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Climate change: governance challenges for Copenhagen.

Climate change has been described as "a diabolical policy problem ... harder than any other issue of high importance that has come before our polity in living memory." (1) To deal with it effectively involves many different policy areas. These include not only the obvious ones like energy, but also others such as macroeconomic and fiscal policy, food security, health, water, trade, biodiversity, and even immigration. The financial implications of climate change--impacts, adaptation, and mitigation--are huge and growing. There is a need for massive deployment of technology, a sector notoriously difficult to regulate. Climate change also involves time frames unknown in public policy. There is currently no overall governance arrangement to integrate all these dimensions. The Bonn-based UN Framework Convention on Climate Change (UNFCCC) secretariat, with its mandate defined by the existing convention and the Kyoto Protocol, can easily be seen as too narrow in scope and expertise, and too small to cope with the scale and complexity of this global challenge.

It is often pointed out that the international institutional framework is sectorally based, whereas climate change is inherently a cross-sectoral issue. Another weakness is that the Annex I/non-Annex I distinction on which the convention, the protocol, and, to a large extent, the negotiations under the Bali Road Map are based has outlived its usefulness. The Bali Road Map negotiations have softened this distinction a little by referring to developed and developing countries, but even this cannot adequately reflect the range of responsibilities and capabilities among countries. By 2050, the horizon we need to work toward if the world is to come to grips with global warming forty-two years after the start of the Kyoto Protocol's first commitment period, the evolution of the world's major economies will have rendered these dualities irrelevant.

There is also much concern about the lack of effectiveness and efficiency of some of the existing institutions, as can be seen by the criticism directed at the Global Environment Facility (GEF) by developing countries, and by concerns about aspects of the Clean Development Mechanism, which had been voiced in the negotiations.

If new institutions were to be formed, therefore, they almost certainly would not replicate the current arrangements. Indeed, the same could be said of sustainable development in general; (2) advocacy of new and stronger governance arrangements is widespread, with some opinion favoring a new world environment organization under UN auspices as the way forward.

The core challenge of mitigation, or emissions reduction, would ideally be addressed first by the small number of countries that represent 80 percent of global emissions, represented in the Major Economies Forum (MEF), a sort of climate G-20, rather than through the UN process where close to 200 countries need to be corralled into agreement. After all, the action taken by fewer than twenty countries will determine whether or not global greenhouse gas concentrations can be limited to 450 parts per million [CO.sub.2] equivalent or lower, so that there is an even chance of limiting global warming to 2 degrees above preindustrial levels. The G8 has given useful impetus to global action on climate change, but its role is limited because it is not sufficiently representative of the developing economies. If the MEF did not already exist, inevitably a similar grouping would have emerged sooner or later. This is not to say that a MEF-brokered agreement on reducing global emissions would be enough in itself. The small, the poor, and the vulnerable, who represent numerically by far the largest number of countries, are in a position to demand that their needs be catered to in any future climate agreement. In particular, no agreement can afford to overlook a large-scale response on adaptation for these countries that have contributed little to global emissions and now find themselves at the forefront of expected impacts of climate change.

The MEF and G-20 grouping can provide strong political direction, but it cannot provide a framework for operationalizing a political agreement. Do we need to look around for a suitable new model of governance in or outside the UN--that can take this broad political level to a practical one? There undoubtedly are better models than the present fragmented approach. But if these models require new institutions, we need to be cautious. UN reform has made painfully slow progress, with a strong inertia around the status quo. Even if new institutions were to be agreed upon, there would be a delay while they were being set up: a delay that both the science and the economics of climate change say we cannot afford. This is both because early action is less costly in the long run and because delay will mean uncertainty for the private sector, which is where most of the money for adaptation and mitigation will need to come from. Maintaining continuity in the carbon markets beyond 2012 is critical.

A further reason to be cautious about institutional reform at this stage is that institutions cannot substitute for substance--form will more easily follow function than the reverse. Yet despite this rather obvious point, one of the difficulties in the negotiations is that there already is a plethora of new bodies and mechanisms among the proposals from parties. The cart is being put before the horse.

