Negotiating a Global Climate Change Agreement: Rapporteur's Report of Executive Session on March 14-15, 1991

Negotiating A Global Climate Change Agreement

Rapporteur's Report of the Executive Session


March 14-15, 1991

91-10                                                                           November 1991

 

CITATION AND REPRODUCTION

This document appears as 91-10 of the Center for Science and International Affairs Discussion Paper Series and as contribution E-91-03 to the Center's Environment and Natural Resources Program.

This report may be cited as: Rapporteur's Report of the Executive Session: "Negotiating a Global Climate Change Agreement." March 14-15, 1991. CSIA Discussion Paper 91-10, Kennedy School of Government, Harvard University, November 1991.

This report may be reproduced for personal and classroom use. Any other reproduction is not permitted without written permission of the Center for Science and International Affairs, Publications, 79 JFK Street, Cambridge, MA 02138, telephone (617) 495-1351 or telefax (617) 495-1635.

ACKNOWLEDGEMENTS

The Executive Session on Negotiating a Global Climate Change Agreement was made possible by a grant from the Charles Stewart Mott Foundation. We would like to thank the Foundation, and especially Jon Blyth, whose guidance and assistance throughout the project were critical to its success.

Special thanks are also owed to Deborah Pruett and JoAnn Mahoney, who helped with the administration and logistics of the session, and to Ted Parson and Vicki Norberg­- Bohm, who served as our rapporteurs.

-Henry Lee                                                                                                                         Executive Director                                                                                                        Environment and Natural                                                                                              Resources Program     

 

TABLE OF CONTENTS

Introduction …………………………………………………………………………………1

I. Negotiation Strategies……………………………………………………………….......3

        1. An Overview of the First Meeting of the IPCC………………………………….3

        2. Panel Discussion on Structuring Strategies for

         Negotiating a Climate Agreement………………………………………………..  5

                a.    Lessons to be Learned…………………………………………………...5

                b.      General Discussion…………………………………………....................7

II.  Policy Responses………………………………………………………………..…...11

         1.  Carbon Taxes………………………………………………………………........11

         2.  Comprehensive Policies......................................................................................12

         3.  Discussion ...........................................................................................................13

III. Transferring Technology and Revenue to Developing Countries ..............…...15

IV. Dinner Speech……………………………………………………………………….18

      Tom Schelling

Addenda

A.           Executive Session Agenda

B.           Executive Session Participants List

 

INTRODUCTION

On March 14 and 15, 1991, Harvard's Global Environmental Policy Project held a two day executive session on "Negotiating a Global Climate Change Agreement." This session brought together senior officials from government, industry and the environmental community to discuss some of the major policy issues surrounding these negotiations.

The executive session was divided into three parts. The first assessed specific negotiation strategies and drew from the recent research produced under the aegis of the Harvard Negotiations Roundtable. To place this discussion in a realistic context, the session opened with a briefing on the developments at the first negotiating session of the Intergovernmental Negotiating Committee for a Framework Convention on Climate Change which took place in early February in Chantilly, Virginia.

The second part of the executive session focused on specific policy responses with emphasis on the feasibility of adopting carbon taxes and/or a comprehensive tradeable permit scheme. The third and final section focused on the transfer of technology and revenues from the developed to the developing countries. This discussion not only touched on particular transfer regimes, but also on the critical equity issues that separated developed from developing countries.

The purpose of this report is to provide the reader with an overview of the highlights of the session. Given the wide range of views represented by the participants, it should not be surprising that consensus on any given issue was extremely elusive. Further, we have attempted to replicate the thrust of the various arguments as they were articulated rather than synthesizing them into a homogenized narrative. While we believe that this style is more effective in providing the reader with the true flavor of the debate, statements on one page may be contradicted by those on another. Finally, since the discussion was off the record, none of the comments are for attribution.

The views expressed in this report do not necessarily reflect those of the faculty and participants in Harvard's Global Environmental Policy Project nor any single individual attending the executive session, but rather form a compendium of ideas and arguments put forth over the course of the two day event.

