What to Look for in any U.S. Withdrawal from the Paris Agreement

by Duncan Hollis

President Trump has indicated that he will announce a decision on future U.S. participation in the Paris Agreement later today at 3 pm. Reports suggest that he has already made up his mind to withdraw. That decision is likely to receive extensive attention (not to mention criticism) on the merits. And certainly that attention is warranted. But I believe an equally important issue will be how the Trump Administration pursues its withdrawal.

Contrary to popular opinion (and this erroneous NY Times Q&A), the Paris Agreement was never intended to be non-binding. It is, on its face, pretty clearly a treaty in the international law sense of that term (see the standard definition in Art. 2(1)(a) of the 1969 Vienna Convention on the Law Treaties (VCLT)). True, one key provision of the Paris Agreement (Article 4) contains language that does not evidence an intention to create legal rights or obligations (and the negotiation of which almost blew up the original deal). But the rest of the agreement was clearly intended to create a treaty and the language used manifests such intentions. For confirmation, one only has to look to the U.N. Treaty Office (which is home to some of the world’s leading experts on treaties) and note how it has always regarded the Paris Agreement as a treaty.

The United States formally joined the Paris Agreement on November 4, 2016, following its acceptance of that treaty on September 3, 2016. It is true that the United States did so without seeking the U.S. Senate’s advice and consent under Art. 2, cl. 2, section 2, nor did Congress specifically authorize U.S. participation as it did for treaties like NAFTA or the WTO Agreement. But U.S. treaty law and practice has long accommodated other means for the United States to enter into treaties in the international law sense, including through the President’s sole executive powers or where prior Congressional authorization supports U.S. participation. In the case of Paris, the precise grounds for U.S. acceptance are contested (see Dan Bodansky and Peter Spiro’s impressive take on these issues here).

As far as international law is concerned, however, there is little question that the United States is currently bound by its acceptance. The law of treaties is most famous for the foundational principle pacta sunt servanda, or as VCLT Art. 26 puts it, “Every treaty in force is binding upon the parties to it and must be performed by them in good faith.” And for those less familiar with the VCLT, it is important to note that although the United States never joined the “treaty on treaties” every Administration since Richard Nixon’s has regarded almost all of its provisions as customary international law (the exceptions being provisions on signature and consultations in the event of breach). Thus, to withdraw or otherwise end its obligations under the Paris Agreement, the United States will have to look to the law of treaties. Indeed, VCLT Article 42 provides that a treaty’s validity or a State’s consent can only be impeached through the VCLT’s application and, more pertinently, “[t]he termination of a treaty, its denunciation or the withdrawal of a party, may take place only as a result of the application of the provisions of the treaty or of the present Convention.”

So, how can the United States get out from the Paris Agreement? I predict the Trump Administration will invoke one of four possible avenues for its exit later today.

Can the U.S. President Enter into a Legally Binding Climate Change Agreement Without Congress?

by Julian Ku

The New York Times is running a big report today on the U.S. plan to sign a “sweeping” climate change agreement without having to go to Congress for approval or ratification.  Instead of a typical treaty requiring ratification by the Senate, the U.S. has a different more creative strategy.

American negotiators are instead homing in on a hybrid agreement — a proposal to blend legally binding conditions from an existing 1992 treaty with new voluntary pledges. The mix would create a deal that would update the treaty, and thus, negotiators say, not require a new vote of ratification.

Countries would be legally required to enact domestic climate change policies — but would voluntarily pledge to specific levels of emissions cuts and to channel money to poor countries to help them adapt to climate change. Countries might then be legally obligated to report their progress toward meeting those pledges at meetings held to identify those nations that did not meet their cuts.

Jack Goldsmith is already out with a typically smart analysis of this approach, and he concludes the new agreement is intended to sound like a big deal, but will be unlikely to commit the U.S. to do anything meaningful.  I think that is probably right, although I can’t really tell based on the incomplete details in this NYT article.  I think there might be a little bit of domestic legal effect, and may also create an important precedent on what the President can do to bind the US on the international level.

Surely, the President can sign a political agreement that pledges voluntary cuts and to channel money to poorer countries. Such an agreement would have no domestic legal effect until Congress acted to implement the legislation.   But can the President bind the U.S. under international law, even if it has no domestic legal effect?

The President can, in limited circumstances, bind the US under international law via a sole executive agreement.  It has done so especially in the areas of post-conflict settlements such as the famous Algiers Accords that released US hostages and also sent seized Iranian and US assets to an international arbitration tribunal.  US courts have given those agreements limited domestic effect.  But the line between what the President can do via a sole executive agreement and what he must do via a treaty is not completely clear (although there is a line!).  Maybe the President is claiming some delegated authority from the original 1992 Framework Convention, which might bolster his ability to bind the U.S. internationally. I don’t see any obvious basis in that treaty for this delegation, but I suppose experts on the Framework Convention might come up with something.

