Carbon Debt
By Nikhat Jamal Qaiyum
A. Common but Differentiated Responsibilities Based on Historical Responsibility
In June 1992, the United Nations Conference on Environment and Development (UNCED) adopted the Rio Declaration. One of the most controversial provisions of the Declaration proved to be the developed countries’ responsibility for existing environmental degradation and its remediationi, in view of the pressures their societies place on the global environmentii and of the technologies and financial resources they command.iii
"The economic model of the developed world must be changed since the development aspirations of the South mirror Northern lifestyles and economic achievements. These Northern lifestyles can be characterized by consumption rates of energy, water, minerals and bio-mass that are roughly ten times higher than those in developing countries. If developing countries were successful in emulating these Northern lifestyles, the worldwide destruction of resources would be dramatically accelerated, leading rapidly to global ecological collapse. Hence it is urgent from an ecological standpoint to make the Northern model sustainable."iv
The tragedy of the atmospheric common has been the lack of rights to the ecological space. As a result, countries have borrowed or drawn heavily and without control. They have emitted greenhouse gases (GHGs) far in excess of what the Earth can withstand. This was because they could emit without limits or quotas and were "free riding" on this natural capital. This "tragedy of the commons" has resulted in the "natural debt" of the North.
At Rio, developing countries were unanimous in putting forward the "historical" responsibility of the industrialised countries for exacerbating the greenhouse effect and refused to envisage any specific commitment to emissions reductions of their own. Nevertheless, based on the principle of "common but differentiated responsibility,"
v they agreed to participate in the negotiation process on condition that their development priorities were recognized and they received guarantees of financial and technological aid to correspond to specific commitments. In the absence of financial support, they would be bound only by "moral" commitments.The Framework Convention on Climate Change (FCCC) adopted by UNCED reflected, in its Preamble itself, the attribution of responsibilities for the present and historical accumulations of GHGs where it belonged - on the industrialized countries of the North.
viThe FCCC differentiates between various categories of States - distinguishing three - and formulates different responsibilities for each of them.
vii The first category consist of 24 countries belonging to the Organisation for Economic Co-operation and Development (OECD), the European Commission (EC) and countries that are undergoing the process of transition to a market economy, i.e. a number of Central and Eastern European States and parts of the former USSR. Each of these countries, listed in Annex-I, is committed to limiting its anthropogenic emissions of GHGs and enhancing its sinks and reservoirs. They have the duty to report on policies and measures, including detailed information, on projected emissions, with the aim of returning ‘individually or jointly’ to their 1990 emission levels (Articles 4(2)(b), 12(2) and 12(5)). Each of these Parties must coordinate, as appropriate with other such Parties, relevant economic and administrative instruments to achieve the objective of the Convention, and periodically review its own policies and practices (Article 4(2)(a)). Article 4(6) allows Annex-I countries undergoing the process of transition to market economy a certain degree of flexibility in meeting their commitments under the FCCC.The second category consists of the ‘developed country parties’ only. They are listed in Annex-II, comprising all 24 OECD Member States and the EC. Under Article 3(1) the ‘developed country Parties are expected to take the lead in combating climate change. It is recognized that the return by the year 2000 to earlier emission levels will contribute to achieving the objective of the Convention.
Lastly, there is the category of non-Annex countries, which can be equated with the developing countries.
viii Article 4(7) provides that the extent to which developing countries will effectively implement their commitments under the Convention will depend on the provision of financial resources and technology by developed country Parties.ix Under Article 12(5) it is provided that these countries should report within three years of the entry into force of the Convention (for Annex-I countries this is within six months) or within three years after the developed countries have made financial resources available in accordance with Article 4(3).Thus, while the FCCC fell short of removing ambiguities concerning the emission commitments of developed countries,
x it avoided shifting the burden to the developing countries. The Convention took into account that "economic and social development and poverty eradication are the first and overriding priorities of the developing country Parties."xiIn effect, developed countries admitted the obvious: that emissions from developing countries must and will increase and that reductions in the rich countries must offset this inevitable increase in emissions by the poor.
xiiB. Equity - Inter and Intragenerational - as Basis for Sustainable Development
The concept of ‘differentiated responsibilities’ raises fundamental questions about international justice, because addressing them requires confronting the unequal distribution of power, wealth and resource endowments between countries, between present and future generations, and within countries.xiii Given the vast differences in wealth and power, coupled with the history of Southern colonialism by Northern countries, the claim that developed countries should adjust their consumption patterns and trading policies and should pay their ‘ecological debt’ to developing countries, is justified as part of the "quest for equity." This "would, of necessity, make allowances for past policies of exploitation."xiv
Global cooperation should strive to achieve "a just world order, an order which is based on and recognizes equity as the dominant principle governing relations between States."Fundamental issues of equity between States were at the heart of the climate negotiations.
xvThe fact that issues of equity were placed at the head of the FCCC and receive repeated emphasis in the text, reflects the nature of the issues and the political realities behind it. The principles laid out in Article 3 of the Convention emphasize the need to protect the global environment and to maintain equity in international economic relationships. Thus, parties to the Convention should "protect the climate system for the benefit of present and future generations of humankind, on the basis of equity," giving full consideration to "the specific needs of developing country Parties," promoting "...sustainable economic growth and development in all Parties, particularly developing country Parties."
"The FCCC currently incorporates only a weak notion of equity...in line with the principle of "common but differentiated responsibilities."
xvi The final text of the FCCC leaves a substantial amount of the core business of the negotiations unfinished. Only by addressing the equity questions in ways, which led to a "clear-cut and unambiguous time bound programme for stabilization and reduction of GHGs originating from the developed countries,"xvii will the Climate Convention become "an effective instrument for combating climate change."So far we have focused on the international dimension of equity, i.e. fairness between countries. The text of Article 3 of the FCCC, cited earlier in this section, indicates another dimension of equity: fairness between generations.
Without doubt, global climate change involves deep inter-temporal and intergenerational issues to a unique degree. If present trends in human generated GHG emissions continue undisturbed, then it is remote generations from the present that will be progressively damaged, and the more distant, the greater the damage.
xviiiIn part, at least, the issue of respecting obligations of the living to the welfare of progeny several generations removed involves a choice between utility and equity. The underlying intent of any commitment to equity is to constrain "a natural inclination to take advantage of our temporary control over the earth’s resources."
xixThe Fiduciary Trust Framework, explained most thoroughly by Edith Brown Weiss in her path-breaking Planetary Trust approach,
xx provides the most promising set of normative principles for addressing the equity issues related to climate change.Weiss states in her work In Fairness to Future Generations: "The theory of intergenerational equity proposed argues that we, the human species, hold the natural environment of our planet in common with all members of our species - past generations, the present generation, and future generations. As members of the present generation we hold the earth in trust for future generations. At the same time, we are beneficiaries entitled to use and benefit from it...we can use it on a sustainable basis or we can degrade environmental quality and deplete the natural resource base."
"All generations are inherently linked to other generations in using the common patrimony of earth."
xxi This normative prescription for "partnership among all generations" is given a decisive turn to symmetry by using Rawls mental game of stochastically placing each potential participant generation in a distributional process in an unpredictable spot in the temporal sequence of generations.xxii Each "...generation would want to inherit the earth in at least as good condition as it has been in for any previous generation and to have as good access to it as previous generations have had. This requires each generation to pass the planet on in no worse condition than in which it received it and to provide equitable access to its resources and benefits." "Each generation is both a trustee for the planet with obligations to care for it and a beneficiary with rights to use it."xxiii"It is not enough, however, to apply a theory of intergenerational equity only among generations. It also carries an intergenerational dimension" Weiss observes that intergenerational and intragenerational equity is not considered in conflict, but "are consistent and in fact must go together."
xxiv "By itself, intergenerational equity does not indicate how the burdens and fruits are to be borne by members of the present generation. For this, intergenerational equity must extend to the intragenerational context."xxv (The discussion of equity thus comes full circle).In what is very relevant to the climate change issue, she notes, "Poverty-stricken communities, which by definition have unequal access to resources, are forced to over-exploit the resources they do have so as to satisfy their own basic needs. As an ecosystem begins to deteriorate, the poor communities suffer most, because they cannot afford to take the measures necessary to control or adapt to the degradation, or to move to pristine areas." "Thus, to implement intergenerational equity, countries need to help poor communities to use the natural environments on a sustainable basis, to assist them in gaining equitable access to the economic benefits from our planet." "As beneficiaries of the planetary legacy, all members of the present generation are entitled to equitable access to and use of the legacy."
