Enhancing the value of adaptation reporting as a driver for action: lessons from the UK

ABSTRACT

As increasing evidence shows that the risks of climate change are mounting, there is a call for further climate action (both reducing global emissions, and adaptation to better manage the risks of climate change). To promote and enable adaptation, governments have introduced, or are considering introducing, reporting on climate risks and efforts being taken to address those risks. This paper reports on an analysis of the first two rounds of such reports submitted under the UK Climate Change Act (2008) Adaptation Reporting Power. It highlights benefits and challenges for reporting authorities and policymakers receiving the reports that could also inform other countries considering such reporting. For reporting authorities, benefits arise from the reporting process and resulting reports. These benefits include elevating climate risks and adaptation to the corporate level and with stakeholders, alongside facilitating alignment and integration of actions within existing risk management and governance structures. For policymakers, reporting provides enhanced understanding of climate risks and actions from a bottom-up perspective that can be integrated into national-level assessments and adaptation planning processes. The identified challenges are those related to capacity and process. These include limited risk and adaptation assessment capacities; relevance of climate change risks and adaptation in the context of other urgent risks and actions; reporting process effectiveness and robustness; and the provision of effective and sufficiently comprehensive support, including feedback.

Key policy insights

• Effective adaptation reporting needs to be designed and delivered so as to enhance the value of the reporting process and resulting reports both for those reporting and those receiving the reports, as well as from the broader policy perspective.

• Providing a positive and supportive reporting environment is critical to encourage participation and facilitating contiuous learning and improvement, while also facilitating delivery of policy-relevant adaptation reports.

• Contributions of adaptation reporting can be enhanced by an inclusive reporting requirement involving a broader organizational mix that enables more effective risk management and reporting that reflects associated (inter)dependencies and consistency with the more comprehensive post-2015 resilience agenda (Paris Agreement, Sendai Framework for DRR and UN Agenda 2030 SDGs).

     

Certified emissions reductions and CDM limits: revenue and distributional aspects

The EU allows those installations that are subject to emissions trading to use a limited volume of certified emissions reductions (CERs), generated through the Clean Development Mechanism (CDM), to cover their own GHG emissions. These CERs can be used in addition to the EU allowances (EUAs), which were primarily allocated free to installations in Phase II of the EU Emissions Trading Scheme (EU ETS) from 2008 to 2012. For the year 2008, the CER limits, which are differentiated by EU Member State, created substantial arbitrage rents (due to the CER-EUA spread) of approximately EU€250 million. Different options for the allocation of this rent are discussed and it is found that, according to economic theory, making the right to use CERs tradable or the regulator pre-committing to buying CERs at the level of the relevant limit reduces the inefficiencies connected to the current regulation. Furthermore, auctioning these CER usage rights shifts the rents created through the CER-EUA spread to the Member State itself. The improved design and implementation of CDM limits justifies EU policy makers intervening to correct previously competition-distorting choices.     

Achieving additional emission reductions under a cap-and-trade scheme

Over the last decade, cap-and-trade emissions schemes have emerged as one of the favoured policy instruments for reducing GHG emissions. An inherent design feature of cap-and-trade schemes is that, once the cap on emissions has been set, no additional reductions beyond this level can be provided by the actions of those individuals, organizations and governments within the covered sectors. Thus, the emissions cap constitutes an emissions floor. This feature has been claimed by some to have undesirable implications, in that it discourages ethically motivated mitigation actions and preempts the possibility that local, state and national governments can take additional mitigation action in the context of weak national or regional targets. These criticisms have become prominent in Australia and the US within the public debate regarding the adoption of an emissions trading scheme (ETS). These criticisms and their potential solutions are reviewed. A set-aside reserve is proposed to automatically retire ETS permits, which would correspond to verified and additional emissions reductions. This minimizes the possibility that ethically motivated mitigation actions are discouraged, allows for additional action by other levels of government, while providing transparency to other market participants on the level of permit retirements.     