So I think the President might be able to sign the US up to a binding international agreement on climate change, but it would be pretty unprecedented and its legal effect uncertain.  Such an agreement would be unlikely to have domestic legal effect on its own, but the President could cite the agreement as the basis for executive orders he is already implementing on climate change.  I don’t think it would carry the policy much farther than he is already doing under creative interpretations of the Clean Air Act, but it might provide just a little bit more support for his domestic orders.

I think it will be important to look at the details of the proposed agreement, and to ask the US administration to explain its legal authority for the new agreement.  Will it be the 1992 Framework Convention?  Or is it going to be just the President’s general Article II executive power?  If the latter, this may be an important precedent for future sole executive agreements under the US Constitution.  In any event, President Obama is certainly exploring the outer limits of his Article II powers.

Cancun Can!

by Dan Bodansky

Concluding plenary at COP-16

Oh, how much difference a year — and lower expectations — make! The BBC report on the Cancun meeting declared that “if Copenhagen was the Great Dane that whimpered, Cancun has been the Chihuahua that roared.”  Never mind that the Great Dane’s whimper was about the same decibel level as the Chihuahua’s roar.  Last year, expectations were sky high for a new legal agreement that would extend, complement or replace the Kyoto Protocol, so the non-binding Copenhagen Accord was a major disappointment.  This year expectations for the Cancun Conference were extremely low, so an outcome that essentially incorporates the Copenhagen Accord into the UNFCCC process is seen as a big win.

Frankly I was doubtful that the Cancun Conference would be able to accomplish this much.  Last year, a small group of countries successfully blocked the COP’s adoption of the Copenhagen Accord, leaving its status within the UNFCCC process uncertain.  Since Copenhagen, the big developing countries such as China and India voiced at beset tepid support for the Copenhagen Accord.  So I had thought it likely that Cancun would produce a weaker result.  But the Mexican chair (Secretary of Foreign Affairs, Patricia Espinosa, shown in the middle in the picture above) did a masterful job in creating a negotiating atmosphere in which countries had confidence, and in putting pressure on Venezuela and its allies not to sink the meeting.  (Reportedly, President Calderon personally called Chavez in an effort to dissuade Venezuela from blocking, as it did last year.)  In the end, when only Bolivia objected to the adoption of the text, Espinosa was able to simply note the Bolivian objection and then gavel the decision through, to widespread applause.

The Cancun Agreements reiterate all of the key elements of the Copenhagen Accord, including:

  • A long-term goal of limiting temperature increase to 2 degrees Celsius (with a review in 2015 that will consider whether to strengthen the goal to 1.5 degrees Celsius).
  • A mechanism for anchroing the emissions targets and actions pledged pursuant to the Copenhagen Accord in the UNFCCC process, through inclusion in two “INF” (information) documents — one for emission targets to be implemented by developed countries, which will be subject to measurement, reporting and verification (MRV); the other for nationally appropriate mitigation actions (NAMAs) to be implemented by developing countries, which will be subject to a process of international consultation and analysis (ICA).
  • A registry for listing NAMAs for which developing countries are seeking international support
  • A collective commitment by developed countries to provide $30 billion in fast start financing for the period 2010-2012, balanced between mitigation and adaptation, as well as a longer term goal of mobilizing jointly $100 billion per year by 2020, a “significant portion” of which should flow through the Green Climate Fund.
  • Establishment of a Green Climate Fund.

But the Cancun Agreements do not simply bring the Copenhagen Accord into the UNFCCC process; they elaborate and operationalize the three page Copenhagen Accord in thirty pages of decision text.  Among its key elements, the Cancun decisions:

  • Provide that the ICA process for developing country NAMAs will be performed by the Subsidiary Body on Implementation.
  • Provide that the Green Climate Fund will be managed by a board of 24 members, split between developed and developing countries, and will be administered for the first three years by the World Bank.
  • Establish a Technology Mechanism to facilitate technology development and transfer.
  • Set forth detailed provisions on adaptation in the Cancun Adaptation Framework.
  • Establish a framework for reducing emissions from deforestation and forest degradation (REDD).

In Cancun, the growing splits among developing countries were on even clearer display than in Copenhagen.  India played a very constructive role (and in particular, Environment Minister Jairam Ramesh), introducing a proposal on ICA that was very forward-leaning and suggesting that it could accept binding commitments.  The small island states continued to push for negotiation of a new protocol that would address emissions from countries without Kyoto targets.  And China found itself under increasing pressure from its fellow developing countries to accept some limits on its emissions.

Going forward, the Cancun decisions under both the UNFCCC and the Kyoto Protocol leave open the question of legal form — that is, whether there should be a new legal agreement under the UNFCCC, a second commitment period under the Kyoto Protocol, or both.  The COP decision extends the mandate of the Ad Hoc Working Group on Long-Term Cooperative Action (AWG-LCA) for another year, and requests that it “continue discussing legal options with the aim to complete the agreed outcome” on the Bali Action Plan, and the parallel decision on the Kyoto Protocol calls on the AWG-KP to complete its work next year, so that there is no gap between commitment periods.

