Poised to assume presidency of the European Union in July, Sweden will lead European nations into the next international conference on climate change this December in Copenhagen.
Looking toward that new role and leadership in crafting a new global climate change mitigation treaty, the Swedish Embassy, with CLIPORE and Resources for the Future, hosted an Earth Day panel discussion in Washington April 22 featuring EU and U.S. climate officials who outlined challenges the two major industrialized blocs face heading toward Copenhagen.
Negotiators from both sides of the Atlantic agree the Obama administration’s emphasis on creating a domestic greenhouse gas regulatory regime will go a long way toward solidifying commitments in an international agreement.
Still, U.S. Deputy Special Envoy for Climate Change Jonathan Pershing acknowledged the U.S. has a lot of ground to regain on the issue of climate change internationally, in part because the U.S. never ratified the Kyoto Protocol and has largely remained inactive throughout the past decade.
”For the first time in a long time we have an administration that believes in the science,” Pershing said.
But he cautioned that the U.S. cannot step forward alone and that high-emitting developing nations like China and India must join agreements to regulate their emissions. Negotiations with developing nations can sometimes be hindered by a fixation on numbers, in the form of emissions reductions and/or financial commitments, according to Pershing and top European Commission climate change negotiator Artur Runge-Metzger. Signaling some potential flexibility in moving forward, Runge-Metzger said, ”many roads lead to Rome,” implying there are a variety of types of commitments the U.S. could make that would advance the international agenda.
The question of when emissions reductions targets should enter into the negotiation process also was a focus of the panel. Joseph Aldy, a White House advisor on energy and climate, said establishing a policy architecture should be a top priority, and the specifics of reductions targets should follow.
As one of the top emitters of greenhouse gases in the world, the U.S. is under pressure to outline its goals soon. Many developing nations feel a climate agreement may stunt the growth of their economies and look to the U.S. to take an early initiative. While there is still debate about structure, Runge-Metzger underscored the salient message of the panel, saying nations on both sides of the Atlantic want, and need, to lead the way on climate change by example.
The Earth Day panel followed a morning of workshops discussing the policy design concerns of competitiveness and offsets.
Competitiveness
In his presentationon competitiveness, University of Gothenburg environmental economics professor Thomas Sterner made the case that empirically, competitiveness has yet to cause problems. Still, Sterner underscored the importance of international emissions allocations and its implications with regard to competitiveness. Some would argue for grandfathering of emissions rights while developing countries might argue for equality of per capita emissions between countries.
For her part, RFF Senior Fellow Carolyn Fischer used a modeling exercise to look at the leakage effects of a carbon policy. She distinguished between leakage that comes from intensity changes abroad (reductions in the use of emissions intensive fuels at home lowers the global market price and encourages their use abroad) and leakage from production change (industrial activity moves abroad where there are no regulations).
She pointed out that border tax adjustments and border relief for exports, or rebates for companies facing international competition can promote domestic production, but they can’t address leakage unrelated to production, and they don’t necessarily reduce global emissions.
Offsets
In his presentation on offsets, Karsten Neuoff was critical of the current Clean Development Mechanism market. He pointed out the problem of rent capturing by developing countries. For example it may only cost $5 to reduce a ton of carbon emissions, but they are receiving the market price, say $20 from developed countries if that is the price of offset credits.
Neuoff would prefer to see a system where offset buyers can price discriminate to eliminate that rent and buy up more reductions with the money. The environmental effects of CDM projects are not as certain as carbon reductions from industry at home, and he is afraid that we could lose the price signal that is needed to spur innovation.
While outlining his thoughts on offsets in domestic policy and international negotiations, RFF visiting scholar Nigel Purvis underscored the high potential for carbon emissions reductions in forestry and proposed an idea for a new market for terrestrial carbon sequestration.
He presented a map that color coded areas with the highest potential for forest carbon credits (i.e. there is a strong threat of deforestation, and the opportunity cost of development is low). However, many areas (such as the Congo) are politically less stable or have less capacity to develop a market. So, taking these factors into account, he presented a new map where the areas with highest potential shifted from Africa to South America.
