This post originally appeared on Robert Stavins’s blog, An Economic View of the Environment.
At the recent climate negotiations at the 20th Conference of the Parties (COP-20) of the United Nations Framework Convention on Climate Change (UNFCCC) in Lima, Peru, a very important issue was left on the table, unresolved: Will the 2015 Paris Agreement (scheduled to be signed in December of this year at COP-21) facilitate – or at least avoid inhibiting – international linkage of national (and for that matter, sub-national) climate policies?
Brief History
In the Durban Platform for Enhanced Action, adopted by COP-17 in 2011, negotiators agreed to develop a new legal instrument “under the Convention applicable to all Parties,” for adoption at COP-21 in December, 2015, in Paris. With the Lima talks now behind us, it appears that the 2015 agreement will reflect a hybrid climate policy architecture—one that combines top-down elements, such as for monitoring, reporting, and verification, with bottom-up elements, including “Intended Nationally Determined Contributions” (INDCs), describing what a country intends to do to reduce emissions, based on domestic political feasibility and other factors. (I wrote about this in Assessing the Outcome of the Lima Climate Talks, posted on December 14, 2014.)
Can the Aggregation of INDCs be Cost-Effective?
A major question facing negotiators is how can the new hybrid policy architecture encourage greater ambition, while remaining true to the principle of “common but differentiated responsibilities.” A key answer to that question is to allow for the linkage of heterogeneous national policy instruments. Why do I say that?
Here’s the reason. An attribute of the Paris architecture that will encourage greater ambition over time is cost-effectiveness. (Another key attribute to encourage greater ambition is comparability of INDCs, a topic on which we’re also working at the Harvard Project on Climate Agreements, about which I will write in the future.) To enhance the cost-effectiveness of the new system, a key feature will be linkages among regional, national, and sub-national climate policies. By linkage, I mean formal recognition by a greenhouse gas (GHG) mitigation program in one jurisdiction (a regional, national, or sub-national government) of emission reductions undertaken in another jurisdiction for purposes of complying with the first jurisdiction’s mitigation program.
Linkage can be straightforward, as with the bilateral recognition of allowances under two cap-and-trade regimes, but – importantly — linkage can also take place among a heterogeneous set of policy instruments, such as between systems of performance standards, carbon taxes, and cap-and-trade.
Linkage in the Paris 2015 Agreement
In a new paper that was released by the Harvard Project on Climate Agreements at a packed “side event” in Lima, my co-authors – Daniel Bodansky of Arizona State University, Seth Hoedl of Harvard Law School, and Gilbert Metcalf of Tufts University – and I analyze theoretical issues relating to linkage among heterogeneous climate policy instruments and apply this analysis concretely to the 2015 Paris agreement. In “Facilitating Linkage of Heterogeneous Regional, National, and Sub-National Climate Policies Through a Future International Agreement,” we examine how the agreement can help facilitate the growth and operation of a robust system of international linkages of regional, national, and sub-national policies, as well as how inappropriate or excessive rules could obstruct effective, bottom-up linkage. Importantly, both economic and legal perspectives are represented in this research (which was supported by the International Emissions Trading Association (IETA) and six of its member companies: Chevron, GDF-Suez, Global CCS Institute, Rio Tinto, Shell, and TransCanada)
Key Findings from Research
I encourage you to take a look at the full paper or, at least, its executive summary, but here – in very brief form — are the key findings.
First, there are a number of design elements the 2015 agreement should avoid, because they would inhibit linkage. These include “supplementarity requirements” that require parties to accomplish all or most of their emissions-reduction commitments within their national borders. The 2015 agreement also should avoid including detailed linkage rules in the core agreement; an agreement with more flexibility would allow rules to evolve on the basis of experience.
Second, to advance linkage, the 2015 agreement should: define key terms, in particular the units that are used for compliance purposes; establish registries and tracking mechanisms; and include default or model rules, from which nations are free to deviate at their discretion.
The most valuable outcome of the Paris Agreement regarding linkage may simply be including an explicit statement that parties may transfer portions of their emissions-reduction contributions to other parties—and that these transferred units may be used by the transferees to implement their own commitments.
It sounds simple, but a small but vocal set of (largely socialist) countries – including Bolivia, Venezuela, and Cuba – have vehemently opposed in the climate negotiations anything that looks remotely like a market, and will try hard to prevent such provisions from appearing in the 2015 agreement.
Next Steps
As the negotiating teams from 195 countries prepare to meet this month in Geneva, Switzerland, and in June in Bonn, Germany, the question remains of whether the 2015 Paris Climate Agreement will allow for and indeed facilitate international linkage of national and sub-national policies, and thereby encourage cost-effectiveness and greater environmental ambition. Over the next several months, the answer to this question will become clear.