Funding low-carbon investments in the absence of a carbon tax

Introducing a carbon tax is difficult, partly because it suggests that current generations have to make sacrifices for the benefit of future generations. However, the climate change externality could be corrected without such a sacrifice. It is possible to set a carbon value, and use it to create ‘carbon certificates’ that can be accepted as part of commercial banks’ legal reserves. These certificates can be distributed to low-carbon projects, and be exchanged by investors against concessional loans, reducing capital costs for low-carbon projects. As the issuance of carbon certificates would increase the quantity of money, it will either lead to accelerated inflation or induce the Central Bank to raise interest rates. Low-carbon projects will thus have access to cheaper loans at the expense of either ‘regular’ investors (in case of higher interest rates) or of lenders and depositors (in case of accelerated inflation). Within this scheme, mitigation expenditures are compensated by a reduction in regular investments, so that immediate consumption is maintained. It uses future generation wealth to pay for a hedge against climate change. This framework is not as efficient as a carbon tax but is politically easier to implement and represents an interesting step in the trajectory towards a low-carbon economy.     

Funding low carbon cities: local perspectives on opportunities and risks

There are compelling reasons for policy makers to be interested in the low-carbon agenda. More than half of the world's population lives in, and more than half of the world's economic output comes from, cities. Up to 70% of global carbon emissions can also be attributed to consumption that takes place in cities. Recent research has shown that cost-effective investments in low-carbon options could deliver a 40% reduction in GHG emissions from cities by 2020, while also providing wider economic benefits such as enhanced competitiveness and increased employment. As yet, however, investments in low-carbon cities have not been made at scale due mainly to the scale of the finance required, local government budgetary constraints, and perceptions about their costs and benefits. With a focus on the UK, a contemporary account is provided of what local authorities see as the major financial risks associated with funding low-carbon cities. Practical proposals – which also have more general relevance to the future financing of low-carbon cities around the world – are offered on how local authorities, in conjunction with central government, the private sector, and institutional investors, can effectively manage these risks.

Policy relevance

Cities house more than half of the world's population, generate more than half of the world's economic output, and produce between 40% and 70% of all anthropogenic GHG emissions. In the UK, 70% of such emissions are under the influence of its local authorities. Thus, one of the key public policy challenges for the low-carbon transition is how it should be financed. There are several obstacles and related risks to this transition, including financial and legal obstacles and the differing views and perceptions of stakeholders. These can be attenuated, somewhat, by national government support at scale, local authority leadership, and cooperation between other authorities and the private sector, and the development of tools and guidance to reduce transaction costs.     

Greenhouse gas emission mitigation plan for the State of Israel: strategies,incentives and reporting

In the context of the negotiations under the United Nations Framework Convention on Climate Change and its accompanying Kyoto Protocol, participating nations have recognized the need for formulating Nationally Appropriate Mitigation Actions (NAMAs). These NAMAs allow countries to take into account their national circumstances and to construct measures to mitigate GHG emissions across economic sectors. Israel has declared to the UN that it would strive to reduce its GHG emissions by 20% in the year 2020 relative to a ‘business as usual' scenario. With its growing population and an expanding economy, the national GHG mitigation plan was developed to draw a course for steering the Israeli economy into a low-carbon future while accommodating continued economic growth. The article describes relevant policy measures, designed to aid in the implementation of the plan and compares them with measures being undertaken by different countries. Emphasis is placed on analysing the progress to date, opportunities and barriers to attaining the ultimate GHG emissions reduction goals. The objective of this article is to contribute to the knowledge base of effective approaches for GHG emissions reduction. We emphasize the integrated approach of planning and implementation that could be especially useful for developing countries or countries with economies in transition, as well as for developed countries. Yet, in the article we argue that NAMAs’ success hinges on structured tracking of progress according to emerging global consensus standards such as the GHG Protocol Mitigation Goals Standard.