NEGOTIATION STRATEGIES

An Overview of the First Meeting of the Intergovernmental Negotiating Committee

The first negotiating session of the "Intergovernmental Negotiating Committee for a Framework Convention on Climate Change" took place on February 4-14, 1991 in Chantilly, Virginia. Despite the late planning of the session, the turnout was large: 101 nations, 20 international organizations and 75 NGOs.

The Committee confirmed procedures for broad participation of NGOs, recognized the Intergovernmental Panel on Climate Change (IPCC) as its primary technical support body, and agreed to use consensus decision-making except when impasses arose, in which case important questions would be put to majority vote.

The Committee established two working groups. The mandates of these groups were the most toughly-negotiated point on the agenda. Several groups of nations wanted prior substantive principles to be cast into the mandates. For example, the EC wanted a prior decision to structure the working group deliberations around separate protocols for energy, forestry, transportation, etc. A group of LDCs wanted the deliberations to be based on certain UN resolutions and equity principles, such as additionality of aid, preferential transfer of technology, etc. The outcome was two working groups, to prepare draft text in two areas: "Commitments" and "Mechanisms." The former is to develop text on "appropriate commitments for limiting and reducing net emissions of carbon dioxide and other greenhouse gases." Contributions are to be equitably differentiated according to: 1) countries' responsibilities and their level of development; 2) adequate and additional financial resources to enable developing countries to meet commitments; and 3) the transfer of abatement technology "on a fair and most favourable basis."

The Mechanisms group is to develop text on legal and institutional mechanisms to meet the above commitments and also to oversee scientific research. The U.S. was surprised that there was substantial disagreement over how central scientific information and research was to the group's deliberations.

The two working groups do not yet have chairs. Further, to accommodate the EC's wish to break the negotiations down into separate protocols, the working groups can divide into subgroups.

The negotiations will be difficult, with the North-South gap likely posing serious obstacles. The interests of both the developing and industrial nations are highly diverse. Saudi Arabia tried to postpone the first negotiating session and only sent an observer. Japan is clearly considering strategic long-term market interests. The USSR is in effect saying "not now, please;" the LDCs, "It's not my problem, but if you pay me to come, I'll listen." Several of the newly industrialized countries (NICs) are pressing for some new version of the New International Economic Order. There are many highly skilled participants involved in the negotiations, and a very tight deadline imposed by the 1992 Brazil conference.

Panel and Discussion on Structuring Strategies for Negotiating a Climate Agreement

Following the briefing on the Chatilly meeting, three experts on negotiations presented strategies which the U.S. might adopt and the implications of those strategies. The lessons to be learned from previous international negotiations formed the focus of the early part of the dialogue, followed by a broader and more wide-ranging discussion of the panoply of topics which must enter into consideration of alternative negotiation strategies.

Lessons to be Learned from Past Negotiations

·              The purpose of international negotiations is to catalyze national decisions and actions, not to make a treaty for its own sake. Right now, it looks like the Framework and Protocols process is conventional wisdom. We are stuck with it in part because of bad feeling over the Law of the Sea and good feelings over the Vienna Convention and Montreal Protocol. But we should think more critically over these procedural questions, with a view to what makes a winning coalition and how to deal with actual or potential blocking coalitions. 

·                    In climate change, and in any international treaty, procedure is as important as the substantive content of an agreement. This is particularly so in the period before substantive regulations are in effect. Such a period may belong, since major social change takes time, both domestically and internationally.

·                    The negotiations for the Law of the Sea [LOS] Conventions had four procedural cornerstones: 1) universal participation, 2) consensus decision­making, 3) a comprehensive agenda, and 4) consideration of proposed deals as a package. This procedure was adopted because of the failure of earlier LOS conferences with separate agendas, which encouraged each country to sign onto only the most attractive parts. The comprehensive LOS approach makes the deal hostage to the most intransigent party on the most difficult issue. The Montreal process was actually similar to LOS, but without the comprehensive agenda and the insistence on package deals.