xxviWeiss has proposed three basic principles of intergenerational equity "conservation of options", "conservation of quality" and "conservation of access." The problem of equitable access is an intergenerational problem. "Although all members have an equitable right of access to and use of these resources, many are effectively unable to realize this because of the great economic disparities in the world community. Those who now receive the benefits from exploiting the planetary resources have more to pass on to future generations...which perpetuates the inequality."
xxviiAccording to Weiss, these "principles of intergenerational equity form the basis of a set of intergenerational obligations" or "planetary obligations" which derive from each generation’s position as part of the "inter-temporal entity of human society."
xxviii This framework of rights and duties can appropriately be viewed as implementing the poignant call of the World Commission on Environment and Development for "sustainable development." The Commission defines this as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs."xxixIt is not possible given the constraints of this paper to explore the Fiduciary Trust Framework in detail. The purpose is only to highlight the normative intent of such an equity framework in as much as it strengthens the case for equity in the climate context. As it is, there is good reason to state that the debate about responsibility to future generations has found its way into international politics. After being repeated in many different contexts, intergenerational responsibility was reaffirmed at UNCED as a central component of the shift to Sustainable Development. Principle 3 of the Rio Declaration confirms that: "The right to development must be fulfilled so as to equitably meet development and environmental needs of present and future generations."
C. Equity in Allocation of Rights to the Atmosphere
The likelihood that climate change could exacerbate international inequalities poses several thorny international distributional issues.
The international distributional aspects of climate change can be grouped into two main areas: First, those associated with the impacts of climate change - who will be affected, how will these impacts, aspects be evaluated, and what are the nature and implications of transboundary responsibilities for coping with these impacts? Second, are the aspects associated with limiting future climatic change - whose activities should be altered to limit emissions of GHGs and who should pay for such restraint?
xxxHenry Shue, one of the few professional philosophers to have written on the climate issue, notes a third issue: fairness of bargaining on climate change, given background inequalities.
xxxi The broader issue of concern here is "justice." By justice is meant "distributions that are ‘appropriate’ and ‘fitting’ given the various claims of the parties." The intuitive sense of justice is what the Romans called "natural law" or equity.xxxiiEquity, however, has multiple notions.
xxxiii A starting point may be the notion of equality (parity); parties that are equal in all normatively relevant respects should share the same burdens equally. Since most of the parties are not equal in all relevant respects, the criteria for a differentiated approach has been included in the FCCC.xxxivEquity, or fairness, has to be seen against the background of both differences among countries in present income levels and the development and industrialization imperative. It also requires explicit recognition of the historical dynamics of world industrialization, which has produced dangerous levels of carbon emissions for the world as a whole while providing the material benefits of industrialization to only a part of the world’s population.
The following typology and indices for allocating GHG emission reductions can be submitted. It uses two sets of questions to separate the negotiating criteria, considering the goals of equity and efficiency. The categorization is as follows:
- To determine the best projects, these questions must be addressed:
What are the goals? (Globally) (And who should do what?)
What are the best opportunities? (Who can do what?
- To determine who will pay, these questions must be addressed:
Where are the resources available? (Who can pay?)
Who has the responsibility for the problem? (Who should pay?)
It is obvious that both the responsibility and the capacity criteria imply that the costs of action to prevent climate change will have to be shared unequally, with the industrialized countries taking the lead in committing resources and reductions. Further, the desert criterion implies that abatement measures should not obstruct economic and social progress in developing countries.
D. Negotiating the Framework for Action after Rio
The First Conference of the Parties (CoP-1) to the FCCC was held in Berlin in 1995. In order to strengthen their commitments, delegates sought the negotiation of a protocol, with the goal of setting for developed countries "quantified limitation and reduction objectives within specified time frames, such as 2005, 2010, and 2020." It was asserted that the process should "not introduce any new commitments for Parties not included in Annex-I."
xxxvi The Berlin meeting also launched the Ad Hoc Group on the Berlin Mandate (AGBM) process. Parties agreed to start negotiations on a "protocol or another legal instrument with a view of adopting the results" at CoP-3 in 1997.CoP-3 met in Kyoto in the December of 1997 and adopted the Kyoto Protocol to the Climate Convention. The Protocol has set specific targets for each industrialised country as well as the industrialised countries as a whole to cut average annual carbon emissions. However, what resulted in Kyoto was only an inadequate commitment to a reduction average of 5.2 percent by the year 2010 for industrialised countries.
xxxviiJapan finally agreed to reduce emissions to 6 per cent below 1990 levels, the United States (US) agreed to 7 per cent, and the European Union (EU) agreed on an 8 per cent reduction by 2008-10.
xxxviiiUnder the Kyoto Protocol framework, developing countries are merely being asked to undertake measures that would help them to reduce their future carbon dioxide (CO2) emissions with the financial help of industrialised countries so that the credit for these emission reductions can go to the latter. In other words, the mechanism for emissions reductions in the South proposed in Kyoto will only help the North to meet its emission reduction targets at a cheaper cost.
The way in which the proposed mechanisms have been conceived do not at all make them instruments that help the North and South to work together to meet the objectives of the Convention. Moreover, they open up opportunities for geopolitics to play an important role. In other words, non-environmental issues can easily enter the arena of environmental cooperation.
xxxixSecondly, the Kyoto proposals mean that developing countries will continue to go ahead on a carbon-intensive path and will be asked to make extremely costly adjustments in their energy paths at a much later stage, when they have already made enormous industrial and energy investments. It is amazing that industrialised countries, and the US in particular, did not propose a better framework for North-South cooperation in Kyoto despite all the song and dance about how developing countries will be the biggest emitters of GHGs in the future.
xlThe Kyoto Protocol includes three specific mechanisms (also "flexibility mechanisms") Joint Implementation (JI) (Article 6), Clean Development Mechanism (CDM) (Article 12), and Emissions Trading (Article 17) with the explicit aim of "assisting" the industrialised countries to meet their targets.
These three flexibility mechanisms or "flexmex" have, since Kyoto, become the centre of all climate-related negotiations. The Protocol allows for JI and emissions trading programmes only between industrialised countries. CDM, meanwhile, is a form of JI between industrialised and developing countries.
D.1. Joint Implementation
The concept of "joint implementation" was one of the ‘innovative’ ideas to emerge from the discussions of mechanisms in the Intergovernmental Negotiating Committee (INC).
xli (The INC met during five sessions between February 1991 and May 1992 to draft the Convention).xliiThe notion of JI was first presented by the EC as part of their decision in 1990 to stabilize CO2 emissions by the year 2000 at 1990 levels. Highlighting the need to ensure cost-effectiveness and economic efficiency in all the measures to be taken, the Norwegian Government introduced the proposal concerning the joint implementation of national commitments to emissions reductions. JI has been on the agenda of the INC since 1991 and was initially supported mainly by Norway and Germany.
xliiiThe concept of JI is based on the notion that emissions limitations of GHGs can be achieved at lower costs in many developing countries as well as in Central and Eastern Europe (CEE) (the so-called countries with economies in transition) than in industrialised countries. It would allow an industrialised country to achieve some of its commitments to emissions reductions through cooperative projects with developing countries. A simple definition of JI could refer to "agreements between countries to share the costs of (and credits for) emissions reductions."
xlivPost-Rio, JI was first discussed in depth by the Eighth INC held in Geneva in August 1993. The subject sparked a lively debate within the INC as well as in the NGO community and in academia on the opportunities and pitfalls of the approach.
xlvAt the Eighth INC, positions of different groups of countries had become relatively clearer with the industrialised countries developing a roughly common position. They suggested developing JI in a pilot phase, in which experience could be gained with the actual performance of relevant projects. The pilot phase, it was suggested, would last at least two to four years and that there would be no emissions credits granted for any projects during this phase. It was also urged that all countries (i.e. including developing countries) be allowed to take part in JI projects.
xlviThe INC session in Geneva also discussed a proposal by Germany and Norway, which suggested that "JI be understood merely on the basis of the application of the offset concept." It said recipient countries (developing countries) would obtain money for projects to compensate for industrialised countries’ emissions. Several countries called the proposal an attempt to "lure" developing countries into solving the North’s GHG problem.
xlviiThe French challenged the German contention that the cheapest emission reduction projects are in developing countries. "It is false to assume it is very expensive to reduce emissions in the developed countries," said Mauricette Steinfelder of France’s environment ministry. "The problem," Steinfelder said, "is the high political cost, as our countries have a culture in which mobility has almost become an end in itself." In contrast to the German proposal, France wanted to restrict JI to a "commitment by rich countries to provide a minimum level of financial assistance according to their standard of living and emissions." This money, it was suggested, could be used to finance emission reduction in other countries but would not entitle industrialised countries to offset their emissions.
xlviiiDuring the negotiations several suggestions were made to mitigate at least some of the drawbacks with the JI concept:
xlix• There seemed to be some agreement that JI projects would only supplement measures taken nationally, which had to account for most of the emissions limitations. It was suggested that the emissions reductions that a donor country is allowed to realize through JI may not exceed, say 25 percent of its overall reductions and/or 5 percent of its total emissions.