So there are two approaches: (1) redesign a climate governance framework from scratch or (2) look to adapt and improve on current arrangements, keeping any new mechanisms or institutions to an absolute minimum. The first may be intellectually superior, but it is Utopian and would require a much longer time frame. Therefore, because only the second approach has a realistic chance of being ready for implementation of the results of a Copenhagen agreement, I shall set out some ideas in this context.

Parts of the climate change governance structure work well already, others can be made to work better, and still others need to be invented. There is not space here to deal with the totality of governance issues. I will address a selection that seems the most critical in ensuring that there will be workable arrangements in place immediately after 2012.

What is working well? The UNFCCC itself, through its Article 2, continues to give the direction to international efforts--stabilization of greenhouse gases at a safe level while maintaining food production and allowing ecosystems to adapt. The underlying principle of "common, but differentiated responsibilities and respective capabilities" is also still appropriate as guidance over the longer term, provided that it is acknowledged that responsibilities and capabilities evolve over time, and that this principle is not a means of dividing countries into two fixed classes. The near universal membership of the UNFCCC argues for it to remain the principal institution governing global climate change efforts. Further, over the years, the UNFCCC secretariat has built up considerable technical expertise on many of the climate change areas covered in the negotiations.

The important scientific underpinning of the policy work under the convention is well established through the Intergovernmental Panel on Climate Change (IPCC). It follows a rigorous process of assessment of peer-reviewed science to establish the state of knowledge and express it in ways that are accessible to policymakers. The frequency of its assessment reports is convenient for periodic reexamination by the international community of both the science and its policy implications. The influence of the 2007 assessment report was a determining factor in launching the Bali Road Map.

If no major change is called for so far, what more do we need? At the heart of the new agreement will be greatly increased financial flows of different kinds, along with more ambitious commitments to reduce or limit greenhouse gas emissions. With potential financial flows on the order of several hundred billion dollars a year, (3) robust institutions and mechanisms are essential. The investment and financial flows will come from both public and private sources. It is likely that the new institutional arrangements will have to cope with a multiplicity of sources, and of delivery mechanisms.

Financing has been one of the slowest areas of the negotiations to advance. There are competing views about mobilization of funds - some favor levies (on issuance of AAUs, (4) or on emissions from international aviation and maritime activities), others a commitment to a certain percentage of gross domestic product (GDP), and still others to contributions to a new fund or funds. There is disagreement over the extent to which official development assistance can contribute to the "new and additional" funding required. There is also no common view on the relative share of public and private funds. But it is widely acknowledged that normal commercial financial flows and investment will have a very large part to play, and these are unlikely to be brought within the framework of a climate change agreement. A command approach to private sector financing will not work. While it therefore is most unlikely that we will see a monolithic solution to financing, there will still be a need for a mechanism to ensure there is some coordination and to maintain an overview.

Much of the financing will be for mitigation actions by developing countries, or nationally appropriate mitigation actions (NAMAs) as they are called in the negotiating mandate. There will be different levels of action: NAMAs funded autonomously and needing no external support, those requiring support for incremental costs, and those accessing market mechanisms. New Zealand has proposed a generic NAMA crediting and trading mechanism as a broader vehicle than the Clean Development Mechanism for developing countries to be given financial incentives for reducing or limiting emissions. It could cater to sectoral, multisectoral, or even economy-wide NAMAs, and would allow countries to access carbon markets for either "no lose" or binding targets. Because of its generic nature, it would allow countries to evolve toward binding commitments as they are able, with the added incentive that in this case they would access the carbon market at the start rather than the end of the period of the NAMA. This mechanism aims to create a "benefit to atmosphere" beyond the offsetting of emissions by developed countries. There are other proposals on the table, all of which recognize the need for a new mechanism. Common to most of them is the need to have a rigorous baseline against which actions can be assessed.