·                 One of the successes of the Montreal Protocol was the use of ratchet provisions based on periodic review and update of treaties, which can help to neutralize opponents. Avoiding divisive ideological underpinnings is also important. In choosing your deal, you choose your enemies. The biggest risk for the climate change negotiations is that they will become a forum for playing out anew the old ideological battle between New International Economic Order and market advocates.

Discussion

Effective transitional measures emphasize national reporting. Almost all international agreements contain requirements for reporting. These tend to be effective for several reasons: because people often tell the truth (it's hard to keep two sets of books); because they provide a basis for monitoring and review; and because most countries feel obliged to respond to challenges.

GATT has in the last few years adopted a similar process, with countries performing self-evaluation of their trade policies and then submitting them for review. The Helsinki agreement is perhaps the most striking example. Even though it said explicitly that it was not binding international law, it forced the Soviets to choose between making progress on human rights and making fools of themselves.

·        Transitional measures also have educational quality. A forced external critique can reveal new possibilities, particularly to those inside government whose range of action is narrow. This is true even for the rich countries, but especially for the poor. The IMF review process is a good example of the merits of a non-confrontational review process. The IMF's legal advisor says that the most important effect of their reviews is to increase the capacity and the domestic power of LDC Finance Ministers.

·        "No New Institutions" is an untenable position. Serious progress on global climate change will require more international institutional capacity. This does not mean another huge bloated UN Agency, but something leaner and better able to exploit resources throughout national and international systems.

·        The following elements of a treaty are of key importance: a good preamble with sufficiently strong statements of principle to protect the signers from the infamy of history; a strong Secretariat; an ongoing assessment process, including continuation of the IPCC; a greenhouse fund, which should be small (to mitigate corruption, and because good projects are presently in shorter supply than the money to fund them); and subsequent protocols that identify tradeoffs.

·        The cost to facilitate efficiency-enhancing investments in LDCs will be on the order of $1 billion per year. There was rough agreement on this order of magnitude, but several participants stressed that implementation was more important than the size of a fund. Overseas Development Assistance (ODA) funds could in fact be a climate fund (if they were simply deployed more efficiently).

·        A recent NRC study committee asked "believers" and "skeptics" for their personal best guesses for climate sensitivity and ocean time constants, and the range was only 0.6 - 1.8 C and 50 - 250 years. What policies are reasonable depends strongly on these numbers, and several participants were troubled that the present IPCC process seems to presume the largest and fastest of these changes. Since mitigation costs are highly non-linear with the speed of onset, the 50 vs. 250 year distinction is important.

·        We need an insurance policy, but how much should we be willing to pay for a premium? What if the premium is so expensive that it destroys a country's economy? Research into more cost-effective technical fixes can be one form of insurance.

·        Participants discussed the cost of greenhouse insurance. Some argued that there is a lot of free insurance available, through low-cost energy conservation measures. EPRI has said that 24% of U.S. electricity could be saved through measures costing less than .04 per KWH. Another responded that this just means the cost of such measures is political, not economic.

·        Will effective action really take 20 to 25 years? One speaker found this discouraging, and suggested that the US would simply be left behind as world leadership shifted elsewhere. Others felt that it was important to start with something good in its own right, rather than pushing for a perfect solution right away.

·        One participant argued that a Framework Convention is not necessary, since a comprehensive action plan can effectively coordinate national actions. UNEP has used this approach repeatedly for Regional Seas, and in fact developed an action plan for the ozone layer in 1976.

·        Perhaps the real problem is not agreeing on a treaty, but building nations' confidence in other nations' capacity and willingness to cut emissions. We are skeptical about whether Brazil will do it, and they are skeptical about us. And as in the recent U.S.-Japan decisions over Structural Impediments to trade, if we both can do it, we will both be better off. Overcoming this blockage will either take an adjustment of our notion of sovereignty where implementation is concerned, or a focus on unilateral action. U.S. unilateral action could set an example for the world, and help to structure the international process so as to increase confidence. If the US, for example, significantly increased transportation fuel prices, then this action would both increase our influence in pushing for good international deals, and exempt us from charges of obstruction when we refuse to sign a bad one.

