific knowledge regarding climate change. All countries that are members of the United Nations and the WMO are members of the IPCC. The panel has three working groups, namely:

  • Working Group 1 deals with scientific assessments
  • Working Group 11 covers impacts, adaptation and mitigation
  • Working Group 111works on the economic and social dimensions of climate change

Member governments as well as intergovernmental and non-governmental organisations nominate experts to serve on the panel, all of whom need to have a proven track record in research on the relevant topics. The bureau of governmental representatives then select writing teams for each of the three working groups based on the criteria of expertise, range of views and a proper geographical spread.

The reports emanating from each of the working groups are subjected to a rigorous peer review that involves hundreds of experts from around the world. In addition, the drafts are also sent to governments for comment. The IPCC working groups and the IPCC plenary, a body that includes political representatives of the member countries, then embarks on a line by line approval of the summary for policy-makers that each working group would have produced. It is these summaries that subsequently provide the main input from the IPCC to the climate negotiations.

Since its establishment in 1988, the IPCC has produced three assessment reports. The first assessment report in 1990 essentially provided the scientific impetus for negotiations on the Climate Change Convention of 1992, while its Second Assessment Report played a pivotal role in the negotiating of the Kyoto Protocol. The Third Assessment Report of Working Group I that was released in January 2001 has seen many of its dire predictions regarding climate change being scaled upwards.


The Clean Development Mechanism

The Clean Development Mechanism (CDM) was seen as the greatest surprise of the COP-3 negotiations in Japan, working itself into the final text of the Kyoto Protocol. The idea behind the CDM initially stemmed from a proposal put forward by Brazil in 1997 that argued for a Clean Development Fund. The money behind this fund, would in their line of thinking, come from financial penalties levied on industrialised countries who fail to comply with their emission reduction targets. This fund would then be used in financing climate change mitigation and adaptation projects in developing countries.

This initial proposal, however, was turned on its head by the American delegation at COP-3 who dropped the penalty component and instead argued for a mechanism that would allow industrialised countries to achieve their emission reduction targets by financing projects in the developing world that reduce GHG emissions. In the words of the final protocol text, the CDM is given the role of assisting developing countries "in achieving sustainable development and in contributing to the ultimate objective of the Convention" as well as helping industrialised countries "in achieving compliance with their reduction targets."

The three criteria which are to guide the implementation of CDM projects are voluntary participation of developing country partners, environmental additionality and the achievement of real, measurable and long-term climate benefits. The last two criteria entail developing a credible baseline upon which to measure any emission reductions brought about by the project. If this is established, then these certified emission reductions (CERs) can be used to offset part of an industrialised country’s obligations.

As expected, the negotiations around the precise rules of the CDM has been a protracted affair as developing countries and environmental organisations are concerned that the mechanism could simply be used by industrialised countries to avoid taking any real domestic action. It is for this reason that some groups have called for a cap on the use of the CDM, as well as arguing that no funds from Official Development Assistance should be used in financing projects. The other contentious issues with regards to the CDM relates to whether sink projects (in other words ones that sequester carbon from the atmosphere) can be included, as well as whether geographical equity with respect to the distribution of CDM projects can be ensured.


Climate Change and International Emissions Trading

The use of a system of tradable permits or quotas to lower the cost of meeting environmental targets appeared in the academic literature as far back as the 1960s, which applied specifically to the allocation of water rights in the United States. Subsequently, with growing concerns about the costs associated with meeting the goals of the US Clean Air Act in the 1970s and 1980s – and consequent non-compliance due to what was perceived as an excessive economic burden – the concept was put into practice to control emissions of sulphur dioxide and later nitrogen oxides and particles. Over the last twenty years emissions trading has become a core component of US efforts to reduce the air pollution generated by industry and other large stationary sources of emissions.

The principle that underlies emissions trading is that, with a given target, the market provides the most efficient way of allocating the responsibility for reducing pollution. This occurs because, unlike a system based on fixed emissions reductions across all firms, trading allows those firms with lower abatement costs to make deeper cuts and sell their "excess reductions" to firms for whom the cost of reducing emissions is prohibitively higher. While the overall reduction remains the same, the cost of achieving it can be significantly lowered.