But whether or not next year’s Durban Conference is able to translate the Cancun Agreements into legal form, the Cancun outcome represents a significant achievement, which shows that – with proper management – the UNFCCC process is still able to move the ball forward.

Sleepless in Copenhagen

by Dan Bodansky

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(Cross posted on Smith School of Enterprise and Environment)

Copenhagen, December 19 – The Copenhagen conference limped to a finish mid-day Saturday after “working” throughout the night. These all night sessions on the closing day are becoming a COP ritual, with people spending most of their time waiting around the conference room while small huddles of key delegations try to find a face-saving way to declare victory and go home.

The issue last night was how the so-called Copenhagen Accord that President Obama had personally helped to broker during his 12 hour touchdown in Copenhagen on Friday would be reflected in the official decisions of the conference. The Danes proposed that the Copenhagen Accord be adopted as a COP decision, but a small group of countries that had played the spoiler role throughout the conference (Sudan, Venezuela, and Bolivia, joined last night by Cuba and Nicaragua) objected, arguing that the Copenhagen Accord be included simply in a “miscellaneous” (or “MISC”) document, with the same status as the submission, say, of Tuvalu. Ultimately, the impasse was broken through a decision to “take note of” the Copenhagen Accord, giving it some status in the UNFCCC process but not as much as approval by the conference of the parties.

<br /Inside conference center>

The debate last night continued the theme of legitimacy that I discussed in my previous post. The spoiler countries couched their arguments in the language of legitimacy, arguing that adoption of an agreement made by a limited group of countries behind closed doors would be illegitimate and undemocratic. (The rhetoric on this was really quite amazing.) Since the Copenhagen Accord had been initially agreed among the US, China, India, Brazil and South Africa, joined later by the UK, Germany, and France, among others, and since the agreement had been endorsed by all of the UN regional groups, this led to the bizarre spectacle of a handful of countries essentially thumbing their nose (through UN procedures) at a decision personally agreed by the heads of state(or government) of all of the major world powers and endorsed by the vast majority of countries at the meeting.

Two other quick observations about Copenhagen. First, the Conference revealed the deep fissures among developing countries on the climate change issue and the complete breakdown of the G-77 as a negotiating block. In the closing plenary last night, Papua New Guinea openly said that in the Copenhagen Accord negotiations on Friday, proposals for stronger language about emissions reductions (which small island states had desperately sought) had been blocked by major developing country emitters (i.e., China and India), not by developed countries. He went on to chastise other developing countries for sending mid-level negotiators to the final meetings where the Copenhagen Accord was hammered out, rather than their heads of state – a signal of disrespect to the heads of state in the room working on the deal.

Second, the Conference brought home for me the power of the internet as a source of information. Throughout Friday, participants inside the Bella Center who had sweated blood to get their names on the small list of those who were admitted had virtually no idea what was going inside the building. This included not only environmental and business observers, but 99% of the government delegates – in essence, all but the extremely small number of people actually working on the deal. As the day unfolded, I found that the most reliable source of information was not what people were saying inside the conference hall (virtually all of which was simply rumor) but rather the AP pool twitter site, which came from reporters staked out around the room where the negotiations were actually being conducted. So, ironically, rather than spend the time, money, and carbon emissions to come to Copenhagen, one could have followed the conference equally well (or, in some respects, better) in the comfort of one’s own home!

Overcoming distrust – the need for a global climate finance registry

by Bryce Rudyk

The one thing that has become abundantly clear this week at Copenhagen is that there is very distinct lack of trust between developed and developing countries. This came to a head on Monday with the walkout of some of the G77 countries as they believed that developed countries were attempting to scrap the Kyoto Protocol.

A critical element in building trust and securing a deal is climate finance; public and private funding by developed countries for mitigation and adaptation in other developing countries. Some recent progress has been made on this issue. A consensus is emerging among developed countries on significant “Fast Track” funding for the next several years. Also, the recent AWG-LCA Chair’s draft, recognizes that private finance through carbon markets should be included in climate finance arrangements along with public funds. However, there is still no agreement on long-term financing, regulatory and other mechanisms, or governance structures.

The impasse stems from two basic problems: first, the lack to date of credible and substantial developed country commitments on public funding; and second, the absence of institutions and governance structures to ensure both equity and environmental effectiveness in climate finance.

Public Finance

Developing countries—wary from a half-century of often-frustrating experience with official development assistance (ODA)—are rightly skeptical of developed country assurances regarding future climate finance through public funding arrangements. The gap between promises and performance in general ODA, including the problem of the “disappearing donor,” is well known. Developed countries, on the other hand, are generally only willing to spend to spend significant domestic funds on international projects when they can maintain flexibility regarding future spending levels depending on program performance, unforeseen developments, and competing priorities.

At the same time, developing countries are seeking to replace or reform existing donor-dominated multilateral institutions, in favor of new structures that give them significant decision-making power over cost sharing, conditionality, and disbursement and use of funds. Developed countries, on the other hand, are rightly unwilling to commit funds without mechanisms to ensure adequate financial controls and assurances of positive environmental outcomes.

