Carmen Bunzl - Universidad Pontificia Comillas

UNIVERSIDAD PONTIFICIA COMILLAS
ESCUELA TÉCNICA SUPERIOR DE INGENIERÍA (ICAI)
INGENIERO INDUSTRIAL
PROYECTO FIN DE CARRERA
AN EVALUATION OF PROPOSALS
FOR THE FUTURE CLIMATE REGIME
AUTOR: CARMEN BUNZL BOULET
MADRID, Junio 2008

Fdo:
Autorizada la entrega del proyecto de la alumna:
Carmen Bunzl Boulet
LOS DIRECTORES DEL PROYECTO
Fecha: ……/ ……/ ……
José Ignacio Pérez Arriaga
Ignacio de Loyola Hierro Ausín
Fdo:
Vº Bº del Coordinador de Proyectos
Tomás Gómez San Román
Fecha: ……/ ……/ ……
Fdo: Fecha: ……/ ……/ ……

Summary ii
Summary
The objective of this project is to carry out a report providing an overview of
the current status of international negotiations on the future climate change
regime; to identify and evaluate the various proposals currently being
considered for the future agreement on climate change; to examine the likely
implications of these potential agreements, in particular for Spain; and to
express an opinion on the architecture that, based on the aforementioned, is
considered preferable.
International negotiations have lead to first steps in combating climate
change with the United Nations Framework Convention on Climate Change
(UNFCCC) and the Kyoto Protocol. Under the Protocol, industrialized countries
have to reduce their greenhouse gas (GHG) emissions by around five per cent
between 2008 and 2012 compared to 1990 levels. It is however broadly
recognized that further steps are necessary to stabilize the climate in the long
term. An appropriate stabilization target for GHG concentrations would be 450-
500 ppmv CO2eq.; this would require a cut in all GHG emissions of around 50%
by 2050, relative to 1990 emission levels. Developed countries, together with
other interim targets, should commit to cutting emissions by 80-90% from 1990
levels by 2050.
The Intergovernmental Panel on Climate Change (IPCC) sent a clear signal
from science after the release of its three reports in 2007, which combined with
the mobilization of political will at the highest level, lead to the breakthrough at
the Bali Climate Change Conference in December. Both developed and
developing countries agreed to jointly step up efforts to combat climate change
and launch negotiations on a new climate change deal to be concluded in
Copenhagen by the end of 2009.
The potential shape and structure of an international agreement – its
architecture – needs to be agreed on. The challenges on the road to Copenhagen
are enormous: negotiating deepened commitments for those countries that are

Summary iii
already bound under the Kyoto Protocol, new commitments for developing
countries (including methods for differentiation), integrating the US with new
commitments, adaptation, deforestation, financial mechanisms, technology
cooperation, transfer mechanisms for mitigation and adaptation, improving the
already existing market mechanisms (such as the CDM). All these processes
have to be combined into one gigantic package deal.
The world should aim for a liquid international carbon market in order to
allow for the most effective, efficient and equitable emissions reductions; a
hybrid bottom-up and top down approach is already being pursued. A staged
approach provides the opportunity to accommodate many ideas into a
compromise and allows for several types of targets, accommodating concerns of
many countries. It is relevant to ensure that market carbon prices remain
sufficiently high to drive mitigation action; they need to be combined with
technology or policies based measures to start combating climate change.
Developed countries will need to take on immediate and binding national,
emissions targets, demonstrate that they can achieve low carbon growth, and
transfer sufficient resources and technologies to developing countries. It is
clear now that developing countries, which by 2050 will account for the greater
part of global emissions, will have to take action; yet, at the same time, fighting
poverty and achieving growth and development are their utmost priorities.
Development plans should place climate change at their core; developing
countries should also benefit from scaled-up opportunities to sell emissions
reduction certificates, such as the current CDM but expanded from a project-
based to a wholesale mechanism. Developing countries’ participation in
international climate agreements emphasizes the need to address equity
considerations not only across countries – common but differentiated
responsibilities and capabilities, but also within countries – a commitment
from the rich people in poor countries is necessary. Promoting participation
may be the greatest challenge for the design of climate policy architecture.

Summary iv
The recent rise of sectoral approaches can be traced to concerns over
competitiveness and leakage. In addition, they are regarded as an effective
mean to encourage mitigation action in developing countries ahead of any
binding national commitments. Several sectoral initiatives and voluntary
agreements are already in place (in the aluminum, steel and iron, and cement
sectors). However, approaches targeting sectoral emissions should complement
national emission reduction targets but not replace them.
Achieving the expected GHG reductions will require both the widespread
diffusion and adoption of currently available low-carbon technologies, as
well as the development of new technologies. Technology oriented
agreements (TOAs), as complements for carbon commitments, will certainly be
needed; renewable targets, efficiency improvement, and technology standards
must overcome market imperfections such as low carbon prices, price volatility
and uncertainty. Urgent action is required to implement energy efficiency
policies and the application of existing technologies, including renewables and
nuclear, and the development of newer but established technologies, including
carbon capture and storage. To be effective, it is indispensable that this
approach is extended to developing countries.
In addition to a fair distribution of the burden of emissions reduction,
support for adaptation in those countries hardest hit by climate change is
required. The most effective form of adaptation to a changing climate is robust,
climate-resilient development; adaptation planning needs to be integrated into
development plans and strategies. This requires additional funding; as part of
cap-and-trade systems, auctioning of emissions allowances could generate
substantial revenue streams.
Climate change is a complex problem that requires a complex solution. It is
the hope of the author that this report can provide some insights into the
current international discussions to facilitate an agreement on the future
international climate change regime.

Resumen v
Resumen
El objetivo de este proyecto es realizar un informe sobre la situación actual
de las negociaciones internacionales sobre el futuro acuerdo sobre el cambio
climático; identificar y evaluar las distintas propuestas que se están planteando;
examinar las previsibles implicaciones de estos posibles acuerdos, en particular
para España; y expresar una opinión sobre el esquema que, a la vista de todo lo
anterior, se considera preferible.
Las negociaciones internacionales han dado lugar a primeros pasos en la
lucha contra el cambio climático con la Convención Marco de Naciones Unidas
sobre el Cambio Climático (CMNUCC) y el Protocolo de Kyoto. En virtud del
Protocolo, los países industrializados tienen que reducir sus emisiones de gases
de efecto invernadero (GEI) alrededor de un 5% entre 2008 y 2012 en
comparación con los niveles de 1990. Sin embargo, es ampliamente reconocido
que la adopción de nuevas medidas es necesaria para estabilizar el clima en el
largo plazo. Un objetivo adecuado de estabilización de las concentraciones de
GEI sería 450-500 ppmv CO2eq., lo que requeriría un recorte en todas las
emisiones de GEI del 50% para el año 2050, respecto de 1990.
El Grupo Intergubernamental de Expertos sobre el Cambio Climático (IPCC)
envió una clara señal desde la ciencia tras la publicación de sus tres informes en
2007, que combinada con la movilización de la voluntad política al más alto
nivel, dio lugar al avance conseguido en la Conferencia sobre el Cambio
Climático de Bali en diciembre. Tanto los países industrializados como los
países en vías de desarrollo se pusieron de acuerdo para intensificar los
esfuerzos para combatir el cambio climático y comenzar las negociaciones de un
futuro acuerdo a finalizar en Copenhague a finales de 2009.
La forma potencial y la estructura de un acuerdo internacional - su
arquitectura - tienen que ser acordadas. Los desafíos en el camino a
Copenhague son enormes: la negociación de profundizar los compromisos para
los países que ya están obligados en virtud del Protocolo de Kyoto, nuevos

Resumen vi
compromisos para los países en desarrollo (incluidos métodos de
diferenciación), la integración de los EE.UU. con nuevos compromisos,
adaptación, deforestación, mecanismos financieros, cooperación tecnológica y
mecanismos de transferencia para abordar la mitigación y la adaptación, la
mejora de los mecanismos de mercado ya existentes (como el MDL). Todos
estos procesos tienen que ser combinados en un gigantesco paquete.
El mundo debe apuntar a un mercado internacional de carbono con el fin de
permitir una reducción de las emisiones eficaz, eficiente y equitativa; un
enfoque híbrido de abajo a arriba y de arriba a abajo ya se está llevando a
cabo. Un enfoque gradual ofrece la oportunidad de dar cabida a muchas ideas
en un compromiso y permitir varios tipos de objetivos, acomodando las
preocupaciones de muchos países. Es de especial relevancia garantizar que los
precios del mercado de carbono sean suficientemente altos para conducir las
acciones de mitigación; deben combinarse con medidas basadas en la tecnología
o en políticas específicas para iniciar la lucha contra el cambio climático.
Los países desarrollados tendrán que asumir de inmediato compromisos
vinculantes de reducción de emisiones, demostrar que pueden lograr un
crecimiento bajo en carbono, y transferir suficientes recursos y tecnologías a
los países en desarrollo. Ya es evidente que los países en desarrollo tendrán
que adoptar medidas; pero, al mismo tiempo, el desarrollo y la lucha contra la
pobreza son sus máximas prioridades. Las políticas de desarrollo deben colocar
el cambio climático en su núcleo; además, los países en desarrollo podrían
beneficiarse de las oportunidades de vender certificados de reducción de
emisiones, como bajo el actual MDL. Con la participación de los países en
desarrollo, el hacer frente a consideraciones de equidad se hace más necesario
que nunca; no sólo entre los países - responsabilidades y capacidades comunes
pero diferenciadas, sino también dentro de ellos – es necesario un compromiso
por parte de los ricos en los países pobres. El fomento de la participación es el
mayor desafío en el diseño de la arquitectura del futuro acuerdo sobre el
cambio climático.

Resumen vii
El reciente interés en los enfoques sectoriales puede atribuirse a
preocupaciones por la competitividad; además, se les considera como un medio
eficaz para alentar las medidas de mitigación en los países en desarrollo antes
de cualquier compromiso vinculante. Ya se han tomado varias iniciativas
sectoriales y acuerdos voluntarios (en los sectores de aluminio, hierro y acero, y
cemento). Sin embargo, los enfoques sectoriales deberían complementar los
compromisos vinculantes de reducción de emisiones, no sustituirlos.
Para lograr la esperada reducción de GEI serán necesarias tanto la amplia
difusión y adopción de las tecnologías bajas en carbono actualmente
disponibles, como el desarrollo de nuevas tecnologías. Los acuerdos
orientados tecnológicamente serán sin duda necesarios; los objetivos de
renovables, de mejora de la eficiencia, y los estándares tecnológicos deberán
superar imperfecciones del mercado tales como los bajos precios de carbono, la
volatilidad de los precios y la incertidumbre. Se requiere una acción urgente
para aplicar políticas de eficiencia energética y la aplicación de las tecnologías
existentes, incluyendo las energías renovables y la energía nuclear, así como el
desarrollo de nuevas tecnologías, incluida la captura y secuestro del CO2. Para
ser eficaces, es indispensable que este enfoque se extienda también a los países
en desarrollo.
Además de una distribución equitativa de la carga de reducción de
emisiones, el apoyo para la adaptación de los países más afectados por el
cambio climático es necesario. La forma más eficaz de adaptación es un
desarrollo robusto, resistente al clima; las políticas de adaptación deben
integrarse en los planes y estrategias de desarrollo. Para ello se requiere
financiación adicional; la subasta de derechos de emisión en los mercados de
carbono podría generar importantes fuentes de ingresos.
El cambio climático es un problema complejo que requiere una solución
compleja. La autora espera que este informe pueda ayudar a conocer mejor las
negociaciones internacionales en curso para facilitar un acuerdo sobre el futuro
régimen internacional sobre el cambio climático.

Index viii
Index
CHAPTER 1. INTRODUCTION ........................................................................................................... 1
1 INTRODUCTION .............................................................................................................................. 2
2 HISTORICAL BACKGROUND ...................................................................................................... 4
2.1 Until 1988............................................................................................................. 4
2.2 After 1988............................................................................................................. 6
3 CLIMATE CHANGE SCIENCE....................................................................................................... 9
4 CLIMATE CHANGE POLICY ARCHITECTURE...................................................................... 11
4.1 The United Nations Framework Convention on Climate Change
(UNFCCC)......................................................................................................... 12
4.2 The Kyoto Protocol........................................................................................... 15
4.2.1 Flexible Mechanisms 17
4.2.1.1 Emissions Trading – The “carbon market”..............................................................17
4.2.1.2 The Clean Development Mechanism........................................................................19
4.2.1.3 Joint Implementation..................................................................................................21
4.2.2 Strengths and weaknesses of the Kyoto Protocol 21
5 LOOKING BEYOND KYOTO ....................................................................................................... 23
5.1 Possible reasons for the delay in international negotiations...................... 23
5.2 Dialogue processes for negotiators................................................................ 25
5.2.1 Negotiations under the UNFCCC 25
5.2.2 Climate change under the G8 26
5.2.3 Asia-Pacific Partnership for Clean Development and Climate 28
6 UNITED NATIONS CLIMATE CHANGE CONFERENCE, BALI ......................................... 28
6.1 Key takeaways .................................................................................................. 29
6.1.1 Fourth Assessment Report of Intergovernmental Panel on Climate Change 29
6.1.2 Adaptation fund 29
6.1.3 Technology transfer 30
6.1.4 Reducing emissions from deforestation in developing countries (REDD) 30
6.1.5 Review pursuant to Article 9 of the Kyoto Protocol 31
6.1.6 Clean Development Mechanism (CDM) 31
6.1.7 Compliance 31
6.1.8 Joint Implementation (JI) 32
6.1.9 Bali Action Plan 32
6.2 Comments.......................................................................................................... 34

Index ix
CHAPTER 2. OPTIONS FOR FUTURE INTERNATIONAL CLIMATE CHANGE
ARCHITECTURES........................................................................................................................... 36
1 INTRODUCTION ............................................................................................................................ 37
1.1 Introduction....................................................................................................... 37
1.2 Elements for a future international agreement on climate change ........... 39
1.3 Criteria for policy choice ................................................................................. 41
2 PROPOSALS FOR INTERNATIONAL CLIMATE CHANGE AGREEMENTS .................. 42
2.1 National emission targets and international emission trading.................. 43
2.1.1 Alternative Target Approaches 44
2.1.1.1 Absolute emission targets..........................................................................................45
2.1.1.2 Dynamic targets ..........................................................................................................46
2.1.1.3 No-lose targets.............................................................................................................47
2.1.1.4 Dual targets..................................................................................................................48
2.1.1.5 Price cap .......................................................................................................................49
2.1.1.6 Sectoral targets ............................................................................................................50
2.1.2 Description of approaches to future commitments 52
2.1.2.1 Multistage approach...................................................................................................52
2.1.2.2 Contraction and Convergence (C&C).......................................................................56
2.1.2.3 Common but Differentiated Convergence (CDC) ..................................................60
2.1.2.4 Global Tryptich............................................................................................................63
2.1.2.5 Historical responsibility – The Brazilian Proposal..................................................66
2.1.3 Overview of the approaches 69
2.1.4 Qualitative Comparison 70
2.1.4.1 Environmental effectiveness......................................................................................71
2.1.4.2 Cost-effectiveness........................................................................................................72
2.1.4.3 Distributional considerations ....................................................................................73
2.1.4.4 Institutional feasibility................................................................................................76
2.1.5 Conclusions 78
2.2 Sectoral agreements ......................................................................................... 80
2.3 Coordinated policies and measures............................................................... 87
2.4 Technology oriented agreements (TOAs)..................................................... 88
2.5 Development oriented actions........................................................................ 89
3 EVALUATING INTERNATIONAL CLIMATE CHANGE AGREEMENTS ........................ 91
3.1 Criterion-based assessment ............................................................................ 92
3.1.1 Environmental effectiveness 93
3.1.2 Cost-effectiveness 94
3.1.3 Distributional considerations 95

Index x
3.1.4 Institutional feasibility 95
3.2 Regional-based assessment............................................................................. 96
3.2.1 Interests of countries 97
3.2.2 Incentives for participation of key countries 101
3.2.2.1 India............................................................................................................................101
3.2.2.2 China...........................................................................................................................102
3.2.2.3 USA.............................................................................................................................103
3.2.3 Regional comparison 104
3.2.4 Major public climate policies and implementation of commitments 106
3.2.4.1 European Union ........................................................................................................106
3.2.4.2 USA.............................................................................................................................108
3.2.4.3 Japan ...........................................................................................................................109
3.2.4.4 Russia..........................................................................................................................109
3.2.4.5 China...........................................................................................................................110
3.2.4.6 India............................................................................................................................110
3.2.4.7 Brazil...........................................................................................................................111
3.2.4.8 Sector-wide transnational (industry) approaches.................................................111
3.3 Post-Kyoto agreement and the Bali Action Plan........................................ 112
4 RECENT PROPOSALS FOR A FULL FUTURE CLIMATE REGIME .................................. 115
4.1 A Viable Global Framework for Preventing Dangerous Climate
Change, Climate Action Network (CAN)................................................... 116
4.2 South North Proposal – Equity in the greenhouse.................................... 117
4.3 Greenhouse Development Rights ................................................................ 119
4.4 International Climate Efforts Beyond 2012: Report of the Climate
Dialogue at Pocantico .................................................................................... 121
4.5 Sao Paulo Proposal of the BASIC Project.................................................... 122
4.6 Sector-based Approach to the Post-2012 Climate Change Policy
Architecture, Center for Clean Air Policy (CCAP).................................... 123
4.7 Policy Directions to 2050, A Business contribution to the dialogues on
cooperative action .......................................................................................... 124
4.8 Global Leadership for Climate Action: Framework for a Post-2012
Agreement on Climate Change.................................................................... 125

Index xi
CHAPTER 3. IMPLICATIONS OF FUTURE CLIMATE REGIME ARCHITECTURES......... 128
1 INTRODUCTION .......................................................................................................................... 129
1.1 Introduction..................................................................................................... 129
1.2 Overview of literature ................................................................................... 130
1.3 Stabilization of greenhouse gas concentrations......................................... 133
2 REGIONAL EMISSION ALLOWANCES ................................................................................. 136
2.1 Overview of approaches................................................................................ 136
2.2 Results and discussion................................................................................... 140
2.2.1 450 ppmv CO2eq. 141
2.2.2 550 ppmv CO2eq. 146
2.2.3 650 ppmv CO2eq. 149
2.2.4 Comparison of the approaches 151
2.2.5 Conclusions 154
3 REGIONAL ABATEMENT COSTS............................................................................................ 155
3.1 Overview of approaches................................................................................ 156
3.2 Results and discussion................................................................................... 157
CHAPTER 4. CASE STUDY: SPAIN ................................................................................................ 163
1 INTRODUCTION .......................................................................................................................... 164
2 CURRENT SITUATION, TRENDS AND PROJECTIONS.................................................... 165
2.1 Introduction..................................................................................................... 165
2.2 Nationwide factors and indicators .............................................................. 166
2.2.1 Factors driving emissions 166
2.2.2 Primary energy supply 169
2.2.3 Historic and projected GHG emissions 171
2.3 Factors and indicators by sector................................................................... 173
2.3.1 Electricity (Industries and fugitive emissions) 174
2.3.2 Industry 175
2.3.3 Transport 176
2.3.4 Households and services 177
2.3.5 Agriculture (non-carbon dioxide) 178
2.3.6 Waste 178
2.3.7 Land use, land-use change and forestry 179
2.3.8 International transport 179

Index xii
2.3.9 Overview of sectoral indicators 180
2.4 Energy investment ......................................................................................... 183
2.5 Policies and measures.................................................................................... 183
2.6 Summary.......................................................................................................... 185
3 OPTIONS FOR POST-2012 EU BURDEN-SHARING. IMPLICATIONS ON SPAIN...... 186
3.1 Introduction..................................................................................................... 186
3.2 Options for post-2012 EU burden-sharing and ETS allocation................ 188
3.2.1 European Commission’s proposal for EU effort sharing (January 2008) 191
3.3 Model analysis (FAIR 2.1) ............................................................................. 197
3.3.1 Option 1. Present system 198
3.3.1.1 Emission allowances.................................................................................................198
3.3.1.2 Emissions trading......................................................................................................201
3.3.1.3 Abatement costs ........................................................................................................202
3.3.1.4 Abatement measures ................................................................................................203
3.3.2 Option 2. EU burden-sharing with ETS allocation at EU level 206
3.3.2.1 Step 1: EU-wide cap for ETS and non-ETS ............................................................207
3.3.2.2 Step 2: Sectoral ETS Caps.........................................................................................208
3.3.2.3 Step 3: Member State non-ETS caps........................................................................210
3.3.2.4 Emission allowances.................................................................................................212
3.3.2.5 Emissions trading......................................................................................................215
3.3.2.6 Abatement costs ........................................................................................................216
3.3.3 Discussions 217
3.3.3.1 Quantitative assessment...........................................................................................217
3.3.3.2 Implications on Spain of EC’s effort sharing proposal (January 2008) ..............219
CHAPTER 5. CONCLUSIONS .......................................................................................................... 224
1 INTRODUCTION .......................................................................................................................... 225
2 BALI: CONCLUSIONS AND THE WAY FORWARD ............................................................ 226
3 KEY ELEMENTS OF THE FUTURE CLIMATE CHANGE REGIME................................... 228
3.1 Emissions targets............................................................................................ 229
3.2 The role of developing countries ................................................................. 234
3.3 International emissions trading.................................................................... 239
3.4 Sectoral agreements ....................................................................................... 243
3.5 Technology ...................................................................................................... 246
3.6 Adaptation....................................................................................................... 250

Index xiii
CHAPTER 6. REFERENCES............................................................................................................... 252

Index of figures xiv
Index of figures
Figure 1 - 1. Changes in temperature, sea level and Northern Hemisphere snow
cover (Source: IPCC 2007).................................................................................................... 10
Figure 1 - 2. Global anthropogenic GHG emissions (Source: IPCC 2007) .............. 10
Figure 2 - 1. Countries’ different expectations of a future climate change regime
.......................................................................................................................................................... 99
Figure 2 - 2. Capacity Capacity/Development Need chart for India, China and
the United States, with $9,000 per capita (PPP) development threshold. ... 120
Figure 3 - 1. Reference emissions and emissions corridor towards stabilization
at 450 ppmv CO2 (550 ppmv CO2eq.) (Source: Höhne, 2006) ........................... 134
Figure 3 - 2. Reference emissions, emissions corridor towards 550 ppmv CO2
(650 ppmv CO2eq.) and emissions corridor towards 400 ppmv CO2 (450
ppmv CO2eq.) (Source: Höhne, 2006) .......................................................................... 135
Figure 3 - 3. Selected global emission levels for 2020 and 2050 relative to 1990
for this analysis (Source: Höhne, 2006)........................................................................ 135
Figure 3 - 4. Illustrative pathway for an Annex I country (left) and a Non-
Annex I country (right)....................................................................................................... 141
Figure 3 - 5.Change in emission allowances from 1990 to 2020 (top) or 2050
(bottom) under the 450 ppmv CO2eq. scenario (Source: Höhne et al., 2007)
........................................................................................................................................................ 143
Figure 3 - 6. Change in emission allowances from 1990 to 2020 (top) or 2050
(bottom) under the 550 ppmv CO2eq. scenario (Source: Höhne et al., 2007)
........................................................................................................................................................ 147

Index of figures xv
Figure 3 - 7. Change in emission allowances from 1990 to 2020 (top) or 2050
(bottom) under the 650 ppmv CO2eq. scenario (Source: Höhne et al., 2007)
........................................................................................................................................................ 150
Figure 3 - 8. Regional abatement costs as percentage of GDP in 2025 and 2050
(Source: den Elzen et al., 2005) ........................................................................................ 158
Figure 4 - 1. Calibration of performance parameters (Source: Höhne et al., 2007).
........................................................................................................................................................ 169
Figure 4 - 2. Trends in nationwide intensities between 1990 and 2004 relative to
their 2004 value (Source: Höhne et al., 2007)............................................................ 169
Figure 4 - 3. ‘Performance meter comparing Spain’s performance to other
countries’ for each of the four indicators (Source: Höhne et al., 2007). ........ 169
Figure 4 - 4 . Evolution of Total Primary Energy Supply(excluding electricity
trade) from 1971 to 2005 for Spain (Source: IEA Energy Statistics 2007)..... 170
Figure 4 - 5. Historical and projected GHG emissions and (progress towards)
GHG targets for Spain......................................................................................................... 172
Figure 4 - 6. Indicators for Industry emissions (left); and ‘performance meter’
for the energy efficiency index (right) for Spain in 2004 (Source: Höhne et
al., 2007). .................................................................................................................................... 176
Figure 4 - 7. Sectoral indicators for Spain (2004 data); trends between 1990 and
2004; and ‘performance meters’ (Source: Höhne et al., 2007). .......................... 181
Figure 4 - 8. Trends in production for each of the sectors compared with trends
in emissions between 1990 and 2004 for Spain (Source: Höhne et al., 2007).
........................................................................................................................................................ 181
Figure 4 - 9. Share of sector in total GHG emissions (without LULUCF and
international transport) for Spain in 2005. ................................................................. 182

Index of figures xvi
Figure 4 - 10. GDP per sector for Spain in 2005. ............................................................... 182
Figure 4 - 11. Breakdown of energy R&D investment in Spain in 2004 into
various categories (Source: Höhne et al., 2007). ...................................................... 183
Figure 4 - 12. Present system: EU burden-sharing with ETS allocation at national
level (Source: Sijm et al., 2007). ...................................................................................... 189
Figure 4 - 13. EU burden-sharing with ETS allocation at EU level (Source: Sijm
et al., 2007). ............................................................................................................................... 190
Figure 4 - 14. European Commission’s proposal for EU effort sharing (23 rd
January 2008)........................................................................................................................... 192
Figure 4 - 15. Country specific targets for non EU ETS modulated on the basis of
GDP/capita (Source: EC 2008) ........................................................................................ 196
Figure 4 - 16. Emission allowances compared to 1990 levels for 2020 for Spain
under the ‘EU 20% unilateral (with or without CDM)’and the ‘EU 30% in a
multilateral regime’scenarios........................................................................................... 199
Figure 4 - 17. Emission allowances compared to baseline levels for 2020 for
Spain under the ‘EU 20% unilateral (with or without CDM)’and the ‘EU
30% in a multilateral regime’scenarios........................................................................ 200
Figure 4 - 18. Emissions trading for 2020 for Spain under the ‘EU 20% unilateral
without CDM’, the ‘EU 20% unilateral with CDM’ and the ‘EU 30% in a
multilateral regime’scenarios........................................................................................... 202
Figure 4 - 19. Abatement costs as % of GDP for 2020 for Spain under the ‘EU
20% unilateral without CDM’, the ‘EU 20% unilateral with CDM’ and the
‘EU 30% in a multilateral regime’scenarios............................................................... 203
Figure 4 - 20.Reduction percentage of the total domestic reduction (baseline
minus target) for Spain per sector for the year 2020 for the ‘EU 20%
unilateral without CDM’ scenario. Other scenarios give similar results. ... 204

Index of figures xvii
Figure 4 - 21. Reduction percentage of the total domestic reduction (baseline
minus target) for Spain per aggregated reduction measure for the year 2020
for the ‘EU 20% unilateral without CDM’ scenario. Other scenarios give
similar results.......................................................................................................................... 204
Figure 4 - 22. The four steps for the calculation of Option 2: EU burden-sharing
with ETS allocation at EU level....................................................................................... 206
Figure 4 - 23. The EU-wide cap for ETS and non-ETS pertaining to the three
allocation options considered for the ‘EU 20% unilateral without CDM’
scenario (left) and ‘EU 30% in a multilateral regime’ scenario (right).
(Source: den Elzen et al., 2007b). .................................................................................... 208
Figure 4 - 24. The EU-wide reduction targets (before emissions trading and
CDM) for the industrial and power sectors, based on an EU-wide ETS cap
for the ‘EU 20% unilateral without CDM’ scenario (left) and ‘EU 30% in a
multilateral regime’ scenario (right). (Source: den Elzen et al., 2007b)........ 209
Figure 4 - 25. The reduction targets (before emissions trading and CDM) for the
industrial and power sectors for Spain for the three allocation approaches
for the ‘EU 20% unilateral without CDM’(left) and EU 30% in a multilateral
regime’ (right) scenario....................................................................................................... 210
Figure 4 - 26. Spain’s reduction targets for the non-ETS sector for the six
considered allocation approaches for ‘EU 20% unilateral with/without
CDM’(left) and ‘EU 30% in a multilateral regime’. .............................................. 212
Figure 4 - 27 . Emission allowances compared to 1990 levels for 2020 for Spain
for the six considered allocation approaches under the ‘EU 20% unilateral
with/without CDM’ and the ‘EU 30% in a multilateral regime’ scenarios.
........................................................................................................................................................ 213
Figure 4 - 28. Emission allowances compared to baseline levels for 2020 for
Spain for the six considered allocation approaches under the ‘EU 20%

Index of figures xviii
unilateral with/without CDM’ and the ‘EU 30% in a multilateral regime’
scenarios. ................................................................................................................................... 213
Figure 4 - 29. Emissions trading for 2020 for Spain for the six allocation
approaches under the ‘EU 20% unilateral without CDM’, ‘EU 20%
unilateral with CDM ’and ‘EU 30% in a multilateral regime’ scenarios. ... 216
Figure 4 - 30. Abatement costs as % of GDP for 2020 for Spain for the six
allocation approaches under the ‘EU 20% unilateral without CDM’, ‘EU
20% unilateral with CDM ’and ‘EU 30% in a multilateral regime’ scenarios.
The dotted lines represent the EU average. .............................................................. 217
Figure 4 - 31. GHG emissions and targets for Spain compared with Europe
(Source: El País)...................................................................................................................... 222

Index of tables xix
Index of tables
Table 1 - 1. Brief history of the science and politics of climate change ..................... 8
Table 2 - 1. Possible country positions. Multistage approach. .................................... 54
Table 2 - 2. Possible country positions. Contraction and Convergence (C&C)... 58
Table 2 - 3. Possible country positions. Common but Differentiated
Convergence (CDC)................................................................................................................ 61
Table 2 - 4. Possible country positions. Global Tryptich ............................................... 64
Table 2 - 5. Possible country positions. Historical responsibility – The Brazilian
Proposal ....................................................................................................................................... 67
Table 2 - 6. Overview of approaches based on national emission targets and
international emissions trading ........................................................................................ 69
Table 2 - 7. Criteria assessment of different national emission targets and
international emissions trading approaches............................................................... 78
Table 2 - 8. Criterion based assessment of international climate change
agreements.................................................................................................................................. 92
Table 2 - 9. Selective country perspectives of international climate change
agreements.................................................................................................................................. 98
Table 3 - 1. Overview of literature regarding regional implications for future
climate change regimes....................................................................................................... 131

Index of tables xx
Table 3 - 2. Possible emission reduction pathways and global emissions
reference points for the different global emission stabilization levels as
used in the analysis carried out by Höhne et al., 2007 ......................................... 136
Table 3 - 3. Summary of the strengths and weaknesses of the major approaches
........................................................................................................................................................ 138
Table 3 - 4. Ranges of emission reductions according to all applied approaches
as percentage change from 1990 under the 450, 550 and 650 ppmv CO2eq.
scenarios (Source: Höhne et al., 2007).......................................................................... 154
Table 4 - 1 . Nationwide indicators for Spain. Factors driving emissions
(population, GDP, and energy) and GHG................................................................. 166
Table 4 - 2 . Nationwide intensities for Spain................................................................... 168
Table 4 - 3 . Mix of energy sources for Spain (Source: IEA Energy Statistics
2007)............................................................................................................................................. 170
Table 4 - 4 . Contribution of the relative gases to total GHG emissions
(excluding LULUCF) in 2006 for Spain (Source: 2008 GHG inventory
submitted to the UNFCCC). ............................................................................................. 172
Table 4 - 5. Change in emissions from base (1990) to latest reported year (2006)
and current (2006) progress to targets for Spain..................................................... 173
Table 4 - 6 . National greenhouse gas emissions per sector for Spain in 2005... 174
Table 4 - 7 . Indicators for Energy industries and fugitive emissions for Spain in
2005. ............................................................................................................................................. 175
Table 4 - 8. Indicators for the transport sector for Spain (2004, 2005 data) ......... 177
Table 4 - 9 . Indicators for the households and services sector for Spain (2004,
2005 data) .................................................................................................................................. 178

Index of tables xxi
Table 4 - 10 . Indicators for the Agriculture sector (non-carbon dioxide) for
Spain (2004, 2005 data)........................................................................................................ 178
Table 4 - 11. Indicators for the waste sector for Spain (2004, 2005 data) .............. 179
Table 4 - 12. Indicators for the land use, land-use change and forestry sector for
Spain (2005 data).................................................................................................................... 179
Table 4 - 13. Indicators for international transport (2004, 2005 data) .................... 180
Table 4 - 14 . Policies affecting sectoral greenhouse gas emissions in Spain...... 184
Table 4 - 15 . Reduction in EU ETS (including outbound aviation) and–non EU
ETS sectors to meet the 20% reduction in a cost-effective way........................ 194
Table 4 - 16. The various allocation methods used in the three calculation steps
for Option 2: EU burden-sharing with ETS allocation at EU level (Source:
den Elzen et al., 2007b)........................................................................................................ 211
Table 4 - 17 . Targets proposed for Spain 2020 by the EC ........................................... 221
Table 4 - 18 . Implicit GHG emission target compared to 1990 levels proposed
by the EC for Spain ............................................................................................................... 221
Table 4 - 19 . Impact of distribution of RES target, GHG reduction commitments
for the sectors not covered by the EU ETS and rights to auction allowances
........................................................................................................................................................ 222