·                   There is a lot of latent cooperativeness, looking for a structure in which to express itself. This is what international legal measures, soft or hard, should do -- give an enabling structure to this latent willingness to help.

II. POLICY RESPONSES

The second section of the executive session focused on specific policy responses with emphasis on two options: 1) the imposition of carbon taxes and 2) the development of a comprehensive program, which would include reduction options for all greenhouse gases.

The session opened with arguments in favor of each option, followed by a heated discussion among all of the participants.

Carbon Taxes

Desirable characteristics of a policy response to climate change are: 1) it should be broadly based, ie. include many countries, all sources and sinks, and all gases; it also should within this context have a mechanism for transferring resources and technologies; 2) it should be flexible -- it must be able to adjust over time; 3) it must provide incentives to develop new technologies that at a minimum will lower the cost of compliance; 4) it must be politically resilient, ie. able to withstand both political changes and the emergence of new information; and finally, 5) it must be efficient, ie. it would be nice if the money spent on responding to this problem was well spent.

A CO2 tax meets these five criteria. This plan could begin with a small tax on CO2 emissions in industrialized countries. The proceeds from such a tax would go into an international fund for GHG abatement in developing countries. Over time, perceptions of the problem change, and as new information comes to the fore, the tax could increase and be levied on all countries.

In order to successfully implement a tax, the U.S. government must find ways to compensate most of the losers. What is needed is a tax shift, not a tax increase. More research will be required as to how various types of offsets could be used along with a CO2 tax to keep the cost of reduction low.

Comprehensive Polices

A comprehensive approach would consider all sources and sinks for greenhouse gases. Such an approach will require the development of a CO2 equivalent index so that the emissions of the various greenhouse gases can be compared to each other. Under such a plan, a country could meet their commitments for reducing greenhouse gases by reducing emission of any of the gases, or increasing sinks through activities such as tree planting.

The advantages of a comprehensive approach are: 1) it promotes economic efficiency by allowing emission reductions in the gases which are the least expensive to abate, or the substitution of increased sinks for reducing emissions if this is the least cost option; 2) it prevents switching form one form of activity which emits greenhouse gases to another that contributes as much, if not more, to the problem of climate change; and 3) it provides an incentive to move science and technology forward.

Economic incentives are favored for the implementation of a comprehensive strategy because they are decentralized and thus can drive technology better than bureaucratic mechanisms. One such approach is a system of comprehensive tradable permits. Comprehensive tradable permits would allow countries to meet their emissions reduction commitments by reducing emissions or increasing sinks for GHGs in either their own country or in other countries. This will result in the most cost-effective emission reductions.

Discussion

·                    The debate in Washington is about a more fundamental question than whether the countries should adopt a carbon tax or a tradeable permit scheme. Specifically, the debate focuses on whether the United States should devote any new resources to the problem of climate change. There is very real concern about the cost of controlling greenhouse gases.

·                    Regulation is often preferred to economic incentives for two reasons: 1) industry prefers to protect plants that are already built, and 2) some environmental groups oppose taxes because they make the cost of environmental protection transparent, ie the very factor which others argue is a positive asset is seen by some as being negative.

·                    The downside of tradeable permits includes: 1) they will create property rights that are difficult to revoke in the future; and 2) they are equivalent to taxes, but it is unclear what level of taxes.

In order to overcome the problem of property rights, permits could be issued with a limited lifetime. Yet, technology innovation is best facilitated by predictability and stability, characteristics diametrically different than those provided by property rights which are subject to change over time.

·                    Some participants argued that there are times when command and control regulation can be as, or more, efficient than economic approaches. They cited as an example appliance efficiency standards. While the optimal response may be achieved by a combination of economic incentives and regulation, there is a concern that the Bush administration is stuck in the ideology of free markets and will not allow regulation, even when it is efficient and not opposed by industry.