• It was also decided that only countries having allocated a certain percentage of their GNP as development assistance (e.g. 0.7 percent as envisaged in Agenda 21) could be allowed to participate as a donor in JI projects.
• It was suggested that emissions reductions achieved by JI could be ‘discounted’. Thus, an industrialised country financing a project in another country would only get credit for part of the emissions avoided.
• To counter the difficulties involved in JI projects aiming at the enhancement of sinks, it was decided to exclude those projects, at least initially.
The developing countries, which at first had announced harsh opposition to the concept - putting forward that it be applied only to projects implemented jointly by industrialised countries, responded to these arguments by softening their position. They eventually declared that they needed more information to judge the pros and cons of JI since many crucial questions remain yet to be settled.
The question of participation was the main point of contention, since most developing countries at the Eighth INC and the Ninth INC, held in February 1994, had demanded that JI projects should be carried out between Annex-I Parties. However, at the Tenth INC, in August-September 1994, there appeared to be a split within the Group of 77 (G-77) with some developing countries, espe
cially several from Latin America and some of the ‘small tigers’ of South-East Asia, showing signs of interest in taking part in JI schemes. And as Berlin had drawn nearer, India and China had started dropping hints that their opposition to JI may not be total.
liHowever, it was impossible for the INCs to agree on a concrete text as a basis for future negotiations.
Article 4(2)(d) of the FCCC required CoP-1 to take decisions regarding criteria and other details of JI commitments. However, JI was not as high on the agenda of CoP-1 discussions as it was during Eighth, Ninth and Tenth INCs. Therefore, the Berlin Mandate did not provide a much stronger guidance to the future "process." It determined the results of the negotiations, i.e. a protocol or another legal instrument, as well as CoP-3 in 1997 as a deadline for the adoption of results. Moreover, the Mandate established a Working Group solely concerned with the protocol negotiations. To prevent attention of the negotiations from being diverted, the CoP in effect de-linked JI from the upcoming protocol negotiations by prolonging the pilot phase until the end of the decade. It was decided that the comprehensive review would then take place for JI criteria.
liiThe decision on "activities implemented jointly under the pilot phase" specifically provides that "no credits shall accrue to any Party as a result of greenhouse gas emissions reduced or sequestered during the pilot phase." The formulation does allow, however, the crediting of reductions achieved after this phase by projects initiated during the pilot phase. In exchange for this the G-77 agreed to the participation of developing countries "on a voluntary basis," if they so request.
liiiAt the Berlin summit of 1995, the only concession that the North, particularly the US delegation, was able to extract from the developing countries was a green signal to commence JI on an experimental basis until AD 2000, when it will be reviewed for establishing the mechanism to exchange credits.
livThere remain several serious problems with JI:
lvFirstly, there is the economic question. Accepting this scheme would mean that the developing countries would be letting industrialised countries use up their cheap options for reducing emissions. Once they have reached high levels of energy efficiency, industrialised countries would have no economic incentive to invest in developing countries. They would rather invest in their own countries. And if global warming is still a threat - as it would be because industrialised countries have not taken any action at home - then there will be pressure on developing countries to cut back on CO2 emissions on their own. And then the costs of cutting back on CO2 emissions will be very high. And at that stage, in the absence of any agreed framework, industrialised countries would not provide any support to the developing countries.
Secondly, there is the question of practicality. The JI strategy raises several technical issues. How will we know that a new technology is being sold to us because it is coming to us as an effort to reduce global warming or simply because it is coming to us as a matter of common practice in international trade which brings us newer and more efficient technologies? There is also the fear that companies could use the garb of JI to dump experimental technologies onto developing countries, which within normal economic calculations would be unviable in these countries.
Thirdly, even if some of these problems can be sorted out, JI will, nonetheless, demand an extraordinary level of governance so that interference in the economic processes of a country will increase. Every such project will have to be screened to ensure that technological dumping is not taking place and developing countries do not become "technological guinea pigs." Most importantly, accepting JI without a simultaneous acceptance of the per capita entitlement principle, means accepting a few dollars today in return for leaving the country’s future development open to unjust pressures.
Fourthly, there is the moral question. JI would make economic sense mostly in the industrial sector. But the industrial sector mainly benefits the richer sections in developing countries like India, and not the poor in that country. Therefore, if any JI has to be undertaken, then the projects must be such that they benefit the poor in the South - like afforestation or watershed development for the benefit of rural communities or agricultural development in backward areas. The more wood and agricultural biomass is produced, the more CO2 will be taken out of the atmosphere.
Finally, JI schemes would force developing countries to compete amongst themselves. The US and several international agencies, including the World Bank were pushing for an approach that combined the idea of the Norwegian type of JI and emissions trading. Under such a scheme, an agency like the World Bank could work with developing countries to prepare a portfolio of projects which industrialised countries can pick from, pay for the extra cost incurred in saving the CO2 that would have otherwise not been saved, and take credit for it. Those schemes that offer the cheapest CO2 reduction would obviously be most likely to be picked.
To many, particularly in the South, JI is nothing but a concept of tradeable emissions - under the command and control of the industrialised countries. It represents shifting the principal responsibility for adequate carbon reductions within Annex-I or industrialised countries to cheaper options in the South. Some call this the win-win option. But, Southern NGOs have been strongly opposed to this proposal in the absence of any global property right system over the global commons. They view JI as a short-term arrangement where industrialised countries are looking for short-term gains. Such a scheme would mean that the developing countries would use up their cheap options for reducing emissions and not even get the credit for it in the global balance sheet of emissions. Therefore, JI can only be permitted if there is a long-term agreement on the principle of per capita emissions rights of all people in the world.
D.2. A ‘Clean’ Development Mechanism?
The assignment of responsibilities to industrialised Annex-I countries according to their contribution to climate change has been a critical issue haunting climate negotiations. Brazil first proposed a "budget" concept on historical emissions at the AGBM meet held in July-August 1997. It found surprise approval from the US at the CoP-3.
lviThe Brazilian proposal was probably the most ambitious proposal made for the Kyoto meet. The proposal put the heaviest burden of "differentiated responsibilities" on historically large emitters. It defined quantitative emission limitation and reduction objectives (QELROs) for adoption by the protocol in Kyoto. The proposal was to limit the actual Annex-I GHG emissions to a constant of 1990 levels in the period 1900 to 2000. This was to be the "effective emissions reference".
lviiThe emissions are to decrease regularly from 2000 to 2020, reaching a 30 per cent lower level than 1990 in 2020. This constituted the "effective emissions ceiling".
lviiiReduction targets for Annex-I countries, for each of the periods 2001-2005, 2006-2010, 2011-2015 and 2016-2020, were calculated to equal the difference between the effective emissions reference and the ceiling. The calculation criterion was "differentiated responsibilities" as opposed to a "flat rate", fixed to a 1990 baseline. It was argued that a flat rate would penalise countries that have maintained relatively low emissions up to the baseline year.
lixThe proposal recognised "net anthropogenic emissions" as the difference between human-induced emissions and human-induced removals by sinks of a given GHG in a year. And "effective emissions" in a given period was defined as the increase in global means surface temperature resulting from an increase in the net anthropogenic emissions of a particular set of gases in a year. The increase was to be over the initial concentration of gases as at the beginning of the calculating period. In this way the relative responsibility of each Annex-I country would be calculated to equal its effective emissions.