1
Introduction

Chapter 1. Introduction 2
1 Introduction
The objective of this project is to carry out a report providing an overview of
the current status of international negotiations on the future climate change
regime; to identify and evaluate the various proposals currently being
considered for the future agreement on climate change; to examine the likely
implications of these potential agreements, in particular for Spain; and to
express an opinion on the architecture that, based on the aforementioned, is
considered preferable.
International negotiations have lead to first steps in combating climate
change with the United Nations Framework Convention on Climate Change
(UNFCCC) and the Kyoto Protocol. Under the Protocol, industrialized countries
have to reduce their greenhouse gas emissions by around five per cent between
2008 and 2012 compared to 1990 levels. It is however broadly recognized that
further steps are necessary to stabilize the climate in the long term.
The Intergovernmental Panel on Climate Change (IPCC) sent a clear signal
from science after the release of its three reports in 2007, which combined with
the mobilization of political will at the highest level, lead to the breakthrough at
the Bali Climate Change Conference in December. Both developed and
developing countries agreed to jointly step up efforts to combat climate change
and launch negotiations on a new climate change deal to be concluded in
Copenhagen by the end of 2009.
The purpose of this paper is to put forward a set of proposals on global
policy that satisfy the following basic principles: effectiveness – it must lead to
cuts in greenhouse gas (GHG) emissions on the scale required to keep the risks
from climate change at acceptable levels; efficiency – it must be implemented in
the most cost-effective way, with mitigation being undertaken there were it is
cheapest; equity – to take account of the fact that poor countries will often be
heat the earliest and hardest, while rich countries have a particular
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Chapter 1. Introduction 3
responsibility for past emissions; and institutional feasibility –the extent to
which a policy may be seen as legitimate, accepted, adopted and implemented,
political realities have to be taken into account.
The purpose of this paper is not to prescribe specific instruments or
technologies. The objective of this paper is to support the negotiations of the
post-2012 international climate change regime which needs to be agreed by
2009 and translated into national policy and action plans between 2010-2012.
For this purpose, existing proposals have been identified, assessed and further
developed in order to suggest which are more likely to be suitable.
The findings of this paper intend to facilitate any discussion on the future of
the international climate change regime, for both experienced negotiators or
people seeking to form an opinion or position on the subject. It takes a broad
view of the problem; throughout the report different issues are discussed and
assessed in order to provide some recommendations on the subject. The scope
of the work of the project included the following research themes:
• To provide an overview of the problem of climate change and current
international negotiations (Chapter 1);
• To review possible options on how to design the future international
climate change regime and to further develop selected available
approaches (Chapter 2);
• To quantify and to assess effects of approaches for selected countries and
regions – mainly emission allowances and abatement costs (Chapter 3);
• To provide data on the current situation regarding climate change and
the possible implications that the future regime designs could have on
Spain (Chapter 4); and
• To provide recommendations of how to develop the design of the future
international climate change regime (Chapter 5).
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Chapter 1. Introduction 4
2 Historical Background
2.1 Until 1988
We owe the discovery that greenhouse gases block infrared radiation to the
Irish-British scientist John Tyndall, in 1859. He was the first to suggest that
changes in their atmospheric concentrations could lead to changes in climate.
In 1986 the Swedish scientist Svante Arrhenius, who won the Nobel Prize for
Chemistry in 1903, published a new idea. As humanity burned fossil fuels such
as coal, which added carbon dioxide gas to the earth's atmosphere, the planet
average temperature would be risen. This “greenhouse effect” was only one of
many speculations; scientists found good reasons to believe that these
emissions could not change the climate, and that any major change seemed
impossible except over tens of thousands of years. He also developed a theory
to explain earth's ice ages and other climate changes.
For the next 60 years or so, the significance of Arrhenius's calculation
remained by and large unrecognized. In the 1930's people realized the North
Atlantic region had warmed considerably during the previous half-century;
scientists supposed this was just a phase of a natural cycle. Only G.S. Callendar,
an amateur, argues that carbon dioxide greenhouse global warming is
underway. In the 1950's, Callendar's claims made some scientists to look into
the question with improved techniques and calculations. The new studies
showed that, contrary to early believes, carbon dioxide could indeed
concentrate in the atmosphere and cause global warming.
Scrupulous scientific work for three decades and several scientific
assessments led to the 1985 International Conference on the Assessment of the
Role of Carbon Dioxide and Other Greenhouse Gases in Climate Variations and
Associated Impacts, organized by the International Council of Scientific Unions,
the World Meteorological Organization (WMO), and the United Nations
Environment Programme (UNEP) at Villach, Austria. In this conference, experts
from 29 countries, both rich and poor, exchanged knowledge and argued over
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Chapter 1. Introduction 5
ideas. From their review of the evidence accumulated in the past years, the
Villach scientists agreed that greenhouse gases could warm the Earth by several
degrees, with grave consequences. The main discovery was that methane gas
and various other gases emitted by industry and agriculture, add to the
warming caused by carbon dioxide; this meant that significant changes could be
expected within a lifetime rather than in some distant future. In their
concluding statement scientists announced that “human releases of greenhouse
gases could lead in the first half of the 21 st century to a rise of global
temperature ... greater than any in man's history.” As usual, the scientists called
for more research, but also called on governments to consider positive actions
to prevent too much warming. They urged “active collaboration between
scientists and policymakers to explore the effectiveness of alternative policies
and adjustments”.
Another milestone in the history of climate change is the 1988 “World
Conference on the Changing Atmosphere: Implications for Global Security”,
nicknamed the Toronto Conference. The Toronto Conference's report concluded
that the changes in the atmosphere due to human pollution “represent a major
threat to international security and are already having harmful consequences
over many parts of the globe”. For the first time, scientists called for
governments to set strict, specific targets for reducing greenhouse gas
emissions. The Montreal Protocol Model was to set targets internationally and
let governments come up with their own policies to meet the targets. By 2005,
said the experts, emissions should be reduced some 20% below the 1998 level.
Governments decided in 1988 to establish the Intergovernmental Panel on
Climate Change (IPCC), a joint program of the WMO and UNEP, to provide
policy-relevant but not policy-prescriptive advice. The IPCC was composed
mainly of people who participated not only as science experts, but as official
representatives of their governments.
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Chapter 1. Introduction 6
2.2 After 1988
Global warming was now firmly in place as an international issue. In many
countries it was debated in national politics, conferences proliferated, scientific
community was taking up the topic with far greater enthusiasm than ever.
Hopes that the Toronto agreement would do to carbon dioxide what the
Montreal agreement had done for ozone soon decreased. Greenhouse gases
could not command the strong scientific consensus that had quickly formed for
the ozone danger. There was no dramatically visible proof, like the “ozone
holes” images shown to the public; and vastly greater economic forces were at
stake.
The IPCC published its first report in 1990, establishing that emissions of
greenhouse gases resulting from human activities were substantially increasing
their atmospheric concentrations and that under a business-as-usual scenario,
the 21 st century would witness an increase in global mean temperature greater
than any seen in the past ten thousand years. The report specifically rejected the
objection, raised by a small group of scientists, that the main cause of any
observed changes was solar variations.
The IPCC had written its report in preparation for a Second World Climate
Conference, held in November 1990. Strongly influenced by the IPCC's
conclusions, the United Nations General Assembly called for negotiations
towards an international agreement that might restrain global warming. The
Intergovernmental Negotiating Committee was established in December 1990,
which drafted the UN Framework Convention on Climate Change (UNFCCC)
including targets for reducing emissions. It was signed by 154 heads of states in
the Earth Summit in Rio in 1992 and came into force in 1994. The agreement's
evasions and ambiguities let governments avoid, if they chose to, serious action
to reduce greenhouse gases. The agreement did establish some basic principles,
and pointed out a path for further negotiation.
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Chapter 1. Introduction 7
In 1995, the IPCC announced its conclusion to the world: while
acknowledging many uncertainties, the experts found, first, that the world was
certainly getting warmer; and second, that this was probably not entirely
natural, “the balance of evidence suggests that there is a discernible human
influence on global climate”.
The next major meeting, the 1997 UN Conference on Climate Change, was
held in Kyoto, Japan. The greenhouse debate became tangled up with problems
involving fairness and the power relations between industrialized and
developing countries. United States proposed to gradually reduce emissions to
the 1990 levels; Western Europe countries demanded more aggressive action;
coal-rich China and most other developing countries, however, demanded
exemption from the regulations until their economies caught up with the
nations that had already industrialized. As a further impediment, the countries
with the most to lose from global warming – the poor – had the least power to
negotiate an agreement. A dramatic intervention by the U.S. Vice President Al
Gore, who flew to Kyoto on the last day, pushed through a compromise – the
Kyoto Protocol. The agreement exempted poor countries for the time being, and
engaged wealthy countries to cut their emissions significantly by 2012. This was
only an initial experiment, presumably followed by a better agreement.
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Chapter 1. Introduction 8
Year Event
1800 – Level of carbon dioxide gas (CO ) in the atmosphere, as later measured in ancient ice, is about 290 ppm (parts per million).
2
1870
Mean global temperature (1850 – 1870) is about 13.6ºC.
1824 Joseph Fourier calculates the Earth would be colder if it lacked an atmosphere.
1859
1896
1930s
1938
1957
1960 Downturn of global temperatures since 1940s is reported.
1965
Boulder, Colo. meeting on causes of climate change: Lorenz and others point out the chaotic nature of climate system and the
possibility of sudden shifts.
1967 Manabe and Wetherald make a convincing calculation that doubling CO2 would raise world temperatures a couple of degrees.
1972 Ice cores and other evidence show big climate shifts in the past between relatively stable modes.
1974 Cooling from aerosols suspected to be as likely as warming; journalists talk of ice age.
1977 Scientific opinion tends to converge on global warming, not cooling, as the chief climate risk in next century.
1979 US National Academy of Sciences report finds it highly credible that doubling CO2 will bring 1.5-4.5°C global warming.
1981 Some scientists predict greenhouse warming "signal" should be visible by about the year 2000.
1985
Villach conference declares consensus among experts that some global warming seems inevitable, calls on governments to
consider international agreements to restrict emissions.
1987 Montreal Protocol imposes international restrictions on emission of ozone-destroying gases.
1988 Toronto conference calls for strict, specific limits on greenhouse gas emissions (20% reduction of 1998 levels by 2005).
Intergovernmental Panel on Climate Change (IPCC) is established.
1990 First IPCC report says world has been warming and future warming seems likely.
1992 Conference in Rio de Janeiro produces UN Framework Convention on Climate Change (US blocks calls for serious action).
1995
1997
2001 Third IPCC report states that global warming, unprecedented since end of last ice age, is "very likely".
US refuses to ratify the Kyoto Protocol.
2005 Kyoto treaty goes into effect.
2007
John Tyndall discovers that some gases block infrared radiation and suggests that changes in their concentrations could change
climate.
Svante Arrhenius publishes fist calculation of global warming from CO 2 human emissions.
Global warming trend since late 19 th century reported.
G. S. Callendar argues that CO 2 greenhouse warming is underway.
Roger Revelle finds that anthropogenic CO 2 will not be readily absorbed by the oceans.
Keeling accurately measures CO2 in the Earth's atmosphere – 315 ppm - and detects an annual rise. Mean global temperature
(five-year average) is 13.9ºC.
Second IPCC report detects "signature" of human-caused greenhouse effect warming, declares that serious warming is likely in
the coming century.
International conference produces Kyoto Protocol, setting targets to reduce greenhouse gas emissions if enough nations sign
onto a treaty.
EU Carbon Market created.
Six countries form the Asia-Pacific Partnership on Clean Development and Climate.
Gleneagles Dialogues launched.
Fourth IPCC report warns that serious effects of warming have become evident; cost of reducing emissions would be far less
than the damage they will cause.
Level of CO 2 in the atmosphere reaches 382 ppm. Mean global temperature (five-year average) is 14.5°C, the warmest in
hundreds, perhaps thousands of years.
Table 1 - 1. Brief history of the science and politics of climate change
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Chapter 1. Introduction 9
3 Climate Change Science
The sate of knowledge has improved with respect to detection and
attribution of the human impact on climate. The Intergovernmental Panel on
Climate Change (IPCC), established by the World Meteorological Organization
and the United Nations Environment Programme in 1988, convenes thousands
of scientists periodically to review and synthesize the state of scholarly research
on global climate change for the policy community. The IPCC has published
four major assessments of the climate change literature, finding with each one
of them stronger evidence of human impacts on the global climate.
The IPCC stated in its fourth assessment report that “warming of the climate
system is unequivocal, as is now evident from observations of global average
air and ocean temperatures, widespread melting of snow and ice, and rising
global mean sea level” (IPCC 2007). From IPCC’s recent findings: global
temperature has increased 0.74 [0.56 to 0.92] ºC from 1906 to 2005; global
average sea level has risen since 1993 at 3.1 [2.4 to 3.8] mm/yr, with
contributions from thermal expansion, melting glacier and ice caps, and the
polar ice sheets; average Arctic sea ice extent has shrunk by 2.7 [2.1 to 3.3] % per
decade, with larger decreases in summer (around 7.4%).
Having established that the global climate is warming, the IPCC concluded
that “Most of the observed increase in globally-averaged temperatures since the
mid-20 th century is very likely due to the observed increase in anthropogenic
GHG (greenhouse gas) concentrations. Global greenhouse gas (GHG) emissions
due to human activities have grown 70% between 1970 and 2004; these
increases are due primarily to fossil fuel use, with land-use providing a smaller
contribution. Atmospheric concentrations of CO2 in 2005 (379 parts per million
ppm) exceeded by far the natural range over the last 650,000 years.
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Chapter 1. Introduction 10
Figure SPM.3
Figure 1 - 1. Changes in temperature, sea level and Northern Hemisphere snow cover (Source: IPCC
2007)
Figure 1 - 2. Global anthropogenic GHG emissions (Source: IPCC 2007)
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Chapter 1. Introduction 11
The IPCC (2007) forecasts accelerated warming under a variety of scenarios.
Even if atmospheric concentrations of greenhouse gases could be held constant
at the year 2000 levels through the twenty-first century, the global climate
would warm 0.6ºC (+/- 0.3ªC). Under a variety of long-term scenarios,
temperature increases could range from 1.1 to 6.4ºC by 2100.
The changing climate will result in numerous impacts. The sea level will rise,
on average globally, about 20 to 60 centimetres through 2100. Extreme weather
events may increase: hot extremes, heat waves, heavy precipitation, tropical
cyclone intensity. Agricultural, fishery, and forest productivity will change,
with adverse impacts more likely with higher levels of warming. Some aspects
of human health will be affected, such as heat-related mortality or changes in
infectious disease vectors like malaria. Some species of plants and animals,
especially those inhabiting unique ecosystems, may be at risk as the climate
changes, especially since the rate of change may exceed their capacity to
migrate or adapt.
Some impacts of anthropogenic warming could include potential
catastrophic events. Partial loss of ice sheets on polar land could result in rapid
and large increases of sea level rise – on the order of ten or more meters – and
imply major changes in coastlines and inundation of low-lying areas. A warmer
climate may induce strong, positive feedbacks, such as through the release of
large amounts of methane from melting of permafrost.
The capacity to adapt to such impacts varies substantially around the world,
as evident by different human capital and technology as well as effective
government institutions. Developing countries, where greater poverty and
vulnerability limit the capacity to act, would be the most serious harmed.
4 Climate change policy architecture
The impacts of global climate change pose serious, long-term risks. Global
climate change is the ultimate global-commons problem; damages are
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Chapter 1. Introduction 12
independent of the location of emissions. Because of this, a multinational
response is required. The challenge lies in designing an international policy
architecture that can guide such efforts.
The current climate policy architecture has evolved since 1992 under the
United Nations Framework Convention on Climate Change (UNFCCC) and the
Kyoto Protocol.
4.1 The United Nations Framework Convention on Climate Change
(UNFCCC)
In 1990, the United Nations General Assembly, based in part on the IPCC’s
first assessment report, initiated negotiations for a multilateral framework to
address the risks posed by global climate change. The result was the United
Nations Framework Convention on Climate Change (UNFCCC), signed at the
United Nations Conference on Environment and Development in Rio de
Janeiro, Brazil in 1992. With 190 countries as parties to the UNFCCC, the treaty
entered into force in 1994. Countries ratifying the treaty – called “Parties to the
Convention” – agree to take climate change into account in such matters as
agriculture, industry, energy, natural resources, and activities involving sea
coasts. They agree to develop national programmes to slow climate change.
The Conference of the Parties (COP) is the prime authority of the
Convention. It is an association of all member countries and usually meets
annually for a period of two weeks. The Conference of the Parties evaluates the
status of climate change (it considers new scientific findings) and the
effectiveness of the treaty (it examines the activity of member countries, by
reviewing national communications and emissions inventories). Some partner
agencies to the UNFCCC include the Global Environmental Facility (GEF) and
the Intergovernmental Panel on Climate Change (IPCC). The GEF has existed
since 1991 to fund projects in developing countries; the job of channelling
grants and loans to poor countries to help them address climate change has
been delegated to the GEF. The IPCC provides services to the Convention,
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Chapter 1. Introduction 13
although it is not part of it, through publishing comprehensive reviews every
five years of the status of climate change and climate-change science.
The UNFCCC created a global policy architecture with four key elements: a
general long-term environmental goal; a near-term environmental goal with
specific quantitative targets; concerns about equity; and preference for cost-
effective implementation.
The ultimate objective of the UNFCCC is the “stabilization of greenhouse gas
concentrations in the atmosphere at a level that would prevent dangerous
anthropogenic interference with the climate system” (Article 2). It was not
defined or quantified what was meant by dangerous. Some suggested
quantifying this objective with a long-term greenhouse gas concentration
stabilization goal (e.g., 550ppm – about double pre-industrial CO2
concentrations) or a temperature increase stabilization goal (e.g., 2ºC above
current levels). However, nothing has been agreed. Also, it was not specified a
time period for action. The UNFCCC states that “such a level should be
achieved within a time-frame sufficient to allow ecosystems to adapt naturally
to climate change, to ensure that food production is not threatened, and to
enable economic development to proceed in a sustainable manner” (Article 2).
The UNFCCC also set a near-term environmental goal with specific
quantitative targets. Industrialized nations, consisting of most members of the
Organisation of Economic Co-operation and Development (OECD) and twelve
economies in transition (countries in Central and Eastern Europe, including
some states formerly belonging to the Soviet Union) were expected by the year
2000 to reduce emissions to 1990 levels. As a group, forming the so-called
“Annex 1” countries - they are listed in the first annex to the treaty - they
succeeded. This compliance was not impressive, as most of them met their goal
through substantial economic decline and transformation (e.g., Russia and
Germany) or non-climate-related energy sector reforms (e.g., the United
Kingdom).
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Chapter 1. Introduction 14
One of the main principles declared is that of “common but differentiated
responsibilities” (Articles 3 and 4). The UNFCCC places the heaviest burden for
fighting climate change on industrialized nations, since they are the source of
most past and current greenhouse gas emissions. Industrialized countries
agreed on emission targets; developing countries had no policy obligations,
they only had to occasionally report on their climate vulnerabilities, and
monitor and report of greenhouse gas emissions. OECD member countries also
had to provide financial support to these countries, a system of grants and loans
had been set up through the UNFCCC and managed by the Global
Environment Facility. Industrialized countries also agreed to share technology
with less-advanced nations.
The UNFCCC established a pilot program for so-called “Joint
Implementation” (JI). This would allow an industrialized country to invest in an
emission-reducing project in a developing country and use the emission
reductions toward its 2000 emission goal. It was thought that this emission
trading would lower costs of achieving emission goals, by providing market-
based incentives to seek out the least-cost emission abatement opportunities.
But the pilot program resulted only in a modest number of jointly implemented
emission reduction projects.
Other important elements of the UNFCCC are processes for monitoring
greenhouse gas emissions, communicating countries’ climate policies or
reporting on how climate change may affect parties to the Convention. The
UNFCCC also acknowledged the vulnerability of developing countries to
climate change and called for special efforts to ease the consequences.
The Convention recognized that it is a “framework” document – something
to be amended or augmented over time, so that efforts to deal with climate
change can be made more effective. The first addition to the treaty, the Kyoto
Protocol, was adopted in 1997.
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Chapter 1. Introduction 15
4.2 The Kyoto Protocol
It took all of one year for the member countries of the UNFCCC to decide
that the Convention had to be augmented by an agreement with stricter
demands for reducing greenhouse-gas emissions. At the first Conference of the
Parties in Berlin, Germany, in 1995, it was decided to begin negotiations for a
second set of commitments by industrialized countries. The “Berlin Mandate”
reiterated the UNFCCC’s “common but differentiated responsibilities” in
effectively exempting developing countries from emission commitments. At the
second COP in Geneva, Switzerland, the United States argued in favour of
binding emission targets. The text of the Kyoto Protocol was finally adopted on
the eleventh day of the ten-day COP in Kyoto, Japan, in December 1997.
The Kyoto Protocol established emission commitments for industrialized
countries for the 2008-2012 time frame. These targets range from -8 per cent to
+10 per cent of the countries' individual 1990 emissions levels "with a view to
reducing their overall emissions of such gases by at least 5 per cent below
existing 1990 levels in the commitment period 2008 to 2012." In almost all cases -
- even those set at +10 per cent of 1990 levels -- the limits called for significant
reductions in projected emissions.
To reduce the burden of compliance on developed countries, the Kyoto
Protocol offered flexibility in how countries may meet their targets. It created
tradable emission allowances for industrialized countries with quantitative
targets, as the basis for an international emissions market. They could also
engage in Jointly Implemented (JI) projects among each other. The agreement
also established the Clean Development Mechanism (CDM), a framework to
generate emission reductions in developing countries. Other elements of
flexibility were included: implicit trading over time – short term banking and
borrowing; annual emissions could fluctuate between 2008 and 2012 as long as
the country’s aggregate did not exceed its five year emissions budget; as
commitments were based on a basket of all six types of greenhouse gases, inter-
gas trading would be implicitly allowed.
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Chapter 1. Introduction 16
The Kyoto Protocol stipulates that industrialized countries’ quantitative
emission commitments are legally binding. If a country exceeds its emission
target it is obligated to “repay” those tons in the second commitment period
plus a 30 percent penalty.
As in the UNFCCC, the Kyoto Protocol only calls on industrialized countries
to reduce their emissions. Developing countries would only have to cooperate
in CDM projects, submit reports to the United Nations, and benefit from
technology transfer.
The Kyoto Protocol not only had to be effective against a complicated
worldwide problem -- it also had to be politically acceptable. Even after the
agreement was approved in 1997, further negotiations at the next four COPs
were deemed necessary to address a variety of implementation details in the
agreement. These rules, adopted in the 2001 COP in Marrakesh, Morocco, are
called the "Marrakesh Accords." After the 2001 COP, industrialized countries
began to ratify the Kyoto Protocol. By that time, however, the George W. Bush
Administration in the United States announced that it would not ratify the
Kyoto Protocol, soon thereafter followed by the Government of Australia.
Kyoto Protocol entered into force in 2005 having met the dual requirements that
55 countries had ratified the agreement and jointly accounted for 55 percent of
1990 Annex I emissions.
Some industrialized countries have begun to consider or implement policies
to reduce their greenhouse gas emissions. The European Union (EU) launches
its Emission Trading Scheme in 2005, to cover approximately half of their
member countries emissions, primarily from power plants and large industrial
facilities. Since 1997, Japan has promoted emission abatement through the
implementation of the Keidanren Voluntary Action Plans on the Environment,
which aim to limit emissions in more than thirty industries to their 1990 levels
before 2010 (Government of Japan 2006). Nearly 500 CDM projects have been
financed by industrialized countries. The Kyoto Protocol will serve as a point of
departure for future climate change policy architectures.
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Chapter 1. Introduction 17
4.2.1 Flexible Mechanisms
The Kyoto Protocol included an array of market based mechanisms to
promote cost-effective implementation. Some of this “flexible mechanisms” are
explained below:
4.2.1.1 Emissions Trading – The “carbon market”
The limits on greenhouse-gas emissions set by the Kyoto Protocol are a way
of assigning monetary value to the earth's shared atmosphere. Nations that
have contributed the most to global warming have tended to benefit directly in
terms of greater business profits and higher standards of living, while they have
not been held proportionately accountable for the damages caused by their
emissions. The negative effects of climate change will be felt all over the world,
and actually the consequences are expected to be most severe in least-
developed nations which have produced few emissions.
The Protocol allows countries that have emissions units to spare – emissions
permitted them but not "used" – to sell this excess capacity to countries that are
over their targets. Countries not meeting their commitments will be able to
"buy" compliance, but the price may be steep. The higher the cost, the more
pressure they will feel to use energy more efficiently and to research and
promote the development of alternative sources of energy that have low or no
emissions.
It is called the "carbon market” as the most widely produced greenhouse gas
is carbon dioxide, and because emissions of other greenhouse gases will be
recorded and counted in terms of their "carbon dioxide equivalents”.
In practice, the Protocol's emissions-trading system was complicated to set
up. The details weren’t specified; additional negotiations were held and
resulted in the 2001 "Marrakech Accords." Some of the main problems are that
countries' actual emissions have to be monitored and guaranteed to be what
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Chapter 1. Introduction 18
they are reported to be; and precise records have to be kept of the trades carried
out.
Smaller "carbon markets" were established by the European Union and other
groups of countries; they were operating before the Protocol entered into force.
These emissions-trading systems were intended to start the process and to link
up with the Protocol's global market once it becomes operational.
European Union Emissions Trading Scheme (EU – ETS)
The European Union (EU) Emission Trading Scheme (ETS) is the largest
multinational greenhouse gas emission trading scheme in the world. The EU-
ETS officially began on January 1, 2005.
Under the scheme, each participating country has a National Action Plan
specifying caps on the greenhouse gas emissions for individual power plants
and other large point sources. Each of these gets a maximum amount of
“allowances” for a particular period. To comply, they can either reduce their
emissions or purchase allowances from facilities with an excess of allowances.
The EU- ETS started with a warm-up phase from 2005 to 2007, to be followed
by successive five year periods. The second phase (2008-2012) coincides with
the Kyoto first compliance period.
In the first phase of allocation for EU – ETS, more permits were allocated
than the businesses needed. This resulted in a sharp fall in the prices of carbon
and therefore the uselessness of the mechanism, as businesses had no limits
imposed. The over generous allocation of permits was based on the countries’
inflated projections of expected emissions.
The lack of any aggregate targets for national emissions worsened the
situation since countries did not need to make an explicit trade-off between
emissions in trading and non-trading sectors. The first phase of EU – ETS
covered six key industrial sectors installations responsible for around 45% of
the European carbon dioxide emissions. Transportation and building energy
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Chapter 1. Introduction 19
use were the largest sectors not included. Transportation remains a major
challenge as its emissions continue to grow strongly despite continuing policy
measures.
4.2.1.2 The Clean Development Mechanism
The Clean Development Mechanism (CDM) is a market-based trading
mechanism created by the Kyoto Protocol with the purpose of assisting:
- Developed (Annex I) countries in achieving their quantified emissions
reduction commitments; and
- Developing (Non-Annex I) countries in achieving sustainable
development.
Industrialized countries pay for projects that cut or avoid emissions in poorer
nations – and are awarded credits that can be applied to meeting their own
emissions targets. The recipient countries benefit from free introduction of
advanced technology that allow their factories or electrical generating plants to
operate more efficiently – and hence at lower costs and higher profits.
Greenhouse gas emissions of developing countries are growing, especially in
the case of enormously populous states such as China and India; with the
contribution of CDM based projects, future emissions will be lower than they
would have been otherwise.
The mechanism is meant to work bottom-up -- to proceed from individual
proposals to approval by donor and recipient governments to the allocation of
"certified emissions reduction” (CER) credits. Countries that earn these CERs
may then apply them to meeting the country’s emission limits, may "bank"
them for use later, or may sell them to other industrialized countries under the
Protocol's emissions-trading system. Certifications are issued by the CDM
Executive Board (CDM EB).
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Chapter 1. Introduction 20
The system also appeals to private companies and investors. Private firms
may earn profits from proposing and carrying out such work and they may
develop good reputations for their technology which will lead to further sales.
There are many challenges the Clean Development Mechanism has to face.
1. At present, projects in South America and Asia account for 95 percent of
CDM projects and CERs; three countries – China, Brazil, and India – account
for almost two thirds of these. On the other hand, Africa has received only a
very small percentage.
2. CERs generated by 2012 are expected to focus on the destruction of two
industrial gases: HFC23 and nitrous oxide (N2O). This has raised concerns
about the viability of projects with greater level of local sustainable
development benefits, which implicate higher implementation costs.
3. One of the biggest difficulties is the need for methodologies that calculate a
project’s emission reductions. Although some new ones have been
approved, they are not sufficient.
4. The role of the CDM in the post-2012 period is not yet clear. This is
constraining the development of new CDM projects.
5. Most projects would only earn CERs after 10 to 21 years, so CERs are
expected to generate well after 2012. Since reductions beyond 2012 have
limited value, the cost of CDM must be recovered prior to December 2012.
Unless a market value is established for post-2012 reductions, CDM projects
are likely to stop.
Some other options being considered at the time are being more permissive
with small-scale projects or allowing afforestation and reforestation projects to
be included in the scheme.
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Chapter 1. Introduction 21
4.2.1.3 Joint Implementation
This programme allows industrialized countries to meet part of their
required cuts in greenhouse-gas emissions by paying for projects that reduce
emissions in other industrialized countries.
The sponsoring governments will receive credits that may be applied to their
emissions targets; the recipient nations will gain foreign investment and
advanced technology, but not credit toward meeting their own emissions caps;
they have to do that themselves.
In practice, this will likely mean facilities built in the countries of Eastern
Europe and the former Soviet Union -- the "transition economies" -- paid for by
Western European and North American countries.
4.2.2 Strengths and weaknesses of the Kyoto Protocol
The international climate policy in the Kyoto Protocol has been both praised
and criticized. Here, six criteria are going to be used:
(1) Environmental outcome: The policy's impacts on climate change –
emissions or concentrations of greenhouse gases.
(2) Dynamic efficiency: An efficient policy would maximize the aggregate
present value of net benefits of taking actions to mitigate climate change
impacts.
(3) Dynamic cost-effectiveness: Identification of the least costly way to
achieve a given outcome.
(4) Distributional equity: Distribution of both costs and benefits across
populations, and between present and future generations.
(5) Flexibility in the presence of new information: A policy that can adapt to
new information and is not rigid, given the significant uncertainties of several
climate change aspects.
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Chapter 1. Introduction 22
(6) Participation and compliance: A climate policy that does not promote
these, will not address the climate change problem satisfactorily.
Strengths
• Cost-effective. The Kyoto Protocol created market-oriented institutions
and rules - the European Union launched the world’s largest emission
trading market in 2005 – and a broad coverage of emission sources and
sinks. A market based approach can lower marginal and total costs; but
this cost-effectiveness of the agreement is limited by its exclusion of
developing countries and its short-term targets.
• Some temporal flexibility in complying with emission commitments.
• Distributional equity. The Kyoto Protocol calls for countries historically
responsible for the anthropogenic greenhouse gases concentration to
adopt the first binding emissions; furthermore, these countries have a
much greater ability to pay for emission mitigation than the poor
countries, with no commitments.
Weaknesses
• Environmental outcome and dynamic efficiency.
The agreement does not include medium- or long-term emission goals,
which is harmful in terms of environmental outcome. On the other hand,
this absence may add flexibility, allowing the international policy
community to respond and adapt to future information. Anyway, it could
have set some long-term goals and also left some flexibility to adapt in the
short-term.
Emission leakage can further reduce the efficiency and the environmental
outcomes of the agreement. It sets cost on some sources – those in countries
with emission commitments – but no costs outside industrialized nations.
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Chapter 1. Introduction 23
Some firms can therefore relocate in these countries without commitments,
where costs would be less.
The most obvious weakness in the Kyoto Protocol is that three of the largest
emitters in the world do not face constraints on their emissions: China and
India do not have quantitative targets, and Russia’s commitments are too
generous. It will particularly reduce the environmental outcome of the
agreement the fact that the United States has not ratified it. This failure to
include the United States, China and India eliminates much of the potential
gains from trade. The large bureaucracy associated with project review
under the Clean Development Mechanism (CDM), as emission reduction
credit program outside the cap-and-trade system, may serve as an example
of how not to do it.
• Incentives for participation and compliance.
Take, for example, the United States’ withdrawal and the lack of developing
country commitments; even worse, the agreement prohibits developing
countries from voluntarily joining the set of emission commitments.
Argentina proposed an emission commitment in 1999, but received little
support for modifying the Kyoto Protocol. The provision for withdrawal
from the agreement suggests that “legally binding commitments” may not
be so binding.
5 Looking beyond Kyoto
5.1 Possible reasons for the delay in international negotiations
The Kyoto Protocol only covered the period from 2008 to 2012; it specified
that negotiations for a second commitment period should start seven years in
advance, in 2005. However, the progress to date has been minimal. Some factors
that may be contributing to this impasse:
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Chapter 1. Introduction 24
The classic asymmetry of future benefits versus present costs is a
problem for governments. They are held accountable for declines in
economic performance – which might be caused when taking action to
mitigate climate change – but not for harmful impacts – climate related
catastrophes – which can always be blamed on natural variability.
There is a tendency amongst all negotiators, in what are perceived to be
zero-sum games, to brinkmanship - the policy of pushing a dangerous
situation to the brinks of disaster or the limits of safety – with the
expectation of arriving at the best possible deal for one's side.
A significant amount of additional resources (around 1 percent of gross
world product) is needed in order to tackle climate change; some of
which will necessarily have to flow from the North to the Global South.
There is some political resistance to large subsidies or resource transfers
to the Global South; there is a perception that these countries have
changed from being appropriate aid recipients to near-term competitors.
On the other hand, there is also a perception in southern countries that
there has been no good-faith efforts on the part of the Global North to
deliver on principles and financial commitments previously negotiated
and agreed upon.
Not all climate change impacts will be negative, at least initially, there
may be some countries who might benefit 1.
Postponing the measures to mitigate climate change will only make both the
costs of inaction – adverse impacts, damages - and action larger. Although
gradual single efforts without a fix system help, collective general action is
essential.
1 For more information read the article in the link at the bottom of this page:
http://www.fundacionsustentable.org/d-sostenible/los-beneficios-del-cambio-climatico/ - more-173.
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Chapter 1. Introduction 25
5.2 Dialogue processes for negotiators
Some of the most important discussion and dialogue processes on future
international action on climate change are the following:
5.2.1 Negotiations under the UNFCCC
The official negotiating process on the second commitment period of the
Kyoto Protocol has started in 2005 (Articles 3.9 and 9.2 of the Kyoto Protocol).
A seminar of governmental experts on past and future actions has been held
in Bonn, Germany, 16-17 May 2005. Although it was an informal "seminar" it
was the first time that countries officially exchanged information on next steps
after 2012 under the UNFCCC.
The international policy community began to consider policies beyond Kyoto
at the eleventh Conference of the Parties (COP 11) and the first Conference of
the Parties serving as the Meeting of the Parties to the Kyoto Protocol (CMP 1)
in Montreal, Canada (28 November to 9 December 2005). Two different
processes were set in motion:
The Parties to the Kyoto Protocol agreed to establish a new working
group to discuss future commitments for developed countries for the
period after 2012 in accordance with Article 3.9 of the Kyoto Protocol.
This process would not provide an opportunity to incorporate countries
currently without emission commitments – including the United States,
China and India.
The Parties to the Convention (almost all countries, including the US)
launched a dialogue on strategic “approaches for long-term global
cooperative action to address climate change” (Decision CP.11, 2005
Montreal COP to the UNFCCC). A series of four workshops were
planned until the end of 2007. This second process was designed to be
much more open-ended.
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Chapter 1. Introduction 26
The COP 12, CMP 2 took place in Nairobi on 6 - 17 November 2006.
Governments were unable to agree on a timetable for negotiating a post-2012
future despite widespread consensus on the diagnosis of the problem.
The COP 13, CMP 3 took place in Bali on 3 – 14 December 2007. The
conference culminated in the adoption of the Bali roadmap, which charts the
course for a new negotiating process to be concluded by 2009 that will
ultimately lead to a post-2012 international agreement on climate change.
Ground-breaking decisions were taken such as the launch of the Adaptation
Fund, as well as decisions on technology transfer and on reducing emissions
from deforestation.
5.2.2 Climate change under the G8
The Group of Eight, formed by the eight most industrialized countries in the
world (Germany, France, the United Kingdom, Italy, Japan, the United States,
Canada, and Russia) is an informal forum held by their respective heads of
government.
The principal objectives under this initiative are:
Building a solid foundation on science to further explore the
relationships between greenhouse gas emissions and the associated level
of climate change.
Reaching agreement on how to speed up science, development of
technology and other measures necessary to meet the threat.
Engage countries outside the G8 who have growing energy needs, such
as China and India, on how these needs can be met in a sustainable way
and how they can adapt to those impacts which are unavoidable.
During the G8 meeting 2005 in Gleneagles, Scotland, five developing
countries (Brazil, China, India, Mexico, and South Africa) also participated; the
Gleneagles Communiqué and Plan of Action on Climate Change, Clean Energy
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Chapter 1. Introduction 27
and Sustainable Development were released. The G8 plus 5 group emphasized
the need to stop and reverse the increase of greenhouse gas emissions. The
process includes three areas of future work:
Ministerial dialogue
A major commitment of the G8 Summit in Gleneagles was to take forward a
“Dialogue on Climate Change, Clean Energy and Sustainable Development”.
This Gleneagles Dialogue is an informal forum for discussion. Its objective is to
complement and reinforce the formal negotiations within the UNFCCC by
trying to create the conditions necessary for successful agreement.
The G8+5 dialogue aims to address the transformation of energy systems for
a secure and sustainable energy supply. It should monitor and build on the
commitments of the Gleneagles Plan of Action and share best practice between
the participating countries.
The German Presidency of the G8 continued the work on the Gleneagles Plan
in 2007; a strong focus in climate change and biological diversity was made. The
2008 G8 Summit, presided by Japan, will conclude the G8 process on climate
change with a final report on previous work under the dialogue.
Cooperation with the International Energy Agency (IEA)
The International Energy Agency (IEA) is described in the Gleneagles
Communiqué as an advisor “on alternative energy scenarios and strategies
aimed at a clean clever and competitive energy future”.
As part of this work the IEA has recently published a major new report
called “Energy Technology Perspectives: Scenarios and Strategies to 2050”. The
IEA’s key findings will be delivered at the G8 Summit in Japan in 2008.
Cooperation with the World Bank
According to the Gleneagles Communiqué the future role of the World Bank
is to take “a leadership role in creating a new framework for clean energy and
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Chapter 1. Introduction 28
development, including investment and financing”. In this context, the World
Bank develops and identifies key elements of an associated strategic work
program. These are included in a first paper on clean energy and development.
5.2.3 Asia-Pacific Partnership for Clean Development and Climate
The Asia-Pacific Partnership for Clean Development and Climate (APPCDC)
is an international agreement announced July 28, 2005 at an Association of
South East Asian Nations Regional Forum meeting.
The participating countries (Australia, China, India, Japan, South Korea, the
United States and Canada since October 2007) - which account for around 50%
of the world's greenhouse gas emissions - agreed to cooperate on development
and transfer of technology. The cooperation focuses on reduction of greenhouse
gas emissions through energy efficiency, clean coal, carbon capture and storage,
methane capture and use, integrated gasification combined cycle, liquefied
natural gas, civilian nuclear power, advanced transportation, rural/village
energy systems, building and home construction operation, bioenergy,
agriculture and forestry, hydropower, wind, solar, for example.
The partnership is consistent with the UNFCCC efforts on Climate Change. It
will complement, but not replace, the Kyoto Protocol. Missing, in contrast to the
Kyoto Protocol, are reduction targets for greenhouse gas emissions.
The Inaugural Meeting of the Asia-Pacific climate pact took place in Sydney,
Australia on January 12, 2006. The second Ministerial Meeting was held in New
Delhi, India, on October 15, 2007.
6 United Nations Climate Change Conference, Bali
From 3 to 15 December 2007 the thirteenth conference of the parties to the
United Nations Framework Convention on Climate Change (COP13) and the
third Conference of the Parties serving as the Meeting of Parties to the Kyoto
Protocol (COP/MOP3) were held in Bali, Indonesia.
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Chapter 1. Introduction 29
These meetings resulted in the adoption of 15 COP decisions and 13
COP/MOP decisions. The main focus in Bali, however, was on long-term
cooperation and the post-2012 period, when the Kyoto Protocol’s first
commitment period expires.
6.1 Key takeaways
The following issues were discussed:
6.1.1 Fourth Assessment Report of Intergovernmental Panel on Climate Change
In the opening, some countries proposed requesting IPCC to prepare an
updated report by mid-2009 in order to inform COP 15; others called for more
research on lower stabilization scenarios and the need for local and regional
modeling.
The COP recognized AR4 as the most authoritative assessment of climate
change. It also urged the parties to make use of the information contained in
this document, both during negotiations and the shaping of climate policies.
COP13 decision on the Fourth Assessment Report of the Intergovernmental Panel on Climate
6.1.2 Adaptation fund
Change: http://eel.nl/documents/bali/cp_IPPCfour.pdf
The adaptation fund, managed by the Global Environment Facility (GEF),
was established in Kyoto in 1997, but had been criticized for being too difficult
to access and for raising insignificant sums of money. Its role is to support
projects on adaptation in developing countries; to help protect those most
vulnerable to the adverse impacts of climate change.
Under the agreement reached in the Conference, developing countries and
other institutions will have direct access to the fund. The fund will be composed
of sixteen members, representatives of both rich and poor countries. Initially
administered by the GEF, the World Bank is to act as its trustee. Funding will
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Chapter 1. Introduction 30
come from a 2 percent tax on transactions within the Clean Development
Mechanism.
COP/MOP3 decision on the Adaptation Fund: http://eel.nl/documents/bali/cmp_af.pdf
6.1.3 Technology transfer
The key is to find ways to transfer cheap, easy-to-use green technology to the
developing countries, while taking into account the demand of companies for
profits and protection for intellectual property rights.
Discussions on technology transfer went around three issues: institutional
arrangements, performance indicators, and financing. Two decisions were
adopted related to the issue of technology transfer to developing countries.
COP13 decision (SBSTA) on the Development and transfer of technologies under the Subsidiary
Body for Scientific and Technological Advice: http://eel.nl/documents/bali/cp_tt_sbsta.pdf
COP13 decision (SBI) on the Development and transfer of technologies under the Subsidiary Body
for Implementation: http://eel.nl/documents/bali/cp_tt_sbi.pdf
6.1.4 Reducing emissions from deforestation in developing countries (REDD)
The Kyoto Protocol had not addressed this issue. One of the main areas of
discussion was the inclusion or not of conservation and enhancement of forest
stocks and the inclusion of deforestation in long-term negotiations under the
UNFCCC.
An agreement on the fight against deforestation and forest degradation in
developing countries, as well as conservation and sustainable management of
forests, was made.
A problematic part of this debate was how to include the issue in the post-
2012 agreement. There was agreement to open up options in future discussions.
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Chapter 1. Introduction 31
COP13 decision on the Reducing emissions from deforestation in developing countries: approaches
to stimulate action: http://eel.nl/documents/bali/cp_redd.pdf
6.1.5 Review pursuant to Article 9 of the Kyoto Protocol
Under Article 9 of the Kyoto Protocol COP/MOP is requested to
“periodically review the Protocol in the light of the best available scientific
information”. The first Kyoto Protocol review was carried out in Nairobi
(COP12) and COP/MOP3 decided for the second review to take place at
COP/MOP4 in 2008.
It was decided that the review will aim to enhance implementation of the
Protocol and further elaborate some of its elements, including adaptation.
COP/MOP3 decision on Scope and content of the second review of the Kyoto Protocol pursuant to
its Article 9: http://eel.nl/documents/bali/cmp_art_nine.pdf
6.1.6 Clean Development Mechanism (CDM)
The annual report for 2006–2007 of the Executive Board of the clean
development mechanism (CDM) was presented. General issues, governance,
methodologies and additionality, regional distribution and capacity building,
were all discussed.
COP/MOP3 decision on Further guidance relating to the clean development mechanism:
6.1.7 Compliance
http://eel.nl/documents/bali/cmp_guid_cdm.pdf
Annual report for 2006–2007 of the Executive Board of the clean development mechanism:
http://eel.nl/documents/bali/CDMannualreport.pdf
The annual report for 2006-2007 of the Compliance Committee was
discussed.
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Chapter 1. Introduction 32
Annual Report for 2006-2007 of the Compliance Committee:
http://eel.nl/documents/bali/CompCom_annualreport.pdf
The national communications and annual greenhouse gas inventories are the
main sources of information for reviewing the implementation of the
Convention by Annex I parties. The Compliance Committee expressed its
concern about the delay of certain Annex I Parties in the submission of the
fourth national communication.
COP/MOP decision on Compliance under the Kyoto Protocol:
http://eel.nl/documents/bali/cmp_compl.pdf
No agreement was reached about the adoption of a compliance regime
“entailing binding consequences” (Protocol Article 18), the discussion was
postponed.
6.1.8 Joint Implementation (JI)
The annual report of the Joint Implementation Supervisory Committee was
considered. A web-based interface to provide information and an overview of
all JI projects was requested.
COP/MOP3 decision on Guidance on the implementation of Article 6 of the Kyoto Protocol:
6.1.9 Bali Action Plan
http://eel.nl/documents/bali/cmp_art_six_kp.pdf
Annual report for 2006-2007 of the Joint Implementation Supervisory Committee:
http://www.eel.nl/documents/bali/JIannualreport.pdf
The most significant issue treated in the UN Climate Change Conference in
Bali was the need for an international framework to address climate change
during the post-2012 period, when Kyoto's Protocol first commitment period
finishes. The Bali Action Plan can be seen as a collection of decisions and
processes adopted and launched by the COP and COP/MOP; a two-year
process, the “Bali Roadmap”, to finalize by December 2009 (COP15 and
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Chapter 1. Introduction 33
COP/MOP5 in Copenhagen ). It has identified the main issues to be considered
in the design of the post-2012 climate policy architecture.
One of the most controversial issues was about the nature of the process
moving forward. The Bali Action Plan established a two separate track process
(Convention and Kyoto Protocol); negotiating tracks to be pursued under the
newly launched Ad Hoc Working Group on Long-term Cooperative Action and
the existing Ad Hoc Working Group on Further Commitments for Annex I
Parties, respectively.
In Bali, sectoral approaches received a significant focus of attention. The Bali
Action Plan made explicit reference to “cooperative sectoral approaches and
sector-specific actions”. There was broad consensus that there was an
opportunity for sectoral approaches to take part of the global framework to be
agreed in 2009.
The key components of this agreement, or “building blocks”, are: mitigation,
adaptation, technology and financing.
Text on mitigation by developed and developing countries was particularly
contentious. Many nations agree that the industrialized world has to take the
lead in cutting emissions, which has gotten rich by burning fossil fuels for
decades. But others such as the US, followed by Japan, Canada and Russia,
want developing countries to reduce pollution as well. Parties finally agreed to
a proposal by India and other developing countries to text referring to
“nationally appropriate mitigation actions by developing country Parties in the
context of sustainable development, supported and enabled by technology,
financing and capacity-building, in a measurable, reportable and verifiable
manner.”
There was also debate in what concerned references to the IPCC Fourth
Assessment Report. Some argued that their mention of the need for a reduction
of 25-40% greenhouse gases emissions may be seen as if they had agreed to that
target.
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Chapter 1. Introduction 34
On adaptation, the COP addressed a range of issues, such as international
cooperation to support urgent implementation of various adaptation actions.
Developing countries are particularly vulnerable to the adverse effects of
climate change.
On technology development and transfer, the COP decided to consider
mechanisms to remove obstacles and provide incentives to accelerate the
transfer of environmental technologies to developing countries and support
cooperation on research and development. Agreement on the final details is
complicated; it may only be reached when an agreement on future
commitments is made.
Regarding financing, the COP decided to consider improved access to
financial resources and support, and the provision of new and additional
resources, including official and concessional funding; also positive incentives
and innovative means of funding, as well as mobilization of public and private
sector funding and investment, and support for capacity building.
Bringing together adaptation and finance, the most significant outcome was
the establishment of the Adaptation Fund to finance adaptation in developing
countries.
6.2 Comments
The Bali roadmap aims to mend some faults in the process of building the
architecture of the climate change regime, with the most relevant being the
refusal of the United States to ratify the Kyoto Protocol. Its main cause, the
tension created between developed and developing countries; among other
thing, the US wants developing countries to contribute to the mitigation of
climate change. In addition, there is a lack of confidence in the effective
implementation of existing commitments.
COP 13 and COP/MOP 3 succeeded in creating a framework for
negotiations for the post-2012 climate regime. It may not be what the EU was
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Chapter 1. Introduction 35
asking for, a concrete commitment to reduce greenhouse gases emissions of 25
to 40 percent below 1990 levels by 2020, but still can be considered significant.
Developing countries have, for the first time, considered “mitigation actions”;
and the US joined the negotiating process after its withdrawal from the Kyoto
Protocol in 2001.
The interplay between international climate politics and domestic elections
was illustrated by the win of Kevin Rudd's Labor Party in Australia. In Bali,
Australia ratified the Kyoto Protocol and declared its intention to reduce
emissions by 60% by 2050 and introduce an emissions trading system. The US
presidential election in November 2008 may have a dramatic impact on the
negotiations of the global climate regime.
In Bali, the “building blocks” of the post-2012 climate regime have been
identified; and negotiations with a clear deadline have been set in motion, COP
15 and COP/MOP 5 in 2009, for the conclusion of an agreement on the post-
2012 period.
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2
Options for Future International
Climate Change Architectures