Although Mexico and Norway (among others) have very recently re-proposed a single global fund to collect and disperse all climate-related finance, such an agreement is politically infeasible and unsuited to advance the policy needs of decentralization, innovation and experimentation.

Private Finance Through Carbon Markets

Moreover, there is no way that such a fund could include private finance through carbon markets, which must play a major role in any carbon finance arrangements. Even if a single multilateral fund is established to receive and disburse public funds, such funds will, for a variety of reasons, continue to flow through bilateral and other arrangements. Climate finance will also be provided through a variety of means, including loan guarantees, concessionary debt, insurance, and mechanisms such as George Soros’ proposal to use IMF special drawing rights to leverage climate mitigation. Private capital through carbon markets will also be generated through a variety of channels. The EU, US, and other OECD countries are unilaterally developing domestic or regional cap-and-trade and offset credit systems that will likely become the main vehicle for private climate finance. This will fragment the existing multilateral Clean Development Mechanism (CDM) approach and potentially marginalize developing countries’ role in governance.

A Global Climate Finance Registry

In order to promote and track compliance with a climate finance deal, we envisage a global climate finance registry (with balanced governance) of funding commitments and actions financed by those funds, including all forms of both private and public finance, and covering both developed and developing countries. Because future climate finance mechanisms will be highly pluralistic, operating through a variety of bilateral, plurilateral, and multilateral arrangements, a single global registry is needed to recognize, track and ensure domestic verification of all of the many different undertakings and programs and present an aggregate accounting.

Recognizing that transparency is necessary for countries to judge the efforts of others, hold them accountable, and draw countries into compliance with their commitments, the global registry would build on current proposals for NAMA registries so as to include both public and private financing commitments (including those taking the form of credit offset programs under domestic ETS) from all relevant countries, as well as the fulfillment of these commitments.

Developing and operating a global finance registry should be the responsibility of an international body enlisting the participation of all nations. The registry would not disburse or spend funds or regulate carbon markets. Those actions would be carried out by an array of different international and domestic authorities.

The Registry would make important contributions by accounting for and reporting on the undertakings and outcomes achieved by these different bodies, serving as a clearing house for best practices for mitigation and adaptation performance assessment methodologies and results-based financial accountability, and promoting harmonization in carbon market credit offset recognition practices by domestic and international regulatory bodies. It should accordingly strive to develop performance metrics for emissions reductions achieved through different modes of financing.

The details of such a registry and other elements of a global regime for climate finance cannot feasibly, or appropriately, be resolved in the short term. But the Copenhagen process must, at a minimum, reach agreement on a comprehensive framework and set of principles for both public and private climate finance as well as an agenda for future elaboration and implementation. Such agreement (which should include credible arrangements for significant adaptation as well as mitigation funding) is essential to winning developing country trust and engagement and providing resources sufficient to curb, and adapt to, anthropogenic climate change. An agreed architecture and correlative set of undertakings for developed and developing country emissions reductions is also indispensible. But without the finance to achieve those reductions, the architecture by itself will be largely a façade.

The Illegitimacy of “Legitimacy”

by Daniel Bodansky

[Professor Dan Bodansky is continuing his dispatches from the climate change talks.  This post is cross-posted at the Smith School of Enterprise and Environment at Oxford.]

Copenhagen, December 17 – With the hours counting down to the end of the Copenhagen conference, real substantive negotiations have yet to begin. Instead, the focus has been almost exclusively on procedure. All week, the Danes have wanted to put forward their own compromise text, which would be negotiated in a smaller group – the approach typically used to hammer out an agreement. But some developing countries – most notably Sudan, Bolivia and Venezuela (apparently with the (at least) tacit support of China) — have rejected this approach, arguing that it lacks transparency and is hence illegitimate. Instead, they have insisted that the only “legitimate negotiating process” is to continue to negotiate on the basis of the heavily bracketed text that emerged over the last two years in the two ad-hoc working groups, in negotiating groups open to participation by all parties. In my view, this process virtually guarantees that the Copenhagen conference will not produce a meaningful agreement, since the texts emerging from the two ad hoc working groups are a mess, with multiple options within options, and negotiating them in an open-ended group, with hundreds of delegations, is a prescription for deadlock.

The refusal by some developing countries to allow the Danes to introduce a text or to negotiate in a smaller group is made in the name of ensuring a legitimate, transparent, democratic process. But another way of understanding it is as a cynical effort by certain countries to use procedural objections to prevent a substantive agreement. Yesterday, after the Danes said they would table new texts, developing countries objected and the formal meetings were suspended for most of the day while the Danes consulted with developing countries about how to proceed. Reportedly, the G-77 (the developing country negotiated group) refused to participate in a smaller group organized by the Danish presidency to have substantive negotiations.