·                    The policies currently being pursued maximize an unfavorable outcome for the Administration. If the United States does not take positive actions, and there are more bad summers, the country is likely to get technology-freezing regulation to manage the problem. The more the industrialized community looks at a comprehensive approach, the worse the U.S. looks because of our high per capita emissions. If the U.S. does not take some initial steps, it may not be in the position to influence the debate in the future.

III. TRANSFERRING TECHNOLOGY AND REVENUE TO DEVELOPING  COUNTRIES

The third and final section of the workshop focused on the issue of transferring technologies for reducing greenhouse gases to developing countries.

The less developed countries have become increasingly vocal in the ongoing negotiations toward a Framework agreement. They see the issue of technology transfer in terms of equity. Specifically, the developing world has been able to enjoy significant economic growth over the past 100 years by treating the atmosphere as a free sink. Now that the capacity in these sinks may be reached, and perhaps exceeded, these countries want to limit the LDCs use of these sinks. LDCs question the fairness of this position and argue that developed countries must pay to support actions by the LDCs to reduce greenhouse gas emissions. Without such payments -- either in the form of revenues or the transfer of environmentally benign technology -- it is unrealistic to expect the LDCs to take any action which could significantly reduce their potential for economic growth.

There was considerable discussion over the merits of this argument. Further, what factors should be considered in developing technology and/or revenue transfer programs? The following points were made:

·                  Most of the technology for controlling greenhouse gas emissions is already in the public domain, and in many cases is already in the hands of LDCs. An emphasis on helping countries manage and disseminate these existing technologies could produce significantly more dividends than an emphasis on transferring new and more technically complex technologies.

·               To change the behavior of LDCs, domestic constituencies must be developed within these countries that understand the connection  between local actions and global environmental problems. That is, technology transfer programs to developing countries must be more demand-driven than in the past. It will be more effective to influence the demand structure in a developing country than to push any specific technology.

·               Additionality is becoming a major plank in the positions taken by the LDCs in various international fora. Additionality is a call for additional funds, over and above the current level of ODA funds that are targeted specifically to managing global environmental problems. Over time, however, donor countries will not specify the difference between environmentally sound development and development in general.

 ·              This debate should not be framed as an effort of the industrialized countries to gain the participation of the developing nations. The latter are at equal or greater risk than the former. Strategies can be devised which contribute to development and reduce GHG emissions. There is much to be done in the forest and energy sectors that would be of immediate benefit to both developed and developing countries.

 ·             A focus on building indigenous capability is valid for two reasons. First, the environmental debate is science-driven. If a country cannot participate scientifically, it will rush to political rhetoric. Secondly, technology transfer can push LDCs ultimately to a position of technological dependence. Developing indigenous technological capabilities will counteract this problem.

·   Debates about technology transfer have been divisive in the past, cast in terms of the new international economic order versus markets, ie cast as a North versus South problem. However, if the debate is reformulated as one of increasing efficiency, (ie. it may be much more cost effective to reduce greenhouse gases in developing countries than in their developed brethren), it may be possible to develop an unusual coalition between corporations, developing countries, and environmental organizations which would collectively press their governments to forge international agreements.

DINNER  SPEECH

Professor Tom Schelling was the dinner speaker. The following is a summary of the highlights of his remarks.

An international carbon tax or system of tradeable permits with substantial LDC participation will not happen in the next 20 years. This is why the soft-law initiatives that are being discussed are so attractive.

I have a long-standing interest in how international institutions have shared their costs. The largest historical example of international transfers is the Marshall Plan, which transferred $4.5 billion in its first year. The Plan represented about 1.5% of the American GNP for a couple of years, which today would be $75 to $80 billion. And the Marshall Plan was not the only U.S. foreign aid project in those years, either.

Today, the total North-South aid flow is only $55 to $60 billion through all mechanisms, on a North GNP of $10 trillion. In relative terms, this is only a quarter to a third of what the U.S. did under the Marshall plan. Some analysts calculate that to keep carbon emissions at today's rate (ie to keep the rate of increase in atmospheric concentration at today's rate) will cost one to two percent of GNP. The only international contributions ever to reach this magnitude were the Marshall Plan and America's contributions to NATO from 1951 to 1953.