Funding for another important element of a future agreement, reducing emissions from deforestation and degradation (REDD) in developing countries, will benefit from a similar framework of a rigorous baseline and a mechanism that would allow different types of funding. There is some hope of an early result on REDD, which should not have to wait until after 2012. Initially, it is most likely that REDD will be funded via grants, in particular, for capacity building and the establishment of measurement and monitoring systems. But in the longer term, use of the carbon markets will have the potential for far more ambitious results.

There will need to be some "matching" mechanism within the UNFCCC to assist with identifying the most suitable funding sources for NAMAs. And here, it is hard to avoid seeing a new body being necessary, possibly even a subsidiary body of the Conference of the Parties. Such a mechanism should not usurp the role of the providers of funding, but could have a useful advisory role as an intermediary between the developing country concerned and the convention as well as other multilateral and possibly bilateral funding sources.

It is likely that major providers of funding will be more comfortable with existing delivery institutions within the World Bank framework. This highlights the need to identify and remedy any problems with the operation of the climate-related funds administered by the GEF and the World Bank. If a Copenhagen agreement delivers a strong result on finance, there may be a case for fewer separate multilateral funds. Many developing countries emphasize their wish for direct access and lack of excess conditionality, and the need to avoid cumbersome bureaucratic procedures that they identify with some funding sources. On the other hand, developed countries point to the need for mutual accountability and rigorous verification. The period immediately after a Copenhagen agreement would be the time to tackle these problems so that they can be resolved by the time the agreement comes into force.

An important step that could ensure a fundamental advance in measuring, reporting, and verification would be for a greatly increased emphasis on national communications and greenhouse gas inventories. At present, this is an unsatisfactory area. Annex I parties are required to submit annual greenhouse gas inventories, but this is not the case for developing countries, most of which have submitted only one inventory and, in many cases, it is years out of date. The first task in setting up a more adequate framework is to establish obligations for regular reporting by developing country parties, perhaps based on emissions levels and GDP.

Inventories and national communications are large undertakings, even for wealthy countries. But the methodologies for reporting emissions are now well established, most recently in the IPCC's 2006 guidelines. The format of the national communication would need to be reviewed against the results of a Copenhagen agreement. Under the convention, the national communication serves as the fundamental accountability document by the country concerned. We need to build on this for developing countries by addressing the frequency of national greenhouse gas inventories, and clarifying the reporting guidelines about policies and measures, including NAMAs. National communications could also be a vehicle for countries to table low-carbon growth plans (as mentioned in the MEF communique of July 2009), which could turn out to be a more effective form of commitment over the longer term, perhaps complementing medium-term quantified targets.

The key requirement of national communications is that they be comprehensive so that even autonomous measures and policies would be tabled. A major difficulty in financing developing country NAMAs is establishing a business-as-usual baseline. The reporting under this format would provide more confidence, and the regular submission of updated information would enable easy monitoring of both the emissions and the effects of policies. Parties would need to be ready to accept a higher level of accountability, perhaps through some combination of external verification and peer review. The same approach could be applied to REDD, where establishing accurate and robust deforestation baselines would also be essential.

Overall, this solution would simplify accountability because reference could be made to baselines when assessing NAMAs, lessening the need for project-by-project verification. It is bottom up and country driven. The national communications also offer a vehicle for assessing technology needs, which are essentially defined at the sector level. Finally, for developed countries and any others who provide finance, their national communications could serve as the reporting and accountability mechanism, revealing the details of their contribution to financing and how it is split among different mechanisms. This approach to governance and accountability, if fully implemented, could simplify the institutional arrangements needed as a result of a Copenhagen agreement.

There might also be advantages in this approach for the difficult issue of compliance. Compliance provisions are likely to be a major sticking point in the finalization of an agreement. Although the compliance provisions of the Kyoto Protocol (5) are yet to be adequately tested, they are unlikely to prove very effective, and are not a model that will work in a broader agreement involving developing country actions. But there would be self-contained incentives for compliance if finance was dependent on effective implementation of NAMAs, assessed against baselines incorporated in national communications. Together with peer review and moral suasion, this format could be just as effective for developing countries as a Kyoto Protocol-type compliance mechanism and would pose fewer legal obstacles.