Chapter 2. Options for future climate change architectures 37
1 Introduction
1.1 Introduction
It is broadly recognized that the Kyoto Protocol to the United Nations
Framework Convention on Climate Change (UNFCCC) is only the first step on
addressing human induced climate change. In order to reach the ultimate
objective of the UNFCCC – “stabilization of greenhouse gas concentrations in
the atmosphere at a level that would prevent dangerous anthropogenic
interference with the climate system” (UNFCCC 1992) – further action to tackle
climate change has to be taken.
Several studies have analyzed the broad range of possible future climate
regimes. Among them, the ones that appear to be most useful are Aldy, 2003;
Höhne et al., 2003; Kameyama, 2004; Bodansky, 2004; Blok et al., 2005; Philibert,
2005; Aldy and Stavins, 2007; Gupta et al., 2007; Höhne et al., 2006; Höhne et al.,
2007; Kameyama, 2007.
The scope of this chapter includes the following themes:
• Section 1: As a necessary part of this introduction, the main elements
(Section 1.2) and evaluation criteria (Section 1.3) of a future international
climate change agreement are identified.
• Section 2: Approaches for a future international climate change regime
are discussed.
Section 2.1 provides a description and qualitative assessment of
approaches based on national emission targets and international
emissions trading, such as the existing Kyoto system. The selected
approaches include: Multistage, Contraction an Convergence (C&C),
Common but Differentiated Convergence (CDC), Global Tryptich, and
Historical Responsibility.
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Chapter 2. Options for future climate change architectures 38
Other proposals return to the concept of policies and measures (Section
2.3), such as some sector based proposals (Section 2.2), technology
cooperation agreements (Section 2.4) or development oriented actions
(Section 2.5).
• Section 3: The approaches identified before are further evaluated
regarding three different types of assessment:
Section 3.1 assesses the approaches against the criteria identified in
Section 1.2.
One important consideration is the difference in national circumstances
and interests of countries. Section 3.2 presents a regional based
assessment of the approaches (Section 3.2.3): interests of countries (3.2.1)
and possible incentives for participation of key countries (3.2.2) are
identified. A brief overview of major public climate policies and
implementation of commitments (3.2.4) is also presented.
Finally, the approaches are assessed taking into account COP 13 key
takeaways, mainly the Bali Action Plan (Section 3.3). The Bali meeting is
more in keeping the breadth of approaches contained in the UNFCCC
than the narrower approach contained in the Kyoto Protocol – quantified
emission reductions for developed countries and emission trading.
• Section 4: Recent several prominent proposals for a full international
climate regime made by various groups are presented in this section. All
of these proposals are from non-governmental institutions but most were
prepared with government input and therefore provide a good overview
of the spectrum of options.
The variety of different options for international climate policy has been
assessed, but an all-encompassing, all-agreeable approach has not been found.
Countries’ national circumstances and interests are too diverse that a system
composed of different stages could be made attractive for as many countries as
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Chapter 2. Options for future climate change architectures 39
possible. There has also been increasing interest in sectoral approaches, which
can best accommodate the different national circumstances of countries,
enhance developing country participation and moderate competitiveness
concerns if applied globally. Nevertheless, the core of the issue is politics, since
the final agreement on an international climate change regime will most likely
arise from an iterative process of countries proposing and assessing each others’
proposals.
1.2 Elements for a future international agreement on climate change
A number of elements are commonly incorporated in existing and new
proposals for climate change agreements. The topics of recent negotiations for a
future climate change agreement seem to be concentrating on four elements:
mitigation (which includes emission reduction efforts by Annex I taking the
lead, but possibly also by advanced Non-Annex I countries taking their “fair
share”), adaptation, technology, and financing. Based on these, the main
elements of the future international climate agreement may be identified
(Höhne et al., 2007):
1. Participation: All agreements are undertaken between specific groups
of participants. Agreements may be global or involve only a subset of
countries. Dangerous climate change can only be prevented if
industrialized countries’ emissions decline and developing countries’
emissions do not raise as much as currently expected; an increasing
number of countries should take on increasingly stringent
commitments.
2. Differentiation of emission targets – allocation: For proposals that
include emission reduction targets it is necessary to set the level of the
reductions for individual countries; how the allocation level should be
determined.
3. Types of commitments: Currently, Annex I countries have
committed themselves to binding absolute reduction targets. Other
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Chapter 2. Options for future climate change architectures 40
types of commitments could also be applied, such as non-binding,
intensity or sectoral targets, or non quantitative commitments such as
the commitment to implement certain policies and measures.
4. Adaptation: A future climate regime should include measures to help
the particularly vulnerable countries to adapt to climate change; even
with the most stringent reduction commitments, some level of climate
adaptation will be necessary. While most authors agree that it is a
crucial part of a future agreement, it has been far less explored to date
than mitigation.
5. Technology: Without technology research, development and
deployment (including transfers and investments) it may be difficult
or impossible to achieve emission reductions at a significant scale. It is
a key element of the future climate regime, but technology will not be
able to limit global emissions to reach low stabilization levels on its
own.
6. Financing: Funding sources for GHG mitigation in developed and
developing countries is a crucial issue in international negotiations on
climate change. International activities on climate need financial
resources; they might be implicitly included in emission targets or
explicitly expressed in the form of e.g. levies on emission intensive
activities. Financing efforts are more likely to be successful if
implemented through private sector engagement and not from
government budgets. Hence, indirect financing mechanisms are
necessary, e.g. emission targets, access to renewable energy markets,
levies.
These are mainly the four building blocks that were mentioned in the 13 th
Conference of the Parties (COP 13) in Bali as part of a future climate agreement:
mitigation (elements 1,2,3), adaptation (element 4), technology (element 5) and
financing (element 6). In this study, the focus lies on mitigation commitments
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Chapter 2. Options for future climate change architectures 41
aimed at reducing greenhouse gas emissions; adaptation to climate change is
very relevant but not further considered here.
1.3 Criteria for policy choice
In defining a set of evaluation criteria, a number of studies have been used,
such as Berk et al. (2002), Höhne et al. (2003) or den Elzen and Berk (2003).
According to the IPCC, “there is broad consensus in the literature that a
successful agreement will have to be environmentally effective, cost-effective,
incorporate distributional considerations and equity, and be institutionally
feasible.” (Terry Barker et al., 2007). These are the criteria that are going to be
used in the assessment:
1. Environmental effectiveness – The extent to which a policy meets its
intended environmental objective or realizes positive environmental
outcomes. It will depend on the policy’s design, implementation,
participation, stringency and compliance.
2. Cost-effectiveness – The extent to which a policy achieves its
objectives at minimum cost for society. It implies both the direct costs
of administering and implementing the policy, and the indirect costs,
such as how the policy drives cost-reducing technological change –
costs for which data are limited and often ignored.
3. Distributional considerations – The distributional consequences of a
policy, which include dimensions such as fairness and equity. These
concepts are difficult to measure and especially to compare, as they
are fundamentally subjective.
A regulation that is perceived as being unfair or for which the
incidence is unbalanced may have a difficult time making it through
the political process. However sometimes the most equitable policy
may be not the most politically popular one. Sustainability may be
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Chapter 2. Options for future climate change architectures 42
important, but only attends to intergenerational distribution and
doesn’t capture political acceptability.
4. Institutional feasibility – The extent to which a policy may be seen as
legitimate, accepted, adopted and implemented. Economists
traditionally evaluate policy under ideal theoretical conditions,
however these are rarely met in practice; political realities have to be
taken into account. The decision-making style of each nation or the
institutional familiarity that may make certain policies more popular
are factors to be taken into account.
Even if a policy has received political support, it may be difficult to
implement under certain bureaucratic structures.
2 Proposals for international climate change agreements
A variety of approaches have been proposed for future international climate
policy post 2012. Summaries are provided in Höhne, 2003; Aldy, 2003;
Bodansky, 2004; Kameyama, 2004; Blok et al., 2005; Philibert, 2005; Höhne, 2006;
Höhne, 2007; Kameyama, 2007; and Gupta et al., 2007.
This section provides an overview and assessment of several approaches and
issues that have been proposed. Some of the presented ideas cover a complete
future regime on climate while others only present ideas on specific issues. The
list of proposals is grouped around the following themes (Gupta et al., 2007):
• National emission targets and international emissions trading
- Alternative target approaches
- Description of the approaches to future commitments
Multistage approach
Contraction and Convergence
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Chapter 2. Options for future climate change architectures 43
Common but differentiated convergence
Global Tryptich
Historical Responsibility – The Brazilian Proposal
- Overview of the approaches
- Qualitative comparison
- Conclusions
• Sectoral agreements
• Coordinated policies and measures
• Technology oriented agreements (TOAs)
• Development oriented actions
2.1 National emission targets and international emission trading
Targets are distinguished from goals in that targets relate to actions that are
near-term and specific. The most frequently evaluated type of target is that of
binding absolute emission reduction target as included in the Kyoto Protocol
for Annex I countries. Many authors see these as too rigid and capping
economic growth; therefore a number of alternative types of emission targets
have been proposed (see section 2.1.1).
One crucial element is to agree on the level of the emission targets. Examples
of processes to agree on a target include:
- Bottom-up basis: Participating countries make proposals (pledges) for
individual reductions. This approach has the risk that proposed
reductions may not be sufficient for the stabilization levels desired.
- A common formula could be agreed upon, which could subsequently
be modified by negotiations.
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Chapter 2. Options for future climate change architectures 44
- Top-down basis: An overall target can be given to a group of
countries, with the group deciding internally how to share the target
amongst the participants. It has already been applied to the EU in the
Kyoto Protocol.
Together with the national emission targets, flexibility provisions may also
be set, as to ‘how’, ‘when’, ‘where’ and ‘what’ emissions are to be reduced.
Some of the flexibility mechanisms provided by the Kyoto Protocol are
International Emission Trading, Joint Implementation and the Clean
Development Mechanism.
In this section alternative target approaches to the already existing binding
absolute targets are first going to be introduced (Section 2.1.1). These may be
included as part of the proposals described afterwards.
Then, some approaches that set national emission targets and therefore can
be combined with international emission trading - such as the Multistage
approach (Section 2.1.2.1), Contraction and Convergence (Section 2.1.2.2), the
Tryptich approach (Section 2.1.2.4) or the Brazilian Proposal (Section 2.1.2.5) –
are going to be described.
After a brief overview of the approaches previously described (Section 2.1.3),
these are going to be assessed based on the criteria presented in Section 1.2
(Section 2.1.4). Finally, some conclusions on approaches that include national
emission targets and international emission trading are drawn (Section 2.1.5).
2.1.1 Alternative Target Approaches
In the Kyoto Protocol industrialized countries have absolute emission
reduction commitments. Developing countries have no targets, but may
participate through emission reduction projects with the Clean Development
Mechanism. In the following section the focus is on element 3: type of
commitments (see Section 1.1). Alternative types of commitments are going to
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Chapter 2. Options for future climate change architectures 45
be briefly described, together with possible country positions, its strengths and
weaknesses (see Blok et al., 2005; Höhne et al. 2007; Gupta et al., 2007).
2.1.1.1 Absolute emission targets
Absolute emissions in a target year are capped for all participating countries.
If combined with emission trading, they have high economic efficiency; final
marginal abatement costs are made equal in all participating countries.
There is certainty about future emissions. Such a target can be reached in a
very flexible manner across greenhouse gases, sectors and borders; each
country determines its own national strategy to meet the target. Absolute
emission targets have been criticized as being too rigid, not able to take into
account unexpected economic development.
Absolute emission targets are unlikely to be applied to developing countries,
who are currently strictly against any type of emission targets; absolute targets
are seen as limiting economic growth. The Group of 77 welcomed them for
developed countries. USA rejected its Kyoto target as being too rigid and
causing harm to the economy. Japan agreed to them under the Kyoto Protocol,
but often calls for alternatives in the second commitment period. Most
developed countries agree to them; they are EU’s preferred type of target.
Absolute emission targets have high environmental effectiveness if their
implementation is guaranteed. When combined with emission trading,
emissions can be reduced where it is more cost effective. Equity concerns may
be taken into account when deciding the countries that participate and the
stringency of their reductions. The technical feasibility depends on the
institutional circumstances of countries, generally a large amount of data is
needed to assure compliance.
Absolute emission targets have proven to be viable in the Kyoto Protocol and
in the EU emission trading system. It is likely that they will be continued to be
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Chapter 2. Options for future climate change architectures 46
used in Kyoto countries, and may be extended in the long run also for the USA
and advanced developing countries.
Some references comparing the approach to other approaches may be Den
Elzen et al., 2003; Höhne, 2003.
2.1.1.2 Dynamic targets
Emission targets are expressed as a function of GDP (Hargrave et al., 1998;
OECD/IEA 2002; Ellerman and Wing, 2003; Höhne et al., 2003; Philibert, 2005;
Pizer, 2005; Kolstad, 2006). The most common is the intensity target
(Emissions/GDP).
Intensity targets are more flexible than absolute ones, so that extremely high
costs are avoided if the economic development and therefore emission
development is greater than expected at the time the target was set. They focus
on improving the carbon efficiency of economies. They are compatible with
Kyoto Protocol’s reporting and mechanisms, but would require additional rules
for emission trading.
Environmental effectiveness is not guaranteed, there is uncertainty of the
global emission level. The final outcome in emissions depend on the
performance of the GDP; if the GDP is reduced due to economic difficulties, it
would be problematic. Also, intensity targets are difficult to set and compare
between countries; and monitoring of the GDP is required.
Including the GDP in the equation takes account of the fact that economic
activity is the main driver of emissions. For most countries the relationship
between GDP and national emissions is significant, but it is difficult to measure
how do they exactly relate. The intensity target as described above uses a linear
relationship.
Some developing countries, such as China or India, are strictly against any
type of emission targets, so it would be unlikely to be applied to them. Intensity
targets could be an option for some countries, only for those that are very
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Chapter 2. Options for future climate change architectures 47
advanced in their development and where the emissions are well correlated
with GDP. In some developing countries the direct relationship is not always
apparent, thus increasing uncertainty. For example, Argentina offered a
voluntary target indexed to GDP (it related emissions to the square root of
GDP) in 1999, where a 1% increase in GDP would allow a 0.5% increase in
emissions; this was due to the fact that agriculture contributes significantly to
emissions, but less significantly to the national GDP.
When the USA rejected its Kyoto target in 2001, it suggested an intensity
target as alternative, aiming to reduce its intensity by 18% in 10 years – a 3%
annual increase of the GDP would mean a 10% increase in absolute emissions
over the 10 years. However, it is unlikely that they would accept an intensity
target as stringent as their Kyoto target.
The EU, Japan and other developed countries may accept this type of
commitment if set at a sufficiently stringent level.
Intensity targets can be environmentally effective if set at sufficient stringent
levels, although the ultimate outcome remains uncertain due to the link of the
unknown growth of the GDP. When combined with emission trading, their
economic efficiency is high, but less than for absolute targets, as the final level
of emission allowances is not known. Equity concerns are accommodated by
the selection of the countries and the stringency of their commitments. As with
absolute targets, the technical feasibility depends on the institutional
circumstances in the country; anyhow, a great amount of data is needed to
assure the compliance of the target. Setting intensity targets involves additional
knowledge about the relation between emissions and GDP.
2.1.1.3 No-lose targets
Emission rights can be sold is the target is overachieved, but none have to be
bought if it is not reached (see Philibert, 2000). This way, this type of targets can
only have advantages but no disadvantages for the country.
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Chapter 2. Options for future climate change architectures 48
The option provides flexibility to newly entering countries, so that high costs
are avoided in case of unexpected developments. No-lose targets make
participation of many countries easier. It would mean a relatively minor
adjustment to the Kyoto system; could be seen as a support mechanism for
developing country action.
The environmental outcome is uncertain, environmental effectiveness would
not be guaranteed. It is unclear how companies of that country could trade
before the country has decided whether to comply or not, in order to avoid
overselling. No-lose targets are difficult to set to balance at the same time the
effort needed and the incentive to participate.
This type of targets would provide a good incentive for developing countries
to start participating with emission targets; economic efficiency would be
increased if they allow an increasing share of countries to participate in the
emission trading system that would not have otherwise. Developed countries
would support them if for some developing countries they are set at a level that
requires some domestic action; the environmental effectiveness depends on the
level of the target.
Some references that compare the approach to other approaches include
OECD/IEA 2002; Philibert et al., 2003; Den Elzen et al., 2003; Höhne et al., 2003;
Höhne et al., 2005.
2.1.1.4 Dual targets
Two targets are defined, a “selling target”, below which emission rights can
be sold, and a “buying target”, above which emission rights have to be bought
(see Philibert and Pershing, 2001; Kim and Baumert, 2002).
They aim to take into account the uncertainty in future emissions, providing
flexibility and avoiding high costs due to unexpected developments. It would
be a first step for newly participating countries.
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Chapter 2. Options for future climate change architectures 49
On the other hand, it reduces certainty on the global emission level, known
only within a certain range; and is difficult to set, as two targets are to be
defined.
Some developing countries may be open to discuss such a target.
Industrialized countries might welcome dual targets if they mean developing
country involvement and increasing participation.
Dual targets may be applied when uncertainty of economic development
prevents setting absolute binding targets.
2.1.1.5 Price cap
The price cap is a hybrid between a tax and emission trading. After the initial
allocation of emission allowances, and unlimited number of additional emission
rights is provided at a given price (Pizer, 2002; Jacoby and Ellerman, 2004;
Philibert, 2004).
It provides more flexibility to countries so that high costs are avoided if
emissions development – because of economic development, energy price
changes, technology development - is different than expected. It would mean
relatively minor adjustments to the existing Kyoto system. The price cap also
reduces economic uncertainties because emission reductions would only take
place if they are cheaper than the price cap.
To be effective the price cap should be high enough, this could make it too
costly for specific countries. Price caps could be available for all or only for a
subset of countries in the system, in this case a rule is required to prevent
countries using the price cap to be net sellers – overselling. If applied only to a
subset of countries, no-lose targets and dual targets could be chosen as an
alternative.
Most developing countries would probably not accept such a target. The
price cap could possibly help some countries such as USA or Japan to take on a
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Chapter 2. Options for future climate change architectures 50
binding emission target, if they are worried about uncertainty of economic
development or of abatement costs.
Targets with a price cap can be environmentally efficient if set at a high level.
Emission trading would be possible at prices bellow the price cap, therefore
improving economic efficiency; at higher prices the cap would work as a tax,
which would have negative impacts on environmental efficiency. Equity would
depend on the level of the price cap. Also, reliable data on marginal abatement
costs would be necessary before fixing it.
The revenue from selling additional emission rights can be used to finance
emission reduction projects, R&D activities, or adaptation.
2.1.1.6 Sectoral targets
Targets are set for selected sectors that are particularly suited for this
approach, such as industrial or electricity production. Sectoral targets can be
defined either globally or only for newly joining countries. They can be binding
or no-lose targets, absolute or dynamic described as function of unit of output
(e.g. CO2/t steel) (Philibert and Pershing, 2001; Samaniego and Figueres, 2002;
Höhne et al., 2006; Schmidt et al., 2006).
In developing countries only part of the economy might provide the
infrastructure or data availability to take in national reduction targets.
However, single sectors may be able to do so. Only the relevant sectors would
take part of international emission trading.
Efficiencies (e.g. CO2/t steel) vary greatly between countries. Annex I
country productions are not necessarily scoring better compared to Non-Annex
I countries. If sectoral targets are defined as no lose or dynamic, they could be
an incentive for some developing countries to participate, to take on a target.
Least developed countries would most likely be exempt; other developing
countries such as China or India would not assume them but would not
disagree if others take on one. Russia is currently less efficient than most
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Chapter 2. Options for future climate change architectures 51
countries, so they might not support them. Other developed countries would
support sectoral targets but for USA for example, only if applied globally,
including China and India. Japan is currently very efficient and has recently
voiced its support to this type of approach. EU would support sectoral targets
for some newly joining countries.
Sectoral targets take into account particular reduction options of different
sectors, focusing on the most important ones. If dynamic, they would provide
flexibility and allow for growth in production and economic development.
They may also be an incentive for participation of some countries, through
participation of their sectors. Applied on the global level, sectoral targets may
address competitiveness concerns within a global sector. They can be built into
the Kyoto system.
Sectoral targets would require detailed sectoral information, which is
currently only available for some countries and some sectors. Targets would
have to be carefully set. Environmental effectiveness would not be guaranteed,
it would depend on production growth if dynamic targets were set, and we also
have to take into account that not all emissions are covered. They can be
environmentally effective if applied to as many sectors as possible.
Sectoral targets are very often mentioned in the international negotiations,
but different groups may be interpreting them differently. It is sometimes
unclear whether global agreements for a sector or emission targets for only one
sector within a country are meant. Targets for only one sector within a country
may be a good stepping off point for newly participating countries to start
learning how to do things. Global agreements for a sector (further discussed in
Section 2.2) seem to be more effective if applied in a supplementary way with
national emission commitments; even though sectoral targets take into account
particular national circumstances, they seem too complex to implement - too
many decisions and great needs of data availability.
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Chapter 2. Options for future climate change architectures 52
2.1.2 Description of approaches to future commitments
In this section is focused on approaches that set national emission targets
which can be used together with international emission trading. The
approaches that better cover the broad range of options proposed to date have
been selected: Multistage approach, Contraction and Convergence, Common
but Differentiated Convergence, Global Tryptich and the Brazilian Proposal.
These are going to be described in detail, including the three major elements
for designing an international regime for mitigation of climate change
introduced above (Section 1.1): (1) participation, (2) sharing emission
allowances and (3) type of commitment. These elements mainly refer to
mitigation actions; as we have said before, adaptation will not be further
considered her. The other elements mentioned, technology and financing, will
only be seen as part of some of these approaches.
An important issue in international climate negotiations is countries’
positions and what commitments they are ready to take in. Together with the
description of the different approaches, its implications for countries and
countries’ perceived positions – these do not represent official country positions
unless indicated otherwise – are going to be described. The following indicators
(Blok et al. 2005) are used to summarize the assessment:
‘+’: Might be willing to support the approach
‘0’: Unclear whether the country would support or not the approach
‘-‘: Unlikely to support the approach
Some general strengths and weaknesses of each approach are also discussed
as an introduction for their criterion based assessment in the following section.
2.1.2.1 Multistage approach
Description
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Chapter 2. Options for future climate change architectures 53
Several authors proposed that countries participate in a future regime in
several stages (element 1, participation) with differentiated types and levels of
commitments (Blanchard et al., 2003; CAN 2003; Criqui et al. 2003; Gupta, 2003;
Blok et al., 2005; Michaelowa et al. 2005; den Elzen et al., 2006; Höhne 2006). The
current system, which consists of essentially two stages (Annex I countries with
emission reduction commitments and Non-Annex I countries with no emission
reduction commitments), is expanded to include several intermediate steps.
Each stage has its stage specific commitments (element 3, type of
commitment). An example of the types of different stages is provided in Höhne
2006:
• Stage 1 – No commitments: Countries with a low level of
development do not have climate commitments. At minimum, all
least developed countries (LDCs) would be in this stage.
• Stage 2 – Enhanced Sustainable Development: Countries with higher
level of emissions per capita commit to sustainable development
policies, in which the environmental objectives should be built into.
Such a first ‘soft’ stage would make it easier for new countries to join
the regime. Requirements could be defined, e.g. inefficient equipment
is phased out and certain standards are met for any new equipment.
• Stage 3 – Moderate absolute target: The emission level may be higher
than in the starting year, but should be below a reference scenario.
The target could also be positively binding (allowances can be sold if
the target is exceeded, but no allowances have to be bough if it is not
reached). An incentive to accept such a target would be the possibility
of participating in emissions trading.
• Stage 4 - Absolute reduction target: Countries in this stage have to
reduce absolute emissions substantially until they reach a low per
capita level. How much each country has to reduce its emissions
(element 2, stringency of reductions) can be defined in different ways,
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Chapter 2. Options for future climate change architectures 54
e.g. converging per capita emissions or based purely on proposals by
countries and negotiations. As time goes on, more and more countries
would enter stage 4.
All countries agree to have commitments at a certain stage and agree on
certain thresholds, e.g. emissions per capita or GDP per capita, when they
would move to a next stage. The first one would be an incentive for countries to
keep emissions low in order not to move to the next stage.
Implications
In order to reach stringent long term goals (such as maximum temperature
increase of 2ºC), additional countries, newly industrialized countries, need to
participate relatively early, best soon after 2012, and major regions, East and
South Asia, before the middle of the century. These countries would start at
significantly lower per capita emissions and GDP levels than industrialized
countries.
Outcomes critically depend on the time when large countries such as China
and India enter the system.
Possible positions
Table 2 - 1. Possible country positions. Multistage approach.
Least developed
countries
+ Would not receive targets, but could benefit
through CDM
India + Is likely to participate relatively late with
quantitative commitments (has very low per
capita emissions)
China + In general, China would only accept
commitments when industrialized countries
take the lead in combating climate change
(which they would in a multistage approach).
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Chapter 2. Options for future climate change architectures 55
Advanced developing
countries
China’s participation would be required by
the middle of the century so the
environmental goals are reached.
- They would graduate very quickly into stages
2 or 3.
Group of 77 0 A multistage approach would imply
Russia 0 Unknown.
differentiation between countries and
therefore a subdivision of the G77; this may
not be in the interest of the G77, as a group
they have greater political power.
USA - In general, not in favour of neither emission
limitation targets or developed countries
taking the lead, they also want developing
countries to take in emission reduction
commitments.
In recent negotiations it seems the USA is
softening their position.
Japan 0 Currently not in favour of emission limitation
Other umbrella group
countries (E.g. Australia,
New Zealand, Norway
and Switzerland)
targets; main supporter of sectoral
agreements.
0 Unknown. Norway and Switzerland may be
supporters. Australia finally ratified the
Kyoto Protocol in the 13 th Conference of the
Parties in Bali, so may also be a supporter
(before, they were in a similar situation like
the USA).
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Chapter 2. Options for future climate change architectures 56
EU + In favour of a staged approach
Strengths and Weaknesses
It seems likely that any future regime will be staged in form; countries are
very diverse and this form of agreement would take into account national
circumstances, in line with the UNFCCC spirit. It is a general framework that
can accommodate many ideas and satisfy many demands. A staged approach
allows for gradual decision making, and is trust-building as industrialized
countries take the lead. It is compatible with Kyoto Protocol, its reporting needs
and mechanisms.
On the other hand, the concept is relatively complex, as it requires many
decisions and allows for exceptions. The critical element of the approach is that
additional countries participate early enough; there is a risk that countries enter
too late so that some long-term stabilization options are lost. Incentives for such
participation (not just thresholds for participation) have to be included in the
system.
2.1.2.2 Contraction and Convergence (C&C)
Description
Contraction and Convergence (C&C) was proposed by the Global Commons
Institute (GCI, 2005). All countries participate in this regime (element 1) with
quantified emission targets (element 3).
The emission allowances are shared as follows (element 2):
• Contraction: As a first step, a global emission path is agreed for each
future year that leads to an agreed long term stabilization level for
greenhouse gas concentrations.
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Chapter 2. Options for future climate change architectures 57
• Convergence: As a second step, the targets for individual countries
are set. The global emission limit for each year is shared among all
countries so that per capita emissions converge from the countries’
current levels to a level equal for all countries within a convergence
period.
Global emission trading would be allowed to level off differences between
allowances and actual emissions.
Implications
Current per capita emissions differ greatly between countries. Some
developing countries could be allocated more emission allowances than
necessary to cover their emissions (“hot air”). They could sell this allowances to
developed countries, generating a flow of resources from developed to
developing countries.
Towards a stable CO2 concentration at 450ppmv and convergence by 2050,
only smaller states in Africa and Asia would have unconstrained emissions and
could sell excess allowances. The per capita emission have to converge to a level
below the current average of developing countries, those developing countries
above or close to the average (e.g. Argentina, Brazil, Venezuela, Mexico, South
Africa, Korea, Namibia, Thailand, China) will soon (e.g. 2020) be constrained
and not receive emission allowances. Due to the low per capita emission level
required to reach the stringent global goal, the possible transfer of easily earned
emission allowances could be relatively low. More excess allowances would be
available under a higher stabilization level, e.g. 550 ppmv CO2, or under earlier
convergence, e.g., 2030.
Reaching a fixed global emission level is easier for Annex I countries if all
Non- Annex I countries participate immediately (C&C), compared to a gradual
phased approach. Only then relatively cost-effective mitigation options in some
developing countries can be accessed and traded within the system.
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Chapter 2. Options for future climate change architectures 58
Possible positions
Table 2 - 2. Possible country positions. Contraction and Convergence (C&C)
Least developed
countries
+ Benefit greatly through allocation of excess
emission rights.
India + Indian per capita emissions are below the
world average, the per capita income and
greenhouse gas emissions per unit of GDP are
low compared to those of Annex I countries.
The Prime Minister of India, as the host of
COP 8, stressed that the only equitable form
for the future would be one based on equal
per capita rights (without further specifying
whether this means C&C)
China - China’s per-capita emissions are around the
Advanced developing
countries
Non-Annex I average, growth in emissions
would be capped early in the century.
- Per capita emissions are above the Non-
Annex I average; they would opt for more
consideration of the historical responsibility
(Brazilian Proposal).
Group of 77 + G77 introduced a first mention of “narrowing
per capita differences between developed and
developing country Parties” in preambular
part of the decision on the Kyoto
mechanisms.
Russia 0 Unknown; but relatively high per capita
emissions.
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Chapter 2. Options for future climate change architectures 59
USA - USA per capita emissions are amongst the
highest globally, the approach would imply
major reductions.
Japan 0 Unknown.
Other umbrella group
countries
USA already objects the concept of using per
capita emissions as an indicator.
0 Unknown.
EU 0 Unlikely to receive support, a staged
Strengths and Weaknesses
approach was favoured in the past.
Participation of all countries and certainty about global emissions are strong
points of this approach. Full international emissions trading would be possible,
therefore including cost-effective reduction options in developing countries;
least developed countries would be supported financially through allocation of
excess emission rights. The concept of eventually converging per capita
emissions in the long term is a simple and clear concept, it could be part of a
future climate regime. C&C is somewhat compatible with the Kyoto Protocol, in
what regards reporting and mechanisms.
Classic Contraction and Convergence is too simple to accommodate the
concerns of all countries, its national circumstances or historical responsibility.
Countries with high per capita emissions, also such developing countries,
would need substantial reductions. Least developed countries need to be
capable to participate in emissions trading – national greenhouse inventories
and emission trading authorities – which may seem unrealistic for some of
them. The excess of emission rights of the LDCs need to be compensated by
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Chapter 2. Options for future climate change architectures 60
developed countries. It may also be seen as unrealistic a decision that all
countries participate at once.
2.1.2.3 Common but Differentiated Convergence (CDC)
Description
Common but Differentiated Convergence was presented by Höhne et al.
2006. Annex I countries’ per capita emission allowances converge within, e.g. 40
years (2010 to 2050), to an equal level for all countries. Individual Non-Annex I
countries’ per capita emissions also converge within 40 years to the same level
but delayed, only from the date when their per capita emissions reach a certain
threshold, a particular percentage of the gradually declining global average.
Non-Annex I countries that do not pass this threshold do not have binding
emission reduction commitments. They could either take part in the Clean
Development Mechanism or voluntarily take on no lose emission reduction
targets – emissions allowances may be sold if he target is overachieved, but
none have to be bought if it is not reached.
Implications
Similarly to the Contraction and Convergence approach, the CDC approach
aims at equal per capita allowances in the long term; the main difference is that
it takes into account the historical responsibility of countries. The impact on
Annex I countries may be similar, as they would have to reduce emissions
similarly to C&C, but many Non-Annex I countries would have more time to
develop until they have to start reducing their emissions. Non-Annex I country
participation is conditional to Annex I action – industrialized countries have to
take the lead – as the threshold for participation is a percentage of the global
average. Also, no hot air would occur, no country will receive more allowances
than it would need to satisfy its baseline emissions.
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Chapter 2. Options for future climate change architectures 61
While the CDC approach aims at equal per capita allowances in the long run,
it provides for more short and medium term equity in line with principles like
the “polluter pays” and the “capability to act”.
Possible positions
Table 2 - 3. Possible country positions. Common but Differentiated Convergence (CDC)
Least developed
countries
0 Are exempt, but are not supported through
allocation of excess emission rights.
India + Indian per capita emissions are below the
world average, the per capita income and
greenhouse gas emissions per unit of GDP are
low compared to those of Annex I countries.
The Prime Minister of India, as the host of
COP 8, stressed that the only equitable form
for the future would be one based on equal
per capita rights.
They would welcome the delayed start of
reduction efforts.
China + They would also welcome the delayed start of
Advanced developing
countries
reduction efforts. They have already made
remarks on delayed reductions in public.
+ Per capita emissions are above the Non-
Annex I average; they would opt for more
consideration of the historical responsibility.
They might support the proposal, at least
more than C&C.
Group of 77 0 Could support the concept.
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Chapter 2. Options for future climate change architectures 62
Russia 0 Unknown.
USA - USA per capita emissions are amongst the
highest globally, the approach would imply
major reductions.
Japan 0 Unknown.
Other umbrella group
countries
USA already objects the concept of using per
capita emissions as an indicator.
0 Unknown.
EU + As a staged approach was favoured in the
Strengths and Weaknesses
past, could receive support; but possibly too
simple to take into account national
circumstances.
The rules applied are simple, thus making the approach transparent and
comprehensive. Countries at a low development stage do not participate, they
do not need to prepare detailed greenhouse gas inventories with the
subsequent institutional and technical requirements. This delay in participation
takes into account historical responsibility for past emissions; the component of
hot air is also eliminated. There is certainty about global emissions. The CDC
approach is compatible with the Kyoto Protocol.
It does not consider detailed national circumstances, possibly too simple.
The CDC is likely to also meet resistance from some developed countries due
to the element of per capita convergence. Even if it is not implemented entirely,
future negotiations can be guided by the principles in this approach: developed
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Chapter 2. Options for future climate change architectures 63
countries’ per capita emissions converge and that developing countries do the
same but delayed in time and conditional to developed country action.
2.1.2.4 Global Tryptich
Description
This approach was originally developed at the University if Utrech (Blok et
al. 1997) to share emission allowances of the first commitment period of the
Kyoto Protocol within the EU; it has been extended since then (Höhne 2006; den
Elzen et al., 2007).
The Tryptich approach describes a way to allocate national emission targets
(element 3) based on sectoral considerations (bottom-up). It is a method to share
emission allowances among a group of countries (element 2); the method as
such does not define which countries should participate (element 1).
The approach was originally based on three broad categories of emissions:
the power sector or electricity production, the group of energy-intensive
industries or industrial production, and the domestic sectors. The choice of
these categories is to take into account national circumstances such as
differences in standard of living, in fuel mix for the generation of electricity, in
economic structure. It was later extended to include all greenhouse gas
emissions of all sectors.
The emissions of the sectors are treated differently: for electricity and
industrial production, growth in physical production – the need for economic
development - is assumed together with an improvement in production
efficiency. For the domestic sectors, convergence of per capita emissions is
assumed - due to a convergence of the standard of living and a reduction in
existing differences in energy efficiency. For the remaining sectors similar rules
are applied.
For each of the sectors, an emission allowance is calculated, using the
national data, but the same Tryptich parameters for all the countries; these are
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Chapter 2. Options for future climate change architectures 64
added up to obtain a national allowance for each country. Only one national
target is proposed, not sectoral targets, to allow countries the flexibility to
pursue any cost-effective reduction strategy. The targets are fixed before the
commitment period based on assumptions about the production growth;
whether the assumed production growth really occurs is not relevant.
Implications
To lead towards stringent stabilization CO2 concentration levels such as 450
ppmv, substantial reductions need to occur in the OECD countries. Even larger
reductions are needed in countries with carbon-intensive industries such as the
Eastern European States and Russian Federation). Most developing countries
would be able to increase their emissions substantially, but rarely above their
business as usual emissions. Only for higher stabilization targets, such as 550
ppmv CO2 concentration, some developing countries may pursue
unconstrained growth.
Possible positions
Table 2 - 4. Possible country positions. Global Tryptich
Least developed
countries
+ Substantial emission increases would be
allowed for sustainable economic growth.
India + Indian per capita emissions are very low, and
therefore would be one of the countries with
the highest allowed increase in emissions;
they could support the approach.
China 0 Unknown. China’s per-capita emissions are
around the Non-Annex I average; growth in
emissions would be capped below reference
relatively early.
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Chapter 2. Options for future climate change architectures 65
Advanced developing
countries
- Unknown. Per capita emissions are above the
Non-Annex I average, they would need to
reduce emissions below reference in h early
half of the century.
Group of 77 0 A split of the group is not necessary; this
approach would allow one type of target for
most countries in the G77.
Russia 0 Unknown; but relatively high per capita
emissions.
USA - The approach would imply major reductions:
per capita emissions are amongst the highest
globally, emission levels of heavy industry
and the power sector are high.
Japan + Japan is already very efficient; the approach
Other umbrella group
countries
could be supported.
0 Unknown. Similarly to the USA, substantial
reductions would be required.
EU + Has already been applied within the EU.
Strengths and Weaknesses
Could receive support as a method to share
emission allowances for a group of countries.
The approach accommodates concerns of many countries; national
circumstances are explicitly taken into account. It allows for economic growth
at improving efficiency in all countries, and aims to put internationally
competitive industries on the same level. It has already been successfully
applied – on EU level – as a basis for negotiating targets. As the other
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Chapter 2. Options for future climate change architectures 66
approaches seen before, the Tryptich approach is compatible with the reporting
needs and mechanisms of the Kyoto Protocol.
It is the most sophisticated approach to share emission allowances within a
group of countries, although it also has high data requirements. It requires
many decisions and sectoral data, making global application a challenge; it may
also be perceived as not transparent. The assumed future production growth
rates for heavy industry and electricity are especially critical.
The approach could be applied globally, but best would be on any subset of
countries (e.g. the group of countries with reduction targets in a staged
approach) where sectoral data are available.
2.1.2.5 Historical responsibility – The Brazilian Proposal
Description
It was originally proposed in 1997 by Brazil as a method to differentiate
emission reduction targets (element 3) between Annex I countries (element 1)
for the Kyoto Protocol. The proposal suggested using the impact of historical
emissions on the global average surface air temperature as an indicator for
historical responsibility for climate change and sharing the emission reduction
burden among industrialized countries accordingly (element 2). A higher
percentage reduction would be assigned to countries with a higher historical
responsibility. The proposal suggested using an agreed simple climate model
for estimating the temperature increase resulting from the emissions of different
countries.
Implications
The approach requires a complex analysis to attribute a country’s
contribution to temperature change based on historic emissions. Even though
the proposal was overtaken in 1997 with the adoption of the Kyoto Protocol, the
consideration of its methodological and scientific aspects has been subject to
continued debate. A joint scientific effort is currently being organized by the Ad
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Chapter 2. Options for future climate change architectures 67
hoc group on the modeling and assessment of contributions to climate change
(see references to the MATH project).
Countries with a longer process of industrialization and thus a longer record
of greenhouse gas emission records, would have a higher historical
responsibility than those countries that industrialized later. However, if
emissions from land-use change and forestry are taken into account, also some
developing countries will have relatively high contributions.
The original method is thought only to be applied only to industrialized
countries and therefore for absolute emission reductions. If applied on a global
scale, decisions are needed on what countries participate (e.g. GDP threshold),
and maybe how targets for newly participating countries could allow controlled
increase in emissions (e.g. reductions below a reference scenario).
Possible positions
Table 2 - 5. Possible country positions. Historical responsibility – The Brazilian Proposal
Least developed
countries
+ Very likely to be exempt.
India 0 No position known, but insistently tried to
postpone the UNFCCC discussion on the
approach (probably not because the approach
itself, but only to block any discussion on the
future).
China 0 No position known, but insistently tried, as
India, to postpone the UNFCCC discussion
on the approach (probably not because the
approach itself, but only to block any
discussion on the future).
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Chapter 2. Options for future climate change architectures 68
Advanced developing
countries
+ Unknown, but could benefit due to low
historical responsibility, while having high
per capita emissions.
Group of 77 + They supported the approach; but for some
developing countries due to high emissions
from deforestation.
Russia 0 Unknown.
USA 0 No position known, but USA’s historical
responsibility may be smaller than that of the
EU.
Japan 0 Unknown.
Other umbrella group
countries
0 Unknown.
EU 0 They supported the official discussion on it;
Strengths and Weaknesses
on the other hand, EU countries have
relatively high historical responsibility.
It is the only proposal made officially by a developing country, and the only
one that is still officially discussed under the UNFCCC. As it was brought
forward by a developing country, it is attractive to be pursued further. It is
compatible with the Kyoto Protocol, regarding reporting and the flexible
mechanisms.
The original method can only be applied to absolute emission reductions. If
Non-Annex I countries do not participate until their contribution to climate
change is equal to that of Annex I countries, stringent goals can not be reached.
The Brazilian Proposal needs to be further developed for the global scale to
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Chapter 2. Options for future climate change architectures 69
ensure that strict environmental goals (e.g. 2ºC) can be reached. Anyhow,
application on the global level is unclear. Another weakness is the complexity
of calculating countries’ contributions to temperature increase. Countries with
long emission history would have very high emission reductions.
It is very likely that the element of historical responsibility will play a role in
the future climate regime, however, it is unlikely that it will be the only
parameter for sharing emission reductions between countries. It may be used as
an indicator to determine when a country would have to act, or the share of
financial contribution to adaptation activities.
2.1.3 Overview of the approaches
The following table summarizes the characteristics of the main approaches
described above in relation to the three elements: participation, sharing of
emission allowances and type of commitment (see Section 1.1).
The Common but Differentiated Convergence approach is not considered
here, as it would be in between the Contraction and Convergence and the
Multistage approaches.
Table 2 - 6. Overview of approaches based on national emission targets and international emissions
trading
Type of
commitment
Multistage
approach
Binding absolute
emission reduction
targets.
Pledge for
sustainable
development.
Contraction and
Convergence
Binding absolute
emission reduction
targets.
Global Tryptich
Binding absolute
emission reduction
targets.
Historical
responsibility –
The Brazilian
Proposal
Binding absolute
emission reduction
targets, not
compatible with
dynamic targets.
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Chapter 2. Options for future climate change architectures 70
Participation
Sharing emission
allowances
Four groups or
stages.
Based on proposals
by countries and
negotiations.
Within each stage,
targets are equal.
All countries. All countries.
Converging per
capita emissions.
Tryptich
methodology.
Sector-based
approach.
Originally only
industrialized
countries, could be
potentially applied
to all countries.
Formula based on
historical
contribution to
global temperature
increase.
With the adoption of the Kyoto Protocol in 1997, the Brazilian Proposal was
overtaken. Although historical responsibility may play a role in the design of a
future agreement - used as an indicator to determine when a country should act
or to determine the share of financial contribution to adaptation activities - it is
unlikely that it will be the only parameter used for burden sharing. It will
therefore not be included in the following assessment of approaches (Section
2.1.4), as it covers only part of a regime, and wouldn’t be applied on its own.
The consideration of its methodological and scientific aspects has been subject
to continued debate within the international negotiation process; a joint
scientific effort is currently being organized by the Ad hoc group on the
modeling and assessment of contributions to climate change.
2.1.4 Qualitative Comparison
In the following section, the approaches described above are going to be
assessed based on the criteria already introduced in Section 1.2:
• Environmental effectiveness (environmental criteria)
• Cost-effectiveness (economic criteria)
• Distributional considerations (political criteria)
• Institutional feasibility (technical criteria)
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Chapter 2. Options for future climate change architectures 71
2.1.4.1 Environmental effectiveness
An environmental effective approach must ensure that stringent global
emission targets are reached. It should include greenhouse gas emissions from
all important sources and sectors and avoid leakage (instead of reducing
greenhouse gas emissions, transferring these emissions to other sectors or
countries). It should also provide certainty about future emission levels.
The Contraction and Convergence and the Tryptich approaches ensure
environmental effectiveness best, if all countries comply with the emission
targets. Stringent concentration levels, such as 450 ppmv CO2 could be reached.
Leakage would be avoided since all countries would participate.
The Multistage approach would eventually include all major developing
countries, but only when a certain threshold is passed. Only if Annex I
countries decrease emissions substantially and developing countries participate
relatively early in time, stringent stabilization levels could be reached. Leakage
of emissions to non-participating countries could occur; if the threshold is based
on per capita emissions, the prospect of having to apply an emission limitation
target may be an incentive not to increase emissions in these countries.
Another environmental criterion to take into account may be the approach’s
encouragement of early action, those countries that do not have yet binding
commitments to keep current emissions as low as possible.
The Contraction and Convergence approach encourages countries to
undertake early action, since less reductions would be necessary afterwards or
even excess emissions allowed.
In the Multistage approach, having low per capita emissions is always an
advantage, as it keeps them from moving to higher steps and to stricter targets,
therefore early actions are encouraged. Non-participating countries would have
incentives to decrease their emissions by participating in the CDM. However, if
the targets are based on an emission level in the future, some countries may not
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Chapter 2. Options for future climate change architectures 72
prefer to sell cheap emission reductions - so called “low hanging fruits” - in the
CDM; in this case early action is partly discouraged.
The Tryptich approach is a mix of both. Early action in the domestic sectors
is encouraged, as emission allowances will eventually converge. However, for
the industrial and power sectors, assigning allowances based on emission levels
of the point in time the system comes into effect, may be an incentive to increase
emissions until then to have a higher target once participating.
2.1.4.2 Cost-effectiveness
The most cost-effective approach is the one that achieves the desired goal at
the least cost. The optimal approach would also give participants flexibility to
reach their commitments, tailored to their national needs and priorities. It
would also ensure that participants have certainty on the inferred costs of
taking on commitments.
All the approaches selected include emission reduction targets, and therefore
emissions trading can be applied. It is seen as the most cost-effective system as
it should ensure that all marginal abatement costs are comparable in all
participating countries, and that reductions occur where they are the most
economically efficient. Emissions can be reduced across sectors, gases and
borders. Participating countries, however, have low certainty of the total costs
needed to meet their targets.
Under the Tryptich approach emission reductions would be shared
efficiently as it specifically takes into account national circumstances and
existing emission reduction potentials.
The second stage of the Multistage approach, pledge for sustainable
development, is also cost-effective. Efforts for development are joined with
possibly small additional efforts for climate. They have the freedom to
implement any sustainable development policy as long as their emissions stay
below a certain threshold.
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Chapter 2. Options for future climate change architectures 73
In the Contraction and Convergence approach, due to the immediate
participation of all countries, the use of the emission reduction of all of them
can help reduce the global costs. This approach would incur the largest transfer
of resources from developed to developing countries, through the sale of excess
emission allowances.
It has already been introduced before that in order to be cost-effective, the
approach should take the diverse starting positions of countries into account –
the current situation, fossil fuels and potential for renewable energy sources,
climatic conditions and other.
The Tryptich approach was specifically developed to take into account the
structural differences at sector level: standard of living, population growth, fuel
mix for power generation, economic structure, energy efficiencies and projected
future changes.
In the Multistage approach, the introduction of several stages allows for
additional considerations of national circumstances. It allows newly
participating countries to do so through a first ‘soft’ step.
Contraction and Convergence considers national circumstances to the lowest
extent. The only criterion for differentiation of targets is the current level of per
capita emissions. This may lead to abrupt changes in the emission trends of
participants, including major developing countries.
2.1.4.3 Distributional considerations
Policies’ impacts, environmental benefits or costs, are rarely distributed
evenly across stakeholders. The distributional considerations of climate change
policies relate largely to equity.
Equity and fairness may be perceived differently by different people.
Responsibility, capacity and need are widely recognized to serve as a normative
basis for a climate policy regime. The principle of need refers to the fact that
meeting basic human needs and economic development are essential for
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Chapter 2. Options for future climate change architectures 74
adopting measures to address climate change, preferably in a sustainable
manner. Responsibility refers to the aspect that those countries that are
responsible for the problem should make greater efforts (polluter pays).
Capability means that those countries that have most resources should act
(ability to pay). All theses principles are included in the Convention, the
principle of need in the ultimate objective; the other two in Article 3.1 which
refers to their “common but differentiated responsibilities and respective
capability”.
As the only approach proposed by a developing country – among the ones
considered here – the Brazilian Proposal specifically takes into account these
principles. The whole approach is based on the responsibility principle (polluter
pays), specially in historical responsibility of countries, countries receive a
burden that corresponds to their cumulative historical emissions and
contribution to global temperature rise. To some extent, capability and need are
also supported, since only industrialized countries are given national abatement
targets according to the original approach.
The Multistage approach allows for sustainable economic development
(need) as participants move stages only when a certain threshold, based on
economic or emission development, is reached. The sustainable development
stage ensures development as a first priority for newly entering countries. The
principle of capability is covered to some extent, as countries are differentiated
in stages. The emission per capita threshold for countries to move upward
refers to the principle of responsibility. Targets assigned in each stage,
differentiating reductions to all participating countries, also increase capability
and responsibility principles.
The Tryptich approach allows for economic growth (need) leaving space for
industrial and electricity production to grow if they do so in an efficient way.
The capability principle is not explicitly addressed. The responsibility principle is
addressed as in the domestic sector; those countries that have higher emission
levels must reduce emissions more.
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Chapter 2. Options for future climate change architectures 75
The Contraction and Convergence approach allows only developing
countries for economic growth (need). Even most of these will see their
economic growth restricted in a few years. The principle of capability is not
explicitly addressed. The polluter pays or responsibility principle is taken into
account as those countries that have higher emissions have to reduce them
more. However, a newly industrialized country with high per capita emissions
will have to reduce the same as an industrialized country with similar level of
per capita emissions; it does not take into account historical responsibility.
Since the international negotiation process is based on decisions agreed by
consensus, the approach would have to be acceptable for as many countries as
possible. An approach that is seen as being unfair or for which the incidence is
unbalanced may have a difficult time making it through the political process.
Possible country positions regarding each approach have been discussed before
in the description of each approach (Section 2.1.2).
To gradually phase into reduction objectives, as seen in the Multistage
approach, may be acceptable to many countries. It also takes explicitly into
account the concept of sustainable development, which is a key element for
developing countries to agree on something. However, in order to reach
stringent stabilization levels, these would have to participate quite early, as of
2020; this may not be acceptable for some of those developing countries. The
USA, whose position is of particular importance due to its withdrawal from the
Kyoto Protocol, may strongly reject absolute emission reduction targets.
The Tryptich approach combines convergence of standard of living (in the
domestic sectors) with flexibility for growing emissions (in industry and
electricity production). This would likely be acceptable to developing countries
with low per capita emissions, which will be allowed increase in emissions;
however, advanced developing countries would have to start reducing
emissions relatively early. USA would need to make substantial reductions, as
current emission levels of heavy industry, the power sector and domestic per
capita emission are high; may not be willing to do so. It has already been
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Chapter 2. Options for future climate change architectures 76
applied within the EU as a method to share emission allowances, could
therefore receive support.
In what refers to the Contraction and Convergence approach, many
developing countries have clearly indicated their preference for the
convergence of per capita emissions. But the most advanced developing
countries would not benefit from this approach and would most likely reject it.
Some developed countries, led by the USA, strictly oppose to the concept of per
capita emissions.
2.1.4.4 Institutional feasibility
Two aspects are critical in reaching successful international agreements:
negotiating and adopting an agreement, and the subsequent implementation
of this agreement.
Since the international negotiation process is based on decisions by
consensus, the optimal approach should be simple and require a low number of
separate decisions by international bodies. For an agreement to be successfully
implemented, all necessary data and tools should be available and verifiable, or
at least collected and verified in the future. If the approach requires a
calculation method, it should also be made available and verifiable. Monitoring
and verification of the implementation of targets should also be available. For
approaches that include emission targets, emissions have to be calculated,
reviewed and verified.
Contraction and Convergence is the least demanding approach from the
negotiation and technical point of view. It is simple and transparent and
involves only a limited number of decisions. Decisions would have to be made
on the convergence year and the convergence level, possibly also on the gases
and sectors included to reach the target. Individual targets would not have to
be negotiated, they would be given by the methodology. Regular reviews of the
decisions would have to be built-in, governments wouldn’t accept a 100 years
fixed path. The current system of reporting and reviewing GHG inventories
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Chapter 2. Options for future climate change architectures 77
would have to be expanded to all countries, especially developing countries
who would be allowed to sell emission rights. However, developing countries
may not have the institutional or technical capacity to deal with these.
In the Multistage scenario, many ideas are integrated into one system,
therefore requiring more decisions. In particular stage two, pledge for
sustainable development, would be complex. Assessing the impact on
emissions is methodologically challenging, which adds complexity to the
negotiation process.
Even if the concept can be easily explained, the Tryptich approach is
relatively complex compared to some other approaches. Countries would have
to agree on the Tryptich criteria applicable, such as the convergence level of the
domestic sectors. The approach also requires a set of data, including expected
growth rates of production in the various sectors. These could be provided by
countries, but there is an incentive to provide high growth scenarios. This could
be overcome if adjustments are applied after the commitment period if the
projected growth rate was considerably different from the actual one, or by
directly using the actual growth rate.
The optimal approach from a technical point of view would be compatible
with the existing international structures of the Convention and the Kyoto
Protocol. They could benefit from the institutions and structures implemented
for the use of the Kyoto mechanisms, such as international emission trading or
emission reduction projects in other countries.
The Multistage, C&C, Global Tryptich and Brazilian Proposal could build
upon the Kyoto Protocol; they are all compatible its processes and institutions,
and emission trading could continue to operate. In the multistage approach,
even the CDM would further be operational. The notion of gradually increasing
the group of countries with emission reduction commitments, is built into the
Convention. Elements to achieve sustainable development, and financial
mechanisms to assist developing countries are also part of the Convention
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Chapter 2. Options for future climate change architectures 78
principles; these have to be enhanced to achieve significant changes in emission
pathways.
2.1.5 Conclusions
In the previous sections a variety of approaches for future international
climate policy post 2012 have been assessed based on several criteria. There are
conflicts between some of these criteria. For example, a simple approach –
Contraction and Convergence - would be relatively easy to negotiate, but
cannot address national circumstances of countries. Complex approaches –
Tryptich – may be able to take into account these specific circumstances, but
may be difficult to negotiate. Therefore, an optimal approach over all criteria
may not be available.
The following indicators are going to be used to evaluate each one of the
three approaches that have been initially considered to dominate the others,
based on the criteria described above:
‘-‘: mainly not met
‘0’: neutral
‘+’: mainly met
Table 2 - 7. Criteria assessment of different national emission targets and international emissions
trading approaches
Environmental
effectiveness
Multistage
Contraction and
Convergence
Global Tryptich
+ + +
Cost-effectiveness + 0 +
Distributional
considerations
+ - +
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Chapter 2. Options for future climate change architectures 79
Institutional
feasibility
0 + -
The Multistage approach rates good in almost all criteria. It seems likely that
any future regime will be staged in some form, it is a flexible system with many
possibilities on types of stages and thresholds for moving stages. The critical
element of the approach is that additional countries participate early enough so
that stringent environmental goals are reached; there should be incentives for
such participation, not only thresholds for participation. An important element
is stage 2, pledge for sustainable development, which could be seen as a
positive outcome for developing countries. The approach is, however, weak on
the technical requirements as it can be a complicated system requiring many
decisions.
The Contraction and Convergence approach rates very well on the
environmental and technical criteria due to its simplicity. But this simplicity is
also its major disadvantage: it doesn’t take into account structural differences of
countries and may not be accepted by most of the countries. Advanced
developing countries, for example, would be treated the same way as low
emission industrialized countries. The concept of eventually converging per
capita emissions in the long term could be part of a futures regime; but classic
Contraction and Convergence is too simple, and a decision that all countries
participate at once could be seen as unrealistic.
The Global Tryptich approach rated very well on the environmental criteria
as it caps global emissions and on the economic criteria as it explicitly takes into
account the national circumstances. It is a sophisticated approach to sharing
emission allowances within any group of countries. Its major disadvantage is its
relative complexity and the high data requirements, especially the assumed
future production growth rates are critical. The Tryptich approach, although it
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Chapter 2. Options for future climate change architectures 80
could be applied globally, would be best used on any subset of countries where
sectoral data are available.
All the approaches assessed here can be built upon the existing international
system: legally binding emission targets for some countries, commitment
periods, emission trading, incentives for developing countries to participate
(e.g. the CDM).
Every approach has advantages and disadvantages. A suitable mix of
approaches – albeit overly complex - can be the key to finding a broadly
acceptable solution, as all participants would find some favorable elements in
such a mix.
2.2 Sectoral agreements
Since the beginning of negotiations on the climate regime post-2012 in 2005,
there has been increasing interest in global sectoral approaches to address
climate change. Sectoral approaches have been prominent during the
negotiations in the 13 th Conference of the Parties in Bali, Indonesia, in December
2007. The Bali Action Plan even includes a specific reference to these; it was also
accorded to set a workshop on sectoral approaches.
Sectoral approaches can be distinguished into:
• Sector-wide transnational approaches, which may be industry-led, so called
global sectoral industry approaches;
• Bottom-up country commitments, possibly combined with no-lose targets;
• Top-down sectoral crediting as an incentive mechanism (e.g. sector CDM).
In this section, the first type of sectoral approachs are discussed - sector wide
agreements. Sometimes they are confused with emission targets for only one
sector within a country, so called sectoral targets, which were approached in
another section (see 2.1.1.6). These sectoral agreements are global agreements
for a sector.
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Chapter 2. Options for future climate change architectures 81
Strengths
Even in the absence of an agreed global long-term target, the urgency of
addressing climate change is now broadly accepted. Global CO2 emissions from
energy production and use are expected to grow rapidly (IEA, 2007). The idea
of targeting the principal emitters has gained ground. Sectoral approaches may
broaden participation in tackling climate change, including emerging
economies and are also thought to help moderate competitiveness concerns in
trade-exposed industries. Emissions would be identified in a sector by sector
basis, building confidence in that policies and measures can be carried out to
reduce emissions.
A number of authors (Schmidt et al., 2006; Bodansky, 2007; Egenhofer, 2008)
have suggested that sectoral approaches may provide an appropriate
framework for post-Kyoto agreements.
Some industrial sectors are so concentrated that even a small number of
companies represent a significant share of emissions; it is natural that climate
change policy would focus on them. Specified targets could be set, starting with
specific sectors that are particularly important, politically easier to address,
globally homogeneous or relatively isolated from competition with other
sectors. Targets may be fixed or dynamic, binding or no-lose.Some candidates
in industry for sectoral approaches (see Vieillefosse, 2007; Baron, 2007;
Egenhofer, 2008):
• Aluminium 0.9% of world GHG emissions (2004)
10 biggest producers = 54% of the world market
• Cement 4.6% of world GHG emissions (2005)
10 biggest producers = 25% of global output
• Steel 5.22% of world GHG emissions (2005)
10 biggest producers = 26% of global output
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Chapter 2. Options for future climate change architectures 82
Other potential industries include energy-intensive industries such as float
glass, a few heavy chemical industries, paper and pulp. Negotiations could
develop sector-wide agreements between all companies active in a particular
sector, e.g. all car manufacturers or all cement producers.
Sectoral commitments can be specified in a narrower basis than total national
emissions, and consider specific sector options. The collection of information
and data about the status of a sector may help benchmarking, such as key
performance indicators or identifying best practice, which in the longer term
could help identifying common medium-term goals. Sectoral approaches make
the comparison of efforts between countries within a sector a relatively easy
process – although comparing results across sectors may be difficult.
Sharing and spreading of best practice within companies may increase
operational efficiency; diffusion of technology would improve performance of
the least efficient installations.
Sectoral approaches attempt to engage governments and big industries in
emerging economies, which is where the most potential for emission reduction
lies, because of the tremendous expected emission growth. As sectoral
approaches are mainly voluntary, incentives for participation are needed, such
as technical assistance to improve operational efficiency, access to improved
technology, or developing sector-based GHG credits.
Initiatives that involve governments may have other additional benefits:
sharing of best practice of governments in order to remove regulations and
other barriers on technology diffusion among others; cooperation in
development of new breakthrough technology (e.g. International Iron and Steel
Institute (IISI) CO2 breakthrough programme). Governments and business may
also learn to better understand each other and jointly solve the problem of
climate change.
Sectoral approaches could, as a side-effect, help define national
commitments, cap-setting and allocation (only if free allocation is chosen). Data
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Chapter 2. Options for future climate change architectures 83
definition and collection would provide governments a more thorough base to
calculate abatement potentials in a given sector, and therefore to set targets in a
more equitable way.
Weaknesses
Some crucial challenges of global sector industry approaches have been
identified (Egenhofer, 2008).
Sectoral approaches are very data-intensive. However, there is rich
experience regarding data collection and use, e.g. for benchmarking
performance, within existing global sectoral industry approaches (under the
World Business Council for Sustainable Development (WBCSD) or the Asia-
Pacific Partnership on Clean Development and Climate (APP), which will be
introduced in another section).
There is difficulty in establishing standard measures: e.g. India uses coal
(with higher per unit CO2 emissions) for industrial heating, while the EU uses
mostly gas. India has also many local and inefficient industrial plants that
provide local services that are very difficult to replace.
Global sectoral industry approaches can be seen as some kind of sector-wide
coordinated activity. Anti-trust concerns in different national or regional
jurisdictions may raise. Because of the expanded roles of industry groupings,
there would be issues on how the market functions, it may not be transparent.
Independent 3 rd parties could be used to protect confidentiality of participant’s
information.
It has been said before that one of the objectives of sectoral approaches is to
enhance participation of major companies of key energy-intensive industries in
emerging economies, where most of the additional emissions will come from.
However, developing countries may perceive sectoral approaches as a way to
push them to binding commitments. Incentives are needed for this
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Chapter 2. Options for future climate change architectures 84
participation, such as technology transfer from developed to developing
countries, or sector cooperation to improve efficiency and performance.
Even if these incentives worked, there are other barriers that would have to
be overcome. Sectoral crediting, especially for the initial baseline, depends on
data availability and collection. Developing countries’ capacity to deal with the
complexities of crediting has also to be taken into account, establishing a proper
methodology can be technically tedious and politically contentious. Already
developing country governments’ capacity to deal with CDM resulted
insufficient in some cases. Another concern is that many industry sectors in
developed economies regard big companies of emerging economies having an
advantageous competitive position, crediting is seen as a subsidy.
In some cases, developing countries have even more efficient technologies
than industrialized countries; but it doesn’t make sense that developing
countries should compensate industrialized countries.
Sectoral approaches may also be used as limiting growth in developing
countries, e.g. developed countries could put conditions so developing
countries don’t compete unfairly if not subject to CO2 prices. It would also be
difficult to achieve a level playing field, as it has already been accepted the
principle of “common but differentiated responsibilities” for developed and
developing countries.
Another critical issue is that of governance. Liability and enforcement would
not be with governments; but industry associations don’t usually have the right
to impose majority decisions, they would have to be supported by them. In
addition, developing countries may not have the administrative capacity for not
only monitoring, reporting and verification but also baseline setting and
enforcement. The governance organization would have to handle the technical
complexities surrounding sectoral approaches, especially in developing
countries. However, negotiations under the UNFCCC to date are principally
political, negotiations on technical issues tend to be delegated.
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Chapter 2. Options for future climate change architectures 85
Another disadvantage is that not all sectors are amenable to sectoral
approaches, e.g. agriculture and land-use change, whose types of emissions are
strongly differing in national circumstances. Economic inefficiency may be
created, as trading across all sectors would be at a lower cost than trading only
within a single sector.
Implications
Sectoral approaches could theoretically be conceived either as separate – e.g.
sectoral industry agreements as part of the post-2012 framework – or as
complementary – crosscutting elements of other policies and frameworks.
Another possibility is to regard sectoral approaches as an intermediate step
until a global agreement is reached. However, as they are very data-intensive
and complex, it is unlikely that stakeholders engage in such a time-consuming
activity for a transition period only.
More realistically, international sectoral agreements could contribute to a
post-2012 effort as one element of a broader framework that includes other
commitment types. In the end, the likelihood of sectoral agreements within a
post-2012 framework depends on their political attractiveness. In sectors such
as cement and aluminum, where industry is well organized at the international
level, companies facing competitive imbalances may have an incentive to
initiate a sectoral approach that could be the base for an inter-governmental
agreement. In other sectors where there may be other rationales for a sectoral
approach, it may fall to governments to take the initiative if sectoral agreements
are to emerge.
An important point to take into account is how to fit global sectoral industry
approaches into a global climate change agreement under the UNFCCC. It will
most likely have to rely on a high degree of both intergovernmental and
industry cooperation with enforcement ensured by national governments.
A solution will also need to be elaborated in the way the sectoral industry
approaches are linked to the GHG emission trading system. One of the
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Chapter 2. Options for future climate change architectures 86
fundamental principles of global climate change policy is to ensure equal costs
on different emitting activities; but marginal abatement costs are different
between sectors, this increases overall costs.
Sectoral approaches would also have to fit into the EU policy, the strongest
link would be with the EU ETS and the global carbon market. Sectoral
benchmarks based on best practice could be used for setting the cap. If free
allocation continues – initial free allocation of the EU ETS was based on
grandfathering or historic emissions – sectoral benchmarks could be applied in
an harmonized way across the EU. Sectoral approaches could also help to link
the EU ETS with other domestic emission trading schemes, if central design
options – such as cap-setting and allocation – are converging.
Because of sectoral approaches, experiences from data collection and
benchmarking may make the Bali Developing Country Paragraph (see section
2.3 for more detail) easier to implement: “Linking measurable, reportable and
verifiable mitigation actions by developing countries to measurable, reportable and
verifiable financial and technical support by developed countries” (Decision
1/CP.13).
For some authors (Höhne, 2006) sectoral approaches seem to be more
effective if applied in a supplementary way with national emission
commitments. Even though sectoral agreements take into account particular
national circumstances, they may be seen as too complex to implement - too
many decisions and great needs of data availability. Maybe sectoral approaches
make sense at the national level, while it is not that clear at the international
level.
Global sectoral industry approaches are now positively affecting the
negotiations of a post-2012 climate change regime (see Egenhofer, 2008) in two
principal ways:
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Chapter 2. Options for future climate change architectures 87
• They lead to real GHG emission reductions. They do not only improve
abatement potentials and costs, but also increase energy efficiency, the
diffusion of new technology and the development of new one.
• They represent a cooperative approach. These are seen to be more
appropriate for a politically difficult and technically complex long-
term issue such as climate change, than the traditional adversary
approach that is now dominant.
“Governments alone will not be able to achieve climate change objectives.
Government efforts need to be combined with efforts by other stakeholder
notably industry and increasingly so financial institutions.” (Egenhofer, 2008)
2.3 Coordinated policies and measures
Instead of setting national emission targets, countries might also agree upon
the joint implementation of policies and measures that reduce the emission of
GHGs. These could include for example agreements on standards on energy
efficiency, carbon efficiency, best available technology (Ninomiya, 2003);
agreements on carbon tax (Cooper, 2001; Nordhaus, 2001); sustainable
development policies and measures (SD PAMs) (Baumert et al. 2005); financial
transfer to developing countries (Schelling, 2002); sector-based approach
(Schmidt et al., 2006). Sectoral policies have been discussed above (see section
2.2), SD PAMs are discussed in section 2.5.
Regarding the proposal for a harmonized tax (Cooper 1998, 2001), all
participating nations – both developed and developing countries – would tax
their domestic carbon usage at a common rate, therefore achieving cost-
effectiveness. There are several problems with this approach: developing
countries could see this common tax as unfair, given the relative welfare and
the relative responsibility; there are little incentives for participation;
governments could change tax codes to neutralize its effects. In addition,
although an equal marginal abatement cost across countries is economically
efficient, it may no be politically feasible: countries that currently apply such
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Chapter 2. Options for future climate change architectures 88
taxes have exempted certain industries, competitive concerns may also arise if
one country adopts a tax and a trading partner doe not.
As in the sectoral approaches, an advantage is that a sectoral wide agreement
would prevent any competitive disadvantage for any company (only if all of
them participated).
Some general disadvantages of this type of approaches are the greater need
for monitoring, the problem of ensuring compliance and the difficulty to choose
the most cost effective approach.
In the Kyoto negotiations, policies and measures were rejected by many
countries because they were seen as prescriptive and leaving less flexibility
compared to emission reduction targets. A menu of best practice policies and
measures could be provided, of which countries have to choose those that best
fit their national circumstances. However, it would be difficult to compare
between countries. A system solely based on policies and measures would not
allow emission trading.
2.4 Technology oriented agreements (TOAs)
A key element of a successful climate agreement would be its ability to
stimulate the development and transfer of technology – without which it may
be difficult or impossible to achieve emission reductions at a significant scale.
Technology oriented agreements (TOAs) are expected to address important
failures in the market for technological innovation. They stimulate additional
innovation to lower costs of mitigation and improve the social and political
acceptability of emission targets (De Coninck et al., 2007; Fischer et al., 2008).
One variant of a technology agreement is formulated by Barrett (2001, 2003).
This proposal emphasizes common incentives for climate-friendly technology
research and development (R&D), rather than targets and timetables. While this
proposal could be environmentally effective, depending on the payoffs to the
cooperative R&D efforts; it would not be efficient nor cost-effective, technology
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Chapter 2. Options for future climate change architectures 89
standards would not be applied to all sectors and may entail some technological
lock-in. Equity is considered explicitly, but the real strength in this proposal lies
in the incentives it would create for participation and compliance. Global
participation would not be required because if enough countries adopt a
standard, others are likely to follow due to the tipping and network effects.
Countries might agree upon jointly developing and implementing specific
technologies. They would invest together in research and development
activities.
Additional work is particularly needed to assist poor countries as these lack
scientific resources and economic infrastructure both to mitigate climate change
and to reduce their vulnerabilities to potential climate changes - adaptation.
An advantage is that this approach would gather like-minded countries with
common interests.
On the other hand, the approach takes into account only the long term
emission reduction and may not affect short term emissions.
The formal commitment to promote and cooperate in the development,
application and diffusion of technology is already included in the UNFCCC
(Article 4.1(c)), but specific measures to enhance such development are to be
defined.
Some examples of existing coordinated international R&D activities are the
following: International Partnership for a Hydrogen Economy (www.iphe.net),
Renewable Energy and Energy Efficiency Partnership (www.reeep.org) or the
Asia-Pacific Partnership on Clean Development and Climate
(www.asiapacificpartnership.org).
2.5 Development oriented actions
An example may be the sustainable development policies and measures (SD
PAMs) approach. It consists of a pledge to implement development policies that
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Chapter 2. Options for future climate change architectures 90
have an additional climate benefit (see Winkler et al., 2002; Bradley, 2005). This
recognizes the political reality that development has a higher priority than
climate change for many developing countries.
Currently, different levels of SD PAMs are discussed:
- Registry of measures, without any need for quantification or monitoring.
- Complementary activities for reaching another type of target, e.g. no-lose or
sectoral target would be the main target for a country to reach. SD PAMs
could be seen as a mean to reach it.
- Quantified and credited effects of SD PAMs, reduction emission credits
could be granted to sell on the international carbon market. They could
be seen as a first step for developing countries.
The environmental effectiveness of SD PAMs may be small in the short term,
but they can lead to less carbon intensive development with subsequent
impacts on long term emissions. Depending on the package of policies, they can
be economically efficient for the country. They focus specifically on the equity
aspect of the need for economic development. Technical feasibility depends
mainly on national infrastructure: assessing the impact of the SD PAMs on
emissions is challenging; for crediting them, detailed information on the
reduction effects is necessary.
SD PAMs may not be suitable for developed countries, nor for every
technology or policy. Another critical issue is that they may not attract the
necessary funding for it to be implemented on the scale required for global
climate change mitigation, they could, however, be implemented as
complementary activities.
The major difficulty in SD PAMs lies in the assessment of whether these
activities are additional to what would have happened otherwise, whether the
country is showing action. This approach could be seen as a possible first step
for Non-Annex I countries into more comprehensive action.
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Chapter 2. Options for future climate change architectures 91
Unless a climate regime preserves a right to development, it can not ensure
the necessary scale of developing country engagement, and is therefore not
politically or practically feasible. In recent negotiations, tension has been
noticed between the demands of addressing climate change and the
development of the South. Mitigation should be sufficiently rapid and global to
avoid dangerous climate change, which itself undermines development.
Adaptation is also a main objective, so that gains in development are not lost
because of climatic changes that are now unavoidable. These two objectives
have to be achieved in a manner that does not undermine the development of
the poor – imposing costs on poor communities or constraining the expansion
of energy services.
The agreement in Bali can be seen as a major step: developing countries
would undertake mitigation actions only “in the context of sustainable
development”, and “supported and enabled by technology, financing and
capacity-building, in a measurable, reportable and verifiable manner” (1(b)(ii),
Decision 1/CP.13). A major commitment to large developed to developing
country assistance – financial and technological – is an inevitable part of the
future climate regime.
3 Evaluating international climate change agreements
In this section, possible future climate change agreements are going to be
assessed in different ways:
• Criterion-based assessment (Section 3.1)
• Regional-based assessment (Section 3.2)
Finally, in Section 3.3 key takeaways of COP 13 in Bali - in what concerns a
post-Kyoto agreement - are going to be discussed. In recent negotiations, some
approaches have had more attention than others.
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Chapter 2. Options for future climate change architectures 92
3.1 Criterion-based assessment
This section reviews international climate change agreements using the same
criteria as in Section 2.1.4 (IPCC, 2007): environmental effectiveness, cost-
effectiveness, distributional considerations and institutional feasibility. As the
different approaches have been assessed throughout their description, they will
not be thoroughly discussed in this section. The discussion is summarized in
the table below.
Table 2 - 8. Criterion based assessment of international climate change agreements
Approach
National emission
targets and
international
emission trading
Sectoral
agreements
Environmental
effectiveness
Depends on
participation and
compliance. If
objectives are not
strong enough, the
carbon price will
not be able to
achieve the
necessary changes
in technology or to
dissuade
consumers.
Not all sectors are
compatible with
this approach;
global efficiency
decreases with a
reduced number of
sectors.
Cost-effectiveness
Emission trading is
seen as the most
cost-effective
system, but this
decreases with
limited
participation and
low gas and sector
coverage.
Lack of trading
across sectors
increases overall
costs. May be cost-
effective within a
sector.
Distributional
considerations
Depends on initial
allocation.
Takes into account
national
circumstances.
Reduces
competitiveness
concerns within a
sector. Depends on
participation.
Institutional
feasibility
Depends on
capacity to prepare
inventories and
compliance.
Many separate
decisions and
technical capacity.
Each sector may
require cross-
country institutions
to manage
agreements.
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Chapter 2. Options for future climate change architectures 93
Coordinated
policies and
measures
Technology
oriented
agreements
Development-
oriented actions
Global emission
level uncertain.
Individual
measures may be
effective. Success is
a function of
compliance.
Depends on
funding, when
technologies are
developed and
policies for
diffusion. Focuses
on the long term,
may not be able to
reach low
stabilization levels.
May be small in the
short term, but can
early lead to less
carbon intensive
development with
impact in long-term
emissions.
Depends on
national policies
and design of
synergies.
3.1.1 Environmental effectiveness
Depends on policy
design.
Depends on R&D
risk. Cooperation
reduces individual
national risk.
Marginal costs
across all sectors
would no be
equalized.
Depends on the
package of policies
and the extent of
integration with
other development
objectives.
May limit
flexibility, but
increase equity.
Emphasizes the
need to act rather
than to meet a
particular target.
Intellectual
property concerns
may be an obstacle
to technology
transfer.
They focus
specifically on the
equity aspect of the
need for economic
development, but
this depends
mainly on
distributional
effects of
development
policies.
Easier with a
smaller group of
countries than at a
global scale.
Many separate
decisions. Depends
on research
capacity and long-
term funding.
Depends mainly on
the national
infrastructure to
implement policies
and measures and
of priority given to
sustainable
development.
Environmental effective agreements lead to reductions in global GHG
emissions and concentrations, or decrease climate impacts. Their success
depends greatly on the incentives provided in order to achieve the specific
outcome.
A critical element in the effectiveness of an international agreement is its
implementation context: it will certainly be more successful in a country with a
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Chapter 2. Options for future climate change architectures 94
high level of domestic awareness and resources, and a strong institutional and
legal framework.
Participation also influences the environmental effectiveness of the
agreement. If it only includes a limited group of countries, particularly if they
are not the major emitters, it may be less effective – especially if there is a
leakage of emissions because of the migration of energy intensive industries
from participating countries to non participating ones. On the other hand,
benefits may increase due to technological spillover.
Timing also affects environmental effectiveness. Those policies that only
focus on long term objectives – as suggested in some technology oriented
agreements – would not make possible to reach low stabilization levels that
require immediate action.
Even though carbon markets are regarded as being environmentally
effective, their outcome would largely depend on the price set for carbon. At
the moment, governments have not the sufficient power or recognition to be
able to fix a sufficiently high carbon price for emission reductions to happen –
there will be no significant technological change or the needed changes in
consumer’s behavior. The climate change problem is urgent, action ‘was needed
yesterday’; command and control measures may be more effective as a first step
in combating climate change – e.g. changing all light-bulbs for efficient ones.
Although carbon price based measures are theoretically or apparently
environmentally effective, at the moment they can not be implemented in such
a stringent manner that would lead to the necessary emission stabilization level.
Technology or policies based measures are necessary to start combating climate
change.
3.1.2 Cost-effectiveness
A cost-effective international climate agreement would minimize global and
national costs. It would also provide sufficient flexibility for participants to
reach their commitments taking into account specific national circumstances; it
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Chapter 2. Options for future climate change architectures 95
would avoid being prescriptive and leave room for the implementation of the
target. It would not create significant distortions in competitiveness between
countries.
Many analysts find an emission trading system with the broadest
participation of countries to be the most cost-effective form of agreement. It
would allow the emission reductions to occur where they can be achieved at the
lower cost. However – as has been already discussed before - there is no time
left to act against climate change, emission trading is apparently a good option
but is not working well in practice, at the moment. Carbon prices can not be set
at a sufficiently high level as to lead to the magnitude of the measures needed.
Until governments are not capable of assuring the right functioning of carbon
markets, technology and policies based options will have to be implemented.
3.1.3 Distributional considerations
The most politically charged issue is equity. An international agreement that
involves national emission targets could be considered conducive to social
development and equity depending basically on participation and initial
allocation of emission rights. Exemptions and modification to the allocation
obligations may help address equity issues.
The tension between the demands of combating climate change and the
development of the poor is at the very center of the global climate negotiations
predicament. A climate regime that preserves a right to development is needed.
A major commitment to large North-to-South assistance – financial and
technological – is an inevitable part of the future climate change agreement.
3.1.4 Institutional feasibility
Two aspects are especially critical when reaching international agreements:
the negotiation and adoption of the agreement, and its subsequent
implementation.
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Chapter 2. Options for future climate change architectures 96
International agreements are usually adopted by consensus, therefore only a
limited number of separate decisions by international bodies are required.
Global agreements also require that all data and tools necessary for enforcement
be available and verifiable.
A sectoral approach would require multiple decisions. Choosing the sectors
or technologies for agreement may be difficult, unless participation were
voluntary. It would also have to be chosen how to regulate or support the
sectors. To assess whether a country has fulfilled its obligations would be
difficult.
Determining the effectiveness of both sectoral or technology agreements
would be a complex task.
New international institutions would need to be established to manage
coordinated policies and measures. Most sectors do not have institutional
arrangements (an exception is the Aluminium Institute, which has set emission
reduction targets among its member companies); while there are institutions to
promote development, few have integrated climate change into their portfolios.
Even if the Kyoto Protocol remains as the core institutional system, a
network of institutions to tackle climate change may be necessary and increase
effectiveness.
3.2 Regional-based assessment
As agreements under the UNFCCC are reached by consensus, an important
element to take into account while discussing different proposals for climate
change agreements is countries’ positions.
Interests of countries (Section 3.2.1) and their expectations for a future
international climate regime are first elaborated.
Possible incentives for participation of countries, based on their interests, are
discussed in Section 3.2.2.
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Chapter 2. Options for future climate change architectures 97
Section 3.2.3 compares differences revealed in proposals from different
regions; respective preferences and concerns regarding a future climate regime
will be important to help reach a multilateral agreement in future official
negotiations.
Finally, major climate policies currently taking place in some countries and
implementation of their commitments are reviewed in Section 3.2.4.
3.2.1 Interests of countries
This Section further elaborates on the countries’ different expectations for a
future international climate change agreement and the subsequent potential
conflict areas on which negotiations must focus.
A detailed list of criteria (Höhne et al., 2005) was developed against which to
check various approaches. A distinction can be made into general criteria, such
as environmental criteria, economic criteria, political criteria and institutional
criteria. Criteria used in other Sections (introduced in Section 1.2) –
environmental effectiveness, cost-effectiveness, distributional considerations
and institutional feasibility – are an example of sub-criteria of the above.
Selected country perspectives - European Union, United States, advanced
developing countries and least developed countries – are summarized in the
table below (see Höhne et al., 2005). The following indicators are used to
summarize the assessment:
‘YY’: Fulfillment of the criterion is very important for the player.
‘Y’: Fulfillment of the criterion is important for the player.
‘0’: Player is indifferent towards the criterion.
‘N’: Fulfillment of the criterion is not desired by the player.
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Chapter 2. Options for future climate change architectures 98
Table 2 - 9. Selective country perspectives of international climate change agreements
Category of criteria
Sub-criteria
Environmental criteria
(1) Putting emphasis on environmental
effectiveness
EU USA
Advanced
developing
countries
(ADCs)
Least
developed
countries
(LDCs)
YY N 0 Y
(2) Participation of industrialized countries Y 0 YY YY
(3) Encouraging early action Y Y 0 0
(4) Involvement of developing countries Y YY N N
(5) Integrating adaptation and sustainable
development
Economic criteria
0 0 YY YY
(1) Minimizing negative economic effects Y YY Y Y
(2) Promoting growth of developing countries Y 0 YY YY
(4) Stimulating technological change Y YY Y Y
(5) Accounting for national circumstances Y Y Y Y
(6) Certainty about costs Y YY Y 0
Institutional criteria
(1) Compatible with the Kyoto system YY N 0 0
(2) Moderate technical requirements Y Y Y Y
Political criteria
(1) Meeting equity principle Needs Y 0 YY YY
(2) Meeting equity principle Capability Y 0 YY YY
(3) Meeting equity principle Responsibility Y 0 YY YY
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Chapter 2. Options for future climate change architectures 99
Countries or country groups have different potential expectations of a future
climate regime, for some criterion they strongly oppose. Four major conflicts
can be extracted from the assessment presented.
Figure 2 - 1. Countries’ different expectations of a future climate change regime
1) Economic efficiency vs. environmental effectiveness
There is conflict within the fundamental approach to address climate change.
Some countries, lead by the USA, approach it as an economic problem, and
view as the highest priority economic efficiency – low cost and certainty about
emission reduction costs. Emphasis is given to short-term economic
considerations rather than to long-term environmental objectives. Emission
reductions are not treated with urgency, they may prefer approaches that
prepare them to act later, e.g. technology development.
Some other country groups, such as the EU, enhance the environmental
aspect of the problem, keeping global emissions low has the highest priority.
Urgency to act is stressed by these countries. They want certainty on low global
emission levels, they may not accept an agreement that would minimize the
costs but it is unclear whether the long-term objective of the Convention can be
met. They would prefer to work towards defining a joint long-term goal.
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Chapter 2. Options for future climate change architectures 100
2) Further commitments for industrialized countries and developing
countries vs. only for industrialized countries
Even if the UNFCCC states the principle of “common but differentiated
responsibilities”, there are still two major positions. This conflicting issue is
essentially between the USA (and to a lesser extent the EU) and advanced
developing countries.
On the one hand, developing countries think industrialized countries have
not yet “taken the lead” and they will not commit to act until progress has been
proven. Industrialized countries should commit to further reductions because
they started emitting GHG many decades before and therefore carry most
historic responsibility.
On the other hand, some industrialized countries point to the fact that some
developing countries considerably contribute to GHG emissions and that even
if drastic mitigation actions were carried out by industrialized countries, these
alone can not ensure stabilization of GHG concentrations. In addition, if only
some countries have limits on GHG, these would provide the countries with no
limit a competitive advantage and distort the market.
3) Mitigation vs. adaptation
Some countries are more vulnerable than others to the impacts of climate
change, e.g. countries low lying coastal lanes. Many of these are developing
countries that do not have financial resources to cope with the effects; they
therefore need considerable financial assistance. They call for early adaptation
measures as part of their sustainable development.
Another group of countries argue that mitigation measures are the best
means to adapt to climate change. For them, attention on adaptation should not
distract from the need to reduce emissions. Even if adaptation is agreed to be a
crucial part of a future agreement, it has been far less explored to date than
mitigation.
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Chapter 2. Options for future climate change architectures 101
4) Building upon Kyoto Protocol vs. negotiating a new Protocol
Some countries, lead by the EU, clearly stated that a second commitment
period of the Kyoto Protocol is the way forward. Building upon the existing
elements and the institutional structure would avoid time-consuming future
negotiations on a completely new institutional setup.
Some other countries, mainly lead by the USA, see the Kyoto Protocol as
having too many weaknesses to be a good basis for the future climate regime.
Setting another mechanism is favoured by these countries.
3.2.2 Incentives for participation of key countries
For any climate change agreement to be environmentally effective, major
emitting countries have to participate. Incentives for such participation are a
key element of the future climate regime.
3.2.2.1 India
India has voiced very clear and strong positions: economic growth and
meeting the needs of large parts of the Indian population are priority issues.
India has stated that emissions will grow as the country seeks to expand its
economic growth. No further commitments are accepted until developed
countries have demonstrated to take the lead. At COP13 in Bali 2007, India
voiced extreme positions – e.g. that no further negotiation process on non-
Annex I participation is necessary – although finally endorsing the agreement
reached.
Under staged approaches (multistage and CDC) – emissions and GDP per
capita are well below non-Annex I average – India would not have to
participate early. Under C&C would not have to reduce emissions significantly
below the reference scenario. The Tryptich approach would require relatively
strict emission limits for the electricity sector – India is strongly dependant on
coal -, and therefore stringent reductions below reference (Höhne et al., 2007b).
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Chapter 2. Options for future climate change architectures 102
At COP8 in New Delhi 2002, Prime Minister Vajpayee said that the only
equitable form for the future would be one based on equal per capita rights.
Since India’s per capita emissions are only a third of the world average, a per-
capita approach is preferred. Choosing an approach that clearly incorporates
the element of per-capita emissions could open the door for possible acceptance
by India.
India relieves that an agreement based on sector-specific reviews of options
and associated barriers would be more effective than a conventional top down
approach. Its position is rather firm, but open to negotiations (see Kumar et al.,
2008).
3.2.2.2 China
China is experiencing a remarkable growth in GDP (9% in 2003). China’s top
priority is economic development. The severe environmental problems – e.g.
the utilization rate of water resources is two times higher than the
internationally accepted warning line – and unfavourable energy resource
endowment – 2 nd biggest oil importer in the world, although having huge
amounts of domestic coal-, are forcing China to take some measures. These
include encouraging energy saving, the use of clean energy and the
development of energy efficiency and renewable energy.
The size, the strong dependence of coal and the fast growth of China will
result in high emissions in the future. In order to achieve relatively low
stabilization levels, it would be necessary to slow China’s emission growth
already by 2020 .Under C&C and CDC, emissions have to be reduced below
current non-Annex I average – China’s emissions per capita are slightly above
the non-Annex I average -, China would therefore need to reduce emissions
early under these approaches. However, under C&C, it would at the same time
a positive impacts from the sale of emission allowances – the marginal emission
abatement costs are very low compared to other countries. The multistage
approach would leave China more room to grow in the short term. The
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Chapter 2. Options for future climate change architectures 103
Tryptich approach requires relatively strict emission limits for the electricity
sector – China is strongly dependant to coal, its emissions per kWh electricity
are among the highest in the world – therefore relatively stringent reductions
for China. (Höhne e al., 2007b).
China takes a proactive attitude towards the global efforts for climate change
control. However, it reiterates that as a developing country, it should focus on
economic development and poverty alleviation and not have binding emission
reduction commitments. Developed countries, who are responsible for all the
emissions to date and still have much higher per capita emissions, should take
the lead. Developing countries should be able to increase their emission to meet
their development needs.
China may only be convinced to take further action if the agreement is seen
not to cap its economic growth or being economically beneficial for China.
Some possible options are: increased participation in the CDM (could generate
revenues), no-lose targets (allowances could be sold if targets are overachieved,
but none would have to be bought if targets are not reached), or rate based
targets (e.g. as a function of kWh or tonne of steel produced, which could take
away the fear of capping economic growth).
3.2.2.3 USA
As the largest emitter with very high emissions per capita and very high
GDP per capita, USA would need to reduce its emissions substantially under all
approaches. Convergence of emissions per capita (C&C and CDC) would be
demanding because of the current high levels – among the highest in the world.
The Tryptich approach would also be demanding because of these and the
relatively low efficiency compared to other Annex I countries; the electricity
sector is also very significant for the USA. As for most Annex I countries, the
Multistage approach would lead to the most stringent reduction efforts to
compensate that most developing countries participate late in time (Höhne et
al., 2007b).
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Chapter 2. Options for future climate change architectures 104
American policy on climate change is less consistent and is greatly
influenced by the flavour of the ruling administration. While the Bush
administration insists that binding emission limits for the USA are not possible,
all potential successor candidates - new elections in the USA are only
September 2008 - voiced their preference for national programmes in the USA
that cap emissions.
There remains an interesting option in engaging the US through the
involvement of individual states (such as the Regional Clean Air Act Incentives
Market operating in Southern California and the US Clean Air Act). Individual
states have already been pressing the Bush administration to regulate emissions
of greenhouse gases. A bottom-up approach could serve as the catalyst to
ensure federal acceptance of a more active role in greenhouse mitigation efforts.
3.2.3 Regional comparison
This section compares and clarifies differences revealed in proposals from
different regions on future international climate change agreement. It is based
on the study carried out by Kameyema (2004).
Tendencies evident in proposals from each region are reviewed from three
perspectives: (1) component of commitment, (2) timeframe and coverage, and
(3) architecture.
In Europe, most studies were on rules for emission allocation and criteria to
evaluate them. Many of the proposals were basically supportive of the current
international emissions trading scheme (element 1); suggestions for alternative
approaches were the minority. A long-term goal (element 2) – such as the
ultimate objective in Article 2 of the UNFCCC - was considered as important; it
was regarded as justification for setting a short-term commitment. Proposals on
burden-sharing rules generally assumed similar architectures to the Kyoto
Protocol (element 3), where national emission targets are set, together with
flexible mechanisms to reach them.
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Chapter 2. Options for future climate change architectures 105
In the United States, alternative kinds of approaches (element 1) were
mainly proposed. Actions were proposed instead of quantitative emission
targets that would be less acceptable to the national government, commitments
on policies and measures were preferable. They intended to give more impetus
to technology innovation and diffusion. Long-term goals (element 2) were
discussed, mainly from the perspectives of technological development, cost
implications and action under uncertainty. Many proposals were intended to
offer alternatives to the Kyoto Protocol (element 3); these were expected to be
more realistic but not to ensure environmental effectiveness.
In the non-Annex I country group, may articles showed concern for equity.
The Brazilian Proposal emphasized responsibility for historical cumulative
emissions, India and China emphasized per capita concerns as measures for
allocating emission reduction targets (element 1). A contentious issue was
developing countries’ participation in emissions mitigation schemes (element
2). The Kyoto Protocol is generally recognized as a first step in climate policy
and seemed to assume that it would continue (element 3). Sustainable
development is also a crucial issue in developing countries.
Large differences in tendency between regions can be observed. There are
several reasons. The main reason is that primary concerns and interests in each
region are different (see Sections 3.2.1 and 3.2.2 for further discussion on
countries’ interests). Another reason could be related to how the “international
relation” is observed: e.g. proposals from the EU may assume that international
laws are well respected, and that global issues should be dealt at multilateral
level; US proposals may see the world under anarchy where countries seek for
self-interest. Proposals for a future climate regime reflect not only consequences
related to climate policy but also views concerning current international
relations in general.
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Chapter 2. Options for future climate change architectures 106
3.2.4 Major public climate policies and implementation of commitments
This section provides a brief overview of the climate policies implemented in
the EU, US, Japan, Russia, China, India and Brazil. Basis of the evaluation is the
historical data – including greenhouse gas emissions -, national
communications to the UNFCCC and other reports on the discussion (Höhne et.
al, 2007).
First, a general overview of the status of climate policies in a given country is
provided. Then some national policies are briefly introduced and assessed.
3.2.4.1 European Union
Emissions in the EU 15 decreased by 2% between 1990 and 2005, which is 6%
from the Kyoto Target of –8% below 1990 emissions. Emissions in the EU 27
have decreased by 11% while their accumulated target is –8% (European
Environment Agency 2007).
The European Union has been very proactive in promoting climate change
mitigation, it is a front runner in climate negotiations. The EU has an ambitious
target to reduce emissions by 20% by 2020 and is even willing to reduce them
by 30% if other industrialized nations take on a comparable effort. It has also set
targets for renewable energy ad energy efficiency for 2020.
One of the most relevant EU policies on climate change is the Emission
Trading Directive (Directive 2003/87/EC). The EU emission trading scheme
(ETS) (see Section 1.3.2.1) is established where emission certificate can be traded
among the participating installations – currently over 11,500 installations
covering 45% of the overall CO2 emissions in Europe. The first phase, from 2005
– 2007, was a learning one, followed by the second phase in 2008 – 2012. Some
of the lessons learned and problems faced are reviewed in a Communication by
the European Commission (COM(2006)676 final): overestimation of baseline
emissions led to unsatisfying environmental outcome, in some sectors the value
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Chapter 2. Options for future climate change architectures 107
of allowances could be passed on to the customer and that volatile market
prices bring uncertainties in investment.
Another important policy is the Directive on Electricity Production from
Renewable Energy Sources (Directive 2001/77/EC), which aims at a share of
electricity from renewable sources of 21% by 2020. Indicative targets are given
which require to be implemented nationally.
In March 2007 the energy and climate change package adopted by the
Commission earlier that year was approved, which included: an independent
EU commitment to achieve a reduction of at least 20% in the emission of
greenhouse gases by 2020 compared to 1990 levels and the objective of a 30%
reduction by 2020, subject to the conclusion of a comprehensive international
climate change agreement 1 ; and a mandatory EU target of 20% renewable
energy by 2020 including a 10% biofuels target.
An energy and climate change package has once again been presented by the
European Commission the 23 rd of January 2008 (EC, MEMO/08/34). It includes:
- a proposal amending the EU Emissions Trading Directive (EU ETS);
- a proposal relating to the sharing of efforts to meet the Community's
independent greenhouse gas reduction commitment in sectors not
covered by the EU emissions trading system (such as transport,
buildings, services, smaller industrial installations, agriculture and
waste);
- a proposal for a Directive promoting renewable energy, to help achieve
both of the above emissions targets.
There also major policies implemented in the member states. As an example,
the German Renewable Energy Sources Act for the promotion of renewable
1 The EU would increase their target to 30% “provided that other developed countries commit
themselves to comparable emission reductions, and economically more advanced developing countries
also contribute adequately according to their responsibilities and respective capabilities”.
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Chapter 2. Options for future climate change architectures 108
energy, and the UK climate change levy, paid by energy users in the industry,
not energy extractors, and excludes households and transport.
3.2.4.2 USA
Greenhouse gas emissions of the USA in 2005 were 16.3% above the
emissions in 1990 and 23.3% above the original Kyoto target (UNFCCC 2007).
The US climate policy is greatly influenced by the ruling administration. The
imminent change of the US presidency has to be noted, as all of Bush’s
successors have solid plans to combat climate change. Climate change is a top
issue for leaders in both the House and Senate in 2008. The Lieberman-Warner
Climate Security Act is the first greenhouse gas cap-and-trade bill to be voted
out of a full Congressional committee, scheduled to be debated by the full
Senate in June 2008.
Energy policy in the US is often prepared on a state level; a variety of
regional bottom-up policies exist in different states which are much more
aggressive than the federal policies.
The Global warming solution act of California (AB 32) has the goal of
capping California’s GHG emissions to 1990 levels by 2020, starting in 2012.
Several states have been also proactive in implementing Renewable Portfolio
Standards. The Regional Greenhouse Gas Initiative consists of 9 states that are
discussing the design of a regional cap-and-trade scheme (www.rggi.org). The
U.S. Conference of Mayors Climate Protection Agreement is an agreement
made between various majors of US cities. They have to beat the Kyoto target in
their own communities, urge their state and federal government to do the same,
and urge the Congress to establish an emission trading scheme
(www.usmayors.org).
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Chapter 2. Options for future climate change architectures 109
3.2.4.3 Japan
Japanese emissions in 2005 were 6.9% above the 1990 base year emissions
and 12.9% above the Kyoto target emissions (UNFCCC 2007). The government
currently has a “Kyoto Target Achievement Plan” in place.
In general, Japan’s efforts rely on voluntary measures, buying of external
credits and expansion of nuclear capacity. In Japan, voluntary measures are not
the same as in Europe; business ethics in Japan would forbid not complying
with the measure. The aim of buying CERs is because Japan faces the highest
GHG emission abatement costs, it is partly explained by the fact that it has
already a highly efficient industry (Höhne et al., 2005).
Most of the Japanese voluntary action is coordinated through the Keidanren
Voluntary Action Plan, an agreement between the Japanese government and
the Industry association Keidanren – which made up 45.3% of Japan’s total
emissions in 1990. Under the plan, industries take on different voluntary targets
aiming at reducing emissions in various sectors (not only the manufacturing
and energy sector) in 2010 below 1990 levels. Monitored emissions in 2005 were
0.6% under the 1990 level.
In the Top Runner Approach, no quantifications are made as to how much
GHG emissions will be mitigated, the policy only aims at product performance.
The voluntary emission trading system in Japan (JVETS) was established in
order to accumulate knowledge and experience, whose biggest drawback is that
no major emitting industries participate.
3.2.4.4 Russia
Due to the economic downturn between 1990 and 1999, emissions in Russia
decreased; now emissions are again steadily increasing. Emissions between
1990 and 2005 declined by 27.8%, which equals the distance from their Kyoto
target (=1990 level).
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Chapter 2. Options for future climate change architectures 110
This might also be the reason why Russian’s current climate mitigation
efforts basically do not exist.
3.2.4.5 China
Since 1990, China’s GHG emissions have grown by about 80%, and may
grow by another 65% to 80% till 2020. Currently, there are various policies in
place, but these are not primarily driven by an interest in mitigating climate
change but instead from a focus on energy security or resource saving among
other aspects. China is the second largest source of the currently available CERs
(25,34%) in the CDM (UNFCCC 2007).
The energy intensity target (energy consumption per unit of GDP) aims at a
reduction of 20% below the 2005 levels by 2010. The renewable energy
promotion has a target of supplying 16% China’s primary energy demand by
renewable energy sources in 2020, up from 7% today. For the electricity sector it
translates in a 20% share. However, generation from renewables remains low,
some reasons may be the high cost of renewables in China, grid access or the
uncertainties that may deter investment brought by the current reforms taking
place in China.
3.2.4.6 India
The Industrial energy intensity of India has declined since 1995, but total
carbon emissions have grown by 63% over the last decade (Chandler et al.,
2002). A major GHG source is coal, as it accounts for over half of the total
primary energy consumption. India currently generates the largest number of
CERs in the world (34,69%) (UNFCCC 2007).
Renewable Energy policy has a strong history in India, a sizeable renewable
energy program has existed for 20 years. They are supported by the IREDA
Renewable Energy Financing. The share of renewable energy based power
generation currently accounts for 5% of installed capacity.
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Chapter 2. Options for future climate change architectures 111
3.2.4.7 Brazil
Emissions in Brazil increased 40.7% between 1990 and 2004. Emissions from
land use change and forestry make up a significant share. Brazil has high
emission rates per GDP but a low emission rate per capita. They have a
relatively low emission intensity, because of the large share of hydro power
plants (Höhne et al. 2007b). Currently, Brazil generates 15.2% of all CERs issued
(UNFCCC 2007b).
Biofuels incentives in Brazil have a long tradition, such as the PROALCOOL
program in the 1970s – which no longer officially exists-, or the existing
National Biodiesel Production & Use Program (PNPB). Approximately 20% of
the vehicle fleet in Brazil today are fuelled by ethanol and the ethanol content of
regular gasoline is 25% (Puppim de Oliveira 2002).
3.2.4.8 Sector-wide transnational (industry) approaches
Sectoral agreements have been introduced in Section 2.2. Industry initiatives
to date are the most relevant sectoral approaches:
• Cement Sustainability Initiative (CSI)
Initially, it focused on data-gathering – “Getting the numbers right”.
Currently the CSI is moving towards policy proposals, such as possible
country or regional baselines negotiated with governments to form
intensity-based commitments and a crediting system.
• International Iron and Steel Institute (IISI)
They cover more than 70% of global steel production, including
companies from China, Russia and India. They proposed to replace cap
and trade emission trading regimes in May 2007 with a sector specific
framework. Among other things, it encourages the phase-out of obsolete
technologies.
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Chapter 2. Options for future climate change architectures 112
• Asia-Pacific Partnership on Clean Development and Climate (APP)
(Previously introduced in Section 1.4.2.6) Formally launched in January
2006, it consists of seven partner countries – Australia, Canada, China,
India, Japan, Republic of Korea, and United States of America. The initial
six partners – excluding Canada – account for 45%of global GDP, 50% of
GHG emissions and 48% of global energy use (Government of Australia,
2007). They produce about 65% of the world’s coal, 48% of the world’s
steel, 37% of the world’s aluminium, and 61% of the world’s cement
(Egenhofer, 2008). They form sectoral task forces where business,
government and scientific researchers cooperate. Data gathering and
benchmarking exercises are covered for three energy supply and five
energy-intensive sectors (APP, 2007).
• International Aluminium Institute (IAI)
They have set themselves the voluntary objective of achieving a 80%
reduction of process emissions and a 10% reduction in energy intensity
compared to 1990 by 2010. They have nearly reached the objective
already.
3.3 Post-Kyoto agreement and the Bali Action Plan
The Bali Action Plan, which parties to the UNFCCC agreed to in December
2007, puts in place a negotiation process to reach a decision on a post-Kyoto
agreement by December 2009.
Although the UNFCCC provides for a variety of approaches to address
climate change, the Kyoto Protocol is limited to essentially one approach –
quantified emission reductions for developed countries and emission trading
(see Section 2.1). The Bali Action Plan appears to re-establish the Framework
Convention’s multiple approaches to mitigating climate change.
The Bali Action Plan would have the parties consider a “long-term global
goal for emissions reductions, to achieve the ultimate objective of the
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Chapter 2. Options for future climate change architectures 113
Convention” (Bali Action Plan, supra note 5, para. 1(a)). The Kyoto Protocol, by
contrast, only contains a goal for 2008 to 2012. Due to resistance by the USA,
Canada, Japan and Russia, an indicative range of mitigation commitments by
industrialized countries that is considered necessary by the IPCC to stay below
two degrees (25–40% compared to 1990 levels) was not included in the text, but
was relegated to a reference in a footnote.
Regarding commitments, the decision calls for developed country Parties’
mitigation commitments “including quantified emission limitation and
reduction objectives”, while “ensuring the comparability of efforts among
them” – a major setback to the drive of the USA and others to replace Kyoto-
style binding absolute targets with voluntary pledges.
Developing countries agreed to consider “nationally appropriate mitigation
actions”; there is no reference to quantified emission reductions. Broadening
participation to include developing countries is an important goal for any post-
Kyoto agreement.
To improve implementation of Article 4.1(c) of the Convention, parties are
also to consider “cooperative sectoral approaches and sector-specific actions”
(see Section 2.2 for Sectoral agreements).
Another major step forward lies in the language used, it moves away from
the terms ‘Annex I’ and ‘non-Annex I’, using ‘developed country Parties’ and
‘developing country Parties’. This leaves space for new combinations of
commitments suitable for the different stages of economic development,
emissions and mitigation potential in which developing countries find
themselves. Finding appropriate indicators and methods for differentiation
between developing countries will be one of the huge tasks of the next two
years ahead (see Section 2.1.2.1 for a Multistage approach).
According to the Bali Action Plan, mitigation actions by developing country
Parties must be “supported and enabled by technology, financing and capacity-
building, in a measurable, reportable and verifiable manner”. Any
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Chapter 2. Options for future climate change architectures 114
commitments on the part of developing countries have to be matched by clearly
identifiable and transparent support from industrialized countries. The biggest
task at hand: forging an alliance between North and South – with the emerging
economies on mitigation and with the poorer countries on adaptation. A global
effort is needed: around 50% of emissions at the moment come from Annex I
countries, with the remaining 50% from non-Annex I countries, and this is
rising rapidly. Substantial contributions from the South will require equally
substantial financial and non-financial support from the North.
While a cap-and-trade program is likely to be at the center of any post-Kyoto
agreement, it should not be the only part of the agreement. A simple extension
of the Kyoto Protocol’s cap-and-trade approach is not likely to succeed in
broadening developing country participation. Under the Bali Action Plan, it
would likely be limited to developed countries, these are the only ones that
agreed to even consider “quantified emission limitation and reduction
objectives”. Its effects on emissions on developing countries – currently around
50% of world emissions and increasing – would be limited unless they changed
their position. Second, the United States is not likely to ratify an agreement that
does not involve developing countries. Third, a cap-and-trade program is not
likely to work effectively in developing countries, due to the lack of elements
such as strict monitoring, adherence to the rule of law, and citizen participation.
Even in developed countries, market imperfections impede to achieve all
potential benefits of a cap-and-trade program.
The Kyoto Protocol type of commitment, absolute nation-wide emission
reduction targets, will certainly continue; emission cuts will be deepened and
the emission trading system strengthened. But maybe, not as a stand-alone
approach.
These limitations in a stand-alone cap-and-trade program may strengthen
the case for other approaches such as policy-based commitments (Section 2.3) or
international sectoral agreements (Section 2.2). The Bali Action Plan includes a
specific reference to sectoral approaches, thereby ensuring that they are part of
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Chapter 2. Options for future climate change architectures 115
the negotiations for the post-2012 agreement. International sectoral agreements
could broaden participation in a post-Kyoto agreement, may simplify
negotiations, allow countries to focus on priority concerns, and reduce
international competitiveness issues by bringing all competitors into the same
agreement.
The Bali Plan of Action can be reasonably understood as creating a process
that will include different types of approaches. It calls for enhanced action on
mitigation, which can be understood as including another round of emission
reductions – steeper cuts on emissions – and following the approach taken in
the Kyoto Protocol. Enhanced developed country action also includes other
“measurable, reportable, and verifiable” mitigation actions that may be
nationally appropriate; these could result in mitigation agreements that go
beyond the quantified Kyoto emission reductions, such as international sectoral
agreements or policy-based commitments. The commitment by developing
countries to consider mitigation measures that are “supported and enabled bu
technology, financing and capacity-building, in a measurable, reportable and
verifiable manner”, also appears to include these type of alternative
approaches. For developing countries, this mitigation actions would need to be
supported by appropriate resources.
The Bali Action Plan appears to put on course a post-Kyoto agreement that
looks further into the future, involves developing countries to a greater degree,
and is broader in scope than the Kyoto Protocol. However, it leaves much to
future negotiations, it represents an incremental step towards the future climate
change agreement.
4 Recent proposals for a full future climate regime
Recently several prominent proposals for a full international climate regime
have been made by various groups. All of these are from non-governmental
institutions but most were prepared with government input, and therefore
provide a good overview of the range of options.
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Chapter 2. Options for future climate change architectures 116
4.1 A Viable Global Framework for Preventing Dangerous Climate Change,
Climate Action Network (CAN)
The worldwide network of 400 NGOs “Climate Action Network (CAN)”
(www.climnet.org/pubs/CAN-DP_Framework.pdf) issued its ideas at COP-9
in December 2003, parts of which were redefined for later UNFCCC meetings.
CAN’s Global Framework is a multi-stage framework which assigns
countries to one of two mitigation “tracks” based on responsibility and
capacity, and, for some countries, to an adaptation track as well. The Kyoto
track builds upon the UNFCCC and the Kyoto Protocol, with legally binding
absolute emission reductions and emission trading (Section 2.1). The
‘Greening’ (decarbonization) track includes non-quantified commitments such
as Sustainable development policies and measures (SD-PAMS) (Section 2.3),
though these would primarily depend on external funding – industrialized
countries would provide resources and technology to drive much of this track.
The Adaptation track, to be funded on the basis of capacity and responsibility,
provides the resources to the most vulnerable regions (small island states, least
developed countries) to deal with unavoidable climate changes. Countries
receiving assistance under the adaptation track would also be eligible to operate
under one of the other tracks.
A combination of factors such as per capita emissions, ability or capacity to
act and historical responsibility would be used to determine when and how
countries move from the ‘Greening’ (decarbonisation) track to the Kyoto track.
The level and character of the mitigation actions would be determined by
reference to these factors; but the CAN framework says little about how they
would be operationalized. No quantified example of the CAN Framework
exists, and CAN is not developing one.
The CAN “viable framework” is a very general framework, essentially a
staged approach (see Section 2.1.2.1), but the elements within the framework
are yet to be specified – which countries are part of each track or how much
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Chapter 2. Options for future climate change architectures 117
individual developed countries would have to reduce their emissions. It is a
relevant approach, as it sets out the principles that CAN considers fundamental,
and thus defines the terms that any proposal would need to meet in order to be
backed by the NGO community.
4.2 South North Proposal – Equity in the greenhouse
The proposal of the South North (SN) Dialogue – Equity in the greenhouse –
is a multi-stage framework which divides countries into six classes, each with
differentiated mitigation commitments based on capacity, responsibility, and
potential to mitigate (Ott et al., 2004; Höhne and Ullrich, 2005; den Elzen et al.,
2007; Baer et al., 2007). As countries develop, they graduate and are expected to
assume increasingly stringent obligations. Countries with quantified
commitments may use emission trading. Adaptation is part of the framework,
by way of general allusions to responsibility-based (polluter-pays) funding.
Three of the categories of countries are based on historical categorization:
Annex I countries, Annex II countries (OECD countries within Annex I
countries), and least developed countries (LDCs). Three criteria were applied
for the differentiation of non least developed countries: capability (per capita
income and HDI), responsibility (historical fossil fuel emissions 1990-2000), and
potential to mitigate (combining per capita emissions, carbon intensity, and
growth rate of emissions). The remaining three categories of countries are
“Newly Industrialized Countries” (NICs), “Rapidly Industrializing Developing
Countries” (RIDCs), and “Other Developing Countries” (Other DCs).
Categorization into one of the six classes determines the basic obligations of
each country in terms of the types of commitments it has and the level of
external funding it can expect to help it comply with those commitments.
Briefly, the obligations are as follows:
• Annex II countries: Quantified (Kyoto-style, but more demanding levels)
reduction targets; also committed to financial and technological transfers
to all classes of developing countries.
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Chapter 2. Options for future climate change architectures 118
• Annex I but not Annex II countries (“Economies in Transition” (EITs)):
Quantified (Kyoto-style) reduction targets; low or no funding
obligations.
• Newly Industrialized Countries (NICs): Quantified limitation or
reduction targets (due to high level of responsibility and potential to
mitigate), with some funding from Annex II countries; also obligatory
Sustainable Development Policies and Measures (SD-PAMs); sectoral
CDM; non-binding Renewable Energy (RE) and Energy Efficiency (EE)
targets.
• Rapidly Industrializing Developing Countries (RIDCs): Quantified
limitation targets contingent on full funding from Annex II countries;
obligatory SD-PAMs (co-funded by Annex II); sectoral CDM; nonbinding
RE and EE targets.
• Other Developing Countries: Obligatory SD-PAMs (co-funded by Annex
II); sectoral CDM; non-binding RE and EE targets.
• LDCs: Optional SD-PAMS, fully funded by Annex II; sectoral CDM;
nonbinding RE and EE targets.
Quantitative mitigation commitments for NICs and RICs are subject to the
condition that all major Annex I countries (including the USA) take on
quantified emission reduction commitments and fulfil their commitments to
provide financial and technological resources.
Formulas – e.g. by which funding obligations are to be calculated or to
differentiate emission targets within classes of countries – are not specified at
all; neither are institutions for Annex II countries funding obligations. In
addition, there are lots of categories and lots of graduation events, many of
which would be controversial within the graduating countries. The system is
useful in indicative terms, but it would be difficult in practice.
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Chapter 2. Options for future climate change architectures 119
The South North Proposal preserves developmental equity under a stringent
mitigation target; it also specifies that mitigation costs in poor countries must be
paid by wealthy countries. Graduation thresholds could be lowered so the
environmental goals be more stringent, but the right to development over time
would be weakened. This tension – between the demands of our threatened
climate and the development of the South – is a critical issue in global climate
change negotiations.
4.3 Greenhouse Development Rights
The Greenhouse Development Rights approach, developed by EcoEquity, is
a proposal for a comprehensive climate regime in which national obligations to
pay for mitigation and adaptation are explicitly tied to a quantitative indicator
of responsibility and capacity. The mitigation side could, but need not be
implemented as a global cap-and-trade regime.
Its central principle is the right to development, rather than a right to
emissions. A ‘development threshold’ is defined – set at 150% of a global
poverty line, approximated by $16 a day, an indicative development threshold
would be $9000 a year (PPP). The GDR burden-sharing framework is based on
the same two principles that underlie the UNFCCC: capacity and responsibility.
Individuals below this level within a country are not expected to share the
burden of mitigating the climate problem.
Based on the national per capita income and Gini coefficient (a measure of
national income inequality), the income that the wealthier portion of population
has in excess of the development threshold is calculated – representing this each
country’s capacity (see Figure 2 – 1). Less than 1% of India’s population earns
more than $9000, approximately 10% of China’s population, and roughly 90%
of the US population.
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Chapter 2. Options for future climate change architectures 120
Figure 2 - 2. Capacity Capacity/Development Need chart for India, China and the United States, with
$9,000 per capita (PPP) development threshold.
A country’s responsibility is calculated as cumulative emissions excluding
emissions corresponding to consumption below the development threshold –
arising from meeting basic needs. Combined in a straightforward way these
can be used as the basis for burden-sharing, yielding the “Responsibility-
Capacity Indicator” or RCI. This would result in more than one-third of the
total global obligation for the US, somewhat more than a quarter for the EU-27,
less than 3% for China, and a negligible 0.1% for India.
These calculations of national obligation explicitly account for the wealth and
poverty in each country. They reflect a presence of a sub-population in
developing countries that is part of the global consuming class and that has
development obligations – domestic human development investment seeking to
reduce inequality – directly proportional to their mitigation exemption. A
concession to a certain kind of realism is made: it is plain that rich countries will
not fund their mitigation obligations if they feel that rich people in poor
countries are free riding on the mitigation regime.
It is critical in evaluating GDRs to know that it is a “reference framework.” It
would be naïve to think that it would be operationalized anytime soon; not, at
least, as a package. GDRs is not intended to be a “realist” proposal, not as
realism is understood today; nevertheless a wide range of plausible
mechanisms is compatible with the core GDRs architecture.
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Chapter 2. Options for future climate change architectures 121
The GDRs framework is one of the few proposals that has made a serious
effort to quantify responsibility and capability in a coherent way. If one would
accept that such an allocation of obligation would be fair even if it is unrealistic,
it would clear out some concepts in the climate policy debate. An adequate
response to the climate challenge will necessarily involve very large North-to-
South assistance – financial and technological. The tension between the
demands of the threatened climate and the development of the South is at the
very center of the climate change debate. It gives a new dimension to the world
solidarity: the survival of the wealthy depends on their solidarity with the poor.
4.4 International Climate Efforts Beyond 2012: Report of the Climate
Dialogue at Pocantico
The Pocantico Report (PEW 2005) reflects the outcome of a high level
dialogue exploring options for advancing the international climate effort
beyond 2012. Government, business, and civil society from 15 countries
participated in the dialogue. The dialogue ended in 2005.
The Pocantico Report lists a set of criteria for an effective framework, which
must: engage major countries, provide flexibility, couple near-term action with
a long-term focus, integrate climate and development, address adaptation and
be viewed as fair.
Elements for the future international effort are also listed in the report:
• Long-Term, Aspirational Goal
• Adaptation
• Targets and trading
• Sectoral Approaches
• Policy-based approaches
• Technology Cooperation
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Chapter 2. Options for future climate change architectures 122
Suggestions on the process of international negotiations are also made: the
initiation of a dialogue among major economies and attempts to link
approaches.
The report does not specify the elements presented. This may be an
illustrative example of how difficult it may be to get an agreement among a
small group of stakeholders on a future approach.
4.5 Sao Paulo Proposal of the BASIC Project
The BASIC Project is a capacity strengthening project – funded by the
European Commission – that operates in Brazil, India, China and South Africa.
The Sao Paulo Proposal (SPP) is an outcome of this project whose purpose is to
discuss future climate policy issues, it is not a consensus document.
The Proposal establishes a long-term (indefinite) regime whose performance
is assessed every 5 years against agreed climate and development goals.
Annual commitments for 2013-2018 would be negotiated by Annex I Parties,
but they would choose the form of the commitment. Each year, Annex I Parties
commitments are extended by one year (in 2013, the 2019 annual commitment is
set); they become more stringent if compliance has been relatively easy.
Non-Annex I Parties can choose between: participating in the CDM as
present, reporting the emission reductions achieved by implementing their SD
PAMs (but with no possibility of credits), or adopting a no-lose target (Section
2.1.1.3) which can generate credits.
Each non-Annex I Party is allocated a share of a global limit on CDM
transfers based on a formula that reflects its population and the principles of
responsibility, capacity and opportunity; allocations are adjusted at five years
intervals. When a non-Annex I country reaches its limit on CDM transfers, or
this limit drops to zero, it is expected to become an Annex I Party.
Some other elements of the Sao Paulo Proposal are listed below:
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Chapter 2. Options for future climate change architectures 123
- Existing carbon markets are maintained.
- The 2% levy currently applied to CDM projects is extended to international
transfers of other units; the revenue goes to a technology fund.
- Allowances for emissions from international aviation and shipping, currently
outside of the Kyoto system, are auctioned; the revenue is used for
adaptation.
- Criteria and standards for infrastructure and equipment are regularly
updated by all parties.
- A new Adaptation Committee of Experts (ACE) is established, together with
a financial mechanism to address extreme events.
- A mechanism is proposed to settle disputes (e.g. intellectual property rights)
over technology transfer. Funds are available to assist developing country
participation in technology R&D an deployment.
To broaden coverage, a memorandum of understanding with non-
participating parties can be approved; if they do not enter this memorandum,
economic sanctions against them could be imposed.
This is one of the most comprehensive proposals to date. It reflects the
principles of equity and common but differentiated responsibilities and
respective capabilities; tries to foster the fundamental technological changes
and structural shifts necessary to stabilize GHG concentrations; and provides
adequate financial resources for adaptation by vulnerable countries. It includes
all elements of a future climate regime in a balanced way. It started discussion
on how to fit the many pieces of proposals together.
4.6 Sector-based Approach to the Post-2012 Climate Change Policy
Architecture, Center for Clean Air Policy (CCAP)
The Sector-Based Approach (CCAP, 2006) emerged from Future Actions
Dialogue (FAD), which brings together senior climate negotiators from 15
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Chapter 2. Options for future climate change architectures 124
developed and developing countries to informally, "off-the-record" dicuss
critical elements of the "post-2012" international climate agreement.
In this approach, the ten highest-emitting developing countries in the
electricity and other major industrial sectors – which are roughly 1/3 of global
emissions - pledge to meet voluntary, “no-lose” (see Section 2.1.1.3) GHG
emissions targets in these sectors. The final “no-lose” emissions targets result
from negotiations with industrialized countries.
Energy-intensity benchmarks are first developed by independent experts, for
the electricity and major industrial sectors. From these benchmarks, the
participating developing countries determine initial GHG emissions targets that
are appropriate for their national circumstances. Industrialized nations then
offer incentives for the developing countries to adopt more stringent emissions
targets through a Technology Finance and Assistance Package, which helps
them to overcome financial and other barriers to technology transfer and
deployment. Annex I countries adopt economy-wide absolute GHG emissions
targets, similar to those in the Kyoto Protocol but influenced by the emissions-
intensity benchmarks.
CCAP’s Sector-based approach builds on developing country unilateral
actions, and then incentives are provided for going further. Importance is
placed on both encouraging sustainable development and achieving GHG
reductions. The approach provides new technology financing, and is also
focused on removing financing and policy barriers.
4.7 Policy Directions to 2050, A Business contribution to the dialogues on
cooperative action
The World Business Council for Sustainable Development (WBCSD) is a
CEO-led, global association of some 190 companies. The publication Policy
Directions to 2050 (WBCSD 2007) sets out an illustrative roadmap from which
routes must be chosen for the transition to a low greenhouse gas (GHG)
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Chapter 2. Options for future climate change architectures 125
economy. It is focused on energy use and infrastructure, rather than on
deforestation and adaptation.
The WBSCD calls for the development and deployment of leading-edge
technologies through partnerships and incentives, and an approach to mitigate
long-term market risk. The four policy priorities are:
• Establishing by 2010 a quantifiable, long-term (50-year), global emissions
pathway.
• For the post-2012 climate regime, use the existing international framework as
a basis, modifying it to build up from local, national, sectoral or regional
programs. Broadening the CDM to sectoral level.
• Building national programs to encourage energy efficiency; broaden the
range of fuels in the transport sector; and awareness and incentives of
consumers toward low-carbon products, services and lifestyles.
• Developing and commercializing low- and zero-GHG emission technologies,
together with supporting policies and programs to address technical and cost
challenges.
The approach allows for industry sector participation at the national level
and trans-nationally. It aims to progressively include all countries, developing
and developed. Industry is more than ever taking an active role in shaping the
discussion on a future framework. Their proposal is driven by national
programmes, not top-down from the international level.
4.8 Global Leadership for Climate Action: Framework for a Post-2012
Agreement on Climate Change
Global Leadership for Climate Action (GLCA) was convened by the United
Nations Foundation and the Club of Madrid to mobilize political will to prevent
catastrophic climate change. It consists of six former head of states, seven
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Chapter 2. Options for future climate change architectures 126
former heads of government, and 12 leaders from government, business and
civil society, who together represent more than 20 countries.
The GLCA framework proposes (GLCA 2007) four elements to be addressed
in future negotiations:
• Mitigation – Targets, Timetables, Market-Based Mechanisms: Developed
countries, including the United States, to reduce emissions by at least 60%
below 1990 levels by 2050; as a first step, reduce them by 30% by 2020.
Rapidly industrializing countries, including China and India, should commit
to reduce their energy intensity by 30% by 2020 (an average of 4% per year);
other developing countries should commit to energy intensity targets
differentiated by their responsibilities and capabilities.
A carbon price should be set; the preferable mechanism would be a system of
harmonized, universal carbon taxes, but it is recognized that many in
industry prefer a cap and trade system – these should be financially linked
across the world with auctioning of emission allowances.
• Adaptation: It should be seen as part of sustainable development and
strategies to alleviate poverty. Centres for Adaptation in Agriculture should
be established, particularly in Africa.
• Technology Development and Cooperation: Due to recent global declines in
investments for energy R&D, the formation of a Consultive Group on Clean
Energy Research is considered, to encourage collaboration on a “clean
technology revolution”.
• Finance: A climate fund - starting at US$10 billion and growing to US$50
billion per year - should be established to support climate change activities in
developing countries (adaptation, avoided deforestation, and clean energy
development and deployment). The Clean Development Mechanism (CDM)
should be reformed to give its full potential.
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Chapter 2. Options for future climate change architectures 127
This proposal receives a lot of weight through the participation of well
recognized world leaders in the process. Although it highlights the areas where
agreement is necessary – mitigation, adaptation, technology and finance
(coinciding with the four building blocks discussed in COP 13 in Bali) -, it does
not go into much detail. It is remarkable that a harmonized carbon tax, which
did not receive much support in the past, is proposed; anyway, it sees a cap-
and-trade system as alternative.
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3
Implications of future climate
regime architectures