Today, in a desperate effort to move from procedure to substance, the Danes accepted the procedural approach insisted upon by developing countries. They promised not to introduce any new texts, and convened two “contact groups” that are open-ended in participation, to consider the texts forwarded from the ad hoc working groups. Meanwhile, it appears increasingly likely that the conference outcome will be a short political declaration largely devoid of substance, and a procedural decision to continue the “process,” such as it is. The ultimate question, of course, is whether there is a deal to be had that bridges the gap between the US, which wants a common legal framework for developed and developing countries (including common provisions on monitoring, reporting and verification); the major developing country economies, which want to preserve the strong differentiation reflected in Kyoto; and the European Union, which would be willing to commit to another round of Kyoto-like targets, but only if the US is subject to a comparable regime and developing countries are willing to join a new legal agreement that subjects them to stronger commitments.

Climate: Does the World Need a China-US Deal?

by Richard Stewart & Benedict Kingsbury

The Copenhagen process is multilateral, focused on reaching global agreements. But to get to a strong and truly effective global climate regime, bold bilateral initiatives may be needed. The conditions are propitious for a deal between China and the US, the world’s largest and second largest emitters, but that will call for imaginative and committed leadership on both sides as well as much political groundwork. Beijing and Washington could strike a deal under which each would undertake to limit emissions and the US would grant offset credits for reductions in China that could be used by US firms to comply with US domestic cap and trade regulation. The credit offset mechanism would deliver private financing and technology to China through carbon markets, probably through sector-based programs, and could be supplemented by measures for technology cooperation. This deal would bring the world’s two major emitters into an international emissions limitations agreement — something the Copenhagen process on its own may to achieve – and set the stage for a series of similar bilateral deals involving the EU and other developed countries as well as the US on one side, and China, India, Brazil and other major developing countries on the other. Such a web of bilateral deals could provide the foundation for negotiation of a more substantial and effective global climate agreement than Copenhagen or immediately following rounds of UN-global negotiations can now realistically achieve.
A China-US deal makes sense for both sides. China has already embarked on an ambitious energy efficiency drive, which forms the basis for its recent undertaking to reduce emissions intensity by 45%. China has economic, political and environmental reasons for its actions. China has much to gain from nationwide energy efficiency, and for some technologies (e.g. renewable energy and power stations) a large domestic market will also provide a springboard for exporting this technology. A deal with the US could bring in welcome infusion of additional capital and know how as well as markets for many Chinese technologies. Politically, China can benefit from showing leadership on a major global issue, and from maintaining access to markets in countries with emissions controls; and the Chinese government is alert to adverse impacts of climate change in China and the accompanying threat of social unrest and political destabilization. Environmentalism too has rising affirmative salience in Chinese public and governmental thinking.

From the US perspective, bringing China into an international limitations agreement would reduce leakage of investment and jobs as well as securing climate benefits and meeting the domestic US political demand for action by China as a condition for the US to undertake strong regulatory limitations on greenhouse gas emissions.

A China-US deal could overcome a major impasse in the Copenhagen process concerning measuring, review, and verification (MRV) of emissions reductions. China has argued strongly that MRV requirements apply to developed (Annex I) countries but should not apply to China or to any developing countries. But assuming Congress manages to pass legislation adopting a cap and trade greenhouse gas regulatory system, this will likely authorize the US Environmental Protection Agency (EPA) to implement a credit offset program under which some emissions reductions in developing countries generate credits that can be sold into the US market. This is politically plausible because offsets generated by emissions reductions in China would reduce compliance costs to US emitters while at the same time creating business opportunities for US firms. Some equivalent of MRV will be part of any such system administered by the US EPA. So China may see benefits in accepting, at least bilaterally, some kind of MRV to gain access to that market, all the more so if the EU and other emissions trading systems take a similar approach. If such a US system is established, President Obama may well be able to make a deal with China to award credits for its reduction by executive agreement, avoiding the political hazards of a treaty requiring Senate ratification.

Another critical element in climate deals for China will be border carbon adjustments, which the US (or the EU and others) may seek to impose on imports from countries without comparable emissions controls, in order to level the competitive playing field for industry and avoid leakage (migration of production to areas with weak emissions controls) or the undermining of climate objectives. China has sought to get agreement in the Copenhagen process to prohibit such measures. But US Congressional climate legislation is likely to include border carbon measures aimed at imports from major developing countries without emissions limitations, which will provide a further incentive for China to agree at least bilaterally on limitations (the trade measures in the Montreal Protocol seem to have influenced China to limit its production and use of ozone depleting chemicals.)