lxThe proposal granted some flexibility to Annex-I countries by allowing them to achieve targets individually or jointly. The difference between the emission ceiling and the actual emissions can be used as a measure for trading among themselves. These provisions sought to limit mitigation efforts to domestic action by an Annex-I country or JI among each other.
lxiA penalty - US $3.33 for each effective emission unit higher than the ceiling limit - would be slapped for non-compliance. It was proposed that the money thus collected would go into the Clean Development Fund (CDF) and will be used for climate change mitigation and adaptation projects in non-Annex-I countries. The financial resources allotted to the non-Annex-I would be in proportion to their allocated effective emissions which, will be calculated as it is done for Annex-I countries.
lxiiIt is often implied that non-Annex-I emissions in the future will tend to grow more rapidly than Annex-I emissions. The year when the non-Annex-I emissions equal those of Annex-I Parties is being taken as the year when the respective responsibilities become equal. However, this approach does not take into consideration the different historical emission path resulting from the industrialisation process and consumption patterns in both groups of countries.
lxiiiFor example, as of 1990, US’ emissions were 5.41 tonnes per capita. A 20 per cent cut by 2005 would bring it down to 4.33 tonnes. This is twenty times that of India. The emissions of the United Kingdom (UK) were 2.74 per capita in 1990. A 20 per cent cut would bring it down to 2.19 tonnes, ten times the level of India. According to the calculations of US scientist Kirk R. Smith, if annual per capita emissions in the US were to remain at 1990 levels and India was to grow at its present rate, India would reach the level of 1 tonne per year by 2024 - a level that was surpassed by the US before 1900.
lxivMoreover, the Intergovernmental Panel on Climate Change (IPCC), taking the 1992 levels, estimated that whereas annual emissions from the South will equal the North by 2037, the resulting human-induced change in temperature are estimated to be the same only in 2147.
lxvHowever, non-Annex-I Parties stand most vulnerable to the adverse effects of climate change. Hence it was important that the developing countries realise that they have a stake in the discussion on "differentiated responsibilities" and methods likely to be adopted by Annex-I countries to achieve their targets.
lxviIn Kyoto, the Brazilian proposal seemed to find support from many quarters that were, however, to rewrite it altogether. The CDM, as it finally emerged, was just a bank for carbon credits.
lxviiUnder the CDM, the climate change secretariat will establish a special body with functions similar to a stock exchange. But instead of stocks, "carbon credits" will be sold and bought. Annex-I countries or private companies from the North will undertake sustainable projects aimed at reducing GHG levels, mostly in developing countries. When such projects succeed in reducing emissions, the amount of the reduction will be counted as carbon credits. Developing countries can bank their credits at the "carbon credit exchange" which can then be purchased by the North to meet their reduction targets. The purchased carbon credits will be included as emission reductions by the developed countries.
lxviiiBox 1: A Capsule on CDM
lxix• The purpose of the CDM is not to help the South but explicitly to "assist" industrialised countries to meet their commitment to reduce emissions.
• Rich countries can invest in projects in developing countries and will buy certified emission reduction units. They will get the credit for the saving in CO2 emission in their balance sheet.
• An Executive Board (EB) will supervise the CDM. But as this is a market-based instrument, the EB at best will be like the EB of a giant multinational corporation of traders of cheap carbon emissions.
• The EB will authorize numerous certification agencies that will assess the internal compliance and reporting mechanisms of the country selling emission reduction units. This will force developing countries to compete with each other for providing the North with the cheapest, most efficient portfolio of projects to invest in.
• The CDM will assist in providing funding. This is a clear example of putting in a few words to cajole and bribe the negotiators of the South. No additional aid or technology transfer is promised.
• The CDM will allow the participation of private and public entities. Therefore, not just governments but also multinational corporations can enter into deals.
The CDM, therefore, is nothing but JI in a new packaging. Under the protocol, JI would grant credits for investments in projects, but only in developed countries. CDM is to become the option of earning credits by financing emission reduction projects in developing countries from the year 2000. Developed countries will thus continue to evade mitigation at home.
lxxIn simple terms, the purpose of the CDM is only to make the South assist the North in meeting their emission reduction targets. Like JI, CDM projects would mean reducing developed countries’ emissions where it is economically the cheapest, while giving no credits to the developing countries.
lxxiIn Kyoto, many developing countries voiced apprehension over the CDM proposal. South Africa pointed out that there was no limit on how much emission reduction activities could be undertaken in other countries, and how much had to be done at home. India, too, opposed the mechanism. But with the US pressing for the proposal, and Latin American and small island nations showing support, it was decided to let it pass.
lxxiiAn important lesson that emerged from the Kyoto talks is that the South’s lack of preparedness may mean that it will have no negotiating counters at a critical moment. Much of the South went to Kyoto with the belief that it would have to stand firm against any involvement of developing countries as agreed in the Berlin Mandate of 1995. But it soon found itself facing a proposal for a CDM.
lxxiiiBox 2: Brokers to the Fore - World Bank vs. UNCTAD vs. UNEP vs. UNDP
The CDM, meanwhile, has spawned a host of agencies, which are keen to get it started early and reap benefits. Even agencies such as the United Nations Environment Programme (UNEP), United Nations Development Programme (UNDP), World Bank and United Nations Conference on Trade and Development (UNCTAD) were eager to get started and play the role of brokers in the emissions trading process, rather than play their role as objective assessors of the environmental and development benefits of the scheme.lxxiv
The World Bank wants to corner the market with its Carbon Investment Fund; the Asian Development Bank, is developing a portfolio of projects of interest; UNCTAD, based in Geneva and a proponent of the tradeable emissions scheme, would like to "manage" the emission trading corporation; the UNEP is looking for its role and contemplating an intergovernmental panel on emission trading. And the UNDP, with its development focus, is positioning itself as the legitimate broker of the CDM. The turf battles for the lucrative carbon market are clearly on.
In short, the current proponents of emission trading are very "simplistic" in their view of this system. All they say is needed first is a source of pollution, which can be measured and monitored, and a market place of polluters willing to accept and trade in permits. Second, what is needed, is to have legally binding targets. These were introduced for the first time in Kyoto. The stage is then set.
The only issues before this group of traders is who should trade? Should it be government or private entities? Second, should the government charge for initial permits or issue them free to existing polluters? But this would restrict new entrants to the market once the allocation is complete.
The US suggests that governments should be allowed to trade with each other. But then how will the system avoid what is known as "hot air trading" and ensure that all Parties have sufficient incentives to reduce actual pollution?
‘Hot Air’ refers to the proposal put forward by Russia, to create a bubble for non-EU industrialised countries, and allow them to take benefit of its low emissions. With the collapse of the Soviet Union and the subsequent decline in the economy of Russia and CEE States, their current emissions are 31 percent below 1990 levels, according to the World Energy Council. CEE countries would have excess emissions of over 300 million tonnes per year during a 2008 to 2012 budget period for a stabilisation target. They have a lot of ‘hot air’ to sell. Therefore, if Russia and the US were to form a bubble, both together could show a major reduction in their emissions below 1990 levels by 2010, even if the US increased its emissions. The ever opportunistic US, of course, showed a great enthusiasm for the proposal. It went even further by achieving a conceptual understanding with several countries. It formed an unholy umbrella alliance - the JUSSCANNZ. Lead by the US, it includes Japan, Switzerland, Canada, Australia, Norway and New Zealand. Later on Iceland, Russia, Ukraine and the Republic of Korea also joined in. This would further reduce compliance costs for those with emission reduction targets.
lxxvThe term, "hot air" is being furiously debated in this context. Some economists believe that "in the short term you may get a certain amount of hot air trading but in the long term, it has to be good for the environment".
But the idea of trading in emissions has many critics as well. Argentinean head of the negotiations Ambassador Raul Estrada-Oyuela, who chaired the Kyoto CoP, has said that emission trading will have to go, over a phase out period of eight years. "We want to make sure we are not creating a new crop for nations to sell." Estrada was responding to concerns expressed by developing countries that emission trading would create a market for cheap emission reduction options.
The most important issue - allocation of rights to trade is completely negated in this debate. So desperate are these new brokers that they are urging developing countries to agree that the present system of allocation of emissions rights is just and equitous. These pragmatic UN officials brush discussion on the issue of equity or sustainability aside.