Chapter 3. Implications of future climate regime architectures 129
1 Introduction
1.1 Introduction
The Kyoto Protocol is only a first step towards reaching the ultimate
objective of the UNFCCC, “to achieve … stabilization of greenhouse gas
concentrations in the atmosphere at a level that would prevent dangerous
anthropogenic interference with the climate system” (UNFCCC 1992).
International negotiations on the future climate change regime have already
started, both under and outside the UNFCCC and the Kyoto Protocol. These
discussions need an analytical basis on the possible impacts that a future regime
design could have on countries.
In this Chapter, the implications that different future climate change regime
architectures will have on countries are assessed. Here, the focus is on regional
emission allocations and abatement costs at a global scale - other studies have
modeled emission allowances within groups of countries, e.g. within the EU
(which will be discussed in Chapter 4, in order to better assess these impacts on
Spain).
First, an overview of literature of different studies aiming at quantitatively
compare different future climate change architectures, is presented in Section
1.2, in order to choose the most comprehensive analysis.
Section 2 describes the global emission levels needed to reach stabilization of
greenhouse gas (GHG) concentrations. Three levels of ambition are explored –
stabilizing GHG concentrations at 450, 550 and 650 parts per million by volume
carbon dioxide equivalent (ppmv CO2eq.).
Section 3 provides required emission reductions for the different (groups of)
countries according to different approaches for the future climate regime
(Höhne et al., 2007). The approaches selected have all been previously
introduced in Chapter 2: Contraction an Convergence (Section 2.1.2.2),
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Chapter 3. Implications of future climate regime architectures 130
Common but Differentiated Convergence (Section 2.1.2.3), Multistage (2.1.2.1),
Tryptich (2.1.2.4), and a sectoral approach (2.2); however, they are briefly
presented in Section 3.1.
Section 4 analyses the abatement costs of some post-Kyoto regimes for
differentiating commitments: the Multistage approach, the Brazilian Proposal
approach and Contraction and Convergence (den Elzen et al., 2005).
1.2 Overview of literature
Several studies have analyzed the broad range of possible future
commitment regimes (see Aldy, 2003; Criqui et al. 2003; Höhne et al., 2003;
Bodansky, 2004; Blok et al., 2005; den Elzen et al., 2005; Höhne, 2006; Gupta et
al., 2007; den Elzen et al., 2007; Höhne et al., 2007; Kameyama, 2007); which
have already been analyzed in the previous chapter.
Some of these studies have quantitatively compared the regional emission
allowances for various approaches (den Elzen et al., 2003; Criqui et al., 2003;
den Elzen et al., 2005; Höhne et al., 2005; Höhne, 2006; Höhne et al., 2007).
The most comprehensive reviews include those of den Elzen et al. (2005) and
Höhne et al. (2007) (see Table below). Berk and den Elzen – for RIVM -
pioneered the detailed analysis of emission allowances with the Framework to
Assess International Regimes for the differentiation of commitments (FAIR)
model (Berk and den Elzen, 2001; den Elzen and Lucas, 2003), but on a regional
level. Höhne et al. (2007) – for Ecofys – provides emission allowances of various
approaches with the Evolution of Commitments model (EVOC) on a country
level.
In Höhne et al. (2007), three levels of ambition - 450, 550 and 650 ppmv
CO2eq. - are explored for 2020 and 2050. Emission allowances - before trading -
are calculated, and the differences between six future climate regime
approaches assessed: Contraction and Convergence, Common but
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Chapter 3. Implications of future climate regime architectures 131
Differentiated Convergence, Multistage, Tryptich, a sectoral approach and
intensity targets.
Some studies have gone one step further and have, based on emission
allocations, calculated emission reduction costs and possible trades of
emission allowances at a regional level, for different post-Kyoto regimes
(Criqui et al., 2003; den Elzen et al., 2005).
Den Elzen et al. (2005) analyze the abatement costs of three post-Kyoto
regimes for differentiating commitments: the Multistage approach, the Brazilian
Proposal, and Contraction and Convergence. Their analysis was based on a
stabilization of GHG concentrations at 550 ppmv CO2eq; as part of the
uncertainty analysis they also tested the alternative target of 650 ppmv CO2eq.
Table 3 - 1. Overview of literature regarding regional implications for future climate change regimes
Article Group Model Analysis
Höhne
et al.,
2007
Den
Elzen
et al.,
2005
Ecofys EVOC
RIVM
7.0
FAIR
2.0
(+
MAC
curves)
basis
Country
level
Regional
level
Stabilization
concentration
levels (ppmv
CO2eq)
450
550
650
550
650
Calculates
emission
allowances
Calculates
abatement
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costs
Yes No
Yes Yes
Analysis
years
2020
2050
2025
2050
Approaches
compared
C&C 2050
CDC
Multistage
Tryptich
Sectoral
Intensity
C&C 2050
C&C 2100
Multistage
Brazilian
For the purpose of Section 3, the results obtained with the EVOC tool and
presented in Höhne et al. (2007) were chosen. The main objective here is to
Model
also
used
in
CCAP
BASIC
Project
OECD
(2008)