Bilateralism can be damaging, and those committed solely to achieving a global UN deal will bristle at this prospect. But a global-multilateral approach may not on its own produce enough. And while bilateral negotiations may be seen as a Western ploy to break up the G77+China negotiating group, it is not so clear that this group can necessarily serve the very divergent interests of its members on some key issues, as strains during the Copenhagen negotiations have demonstrated. Vulnerable island and low-lying states have understandably demanded that large emitters among developing as well as developed countries must accept much tougher emissions curbs. African delegates are right to protest that (with the partial exception of REDD for forests) too little is on the table at Copenhagen to address the interests of their peoples, who were and remain low emitters, bear high costs from reducing emissions (e.g. banning charcoal as fuel), have few resources to meet the costs of adapting to drought or other consequences of climate change, often lack electricity or other modern energy sources, and are unjustly beset by poverty and short life expectancies. A bilateral China-U.S. deal would do nothing to address these latter problems, but it might conceivably help open the way for a much stronger global deal with substantial emissions curbs and large financial flows in which adaptation, low-carbon development and even some basic climate justice receive more fundamental attention with rising stakes and more on the table.

Red herrings in debates over climate finance

by Arunabha Ghosh

One gets a new perspective on climate negotiations when your toes are about to fall off! It took me 8.5 hours of standing in sub-zero temperatures to get registered at the Bella Centre (and this is after I was only about fiftieth in line, showing up at 6.45am). There were thousands of people behind me when I last looked back. Not one official came out to explain what was happening or whether people should simply go home. If this level of mismanagement had occurred in a developing country, at best we would have called for ‘capacity building’; worse, we would have been reading about ‘poor governance’, ‘lack of foresight’, or even ‘disregard for basic human rights’. Seeing this, a potential recipient of climate finance in a developing country might wonder: why should a rich country taxpayer worry about mismanagement in poor countries when their own record does not seem to be much better? But an opponent of public finance for climate change might also ask: why should we believe that the UN or any other international body can handle $100 billion when it can’t manage a conference? Both sides would be right but their questions come from completely different perspectives. This is the fundamental divide in climate negotiations – there seems to be no reason to trust each other.

Much is written these days about the need for building trust. Political scientists and international lawyers offer many solutions: credible commitments to resolve time inconsistencies, contingent and conditionality-based support, procedures for monitoring and verification, reciprocity in actions, and compliance-oriented sanctions. But international negotiations, in general, and climate negotiations, in particular, have shown how difficult it is to either agree on such arrangements or to put them into practice. For instance, the Kyoto Protocol already suffered from an institutional design that postponed fines for non-compliance to future commitment periods. Worse still, if a completely new protocol is negotiated at Copenhagen or afterwards (as is the demand of developed countries), then the credibility of future compliance procedures will also be called into question.

The trust deficit is particularly deep on the question of climate finance. Current negotiations are unlikely to result in a substantive deal, notwithstanding a new Mexican-Norwegian joint proposal. Word in the corridors point more in the direction of a fudge, whereby short-term funding proposals will be made (like the recent EU announcement or the declaration at the Commonwealth summit); long-term institutional and financing questions will remain open for further discussions. But discussions on emissions reductions or low energy intensity targets without thinking about where the money will come from suggest a strategy of putting the cart before the horse. Remember that the Montreal Protocol needed the London Amendments of 1990, which included a financing mechanism, to gain acceptance from developing countries and facilitate effective implementation.

If Copenhagen does not deliver substantive outcomes on climate finance, in the minimum we could start building trust by exposing some of the red herrings that distract attention from in depth discussions.

Public versus private

A common demand from developing countries is for public finance support from rich countries for their mitigation and adaptation projects. A common refrain in developed nations is that big transfers of taxpayer money to poor countries is political infeasible. This is an unhelpful way to frame the climate finance debate. It is now well established that a funding mix is essential. As currently configured, carbon markets will not generate funding to match the actions required. The incremental costs of moving up the technology ladder – R&D, capital costs, intellectual property – imply public financing support. At the same time, public financing that does not facilitate sustainable business models to induce greater flows of private capital would result in cherry-picking technologies and entrenched vested interests in some sectors over others. Political leaders need to be more honest to taxpayers about the purpose of public funds to combat climate change. Treating it as merely development assistance is unhelpful, dishonest and undermines negotiations.

Us versus them

A second worry about any international arrangement on climate finance is the fear that this is a recipe to strengthen one’s competitors. This was implicit in Todd Stern’s comment during the negotiations that he did ‘not envision public funds, certainly not from the US, going to China.’ Yet, climate finance is needed to facilitate cooperation on research, development and deployment of clean energy technologies. In fact, in November China and the United States announced several joint initiatives, on energy efficiency, research on cleaner coal plants, electric vehicles, carbon capture and storage, and renewable energy, among others. Other bilateral and regional initiatives have included Australia, the EU, India and Japan in addition to China and the US. The main problem is that the sums involved are too small compared to the scale of investments needed.

Conditionality versus commitment

A related problem is that, on one hand, rich countries argue that they would not transfer funds unless recipients undertake to fulfil conditions, including clear programmes of action that are monitored and verified. In turn, poor nations want a credible commitment on financing before they promise to undertake actions. This chicken-and-egg debate stems from a long history of unmet funding commitments on the donor side (the record of the G8 on its Gleneagles promises being only the most recent example). Once again, as long as we think about climate finance as purely wealth transfers from rich to poor, the donor-recipient, conditionality-commitment, you-first-me-later morass will only become deeper.