By and large, emissions trading in the US is considered to have been successful: emissions targets have generally been met (and in some cases exceeded) and costs have been reduced. Estimates of the savings achieved range from between 40% and 90%. Outside the US, however, emissions trading has scarcely been employed as an instrument of official environmental policy. In Singapore a quota-based system was successfully employed to meet the requirements of the Montreal Protocol and an emissions-based system established but soon abandoned in Chile. Tradable rights for the exploitation of natural resources have been more widely used in both industrialized and developing countries; for example, for forestry concessions and fishing rights. In some cases, trading of quotas has been introduced informally rather than through legislation, as users have seen the benefits of such exchanges. Nevertheless, despite the flurry of interest generated by the Kyoto Protocol and the plans to introduce national greenhouse gas trading systems in a number of OECD countries, emissions trading is as yet relatively untried and its likely contribution to the fight against global warming unknown.

In the context of climate change, the concept of emissions trading as an international policy instrument was introduced into the negotiations by the U.S and a number of its allies as a condition to agreeing to binding GHG emissions cuts and subsequently incorporated in the Kyoto Protocol agreed in December 1997. Article 17 states:

The Conference of the Parties shall define the relevant principles, modalities, rules and guidelines, in particular for verification, reporting and accountability for emissions trading. The Parties included in Annex B may participate in emissions trading for the purposes of fulfilling their commitments under Article 3. Any such trading shall be supplemental to domestic actions for the purpose of meeting quantified emission limitation and reduction commitments under that Article.

According to this Article, Parties may transfer parts of their Assigned Amounts (PAAs - the emissions that they are allowed to produce under the Protocol) to other Parties if their emissions are below the prescribed level, or purchase PAAs in order to comply with their emissions targets. As can be seen, however, the text of the Protocol does little more than establish the existence of emissions trading: according to the Buenos Aires Plan of Action agreed at COP4 in 1998, the rules of its operations should have been determined by COP6 in The Hague in November 2000. Given the failure of this latest round of negotiations, however, most of the key issues are still outstanding. Amongst the most important of these are:

  • The interpretation of the phrase "supplemental to domestic actions".
  • The conditions that a Party must satisfy before becoming eligible to trade, particularly with regard to emissions inventories and the establishment of national registries and reporting systems.
  • The participation of the private sector in emissions trading.
  • Rules to avoid overselling of emissions allowances.
  • The rules of the compliance regime.
  • The treatment of Russian and Ukrainian "hot air".
  • The charging of a levy on transactions to finance a fund to support adaptation to climate change in vulnerable countries.

In general terms the debate has centred on the size of the role that emissions trading and the other Kyoto mechanisms (Joint Implementation and the Clean Development Mechanism) should play in a country’s implementation plans, as well as the necessary institutional and technical arrangements and the conditions a country must fulfil before being eligible to participate. There still appear to be marked differences between those who favour a completely unfettered trading system and those who doubt the efficacy of trading in meeting the Kyoto targets and, hence, are prepared to sacrifice economic efficiency in order to ensure their achievement. Developing countries have tended not to push strongly on specific rules but have been keen to ensure that the ability to trade does not confer property rights over the atmosphere nor set a precedent for a future inequitable allocation of pollution rights.

The significance of how these issues are resolved, however, goes beyond the immediate concern over how industrialized nations will meet their First Kyoto commitment period targets. If, as has been suggested in some quarters, emissions trading will provide the cornerstone for future climate policy – indeed many of the proposals on how the Climate Convention might evolve in the future incorporate, either explicitly or implicitly, some form of trading - it is vital that it is both effective in preventing a further build-up of greenhouse gases in the atmosphere and that it does not serve to exacerbate existing international inequalities.

In this context it is worth mentioning some of the principal conditions that are acknowledged to have contributed to the success of emissions trading in the U.S.:

  • The existence of clearly defined targets that are established over the medium-term and well known by firms, thus enabling them to plan their investment strategies.
  • The existence of rigorous and trusted monitoring and enforcement mechanisms.
  • The existence of a strict compliance regime with automatic penalties for non-compliance.
  • The enforceability of contracts between buying and selling firms.
  • Wide accessibility of information regarding the system, its functioning and the trades that take place.
  • General public support for the system.

It is clear that internationally many of these conditions do not exist. Indeed, many of the circumstances that prevail in a country like the U.S. – strong contract law, enforceability of legislation, etc. – do not arise in other parts of the world. Furthermore, emissions trading is as yet untried in the realm of climate policy and in schemes that involve more than one country. Therefore, it is essential that simple, clear and transparent basic rules are put into place before trading starts and that regular reviews are held in order to assess the viability and effectiveness of an international GHG emissions trading system. Basic criteria for judging this evaluation might include:

  • Will the use of the Kyoto flexibility mechanisms in general and emissions trading weaken the targets established for the first commitment period and damage the environmental integrity of the Kyoto Protocol?
  • Will emissions trading serve to stimulate increased investment and domestic action rather than become a substitute for it, and will it stimulate action beyond that required by the Kyoto Protocol?
  • Does the emissions trading scheme established for the first commitment period set an acceptable precedent for future commitment periods and for the deeper emission cuts that will be required by all countries in the future?
  • Does the system agreed guarantee complete transparency, including the provision of real-time information on volumes traded, prices, current emissions levels and the Parties involved in each trade? In this context, are all the technical and institutional conditions necessary to ensure this transparency – monitoring, measuring, etc. - in place?
  • Does the system prevent any excessive wielding of market power by large nations or companies and avoid reinforcing present inequalities?