Chapter 3. Implications of future climate regime architectures 132
compare emission allowances for different future international climate change
regimes; in Ecofys’ study, more approaches - actually most of the ones
presented in Chapter 2 - are assessed. In addition, not two but three levels of
ambition have been explored – they add the much more stringent stabilization
target of 450 ppmv CO2eq.
Höhne et al. use a regional downscaling method that has been criticized in
the literature (van Vuuren et al., 2007; den Elzen et al., 2007). A source of
uncertainty in the analysis, among others, stems from the unknown future
development of emissions. The standard set of future emission scenarios used
as a basis, the IPCC SRES scenarios, are only available at the level of up to 17
regions. They applied the growth rates for 17 world regions on the latest
available data points of the individual countries within the respective regions.
On the level of regions, the full range uncertainty about future emissions is
covered; because when again aggregating the regions, the effect of downscaling
cancels out. Therefore, the assessment presented in this Chapter is valid from
this point of view.
Höhne et al., 2007 also provide a sensitivity analysis for different options to
share emission allowances between Annex I countries. When modeling
emission allowances within groups of countries - e.g. whithin the EU (which
will be discussed in Chapter 4), and therefore focusing on the national level -
the full level of uncertainty is not covered. Höhne et al. use regional growth
rates for individual countries, thus basically using the same trend for all the
countries within a region. In Chapter 4, another study will be chosen – den
Elzen et al. (2007).
However, Höhne et al. do not present abatement costs for the different
approaches to future international climate change agreements. For the purpose
of Section 4, the results obtained with the FAIR model for three different post-
Kyoto climate regimes – the Multistage Approach, the Brazilian Proposal and
Contraction & Convergence – are used (den Elzen et al., 2005).
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Chapter 3. Implications of future climate regime architectures 133
1.3 Stabilization of greenhouse gas concentrations
Not only the method for differentiating commitments needs to be defined,
but also the overall global emission objective. The European Union and several
European ministers, among others, have repeatedly committed to the 2ºC
temperature target – “global average temperatures should not exceed 2ºC above
pre-industrial level” (EU Council 1996). The translation of change in
atmospheric greenhouse gas concentrations to change in temperature involves
the relatively large uncertainty of the climate sensitivity. The IPCC Fourth
Assessment Report (IPCC 2007b) suggested that climate sensitivity is likely to
be in the range of 2°C to 4.5°C. At average climate sensitivity, the EU has to aim
for a CO2 concentration below 450 ppmv (i.e. 550 CO2eq. 1). Using various
probability distributions of the climate sensitivity, Hare and Meinshausen
(2004; Meinshausen 2005) conclude that it is “unlikely” that the 2°C will be met
(70%-100% risk of stabilizing above) with stabilisation of at 550 ppmv CO2eq.
(450 ppmv CO2 only). They deduce further that there is roughly a 50/50 chance
that it is met at 450 ppmv CO2eq. (400 ppmv CO2 only); and that it is “likely” to
be met (2% to 55% risk of stabilizing above) at 400 ppmv CO2eq. (370 ppmv CO2
only), which is already exceeded today 2 .
Starting with a baseline or business-as-usual (BAU) emissions scenario, and
considering different global emission pathways for the ambition levels chosen
(450, 550 and 650 ppmv CO2eq.) (Figures 1 and 2), global emission reduction
objectives can be defined (Figure 3). Under the BAU scenario no special
emission reduction efforts are assumed for the future. The three emission
reduction scenarios shall illustrate which global emission reduction efforts
1 Stabilising the CO2 concentration at 450 ppmv CO2 and reducing emissions of other gases at similar
rates would lead to a combined radiative forcing equivalent – i.e. the amount of radiation (heat) trapped
by the gas, which is used to compare greenhouse gases - to that of 550 ppmv CO2 (450 ppmv CO2 ~ 550
ppmv CO2eq).
2 Since the industrial revolution, anthropogenic emissions have increased the atmospheric CO2
concentration from 280 ppmv to the current level of around 380 ppmv.
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Chapter 3. Implications of future climate regime architectures 134
would be needed compared to the BAU case to reach different emission
stabilization levels - 450, 550 and 650 ppmv CO2eq. (Höhne, 2006).
Due to the long residence time of CO2 in the atmosphere (in the order of 100
years), the cumulative emissions, irrespective of the time of emission, can be
approximated to define the concentration level. This means that many
alternative pathways are permitted which may have significant differences in
the timing of required emission reductions. Therefore, the spread of emissions
pathways that lead to the same concentration levels can be large. In this context,
emission pathways describe the annual global emission level for some time
period. An emissions corridor is a range of emissions pathways which lead to a
particular stabilization level. The corridor for a 450 ppmv CO2eq. stabilization
level in Figure 1 includes two example pathways: One where global emissions
increase rapidly, peak and then decrease rapidly and one where emissions
decrease moderately from the start. Both paths lead to the same concentration
level - 450 ppmv CO2eq. - by the end of the century.
Figure 3 - 1. Reference emissions and emissions corridor towards stabilization at 450 ppmv CO2 (550
ppmv CO2eq.) (Source: Höhne, 2006)
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Chapter 3. Implications of future climate regime architectures 135
Figure 3 - 2. Reference emissions, emissions corridor towards 550 ppmv CO2 (650 ppmv CO2eq.) and
emissions corridor towards 400 ppmv CO2 (450 ppmv CO2eq.) (Source: Höhne, 2006)
Figure 3 - 3. Selected global emission levels for 2020 and 2050 relative to 1990 for this analysis (Source:
Höhne, 2006)
Six reference points of global emission levels, which have to be met by all
approaches, were defined (see Figure 3 - 3 or Table 3 - 2). The reference points,
used in Höhne et. al (2007), are based on a review of recent literature (den Elzen
and Meinshausen 2005; Höhne et al. 2005a; Höhne and Blok 2006; IPCC 2007a);
and therefore do not correspond completely to the given emission reduction
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Chapter 3. Implications of future climate regime architectures 136
corridors in Figure 3, which only reflects the scenario set presented by Höhne
(2006), based on simple assumptions and only CO2.
Table 3 - 2. Possible emission reduction pathways and global emissions reference points for the
different global emission stabilization levels as used in the analysis carried out by Höhne et al., 2007
Emission level in ppmv Reduction compared to 1990
CO2 ~CO2eq. 2020 2050
550 650 +50% +45%
450 550 +30% -10%
400 450 +10% -40%
2 Regional emission allowances
This section presents emission allowances for five possible future climate
change architectures 1 consistent with emission pathways towards 450, 550 and
650 ppmv CO2eq. for the years 2020 and 2050 - the calculation outcomes have to
meet the global emissions reference points mentioned above. For this
comparison of future architectures the Evolution of Commitments tool (EVOC)
is used.
2.1 Overview of approaches
The following approaches are included in the calculation of emission
allowances:
• Contraction and convergence (Chapter 2, Section 2.1.2.2) by 2050
• Common but differentiated convergence (Chapter 2, Section 2.1.2.3)
• Multistage (Chapter 2, Section 2.1.2.1)
• Global Triptych (Chapter 2, Section 2.1.2.4)
1 Höhne et al. (2007) include six different architectures, however, here only five are considered.
Greenhouse gas intensity targets for all countries seem a less realistic case.
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Chapter 3. Implications of future climate regime architectures 137
• Sectoral approach (Chapter 2, Section 2.2)
All of the approaches include as an element emission reduction targets.
Other approaches - such as an agreement on policies and measures (see Section
2.3 of Chapter 2) or on technology development (see Section 2.4 of Chapter 2) -
are not included, because their effect on countries’ emissions is difficult to
quantify.
Different sectoral approaches are discussed in international negotiations.
One option would be that the industry in one global sector would assume a
target (see Egenhofer, 2008); the responsibility to implement the target would
be with that industry and not with the national governments. Another option is
that responsibility stays with national governments but that the same rules for
one sector are applied to all countries – e.g. emission standard or benchmark. A
further option would be that emission targets are defined for all individual
sectors as function of their respective output – e.g. ton of steel, kWh produced.
The targets can still be reached in a flexible manner across greenhouse gases
and sectors, as well as through emission trading. This last option is further
developed into a global regime by the Center for Clean Air Policy (CCAP – see
Section 4.5 of Chapter 2) (Schmidt et al., 2006) and is used in this analysis.
The sectoral approach is modeled separately based on Höhne et al. (2006b)
and not within the EVOC tool, used for the rest of approaches. Due to data
limitations, the sectoral approach is only modeled until 2020, and not for all the
regions – the result of the calculations cannot be shown completely in the
figures below. The specific assumptions under which these approaches were
explored, are not presented here (for more information see Höhne et al., 2007) –
the focus is on the results.
The approaches have already been assessed in Chapter 2, however, a brief
qualitative comparison is going to de made in this Section. The strengths and
weaknesses of the approaches selected are summarized in the following table:
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Chapter 3. Implications of future climate regime architectures 138
Table 3 - 3. Summary of the strengths and weaknesses of the major approaches
Contraction & Convergence
Common but Differentiated Convergence
• Simple, clear concept
Strengths Weaknesses
• Immediate participation of all countries
• Certainty about global emissions
• Cost-effective reduction options in
developing countries through full
international emission trading
• Support for least developed countries
(LDCs) through excess of emission
allowances
• Compatible with Kyoto Protocol (reporting
and mechanisms)
• Simple, clear concept
• Delay of non-Annex I countries’
participation takes account of
responsibility for past emissions
• Certainty about global emissions
• No excess allowances for low emission
countries – no “hot air”
• Compatible with Kyoto Protocol (reporting
and mechanisms)
• Dos not take into account national
circumstances (including historical
responsibility)
• Substantial reductions for countries with high
per capita emissions, including such
developing countries
• LDCs need to be capable of participating in
emission trading (national GHG inventories
and emission trading authorities)
• Excess of emission allowances for LDCs need
to be compensated by more stringent
reduction targets for developed countries
• Dos not take into account national
circumstances, except per capita emissions
and current membership of Annex I
• Too simple and not considering national
circumstances
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Chapter 3. Implications of future climate regime architectures 139
Multistage
Triptych
Sectoral approach
• Gradual phase-in of countries, taking into
account national circumstances
• General framework that can accommodate
many ideas and satisfy many demands
• Allows for gradual decision making
• Industrialized countries take the lead
• Compatible with Kyoto Protocol (reporting
and mechanisms)
• National circumstances are explicitly
accommodated
• Explicitly allowing for economic growth at
improving efficiency in all countries
• Aims to moderate competitive concerns
between industries in some sectors
• Has already successfully been applied on
the EU level as a basis for negotiating
targets
• Compatible with Kyoto Protocol (reporting
and mechanisms)
• Explicit considerations of national
circumstances per sector
• Focus on most important sectors and
particular reduction options
• Makes participation of many selected
sectors and consequently of countries
easier
• If applied globally, decreases
competitiveness concerns
• Can be build into the Kyoto system
• Requires many decisions and allows for
exceptions, can lead to a complex system
• Risk that stringent long-term stabilization
options are lost if countries start participating
too late
• Incentives needed for countries to participate
in a certain stage
• High complexity – requires many decisions
and sectoral data – makes global application a
challenge, may be seen as not transparent.
Best applied for a subset of countries where
sectoral data is available
• Agreement on projections of production
growth rates for heavy industry and
electricity may be difficult
• Only partial coverage of sectors may make
achievement of low stabilization levels less
feasible
• Detailed sectoral information required,
currently only available for selected countries
and sectors
• Requires careful target setting
• Certainty on the global emission level is
reduced, increases in production volumes
(and thus GHG emissions) are possible
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Chapter 3. Implications of future climate regime architectures 140
2.2 Results and discussion
Figure 5, Figure 6 and Figure 7 show modeled results for the change in
emission allowances from 1990 to 2020 and 1990 to 2050 for the 450, 550 and 650
ppmv CO2eq. cases respectively for Contraction and Convergence (C&C),
Common but Differentiated Convergence (CDC), Multistage, Triptych, the
Sectoral approach, Global intensity targets (which will not be discussed here)
and the reference case. Here, the initial emission allocation before trading is
shown, final resulting emission levels after trading are different (these will be
discussed in Section 4, as a necessary analysis for the calculation of regional
abatement cost).
To capture a wide spread of possible future developments, one case is
calculated for each of the IPCC scenarios (Nakicenovic et al., 2000). In the
figures, the median over these different scenarios is provided; the whole spread
of scenarios is provided as error bars. Comparing the reductions with the
reference cases gives an indication about the level of effort needed to reach the
reductions.
The horizontal red lines for Annex I countries indicate the emission level in
2010 – the starting point for the calculations. For most countries this is the
Kyoto target (solid lines). For the USA the 2010 level is based on the national
target of an improvement of emissions per GDP by 18% from 2002 to 2012. This
would result in emissions far above the Kyoto target (+23%, dotted line,
compared to -7%). For Russia and the rest of Eastern Europe in Annex I the
reference emissions in 2010 are chosen as a starting point, which are well below
their Kyoto target (-32%, dotted line, compared to -8%).
For a typical Annex I country – some exceptions are Spain or Portugal -
emissions have declined from their 1990 value to their Kyoto target in 2010 (see
Figure 4 left), from then on further reductions are necessary. Typical Non-
Annex I countries’ emissions increase from 1990 until they participate (earliest
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Chapter 3. Implications of future climate regime architectures 141
after 2010), growth is then slowed and eventually turned into a reduction (see
Figure 4 right).
Figure 3 - 4. Illustrative pathway for an Annex I country (left) and a Non-Annex I country (right).
It has already been presented in Section 2 that it is “unlikely” that the
2°C will be met (70%-100% risk of stabilizing above) with stabilization of at 550
ppmv CO2eq. (Hare and Meinshausen, 2004; Meinshausen, 2005). Therefore, the
assessment of implications of different future climate change regime
architectures on countries’ emission allowances are going to be made mainly for
the 450 ppmv CO2eq. level of ambition. Then, the main differences between
these results and the results for the other two level of ambitions – 550 and 650
ppmv CO2eq – are going to be assessed.
2.2.1 450 ppmv CO2eq.
The first step in the evaluation is a more general comparison of emission
reduction levels for Annex I (on the left side of Figure 5) and non-Annex I (on
the right side of Figure 5) regions. Figure 5 depicts the change in the regional
emission allowances compared to the baseline levels for 17 aggregated regions 1,
1 Calculations were done at the level of 17 regions. Annex I countries, placed on the left hand-side of
Figures 5, 6 and 7: EU15 (Old EU Member States), USA, EU25, FRA (France), GER(Germany), UK,
RUS+EEU (Russia and the rest of Annex I countries from Eastern Europe), JPN (Japan), RAI (Rest of
Annex I – Australia, Canada...). Non-Annex I subgroups include (situated on the right hand side): REEU
(Rest of Eastern Europe or former soviet states), LAM (Latin America), AFR (Africa), ME (Middle East),
SAsia (South Asia, mainly India), CPAsia (Centrally planned Asia, mainly China), Easia (East Asia).
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Chapter 3. Implications of future climate regime architectures 142
providing information on the magnitude of effort required from the different
Parties.
- Annex I regions
Having a first look at Annex I regions’ reference scenarios – which represent
their change in emissions from 1990 taking into account only the policies
already implemented (business-as-usual scenario) – emissions would increase
in all of them, specially in the rest of Annex I (RAI) region and in the USA. In
2020, Germany would have been the only one to have reduced their emissions,
together with Russia (although Russia’s decreasing emissions have nothing to
do with a gain in efficiency or clean energy). In 2050, emissions would be lower
in general; Japan (whose efficiency is already very high) and the UK, would join
Germany and Russia in the decreasing emissions group. All regions would
have decreased their emissions, except for Russia and the rest of Annex I
countries from Eastern Europe (RUS+EEU), which even though still lower than
1990 levels, emissions from 2020 to 2050 would increase. The reference scenario
is important to determine the reduction efforts of each region.
At a first quick glance, it can be observed that regional emission allowances
for the different approaches and also between regions are far more
homogeneous in 2050 (all regions would have had to reduce emissions around
90% of 1990 levels) than in 2020. This may be because all the approaches
selected for the study show some convergence in the per capita emissions
around 2050.
The Multistage approach (the global intensity target approach is not studied
here) is the most demanding for all the regions and both in 2020 and 2050;
followed by the CDC approach. These are both staged approaches in which
developing countries would not participate until they reach a certain threshold,
therefore developed countries would have to support part of their burden in
order to reach low stabilization levels. For 2020, the sectoral approach would be
even more demanding for Annex I countries as a group; nevertheless, this
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Chapter 3. Implications of future climate regime architectures 143
Figure 3 - 5.Change in emission allowances from 1990 to 2020 (top) or 2050 (bottom) under the 450
ppmv CO2eq. scenario (Source: Höhne et al., 2007)
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Chapter 3. Implications of future climate regime architectures 144
approach can not be directly compared, as it has been obtained with a different
model than the other approaches.
However, regional emission allowances do not differ greatly from one
approach to another. One exception would be USA’s situation in 2020, the
Multistage approach is two times more demanding than the other approaches.
In order of stringency, the Multistage approach would be the more demanding,
generally followed by the CDC, C&C and Triptych. The Triptych approach may
be the least demanding because it allows for growth and takes into account an
increase in efficiency.
Under all approaches, Annex I countries need to reduce emissions
substantially. Under the approaches shown here, Annex I countries need to
reduce emissions below 1990 levels in the order of 25% to 45% in 2020 and 70%
to 95% in 2050.
- Non-Annex I regions
Looking at their reference scenarios, it can be observed that they all
experiment great increases in emissions compared to 1990 levels; most of them
are fast growing developing countries. In 2020, some regions such as Africa and
India are going to see their emissions increased by more than 200%; in 2050,
Africa is expected to grow emissions by nearly 700% compared to 1990 levels,
India would make a significant contribution too, with a growth of around 600%.
The most slow growing region would be the former soviet states that are non-
Annex I countries (REEU – Rest of Eastern Europe).
For non-Annex regions, the results are much more differentiated for the
various commitment schemes and time horizons (2020 versus 2050) than for
Annex I regions.
Most non-Annex I regions will need to reduce their emissions by 2025
compared to baseline levels, but emissions can increase compared to 1990 in all
regimes analyzed. An exception to these is the REEU region, which would have
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Chapter 3. Implications of future climate regime architectures 145
to reduce their emissions compared to 1990 levels. However, under such a
stringent stabilization target - 450 ppmv CO2eq. – non-Annex I countries would
have to even reduce emissions below 1990 levels in 2050. Only Africa, South
Asia (mostly India) and East Asia would be allowed some increase – not much –
in all the approaches considered.
For such a stringent stabilization level, all non-Annex I regions would
participate in the Multistage approach by 2020. The only exception is South
Asia (mainly India) (their Multistage approach allowances would be equal to
the baseline scenario), because of their low per capita emissions, India would
participate later in time, but before 2050. None of the regions would receive
excess of allowances (more allowances than their reference scenario) – as could
be the case in the C&C approach, there is no space left under such a stringent
stabilization level.
For almost all the regions which are allowed an increase in emissions
compared to their 1990 levels, the Multistage approach would be the approach
to allocate more emission allowances. For the regions having to reduce
emissions compared to their 1990 levels (such as the REEU in 2020; and REEU,
LAM, ME and CPAsia in 2050), the Multistage approach would be the more
demanding. Therefore, the Multistage approach is the most demanding for
countries which are expected to be in a more developed stage (such as Annex I
countries and the ones identified earlier); and therefore leaves the most space
for the rest of the developing countries to grow, to increase by more their
emissions.
It has already been noticed before that the sectoral approach can not be
directly compared to other approaches. Nevertheless, it seems that a sectoral
approach would be even more permissive with non-Annex I regions and more
demanding with Annex I regions, in general, than the Multistage approach.
National circumstances are better taken into account in the sectoral approach.
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Chapter 3. Implications of future climate regime architectures 146
There are substantial differences between the impacts of different approaches
in the different non-Annex I regions (for Annex I countries the impact of
different approaches was similar, being the most demanding the Multistage
approach, generally followed by CDC, C&C 2050 and Triptych).
For 2020, in regions with very low emissions per capita (such as Africa, India
or South Asia), emission allowances between approaches differ much more
than in other regions; because of their later participation under a multistage
scenario, and therefore much more space left under this approach. C&C by 2050
and CDC’s emission allowances are similar; the most demanding approach
would be the Tryptich approach, may because of their inefficiencies and coal-
intensive industry.
On the other hand, for China (CPAsia), in 2020 the most demanding
approach is CDC (because of their relative high emissions per capita), followed
by C&C and the Multistage approach. The most permissive approaches are the
sectoral based ones, such as Triptych and the Sectoral approach.
Differences between the various approaches are larger for most developing
countries, because they make different assumptions on their participation. The
Triptych approach, with the parameters used here, may be demanding for coal-
intensive countries that in other approaches would not have participated, e.g.
India (South Asia). For other countries that need to participate in all
approaches, such as countries in the rest of Eastern Europe (REEU) and the
Middle East (ME), the levels across approaches are again more uniform as they
are for Annex I countries.
2.2.2 550 ppmv CO2eq.
Under a higher stabilization scenario, the level of effort required for both
Annex-I and non-Annex I regions would be lower. Figure 6 provides the change
in emissions from 1990 to 2020 and 2050 aiming at 550 ppmv CO2eq.
concentration for each region according to the various approaches.
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Chapter 3. Implications of future climate regime architectures 147
Figure 3 - 6. Change in emission allowances from 1990 to 2020 (top) or 2050 (bottom) under the 550
ppmv CO2eq. scenario (Source: Höhne et al., 2007)
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Chapter 3. Implications of future climate regime architectures 148
- Annex I regions
Substantial reductions are still needed in order to achieve a concentration
level of 550 ppmv CO2eq. 1 , Annex I countries need to reduce emissions below
1990 levels in the order of 15% to 30% in 2020 and 55% to 90% in 2050.
The impact of different approaches in a certain region wouldn’t change much
compared to the 450 ppmv CO2eq. scenario. The Multistage approach would be
the most demanding, followed by the CDC, C&C and the least demanding
would be the Triptych approach. Even though it is still not very large,
differences between approaches are more significant for a higher stabilization
level. This may be due to later participation of developing countries, under
staged approaches such as the Multistage and CDC.
One exception is USA in 2020, the Multistage approach would still be the most
demanding, but the CDC approach would even allow for an increase of
emissions compared to 1990 levels. A choice of a higher stabilization level,
regarding these results, would be much more beneficial for USA than for other
regions in 2020 – EU, for example, would have to reduce a 10% less; the USA
would have to reduce 20% less. This may be because of USA’s high emissions
per capita, under a higher stabilization level, these would not have to converge
such a low level; this beneficiates countries with high emissions per capita.
- Non-Annex I regions
On the other hand, a higher stabilization scenario requires less efforts from
developing countries. In 2020, none of them have to reduce their emissions
compared to 1990 levels. South Asia would even have more emission
allowances than their baseline scenario under C&C, so called “hot air”. Under
staged approaches such as CDC and Multistage, South Asia would not start to
participate until after 2020.
1 Using various probability distributions of the climate sensitivity, Hare and Meinshausen (2004;
Meinshausen 2005) conclude that it is “unlikely” that the 2°C will be met (70%-100% risk of stabilizing
above) with stabilisation at 550 ppmv CO2eq.
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Chapter 3. Implications of future climate regime architectures 149
Under a stabilization target of 450 ppmv CO2eq., the Multistage approach
was clearly the most permissive. In this case – under a stabilization target of 550
ppmv CO2eq., there is not that much difference between the Multistage
approach and the other approaches; in 2020 they would require similar efforts.
The CDC approach would be, after the Multistage approach, the next least
demanding for developing countries. This is logical: global emissions are fixed,
the most demanding approaches for Annex I regions will be the most
permissive approaches for non-Annex I regions.
The large differentiation between non-Annex I regions has previously been
noticed. In 2050, under a stabilization target of 450 ppmv CO2eq., the REEU
would have to reduce their emissions below 1990 levels. Another subgroup
could be Latin America, the Middle East and Centrally Planned Asia, which in
2050 their emissions would have to be close to their 1990 levels. Specially Africa
and South Asia are left with more space to grow since 1990. However, on the
other hand these regions have higher baseline scenarios, therefore their
reduction effort would be more or less comparable.
2.2.3 650 ppmv CO2eq.
Figure 7 provides the change in emissions from 1990 to 2020 and 2050 aiming
at 650 ppmv CO2eq. concentration for each region according to the various
approaches.
- Annex I regions
The reduction efforts required are much smaller than in the other cases. In
2020, they would only have to reduce between 0% and 15%; in 2050, emission
reductions would need to be between 25% and 75%. The USA would even be
allowed to increase their emissions compared to 1990 levels.
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Chapter 3. Implications of future climate regime architectures 150
Figure 3 - 7. Change in emission allowances from 1990 to 2020 (top) or 2050 (bottom) under the 650
ppmv CO2eq. scenario (Source: Höhne et al., 2007)
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Chapter 3. Implications of future climate regime architectures 151
- Non-Annex I regions
Once again, a higher stabilization target would be more beneficial for
developing countries; which would not have to participate – reduce emissions –
until later in time. Developing countries do not have to reduce their emissions
below their 1990 levels neither in 2020 or in 2050, to achieve a concentration
level of 650 ppmv CO2eq.
Neither Central Planned Asia (mainly China) nor South Asia (India), would
have to participate in 2020 under both CDC and the Multistage approach.
Developing countries may even receive more allowances than their reference
scenarios, e.g. under C&C (in South Asia) or under the Triptych approach (in
South Asia, only in 2020). Yet many non-Annex I countries (especially in Latin
America, Middle East and East Asia) would need to deviate from their baseline
scenarios under these approaches in 2020.
The configurations for the sectoral approach under a 650 ppmv CO2eq. target
were chosen in a way that only Annex I have to reduce emissions by 2020, and
developing countries can follow their business-as-usual path.
There are significant differences – much more than for Annex I regions -
between the impact of different approaches for a given non-Annex I region,
especially in 2050. In China 2020 (Centrally planned Asia), the reduction effort
under C&C would be large compared to other approaches due to their relative
high per capita emissions. It is always the most demanding approach for this
region. However for regions with low per capita emissions, such as India (South
Asia) and Africa, the C&C approach is the most permissive.
2.2.4 Comparison of the approaches
As the global emission level has been kept constant over all approaches, it can
be observed how the approaches distribute these global emissions over the
countries and regions. The following observations can be made from Figure 5,
Figure 6 and Figure 7 on comparison of the different approaches:
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Chapter 3. Implications of future climate regime architectures 152
Contraction and Convergence
All countries participate.
Under relatively strict long-term targets (e.g. 450 ppmv CO2eq.) and
convergence by, e.g., 2050, several developing countries would have to reduce
their emissions compared to the BAU. Per capita emissions have to converge to
a level below current average of developing countries, those developing
countries above or close to the average (e.g. Argentina, Brazil, Venezuela,
Mexico, South Africa, South Korea, Namibia, Thailand, China) will soon (e.g.
2020) be constrained and will not receive excess allowances.
For stabilization targets of 550 and 650 ppmv CO2eq., some developing
countries (e.g. India) would have an excess of allowances (above their baseline
scenario) and therefore be beneficiated under the approach.
Regarding Annex I regions, C&C leads to the lowest reductions for EU and
Japan because of their relative low per capita emissions, and the fact that all
countries contribute.
The later the convergence year, the higher is the contribution of developing
countries because late convergence years require low emission levels.
Triptych
All countries participate.
As in C&C, Annex I countries as a group have to reduce less relative to other
cases.
Developing countries (particularly the coal-intensive countries in Africa and
South Asia in 2050) have to contribute more to the global effort than for other
cases.
Common but differentiated convergence
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Chapter 3. Implications of future climate regime architectures 153
Assumes action by developed country first and delayed action by developing
countries. Hence, the reductions necessary for Annex I under these approaches
are higher in 2020 than for other approaches.
However, when chosen such a stringent stabilization level as 450 ppmv CO2eq.,
developing countries participate early (most of them by 2020); and there is not
much difference between the approaches.
Multistage
The setting used for this approach, leans even more toward reductions by
Annex I countries and delayed reductions by non-Annex I countries.
This is evident in the 450 ppmv CO2eq. scenario results; the multistage
approach leads to the most different regional emission allowances compared to
the other approaches.
The choice of parameter values is subjective. Lower stage-thresholds, for
example, would require higher contributions of developing countries.
Sectoral approach
With the number of sectors included in these calculations, it is very difficult to
achieve the necessary reductions, parameters are very stringent.
All sectors would have to be included to stabilize at a low level such as 450
ppmv CO2eq.
Looking broadly at the results across the approaches, it can be observed that
significant reductions below 1990 levels for all approaches and stabilization
levels are necessary from developed countries in addition to early deviation
from reference in developing countries. The necessary reductions across the
approaches are summarized in Table 3 - 4.
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Chapter 3. Implications of future climate regime architectures 154
Table 3 - 4. Ranges of emission reductions according to all applied approaches as percentage change
from 1990 under the 450, 550 and 650 ppmv CO2eq. scenarios (Source: Höhne et al., 2007).
Stabilization level Region 2020 2050
450 ppmv CO2-eq. Global 1 +10% -40%
Annex I -25% to –45% -70% to –95%
Non-Annex I
Substantial deviation from
baseline in all regions
Substantial deviation from
baseline in all regions
550 ppmv CO2-eq. Global +30% -10%
Annex I -15% to –30% -55% to –90%
Non-Annex I
Substantial deviation from
baseline in Latin America,
Middle East, Centrally planned
Asia and East Asia
Substantial deviation from
baseline in all regions
650 ppmv CO2-eq. Global +50% +45%
Annex I 0% to –15% -25% to 75%
Non-Annex I
Deviation from baseline in
Latin America, Middle East and
East Asia
Deviation from baseline in most
regions, especially in Latin
America and Middle East
The wide diversity of approaches means that not all countries participate
under all regimes – even if an identical concentration target is achieved.
However, the difference in reductions required between various approaches is
small for participating countries.
2.2.5 Conclusions
Regional greenhouse gas allowances for 2020 and 2050 consistent with
stabilization levels of 450, 550 and 650 ppmv CO2eq. under different approaches
1 Global reduction values are chosen to represent one possible path towards the given stabilisation
level (see Figure 3 and Table 2). Other global emission levels in 2020 and 2050 would be possible to reach
the same stabilisation levels, and their choice would influence the necessary reductions for the country
groups.
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Chapter 3. Implications of future climate regime architectures 155
(C&C, CDC, Multistage, Triptych and Sectoral) for future international climate
regimes were presented.
To keep 550 ppmv CO2eq. concentration – which would seem, given current
scientific understanding, to be unduly risky 1 - within reach:
Developed country emissions would have to be reduced substantially,
under all the approaches studied.
Developing country emissions need to deviate from the baseline as soon
as possible, for some countries even as of 2020 (Latin America, Middle
East and East Asia). For a 450 ppmv CO2eq. concentration, most
countries would have to participate in emission reductions by 2020.
Actions from developed countries, such as technology transfer and
financial contributions, would be needed to keep emissions in
developing countries below their business-as-usual scenarios.
For those regions that participate under all approaches, i.e. Annex I countries
and the rest of Eastern Europe and the Middle East, the difference in reductions
between stabilization targets (450, 550 and 650 ppmv CO2eq.) is larger than the
difference between the various approaches aiming at the same stabilization
target.
Only for developing countries that participate under some and do not
participate under other approaches, the differences between approaches are
large. For those countries, the criteria for participation are an important
determinant.
3 Regional abatement costs
Several studies have gone one sep further and have, based on emission
allocations, calculated emission reduction costs and possible trades of emission
1 It is “unlikely” that the 2°C will be met (70%-100% risk of stabilizing above) with stabilization at 550
ppmv CO2eq. (Hare and Meinshausen, 2004; Meinshausen, 2005).
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Chapter 3. Implications of future climate regime architectures 156
allowances at a regional level for different concentration targets (Criqui et al.,
2003; Böhringer and Welsch, 2004, 2006; den Elzenet al., 2005; Persson et al.,
2006).
The discussion presented in this Section will be based on the results obtained
with the FAIR 2.0 model and previously presented by den Elzen et al. (2005).
The abatement costs of three post-Kyoto regimes for differentiating
commitments compatible with stabilizing GHG concentrations at 550 ppmv
CO2eq. will be analyzed here.
3.1 Overview of approaches
The three regimes explored are:
• The Multistage approach, which assumes a gradual increase in the
number of participants who are adopting either emissions intensity or
reduction targets (based on the Multistage approach proposed by Berk
and den Elzen, 2001) (see Section 2.1.2.1 of Chapter 2);
• The Brazilian Proposal approach, i.e. the allocation or reductions based on
countries’ contribution to climate change (see Section 2.1.2.5 of Chapter 2);
• Contraction & Convergence, with full participation in convergence of per
capita emission allowances (see Section 2.1.2.2 of Chapter 2).
At that time - before 2005 -, the Brazilian Proposal approach was the only
climate regime that had been formally discussed and documented within the
UNFCCC, and therefore was included in the analysis. It is unlikely that
historical responsibility will be the only parameter used in the future climate
regime for burden sharing, however it may play a role in the design of a future
agreement - used as an indicator to determine when a country should act or to
determine the share of financial contribution to adaptation activities.
The Contraction & Convergence approach was chosen because of its appeal
in the developing world, due to its main element being per capita convergence
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Chapter 3. Implications of future climate regime architectures 157
of emissions. Although as it has been presented repeatedly, it may not be
favorable for developing countries with high emissions per capita such as
China. In this analysis, two cases with different convergence years - 2050 and
2100 - are explored, since the results of the approach are so strongly dependent
on the convergence year chosen.
The Multistage approach was selected because it best satisfied the various
types of criteria (environmental, political, economic, technical) presented in
previous analyses (see Section 2.1.5 of Chapter 2).
3.2 Results and discussion
This Section explores the consequences of the three climate regimes
presented – the Brazilian Proposal, Contraction & Convergence and Multistage
approach - in terms of abatement costs. The mitigation costs model of FAIR 2.0
is used, taking into account the impacts of emission trading. This model makes
use of aggregated permit demand and supply curves, derived from marginal
abatement cost (MAC) curves for the different regions, gases and sources. 1 The
permit demand and supply curves are used to determine the international
market equilibrium permit price (for more information, see den Elzen et al.
(2005)).
The overall global emission objective is chosen at a stabilization of GHG
concentrations at 550 ppmv CO2eq.. Calculations were done at the level of 17
regions (the same as in Section 3), but they were aggregated to 10 regions for
reporting reasons. Here, the years for which the analysis is provided are 2025
and 2050.
The regional abatement costs as a function of GDP (effort rates) for various
regimes and regions are illustrated in Figure 3 – 8 below.
1 A MAC curve, differing per country, reflects the additional costs of reducing the last unit of carbon as
a function of the level of abatement.
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Chapter 3. Implications of future climate regime architectures 158
Figure 3 - 8. Regional abatement costs as percentage of GDP in 2025 and 2050 (Source: den Elzen et al.,
2005)
- Annex I regions
The efforts rates of Annex I regions – apart from the FSU (states from the
Former Soviet Union) – increase from 0.5% - 1% in 2025 to 1-2% in 2050, with an
exception for the lower costs in the C&C 2100 case. If chosen C&C by 2100,
Annex I regions would have less stringent emission reductions, and therefore,
abatement costs.
The Brazilian Proposal case leads to the highest abatement costs for EU plus
(i.e. OECD-Europe and Eastern Europe), the FSU and Japan, due to their
relatively large historical contributions to temperature increase, which lead to
more stringent emission reductions. This can be noticed both in the results for
2020 and 2050.By 2050, Canada and USA’s historical contribution to
temperature change would have increased, which would translate in high
abatement costs under the Brazilian Proposal.
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Chapter 3. Implications of future climate regime architectures 159
C&C by 2050 and the Multistage approach lead to the lowest abatement
costs for EU plus and Japan because of their relative low per capita emissions,
which lead to less stringent emission reductions.
Total abatement costs tend to be relatively high in all regimes for Canada
and USA, and Oceania (regions with the highest per capita emissions), and
somewhat lower for the EU plus and Japan (regions with medium per capita
emissions). Total costs are the highest for the FSU due to their relative high
emissions per capita and a medium income.
- Non-Annex I regions
There are much larger differences between the non-Annex I regions than
between the Annex I regions. The Middle East and Turkey and Latin America
act as permit-importing regions, and are therefore confronted with high
abatement costs. Africa, South Asia and South-East and East Asia are permit-
exporting regions, and benefit from the revenues of permit trading, having even
gains in most cases.
The C&C 2100 case, with no surplus allowances and the highest reduction
target, leads to the lowest financial revenues and high domestic abatement
costs. It is the only case in which all non-Annex I regions are faced with
abatement costs.
The non-Annex I regions with large historical land-use emissions, such as
Latin America, would have relatively large reduction efforts under the
Brazilian Proposal; with the subsequent high abatement costs. In 2050, the
more stringent reduction objective of Latin America results in higher abatement
costs, which, combined with their medium-income results in relatively high
effort rates (1.5–2%).
Middle East and Turkey are confronted with the highest effort rates (1-2% in
2025 and 3-4% in 2050). This is mainly due to their relatively high emission
reduction objectives - as a result of relatively high per capita emissions - and
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Chapter 3. Implications of future climate regime architectures 160
low GDP. Because of their high emissions per capita, the highest abatement
costs for this region would be under the Multistage approach.
Africa and South Asia (mainly India) make gains under all the approaches
considered – except for the C&C 2100 case. For the C&C 2050, the surplus
allowances lead to high financial revenues. For the Multi-Stage approach, the
delayed participation in full permit trading leads to lower gains. The effort rates
in Africa show more extremes due to their relatively low GDP.
Under the C&C 2500 approach, since per capita emissions of East Asia
(China) are close to the world average, they would have relatively high
emission reduction abatement efforts; but these are partly compensated due to
their relatively high gains from permit trading.
- Comparison of approaches
In general, the differences the differences in regional costs for each region
reflect the differences in reduction targets, since the reduction efforts and
abatement costs are strongly related.
The effort rates of the three regime approaches for the various regions are
more systematically analyzed by comparing the effort rates with the world
average. Four groups of regions with similar efforts can be identified (den Elzen
et al., 2005):
(1) OECD regions (Annex I regions excluding the FSU) with average
costs (1-2% of GDP on 2050) – with high income and high per capita
emissions.
(2) FSU, the Middle East and to a lesser extent Latin America 1 with high
costs (3-4% of GDP and lower for Latin America) – with medium to high
per capita emissions but medium income levels.
1 Based on the arguments that Latin America has costs higher than the world average; however, since
their costs are less than the costs of the other group 2 regions, this region could also be placed in group 3.
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Chapter 3. Implications of future climate regime architectures 161
(3) South-East Asia and East Asia (including China) with low costs (0.5-
1% of GDP) – with low to medium income levels and per capita
emissions.
(4) South Asia (including China) and Africa with net gains from
emission trading (0.5-2.0% of GDP) – due to an excess of allowances
because, with low per capita emissions and a low income.
This way, it can be evaluated whether the different approaches are more or
less attractive in terms of abatement costs for the various regions.
For group 1 – Annex I regions excluding the FSU – the Multistage and
Contraction & Convergence (in particular C&C 2100) could be attractive
regimes. They lead to the lowest reductions for EU plus and Japan because of
their relative low per capita emissions; the fact that all countries contribute is
another advantage for Annex I regions under the C&C approach. Whereas the
Brazilian Proposal, which takes into account historical contribution to climate
change, is less attractive, leading to the highest reductions and costs for
industrialized countries.
For the Middle East and Turkey – group 2 – all approaches seem
unattractive, since they all lead to high costs. This is mainly due to their
relatively high emission reduction objectives - as a result of relatively high per
capita emissions - and low GDP. For Latin America – group 2 – the Brazilian
Proposal approach is not attractive, due to their large historical land-use
emissions.
For group 3 – South-East and East Asia (mainly China) - Contraction &
Convergence can be less attractive because of their relatively high emissions per
capita. Other approaches with an income threshold, such as a Multistage
approach, could be preferred; due to their low income levels, they would
participate later.
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Chapter 3. Implications of future climate regime architectures 162
For group 4 – South Asia (mainly India) and Africa – all regimes are
attractive. In particular, those where their allowable emission levels are larger
than their baseline emissions (excess emission allowances) as under the
Contraction & Convergence 2050 approach, would lead to the highest gains.
The gains of global emissions trading can provide an incentive for these non-
Annex I countries to take on quantified emission limitation commitments.
From the perspective of abatement costs, these findings lead to the overall
conclusion that the Multi-Stage, and Contraction & Convergence 2050, seem to
provide the best prospects for most Parties. However, regions in group 2 – FSU
and the Middle East – could face significantly higher costs than the other
regions, indicating that national circumstances need to be better accounted for
in the design of future regimes so as to arrive at more acceptable costs for these
regions as well.
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4
Case study: Spain