In fact, officials at the UNCTAD, who are keen to work on a tradeable emissions programme are even suggesting that the target set on the baseline can be viewed as a country’s entitlement - share of the atmosphere - and that officials in developing countries should use this opportunity to increase their projected emission targets. They argue that the term ‘assigned amounts’ used in the Kyoto Protocol for the reduction target is actually the country’s "assignment" of its entitlement over the atmosphere. Therefore, in order to maximise their assigned amounts, developing countries must start emitting more or at least projecting to emit more. A cut on the projected emissions would be the country’s entitlement. This can then be traded.
lxxviBox 3: Banking on Carbonlxxvii
World Bank’s proposed role in the global carbon market is good news for the US, but it may spell doom for developing countries
In a crowded corner of the busy corridors at the venue for round four of the climate negotiations in Buenos Aires, a ballot box was being crammed with votes. This was an ‘election’ of a novel type. Participants attending the conference, NGOs and negotiators alike were asked to cast their verdict on the fossil fuel projects funded by the World Bank.
Ninety-three per cent of the voters disapproved of the bank playing a key role in jump starting the global carbon market while spending billions of dollars on fossil fuel development projects. The World Bank, on its part, was making an all out effort to keep its proposal on a Prototype Carbon Fund (PCF) for carbon trading a hush-hush affair. It is known that, so far, the PCF has secured advance commitments of at least US $130 million from 13 companies and five countries. The bank, however, has refused to provide any other information about the PCF.
But, the bank’s strategy has been made public in a detailed report prepared by the Washington-based Institute for Policy Studies (IPS), after a five-year assessment of the World Bank’s role in fuelling climate change. The report shows that:
• The World Bank has spent 25 times more on fossil fuel projects than on renewable energy since the 1992 Earth Summit;
• In the next 20 to 50 years, World Bank-financed projects will add carbon emissions to the atmosphere equivalent to 1.3 times the amount emitted by countries world-wide;
• Less than 10 per cent of all World Bank projects are being calculated for their impact on the climate;
• 9 out of 10 World Bank fossil fuel projects benefit transnational projects based in the wealthy G-7 countries, many of whom are members of a US-based lobbying group, the Global Climate Coalition, that actively opposes any action on climate change.
Criticism of the bank’s performance on the environmental front has been growing over the last few years. The organisation, whose prime role is to tackle poverty and promote sustainable development, has shown that it is not interested in doing either or in promoting a less carbon-intensive future.
At the CoP-3 held in Kyoto in December 1997, emission reduction targets were set for 38 industrialised countries, which is to be met by 2008-2012. At that time, the World Bank unveiled its proposal for setting up a PCF. The idea was "to pool funds from governments and companies in countries with commitments and invest them in emission reductions in economies in transition and developing countries."
The World Bank’s approach is to get the best deal by developing a portfolio approach which drives each project to compete against the other, effectively leaving the buyer to pick and choose and arm twist for the best option. The Bank’s PCF is an effort in exactly this direction.
The Fund will essentially be used to develop a set of bankable CDM and JI projects and then sell it to prospective investors. This would reduce the transaction costs, risks and more importantly, using the portfolio approach would make countries compete against each other - securing the lowest cost options for the buyers. The Bank is callings its fund, "a model and not the model." The Bank is hoping to begin transaction business by early 1999 and calculates to do project business worth US $8 billion in trading under the Protocol in early years, going up to US $17 billion as CDM investments grow. The Bank sees a "large potential for leveraging investments in energy efficiency." It would also provide its "brokerage" services on a bilateral basis to develop bankable projects. The Bank has received funding from a number of utility companies and Scandinavian governments to start developing a portfolio of projects from the South. By the end of 1998, 13 companies and 5 governments had signed a memorandum of understanding with the World Bank for projects in the electricity, gas and oil sectors and had committed US $120 million. The initial price of the carbon sale by the Bank is US $20 per tonne.
According to Daphne Wysham, co-author of a 1998 report, The World Bank and the G-7: Changing the Earth’s Climate for Business, and co-ordinator of the sustainable energy and economy network, a project of the Washington-based Institute for Policy Studies, the World Bank proposes to collect a five per cent commission on all transactions through its PCF, which had been kept under wraps at Buenos Aires. This is because even the US government has voiced concern that this development represents enormous conflict of interests. Their own internal documents show that by the year 2005, the World Bank expects to make US $100 million from a global carbon transaction volume worth US $2 billion. The World Bank’s documents suggest that the cost of climate action to the OECD countries with emissions trading by 2020 will be US $150 billion and without emissions trading it will be three times that or US $450 billion.
The US, as World Bank’s largest contributor, has the most influence over the bank’s policies. It is no surprise, therefore, that US business would profit the most under global emissions trading. A preliminary study commissioned by the US Business Round Table and faxed to the US delegation at climate talks in Buenos Aires was "accidentally discovered" by an NGO. The study states that costs could be reduced by 75 per cent or more if the US is able to purchase permits to cover 80 to 90 per cent of its reduction target. It further states that US Gross Domestic Product (GDP) losses would exceed US $60 billion a year from the year 2010 under any other scenario. US agriculture, chemicals and other energy intensive industries risk losses in sales of up to five to 10 per cent in 2010. Even in a trading scenario involving other industrialised countries, the US would suffer losses of two to four per cent.
The study’s contents expose the US’ intent to preserve its own interests by pushing for emissions trading. It discloses that participation in global trading actually puts developing countries at a competitive disadvantage, because their economies are more energy-intensive than industrial countries. Therefore, through the PCF, the World Bank will only serve US interests at the cost of developing countries.
It is apparent that the bank has chosen to become the largest public financier of carbon-emitting projects in developing countries. The immediate consequence would lock developing countries into a fossil fuel energy path. And the ultimate consequence is rapid, perhaps irreversible, global climate change.
Box 4: Sinks - A Carbon Reservoir?
The issue of land use change and forestry (LUCF), and its treatment as "sinks", has always loomed large in climate change negotiations in the past. It was among the hotly debated subjects in the lead-up to the Kyoto meeting in December 1997, and was subsequently addressed in Articles 3.3 and 3.4 of the protocol.lxxviii
That the issue has now gained tremendous momentum can be gauged from the fact that almost all subsequent CoPs and meetings of the Convention’s Subsidiary Body for Scientific and Technological Advice (SBSTA) have seen a good part of the discussions addressing it.
CO2 is removed from the atmosphere by a number of processes that operate on different time scales, and is subsequently transferred to reservoirs or sinks. The fastest process of removal is absorption into vegetation and surface layer of oceans. Roughly, sinks are of three types - oceanic, terrestrial (forests) and inferred or "missing".
lxxixUnder the Kyoto Protocol, Articles 3.3 allows Annex-I countries to use afforestation, reforestation and deforestation (ARD) activities to meet their reduction targets. Article 3.4 allows them to get credits for activities other than ARD, called "additional activities." This includes enhancement of the carbon content of agricultural soils, management of forests, croplands and grazing lands. In simple words, the Protocol allows for the use of afforestation as a sink to reduce CO2 levels in the atmosphere. Hence, without doing much to reduce emissions from burning of fossil fuels, Annex-I countries can now take recourse to afforestation programmes to show reduction in CO2 levels and thereby meet their specified commitments under the Protocol.
lxxxThis "Net Approach", proposed by New Zealand, was adopted in the Protocol despite scientific uncertainty surrounding the contribution of sinks in reducing carbon levels in the atmosphere. At present, information about sinks and its rate of absorption is minimal.
lxxxiThe EU, G77 and China, with support from the NGOs, urged that no decisions related to LUCF should be taken until broad scientific assessment had been done. Hence, it was requested that the IPCC write a special report to be ready in time for the CoP-6 in 2000.
lxxxiiThe IPCC has also been requested to prepare a special report on the "methodological, scientific and technical implications of the Protocol, with particular reference to sections dealing with emissions from land use changes and forestry. This report will be discussed only at CoP/MoP-1, the first Meeting of the Parties, which is expected only after ratification of the Kyoto Protocol by the requisite number of countries.
lxxxiiiIn June 2000, the IPCC released its report on Land Use, Land Use Change and Forestry (LULUCF). The report states that there are too many complications and uncertainties associated with the use of LULUCF activities to ‘fix’ CO2.
• The IPCC points that there are problems of consensus on definitions of what constitutes forests and ARD activities.