Policy relevance:

The study is consistent with the NAMA concept, enabling a country to adopt a ‘climate action plan’ that contributes to its sustainable development, while enabled by technology and being fiscally sound.

The analysis shows that although NAMAs have been framed in terms of projects, policies, and goals, current methodologies allow only the calculation of emission reductions that can be attributed to distinct projects. Currently, no international guidance exists for quantifying emissions reduction from policy-based NAMAs, making it difficult to track and validate progress. This gap could be addressed by an assessment framework that we have tested, as part of a World Resources Institute pilot study for an emerging voluntary global standard.     

Alternative climate policy pathways in the US

Although it is likely that the political–economic coalition required for implementing a federal cap-and-trade programme for GHGs in the US is now sufficiently strong, the structural impediments that have prevented its legislative passage remain impressively durable and can be expected to continue to lay waste to congressional proposals for the foreseeable future. Indeed, given the complex history of environmental policy gridlock in Washington since the early 1980s, any expectations that a cap-and-trade programme could have been realistically achieved through the traditional legislative passage in Congress are fundamentally misplaced. Building on previous research, it is argued that – as with most other forms of environmental policy in the US over the past three decades – a national carbon market is more plausible given alternative policy pathways, which if taken are capable of circumventing the Federal Congress altogether. In particular, the interaction between litigation against the federal government and the ‘rulemaking’ authority possessed by the Executive Branch provides the potential space for the current administration to unilaterally establish a model rule for a national carbon-trading programme.

Policy relevance

This article aims to contribute to American climate policy debates by re-thinking the policy mechanisms most capable of establishing a national carbon market in the US. By taking into account the array of structural factors that have prevented the legislative passage of such a programme in federal Congress, a range of alternative policy ‘pathways’ is considered that have historically allowed progressive environmental policies to endure in Washington (despite increased Congressional gridlock over the past few decades). Two specific alternative strategies and the relationship between them are assessed: the use of litigation to impose legal obligations on federal agencies to regulate effluents, and the use of executive authority to define the nature and scope of environmental regulation. The administration's current potential to unilaterally develop a model-rule for a cap-and-trade programme under the Clean Air Act is emphasized, and the political implications of such a strategy are considered.     

Living with limits: growth,resources, and climate change

Is it possible for all of humanity to enjoy the standards of living of today's high-income countries? What would happen if these limits were reached, perhaps because of climate change or a shortage of natural resources essential to production? How would society manage – or fail to manage – such limits? Notwithstanding the current financial and economic crises, these are perhaps the biggest questions confronting our species (and of a host of other species, who are the victims of our decisions). The article begins by considering the biggest economic event of our lifetimes – the ‘great convergence’ and its implications for the demand for resources. The discussion then turns to a specific limit on our development, climate change, which is different from most other limits, because it involves a global public good: the atmosphere. What such limits might mean for our civilization is discussed. One can persuade people to tackle climate change only if those concerned with the dangers persuade ordinary people that action will not come at the expense of their prosperity.     

Profitability of fossil-fuel production under different instruments in international climate policies

This article discusses how different climate policy instruments such as CO₂ taxes and renewable energy subsidies affect the profitability of fossil-fuel production, given that a fixed global climate target shall be achieved in the long term. Within an intertemporal framework, the model analyses show that CO₂ taxes reduce the short-term profitability to a greater extent than technology subsidies, since the competition from CO₂-free energy sources does not become particularly noticeable until decades later. Due to, for example, the discounting of future revenues, most fossil-fuel producers prefer subsidies to their competitors rather than CO₂ taxes. However, this conclusion does not apply to all producers. Oil producers outside OPEC lose the most on the subsidizing of CO₂-free energy, while CO₂ taxes only slightly reduce their profits. This is connected to OPEC's role in the oil market, as the cartel chooses to reduce its extraction significantly in the tax scenario. The results seem to be consistent with the observed behaviour of important players in the climate negotiations.