Chapter 4. Case Study: Spain 164
1 Introduction
The international climate change negotiations are based on the principle of
consensus. Reliable data on the situation of each country is of vital importance
to help delegations make informed decisions. Here, the case of Spain is further
discussed. The information should allow for a better assessment of the
acceptability of specific proposals by Spain.
Three kinds of data are relevant in this context:
1. The description of the current status and likely future trends of Spain;
2. The potential and costs to reduce emissions below likely future trends; and
3. The implications of possible future options of EU burden-sharing on Spain.
For a description of the current situation and future trends for Spain the task
at hand for this project is to package, synthesize and interpret the available
information from the various sources so that it can be useful for policy makers.
Section 2 provides emissions and underlying drivers on a detailed level. Data
on the current status of factors and indicators reviewing national and sectoral
aspects is also presented, relevant to the determination of the mitigation
potential of Spain.
The EU has shown leadership in the fight against climate change, however
the implications on Spain become relevant when assessing EU internal burden-
sharing, rather than future international climate change architectures.
Implications for options for allocating the EU reduction objectives (20%
unilateral and 30% multilateral) adopted by the Council of the European Union
on March 2007 are further discussed. Section 3 analyses reduction targets and
abatement costs for Spain on the basis of two major types of options for EU
burden-sharing and ETS allocation beyond 2012: (1) Present system and (2) EU
burden-sharing with ETS allocation at EU level. Finally, as part of Section 3, the
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Chapter 4. Case Study: Spain 165
recent Commission’s proposal for effort sharing – as of 23 rd January 2008 – is
discussed and assessed for the case of Spain.
2 Current situation, trends and projections
2.1 Introduction
Countries vary substantially in their national circumstances, including
emission profiles, energy use and action against climate change. This section
provides an overview of a number of important national circumstances,
characteristics and trends for negotiations on post-2012 climate change
architectures for Spain, allowing for a better assessment of the acceptability of
specific proposals.
Data has been gathered from a variety of sources, with the preference of
formally accepted data such as from the government – e.g. 2008 emission
inventory submitted to the UNFCCC. Further sources are data from recognized
international sources such as the International Energy Agency (IEA) or the
World Bank.
The IPCC, in its special report on emission scenarios (Nakicenovic and
Swart, 2000), states that the major driving forces of past and future
anthropogenic GHG emissions include demographics, economics, resources,
technology and (non-climate) policies.
This chapter compiles some of the most important national and sectoral
factors and indicators regarding climate change of Spain. It presents, first, broad
socio-economic factors, such as total emissions, GDP, population and total
primary energy supply; second, indicators underlying such socio-economic
factors (generally referring to intensities, percentages or efficiencies at the
national or sectoral level); and, third, cross-cutting factors including technology,
policies and measures, and costs of mitigation.
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Chapter 4. Case Study: Spain 166
2.2 Nationwide factors and indicators
2.2.1 Factors driving emissions
The nationwide indicators include relevant information on GHG emissions,
both historical emissions by gas, projected emissions and the progress towards
the Kyoto target. Also shown are underlying trends in important drivers for
those emissions:
• Energy consumption – split up into the different energy sources: For most
Annex I Parties, the production and/or use of energy is one of the main sources
of GHG emissions. TPES accounts for all the energy that is supplied to the
economy.
• Gross domestic product (GDP) on a purchasing power parity (PPP) basis:
This indicator provides information on the size and strength of the economy.
• Population and population growth: The size and trends of population can
affect national GHG emissions, as a larger population generally implies higher
demand and hence higher economic activity. Population in Spain has grown
due to the recent and intense immigration.
Table 4 - 1 . Nationwide indicators for Spain. Factors driving emissions (population, GDP, and energy)
and GHG.
2005 2006
Population 43,40 44,12 million people
Projected population growth 2004-2020 4 %
GDP (PPP) 995,48 billion 2000 US$
Primary Energy Supply (TPES) 145,20 Mtoe
GHG emissions 1 440,89 433,34 MtCO2eq.
Change in GHG emissions from 1990 53,25 50,63 %
1 Excludes LULUCF and excludes international transport.
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Chapter 4. Case Study: Spain 167
Spain has increased emissions substantially since 1990 – around 50%, in close
association to its high economic growth. Other factors, such as a lack of effort in
energy saving and efficiency, are also of importance here. The favorable trend
in emissions reduction of 2006 has not continued in 2007, unfortunately,
according to still non-official data. As the absolute amount of emissions alone
provides only very limited information, total emissions are often converted into
relative parameters:
• Emissions per GDP: This is an indicator of the carbon intensity of the
economy, which relates national emissions to economic activity; it reflects the
net effect of the energy intensity of the economy and the fuel mix. When
compared to other countries’ in the ‘performance meter’ (Figure 4 – 2), it can be
observed that the value for Spain is low; this can be due to low emissions
and/or high GDP, such as highly developed economies with large renewable
resources.
• Energy supply per capita: This is an indicator of the energy intensity of
the economy, which relates total energy supply to the size of the population; it
reflects the net effect of economy structure and energy efficiency. It can be
observed (Figure 4 –2) that Spain’s is below the average. Depending on the fuel
mix, a high value may mean high mitigation potential.
• Emissions per capita: This indicator relates national emissions to the size
of the population; reflecting the net effect of energy intensity, fuel mix and
welfare levels. Spain’s emissions per capita are below Annex I average but
above the world average (Figure 4 – 2). A high value may mean high national
mitigation potential.
• GDP per capita: This indicator reflects the welfare level. Spain’s GDP per
capita is around Annex I average (Figure 4 – 2). Spain has experienced a rapid
economic growth over the last years; since 1995, the inter annual growth in
GPD has been over the EU-15 average. In 1995, Spain’s GDP per capita was 13%
below the EU average, in 2004 there was only a 2% difference.
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Chapter 4. Case Study: Spain 168
• HDI: The state of a country’s development can be expressed in terms of
life expectancy, education and GDP. In principle, high values of this index
could mean that the country in question has the technical, financial and
institutional resources to implement mitigation actions. Spain is at the top end
of the scale.
Table 4 - 2 . Nationwide intensities for Spain.
2005
GHG emissions/GDP (PPP) 7,554 kgCO2eq./2000 US$
GHG emissions/capita 6,9 tCO2eq./cap
TPES/capita 43,6 Toe
GHG emissions/TPES 0,16 t CO2eq./toe
TPES/GDP (PPP) 48036 Toe/M 2000 US$
GDP (PPP)/cap 0,908 Ths 2000 US$/cap
Human Development Index 0,94
Figure 4 – 1 shows trends in four of these indices between 1990 and 2004
relative to their 2004 value to allow for comparison across quantities and to
identify potential decoupling trends.
Figure 4 – 2 shows a ‘performance meter’, comparing Spain’s performance to
that of other countries for each of the four indicators. In general 1 , the borders
between the colours represent the non-Annex I average, world average and
Annex I average as indicated below in Figure 4 – 1.
1 Usually the Annex I average is above the world average and the non-Annex I average is below the
world average. When this is not the case, the order of Annex I and non-Annex I averages (and the
corresponding colours) in the meters are swapped.
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Chapter 4. Case Study: Spain 169
Figure 4 - 1. Calibration of performance parameters (Source: Höhne et al., 2007).
Figure 4 - 2. Trends in nationwide intensities
between 1990 and 2004 relative to their 2004
value (Source: Höhne et al., 2007).
2.2.2 Primary energy supply
Figure 4 - 3. ‘Performance meter comparing
Spain’s performance to other countries’ for each
of the four indicators (Source: Höhne et al.,
2007)
The total primary energy supply (TPES) accounts for all the energy that is
supplied to the economy. It includes energy generated in the country and that
which is imported but excludes exported energy and international marine
bunkers; TPES is also adjusted for stock changes (table 4 – 1, row 4). If the
energy is used for electricity generation, the values also include the waste heat
that is produced during the process.
Although increases in energy use can lead to higher GHG emissions, the
increase in emission levels also depends on the carbon intensity of power and
heat generation, including the fuel mix, and the efficiency of the process.
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Chapter 4. Case Study: Spain 170
Countries differ in their mix of energy sources, which defines to some degree
the carbon intensity of TPES.
Figure 4 – 3 shows the development of TPES for Spain between 1971 and
2005. The percentage contribution of each of the energy sources to the TPES in
2005 is presented in Table 4 – 3. Spain is currently experiencing a significant
shift in relative shares of TPES, with natural gas increasing in importance at the
expense of coal and, to a lesser extent, oil; there is also a strong increase in the
share of renewable energy.
Table 4 - 3 . Mix of energy sources for Spain (Source: IEA Energy Statistics 2007).
Biomass/waste Geothermal/solar/wind Hydro Nuclear Gas Oil Coal
Share in TPES in 2005 3.5% 1.3% 1.2% 10.3% 20.5% 49.1% 14.1%
Figure 4 - 4 . Evolution of Total Primary Energy Supply(excluding electricity trade) from 1971 to 2005
for Spain (Source: IEA Energy Statistics 2007).
The TPES method measures the energy content of the first commodity or raw
material which is the basis for multiple energy uses before transformation into
final energy use. As such, no transformation losses are taken into account. For
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Chapter 4. Case Study: Spain 171
instance, for electricity that is generated through wind, hydropower or solar
energy it is assumed that the primary energy input is equal to the energy
output. This puts these 'non-thermal' renewable energy sources at a
disadvantage against the other energy sources because even if they would
produce the same amount of electricity, they still would require a lower amount
of primary energy as no transformation losses are accounted for. This bias
against renewable energy becomes increasingly significant as the share of these
renewable energy sources grows within the overall energy mix.
Existing European legislation has set renewable energy objectives (in the
electricity and biofuels sectors) more on the basis of final energy consumption,
defined as the energy commodities delivered to consumers for energy
purposes, than of primary energy consumption. Therefore, Spain’s share of
renewable energy in 2005 is 8.7% of final energy; this method is used to set
renewable energy targets by the European Commission 1 .
2.2.3 Historic and projected GHG emissions
Figure 4 – 4 shows historical emissions by gas (excluding land-use, land-use
change and forestry – LULUCF and excluding emissions from international
transport), as well as the projected emissions according to a reference scenario 2 .
Both the Kyoto target and the recently proposed target for Spain by the EC 1 are
also shown in the graph.
1 In Section 2.1 and Section 3.2.1 the Commission’s Proposal of 23 rd January 2008 will be further
discussed.
2 Emission projections have been taken from the 4 th National Communication, the “with implemented
measures” scenario.
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Chapter 4. Case Study: Spain 172
GHG emissions (MtCO2e)
700
600
500
400
300
200
100
0
1990 1995 2000 2005 2010 2015 2020
F-gases
N2O excl. LULUCF
CH4 excl. LULUCF
CO2 excl. LULUCF
EC's target
Kyoto target
Reference scenario
Figure 4 - 5. Historical and projected GHG emissions and (progress towards) GHG targets for Spain.
Table 4 – 4 shows the relative contribution of the different gases to total
emissions (excluding LULUCF) in 2006. Below, both the Kyoto target and the
target proposed by the EC 1 are listed together with the current (2006) progress
towards the targets for all GHGs. The change in CO2 and non-CO2 GHGs
between the base year and 2006 are also presented.
Table 4 - 4 . Contribution of the relative gases to total GHG emissions (excluding LULUCF) in 2006 for
Spain (Source: 2008 GHG inventory submitted to the UNFCCC).
Share in 2006
CO2 excl. LULUCF 83,0%
CH4 excl. LULUCF 8,7%
N2O excl. LULUCF 6,9%
F-gases 1,4%
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Chapter 4. Case Study: Spain 173
Table 4 - 5. Change in emissions from base (1990) to latest reported year (2006) and current (2006)
progress to targets for Spain
Current CO2 (1990-2006) 57,38 %
Current non-CO2 (1990-2006) 24,56 %
Current total GHGs (1990-2006) 50,63 %
Kyoto target (KT) 15,00 %
Difference with KT 35,63 %
EC's proposed target (ECT) 31,80 %
Difference with ECT 18,83 %
2.3 Factors and indicators by sector
The share of national emissions among sectors, presented in table 4 – 6, is
determined by several factors, which include the contribution of each sector to
GDP, the efficiency of the use of energy for production and the carbon intensity
of the production processes.
The split of sector for the purpose of this document is based on the source
categories of the Revised 1996 IPCC Guidelines for National Greenhouse Gas
Inventories.
Background information and drivers of emissions at a sectoral level will be
presented, together with a performance indicator for each of the sectors
(electricity, industry, transport, households & services, agriculture, waste,
LULUCF, and international aviation and shipping). In most cases the indicator
is emission intensity (i.e. per kilowatt-hours (kWh), per ton of product) or per
capita emissions.
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Chapter 4. Case Study: Spain 174
Table 4 - 6 . National greenhouse gas emissions per sector for Spain in 2005
Share of sector in total GHG emissions (without LULUCF and international transport)
Energy
industries
and fugitive
emissions a
(%)
Industryb Households
Transportc and servicesd Agriculturee Wastef LULUCFg Compared with total GHG
emissions (excluding LULUCF
and international transport)
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(%)
International
transport h
29,52 24,37 23,90 9,11 10,16 2,94 -11,27 7,94
2.3.1 Electricity (Industries and fugitive emissions)
The share of emissions from energy industries includes emissions from
electricity produced for the public market, refineries and other fuel production.
For almost all Annex I Parties energy industries contribute significantly to
emissions, only a few countries that use renewable sources of energy (e.g.
Switzerland and Iceland) or nuclear energy (e.g. France) extensively or import
most of their electricity (e.g. Liechtenstein) have a relative low share.
Nevertheless, Spanish’s share of emissions from energy industries (Table 4 – 7,
column 1) is below the Annex I Parties’ average.
a Sum of IPCC source categories 1A1 (energy industries) and 1B (fugitive emissions from fuels).
b Sum of IPCC source categories 1A2 9manufacturing industries and construction), 2 (industrial
processes) and 3 (solvents).
c IPCC source category 1A3 (transport).
d Sum of IPCC source categories 1A4 (other sectors) and 1A5 (other). Indirect emissions from electricity
use are only included under energy industries and fugitive emissions.
e IPCC source category 4 (agriculture).
f IPCC source category 6 (waste).
g IPCC source category 5 (land use, land-use change and forestry).
h Sum of IPCC source categories 1A3a,i (transport civil aviation, international) and 1A3d,i (transport
navigation, international).

Chapter 4. Case Study: Spain 175
Fugitive emissions include mainly CH4 that leak from gas fields and
pipelines, as well as from coal mines. Spain’s fugitive emissions are relatively
low (Table 4 – 7, column 2), as it does not significantly produce natural gas or
coal.
Table 4 - 7 . Indicators for Energy industries and fugitive emissions for Spain in 2005.
Share of national GHG emissions (%)
Energy Industries
Fugitive
emissions
CO2
emissions/KWh
(kg CO2 per kWh)
Share of
renewable energy
in electricity
production (%)
Share of nuclear
energy in electricity
production (%)
28,59 0,93 0,43 17,80 19,57
Another performance indicator for the Spanish electricity sector shown in
these tables is the carbon intensity of electricity generation, which is calculated
by dividing CO2 emissions from electricity production by the amount of
electricity generated. Spain’s 2005 value is around the Annex I average (Table 4
– 7, column 3). A high value indicates that the electricity generated is carbon
intensive, which is usually the case with electricity generated from coal and oil.
A low value indicates the use of renewable (Table 4 – 7, column 4) or nuclear
energy (Table 4 – 7, column 5) or a high share of combined heat and power
(CHP) generation.
2.3.2 Industry
Industry produces a significant share of emissions in all Annex I Parties,
including Spain (24,37% of GHG emissions in 2005). These emissions do not
include those associated with electricity produced for the electricity grid and
consumed by the industry. They include those from electricity produced by
industry for its own use.
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Chapter 4. Case Study: Spain 176
For the industry sector, indicators for a number of important sub-sectors are
shown in Figure 4 – 6. The carbon intensity of production is calculated by
dividing total emissions from production by the output 1.
An aggregated energy efficiency index for industry is also shown below, and
a ‘performance meter’, comparing Spain’s performance to that of other
countries. This index is 1 if a country uses best available technology; for Spain,
the index is 1.3, which indicates that it uses 30% more energy than necessary
under best practice. Spain’s industry performance, regarding energy efficiency,
is well below the world average.
Figure 4 - 6. Indicators for Industry emissions (left); and ‘performance meter’ for the energy efficiency
index (right) for Spain in 2004 (Source: Höhne et al., 2007).
2.3.3 Transport
Transport contributes significantly to GHG emissions in all Annex I Parties,
including Spain (table 4 – 8, column 1). Emissions from transport per capita are
influenced by carbon intensity of vehicles, travel volume or fuel efficiency;
Spain’s value for this indicator (table 4 – 8, column 2) is above the Annex I
average.
Freight transport activity per capita is influenced by the industrial activity of
a country, being in Spain relatively high (table 4 – 8, column 4). The modal split
(table 4 – 8, columns 5 to 7) depends on consumer preferences, historical and
current development of transport infrastructure, and prices of the modes of
transport; in Spain road transport prevails over other forms of transport, which
is much more inefficient than for example rail transport – which has even
decreased in absolute terms since 1990.
1 This values are not available in a consistent format. Data reported under the UNFCCC are not
detailed enough to allow a thorough calculation of the carbon intensity of industry. Some indicative values
compiled by Höhne et. al (2007) are used here.
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Chapter 4. Case Study: Spain 177
Some countries are less populated per area than others and therefore may
have more transport activity. Spain’s population density (table 4 – 8, column 8)
is relatively low compared to countries such as Japan, Netherlands and
Belgium.
Table 4 - 8. Indicators for the transport sector for Spain (2004, 2005 data)
Share of
sector in
national
GHG
emissions
2005 (%)
GHG
emissions of
sector/capita
2005
(tCO2eq)
Fuel
efficiency of
passenger
cars 2004
(litre/100km)
Freight
transport
activity 2004
(tkm/capita)
Modal split of freight transport
2004 (%)
Road Rail Water
Population
density 2005
(people/km 2)
23.90 2.4 7.59 9054 86.5 3.1 10.4 86
2.3.4 Households and services
Emissions from this sector originate directly from fuel used for space heating
and indirectly from the use of electricity and heat. However, here indirect
emissions from electricity use are only included under energy industries and
fugitive emissions; therefore including only an incomplete picture of the direct
emissions (Table 4 – 9, columns 1 and 2).
The electricity use in households and services per capita is influenced by the
number and efficiency of electrical appliances used and the amount of
electricity that is used for heating and/or cooling. Spain’s value (Table 4 – 9,
column 3) is below the Annex I average.
Spain’s heating needs (Table 4 – 9, column 4) are low compared to most
Annex I countries’; however Spain’s cooling needs (Table 4 – 9, column 4) are
relatively high. This is due to Spain’s climatic conditions: very hot summers and
relatively cold winters.
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Chapter 4. Case Study: Spain 178
Table 4 - 9 . Indicators for the households and services sector for Spain (2004, 2005 data)
Share of sector
in national GHG
emissions 2005
(%)
GHG emissions
of sector/capita
2005 (tCO2eq)
Electricity
use/capita 2004
(kWh/capita)
Heating degree
days 2004
Cooling degree
days 2004
9.11 0.9 2614 1431 702
2.3.5 Agriculture (non-carbon dioxide)
CH4 and NO2 emissions from this sector originate mainly from raising
animals and using fertilizers. Spain’s agricultural emissions are above the
Annex I average , due to its relatively extensive agricultural activity.
Table 4 - 10 . Indicators for the Agriculture sector (non-carbon dioxide) for Spain (2004, 2005 data)
2.3.6 Waste
Share of sector in national
GHG emissions 2005 (%)
GHG emissions
of sector/capita
2005 (tCO2eq)
GHG emission of
sector/GDP PPP of
agricultural sector 2004
(tCO2 eq/USD 1000)
10.16 1 1.4
Emission sources in this sector include solid waste disposal (landfills),
wastewater treatment and incineration of waste not used for energy generation.
Waste does not contribute much to Spain’s GHG emissions (Table 4 –11,
column 1).
CH4 emissions from landfills can be captured and burned or used for
electricity and heat generation at low cost, Spain’s percentage of CH4 recovered
is relatively low ((Table 4 –11, column 3). If waste is incinerated, most CH4
emissions are avoided.
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Chapter 4. Case Study: Spain 179
Table 4 - 11. Indicators for the waste sector for Spain (2004, 2005 data)
Share of sector
in national GHG
emissions 2005
(%)
GHG emissions
of sector/capita
2005 (tCO2eq)
Percentage of
methane
recovered 2004
(%)
Municipal waste
per capita 2004
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(kg)
Percentage of
waste recovered
2004 (%)
Percentage of
waste landfilled
2004 (%)
2.94 0.3 16.0 650 6.7 51.7
2.3.7 Land use, land-use change and forestry
The LULUCF sector contributes to mitigation by removing CO2 from the
atmosphere, for example through reforestation, as well as by reducing
emissions, for example through reduced forest degradation. It should be noted
that values for net emissions or removals can fluctuate substantially between
years depending on market conditions, climate, fire and others. Table 4 – 12,
column 1, provides only a snapshot of net emissions or removals from this
sector.
Population is not the major driver of these emissions, it is the total forested
area that is significant (Table 4 – 12, column 3). The forest area as percentage of
land area shows the importance of forests to a country (Table 4 – 12, column 4).
Spain’s value is around Annex I average.
Table 4 - 12. Indicators for the land use, land-use change and forestry sector for Spain (2005 data)
Share of sector
compared with
national GHG
emissions 2005 (%)
Net GHG
emissions or
removals of
sector/capita 2005
(tCO2eq)
Forest area 2005
(km 2)
Forest area as
percentage of land
area 2005 (%)
Net CO2 emissions
or removals per
forested area 2005
(tCO2eq/km 2)
-11.27 -1.1 179.2 35.5 -277
2.3.8 International transport
Emissions from international transport are usually excluded from national
total GHG emissions. They are relatively high for Spain compared to other
Annex I countries, since Spain has relatively large international airports and

Chapter 4. Case Study: Spain 180
harbours (Table 4 – 13, columns 1 and 2) and tourism is a major component of
GDP. Population is not the major driver of these emissions.
Most countries report emissions associated with domestic aviation and
shipping as part of total national GHG emissions, but exclude those associated
with international aviation and shipping (table 4 – 13, columns 4 and 5).
Table 4 - 13. Indicators for international transport (2004, 2005 data)
Share of
international
aviation in national
GHG emissions
2005 (%)
Share of
international
navigation in
national GHG
emissions 2005 (%)
GHG emissions of
sector/capita 2005
(tCO2eq)
Share of
international
aviation in total
aviation 2004 (%)
Share of
international
shipping in total
shipping 2004 (%)
2.18 5.76 0.8 62.0 90.4
2.3.9 Overview of sectoral indicators
Below are shown the values for each of the sectoral performance indicators in
2004 1 , the trend between 1990 and 2004 (increasing or decreasing) and a
‘performance meter’, comparing the country’s performance to that of other
countries.
In most of these sectors Spain is above the world average, but below Annex I
average; an exception is agriculture, which is around the Annex I average.
However, some of these indicators (based on emissions per capita) do not
reflect the sector’s emissions, as population is not the major driver for emissions
(e.g. international transport, LULUCF). Other sectoral performance indicators
have been shown before.
1 The electricity and transport sector are not included here, because these have already been shown
before (Sections 2.3.1 and 2.3.2, respectively).
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Chapter 4. Case Study: Spain 181
Figure 4 - 7. Sectoral indicators for Spain (2004 data); trends between 1990 and 2004; and ‘performance
meters’ (Source: Höhne et al., 2007).
Figure 4 – 8 shows the trends in production (or activity) for each of the
sectors between 1990 and 2004 and compares this with the trends in emissions
over the same period. This allows for the identification of potential decoupling
of trends.
Figure 4 - 8. Trends in production for each of the sectors compared with trends in emissions between
1990 and 2004 for Spain (Source: Höhne et al., 2007).
An example is the Iron and Steel industry, although having increased their
activity, emissions from this sector have been reduced – perhaps due to much
more efficient and cleaner technologies. On the other hand, emissions from the
pulp and paper industry and the transport sector have grown much more than
its production or activity. Households and services emissions have grown even
when there has been a reduction in activity – this may be due to the increased
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Chapter 4. Case Study: Spain 182
use of space heating compared to 1990 1 . Waste emissions have also increased
significantly since 1990.
Finally, the importance of the different sectors in terms of contribution to
total GDP and total GHG emissions in Spain in the most recent year available
(2005) are shown in Figures 4 – 9 and 4 – 10. As emissions from land-use change
and forestry can also be negative, emissions from this sector are excluded from
this graph.
Agriculture
10%
Households and
services
9%
Waste
3%
Transport
24% Industry
24%
Energy industries
and fugitive
emissions
30%
Figure 4 - 9. Share of sector in total GHG emissions (without LULUCF and international transport) for
Spain in 2005.
Services
68%
Agriculture
3%
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Industry
29%
Figure 4 - 10. GDP per sector for Spain in 2005.
1 It has already been noted that indirect emissions from electricity use are not included in this sector.

