New Harvard Project Report Outlines Ideas for Successor to Kyoto Protocol

CAMBRIDGE, Mass. -- A new report from the Harvard Project on International Climate Agreements outlines several promising ideas for successors to the Kyoto Protocol. The report also provides guidance on the most intractable challenges facing global climate negotiators, including participation by developing countries, how to reduce deforestation, and how to prevent a "collision" between climate policy and international trade law.

The report -- an interim document produced for global climate negotiators who are convening next week in Poznan, Poland, for the 14th Conference of the Parties of the Framework Convention on Climate Change -- addresses some of the key issues that negotiators must tackle before reaching a global deal to reduce greenhouse gas emissions, the cause of climate change.

"There are very great challenges facing the community of nations seeking to establish an effective and meaningful international climate agreement," said Robert N. Stavins, co-director of the Harvard Project and a professor at the Harvard Kennedy School. "But important principles and innovative ideas are beginning to emerge."

The Harvard Project is informed by the Bali Action Plan, the two-year roadmap that guides the negotiation of a framework that builds on and succeeds the Kyoto Protocol. The project's research program addresses key issues in the road map with the aim of informing the design and evaluation of various policies that would comprise the next international climate regime. Specifically, Harvard Project research teams have brought their scholarship to bear on each of the five major elements of the Bali Action Plan: a long-term global climate policy goal, emission mitigation, adaptation, technology transfer, and financing.

The report synthesizes the work of 28 research teams from around the world, including China, India, the United States, Europe, Australia and Japan. It discusses four credible approaches that could succeed the Kyoto Protocol. Each has advantages and disadvantages; each is promising in some regards and raises important issues for consideration. The report also discusses several potentially important "design elements" -- more specific building blocks of an international climate agreement that should be considered regardless of which broader architecture is chosen.

Importantly, the Harvard Project on International Climate Agreements does not endorse a single approach to international climate policy, partly because the decision to adopt a particular architecture is ultimately a political one that must be reached by the nations of the world, taking into account a complex array of factors -- and partly because more research needs to be done. Moreover, the views expressed in the Interim Progress Report are those of Stavins and the other Project Co-director, Joseph E. Aldy, a fellow at Resources for the Future. The Report does not reflect the views of Harvard University or the Harvard Kennedy School, which, as a matter of course, do not recommend specific approaches to meeting public policy challenges. The Interim Progress Report has not undergone formal review and approval; it is intended to elicit feedback and to encourage debate on the important challenge of global climate change.

Highlights of the Four Proposals (Note: these are listed in random order, not in order of importance or the Project's preference):

Proposal No. 1:

One proposed framework argues that a new international climate agreement should establish a global cap-and-trade system, where the emissions caps are determined using a set of formulas. These formulas take into account a variety of economic factors, including GDP and economic growth rates, such that a country's annual cap may change over time, rather than being set as an absolute quantity of emissions for the duration of the agreement. The result, it is hoped, is that every country will feel it is only doing its fair share.

Proposal No. 2:

A second idea calls for an international system of national carbon taxes. Nations would implement the taxes and would keep the revenues. An international carbon tax regime could be structured to co-exist with cap-and-trade systems in the European Union and elsewhere. A carbon tax, while roughly equivalent in economic impact to a cap-and trade system, is easier to administer, rendering it more feasible to implement for countries with less developed administrative systems.

Proposal No. 3:

A third proposed framework: Rather than attempting to address all sectors and all types of greenhouses gases under one unified regime, global negotiators could pursue a system of parallel international agreements that separately address different sectors and gases, as well as key issues such as adaptation, technology R&D, and last-resort remedies like geoengineering. (Geoengineering strategies attempt to limit warming by reducing the amount of solar radiation that reaches the Earth's surface.)

Proposal No. 4:

A fourth proposal is based on the reality on the ground: Countries around the world are establishing cap-and-trade systems to reduce emissions. Europe has already established its version of a cap-and-trade system (the European Union Emission Trading Scheme), while Australia, Canada, the United States, and Japan are all considering similar systems. The proposal looks at ways to link these systems together, while preserving their individual integrity. Such linkage would increase both the cost-effectiveness and the environmental effectiveness of the overall system, by increasing the pool of opportunities for low-cost emissions reductions accessible to all. There are challenges, as well, with this approach, but some of them would be alleviated by linking regional and national cap-and-trade systems to emission-credit systems, most notably the Clean Development Mechanism (CDM), as well as to other cap-and-trade systems. The CDM is an instrument under the Kyoto Protocol that allows developed countries to fund emission-reduction projects in developing countries.