• A difficult condition attached to ARD activities is that these should be ‘direct’ in nature. The closer in time and space the activity is to the impact, the more direct it is. Given the present availability of scientific tools, separating direct and indirect effects would be very difficult, if not impossible.
• LULUCF activities should also qualify as ‘human-induced’, requiring a definition that would distinguish it from natural effects.
• Results of LULUCF activities are also not permanent. In the long-term, sequestered CO2 can always be "leaked" back into the atmosphere due to natural or human accidents.
• 'Leakage’ can also occur due to uncalculated spillover negative activities like logging onto land outside the project area.
• At higher concentrations of CO2 in the atmosphere, carbon sinks can progressively even become sources of global warming in a few decades.
• Measuring changes in the quantity of carbon sequestration and storage would entail high operational expenses and infrastructural investments. Even developing countries would be expected to do so when they undertake commitment targets for emission reduction.
Despite uncertainties listed by the IPCC, countries like the US, Japan, Australia, Canada and New Zealand have been eager for a quick decision on this issue since it would provide them with an easy and cheap way to meet their commitments. The US and Japan have voiced the "urgent" need for a decision on sinks because it would "influence the ability of some countries to ratify the protocol." However, the US’ scheme has nothing to do with the need for scientific understanding. Joined by Norway and some Latin American countries, the US has only been pushing sink-related activities forward to get it included under the CDM.
lxxxiv And sinks provide the cheapest, most efficient portfolio of projects to invest in and earn carbon credits.lxxxvThe CoP-6 at The Hague, in November 2001, met with complete breakdown in talks due to an impasse on the issue of sinks. The JUSSCANNZ umbrella was not willing to let go of cheap mitigation activities allowed under Article 3.4. In light of the uncertainties revealed by the IPCC report, Article 3.4 activities like forest management were totally unacceptable to the EU and the G-77 and China. JUSSCANNZ fought to ensure that sinks would be included as a valid activity under CDM in the first commitment period of 2008-2012. Canada even declared that it would not ratify the Protocol unless additional sinks under Article 3.4 were allowed.
The resumed CoP-6 in Bonn, in July 2001, saw a weakening of the Kyoto Protocol targets, when an agreement was finally taken on sinks. Since the US decided to stay out of discussions, the others from the umbrella were able to demand greater concessions as a cost of their 'cooperation’.
Forest, cropland and grazing land management and revegetation were allowed as eligible activities under Article 3.4. Credits from these activities would be fully counted. However, credits for forest management would be given in complex two-step arithmetic. The complicated juggle of calculations, the language of which was to be finalised by the following CoP-7 in Morocco, heavily dilutes the reduction targets of Annex-I countries.
As for LULUCF projects under CDM, these have been restricted to afforestation and reforestation projects (Article 3.3) in the first commitment period. Credits from these activities should not exceed 1 per cent of an industrialised country’s emissions in 1990. Negotiations for the second commitment period will decide how these projects will be treated in future.
lxxxviBy growing trees in the South, Annex-I nations are doing nothing but shifting the responsibility of emissions reduction to the latter. And the South will not even earn merit for cleaning the atmosphere.
lxxxvii There is also the fear that the race for credits will overpower the immediate concerns of developing countries, of improving the quality of life of the rural poor. Many indigenous groups in the developing world have opposed the inclusion of sinks in CDM out of fear that industries will start viewing forests as gigantic carbon sponges, rather than the source of livelihood for the poor. Fast-growing monoculture plantations could replace bio-diverse forests. Old-growth forests store more CO2 than new plantations, but countries trying to make the maximum use of sinks could be tempted to cut down these forests and plant new trees.lxxxviiiRecently, in March 2002, the government of Thailand rejected the 'forest conservation proposal’ by the US. The US had proposed to transfer US $12.6 million, comprising Thailand’s financial debt, into the 'Tropical Forest Conservation Fund’. The fund, in turn would establish tree plantations in Thailand to absorb CO2, allowing the US to gain credit for carbon sequestering. The US already has signed such pacts with Belize, El Salvador and Bangladesh. In rejecting the US proposal, the chairperson of Thailand’s National Human Rights Commission, said, "The government should not risk our biological resources in exchange for a cut in our debt...Thailand will no longer surrender to unfair agreements that serve US interests."
lxxxixD.3. Tradeable Emissions Permits
INC delegations have extensively discussed "tradeable emission rights" as a possible extension of JI. During the negotiations of the Convention, a large amount of economic literature was produced advocating the use of various tradeable emission permit schemes as the most cost-effective way of limiting global GHG emissions.
xcThe use of a tradeable emission permit system has been suggested as a means to control and limit increased GHG concentrations in the atmosphere and was considered in the 1990 Report of the Response Strategies Working Group of the IPCC, in its Chapter on 'Economic (Market) Measures’.
xciThe tradeable permit system is considered by many authorities to be the best way of limiting CO2 emissions. A 1994 UNCTAD study notes, "The case for a tradeable entitlements system is based on the advantages that it would offer compared to other politically feasible alternatives."
xciiThere is even some precedence for direct country-to-country trading under Article 2 of the 1990 London Amendments to the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer. It provides that a Party may transfer to another portion of the first Party’s allowed share of controlled substance pollution, provided that the combined pollution of the two trading countries does not exceed prescribed limits.
xciii Otherwise, tradeable permits in environmental policy are a relatively new instrument, in theory as well as in actual policy. As an instrument of pollution abatement policy, tradeable permits were put into practice for the first time from 1975 on in the US’ Environmental Protection Agency (EPA) Offset Programme for air pollutants.xcivA full-blown system of tradeable permits would involve placing a cap on emissions; creation of permits or entitlements that create a right for their owner on a predetermined (per capita) emission rule. Countries can then further allocate permits to emitters within their borders - for free or in exchange of payments; and the total pollution quota distributed in this way equals the pollution ceiling. After the distribution, each country would hold a finite number of entitlements. Countries with high emission levels (the industrialised countries) will not possess entitlements sufficient to continue their activities at previous emission levels, and will be forced either to reduce their pollution to the level allowed by permit allocation, or to purchase permits from other countries who have surplus permits (developing countries in this case) or who can reduce their pollution more cheaply and sell unused entitlements at a profit. Overall, this system provides an economic incentive to the high-level polluters to reduce their emissions.
xcvDespite the theoretical appeal of such an international entitlements trading scheme, there are a number of practical difficulties, which must be addressed before such a scheme could be implemented. While institutional issues have been concerns for academic debates on the feasibility of tradeable permit schemes, it is short-term political issues that have truly torpedoed any prospects of immediately implementing a version of this concept. In particular, what is to some a strength - that the requirement of permit allocation enables equity issues to be addressed directly - is to a large extent a weakness, in the context of political battles over resources and the allocation of blame.
xcviThe efficiency of the tradeable permit scheme is premised on competitive market conditions. However, such a market may well not be competitive. In the case of carbon emissions, it is all too easy to see that permits to emit carbon would rapidly accumulate in the richest countries, while the developing world would soon be in a position of having to try and buy back permits from the richer countries in order to develop. Since the 'price’ might well escalate with time as global targets are tightened, the result could be very regressive, perpetuating the existing international economic order.
xcviiThe INC Secretariat has noted that matters relating to tradeable permits might leave developing countries in an extremely unfavourable economic position unless the initial allocation of permits was weighted in their favour. A tradeable permit scheme in the absence of an entitlement allocation would blur the differentiation of responsibilities by creating a "right to pollute" that can be purchased by those with the highest level of income. Hence, irrespective of the post-trading outcome, the initial allocation remains politically contentious.
xcviiiIn the Kyoto Protocol, Article 17 on Emission Trading was a midnight entry that got drafted in at the last minute of negotiations at CoP-3. When developing countries raised objections at the inclusion of this mechanism without the discussion on the issue of entitlements, it was agreed that this issue would be part of the work plan for the future.
xcixThe Protocol says that the "relevant principles, modalities, rules and guidelines, in particular for verification, reporting and accountability of emission trading, has to be worked out." It is now essential that governments define these principles in a manner that is both equitable and sustainable.