Chapter 4. Case Study: Spain 183
2.4 Energy investment
Investment into energy research and development is key factor if GHG
emissions are to be reduced significantly in the long term. Figure 4 – 11 shows
total public funding energy research and development in 2004 in Spain. Energy
R&D in Spain represents a 0.06 ‰ share of national GDP, which amounted to
700,000 US$ in 2005.
Figure 4 - 11. Breakdown of energy R&D investment in Spain in 2004 into various categories (Source:
Höhne et al., 2007).
2.5 Policies and measures
Spain has signed up to the UNFCCC and the Kyoto Protocol, being an Annex
I Party. Spain is also a member of the Gleneagles Dialogue.
Spain has no voluntary GHG emission targets, but according to the Kyoto
Protocol has to reduce emissions between 2008 and 2012 to 15% over its 1990
levels – which are now over 50%. The reduction of greenhouse gas emissions is
a priority for the Spanish Government. It has therefore implemented many
measures both within industry and in the so-called diffuse sectors (particularly
transport and residential). Since 2004, the aim has been to reverse the trend of
the past decade which had placed Spain far out of reach of its commitments.
The National Allocation Plan for 2008-2012 (PNA), takes steps to achieve
compliance as established by the Government so that total emissions in Spain
should not increase by more than 37% over the base year. This is the equivalent
of 22% points difference from the target set in the Kyoto Protocol. Of this 22%
difference, 2% must be obtained from the carbon sink and the rest (20%) from
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Chapter 4. Case Study: Spain 184
flexibility mechanisms. Regarding the CDM, there are already many bilateral
agreements in place with Latin American countries; the Ibero-American
Climate Change Bureau Network (RIOCCC) and carbon funds have been
created.
The key element for compliance with the commitments resulting from
ratification of the Kyoto Protocol is the Spanish Strategy on Climate Change and
Clean Energy, Horizon 2007-2012-2020, which covers policies and measures
which contribute to sustainable development in two levels: both climate change
and clean energy.
In Spain, economic growth has been accompanied by higher growth in
energy consumption. It is therefore a Government priority to develop legal
instruments and mechanisms to achieve increased energy efficiency, reversing
the current trend. In July 2007, the Council of Ministers approved the 2008-2012
Action Plan for the Spanish Energy Savings and Efficiency Strategy 2004-2012 (E4).
In recent years, certain renewable energy applications have really taken off in
Spain. The Renewable Energies Plan for 2005-2010 entails a contribution from
renewable sources of 12% of primary energy consumption in 2010, electrical
production from these sources of 29.4% of gross electricity consumption and
consumption of biofuels of 5.75% of the consumption of petrol and diesel
estimated for transport.
Table 4 – 14 presents a short description of main climate change policies and
measures for each of the sectors previously identified in Section 2.3.
Table 4 - 14 . Policies affecting sectoral greenhouse gas emissions in Spain
Electricity EU ETS. Feed-in tariff system for renewable electricity. Substantial increase in RE
production capacity.
Industry EU ETS. Voluntary agreements.
Transport Support and development of biofuels.
Households Energy efficiency plans for buildings. Energy saving appliances.
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Chapter 4. Case Study: Spain 185
Agriculture Soil and livestock management programmes in place. Support for biomass.
Waste Waste reduction programme. Push for improving recycling rates, especially glass
2.6 Summary
and paper.
Spain has the typical GHG emission’s profile of an industrialized country:
with dominating emissions from energy transformation processes (30% of total
GHG emissions in 2005), industry (24%) and transport (24%) with regards to
sectors; and CO2 emissions (83% of total GHG emissions in 2006) with regards
to gases.
Emissions in Spain show a significant growth trend since 1990, with slight
punctual decreases for some years – 1993, 1996 and 2006 (the high level of
hydrology energy use in this years may be a significant driver of these results).
This has led to total emissions in CO2 equivalent of 440.7 Mt in 2005, compared
to 289.6 Mt in 1990 (an increase of 52%).
Rapid economic growth – since 1995 the Spanish GDP growth remains above
the EU-15 average – has been accompanied by similar growth in energy
consumption – the average annual growth in demand for primary energy
between 1990 and 2005 was 3.1%, compared to the 1.1% value in the EU-15 –
and therefore emissions. Other key factors driving emissions in Spain are the
population increase – due to the recent ant intense immigration phenomenon –
and the rising mobility – the Spanish car fleet has increased fourfold between
1975 and 2005, being now one of the oldest in Europe.
Emissions per capita (10.2 tCO2eq./cap in 2005) are still below the Annex I
average, but have already reached the EU-27 average. Most of the increase in
primary energy supply has come through gas, but also oil.
Spain has very high dependence on energy imports, regardless of which few
achievements in efficiency have taken place. Until 2005, growth in consumption
was significantly higher than the European average and also that of primary
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Chapter 4. Case Study: Spain 186
energy, although starting from lower values than the EU average. Energy
intensity continued an increasing trend, contrary to that observed in the EU-15.
The potential for further large hydroelectric installations is virtually
exhausted. The use of domestic coal has been gradually slowed, and nuclear
power has a significant public opposition. There are abundant renewable
resources in solar, wind – Spain has one of the highest wind generation
capacities in the world – and biomass that are developing very actively, though
unevenly, supported by a feed-in tariff.
The long term energy R & D effort is insufficient – 700,000 US$ in 2005, in
this case similar with recent EU and global trends. Although this appears to be
changing, finally, very recently.
With regards to policy, achieving the Kyoto target will be a major challenge
for Spain, as emissions are well above the target (+37% in 2005). The
implementation of the E4 Energy Efficiency Strategy will be pivotal for reducing
emissions. Ambitious targets are also set for renewable energy.
On 23 rd January 2008 the European Commission has proposed new targets
for individual EU countries, including Spain, beyond 2012 (see Section 3.2.1);
based on the energy and climate change package adopted on January 2007 (see
Section 3.1), including an independent EU commitment to achieve a reduction
of at least 20% in the emission of GHG by 2020 compared to 1990 levels, and a
mandatory EU target of 20% renewable energy by 2020 including a 10%
biofuels target. Further implications for Spain will be discussed in Section 3.4.
3 Options for post-2012 EU burden-sharing. Implications on
Spain
3.1 Introduction
Under the Kyoto Protocol, the EU Environment Council adopted in 1997 a
greenhouse gas (GHG) emission reduction target of 8% in 2012 relative to 1990.
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Chapter 4. Case Study: Spain 187
In March 2007 the energy and climate change package adopted by the
Commission earlier that year was put forward by the European Council. It
included:
- an independent EU commitment to achieve a reduction of at least 20% in
the emission of greenhouse gases by 2020 compared to 1990 levels and
the objective of a 30% reduction by 2020, subject to the conclusion of a
comprehensive international climate change agreement 1 ;
- a mandatory EU target of 20% renewable energy by 2020 including a 10%
biofuels target.
With this independent commitment, the EU showed leadership in the fight
against climate change, while at the same time indicating its willingness to go
even further in the context of an ambitious international agreement.
The issue of how to distribute the emission reduction burden internally
became again important. The Council conclusions in March 2007 decided that a
differentiated approach to the contributions of the Member States was needed,
which should reflect fairness, be transparent and take into account the national
circumstances of the Member States.
An energy and climate change package has once again been presented by the
European Commission the 23 rd of January 2008 (EC, MEMO/08/34). It includes:
- a proposal amending the EU Emissions Trading Directive (EU ETS);
- a proposal relating to the sharing of efforts to meet the Community's
independent greenhouse gas reduction commitment in sectors not
covered by the EU emissions trading system (such as transport,
buildings, services, smaller industrial installations, agriculture and
waste);
1 The EU would increase their target to 30% “provided that other developed countries commit
themselves to comparable emission reductions, and economically more advanced developing countries
also contribute adequately according to their responsibilities and respective capabilities”.
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Chapter 4. Case Study: Spain 188
- a proposal for a Directive promoting renewable energy, to help achieve
both of the above emissions targets.
Other proposals that are also part of the package include a proposal for a
legal framework on carbon capture and storage, a Communication on the
demonstration of carbon capture and storage and new guidelines for
environmental state aid.
This Section is structured as follows:
• First, two major types of options for EU burden-sharing and ETS
allocation beyond 2012 are introduced in Section 3.2, together with six
EU burden-sharing approaches (most of them already introduced in
Chapter 2). The Commission’s proposal – 23 rd January 2008 – for EU
internal effort sharing will be further discussed in Subsection 3.2.1.
• Then, in Section 3.3, methods for allocating the EU reduction objectives
(20% unilateral or 30% multilateral) are explored, in order to analyze the
implications – costs, reduction efforts and distributional effects – of the
various approaches on Spain. The results used are the ones presented by
den Elzen et al. (2007b); they use the FAIR 2.1 modeling framework.
• Finally, in Section 3.4, the results will be further discussed and compared
to the Commission’s proposal for EU internal effort sharing; always
regarding the implications on Spain.
3.2 Options for post-2012 EU burden-sharing and ETS allocation
The purpose of Section 3 is to identify the implications for Spain, in
quantitative terms – i.e. abatement costs and emission allowances – depending
on the approach or methodology used for distributing the EU-assigned amount
of emission allowances at the national or sector level, as discussed below for the
various types of options for EU burden-sharing and ETS allocation (post-2012).
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Chapter 4. Case Study: Spain 189
Sijm et al. (2007) consider three major types of options for EU burden-sharing
and ETS allocation beyond 2012. Here, the analysis focuses only on two of these
options:
Option 1. Present system
In the present system, the overall EU emission target is shared among its
Member States and, subsequently each Member State divides its national target
between the ETS and other sectors (see Figure 4 - 12). This option is
characterized by a high level of decision-making at the Member State level.
Figure 4 - 12. Present system: EU burden-sharing with ETS allocation at national level (Source: Sijm et
al., 2007).
For option 1, six different possible post-2012 regimes for internal EU burden-
sharing are selected:
i. Grandfathering, i.e. applying a flat reduction rate for all EU countries to
their historic emissions in a certain reference period (Kyoto targets);
ii. Per capita convergence, i.e. differentiation of emission reductions based on
a convergence of emission allowances towards an equal per capita
emissions in a certain convergence year (2050);
iii. Multi-criteria, i.e. differentiation of emission reductions based on a
convergence of the indexed value of a mix criteria: income per capita,
emissions per capita, and emissions per unit GDP (equal weighting);
iv. Ability to pay, i.e. differentiation of emission reductions based on per
capita income;
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Chapter 4. Case Study: Spain 190
v. The Triptych approach, i.e. differentiation of emission reductions based on
a variety of sector and technology criteria (See Section 2.1.2.4 of Chapter
2); and
vi. The Equal costs approach, i.e. differentiation of emission reductions based
on equal mitigation costs per country.
Option 2. EU burden-sharing with ETS allocation at EU level
Under this approach, both the top-down ETS cap an the bottom-up allocation
rules are set at EU level, while the EU target for the non-ETS sectors is shared
among the Member States. With regard to the EU-ETS allocation process, this
option requires a high level of decision-making at the EU level.
Figure 4 - 13. EU burden-sharing with ETS allocation at EU level (Source: Sijm et al., 2007).
Option 2 is actually the one chosen by the European Commission (EC) and
proposed the 23 rd of January 2008. The proposal will be presented in the
following subsection 3.2.1.
For option 2, setting an EU-wide target for the ETS as a whole (versus the
other sectors) can be based on different approaches, including: (i) Marginal
abatement costs, (ii) Grandfathering, (iii) Triptych approach. The first option is
selected because it reflects the ambition for maximum cost efficiency, the
second as this method is used as the present allocation scheme. The third option
has been used in the past for the internal EU burden-sharing during the Kyoto
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Chapter 4. Case Study: Spain 191
negotiations. The recently proposed EU effort sharing is based on a cost-
effective reduction approach (similar to case (i)).
Subsequently, the EU-wide cap for the ETS as a whole is allocated straight to
the eligible installations throughout the system, based on EU-wide allocation
rules. In contrast, the EU-wide target for the non-ETS sector is first shared
among the Member States, which can be based on a variety of burden-sharing
approaches; here, the approaches selected are Marginal abatement costs,
Grandfathering, Triptych and Per capita convergence. The Commission proposes
using GDP/capita as the main criteria when setting the targets for Member
States.
Sijm et al. (2007) discussed the pros and cons of both options. Centralizing or
harmonizing the process of setting the ETS cap and the allocation rules for
eligible installations throughout the EU, as in option 2, may appear an attractive
option as it reduces competitive distortions and other adverse effects due to a
national-oriented allocation process, but it implies a significant transfer of
decision competence from the national to the EU level (compared to the present
allocation process).
3.2.1 European Commission’s proposal for EU effort sharing (January 2008)
On 23 rd January 2008 the European Commission included a proposal on how
efforts could be shared among Member States (MS) to achieve the targets
endorsed both by the European Parliament 1 and by EU leaders at the March
2007 European Council (see Section 3.1).
The EU ETS is an EU-wide policy instrument used to reduce GHG emissions
in electricity plants and major industrial installations in a cost-effective manner,
currently covering some 40% of all EU-27 GHG emissions. In the past, National
Allocation Plans (NAPs) were used to define the total amounts of allowances to
be distributed to these companies.
1 European Parliament resolution on climate change adopted on 14 February 2007 (P6_TA(2007)0038).
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Chapter 4. Case Study: Spain 192
Now, a single EU wide cap for the emissions covered by the EU ETS is
proposed, together with an increased use of auctioning – it is estimated that
60% of the total number of allowances will be auctioned in 2013, and this
proportion would increase in later years. A number of new industries (e.g.
aluminum and ammonia producers) would be included in the ETS, so would
two other gases (nitrous oxide and perfluorocarbons). Member states would be
allowed to exclude small installations from the scope of the system, provided
they are subject to equivalent reduction measures. However, the Commission
has not included the possibility of allowing credits from land use, land-use
change and forestry (LULUCF) projects, believing that global deforestation
could be better addressed trough other instruments. Increased harmonization of
the EU ETS would make the system simpler and more transparent, increasing
its attractiveness for other countries and regions to link up to it; a bigger carbon
market would potentially lower the aggregate cost of reducing greenhouse
emissions.
Figure 4 - 14. European Commission’s proposal for EU effort sharing (23 rd January 2008).
Something to notice is that all objectives are based on the year 2005, and not
1990, as the Kyoto Protocol. Calculating reductions and renewable energy
shares in comparison with 2005 gives an easily understandable picture of the
changes needed, as it compares such changes with what is effectively the
present situation. Moreover, the data for 2005 is more reliable and more easily
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Chapter 4. Case Study: Spain 193
available: it includes verified emissions at installation level within the EU ETS,
as well as the overall GHG emissions of Member States as officially reported to
the UNFCCC.
(i) Relative efforts for the EU ETS and non ETS sectors
To determine the effort to achieve the 20% greenhouse gas reduction
commitment between the EU ETS – i.e. the EU ETS cap – and the sectors not
covered by the ETS, the preferred choice has been to use the cost-efficient
reference option as a basis, ensuring minimal overall cost 1 . The Commission
proposed the following approach:
- A 21% reduction in EU ETS sector emissions compared to 2005 by 2020;
- A reduction of around 10% compared to 2005 for the sectors that are not
covered by the EU ETS.
This division, with about 60% of reductions to be achieved in EU ETS sectors,
reflects the larger cost-effective potential, in particular in the electricity sector,
compared to non ETS sectors. Within the non ETS sectors there are also
considerable differences, with larger reductions in non CO2 gases (-21%
compared to 2005), and lower CO2 emissions reduction opportunities from for
instance buildings, and even more so in transport (-7% compared to 2005).
Taken together, these measures result in an overall reduction of -14%
compared to 2005, which is equivalent to a reduction of -20% compared to 1990.
1 To implement both the renewables target and the GHG reduction commitment, a wide range of
policy design choices were analyzed (see EC 2008). However, all options were based on the simultaneous
achievement of both the 20% renewable target and the 20% reduction of greenhouse gas emissions.
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Chapter 4. Case Study: Spain 194
Table 4 - 15 . Reduction in EU ETS (including outbound aviation) and–non EU ETS sectors to meet the 20%
reduction in a cost-effective way.
(ii) Sharing of effort among Member States in the sectors not covered by the
EU ETS
Sectors not covered by the EU ETS, which are made up of small scale
emitters in a wide range of sectors such as transport (cars, trucks), buildings (in
particular heating), services, small industrial installations, agriculture and
waste, currently represent some 60% of total GHG emissions in the EU.
If one wants to differentiate between Member States for fairness reasons then
it makes sense to do so in the non-ETS sectors, sectors where climate change
related measures have less impact on the internal market and on
competitiveness across borders and where Member States have more freedom
and competence to act. However, EU-wide measures (such as product
standards for cars and appliances) would supplement Member States efforts to
achieve such national targets.
To give some insights in potential differentiated approaches, several
examples where assessed (see EC 2008):
• A cost-effective reduction at the level of the whole EU regarding non-
ETS sectors; this would result in a proportionally higher increase (at least
50% higher than the EU average) in the overall cost compared to GDP for
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Chapter 4. Case Study: Spain 195
the Member States with a GDP per capita below EU average than for
other countries.
• If emissions per capita in the sectors not covered in the EU ETS were to
be equalized by 2020, then some EU-15 Member States are not expected
to achieve these efforts.
• An equal percentage reduction per Member State compared to 2005,
which would require GHG emissions in the sectors not covered by the
EU ETS to reduce around 12 % in each Member State. This would require
much larger efforts for most Member States with a GDP per capita below
EU average compared to the cost efficient case.
• A scenario that would differentiate the reduction targets in the sectors
not covered by the EU ETS depending on the relative GDP/Capita of the
different Member States: decreasing the targets in the Non-ETS for
countries with lower GDP per capita and increasing them for countries
with higher GDP per capita increases overall costs in the EU. While cost
increases would remain limited across the whole EU, cost reductions
could be very substantial in those countries with a very low GDP per
capita relative to the EU average.
The Commission proposed to use GDP/capita as the main criteria when
setting the targets for Member States. In this approach, countries with a low
GDP per capita would be allowed to emit more than they did in 2005 in sectors
not covered by the EU ETS, thereby reflecting projections that their relatively
higher economic growth will be accompanied by increased emissions in for
instance the transport sector, and to a lesser extent in heating of buildings.
These targets do however still represent a cap on their emissions, and will
require some sort of reduction effort for all Member States.
The figures chosen are limited to a maximum of -20% or +20% compared to
2005 (see Figure 4 – 15). These limits ensure that specific national targets remain
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Chapter 4. Case Study: Spain 196
technically and economically feasible and reasonable in each country, and that
there is no unreasonable increase in overall costs.
Figure 4 - 15. Country specific targets for non EU ETS modulated on the basis of GDP/capita (Source:
EC 2008)
If there were no progress beyond the 20% independent commitment,
Member States could use CO2 credits from GHG reduction investments in third
countries up to a level of 3% of 2005 emissions – almost one third of the 10%
reduction being made. The limits are in place to ensure that the package
triggers investment in cleaner technologies and renewables.
If an international agreement on climate change were reached in which
developed countries agreed to take equivalent measures, the EU would increase
its emission reduction target to 30%. Targets, both for ETS and non-ETS sectors,
would be adapted in a manner that is proportional to their share of total
emissions in 2020. Half of the additional reduction effort required from each
Member State may come from CO2 credits acquired through GHG reduction
investments in developing countries, thereby giving a strong incentive for such
countries.
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Implementing the package would require a considerable economic effort and
increased investment in renewable energy. Power plants, appliances and
transport must be made more energy-efficient. The Commission has estimated
the direct cost of achieving both the 20% GHG reduction target and the 20%
renewable energy target simultaneously at 0.58% of EU GDP or €91billion in
2020. Oil and gas imports are expected to go down by some € 50bn in 2020,
while electricity prices are likely to go up by 10-15% in comparison to today’s
level. Overall, this leads to an energy intensity improvement of approximately
32% between 2005 and 2020. If emission reduction credits from projects in third
countries such as CDM are allowed, costs are estimated to decrease to 0.45 % of
GDP (see EC 2008).
The proposal is to be discussed in parallel in the Council and the European
Parliament; if approved, the package would become operational after the
conclusion of the first commitment period of the Kyoto Protocol, in 2013. If
climate change is to be limited to 2ºC above the temperature in pre-industrial
times, global emissions need to be halved by the middle of this century. The
recently adopted Bali Roadmap in the latest Conference of the Parties was a
breakthrough, with all countries – included the US and major developing
countries – agreeing to start formal negotiations for a future international
climate change agreement as a follow-up to the Kyoto Protocol, to be concluded
by 2009.
3.3 Model analysis (FAIR 2.1)
This section analyses the emission reductions, abatement costs and reduction
measures for Spain for the two options for post-2012 EU burden-sharing and
ETS allocation presented in Section 3.2.
The analysis focuses on three scenarios based on different assumptions for
the level of international participation and the EU reduction objective:
• EU 20% unilateral without CDM. Emission allowances are traded freely
between the EU Member States, but this case assumes no availability of
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Chapter 4. Case Study: Spain 198
Joint Implementation (JI) and Clean Development Mechanism (CDM)
beyond 2012 1 ;
• EU 20% unilateral with CDM. This case is similar to the previous one, but
now with the availability of international flexibility mechanisms JI and
CDM;
• EU 30% in a multilateral regime. The EU adopts a 30% reduction target as
part of a broader coalition, in which Annex I countries and advanced
developing countries adopt comparable reduction efforts by 2020 2 .
Emissions trading is only allowed within the coalition. There is also the
availability of JI and CDM beyond 2012, as an emission reduction option
in countries with no restrictions on emissions, such as India.
3.3.1 Option 1. Present system
This Section uses option 1 (as described in the previous Section) as a starting
point. Starting with an EU reduction target, emissions among the individual
European countries are re-allocated using different burden-sharing approaches,
then national reduction targets and abatement costs are calculated (accounting
for the Kyoto Mechanisms). Here, only the results for Spain will be presented.
3.3.1.1 Emission allowances
The initial emissions in the starting year (2010) are assumed to be equal to
the Kyoto targets. This assumption is an important issue to take into account in
the post-2012 EU negotiations. It would favor those Annex I countries with
baseline emissions in 2010 much lower than their Kyoto targets - e.g. former
Soviet Unions – with excess emission allowances (‘hot air’). On the other hand,
countries like Spain – which exceed by far their Kyoto targets - would lose out.
1 Although this case is no longer realistic - due to the already confirmed continuation of Kyoto
mechanisms beyond 2012 - it will be studied here as it is the simplest scenario, which serves as a base for
the calculations of the other two.
2 Den Elzen et al. (2007) further analyze the question as to what level of efforts by other Annex I parties
and advanced developing countries could be considered comparable to the EU 30% reduction targets.
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Chapter 4. Case Study: Spain 199
This would not be taken into account and they would have to reduce both their
yet not reduced GHG emissions under Kyoto and also GHG emissions under
the new EU commitment.
Under the recent European Commission’s proposal for EU effort sharing (see
Section 3.2.1), the base year changes to 2005. Reductions will be calculated in
comparison with 2005 - with what is effectively the present situation - without
taking into account the changes in growth of GHG emissions from 1990-2005.
This approach greatly benefits Spain, as it does not take into account the non-
achievement of Kyoto targets.
The resulting emission allowances are the same under the ‘EU 20% unilateral
without CDM’ and the ‘EU 20% unilateral with CDM’ scenarios, as these are
calculated before trading. In general, the pattern of high and low reduction
targets for the different regimes is roughly the same in the ‘EU 30% multilateral
regime’ scenario, but evidently with higher reduction targets.
60
50
40
30
20
10
0
-10
-20
-30
% change compared to 1990-level
EU 20% EU 30%
Per capita convergence
Multi-criteria
Ability to pay
Triptych
Equal costs
Baseline
Figure 4 - 16. Emission allowances compared to 1990 levels for 2020 for Spain under the ‘EU 20%
unilateral (with or without CDM)’and the ‘EU 30% in a multilateral regime’scenarios.
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Chapter 4. Case Study: Spain 200
% reduction compared to baseline-level
0
-10
-20
-30
-40
-50
-60
EU 20% EU 30%
Per capita convergence
Multi-criteria
Ability to pay
Triptych
Equal costs
Figure 4 - 17. Emission allowances compared to baseline levels for 2020 for Spain under the ‘EU 20%
unilateral (with or without CDM)’and the ‘EU 30% in a multilateral regime’scenarios.
The Grandfathering approach 1 leads to the highest reductions compared to
baseline levels for Spain – twice as much as the EU average; this is because
Spain had growth targets under the Kyoto Protocol compared to 1990 levels.
The Ability to pay approach leads to the highest reductions (apart from the
Grandfathering approach) for Spain. Although not yet among the richest
countries, Spain has experienced a great economic growth during the last years
and its GDP per capita is much higher than Eastern Europe countries, which
would be allocated even an excess of emissions under such an approach.
The Per capita convergence approach, as one might expect, favors the
countries with low per capita emissions. Spain’s GHG emissions per capita are
around the EU average, therefore leading to an average reduction effort.
The Multi-criteria approach leads to high reduction targets for Spain due to
its relatively high emission intensity.
1 The Grandfathering approach is not shown here due to reporting reasons, but it would lead to a 20% and 30%
GHG emission reduction compared to 1990 levels (-48% and –55% compared to baseline) in the ‘EU 20% (with or
without CDM)’and the ‘EU 30%’ scenarios respectively.
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Chapter 4. Case Study: Spain 201
The Triptych approach allows emission growth compared to 1990 levels for
Spain.
The Equal costs approach leads to the lowest reduction targets compared to
the other approaches. It should be noted that these results depend strongly on
the marginal abatement costs assumptions.
3.3.1.2 Emissions trading
Emissions trading is determined by a country’s reduction objective – at the
same time dependant on the emission regime - as well as their abatement
potential and costs.
Spain would be a net buyer of emission allowances. Here, large reduction
objectives can result in high costs, as it would not be able to implement all
reductions domestically. Countries that could still have excess of emission
allowances in 2020 – e.g. former Soviet Union countries – would be large
suppliers, selling their emission allowances on the EU emission trading market.
Overall, the Ability to pay regime results in the largest emissions trading,
while Equal costs shows the least emission reductions traded on the EU internal
emissions trading market.
Compared to the ‘EU 20% unilateral without CDM’ scenario, emissions after
trading in the ‘EU 20% unilateral with CDM’ would be much higher and total
internal reduction is substantially lower, as a large amount of cheap emission
reductions are in this scenario achieved via CDM outside the EU.
However, the emissions trading in both the ‘EU 20% unilateral with CDM’
and the ‘EU 30% multilateral regime’ scenarios also show the same trends as in
the ‘EU 20% unilateral without CDM’ scenario.
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Chapter 4. Case Study: Spain 202
Emissions trading (MtCO2eq.)
140
120
100
80
60
40
20
0
EU 20% without
CDM
EU 20% with CDM EU 30%
Per capita convergence
Multi-criteria
Ability to pay
Triptych
Equal costs
Figure 4 - 18. Emissions trading for 2020 for Spain under the ‘EU 20% unilateral without CDM’, the
‘EU 20% unilateral with CDM’ and the ‘EU 30% in a multilateral regime’scenarios.
3.3.1.3 Abatement costs
The abatement costs also show similar trends for the different regimes under
the three scenarios analyzed. Grandfathering and the Ability to pay approach
produce the most extreme results, with very high costs for Spain – around 1% of
GDP. The Tryptich approach results in the least costs for Spain, together with
the Equal costs approach.
The abatement costs when using the CDM are much lower, as reduction
efforts can be made where they are most cost-effective. Overall abatement costs
are approximately four times as high in the 30% reduction scenario than in the
20% reduction scenario with CDM.
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Chapter 4. Case Study: Spain 203
1,2
1
0,8
0,6
0,4
0,2
0
Abatement costs as % of GDP
EU 20% without
CDM
EU 20% with CDM EU 30%
Per capita convergence
Multi-criteria
Ability to pay
Triptych
Equal costs
Figure 4 - 19. Abatement costs as % of GDP for 2020 for Spain under the ‘EU 20% unilateral without
CDM’, the ‘EU 20% unilateral with CDM’ and the ‘EU 30% in a multilateral regime’scenarios.
3.3.1.4 Abatement measures 1
As emission trading is included, the measures are taken where they are more
cost-effective. Therefore, the domestic abatement measures are the same for the
six approaches analyzed, although they differ for the three scenarios due to
different emission targets (-20% and -30% compared to 1990 levels) and
different international participation rules, which determines the amount of
credits available on the international market.
In this section, the domestic abatements for Spain per sector and per category
(renewables, energy efficiency, CHP, etc) are presented. Scenarios show small
differences in the absolute domestic abatement measures. In terms of the
relative contributions of sectors and reduction categories to the domestic
abatements, the differences become even negligible, and therefore this section
only shows the results of the ‘EU 20% unilateral without CDM’ scenario.
It should be noted that the reduction over the various categories (renewables,
energy efficiency, CHP, etc) is done on the basis of a cost-effective strategy.
Therefore it does not fully account for the Energy Package as agreed by the EU
1 The following results are drawn from the analysis made by den Elzen et al. (2007b).
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Chapter 4. Case Study: Spain 204
in March 2007 – i.e. 20% improvement in energy efficiency by 2020, 20%
renewable energy mandatory objective by 2020, biofuels target of 10% by 2020.
Nuclear power (left to Member State’s choice in EU Energy Package) as a
reduction measure is not considered here.
Others
1%
Households
18%
Industry
1%
Services
11%
Transport
19%
Sector shares
Waste
1%
Fossil fuel
extraction
0%
Energy supply
45%
Agriculture
4%
Figure 4 - 20.Reduction percentage of the total domestic reduction (baseline minus target) for Spain per
sector for the year 2020 for the ‘EU 20% unilateral without CDM’ scenario. Other scenarios give similar
results.
Savi ngs and CHP
41%
% per reduction measure
Renewables
10%
Figure 4 - 21. Reduction percentage of the total domestic reduction (baseline minus target) for Spain per
aggregated reduction measure for the year 2020 for the ‘EU 20% unilateral without CDM’ scenario.
Other scenarios give similar results.
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CCS
3%
Non CO2
13%
Fuel shi f t
33%

Chapter 4. Case Study: Spain 205
Nearly half of the measures (45%) are taken in the energy supply sector, due
to a significant potential for fuel shift (from coal to natural gas). Households
contribute around 18% to the reductions in Spain. The percentage from the
transport sector is small compared to this sector’s emissions, because reduction
measures are relatively expensive in this sector. Although innovative measures
may happen here, as the plug-in hybrid electric cars.
Figure 4 – 21 shows the contribution of technological options to the
greenhouse gas emission reductions for 2020 for Spain 1 . Within the total
portfolio of measures increased energy efficiency improvements and CHP
(41%) and fuel switch (33%) (using natural gas instead of coal) play a
particularly important role. A less important option in 2020 is carbon capture
and storage (CCS).
It should be noted that beyond 2020, the contribution of renewables and CCS
can become more important (as also illustrated in Van Vuuren et al., 2007a),
whereas the contribution of the energy efficiency can become smaller. The main
reason for the later is that the increasing share of zero carbon energy supply
options, like renewables, reduces the effectiveness of energy efficiency
measures.
Measures in the category ‘Savings and CHP’ count for a large percentage in
Spain (41%); they apply mainly to households and the service sectors, which are
relatively large source of emissions here. Measures related to a fuel shift
account for a large proportion (33%), as Spain’s energy production is relatively
carbon-intensive and more inefficient compared to the EU-15. A fairly large
number of power plants in Spain run on coal and therefore the shift from coal to
gas has a large potential. The relatively small share of abatement from
renewables (10%) is because generally they are more expensive than measures
such as fuel shift, savings and CHP.
1 Den Elzen et al. (2007b) present an extensive review of the abatement measures relating to the various
categories.
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Chapter 4. Case Study: Spain 206
3.3.2 Option 2. EU burden-sharing with ETS allocation at EU level
This section uses EU burden-sharing with ETS allocation at EU level (Option
2) as its main starting point. The calculations are performed in four steps, as
described in Figure 4 – 22.
Figure 4 - 22. The four steps for the calculation of Option 2: EU burden-sharing with ETS allocation at
EU level.
The recent European Commission’s proposal for effort sharing is similar to
this option, but would only involve implementing steps 1, 2a and 3 (shown by
the red line in Figure 4 – 11). Here, ETS sectoral caps are allocated to each
Member State (Step 2b) and summarized together with non-ETS Member State
caps in Step 4, therefore providing and approximate measure of individual
countries’ efforts such as Spain.
For the calculations, it is assumed that the ETS sector includes all GHG
emissions from the industrial and electricity sectors, and that the non-ETS
sector includes the remaining GHG emissions.
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Chapter 4. Case Study: Spain 207
So far, the Grandfathering is used presently as the allocation rule, and for this
reason it is analyzed here. The Marginal abatement costs approach is selected as it
best satisfies the criteria of cost-efficiency. The Triptych approach has been used
in the past for the internal EU burden-sharing during the Kyoto negotiations
and as an alternative approach.
3.3.2.1 Step 1: EU-wide cap for ETS and non-ETS
Figure 4 – 23 illustrates the EU-wide cap for ETS and non-ETS for the three
allocation approaches as well as the ‘EU 20% unilateral without CDM’ and ‘EU
30% in a multilateral regime’ scenarios. It should be noted that the reductions
presented for the three allocation methods are before emissions trading and
CDM, and are independent of the final CDM amounts, and therefore ‘EU 20%
unilateral with CDM’ gives similar results to ‘EU 20% unilateral without CDM’.
For both the Triptych approach and the Marginal abatement costs approach, the
reduction for the ETS sector, compared to the 1990 levels, exceeds the reduction
in the non-ETS sector. The differences for a cost-effective approach –
represented by the Marginal abatement costs approach – are small. However, as
in the baseline scenario for 2020, the total emissions in the non-ETS sector
(especially from transport) increase more than the emissions in the ETS sector
(see column 4 in Figure 4 – 23). Compared to the baseline levels the reductions
in the non-ETS sectors exceed the reductions in the ETS sectors, as reducing
emissions in the non-ETS sector is more effective in terms of reduction
potentials compared to the ETS sector.
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Chapter 4. Case Study: Spain 208
Figure 4 - 23. The EU-wide cap for ETS and non-ETS pertaining to the three allocation options
considered for the ‘EU 20% unilateral without CDM’ scenario (left) and ‘EU 30% in a multilateral
regime’ scenario (right). (Source: den Elzen et al., 2007b).
The Commission’s proposal for effort sharing between the ETS and non-EtS
sectors is based in the most cost-efficient option – represented her by the
Marginal abatement costs approach – however both the GHG reduction and
renewables (20% by 2020) had to be simultaneously met. For the non-ETS
sectors an average GHG reduction of 10% compared to 2005 levels is proposed;
here, the reduction for these sectors would be around 15% compared to 1990
levels. The results are therefore similar. The proposed reduction efforts for the
ETS sectors are 21% below 2005 levels; here, they are also – at least compared to
1990 levels – more stringent than those set up for the non-ETS sectors. It is
cheaper to reduce emissions in the electricity sector than in most others.
3.3.2.2 Step 2: Sectoral ETS Caps
Figure 4 – 24 presents the emission reductions of the power and industrial
sectors at EU level compared to the 1990 levels for the two scenarios ‘EU 20%
unilateral without CDM’ (gives similar results to ‘EU 20% unilateral with
CDM’) and ‘EU 30% in a multilateral regime’.
The absolute emission reductions (compared to the baseline scenario) for the
power sector are indeed higher than for the industrial sector: just as in the
baseline scenario the power emissions show an increasing trend compared to
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Chapter 4. Case Study: Spain 209
1990 levels, whereas the industrial emissions show a decreasing trend. For the
30% EU reduction target the differences between the power and the industry
sector become less.
Figure 4 - 24. The EU-wide reduction targets (before emissions trading and CDM) for the industrial and
power sectors, based on an EU-wide ETS cap for the ‘EU 20% unilateral without CDM’ scenario (left)
and ‘EU 30% in a multilateral regime’ scenario (right). (Source: den Elzen et al., 2007b).
Although the allocation of the emission reductions for the various ETS
installations (here only the power and industrial sectors) will be arranged at the
European level, projections for the reduction targets in Spain can also be made
(industrial and power sectors) for the three allocation approaches, as shown in
Figure 4 – 25.
Significant differences between the approaches can be observed. The
Marginal abatement costs approach would allocate the Spanish industry sector a
growth target compared to 1990-level, as the most cost-effective approach this
would mean that abatement costs in this sector are greater for Spain than for
other EU countries. However, under the Tryptich approach, the reduction target
would be under 1990 levels; although costly, Spanish industry is inefficient.
Regarding the power sector, it would be the other way round. Under the
Marginal abatement costs approach Spain would have to reduce emissions
compared to 1990 levels. The Tryptich approach would allow an increase in
emissions of 37% to the Spanish power sector.
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Chapter 4. Case Study: Spain 210
It should be noted that this findings largely depend on the assumptions that
were made for the Triptych parameter settings. Different assumptions, such as
choosing a lower final per capita emission convergence level for the domestic
sector, would lead to less stringent reductions for the industrial sector
50
40
30
20
10
0
-10
-20
-30
% change compared to 1990-level (EU 20%)
Industry Power
% change compared to 1990-level (EU 30%)
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50
40
30
20
10
0
-10
-20
-30
-40
Industry Power
Marginal abatement costs
Grandfathering
Figure 4 - 25. The reduction targets (before emissions trading and CDM) for the industrial and power
sectors for Spain for the three allocation approaches for the ‘EU 20% unilateral without CDM’(left) and
EU 30% in a multilateral regime’ (right) scenario.
3.3.2.3 Step 3: Member State non-ETS caps
Finally, the EU non-ETS cap is calculated as in step 1, using the different
burden sharing approaches. Then it is allocated once again among the Member
States using the same three approaches as for the first two Steps, and included
the Per capita convergence approach (commonly used as allocation scheme for
population-related emissions, as the non-ETS emissions). Grandfathering in
combination with complex approaches such as Triptych and Marginal Abatement
costs are not seen here, as it would be less logical (see Table 4 – 16).
Triptych
Baseline

