Replacing carbon lost from forests: an assessment of insurance,reserves, and expiring credits

Abstract

Concern over the “non-permanence” or reversibility of carbon sequestration projects has been prominent in discussions over how to develop guidelines for forest project investments under the Clean Development Mechanism (CDM) of the UNFCCC Kyoto Protocol. Accordingly, a number of approaches have been proposed that aim to help ensure that parties do not receive credit for carbon that is lost before project obligations are fulfilled. These approaches include forest carbon insurance, land reserves, and issuance of expiring credits. The potential costs of each of these different approaches are evaluated using a range of assumptions about project length, risk and discount rate, and a comparison of costs is ventured based on the estimated reduction in value of these credits compared with uninsured, and permanent credits. Obstacles to participation in the different approaches are discussed related to problems of long-term commitments, project scale, rising replacement costs, and low credit value. It is concluded that a system of expiring credits, which could be coupled with insurance or reserves, could guarantee obligations that span time-scales longer than that of conventional insurance policies while maintaining incentives for long-term sequestration.     

Mainstreaming adaptation to climate change in Least Developed Countries (LDCs)

Abstract

The Least Developed Countries (LDCs) are a group of 49 of the world's poorest countries. They have contributed least to the emission of greenhouse gases (GHGs) but they are most vulnerable to the effects of climate change. This is due to their location in some of the most vulnerable regions of the world and their low capacities to adapt to these changes. Adaptation to climate change has become an important policy priority in the international negotiations on climate change in recent years. However, it has yet to become a major policy issue within developing countries, especially the LDCs. This article focuses on two LDCs, namely Bangladesh and Mali, where progress has been made regarding identifying potential adaptation options. For example, Bangladesh already has effective disaster response systems, and strategies to deal with reduced freshwater availability, and Mali has a well-developed programme for providing agro-hydro-meteorological assistance to communities in times of drought. However, much remains to be done in terms of mainstreaming adaptation to climate change within the national policymaking processes of these countries. Policymakers need targeting and, to facilitate this, scientific research must be translated into appropriate language and timescales.     

An emission intensity protocol for climate change: an application of FUND

Abstract

An emission intensity protocol to govern long-term international greenhouse gas emission reduction is proposed. The protocol may also be interpreted as a technology protocol. The protocol consists of three parameters: a graduation income, below which countries have no emission reduction obligations; a convergence rate, at which emission intensities should approach that of the most carbon-extensive countries; and an acceleration rate, at which the most carbon-extensive countries should improve their technology over and above the business-asusual scenario. Depending on the parameter values, emission reduction ranges from draconian to almost nil. The graduation income and acceleration rate have the expected effects. The effect of the convergence rate is strongly scenario-dependent; some scenarios, perhaps unrealistically, assume strong technological convergence in the nopolicy case; in other scenarios, adopting ‘best commercial technology in the whole world’ would lead to substantial emission reduction. Not surprisingly, different regions prefer different parameters in the emission intensity protocol. Adopting the opinion of the median voter, atmospheric concentrations of carbon dioxide in the year 2200 would be reduced from 1650 to 950 ppm. This reduction is relatively robust to changes in crucial model parameters. The costs of complying with the emission intensity protocol can be reduced substantially through international trade in emission permits and, in particular, by banking and borrowing.     

Implementing the Kyoto Protocol without the USA: the strategic role of energy tax adjustments at the border

Abstract

This article explores options for countries that have ratified the 1997 Kyoto Protocol to the UN Framework Convention on Climate Change and that intend to implement ambitious climate protection strategies—the ‘Kyoto coalition’—to deal with possible comparative disadvantages vis-à-vis third parties, in particular industrialized countries that do not adhere to the Kyoto Protocol. Specifically, the article focuses on the instrument of border adjustments for energy taxes. We outline the rationale for such adjustments and examine in detail whether certain border adjustments for energy taxes would be permissible under world trade law, in particular the General Agreement on Tariffs and Trade and the Agreement on Subsidies and Countervailing Measures. We conclude that despite remaining ambiguity in both the legal provisions and the pertinent case law, border tax adjustments are under certain circumstances compatible with world trade law. Yet, given persisting legal uncertainty, it seems likely that affected members of the World Trade Organization would challenge such energy tax adjustments at the border before the WTO dispute settlement mechanism.     

Economic and environmental effectiveness of a technology-based climate protocol

Abstract

The present stalemate in climate negotiations between the USA and the other Annex I countries has led policy analysts and economists to explore the possible emergence of alternative climate regimes that may be applied after 2012. This article explores the idea of replacing international cooperation on greenhouse gas emission control with international cooperation on climate-related technological innovation and diffusion. This idea—recently proposed among others by Barrett (2001) and Benedick (2001)—is based on the insight that incentives to free-ride are much smaller in the case of technological cooperation than in the case of cooperation on emission control. This article provides a first applied game theory analysis of a technology-based climate protocol by assessing: (i) the self-enforcingness (namely, the absence of incentives to free-ride) of the coalition that would form when countries negotiate on climate-related technological cooperation; (ii) the environmental effectiveness of a technology-based climate protocol. The analysis is carried out by using a model in which endogenous and induced technical change are explicitly modelled. The results of our analysis partly support Barrett's and Benedick's conjectures. On the one hand, a self-enforcing agreement is more likely to emerge when countries cooperate on environmental technological innovation and diffusion than when they cooperate on emission abatement. However, technological cooperation—without any commitment to emission control—may not lead to a sufficient abatement of greenhouse gas concentrations.     