There would need to be some preliminary work to make this heightened role for national communications possible. At present, the review of Annex I greenhouse gas inventories requires parties to make available expert reviewers. There already is a shortage of such reviewers. Relying on parties for this key function does not appear sustainable over the longer term and especially not if we are looking toward a major scaling up of effort. So creating a permanently employed group of experts within the UNFCCC secretariat could be preferable while still retaining a role for parties in a peer review mode. Parties would have to agree to fund the secretariat for this purpose. There would also need to be further capacity building in developing countries.

The conclusion with regard to the Bali Road Map negotiations is that the UNFCCC, backed by high-level political processes, can be the appropriate vehicle for the governance of climate change issues likely to be part of a Copenhagen agreement. What about the broader issues of climate change aspects referred to above, which it will clearly be unrealistic to expect to include in a Copenhagen agreement? In an already overloaded negotiating agenda, these would risk getting in the way of progress on the substance.

The UN secretary-general's initiative to improve UN-wide coordination on climate change is to be applauded, and it has made all partner agencies better aware of the linkages of their work. A light-handed approach, which allows agencies to develop a network model of cooperation, is preferable to a top-down approach. There is certainly scope for more cooperation among agencies through joint meetings and joint studies. These allow each agency to stay within its mandate while benefiting from the expertise of others. A good example of this working well is over the vexed issue of the relationship between trade and climate change, which has included concerns over possible trade restrictions such as border tax adjustments and food miles. Two agencies, the World Trade Organization and UN Environment Programme, together produced a groundbreaking report on trade and climate change, (6) which will provide much-needed clarification of the issues and reduce levels of concern. Because it was produced independently and outside of the negotiations, this report can in turn be taken into account by those involved in the UNFCCC negotiations. The same model could well apply to some other areas of concern such as biodiversity and the impacts of climate change on migration.

It is to be hoped that, in the lead-up to a Copenhagen agreement and the period immediately after, all international efforts will be focused on achieving an ambitious result on the core issues, then making it implementable. The opportune time for deeper reflection on governance will be once these arrangements are operational.

Notes

Adrian Macey is New Zealand's climate change ambassador since 2006. In 2000, he became New Zealand's principal trade negotiator, responsible for managing the country's WTO negotiations. Previously, he was New Zealand's ambassador to France and permanent representative to the OECD; ambassador to Thailand; counsellor and consul-general in Geneva, where he was a New Zealand negotiator in the Uruguay Round for dispute settlement; and deputy permanent delegate to UNESCO. He also represented New Zealand at the International Labour Organization.

(1.) Ross Garnaut, "Garnaut Climate Change Review," 2008, available at www.garnautreview.org.au.

(2.) See, for example, Pierre Jacquet, Rajendra K. Pachauri, and Laurence Tubiana, eds., A Planet for Life: The Governance of Sustainable Development (Paris: Presses de Sciences Po, 2009).

(3.) Estimates for both mitigation and adaptation are contained in "Investment and Financial Flows to Address Climate Change" (Geneva: UNFCCC, 2007) and the 2008 update (Bonn, Germany: UNFCCC) in Doc. FCCC/TP/2008/7.

(4.) Assigned Amount Units, which are agreed national emission allowances.

(5.) Any Annex I country that exceeds its quota will be required to make up the difference between its emissions and its assigned amount during the second commitment period, plus an additional deduction of 30 percent.

(6.) World Trade Organization-UN Environment Programme, "Trade and Climate Change" (Geneva: World Trade Organization, 2009).
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Title Annotation:GLOBAL INSIGHTS; Copenhagen, Denmark
Author:Macey, Adrian
Publication:Global Governance
Article Type:Report
Geographic Code:4EUDE
Date:Oct 1, 2009
Words:3280
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