Chapter 4. Case Study: Spain 211
Table 4 - 16. The various allocation methods used in the three calculation steps for Option 2: EU
burden-sharing with ETS allocation at EU level (Source: den Elzen et al., 2007b).
The Per capita convergence approach (A2, B2) leads to the stringent reductions
for Spain due to its relatively high per capita emissions.
On the other hand, the Marginal Abatement costs approach (A1, B1 and C1)
would allow Spain to expand its emissions even over its baseline scenario (‘hot
air’). However, it should be noted that the results depend strongly on the
marginal abatement costs assumptions; non-ETS sectors’ abatement costs for
Spain seem to be extremely high.
The Triptych approach leads to relatively similar results as the Per capita
convergence cases (compare C3 with A2 and B2), as the Triptych approach also
assumes per capita convergence for the residential and transport emissions,
which dominate the domestic ETS emissions.
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Chapter 4. Case Study: Spain 212
% change compared to 1990 levels
50
40
30
20
10
0
-10
-20
-30
-40
Reduction targets for the non-ETS sector (Spain)
EU 20% EU 30%
A1. Marginal abatemet costs
A2. Per capita convergence
B1. Marginal abatemet costs
B2. Per capita convergence
B4. Grandfathering
C1. Marginal abatemet costs
C3. Triptych
Baseline
Figure 4 - 26. Spain’s reduction targets for the non-ETS sector for the six considered allocation
approaches for ‘EU 20% unilateral with/without CDM’(left) and ‘EU 30% in a multilateral regime’.
The Commission proposed to use GDP/capita as the main criteria when
setting the non-ETS targets for Member States. Here, that approach is not
considered. Spain’s GDP/capita is at the same level than the EU average,
therefore having a GHG reduction target of –10% compared to 2005, which
would be similar to a growth compared to 1990 levels. It is logical that all the
approaches considered here allow Spain a growth target. The approach selected
by the EC to achieve a reduction of 20% is first based in cost-efficiency (burden
sharing the EU overall cap between ETS and non-ETS sectors), therefore would
have to be similar to Marginal abatement costs approaches (a growth target of
30% compared to 1990 levels).
3.3.2.4 Emission allowances
The reductions for all GHG emissions (ETS and non-ETS sector) show a wide
range for the various allocation methods, even growth targets for most of
them 1 .
1 Even though there will eventually not be specific national targets for the sectors covered by the EU
ETS, they are considered here as a way to have an idea of the level of effort required.
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Chapter 4. Case Study: Spain 213
% change compared to 1990 level
60
50
40
30
20
10
0
-10
-20
-30
-40
EU 20% EU 30%
A1. Marginal abatemet costs
A2. Per capita convergence
B1. Marginal abatemet costs
B2. Per capita convergence
B4. Grandfathering
C1. Marginal abatemet costs
C3. Triptych
Baseline
Figure 4 - 27 . Emission allowances compared to 1990 levels for 2020 for Spain for the six considered
allocation approaches under the ‘EU 20% unilateral with/without CDM’ and the ‘EU 30% in a
multilateral regime’ scenarios.
% change compared to baseline level
0
-10
-20
-30
-40
-50
-60
EU 20% EU 30%
A1. Marginal abatemet costs
A2. Per capita convergence
B1. Marginal abatemet costs
B2. Per capita convergence
B4. Grandfathering
C1. Marginal abatemet costs
C3. Triptych
Figure 4 - 28. Emission allowances compared to baseline levels for 2020 for Spain for the six considered
allocation approaches under the ‘EU 20% unilateral with/without CDM’ and the ‘EU 30% in a
multilateral regime’ scenarios.
In general, the pattern of high and low reduction targets for the different
cases is roughly the same for both the -20% and –30% EU reduction targets, the
latter with evidently higher reduction targets for all countries.
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Chapter 4. Case Study: Spain 214
The Grandfathering cases (B1, B2 and B4) – particularly B4, allocation entirely
based on Grandfathering – lead to fairly high reductions for Spain, which had
growth targets under the Kyoto Protocol compared to 1990 levels (+15%).
The Triptych approach leads to reductions that are somewhere in the middle
compared to the reductions resulting from the other approaches.
It has been noted before that the Marginal abatement costs results greatly
depend on the assumptions used for marginal abatement costs. For Spain, it
would lead to relatively low reductions compared to other approaches (C1 with
C3, B1 with B2 and B4, A1 with A2), especially if the approach is applied as
burden sharing within the non-ETS sector.
The least demanding approach for Spain would be a Triptych approach as
first step, used to differentiate the overall EU cap between ETS and non-ETS
sectors; and then, for burden sharing the non-ETS sector cap among Member
States, the Marginal abatement costs approach. Marginal abatement costs – as
defined in this analysis – applied in both steps would also be relatively less
stringent for Spain.
Therefore, Spain would be beneficiated if an approach based on Equal costs
was to be used in the EU burden sharing. The Triptych approach would be
Spain’s second best option. An approach based on Grandfathering, which does
not take into account national circumstances, would place an extremely heavy
burden on Spain.
However, Spain’s reduction efforts would be relatively high for all of the
approaches analyzed here. Although sometimes allowed growth targets
(compared to 1990 levels – taking therefore account of its economic growth), it
would have to reduce between 20% and 50% compared to the baseline scenario.
The Commission’s proposal of EU effort sharing uses as a base the most cost-
effective reference scenario, therefore Spain is greatly beneficiated by this.
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Chapter 4. Case Study: Spain 215
Moreover, reduction efforts use as a base year 2005, this being very beneficial
for countries that have reduced less than others, like Spain.
3.3.2.5 Emissions trading
Spain acts as a buyer (Figure 4 – 18), except for the Triptych plus Marginal
abatement costs approach (case C1), in which Spain would act as a seller of
emission allowances.
The implications for Spain regarding the traded emission permits, could be
anticipated from the results of the emission allowances. The Grandfathering
cases (B1, B2 and B4) lead to the largest transfer of permits. The transfer flows
are much lower under the Triptych cases (C1 and C3) and evidently the lowest
for Marginal abatement costs cases (A1 and A2).
Under the ‘EU 20% unilateral with CDM’ scenario, the total internal
reduction is substantially lower than the ‘EU 20% unilateral without scenario’,
as a large amount of cheap emission reductions from outside the EU enter the
emissions trading market. The lower permit price on the emissions trading
market also results in increased emissions being traded within the EU.
Nevertheless, the emissions trading for the different approaches and
scenarios show similar trends.
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Chapter 4. Case Study: Spain 216
Emissions trading (MtCO2eq.)
160
140
120
100
80
60
40
20
0
-20
EU 20% without
CDM
EU 20% with
CDM
EU 30%
A1. Marginal abatemet
costs
A2. Per capita convergence
B1. Marginal abatemet
costs
B2. Per capita convergence
B4. Grandfathering
C1. Marginal abatemet
costs
C3. Triptych
Figure 4 - 29. Emissions trading for 2020 for Spain for the six allocation approaches under the ‘EU 20%
unilateral without CDM’, ‘EU 20% unilateral with CDM ’and ‘EU 30% in a multilateral regime’
scenarios.
3.3.2.6 Abatement costs
Spain shows costs that are in most approaches and scenarios over twice the
EU average, especially in the ‘EU 20% unilateral without CDM’, where most of
the reductions are to be done domestically. Spain’s domestic abatement costs
seem to be much larger than the EU average (or at least it has been assumed so
in this analysis).
The Triptych cases usually lead to the most balanced cost projections for
Spain – close to EU average. On the other hand, the Grandfathering cases produce
the most extreme results, with very high costs for Spain (in some cases over 1%
of GDP). The Marginal abatement costs cases lead to the lowest costs for Spain, as
it is the most cost-effective approach. It would also lead to lower overall costs.
Should the CDM be available, the costs would be much lower for a given EU
reduction objective (previously discussed in Section 3.3.1.3).
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Chapter 4. Case Study: Spain 217
abatement costs as % of GDP
1,2
1
0,8
0,6
0,4
0,2
0
EU 20% without
CDM
EU 20% with CDM EU 30%
A1. Marginal abatemet costs
A2. Per capita convergence
B1. Marginal abatemet costs
B2. Per capita convergence
B4. Grandfathering
C1. Marginal abatemet costs
C3. Triptych
Figure 4 - 30. Abatement costs as % of GDP for 2020 for Spain for the six allocation approaches under
the ‘EU 20% unilateral without CDM’, ‘EU 20% unilateral with CDM ’and ‘EU 30% in a multilateral
regime’ scenarios. The dotted lines represent the EU average.
3.3.3 Discussions
3.3.3.1 Quantitative assessment
A key difficulty in designing a post-2012 EU burden-sharing agreement is
related to the acceptability of the corresponding emission reduction targets to
the different Parties; here, the case of Spain is assessed. The regimes should
preferably not lead to extreme results (for example, when abatement costs as a
percentage of GDP far exceeds the EU average costs), or be particularly
unattractive.
For the first option for EU burden-sharing and ETS (Present system) the
reduction targets show a wide range of outcomes for the six burden-sharing
regimes explored. The Grandfathering approach yields no differentiation, and
therefore leads to high reductions and thus also high costs for countries that
presently have growth targets, which is the case of Spain. In general, applying a
uniform reduction target for all countries seems politically unacceptable for all
EU Member States. Per capita convergence and the Multicriteria approaches lead
to average reductions for Spain whose per capita emissions are around the EU
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Chapter 4. Case Study: Spain 218
average. The Ability to pay approach would lead to a huge amount of excess
emission allowance for the new entry European countries, with low GDP per
capita, which have to be compensated by relatively high reductions for the EU-
15 countries, such as Spain. The Equal costs approach, which set targets so that
the costs are equally distributed over all participating countries (e.g. a
percentage of the GDP), seems to be a fair option, at least from a theoretical
point of view. However, the outcome depends quite a lot on the model and
costs definition assumptions used, forming a major barrier to the
implementation of this method. Given the assumptions made for the
parameters, the results of the Triptych approach are relatively beneficial for
Spain compared to the other regimes. It has proven to be helpful in arriving at
past EU burden-sharing agreements, supporting a negotiation outcome based
on compromises by all Parties, also accounting for sectoral differences and
national circumstances.
For Spain, if the present system were to continue, the most demanding
approaches would be the Grandfathering and the Ability to pay, given the
assumptions made here. The least demanding approaches, and therefore the
most beneficial, would be the Equal costs approach followed by the Tryptich
approach.
For the second option for EU burden-sharing and ETS (EU burden-sharing
with ETS allocation at EU level) the same pattern of differences in reductions
for the various burden-sharing regimes, as discussed above for option 1, is
observed. More specifically, the Grandfathering approach leads to high
reductions for Spain, which at present has emission growth targets under the
Kyoto Protocol. The Marginal abatement costs cases lead to the lowest reductions,
compared to the regimes considered, for Spain. The reductions under the
Triptych cases are more-or-less in the middle compared to the reduction of all
cases.
It should be acknowledged that the quantitative results for the emission
allowances are particularly dependent on the policy parameter settings, the
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Chapter 4. Case Study: Spain 219
baseline emission scenarios, the marginal abatement cost curves and the
starting-point (2010) emissions. In particular for Spain, the choice of the starting
point emissions (either the Kyoto targets (as assumed here), or the baseline
emissions) can significantly affect Spain’s 2020 targets even more than the
regime or the agreed EU reduction objective 1 . Therefore care must be taken in
interpreting the conclusions with respect to regimes on the basis of the
quantitative outcomes presented.
3.3.3.2 Implications on Spain of EC’s effort sharing proposal (January 2008)
On January 2007 the European Commission (EC) adopted an energy and
climate change package, which included:
- an independent EU commitment to achieve a reduction of at least 20% in
the emission of greenhouse gases by 2020 compared to 1990 levels and
the objective of a 30% reduction by 2020, subject to the conclusion of a
comprehensive international climate change agreement;
- a mandatory EU target of 20% renewable energy (RES) by 2020 including
a 10% biofuels target.
On 23 rd January 2008, the EC proposed a set of key policy proposals that are
closely interlinked, including how efforts could be shared among Member
States to achieve these targets.
The energy and climate change package can be implemented in different
ways. The GHG reduction commitments for the EU ETS, sectors not covered by
the EU ETS and the RES targets would be allocated ex ante on a cost efficient
way; but this would imply disproportionate costs for the Member States with a
GDP per capita below EU average.
1 As Spain is far from achieving its Kyoto target, to assume that in 2010 its emissions will be at the
Kyoto target level (+15% compared to 1990) would be unrealistic. This could be overcome by choosing a
different base year than 1990, such as the one used in the Commission’s proposal – year 2005.
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Chapter 4. Case Study: Spain 220
In order to differentiate commitments, a number of measures were proposed.
GHG reduction commitments in the sectors not covered by the EU ETS could be
allocated in such a way that Member States with a higher ability to pay get
higher efforts awarded – using GDP per capita as the main criteria.
Furthermore there is the option to distribute the auctioning rights differently
between Member States. Given that redistribution of RES targets might lead to
high costs, trade in RES could be allowed. Finally investments in JI/CDM
impacts on the overall costs of the package.
The year 2005 is used as a common reference, therefore the individual
achievements of each country until 2005 are socialized. Since global EU
reduction in 2005 was 6%, a global reduction target of 14% is established in
order to achieve the unilateral EU 20% reduction target compared to 1990
levels. This is very beneficial for countries that have reduced less than the
average, such as Spain. In addition, due to Spain’s peak of emissions in 2005, it
is especially beneficial for Spain. The 14% GHG reduction is split between 21%
reduction in sectors covered by the ETS (60% of total reduction), and 10%
reduction in disperse sources (40% of total reduction).
In Table 4 – 17 an example is given of reduction targets by 2020 compared to
2005 levels for Spain for the sectors not covered by the EU ETS (as Spain’s GDP
per capita is approximately in the EU average, its reduction target would also
be 10%), of RES targets by 2020 and of auctioning with a certain distribution of
auctioning rights between the Member States (certain countries, including Spain
– 13% – receive and additional amount of allowances to auction, due to an
expected higher economic growth and therefore a higher reduction effort).
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Chapter 4. Case Study: Spain 221
Table 4 - 17 . Targets proposed for Spain 2020 by the EC
Reduction target in sectors not covered by the EU
ETS compared to 2005
Share Renewables in the final energy demand by
2020
Amount of auctioning rights received by Member
States on top of the 90% distributed according to
proportional 2005 EU ETS emissions
These targets implicitly lead to a +31.80% emission target compared to 1990
levels by 2020 for Spain (see Table 4 – 18), which if compared with the actual
Kyoto Target (+15% compared to 1990 by 2012) is very beneficial for Spain. The
EC’s proposed target for Spain is two times higher than the Spain’s Kyoto
target; and not only is it beneficial in reduction levels, but also in time targets,
being referred to 2020 instead of 2012.
Table 4 - 18 . Implicit GHG emission target compared to 1990 levels proposed by the EC for Spain
2020 EU
2020 MS
2020 MS
2005 EU % EU
ETS 2020 non-
%reduction 2012 MS
2005 non-
2020 non- emission
1990 2005 ETS ETS
emission EU ETS
for all target
EU ETS
EU ETS (IMPLICIT)
emissions emissions verified verified
allowances %reduction
emissions compared
emissions
reduction for all
(MtCO2eq.) (MtCO2eq.) emissions emissions
for compared
compared to 1990
(MtCO2eq.)
(MtCO2eq.) sectors
(MtCO2eq.) of 2005
auctions to 2005
to 1990 levels
(MtCO2eq.)
(MtCO2eq.)
levels
288,4 440,6 182,9 8,62 257,7 148,19 -10% 231,93 380,12 31,80% 15%
In figure 4 – 31 it can be observed the difference in emission targets at
European level and Spain, who is very much beneficiated by the recent
Commission’s proposal for effort sharing.
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-10%
20%
13%

Chapter 4. Case Study: Spain 222
Figure 4 - 31. GHG emissions and targets for Spain compared with Europe (Source: El País).
Even under such an approach, the implications of such targets in Spain
would be relatively high compared to the EU wide implications, as can be
observed in Table 4 –19. In the cost efficient case Spain would experience a
higher cost relative to GDP than the EU average. After distribution of the
different commitments, Spain would experience higher costs than the EU
average, if it were not for the redistribution of the RES targets together with full
RES trade.
Table 4 - 19 . Impact of distribution of RES target, GHG reduction commitments for the sectors not
covered by the EU ETS and rights to auction allowances
Cost as % achievement
of GDP
Cost
efficient
of the RES
target and
GHG target
+
redistribution of
the targets in the
Non-EU ETS
according to
GDP/cap
+
redistribution of
the auctioning
rights
JI/CDM
with carbon
+
price of 30
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€
+
redistribution of
the RES targets
together with
full RES trade
EU 27 0.58% 0.61% 0.61% 0.45% 0.45%
SPAIN 0.70% 1.20% 1.08% 0.62% 0.42%
The Spanish Government, as result of the initial assessment, presented the
proposal as positive for Spain; the effort sharing proposal takes into account the
principles of equity and solidarity between Member States. However, the
specific impacts for Spain should be further analyzed in both the EU 20% ad EU

Chapter 4. Case Study: Spain 223
30% reduction scenarios. On the other hand, as part of the initial assessment,
the Spanish Government found the flexibility mechanism to be too restrictive.
The Commission’s proposal is extremely beneficial for Spain, as it takes a
picture in 2005 and does not take into account how much each Member State
has reduced until then. Spain’s GHG emissions in 2005 had grown 52% since
1990, when its Kyoto target allows only for +15% compared to 1990. With a 37%
difference above its target, achieving the Kyoto target would be a major
challenge for Spain. Under the new proposal, Spain would have a target of
+31,8% compared to 1990 by 2020; which is much more viable in Spain’s actual
situation.
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5
Conclusions

Chapter 5. Conclusions 225
1 Introduction
The three reports published by the Intergovernmental Panel on Climate
Change in 2007 resulted in an incredible build-up of momentum. The first one
proved beyond doubt that climate change is happening and accelerating and
that much of it is caused by the continued and increasing emissions of
greenhouse gases from human activities. The second one showed that – if
failing to act – the impacts of climate change will have devastating effects on
economies, societies and eco-systems throughout the world, especially in
developing countries. And the third one stressed that many of the technologies
needed to deal with climate change are already at our disposal.
This clear signal from science called for a clear answer from politics. It
started with the G8 Summit in Heiligendamm where Heads of State of
Government of the G8 countries and five emerging economies declared to be
committed to begin negotiations on a stronger response to climate change by
the end of that year. The EU stepped forward and announced its ambitious
target to unilaterally cut its emissions by 20%, and by 30% if other countries
joined. In September over 80 Heads and State of Government gathered in New
York at the Climate Change event that United Nations Secretary-General Ban
Ki-Moon had organized.
It was the combination of the clear signal of science and the mobilization of
political will at the highest level that led to the breakthrough at the Bali Climate
Change Conference in December 2007. Both developed and developing
countries agreed to jointly step up efforts to combat climate change and launch
negotiations on a new climate change deal to be concluded in Copenhagen by
the end of 2009.
Whether the first climate deal – the Kyoto Protocol, whose first commitment
period has started in 2008 and will finish in 2012 – is regarded as good or bad, it
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Chapter 5. Conclusions 226
is clear that a second step is required. The potential shape and structure of an
international agreement – its architecture – needs to be agreed on.
The new climate change agreement must be first of all, effective – in the
sense that it measures up to what science has declared needs to happen.
Secondly, it has to be equitable in the sense that every country does its fair
share, based on the principle of common but differentiated responsibilities and
capabilities. Thirdly, the Copenhagen agreement has to make economic sense –
climate change is an environmental issue, but it clearly calls for an economic
answer. The course of our carbon emitting economies has to be steered into a
low emissions direction; it is about rewarding change and innovation.
This study has intended to present the most prominent actual proposals
regarding the future climate change regime in chapter 2, and its implications for
countries – who are the real negotiators – in chapter 3. In addition, a case study
of Spain has been carried out in chapter 4: both detailed data on the current
situation regarding climate change and its implications under different EU
internal burden sharing approaches were presented. In this chapter, the most
relevant themes regarding the future climate change architecture are discussed
and some key expected elements of the future climate change regime outlined.
2 Bali: Conclusions and the way forward
One of the main factors to bring about the success of the 2007 Bali
Conference was a change of strategy by developing countries. Under the
traditional strategy, developing countries had insisted that Annex-I countries
should take the lead. In Bali, they showed an unprecedented willingness to take
up an active role in the fight against climate change, willing to do more, to
contribute with their fair share. China, South Africa and Brazil all played
leading roles; the Indian position evolved from a full-on opposition to
negotiations for developing country mitigation, to one of acceptance at the end.
The main excuse presented by some industrialized countries for not taking
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Chapter 5. Conclusions 227
further commitments was thus annihilated – the lack of such commitments was
one of two cited reasons for President Bush’s rejection of the Kyoto Protocol.
Nevertheless, any commitments on developing countries’ part will have to
be matched by support – both financial and technological – from developed
countries. It will be important to develop mechanisms for financing mitigation
in developing countries and for technology cooperation: simplification of the
financial mechanisms’ operation, the establishment of new mechanisms of
technology transfer, and scaling up of funding.
In the area of adaptation, the Kyoto Protocol’s Adaptation Fund was finally
made operational so that it can begin distributing funds generated from the
levy of the Clean Development Mechanism. Technology transfer and
cooperation is a top priority of developing countries and has now received
much greater focus than in the past. Public and private sector funding was also
considered – from carbon markets to investment banks. These three areas of
negotiation were crucial in order to build the trust of developing countries to
launch their mitigation negotiations. Social justice and equity were equally
emphasized in the negotiations.
A separate, but linked, negotiation on reducing emissions from deforestation
and forest degradation in developing countries was also launched. An effort
has to be made to ensure that aviation is not forgotten, as it is not explicitly
noted in the Bali text.
The challenges on the road to Copenhagen are enormous: negotiating
deepened commitments for those countries that are already bound under the
Kyoto Protocol, new commitments for developing countries (including methods
for differentiation), integrating the US with new commitments, adaptation,
deforestation, financial mechanisms, technology cooperation, transfer
mechanisms for mitigation and adaptation, improving the already existing
market mechanisms (such as the CDM). All these processes have to be
combined into one gigantic package deal.
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Chapter 5. Conclusions 228
A major challenge that the negotiators will not be able to influence at all is
the elections in the United States. Although most leading Congressional and
business figures, and all major Presidential candidates, support mandatory
targets to cut emissions, it is far from certain the US after the elections will play
the role that is expected. If a ratification of a post-2012 agreement by Congress
proves to be impossible, the next US government could establish a strong
national climate programme, including ambitious reduction targets, and declare
unilaterally that the US considers itself bound to this target by international
law. Nevertheless, there is small chance that this could politically satisfy the rest
of the world.
Forging an alliance between the North and the South will be the key to
successful negotiations, and also the more difficult task. Emerging economies
must be supported on mitigation and the poorer countries in adaptation. The
threat of a destabilization of the climate system can only be solved by a truly
global effort. Substantial contributions from the South will require equally
substantial financial and non-financial support from the North.
3 Key elements of the future climate change regime
The Bali text allows the next two years of deliberations to decide on both the
form and the level of any future commitments, in recognition of the fact that
there is a wide variety of potential mitigation commitment types that countries
could take. It is evident that the design of the new regime will not be as simple
as the design of the Kyoto Protocol, which simply differentiates industrialized
from developing nations. Future mitigation commitments are likely to abandon
the simplicity of exclusively setting fixed targets; representing an
unprecedented opportunity to rethink the structure, the logic and the potential
of the global climate regime.
A number of important questions are raised regarding the successor of the
Kyoto Protocol. Here some of the most relevant ones are going to be addressed.
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Chapter 5. Conclusions 229
3.1 Emissions targets
An appropriate stabilization target for greenhouse gas (GHG)
concentrations would be 450-500 ppmv CO2eq.; this would require a cut
in all GHG emissions of around 50% by 2050, relative to 1990 emission
levels. Developed countries, together with other interim targets, should
commit to cutting emissions by 80-90% from 1990 levels by 2050.
Some kind of top-down approach is certainly needed in order to address
the urgency of the climate change issue; but any bottom-up initiative is
welcome, as a complement to the main climate change architecture. The
world is already pursuing a hybrid bottom-up and top down approach.
The future climate change regime will probably be based on national
targets and timetables – as the existing Kyoto Protocol – but modified to
provide an incentive for developing country participation while moving
forward with even more ambitious emission caps for developed
countries, including the United States.
Commitments could be based upon some formulas combining indicators
of responsibility and capability, serving as a stepping off point for
negotiations.
A staged approach provides the opportunity to accommodate many
ideas into a compromise and allows for several types of targets,
accommodating concerns of many countries.
On the basis of the science of climate change together with the risks and costs
of action and inaction, an appropriate stabilization target for greenhouse gas
(GHG) concentrations would be 450-500 ppmv CO2eq. (further discussed in
Chapter 3, Section 1.3). Meeting a 500 ppmv CO2eq. target requires a cut in all
GHG emissions of around 50% by 2050 relative to 1990 emission levels. Most
electricity production will need to be decarbonised, and emissions from transport, land-
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Chapter 5. Conclusions 230
use, buildings and industry will need to be cut very sharply. Developed countries
need to cut their emissions by 80 to 90% by 2050, with interim emissions
reduction of 20 to 40% by 2020.
Some countries, lead by the EU, have clearly stated that a second
commitment period of the Kyoto Protocol is the way forward. Building upon
the existing elements and the institutional structure would avoid time-
consuming future negotiations on a completely new institutional setup. Some
other countries, mainly lead by the USA, see the Kyoto Protocol as having too
many weaknesses to be a good basis for the future climate regime. Setting
another mechanism is favored by these countries.
The first group argues that the Kyoto framework should be modified only
slightly to provide an incentive for developing country participation, while
moving forward with even more ambitious emission caps for developed
countries, including the United States; the Kyoto Protocol and its mechanisms
reflect a tremendous investment and commitment by much of the international
policy community. There is broad consensus that all three market mechanisms
under the Kyoto Protocol should continue in the future. Setting binding country-
level emission targets is critical to achieving long-term quantitative goals, such as
stabilization of greenhouse gas concentrations.
Others challenge that the top-down approach is not viable in a world where
no supranational authority exists to enforce such an agreement, and that
incentives are driving a bottom-up international climate policy. This bottom-up
approach may be broad in terms of participation, but very shallow in terms of actions.
The world is already pursuing a hybrid bottom-up and top down approach. Parts of
the world have pursued the top-down Kyoto approach, while others, such as
the United States, have taken unilateral action on climate policy. A number of
unilateral commitments with serious climate change impacts have been made,
from the EU’s January 2008 package of energy and environmental policies to
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Chapter 5. Conclusions 231
China’s Five Year Plan goal to cut the energy intensity of economic output by 20
percent.
Some kind of top-down approach is certainly needed in order to address the urgency
of the climate change issue; but any bottom-up initiative is welcome, as a complement to
the main climate change architecture.
The international agreements’ architecture – its potential shape and structure
– can basically take three formats: targets and timetables, harmonized domestic
actions, and coordinated and unilateral policies.
The existing international climate policy framework focuses on countries’
efforts through national targets – quantitative country-level emissions goals –
and timetables – over a specified timeframe. Proposals would maintain the
international emissions trading and clean development project institutions that
have received broad support in Europe and developing countries. They attempt
to remedy the primary drawback in the Kyoto Protocol by explicitly addressing
participation by the United States and developing countries.
Some academics and policy makers argue that top-down architectures, such
as those based on multilateral agreements on targets and timetables, may not
provide robust incentives for participation and compliance. Because national
governments maintain their sovereignty, the design of policy architectures
should focus on harmonizing domestic actions across much stronger national
and regional institutions. Some have suggested a limited initial participation of
the few most pivotal countries in climate change; but this would be against the
global commons nature of climate change. Even if negotiations are more
demanding, countries can not be left aside. This approach may certainly
complement the climate change future architecture – similar to what some
reduced groups of countries such as the Asia-Pacific Partnership for Clean
Development and Climate or the G8 are contributing today – but the future
climate regime will probably not be solely based on harmonized domestic
actions.
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Chapter 5. Conclusions 232
Even though the future climate change regime will probably be based on targets
and timetables some have suggested that incentives are driving a bottom-up
international climate policy and the effort to develop a comprehensive, elegant,
top-down architecture is not viable. They propose to rely on individual
countries to coordinate policies or to implement unilateral policies. These
bottom-up architectures would eventually evolve into a more cohesive
international architecture, as countries gain more experience with their
domestic efforts and understanding of other countries’ activities. This may be
viable in the mean time until the Copenhagen deal in 2009 is reached, but from then
on a comprehensive and global architecture has to be agreed on. The climate change
issue demands concrete internationally agreed targets – even though some
countries are currently opposed to these. Although policies such as those that
ensure coordinated international research and development programs or
technology standards will obviously contribute to the global effort, they may
not be sufficient to address the urgent climate change problem; certainly not if
only based on pledges.
Another decision to be made is whether national targets should be based on
negotiating strengths or formulas. Some suggest that it is easier to agree on the
reduction target for the world as a whole or a block of countries than for
individual countries. In addition, reduction targets and special provisions for
individual countries are dependent upon their bargaining and negotiation
strengths. Commitments could be based upon some formulas combining, among others,
indicators of responsibility – perhaps based on cumulated greenhouse emissions –
and capability – based on per-capita income. Combining the two would provide
a way to operationalize the concept of common but differentiated
responsibilities and capabilities. The formula could serve as a stepping off point
for negotiations to achieve the actual reduction targets, taking into account
differences in national circumstances.
Only a compromise approach can be equally appealing to all countries. As
discussed in Chapter 2, each approach is more attractive for some and less
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Chapter 5. Conclusions 233
attractive for others. A simple approach can only act as a general guide of
direction; the multistage approach provides the opportunity to accommodate many
ideas into a compromise. A staged approach is the most likely outcome of the
sequential decision-making that is currently applied. Countries are very
diverse; hence, several types of targets are likely to exist in parallel,
accommodating concerns of many countries. Under such an approach,
developing countries would take on emission targets through a graduation
mechanism.
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Chapter 5. Conclusions 234
3.2 The role of developing countries
It is clear now that developing countries will have to take action, yet, at
the same time, fighting poverty and achieving growth and development
are their utmost priorities. Development plans (SD PAMs) should place
climate change – both mitigation and adaptation – at their core.
Developing countries should not be asked to take on binding national
targets until developed countries provide the example of lower carbon
growth and can demonstrate that financial flows to developing countries
will be substantial, and that low carbon technologies will be both
available and shared.
In the meanwhile, a one-sided trading regime such as the CDM – which
rewards developing countries for reducing emissions but does not
punish them for failing to do so – is proposed.
The current CDM structure is not able to generate sufficient financial and
technological support; it needs to move from a project-based to a
programmatic approach, perhaps based on sector-specific efficiency
targets or on technology benchmarks, which would facilitate scaling-up.
The level of ambition of developing country mitigation will go hand-in-
hand with the level of support – financial and technological – from
industrialized countries.
Developing countries’ participation in international climate agreements
emphasizes the need to address equity considerations not only across
countries – common but differentiated responsibilities and capabilities –,
but also within countries – a commitment from the rich people in poor
countries is necessary.
Promoting participation may be the greatest challenge for the design of
climate policy architecture.
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Chapter 5. Conclusions 235
It is clear now that developing countries will have to take action. First, the
substantial majority of forecast greenhouse gas emissions in the twenty-first
century will occur in developing countries. Already, developing countries
account for about 50 per cent of energy-related carbon emissions, and their
share is expected to rise to 70 per cent by 2030. Even if the developed countries
reduce their emissions to zero, such growth in emissions in developing
countries would preclude atmospheric stabilization of greenhouse gas
concentrations in this century. Second, many developing countries are
emerging economically and surpassing some of the poorest countries with
Kyoto Protocol targets. For example, Romania, the poorest country with a
Kyoto target, has lower per capita income than more than 50 countries without
such targets.
The control of emissions in developing countries is an undeniable scientific
necessity, yet, at the same time, fighting poverty and achieving growth and
development are their utmost priorities. Development plans have to place climate
change – both mitigation and adaptation – at their core. The climate crisis calls for a
regime that can rapidly curb emissions globally, but preserving a right to
development; if this is not achieved, the necessary scale of developing country
engagement will not be engendered, and such a weak regime would not be
politically or practically feasible.
Once countries met certain graduation criteria they would be expected to
assume binding national targets but conditional to developed countries
showing that low carbon growth is possible, that financial flows to developing
countries will be substantial, and that low carbon technologies will be both available
and shared.
Several analysts have proposed rules for graduating into a system of
quantitative emissions commitments. This notion of progressivity is implicit in
the Kyoto Protocol commitments, which increase in stringency with per capita
income. The problem with such approaches to promoting participation is that
they assume there are some countries willing to take on more stringent targets
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Chapter 5. Conclusions 236
and make side payments. For example, if the United States does not want to
take on an ambitious emissions target, there will be much less demand and thus
lower prices for the permits developing countries would aspire to export.
Creating the incentive for some countries to participate should not
simultaneously create the disincentive for others to do so. The challenge lies in
whether governments of developed countries would be willing to finance
substantial transfers to developing countries. The alternative would probably
be a weak regime with little chance of preventing catastrophic climate change.
One potential first step would be to recognize the steps that developing countries
are already taking, such as China’s goal to reduce emissions intensity by 20
percent. Another idea would be to look at domestic policies – such as
eliminating energy subsidies – rather than caps on emissions. Particularly in
developing countries there is a need to link climate policies to sustainable
development, identifying and assessing Sustainable Development Policies and
Measures (SD-PAMs) (Section 2.7, Chapter 2) already in place, and a careful
monitoring of their evolution and potential inter-play with climate policies. SD
PAMs could incorporate climate change efforts into development priorities.
In the interim period when developing countries do not yet have binding
emission targets, they could use baseline-and-credit schemes such as the Clean
Development Mechanism (CDM). Countries would not be penalized for
remaining above the emissions threshold, but could earn credits by moving
below baseline emissions. However, the current CDM structure is not able to
generate the financial and technological flows needed.
The CDM needs to move from a project-based approach to a programmatic
approach – perhaps based on sector-specific efficiency targets or on
technology benchmarks –, which would facilitate scaling-up. Sectors where
this approach might work include most emissions- and energy-intensive
industries – these include electric power, refining, pulp and paper, metals and
cement. Sector benchmarks may also be a good way of incorporating
international transport emissions (airlines, shipping) into the future climate
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Chapter 5. Conclusions 237
change architecture. Problems may arise from data limitations, or potential
unwillingness of companies and countries to share data; sector benchmarks
may not be possible everywhere. In internationally traded sectors, such as
aluminum and steel, they could take the form of global sector agreements, that
would help reduce the risk of carbon leakage and to alleviate competitiveness
concerns.
Differentiation has to be applied also between developing countries, their
differences are more striking than their similarities – booming economies in
Asia and Latin America have little in common with many least developed
countries. This opens the door to new combinations and grades of
commitments for developing countries, taking into account the different stages
of economic development, emissions and mitigation potential.
The next two years will focus on negotiating new actions and approaches for
developing countries to bend their emission curves. However, those actions are
inevitably linked with support in the fields of technology, financing and
capacity building. It is clear that the level of ambition of developing country
mitigation will go hand-in-hand with the level of support from industrialized countries.
Developing countries’ participation in international climate agreements
emphasizes the need to address equity considerations, beyond efficiency and
effectiveness. Equity should be addressed not only across countries (or
generations) but also within countries, based for instance on the measurement of
well-being indicators.
As it has been noted before, equity within countries does also have to be
taken into account; a commitment from the rich people in poor countries is also
necessary. It is unlikely that a large proportion of the total mitigation and
adaptation costs would emerge from developed countries if the wealthy
minority in developing countries were not also paying their “fair shares”. This
concept has been considered in the Greenhouse Development Rights
framework, yielding a combined Responsibility-Capacity Indicator, estimated
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Chapter 5. Conclusions 238
based among other indicators on the Gini coefficient – a measure of national
income inequality.
A policy architecture that cannot secure broad participation cannot deliver
environmental benefits in the long run in a cost-effective or equitable manner.
Promoting participation may be the greatest challenge for the design of climate
policy architecture. No policy architecture can be successful without the United
States, Russia, China, and India taking meaningful actions to slow their
greenhouse gas emissions growth and eventually reduce their emissions.
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Chapter 5. Conclusions 239
3.3 International emissions trading
Market based approaches, such as international emissions trading, are
the best means to promote cost-effective climate change mitigation. In a
world with scarce resources, the most cost-effective the means are, the
more feasible an ambitious goal is.
It is relevant to ensure that market carbon prices remain sufficiently
high to drive mitigation action; they need to be combined with
technology or policies based measures to start combating climate change.
Cap-and-trade systems should be supplemental to domestic action in
meeting emission reduction targets.
International emissions trading can serve as a vehicle to transfer funds
to developing countries. However, further mechanisms are required to
ensure that in addition to the availability of finances, technical and
capacity building are provided; and that the flow of allowance revenue is
sufficient to support developing countries.
Other policies – regulation, standards, and taxation – should also be
pursued, and can complement a cap-and-trade system; working towards
effective carbon prices and product standards.
There is broad consensus that all three market mechanisms under the
Kyoto Protocol should continue in the future.
There is a conflict within the fundamental approach to address climate
change. Some countries, lead by the USA, approach it as an economic problem,
and view as the highest priority economic efficiency – low cost and certainty
about emission reduction costs –. Emphasis is given to short-term economic
considerations rather than to long-term environmental objectives. Emission
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Chapter 5. Conclusions 240
reductions are not treated with urgency, as they may prefer approaches that
prepare them to act later, e.g. technology development.
Some other country groups, such as the EU, emphasize the environmental
aspect of the problem, so that keeping global emissions low has the highest
priority. Urgency to act is stressed by these countries. They want certainty on
low global emission levels, they may not accept an agreement that would
minimize the costs but it is unclear whether the long-term objective of the
Convention can be met. They would prefer to work towards defining a joint
long-term goal.
Nevertheless, there is broad consensus that the next agreement must
stimulate substantial, cost-effective emissions abatement. Lower costs of
implementation can facilitate greater participation and compliance with climate
goals. In a world with scarce resources, the most cost-effective the means are,
the more feasible an ambitious goal is.
Stringency in setting emission reduction obligations is relevant to ensure that
market carbon prices remain sufficiently high to drive mitigation action. The
high potential for offsets could result in carbon prices being too low to bring
about sufficient mitigation. Even though carbon markets are regarded as being
environmentally effective, their outcome would largely depend on the level and
stability of the price set for carbon. At the moment, governments do not have
the sufficient power or recognition to be able to fix a sufficiently high carbon
price for emission reductions to happen – there will be no significant
technological change or the needed changes in consumer’s behavior. The
climate change problem is urgent, action ‘was needed yesterday’; command
and control measures may be more effective as a first step in combating climate
change – e.g. changing all light-bulbs for efficient ones. Although carbon price
based measures are theoretically or apparently environmentally effective, at the moment
they cannot be implemented in such a stringent manner that would lead to the
necessary emissions stabilization level.
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Chapter 5. Conclusions 241
Technology or policies based measures to complement market-based approaches are
necessary to start combating climate change. Examples may be measures to make
higher-cost technologies more economic, provide for technology cooperation
and sufficient financial and investment flows, and cover emissions sources not
included in market-based approaches. Also, it needs to be recalled that market-
based approaches should be supplemental to domestic action in meeting emission
reduction targets.
Market-based instruments, such as emissions trading or emissions taxes, can
serve as the means for achieving climate policy goals at relatively low cost.
International emissions trading serves as the cornerstone of several proposed
international policy architectures (see Chapter 2, Section 2.1). In addition, it can
serve as a vehicle to transfer funds to developing countries; providing the
compensation that may be necessary to secure participation by developing
countries, also enhancing countries with low costs of emissions abatement to
join the international regime. Despite all this, national sovereignty impedes
countries to be legally coerced to take actions against their self interest. A tax
may have less appeal because it eliminates the potential for an implementation
mechanism to transfer resources to low-income countries.
A careful assessment of the equity implications of market-based
instruments, also at the country level, is needed. The primary means through
which support would flow is the mechanism of market-based allowance
trading; countries whose emissions exceeded their allowances would purchase
allowances from countries whose allowances exceeded their emissions. One key
question is whether this type of support is adequate; further mechanisms would
be needed to ensure that in addition to the availability of finances, there were
also technical and capacity building needed to bring about the transition to a low-
carbon economy. Another question is whether the flow of allowance revenue
would provide sufficient support to enable developing countries to undertake
the necessary scale of mitigation – and adaptation – without compromising
their development efforts.
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Chapter 5. Conclusions 242
Market based approaches are the best means to promote cost-effective
climate change mitigation. There is broad consensus that all three market
mechanisms under the Kyoto Protocol should continue in the future; the unresolved
question is whether such systems can be imposed from the top down, as in the
Kyoto Protocol, or whether a more viable framework would evolve organically
from a variety of national and regional regimes. Here, as already presented, a
top-down approach is preferred, although any bottom-up approach that would
complement it is welcome.
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Chapter 5. Conclusions 243
3.4 Sectoral agreements
The recent rise of sectoral approaches can be traced to concerns over
competitiveness and leakage.
They are regarded as an effective mean to encourage mitigation action
in developing countries ahead of any binding national commitments,
when combined with the CDM.
Although not possible in some sectors such as those with disperse
emission sources (agriculture), they should work in most emission- and
energy-intensive sectors (electric power, refining, cement).
May be a good way of incorporating international transport emissions
(airlines, shipping) into the global agreement.
Several sectoral initiatives and voluntary agreements are already in
place (in the aluminum, steel and iron, and cement sectors).
However, approaches targeting sectoral emissions should complement
national emission reduction targets but not replace them.
In an ideal world, an international climate agreement would include a global
price on greenhouse gas emissions, applicable to all countries and all sectors, set
by market-based systems such as cap-and-trade. But the reality is much more
likely to be a patchwork of varying systems, with only some countries and sectors
participating, at least at first. At the hard core of likely future agreements there is
in fact a graduation of national targets. There may be ways to bridge this gap
through linkage among systems, and agreements within energy-intensive,
trade-exposed sectors. A sectoral approach could be combined with the CDM to
gradually strengthen emissions commitments in developing countries.
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Chapter 5. Conclusions 244
The rise of sectoral approaches can be traced to concerns over competitiveness
and leakage. There is concern that regional carbon constraints will unfairly
disadvantage those regulated and therefore decrease their international market
share and hence profitability. Closely linked is the possible movement of new
investments to countries not covered with binding carbon constraints.
Another key driver is the recognition that sector specific approaches may be
an effective means to encourage mitigation action in developing and major emitting
developing countries ahead of any binding national commitments. For
developing countries, the sector approach offers an opportunity to accelerate
the adoption of technology while also providing access to financing. For the
developed world there are a couple of motivators. First, access to lower cost
reductions within sectors can obviously reduce mitigation costs; but more
importantly perhaps is the ability to seek to minimize competitiveness impacts.
Indeed, the sector-specific approaches may be a way to get real movement on
reductions from major emitting developing countries well in advance of any
binding mitigation commitments.
However, sectoral approaches contain several potential drawbacks — most
notably, the difficulty with which such agreements are negotiated and
administered, lack of cost-effectiveness, potentially high levels of government
regulation, and the potential for politically powerful industries to carve out favorable
deals.
Sectors where this approach might work include most emissions- and energy-
intensive industries. These include electric power, refining, pulp and paper,
metals and cement. Sector benchmarks may also be a good way of
incorporating international transport emissions (airlines, shipping) into the future
climate change architecture. In some sectors, problems may arise from data
limitations, or potential unwillingness of companies and countries to share
data; sector benchmarks may not be possible everywhere.
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Chapter 5. Conclusions 245
The Japanese proposal for a “sectoral approach,” whereby national targets
would consist of sector-by-sector targets across national boundaries proved to
be one of the most contentious issues of the Bangkok meeting. Many feared this
would undermine legally-binding commitments by developed countries, such as
Japan who already has a high level of energy efficiency in many industries, and
have implications for future commitments of developing countries, such as China,
who would have to drastically increase the energy efficiency to be competitive
in certain sectors, like steel.
Several sectoral initiatives and voluntary agreements are already in place,
for example, those implemented by the International Aluminum Institute, the
International Iron and Steel Institute, the Cement Sustainability Initiative within
the World Business Council for Sustainable Development, and ICAO. However,
approaches targeting sectoral emissions should complement national emission reduction
targets but not replace them.
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Chapter 5. Conclusions 246
3.5 Technology
Achieving the expected GHG reductions will require both the
widespread diffusion and adoption of currently available low-carbon
technologies, as well as the development of new technologies.
To stimulate the necessary technological innovation, international
climate policy should create both technology push (public support for
R&D) and market pull incentives.
Technology oriented agreements (TOAs), as complements for carbon
commitments, will certainly be needed; renewable targets, efficiency
improvement, and technology standards must overcome market
imperfections such as low carbon prices, price volatility and uncertainty.
Urgent action is required to implement energy efficiency policies and
the application of existing technologies, including renewables and
nuclear, and the development of newer but established technologies,
including carbon capture and storage.
To be effective, it is indispensable that this approach is extended to
developing countries.
Some key aspects are to manage the large increases in investment and
R&D needed, ensure transfers of technology to developing countries
are done effectively, and globally coordinate complex policies.
Achieving the targets of cutting global emissions by half will require both the
widespread diffusion and adoption of currently available low-carbon
technologies, as well as the development of new technologies. The overall
objective for technology policy is to expand the global market for low-carbon
technology thus providing incentives for needed innovations.
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Chapter 5. Conclusions 247
The next climate change regime must stimulate technological innovation. A
long-term effort to address climate change will require the development and
deployment of zero-emitting technologies. To stimulate the innovation
necessary to deliver these new technologies, international climate policy should
create both technology push (public support for R&D) and market pull (stable
economic incentives for innovation and widespread technology development)
incentives.
The most effective incentives to pull new technology into the market are
those that put a price on greenhouse gas emissions, like a cap-and-trade system.
These policy instruments would discourage the continued investment in
carbon-intensive capital, and with time it is expected that they will induce
technological change. Also, via their impact in energy prices, carbon prices
would help in changing patterns of energy consumption. Besides, economic
rents from carbon markets might be used to fund innovation efforts in new
clean technologies.
However, carbon prices will not suffice to promote the required deployment of
low-carbon technologies. Stable and high prices would drive investments in
new clean technologies; in practice, this is not achieved because of low carbon
price levels, price volatility and uncertainty, among others. An alternative
approach would be to subsidize investment in new, climate-friendly
technologies.
Technology oriented agreements (TOAs) (presented in Chapter 2, Section
2.4) as complements for carbon commitments will certainly be needed; if energy and
carbon markets do not provide sufficiently strong incentives, TOAs can help in
promoting technological progress.
Energy efficiency should be the major instrument for climate change
mitigation, especially in developing countries, both due to its potential and to
its low cost compared to other alternatives. Renewable energy is another low-
carbon, sustainable technology; more efficient instruments should be promoted,
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Chapter 5. Conclusions 248
as the subsequent cost reduction for the consumer would entail a much larger
deployment.
These low-carbon technologies may not suffice to achieve the demanding
targets of GHG emission reduction on their own; other major low-carbon
technologies will be needed. Coal will continue to be a major part of the energy
picture for a long time – its supply is more secure than gas and oil, it has
competitive costs and there is still a lot of coal. Carbon capture and
sequestration would therefore be necessary, at least as a bridging technology.
However, it is still too costly to compete with more traditional electricity
generation alternatives at current carbon prices and would therefore require
huge investments. It should especially be extended to developing countries
such as China and India and other large coal consuming countries.
Another major low-carbon technology would be nuclear energy; some
governments have already expressed their desire to promote nuclear plants as a
component of their climate change strategy – its lower carbon emissions,
security of supply and competitive cost are some of its arguments in favor –.
However, some disadvantages such as political risk and public acceptance
problems, and other regulatory and economic risks, should be reduced to
reasonable levels. Another relevant question is whether to transfer nuclear
power technology indiscriminately, global security risks and political issues
cannot be ignored.
Carbon markets will introduce carbon prices that should be increasingly higher;
national governments are to set mandatory targets such as efficiency improvements,
renewable targets or technical standards. The goal is to provide a stable and
attractive environment for the private investment to take place and foster
technological innovation in order to achieve a low carbon economy.
For an effective reduction of global GHG emissions it is indispensable that
this approach is extended to developing countries, who will be the main contributors
to future GHG emission growth; their mitigation actions being always
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Chapter 5. Conclusions 249
conditional to financial and technological support from developed countries. Only a
global framework can secure the full participation of developing countries.
Some key aspects may be to manage the large increases in investment and R&D
needed, ensure transfers of technology to developing countries are done effectively,
and globally coordinate complex policies.
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Chapter 5. Conclusions 250
3.6 Adaptation
The next agreement will need to do more to address climate change
adaptation; even if the world undertakes dramatic emissions mitigation,
the climate will still undergo further change.
There are three main issues that need to be addressed: mitigation,
development and addressing the specific risks and impacts. Adaptation
planning needs to be integrated into development plans and strategies.
Developing countries need to be assisted by developed countries not
only financially, but also through capacity building, provision of social
protection policies, and access to insurance, information, markets and
technologies.
All of these need additional funding; as part of cap-and-trade systems,
auctioning of emissions allowances could generate substantial revenue
streams.
The Kyoto Protocol only references climate change adaptation in two
paragraphs, the next agreement will need to do more to address this issue. Even
if the world undertakes dramatic emissions mitigation, the climate will still
undergo further change, and some of the most vulnerable populations may
suffer from climate-related shocks, such as drought, more intense extreme
storms, or increased range of infectious diseases.
There are three main issues that need to be addressed to reduce the effects of
climate change on poor countries: mitigation, robust development and
addressing the specific risks and impacts of climate change on development.
While additional work needs to be undertaken to inform the design of
adaptation policy, the challenge appears to lie in making development more
climate friendly and making climate policy more development friendly.
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Chapter 5. Conclusions 251
Adaptation planning needs to be integrated into development plans and strategies to
deliver development goals in a climate resilient manner.
Any global agreement will need to commit developed countries to helping
developing countries adapt to climate change; not only because of the disparity in
wealth (capability or ability to pay), but also that historic and current emissions
from developed countries are the primary cause for climate change
(responsibility). Some assistance measures may be: better access to climate
information, building the capacity of planning and decision-making, provision
of social protection policies and programmes, access to markets and
technologies.
All of these need additional funding, which cannot be achieved by either the
public or the private sector acting alone. As part of cap-and-trade systems,
auctioning of emissions allowances could generate substantial revenue streams;
some of this revenue could be diverted to finance adaptation in developing
countries. National governments would be responsible for using funds to
address issues such as poverty, health and climate vulnerability; delivery of these
goals should be monitored and evaluated.
Climate change is a complex problem that requires a complex solution. It is
the hope of the author that this report can provide some insights into the
current international discussions to facilitate an agreement on the future
international climate change regime.
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6
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