Finally, it should be remembered that emissions trading is but one of many instruments that can be used to combat climate change. While economic efficiency is certainly important – in the sense that if there are two ways of achieving the same end, ceteris paribus it makes sense to take the cheaper route – it should also be clear that the primary objectives of the Climate Convention and the Kyoto Protocol are to combat global warming and prevent the worst of its impacts on the most vulnerable members of the community. Emissions trading may well be an effective policy tool: however, the ability to fight climate change does not depend exclusively on the success of emissions trading. If ineffective, other instruments also exist which may replace or complement trading. Thus, even if conventional economic theory suggests otherwise, policymakers should not be afraid to abandon policies that do not work.

Mark Kenber, WWF-UK


Beyond narrow economic concerns

Global negotiations on climate change are currently focused on mainly one issue: how can industrialised countries meet their emissions reduction commitments under the 1997 Kyoto Protocol at the least possible cost and with the least possible impact on their economies. This almost exclusive focus on the economic effectiveness of the negotiations ignores two other equally, if not more, important aspects:

  • the ecological effectiveness of the negotiations (i.e. whether or not they will actually result in a decrease of greenhouse gas (GHG) concentrations in the atmosphere), and
  • issues of equity and social justice in international rule-making.

The climate change problem can be only addressed if these three elements work in synergy with each other. Otherwise one element can work to the detriment of the others.

Ecological effectiveness

In order to be ecologically effective, the negotiations must result in controlling GHG emissions so atmospheric concentrations do not exceed a tolerable 450 parts per million concentration by 2100 (IPCC). This aim can be achieved only if the world moves towards a global economy built on zero-carbon energy sources. Energy-efficient fossil fuel scenarios fail to meet the desired concentration targets -- only energy-efficient renewable energy scenarios succeed in doing so.

To achieve this shift towards renewable energy sources demands action now. There is very little nations can do to restructure the global system until 2020 -- a period that will see massive energy investments in the developing world. But if renewable energy sources are not competing in the marketplace by the end of the first quarter of the 21st century, the world will be locked into a fossil fuel-dominated energy system well until 2050 and carbon emissions will remain high for the rest of the century. This is because any fossil fuel plant built today will continue to emit carbon for at least 30 years in the future.

Economic effectiveness

Global negotiations have put forward emissions trading as the cheapest means of emissions reduction. Carbon emission can be reduced in developing countries at a lower cost because their economies are much more energy-inefficient than industrialised countries. But an entirely market driven emissions trading system will seek low-cost emissions reduction options, all of which are in the fossil fuel sector. If the Clean Development Mechanism (CDM), the North-South emissions trading mechanism provided in the Kyoto Protocol, seeks least cost options it will inevitably end up subsidising the fossil fuel sector and will lock out the renewable energy sector, to the detriment of the ecological effectiveness of the Kyoto Protocol.

Renewable energy technologies (RETs) -- from geothermal and windmills to solar cells, fuel cells and biomass energy -- have all witnessed remarkable technological progress and cost reductions despite reduced government support for Research & Development (R&D) in recent decades. Yet, they have not been able to penetrate the energy market sufficiently. A key reason is reduced fossil fuel prices and increased efficiency of fossil fuel-based energy systems as a consequence of increased liberalisation of energy markets and the resulting increase in competition. Thus non-carbon energy sources face an ever-receding target. Renewable energy systems will begin to compete only if governments create conditions which favour their increased market penetration into niche markets, demonstration projects and research and development. Sun-blessed developing countries offer the best scope for niche markets but cannot make full use of current progress in RETs because of lack of capital.

Equity and social justice

Equity and social justice demand that poor nations have the maximum 'ecological space' for their future economic growth and the threat of climate change be averted as fast as possible since they will suffer the most from it because of their lack of resources to deal with it. But as long as the world remains within a carbon-based energy economy, equity and social justice demand that a system of tradable and equitable per capita emissions entitlements be set up, given the close relationship that continues to exist between modern lifestyles and economies and carbon emissions. This system of equitable entitlements will provide developing countries with the right opportunity to start participating in the global effort to combat climate change. Studies show that trading creates an incentive for them to keep their emissions low and adopt a different carbon emissions pathway. But trading without entitlements means that North-South cooperation lasts only as long as developing countries can provide least cost emissions reduction options.