A way forward

In a recent paper, Kevin Watkins and I propose a multilateral Low Carbon Technology and Finance Facility. It would use public funds to cover incremental costs for more efficient technologies. The facility would also adopt flexible modalities to leverage private investment, through concessional finance, loan guarantees, risk insurance, advance payment guarantees, and payment of intellectual property fees. Further, it would give rich and poor countries balanced representation in decision-making and in monitoring and reviewing both project performance and financial flows. It is unlikely that Copenhagen will be the venue for movement along these lines. But a constructive dialogue on governance questions will not begin unless we recognise how current narratives define and distract discussions on climate finance.

Update from Copenhagen

by Daniel Bodansky

Monday, December 14 – The climate negotiations ground to a halt for much of today, as negotiators debated the organization of work for the second and final week of the meeting. The ostensible cause of the breakdown was concern among (some?) developing countries that the Kyoto Protocol (KP) track in the negotiations is moving more slowly, and getting less attention, than the Convention track (the so-called Long-Term Cooperation Action track, or LCA) (although since the LCA track is itself moving very slowly, it is a bit difficult to understand the concern). For many members of the G-77, the differentiation enshrined in the Kyoto Protocol between developed countries (which have quantified emission reduction targets) and developing countries (which do not) is sacred. All last week, developing countries had been emphasizing the importance of continuing the Kyoto Protocol, rather than merging it into a single comprehensive agreement that addresses both developed and developing countries (as the EU, Japan and other industrialized countries would prefer). At the procedural level, this developing country position is reflected in a desire to maintain the complete separation between the two tracks in the negotiations, rather than merging them into a single discussion, as the Danes apparently envisioned.

But whether substantive concerns about the KP’s future fully explain today’s events is open to question The organization of work envisioned by the Danes (as COP president) had apparently received tacit approval at a ministerial meeting held on Sunday. So there is no reason why developing countries that had accepted the work program yesterday should suddenly object today. One possible explanation is that Sunday’s ministerial meeting included only a select group of about forty countries, and today’s work suspension reflected a move by the countries excluded from Sunday’s meeting to reassert themselves. Others speculate that today’s events reflect a reaction by working level negotiators worried that ministers might be too willing to reach agreement. Whatever the explanation, the COP lost the better part of a day, with only two days remaining now before heads of state arrive.

Ultimately, the Danish president convened a ministerial-level group to consider Kyoto Protocol issues, and a series of ministerial-led groups to consider particular issues in the LCA, including: the long-term goal of limiting temperature change (2 degrees, 1 ½ degrees, etc.), the way in which developing country actions are be reflected (a schedule, registry, etc.), and the scale of financial contributions. The other issues in the LCA, not elevated to the ministerial level, will continue to be discussed tonight and tomorrow morning in the various LCA contact groups, with the LCA (in theory) scheduled to wrap up its work tomorrow night and to report back to the COP on Wednesday morning.

Overall the conference is chaotic. Reportedly, some participants spent the better part of the day outside waiting in the registration line. Meanwhile, inside, NGO observers sang songs, strummed the guitar, and organized a “crime scene” with Sherlock Holmes inspecting a chalk drawing on the floor of Africa. With the number of registered participants far exceeding the capacity of the conference, security guards will begin restricting access tomorrow, with each NGO receiving only a limited number of slots.

Seawalls are Not Enough: Climate Change and U.S. Interests

by Andrew Guzman

For too many years American climate change debates were political contests in which scientific evidence took a back seat to political posturing, obfuscation, and ultimately, inaction. Today, the science demonstrating that our world is warming and that humans are a primary cause of this warming is unambiguous. Though there remain a few public voices willing to deny the evidence, the credibility of their objections fades with each new development and the ever-mounting evidence.

Now that the public discourse has accepted the reality of climate change, the discussions have turned to focus on possible responses to the problem and the costs of those responses. Even where there is consensus on the existence of climate change, there is often disagreement about what should be done. The most common objections to action point to the costs that would be involved. For example, critics of the Waxman-Markey cap-and-trade climate change bill have claimed that it would cost the average American household $1,870 per year. There is little evidence to support this figure, but it has entered the political discourse nonetheless. On the other side of the debate, proponents of the bill point to a Congressional Budget Office report suggesting that the bill will cost the average family less than one-tenth of that – just $160 per year.

This debate over the costs of action is critical, but it cannot guide policy by itself. We also have to understand the costs that climate change will impose. What will it cost the United States if the Earth warms?

Professor Jody Freeman and I investigated this question in our recent article, Climate Change and U.S. Interests, published in the Columbia Law Review. We sought to estimate the full cost of climate change on the United States. The article is in part a response to the view, advanced in some fora, that the United States can afford to be passive with respect to emissions reductions. The idea is that the U.S. will suffer very modest economic harms as a result of climate change – indeed, some suggest that the country may enjoy small economic gains – and so has little incentive to bear any costs to reduce global warming.