Learning and climate change

Abstract

Learning—i.e. the acquisition of new information that leads to changes in our assessment of uncertainty—plays a prominent role in the international climate policy debate. For example, the view that we should postpone actions until we know more continues to be influential. The latest work on learning and climate change includes new theoretical models, better informed simulations of how learning affects the optimal timing of emissions reductions, analyses of how new information could affect the prospects for reaching and maintaining political agreements and for adapting to climate change, and explorations of how learning could lead us astray rather than closer to the truth. Despite the diversity of this new work, a clear consensus on a central point is that the prospect of learning does not support the postponement of emissions reductions today.     

Interim targets and the climate treaty regime

Abstract

We propose that international climate change policy would be strengthened by the development and adoption of targets for atmospheric concentrations of greenhouse gases 25–50 years in the future in addition to near- and long-term targets. ‘Interim concentration targets’, which could be accommodated under the current Convention/Protocol framework, would provide several advantages over the current focus on either the short term (e.g. Kyoto Protocol) or the long term (e.g. ultimate stabilization targets). Interim targets would help constrain rates of climate change (which are not sufficiently addressed by short- or long-term targets, even when paired together). They would also provide a means for keeping open the option of achieving a range of long-term goals while uncertainty (and political disagreement) over the appropriate goal is resolved. We substantiate a number of rationales for such an approach, discuss the use of interim targets in other contexts, and illustrate how such targets for climate change policy might be set.     

Common but differentiated convergence (CDC): a new conceptual approach to long-term climate policy

Abstract

This article describes a new concept for an international climate regime for differentiation of future commitments: the ‘common but differentiated convergence’ approach (CDC). Under CDC, Annex-I countries' per-capita emission allowances converge within a convergence period to a low level. Individual non-Annex-I countries' allowances converge to the same level also within the same period (‘common convergence’), but starting when their per-capita emissions are a certain percentage above global average (‘differentiated’). Until then they may voluntarily take on ‘positively binding’ targets. This approach eliminates two concerns often voiced in relation to gradually converging per-capita emissions: (i) advanced developing countries have their commitment to reduce emissions delayed and their targets are not the same as Annex-I countries with equal per-capita emissions; (ii) CDC does not provide excess emission allowances to the least developing countries. Under CDC, stabilizing greenhouse gas concentrations at 550 and 650 ppm CO₂-equivalent can be reached with participation at roughly 0% and 50% above global average and convergence to around 3 and 4.5 tCO₂-eq/cap within 40 years. Even if the CDC approach is not implemented in its entirety, it is possible that the step-by-step decisions on the international climate regime can be guided by the principles provided in the CDC approach.     

Meeting the EU 2°C climate target: global and regional emission implications

Abstract

This article presents a set of multi-gas emission pathways for different CO₂-equivalent concentration stabilization levels, i.e. 400, 450, 500 and 550 ppm CO₂-equivalent, along with an analysis of their global and regional reduction implications and implied probability of achieving the EU climate target of 2°C. For achieving the 2°C target with a probability of more than 60%, greenhouse gas concentrations need to be stabilized at 450 ppm CO₂-equivalent or below, if the 90% uncertainty range for climate sensitivity is believed to be 1.5–4.5°C. A stabilization at 450 ppm CO₂-equivalent or below (400 ppm) requires global emissions to peak around 2015, followed by substantial overall reductions of as much as 25% (45% for 400 ppm) compared to 1990 levels in 2050. In 2020, Annex I emissions need to be approximately 15% (30%) below 1990 levels, and non-Annex I emissions also need to be reduced by 15–20% compared to their baseline emissions. A further delay in peaking of global emissions by 10 years doubles maximum reduction rates to about 5% per year, and very probably leads to high costs. In order to keep the option open of stabilizing at 400 and 450 ppm CO₂-equivalent, the USA and major advanced non-Annex I countries will have to participate in the reductions within the next 10–15 years.     

Policy uncertainty and diffusion of carbon capture and storage in an optimal region

Abstract

The social cost of carbon (SCC) is the value of the climate change impacts from 1 tonne of carbon emitted today as CO₂, aggregated over time and discounted back to the present day. We used PAGE2002, the same probabilistic integrated assessment model as used by the Stern Review (Stern et al., 2006), to calculate the SCC and to examine how it varies with discount rate; and find that it is not sensitive to the path of emissions on which the tonne of carbon is superimposed. The mean value of the SCC is $43 per tonne under both a business-as-usual scenario, and under a scenario aimed at stabilizing CO₂ concentrations at 550 ppm. This counter-intuitive result is caused by the interplay between the logarithmic relationship between forcing and concentration, the nonlinear relationship of damage to temperature, and discounting. However, the SCC is sensitive to a number of scientific and economic inputs to the model. Two recent distributions for the sensitivity of climate to a doubling of atmospheric CO₂ (Murphy et al., 2004; Stainforth et al., 2005) increase the mean value of the SCC from $43 to $68 and $90 per tonne. Using a pure rate of time preference of 0.1% per year, as in the Stern Review, gives a mean SCC of $365 per tonne.