E. Per Capita Entitlements
International agreements to limit climate change will be easier to negotiate if they are perceived to be equitable. Hence, one very commonly suggested rule is to allocate the total number of permits amongst countries on a per capita basis. There is precedent for this approach in the 1987 Montreal Protocol to the 1985 Vienna Convention for the Protection of the Ozone Layer which allocated chlorofluorocarbons (CFC) emission quotas equally per capita among the industrialised countries, using current population as the basis of the distribution.c
In fact, it was explicitly proposed in an early draft of the FCCC, a Revised Version of which was agreed at the Rio Earth Summit. According to this draft, emissions were to converge to a common per capita level over the course of the years.
ciMichael Grubb explains this rule as follows: "The moral principle is simple, namely that ...since the natural climate is part of the common heritage of mankind, entitlements to alter that heritage should be allocated equally to every member of the human community...Every human being has an equal right to use the atmospheric resource."
cii The corollary to this principle is that countries whose per capita emissions are above the world average should compensate those countries whose emissions are below average for their disproportionate use of the atmospheric commons. "The moral principle is simple...The economic principle follows directly...The practical effect is obvious: it would require the industrialised world, with high per capita energy consumption, to assist the developing world with efficient technology and technical services."ciii This allocation criteria is derived from the egalitarian ethic, which emanates from basic percepts of equality as embodied in the constitutions of many countries. Interestingly, this is a purely individualistic criterion that transcends national entities, so it applies to the international setting unchanged. With minor variations, this takes two general forms.cvThe egalitarian concept of fairness, based on equal contemporary entitlements, would suggest that emission abatement should be undertaken in proportion to population and that entitlements should be allocated also in proportion to population.
cvi This route is proposed by Geoff Bertram, Joshua M. Epstein and Raj Gupta, Anil Agarwal and Sunita Narain, among others.cvii This allocation criteria is strongly supported by developing countries, which have low per capita emissions and would thus receive an excess of permits, but has been vigorously opposed by a number of industrialised countries. Potentially large resource transfers to the developing world would result, and for this reason, most political analysts in the North consider per capita allocations to be infeasible.cviiiObjections have also been raised on grounds of concern that such allocation might 'reward’ population and population growth, reducing incentives for population control. Proponents of the approach however tend to argue that any such effect is negligible compared to other factors influencing population. To avoid any inducement to population growth, nevertheless, Grubb suggests that the population measure should be restricted to population above a certain age - an allocation based on adult population.cix Depending on the definition of 'adult’, it would provide a 15-21 year delay between births and receiving the allotment.cx Incidentally, since the fast-growing population of developing countries tends also to have a larger non-adult share, this rule redresses some of the advantage given to those countries by the population rule.cxi An alternative incentive for population stabilization could be built into the scheme by pegging the allotment to the entire population in recent year and not increase future emissions. This 'lagged’ allocation has been suggested by Grubb et al., together with a range of other possibilities, including apportionment to a fixed historical date, or the inclusion of an explicit term related inversely to population growth rate.cxii To partially account for the lag in stabilizing population, after a reference year has been fixed, it could be agreed to allow a redistribution of permits in 10-15 years, based on some weighting of the then-current and initial population distributions.cxiii
At unaltered 1988 emission and population levels, the transfers would amount to about 0.42 percent of Gross National Product (GNP) in the US and twice this for the erstwhile Soviet Union and Eastern Europe, with GNP estimated at conventional exchange rates. The average transfers from the rest of the OECD countries would be around 0.16 percent of GNP. It would require more from the US than its current Official Development Assistance (ODA) levels, and about a third of the current ODA from the rest of the OECD countries. The giant nations of India and China would get the lion’s share. Some have argued that such a transfer is warranted anyway, and will be a good way of enforcing the transfer of resources from the North to the South.
cxivBoth the developed and developing world face penalties and advantages in an allocation scheme based on population during a fixed reference year: the developed countries have high per capita emissions and a lag occurs in the transition to best available technology to reduce emissions, but most have stable or very slowly growing populations, while developing countries have high population growth rates and will experience a lag in reducing population growth, but have significant opportunities for technological ‘leapfrogging’ as they undergo development. Since both groups of countries would experience both advantages and disadvantages, and both will be seen to be conceding something, acceptance of this allocation will be easier than if one group only has to make concessions. Moreover, long-term limitation of GHG emissions requires different policy responses in developed and developing countries: in the case of developed countries, per capita emissions must be reduced, while in the case of developing countries, it is more important to stabilize population than to limit the near-term increase in per capita emissions. The regime proposed here will provide strong incentives for this asymmetric response.
cxv(An exception to the above generalization occurs in the case of Canada, the US, and Australia, which have high per capita emissions and relatively high population growth rates. They, like the developing countries, will have to grapple with population policy as part of their response to the need to limit GHG emissions.)
In another version of the same principle, I. Fujii, Prodipto Ghosh, and Aubrey Meyer propose the egalitarian concept of allocations based on historical per capita entitlements: everyone should have an equal right to identical emissions regardless of nation and generation.
cxviFujii and Meyer have developed detailed systems of accounts involving intergenerational transfer of the responsibility for past excess per capita emissions by the industrialised countries. Fujii’s formulation, in effect, would require regions, which historically have been the principal contributors to increased atmospheric concentrations of GHGs to compensate regions whose historical GHG emissions have been lower.
cxviiGhosh provides an analytical derivation of the Fujii doctrine as follows:
• Equality of opportunity requires that inequalities (in wealth or welfare) arising from differential levels of GHG emissions do not carry over across generations. Specifically, at a minimum this principle would seem to require that the access to GHG emissions could not be hereditary. This principle furnishes the basis for the assertion that societies with higher historical per capita emissions should compensate societies with lower past per capita emissions. Ensuring equality of opportunity is a central concern of the Welfare State, and is sought to be realized in all but avowed legally minimalist States. Little support may be found in international public documents or current instruments for abrogating this principle.
M. dens Elzen et al. apply the idea with an energy model to a total carbon budget defined over 1800-2100.cxix
Barry Solomon and Dilip R. Ahuja also propose allocations based on 'national historical per capita emissions’, based on the 'natural debt’ concept.
cxxAll these studies indicate that the industrialised countries have 'overused’ the atmosphere in the past, and on most such approaches have built up a large 'debt’; the developing countries are, however, in credit.
cxxiBox 6: CSE’s Stand on Emissions Trading and Entitlementscxxii
The concept of per capita entitlements was first proposed by the New Delhi based Centre for Science and Environment (CSE) in their 1991 publication Global Warming in an Unequal World. The report has made a seminal contribution to the discussion on a cooler and greener earth, by demanding that the South be entitled to a fair share of the earth’s common resource - the atmosphere. It also helped in building a school of thought on 'equity and entitlement’ in environmental negotiations.
CSE proposes a rights-based approach in regulating climate change; treating the atmosphere as a limited common resource to be managed under an equity regime. There cannot be, under any circumstances, the acceptance of a position that a global common property resource like the atmosphere can provide more benefits to an American or an Englishman more than an Indian or an African. In other words, this means that the entitlements to the use of the atmosphere have to be built on per capita emissions (freezing the per capita entitlements on the basis of a population distribution index for a chosen year).
This approach then provides each country with a quota of the permissible emissions it can emit. Scientists should define what the total sustainable limit of such emissions would be for the world. And this entire global quota, as defined by scientists, should then be equitably shared by all the countries of the world.
The world will have to accept a maximum per capita emission cap in order to deal with global warming. We cannot allow a world in which some countries have to freeze their CO2 emissions at one level and other countries at another level. This would mean freezing global inequality. A convergence principle towards a just and sustainable norm has to be the other rational principle in such a situation.
Such a system could take into account the historical emissions of the developed countries - their "natural debt."
Surplus entitlements with less polluting countries can give way to an international emission trading regime.
Under the CSE proposal, it is vital that property rights, or entitlements, are established before any trading is allowed. Trading of these entitlements will provide the right incentive and disincentive for countries to deal with global warming, by moving towards a less carbon-intensive path of development. Also, once such a quota is established, developing countries would have no interest in inviting polluting industries, which threaten the world’s atmosphere to their backyards.
Further, the proposal suggested that an international tax could be levied on countries exceeding the limits imposed by their permissible entitlement allocation. Such a levy of tax can be based on the precedent of the Polluter Pays Principle. Resources generated by the tax system and the market-based solution of emission trading will aid the process of resource transfer in real terms.
