Durban, December 2011, will be the place where the Kyoto Protocol is either buried or resurrected. The protocol is the only legally binding international instrument the world has today for fighting climate change.
When nations gathered in Copenhagen, Denmark, in December 2009 for the 15th annual Conference of the Parties (COP15), the world was looking for a climate deal that was “fab” — fair, ambitious and binding.
What they got — the Copenhagen Accord — was something that was “fair” in as much as it promised money to poorer nations to help them cope with climate change (so-called “adaptation”) and also included countries such as South Africa and China, which are significant emitters of greenhouse gas but did not previously have any obligations under the protocol.
The accord was also “ambitious” to the extent that pledges for emissions reductions went well beyond the commitments of the protocol and that it spoke of a magical, but mostly political, number of $100-billion in support by 2020.
What the accord was not was legally binding. The pledges made under it are promises, not contracts — a precarious situation on which to bet the future of entire nations, the island states, the lives and livelihoods of millions of people, especially poor Africans and Asians, and our collective legacy to our children.
Pledges seem made to be broken, as we have seen many times in the past; for example, the pledge at the 2005 Gleneagles G8 summit to raise aid from the world’s wealthiest countries for the world’s poorest to 0.7% of the rich nations’ gross domestic product. With the exception of a few countries, notably the Scandinavian and Benelux countries, development assistance continues to fall well short of these commitments six years later.
The Durban conference will probably announce the creation of new institutions to deal with climate finance and with the sharing of technology for reducing emissions — mitigation — and coping with climate change — adaptation.
These institutions are necessary but not sufficient to ensure a co-ordinated global response to climate change. What is a fundamental prerequisite from an economics point of view is that the world starts to value carbon — a building block of life itself — in a literal sense.
“Putting a price on carbon” reflects the fact that burning rather than conserving it results in greenhouse gas emissions that, in turn, leads to droughts, floods, disease and devastation around the world. Without a price on carbon, it pays us — or at least oil, coal and gas company shareholders — to kill ourselves.
The only international instrument we have that forces at least some countries to put a price on carbon is the protocol. The way in which it sets a price on carbon is not straightforward: the Kyoto Protocol sets limits to the amount of emissions allowed for each of the wealthy countries listed under its annex 1. Signatory countries then auction off the rights to emit greenhouse gasses to emitters in each economy through a carbon market, a process that results in a price. The world’s leading carbon market is the European emissions trading system.
The problem is that the protocol in its current form covers commitments only for the five years up to December 21 next year. When this period expires, access for new Âprojects to the economic instruments it gave rise to will be cut off.
These instruments include the clean development mechanism, which facilitates the provision of financial support by annex 1 countries to thousands of projects in developing countries. From 2002 to 2008 the clean development mechanism supported emissions projects — reducing projects in developing nations totalling $95-billion — that would not have happened without that support.
Failures and solutions
The dominoes do not stop tumbling there. One of the few areas in which progress has been made in climate negotiations to date has been in establishing an adaptation fund to help poor countries cope with the unavoidable impacts of climate change. A levy on mechanism transactions is the main source of funding for the adaptation fund.
So without the protocol there is no mechanism; without the mechanism there is no levy and without the levy there is no certainty about where the funding for the adaptation fund will come from, which takes us back to relying on pledges.
To save the protocol from extinction, its signatories will have to agree either to commit to a second period with more ambitious commitments — something that seems unlikely — or to extend or remove the “expiry date” on the first commitment period.
The world is now asking the European Union — historically the major backer of the protocol — to rescue it, or at least the instruments to which it gave rise.
But the EU has already done more for fighting climate change than virtually any other national grouping and faces its own economic problems at home in the form of the sovereign debt crisis affecting many of its member states, which are divided on the issue.
Action to save the protocol should ideally be supported by all annex 1 countries, including Australia, Canada, Russia and, ironically, Japan — countries that have opposed the continuation of the protocol, largely on the basis that it does not include major emitters not currently listed under the annex.
In solidarity — and on principle — the rapidly industrialising and transition economies such as China and South Africa that are neither part of annex 1 nor poor, as in the case of the so-called least-developed countries, should commit to implementing a price on carbon domestically. They can do this through a carbon tax, an instrument already on the table in South Africa that has received mention in China.
Such an instrument circumvents an issue that regularly crops up in all multilateral negotiations, namely that of the sovereignty of nations to determine their own developmental priorities. Countries that adopt a carbon tax would be able to determine for themselves how they use the resulting revenues in a way that is best for the economy and protects the poor — whether they spend it on health, education or climate-friendly infrastructure.
To further sweeten the deal, all parties should agree to refrain from imposing carbon taxes on goods imported from other countries if the exporting countries have already implemented a price on carbon at home that is higher than a reasonable minimum, say $10 a ton of CO² emitted. Such an agreement would not only ease fears from many developing nations of “green protectionism” by their annex 1 trade partners against carbon-intensive exporters, it would also stabilise the value of carbon credits by setting a minimum price for them and thereby would ensure more predictable levels of support from the clean development mechanism.
Finding common ground
Getting to a solution that moves everyone forward would require progress by all parties: the EU and other annex 1 parties would have to commit to a policy of “no retreat” amid one of the biggest economic crises it has ever faced. This commitment should be supported by countries recently critical of the protocol, such as Japan, Canada, Russia and Australia.
African parties — and many South American and island states, as well as non-governmental organisations — would have to moderate, at least for now, the extent of their demands for more money from and stricter targets for wealthy nations, by placing the issues of “fair and binding” above “ambitious” on the list of attributes for an ideal deal.
South Africa, in turn, in presiding over the meeting and in the absence of co-operation from all parties, might have to make some tough choices on procedural issues to overrule a handful of obstructionist parties, thereby ensuring an outcome. It would have to do this on the basis of principle that “progress based on leadership is better than stagnation based on consensus”.
A climate deal would reinvigorate the global effort to address climate change. It would result in significant growth in credit — the good, low-risk kind — for building green infrastructure and provide a global stimulus for a dangerously teetering EU economy because many union companies are world leaders in supplying green infrastructure.
Climate change, even more than recent global economic crises, highlights the fact that the nations of the world will ultimately either prosper or fail together. In the run-up to Durban we need bold action, rather than another compromise, to give hope to the people of the world.
Peet du Plooy is programme manager: sustainable growth at research firm Trade and Industrial Policy Strategies