Three Pillars of Post-2012 International Climate Policy

Introduction

The nations of the world continue to negotiate the post-2012 (or post-Kyoto) climate regime through the United Nations Framework Convention on Climate Change (UNFCCC), which includes the Fifteenth Conference of the Parties (COP-15), scheduled for Copenhagen, Denmark, in December 2009. The seventeen countries with the greatest greenhouse gas (GHG) emissions have also been holding a series of meetings under the auspices of the Major Economies Forum, and a number of nations have been meeting in various other multilateral and bilateral venues. In all of these processes, the major goal is to develop international cooperation to address climate change when the first commitment period of the Kyoto Protocol expires at the end of 2012.

The Kyoto Protocol, the first significant multinational attempt to curb the greenhouse gas emissions that are changing the global climate, came into force in February 2005 and began to bind for ratified countries in 2008. The Protocol's strengths and weaknesses provide lessons for the design of future international climate policy agreements.

On the positive side, the Kyoto Protocol includes several provisions for market-based approaches to improve the cost-effectiveness of the global climate regime. In addition, it provides flexibility for nations to meet their emissions targets in any way they want. The Kyoto Protocol also has at least the appearance of fairness in that it focuses on the wealthiest countries and those responsible for the majority of the current atmospheric stock of anthropogenic greenhouse gases. Finally, the fact that the Protocol was signed by more than 180 countries and ratified by a sufficient number of industrialized countries for it to come into force speaks to the political viability of the agreement in terms of participation, if not compliance.

The Kyoto Protocol also has some weaknesses that can provide valuable lessons for the path forward. First, some of the world's leading greenhouse gas emitters are not constrained by the Protocol; this includes the United States as well as some of the largest, fastest-growing developing economies. Second, since a relatively small number of countries have agreed to take action under Kyoto, the production of carbon-intensive goods and services (and emissions) may shift from participating nations to nonparticipating nations — a phenomenon known as "emissions leakage." Third, the Protocol's provision for international emissions trading is unlikely to be effective, if it is utilized at all, because trading would need to be among national governments, not private firms. And the Protocol's clean development mechanism (CDM), an emissions-reduction-credit system, is dogged by the question of the "additionality" of generated offsets — are the emissions credits generated by projects really emissions "savings", or would emission reductions have been achieved even without the projects? Fourth, the Kyoto Protocol's five-year time horizon (2008 to 2012) represents a short-term approach for what is fundamentally a long-term problem. Finally, the Protocol may not provide sufficient compliance incentives; some countries that took on emissions reduction targets for this period may not meet them.

The Kyoto Protocol imposes relatively high costs and generates minor short-term benefits while failing to provide a real solution. It came into force without U.S. participation or meaningful participation by developing countries; its effects on climate change will be trivial; but the economic and scientific consensus points to the need for a credible international approach. What can be done? We offer a suggestion of a scientifically sound, economically rational, and politically pragmatic way forward.