The US Submission on Elements of the 2015 Agreement has recently appeared on the UNFCCC website and outlines, in some detail, the approach the US is now seeking with regards “contributions”. Adaptation and Finance are also covered, although not to the depth of the section on Mitigation.
The submission makes it very clear that the US expects robust contributions from Parties, with schedules, transparency, reporting and review. There is also a useful discussion on the legal nature of a contribution. None of this is surprising as the US delegation to the recent COPs and various inter-sessional meetings has made it very clear that real action must be seen from all parties, not just those in developed countries.
But the submission makes no reference to the role of carbon markets or carbon pricing. Only in two locations does it even refer to market mechanisms and this is only in the context of avoiding double counting. This is coming from the Party that gave the world the carbon market underpinning of the Kyoto Protocol, which in turn has given rise to the CDM, the EU ETS, the CPM (in Australia) and the NZ ETS to name but a few, so perhaps reflects the current difficulty Parties are having keeping carbon price thinking on the negotiating agenda.
I would argue that without a price on carbon emissions, the CO2 emissions issue will be much more difficult to fully resolve. Further to this, while individual countries may pursue such an agenda locally, the emissions leakage from such systems could remain high until the carbon price permeates much of the global energy system. This then argues for an international agreement that encourages the implementation of carbon pricing at a national level. The Kyoto Protocol did this through the Assigned Amount Unit, which gave value to carbon emissions as a property right. While there is no such “Kyoto like” design under consideration for the post 2020 period, the agreement we are looking for should at least lay the foundations for such markets in the future. The question is, how??
In the post 2020 world, carbon pricing is going to have to start at the national level, rather than be cascaded from the top down. Many nations are pursuing such an agenda, including a number of emerging economies such as China, South Korea, South Africa and Kazakhstan. Linkage of these carbon price regimes is seen as the key to expansion, which in turn encourages others to follow similar policy pathways and join the linked club. The reason this is done is not simply to have carbon price homogeneity, but to allow the transfer of emission reduction obligations to other parties such that they can be delivered more cost effectively. This allows one of two things to happen; the same reductions but at lower cost or greater reductions for the expected cost. The latter should ideally be the goal and is apparently the aspiration the USA has, given it states that the agreement should be “designed to promote ambitious efforts by a broad range of Parties.” The carbon price is simply a proxy for this process to allow terms of trade to be agreed as a reduction obligation is transferred.
All of this implies that the post 2020 agreement at least needs a placeholder of some description; to allow the transfer of reductions to take place between parties yet still have them counted against the national contribution. As it stands today, it is looking unlikely that explicit reference to carbon pricing or carbon markets will make its way into the agreement, but perhaps it doesn’t need to at this stage. On the back of a transfer mechanism, ambition could increase and a pricing regime for transfers could potentially evolve. If that happens to look like a global carbon market in the end, then so be it.
I realize that it is the role of politicians to make things complicated and opaque, especially when simple and clear would be impolitic. That is our reality.
Since the science is “settled”, we certainly know the percentage reduction in global annual CO2 emissions required to “control” our climate and avoid “climategeddon”; and, we also know the timeframe over which the reductions must occur. Since I am not privy to the totality of the “settled” science, let us assume, for the sake of argument, that the percentage reduction is 100% and the timeframe is 50 years; and let’s set the base year as 2013, for which we should have reliable emissions data relatively soon, and the first compliance year as 2015.
With these inputs as our starting point, a very simple and transparent emissions cap at 2013 global emissions levels beginning in 2015, combined with a linear decrease of 2% per year in the annual emissions cap and significant penalties for failure to comply would reduce global annual CO2 emissions to zero by 2065, averting “climategeddon”, though theoretically leaving us with a somewhat warmer globe, perhaps for as long as another century.
In the interests of transparency, this program would not permit “fuzzy” offsets, but would actually require documented reductions of fossil-sourced CO2 emissions of at least 2% per year. The declining cap would be combined with the opportunity to freely trade emissions within the cap, thus providing the opportunity for emitters who are able to reduce their emissions rapidly and at relatively low cost to sell excess emissions allowances to those for whom the reductions would require long lead times, the application of technologies not yet commercially demonstrated, or disproportionately high levels of investment.
I can appreciate that this simple, transparent program would be grossly impolitic. Any nation which persisted in increasing its emissions would have to purchase large quantities of allowances in a market in which those allowances would have to be made available through emissions reductions at rates far higher than 2% per year. That would suggest that the early cost of emissions allowances would be quite high, at least until all national increases in emissions ceased.
This program would also be impolitic because it would provide no new revenue stream to the national governments; and, thus, no new source of “boons” to be bestowed upon favored groups.
Since this program, based on the “settled” science, would avoid “climategeddon”, there would be no need for massive transfer payments from the developed nations to the undeveloped nations in reparation for climate disasters which had not occurred and would not occur. This would eliminate one of the most contentious elements of the discussions at the recent COPs.
A program such as that described above would be expected to immediately halt any investments in new, long lived emissions sources, since allowances would have to be purchased in the allowance market for all of those emissions; and, because the end-of-life date for the investment would be known in advance with absolute certainty. Investors would be making their investments without the risk of potential future incremental changes in regulations which might dramatically reduce the value of those investments.
In the immortal words of Captain Kirk of the Starship Enterprise: “Make it so, Number One.” 😉
I can’t possibly disagree with you on any of this. But transparency and simplicity are not exactly one with climate politics. The even simpler way, which is advocated by a few, would be to require that from 2020 1% of any CO2 emitted must be captured and stored, rising to 110% by 2100. The latter is possible by combing bio processing with CCS. This route even has the advantage of directly addressing the problem and says nothing about what you should or shouldn’t do with the energy mix, other than not freely emitting the CO2.
The one thing you should have disagreed with was my attribution of the quote, which should have been to Captain Jean-Luc Pickard. Wrong Star Trek generation. My bad.
Being something of a Trek fan I should have picked up on that!!