Key Design Elements

The report also made several observations regarding key "design elements" -- more specific building blocks of an international climate agreement that should be considered regardless of which broader architecture is chosen.

Burden-Sharing in an International Climate Agreement

• The most challenging aspect of establishing a post-Kyoto international climate regime will be reaching agreement on burden-sharing among nations. One approach is to start by focusing on what is politically possible and to identify an allocation of responsibility -- with appropriate changes over time -- that makes every country feel it is doing only its fair share.
• The architecture described above -- dynamic formulas combined with cap-and-trade -- would set national emissions caps through a set of formulas that assign quantitative emissions limits to countries in every year until 2100. Importantly, developing countries would not assume any cost burden in the early years and would not be asked to make sacrifices that differ from the sacrifices of industrialized countries, after accounting for differences in income, in later years.

Technology Transfer in an International Climate Agreement

• The most important tool to facilitate energy R&D is to put a price on carbon, either via a cap-and-trade system or a carbon tax.
• Beyond carbon prices, the next international climate agreement can provide several mechanisms to facilitate the development and deployment of climate-friendly technologies, such as providing a venue for countries to pledge resources for technology transfer and for R&D activities, and coordinating agreement on the principles for allocating resources.
• Likewise, a World Trade Organization (WTO) agreement could reduce tariff and non-tariff barriers to trade in environmental goods and services.

Reforming the Clean Development Mechanism

• The current Clean Development Mechanism contains flaws - largely because it is very difficult to detect whether claimed emission reductions would have happened anyway, without funding from rich countries.
• One approach would involve less emphasis on strict ton-for-ton accounting and more emphasis on a range of activities that could produce significant long-term benefits. The criteria for offsets would be changed from "real, verifiable, and permanent reductions" to "actions that create real progress in developing countries toward mitigation and adaptation." The purchase of offsets through this approach would effectively finance a portfolio of diverse investments in climate-friendly projects, policies, and activities that may be difficult or prohibitively expensive to implement through the CDM.
• A fundamentally different approach would be to create specific climate accession deals for individual countries. For example, such a deal for China could focus on making new power plants more efficient, encouraging greater use of natural gas and nuclear fuel for generating electricity, and improving the efficiency of the electric power grid. These deals - which would be anchored in developing countries' interests and capabilities, backed by resources from the industrialized world - could accelerate developing countries' entrance into a global climate agreement.

Addressing Deforestation in an International Climate Agreement

• One promising path forward could be a national inventory approach, in which nations conduct periodic inventories of their entire forest carbon stock. The measured stock is compared to a negotiated baseline stock to determine the number of credits to redeem (or debits to cover) in the permit market.
• This may be superior to a project-specific approach because it would prevent counting projects that would happen anyway (additionality), as well as prevent landowners from simply cutting trees in another location (leakage).

Making Global Climate Policy Compatible with Global Trade Policy

• Global efforts to address climate change may be on a "collision course" with the World Trade Organization, as nations that have agreed to put a price on carbon look for ways to keep their companies competitive globally.
• Although many of these efforts run afoul of global trade rules, it is possible to design measures that are WTO-compatible. We need a multilateral regime to guide such measures - they should not be unilateral.

About the Harvard Project: The Harvard Project on International Climate Agreements, co-directed by Robert N. Stavins and Joseph E. Aldy, is an international, multi-year, multi-disciplinary effort to help identify the key design elements of a scientifically sound, economically rational, and politically pragmatic post-2012 international policy architecture. Leading thinkers from academia, private industry, government, and non-governmental organizations around the world have contributed and will continue to contribute to this effort. The foundation for the Project is our book published in September 2007 by Cambridge University Press, Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World. From that starting point, the Harvard Project on International Climate Agreements aims to help forge a broad-based consensus on a potential successor to Kyoto. Major funding for the Harvard Project on International Climate Agreements has been provided by a grant from the Climate Change Initiative of the Doris Duke Charitable Foundation.

Project Website: www.belfercenter.org/climate

Read the full report here: http://belfercenter.ksg.harvard.edu/publication/18686/