The CSE framework would demand that scientists sit together to decide what is the acceptable amount of total emissions between now and a certain point in the future that would help to avoid the worst effects of global warming. Global concentrations of CO2 in the world’s atmosphere have risen from pre-industrial level of 280 parts per million (ppm) to 360 ppm at present, and further rising at a rate of about 15 ppm per decade. If we agree to stabilise this concentration at 450 ppm, say by 2030 or 2050 that would give us the total quantity of CO2 that can be allowed to accumulate in the atmosphere. Once the scientific community gives us that quantity, it can then be broken down into total annual emissions that would be permissible.
The next step, of course, would then be to set up a system for countries to trade their unused share of annual emissions.
F. Equitable Entitlements and Convergence
Global negotiations have thrown up emissions trading as the most economically effective strategy for emissions reduction, and equal per capita entitlements and convergence as the key components for equity and solidarity. These principles help to define the rights and responsibilities of all countries within an equitable framework.
The principle of entitlements sets emissions limits for all countries. The principle of convergence holds every country responsible to make efforts to live within its entitlements. In simple words, this means that the world’s large emitters, the industrialised countries, should make urgent efforts to reduce their emissions to their entitled amounts whereas the world’s growing emitters take steps not to exceed theirs. The world, therefore, needs an ’ecologically effective’ international mechanism that provides incentives to all countries to put this plan into action. Every effort to delay puts the world, especially its poor people, at greater risk.
The framework of entitlements can be established in two simple ways. One, by setting a carbon dioxide atmospheric concentration target by a specified date and sharing the resulting carbon dioxide budget equitably or, two, by accepting an ad hoc per capita carbon entitlements for all people on earth to which all countries agree to converge. Flexibility would be needed to review the ad hoc per capita entitlement accepted or the targeted atmospheric carbon dioxide concentration every five to ten years to take into account the latest scientific knowledge on the economic, social and ecological impact of global warming. In case of adverse tidings, the carbon entitlements would obviously have to be reduced equitably.
Equal per capita entitlements could be built on one or a combination of the following concepts:
• The emissions absorbed annually by the global atmospheric sinks, especially which arise out of common resources like the oceans, could be distributed equally among all the people of the world, thus providing each person with an equal entitlement.
• A long-term per capita emissions convergence target could be identified and each person could be given that as entitlement. This target itself could be kept flexible, allowing movement up or down based on latest scientific information available of the seriousness of the emerging threat of global warming.
• Future atmospheric concentration targets for different GHGs could be agreed upon, keeping in mind that the targeted concentration does not threaten to seriously destabilise the global climate. The global emissions budget that would allow humanity to reach that concentration target could then be equally distributed among all countries on the basis of equal per capita entitlements. Once the principle is accepted, national entitlements can be steadily phased in towards a convergence point of equal per capita entitlements over successive commitment periods. At the same time the targeted atmospheric concentration could be kept subject to review based on latest scientific information available.
A report released by UK’s Royal Commission on Environmental Pollution (RCEP) in June 2000 said that an effective, enduring and equitable climate agreement will require GHG emission quotas to be allocated to countries on a simple and equal per capita basis.
cxxiii As a system of per capita entitlements cannot enter into force immediately, the report proposes "contraction and convergence." Aubrey Meyer from the London-based Global Commons Institute, who has been a leading advocate of this approach, explains that initially the shares would maintain a status quo - based on each country’s income. However, over an agreed future period of time all countries would converge on the same allocation per head of their population in a base year that would be pre-determined by agreement. (See earlier discussion of Meyer’s egalitarian concept of allocations based on historical per capita entitlements: everyone should have an equal right to identical emissions.)This would mean the quotas of industrialised countries fall year by year, while those of developing countries rise until all countries converge to emit equal amounts of GHG per head. The RCEP report proposes 2050 as the year for convergence. It will also be the cut-off date for national populations, i.e. further changes in a country’s population will not affect its emission quota. After the point of convergence has been reached, the quotas of all countries would contract at the same rate.
According to the report, commentators on climate negotiations have identified "contraction and convergence" as the leading contender among the various proposals for allocating emission quotas to countries in the long run. To make an agreement based on per capita allocation quotas more feasible, the report supports emissions trading between countries. Countries that wish to emit GHG in excess of their respective quotas would be able to purchase unused quotas at prices that give an incentive to others to emit less.
To achieve the reduction targets RCEP recommends reductions in energy demand and a large deployment of renewable energy sources, which could include energy harnessed from waves, undersea turbines powered by tidal waves, wind and solar energy.
cxxivG. Towards a Non-Carbon Worldcxxv
Climate change can only be combated if the world can make a rapid transition to a non-carbon energy economy because then the limitations of environmental space posed by a carbon energy economy disappear. Therefore, the world needs an international mechanism that not only provides incentives to all countries to live within their entitled amounts but also helps to promote a rapid transition to a non-carbon energy economy.
This transition is also necessary because we cannot expect industrialised countries to reduce their high carbon emissions rapidly to the low levels that are necessary to combat climate change. The IPCC has recommended that the world must immediately reduce its 1990 emissions by 50-70 per cent to meet this objective. As this looks impossible in the near future if the world economy is to continue to function within a carbon energy economy - for the US this means a reduction in carbon dioxide emissions from over 5 tonnes of carbon per capita to less than 0.5 tonnes of carbon per capita - then all that the world can now do is to move towards a non-carbon energy economy as fast as possible and, thus, hopefully restrict the economic and ecological damages caused by climate change.
Developing countries can help by changing the current trajectory of their energy path by relying more and more on non-carbon energy sources. This would be the most 'meaningful participation’ of developing countries. In fact, given a suitable economic environment, developing countries can provide a global market for a non-carbon energy source like solar energy because it has far more solar energy than the developed world and it has large numbers of people who are still not connected to the grid.
Such a framework would provide right away adequate incentives for all countries to cooperate with each other to meet the ultimate objective of the climate convention and solicit the participation of developing countries in a meaningful and equitable manner. Entitlements will provide this framework as it will give the South the incentive to control emissions and to move towards a non-fossil fuel trajectory while putting a clear target for industrialised countries.
The ultimate purpose of the framework is not to ensure that all countries, especially the industrialised countries, reach the impossibly low per capita emissions by remaining in a fossil fuel economy. It is to start a process of international cooperation to get the world moving rapidly towards a non-carbon energy transition, thus, combating climate change and ultimately rendering the carbon emissions entitlements redundant.
Under the Kyoto Protocol, industrialised countries have ingeniously allocated the right to trade emissions amongst themselves without the assignment of entitlements on the basis of equity. The simple formulation adopted by the Protocol is that countries take a percentage reduction on its current emissions. The Kyoto Protocol has turned 'compliance’ into an intense numbers game.
Proposed mechanisms like emissions trading, JI and CDM further provide opportunities to borrow 'emissions reduction’ from other countries where emissions reduction is already taking place because of a slowing down of the economy (like in Russia) or from those countries where reducing emissions is cheaper in the short run. This sets a precedent that will lead to more GHG emissions and will force each country to fiddle with their carbon budget.
cxxviIn the Kyoto game, activities that have ceased or reduced immediately, since the base year of 1990, give the country a head start. Take the case of Australia. In 1990, 30 per cent of the country’s emissions were from deforestation alone. Since this deforestation was subsequently controlled, it can claim to have reduced its emissions since 1990. By winning the right to count any improvement from 1990 as its national credit, Australia can actually increase its emissions by 8 per cent. Given that these emissions are still present in the atmosphere and will cause global warming this is a death gift indeed.
cxxviiIf this innovative climate accounting is accepted as the method of calculating each country’s target then it virtually rewards the big polluters and lets them appropriate the common space. In fact, this method would suggest that developing countries should be allowed to expand their emissions before they accept a percentage cut. Therefore, for developing countries, which will enter the same numbers game sooner or later, the baseline will be very important. The Kyoto Protocol, therefore, provides a perverse incentive to polluters. The baseline method cannot be accepted as the principle for allocating atmospheric space.
cxxviiiWhat developing countries should also not accept is the principle of trading emissions, or international cooperation to prevent climate change, which is built on the argument that developing countries provide a lucrative opportunity to reduce emissions cheaply than in industrialised countries. Trading cannot simply be carried out to achieve economic efficiency. It must be undertaken in an environment that also promotes ecological efficiency and social efficiency.
A three-pronged combination of emissions trading, equitable entitlements, and promotion of renewables thus constitutes a truly ’meaningful’ plan of action.
H. The Road Ahead