Robert Stavins Presents at Climate Conference in Seoul, Korea

Harvard Project Director Robert N. Stavins delivered a presentation, "International Climate Policy Architecture for the 2015 Paris Agreement: The Role of Linkage," in Seoul, Republic of Korea, on September 3, 2014 (Stavins' summary of his presentation appears below). The event, Seoul Climate-Energy Conference: Building the New Climate Regime: What Needs to be Done at the Climate Summit 2014, hosted by the KAIST Graduate School of Green Growth, brought together researchers and business leaders to discuss and prepare for the United Nations Climate Summit on September 23 in New York City. Stavins' participation in the conference was cited in articles about the conference in The Korea Times (August 28) and Korea JoongAng Daily (September 4).

Drawing on a diverse set of research sponsored by the Harvard Project on Climate Agreements, Professor Stavins characterizes potential future international climate policy architectures as falling into one of three categories:  strong multilateralism (centralized architectures); harmonized national policies; and decentralized architectures and coordinated national policies.

Key questions about this emerging architecture include whether such an agreement in Paris in 2015 can be anchored in domestic political realities, while adequately addressing the imperatives to address emissions and climate impacts, and whether there are ways to enable and facilitate increased ambition over time. For both objectives, providing for linkage of national policies could be very important.

Cap-and-trade is emerging as instrument of choice in many countries. This includes:  the European Union, New Zealand, the northeast USA (RGGI), California, Quebec, China, Korea, and others. Inevitably, attention has increasingly turned to linking these systems. What is linkage?  It consists of connections among cap-and-trade and other regulatory systems that allow emission reduction efforts to be redistributed across systems. In direct linkage, one or both systems recognize the other's allowances for compliance; and in indirect linkage, allowance supply and demand in one system affects supply and demand in another system through direct links with a common (third) system.

Why is there so much interest in linkage?  First, it can achieve very significant cost savings (if marginal costs of emission reductions vary across systems). Second, it can improve functioning of individual markets by reducing market power and reducing total price volatility. Third, it allows for the achievement of the UNFCCC's "common but differentiated responsibilities," but without having to sacrifice cost-effectiveness.

The Kyoto Protocol may be in its final commitment period, covering only a small fraction (about 14 percent) of global GHG emissions. Under the Durban Platform for Enhanced Action, negotiators are now gravitating toward a hybrid system, and the growing network of linkages may turn out to be a key part of the future hybrid climate policy architecture.

What needs to be in the 2015 Paris Agreement to facilitate effective linkage?  Drawing on a new research paper (sponsored by the International Emissions Trading Association), from the Harvard Project on Climate Agreements, "Facilitating Linkage of Heterogeneous Regional, National, and Sub-National Climate Policies through a Future International Agreement," Professor Stavins begins by noting that the first key principal is "Do No Harm."  If poorly designed, the 2015 agreement could actually inhibit effective linkage, such as through the sort of "supplementarity requirements" that were discussed in Kyoto in 1997.

So, what should the 2015 Paris agreement include to facilitate effective international linkage?  There are two key design elements that should be included, either directly or by establishing a process for subsequent international elaboration. First, effective linkage requires common definition of key terms, in particular, of units that are to be used for compliance purposes. Second, registries and tracking are necessary. The key role for top-down part of hybrid architecture will be tracking, reporting, and recording of unit transactions across jurisdictions.

On the other hand, the inclusion of detailed rules in core agreement is not desirable, because it could make it difficult for rules to evolve over time in the light of experience. Instead, standards to ensure environmental integrity should be elaborated in subsequent COP decisions, such as requirements for National MRV, registries, and crediting mechanisms. This means that the core 2015 Paris agreement need only articulate general principles regarding linkage and authorize the COP to develop more detailed rules later. Less can indeed be more!

Photo credits: Seoul Climate-Energy Conference