In the Marshall Plan, the focus was on sharing benefits, not costs. There was only one donor, and the fifteen recipients had to agree on how to divide the pot. They had tosubmit proposals, make decisions, and review the expenditures. The OOEC (the organization established to distribute the funds) never set criteria, but developed a consensus among members on what were pertinent arguments. And the recipient nations did agree on how to share. Nobody said, "We'll never catch up to the UK even with the money, so give us all of it." Countries were not found in violation of the principles or conditions of the plan, but were sometimes called to give accounts of themselves.

Several aspects of this can serve as a model for a climate change regime. All the efforts to reduce greenhouse gases will come from the industrialized countries, while the rest of the world will make only token or fake contributions. The participating countries will present and defend plans to reduce their emissions. The U.S. cannot commit to a carbon dioxide output goal because we do not know what it will take to achieve particular reductions. But we can specify taxes, regulations, investments, and so on. We will then be judged according to our program. Did we do what we said we would? Secondarily, did it accomplish what we thought it would? In this respect, the system would resemble the Marshall Plan.

But unlike the Marshall Plan, what matters is world emissions, not US emissions. Emissions reductions in China or Brazil are just as good as reductions in America. If there is no local effect of paying a country to reduce their emissions, nobody should care where you do it. Of course, there probably is a local economic effect, so such programs would have to be negotiated between the two countries concerned. Recipient countries are likely to game the system by threatening large increases in emissions unless they are bought off for huge sums.

A recent US Forest Service report calculated the cost of recapturing carbon emissions through tree planting in the U.S.. They calculated that you could absorb 800 million metric tons of carbon per year for $19 billion per year, and you could get 500 million metric tons for only $8 to $9 billion. This is incredibly cheap and, since the cost is mostly for renting the land, would likely be even cheaper in developing countries. If developed nations were given credit for planting trees in these countries, perhaps everyone would benefit.

APPENDIX

 

NEGOTIATING A GLOBAL CLIMATE CHANGE AGREEMENT
EXECUTIVE SESSION
March 14 & 15, 1991
Participants List

Mr. Richard Benedick                                                                                                              Senior Fellow                                                                                                                            World Wildlife Fund                                                                                                   Conservation Foundation                                                                                                         1250 24th Street, NW                                                                                                  Washington, DC 20037

Professor Lewis Branscomb                                                                                                    Director                                                                                                                                  Science Technology and Public Policy                                                                              Harvard University                                                                                                                       79 JFK Street                                                                                                                    Cambridge, MA 02138

Professor Harvey Brooks                                                                                                 Professor Emeritus                                                                                                               Harvard University                                                                                                                          79 JFK Street                                                                                                                    Cambridge, MA 02138

Mr. Noel Brown                                                                                                                      UNEPNY                                                                                                                                     Two United Nations Plaza                                                                                                         DC-2 Building, Room 803                                                                                                         New York, NY 10017

Dr. Ash Carter                                                                                                                       Director                                                                                                                                      Center for Science and International Affairs                                                                    Harvard University                                                                                                                         79 JFK Street                                                                                                                     Cambridge, MA 02138

Dr. William U. Chandler                                                                             Senior Scientist                                                                                      Battelle, Pacific Northwest Laboratory                                                            370 L’Enfant Promenade, SW                                                               Washington, DC 20024-2115

Professor Abram Chayes                                                                           Professor                                                                                               Harvard University                                                                                         Law School Griswold 404                                                                     Cambridge, MA 02139

Dr. Nazli Choucri                                                                                   Professor of Political Science                                                                          MIT                                                                                                              77 Massachusetts Avenue                                                                         Building E-53, Room 493                                                                     Cambridge, MA 02139

Mr. Robert Cole                                                                                   Corporate Vice President                                                                           Kaiser Aluminum                                         &#160