Table 1: US per capita emissions vs. per capita emissions of South Asian nations


Per capita emissions (tC)

No. of citizen’s equivalent to one US citizen








































Sri Lanka





Source: Greg Marland et al 1999, National CO2 Emissions from Fossil Fuel Burning, Cement Manufacture and Gas Flaring, Oak Ridge National Laboratory, USA

Ecological and economic effectiveness, with equity

Entitlements can be used to promote both of the two other objectives for combating climate change - ecological effectiveness and economic effectiveness. In order to prevent subsidising further use of fossil fuels in these countries and support the creation of niche markets for RETs, CDM projects should be restricted only to projects that use zero-carbon systems. Hopefully, this support to RETs will help reduce their prices enough for them to begin competing with fossil fuels. The emissions reduction cost per tonne of carbon will definitely be 3-4 times higher in the initial commitment period (some US $ 30-40 billion for the CDM market instead of the estimated US $10 billion market) but studies show that in the long-term investments in demand-side energy efficiency and RETs are likely to lead to much lower requirements for investments in the energy sector.

Once RETs begin to compete with fossil fuel based systems, the problem of climate change will be arrested and the stringency placed on the world economy by low per capita emissions entitlements will no longer be required. Studies predict that fuel cells and solar cells will reach their lowest prices only when an investment of 50 Gigawatts is made in each of the technologies. The earlier these investments are made the better for climate change, because RETs could get 'locked out' otherwise. Ideally, this investment needs to be made by 2020. This is a fraction of the energy investments that are going to be made in the developing countries between now and 2020 -- about 2 per cent of the 2387 GW power generating capacity that is expected to be set up between 1995 and 2020. At current rates, the world will not even see an investment in 6 GW of photovoltaics by then.

Developing countries with high economic growth rates will soon be forced into cleaner energy systems because rapidly growing fossil fuel emissions will have a severe effect on the local environments - urban air pollution, for instance -- long before severe impacts of the changes in the global environment are felt. Energy efficiencies are in any case changing rapidly in developing countries with high economic growth and market liberalisation. Therefore North-South cooperation for combating climate change which is built on the promotion of the zero-carbon energy systems should be welcome in these countries. Since the initial niche markets for RETs will often be in the rural areas of developing countries, this strategy will also be more equitous within the developing countries.

Unfortunately the Kyoto Protocol and its entire politics is currently focused on the wrong targets of cutting carbon emissions. Instead, they should be focused on targets for the penetration of RETs with the ultimate objective of getting them to compete with fossil fuel-based technologies. A combination of equity, trading and renewable energy can help us to reinvent precisely the energy system that can get the world out of the threat of unbearable climate change. But it will require political leadership with a long-term vision.

Centre for Science and Environment, New Delhi, India


Calendar of Events
8 – 11 April 2001: 12th Global Warming International Conference & Expo – Kyoto Compliance Review, Cambridge, United Kingdom
June - July 2001: 14th Sessions of the UNFCCC Subsidiary Bodies / Resumed COP-6, Bonn Germany
15 – 19 October 2001: 13th Meeting of the Parties to the Montreal Protocol, Colombo, Sri Lanka
29 October – 9 November 2001: UNFCCC COP – 7, Marrakech, Morocco


United Nations Framework Convention on Climate Change (UNFCCC)
Centre for Science and Development
Friends of the Earth International
Global Commons Institute
International Institute for Sustainable Development (IISD)
IUCN - World Conservation Union
UNEP Information Unit for Conventions (IUC)
World Resources Institute (WRI)
World Wide Fund for Nature – Climate Change Campaign







  • Climate Change, Information Kit, United Nations Environment Programme’s Unit for Conventions, July 1999
  • WorldWide Fund for Nature, Climate Change Campaign
  • Oberthur & Ott, The Kyoto Protocol: International Climate Policy for the 21st Century, Springer, 1999
  • Agarwal, Narain & Sharma, Global Environmental Negotiations I: Green Politics, Centre for Science and Environment, India 1999
  • International Institute for Sustainable Development, Earth Negotiations Bulletin, Vol. 12 No.163, November 2000
  • A Guide to the Climate Change Process, Secretariat of the United Nations Framework Convention on Climate Change, Germany 2000