We dispute this conclusion, which emerges from “integrated assessment models” (IAMs) of the economy. We do not challenge the models themselves or the economists who use them, but we object to how the results of these economic studies have been used in policy debates. The translation of IAMs from academic research to policy-relevant evidence too often overlooks two main points. First, IAMs are systematically biased downward in their estimates because they omit a range of economic harms that will be felt as the earth warms. Second, the assumptions used in the IAMs are often forgotten when the results are considered in policy debates, and results are simplified in ways which aggravate the downward bias of estimates.

Limiting Climate Change: Who is going to pay?

by Richard Stewart & Benedict Kingsbury

Here in Copenhagen, agreeing on some principles of climate finance, at least in very basic form, is at last becoming a priority. Last week, after announcing EU money for a climate change fast start fund, German Chancellor Angela Merkel acknowledged that developing countries would only enter into a climate agreement if sufficient money was committed by developed countries: “This is the biggest headache to me.”

And last Thursday, billionaire George Soros proposed using IMF Special Drawing Rights to leverage over $100bn for mitigation and adaptation in developing countries, with the investments eventually to be recouped by the IMF. This has the attraction that the SDRs are already there – they do not require transfers from taxpayer funds. But this proposal for a fairly radical shift in what the IMF does has not attracted much attention at the COP.

All agree a final political declaration will depend on the developed countries putting some public money on the table. Where the developed governments are starting to make commitments is to the fast start fund, which will fund projects (clean adaptation, clean technology and avoided deforestation projects) immediately and through 2012, when the potential successor to Kyoto would begin. The EU has now pledged €7.2 billion over those three years, although a portion of this is existing promises or will be reallocated from aid budgets, rather than new funding. The US and others expect to provide similar funds too.

But while symbolically important (and potentially a stepping stone to further commitments), the amounts now being discussed by developed country governments are nowhere near what is likely needed to limit warming to 2°C, nor are they commitments that will last beyond 2012. The UN and other respected independent sources estimate that €55-80 billion in additional international financing is needed annually over the period 2012- 2020 to curb emissions in developing countries, and an additional €10-20 billion annually for adaptation, for a total of €65-100 billion annually.

Much of the needed finance—perhaps €50-70 billion annually—will have to come from public sources, including bilateral ODA, domestic emissions allowance auctions, World Bank and other multilateral programs, and international levies on marine and aviation sectors and perhaps a tax on international financial transactions.

Private finance would have to supply the balance: €15-30 billion annually. It will largely be generated through the international carbon markets, in which regulated entities in developed countries purchase emissions reduction credits from verified reducers in developing countries. Up to this point in the negotiations, developing countries had been very hesitant to include private finance in the funding mix. However, the AWG-LCA Chair’s most recent draft text includes recognition that private finance should play some role (and that part of the text is not in square brackets). This is a significant and important shift because AWG-LCA (Ad Hoc Working Group on Long-term Cooperative Action) is where most of the negotiating is happening right now.

There is very little detail yet in the negotiating texts on the institutions necessary to coordinate, deliver, and govern these funds, or on MRV arrangements for donors (which currently seem unlikely to be very robust). Some vital topics, such as finance leveraging, are not even on the table.

Leveraging—achieving more reductions per unit of finance than would be achieved through awarding one credit for every unit of emissions reduction (e.g. for every tonne or carbon equivalent)—is essential if the available funds are ever to be scaled up to the necessary levels of finance to adequately curb emissions without blocking low-carbon development.

Leveraging of public financing can take a number of forms: low-interest loan guarantees or concessionary debt in which loans for low-carbon growth are given to developing countries below commercial rates; developed country funds could be used as collateral to secure developing country loans; provision of investment insurance or export credit provided by domestic or international public agencies, to minimize risk for private investors in developing country mitigation projects; or arrangements to catalyze technology transfers, which may include domestic tax or fiscal incentives to developed country manufacturers/patent holders.

In the case of private funding, leveraging might take new forms. Two likely techniques are:

1. Intermediary carbon banks would purchase reductions in developing countries at prices approximating the marginal costs of producing them. The banks would then sell the reductions at the market price that credit offsets command in developed countries—quite often a large spread—with the difference used to purchase additional reductions for the benefit of the climate system, or development goals.

2. Credit Discounting would require, for example, that 1.25 offset credits have to be surrendered to offset 1 unit of domestic emissions by regulated sources. This mechanism is found in the Waxman-Markey bill that passed the U.S. House.

But as we said above leveraging options, including arrangements that use public and private funds to leverage each other, are not on the table for serious discussion in Copenhagen. Unfortunately, that discussion is dominated by the issue of the magnitude of financing, but some basic approaches to MRV and climate finance institutions are being negotiated. We will write tomorrow on institutions that might overcome the basic lack of trust most developing countries feel in the prospects that adequate finance will actually flow to their domestic mitigation projects or programs.

Blogging the Copenhagen Climate Talks and Climate Finance, More Generally

by Chris Borgen

As the UN Climate Change Conference in Copenhagen enters its crucial week, we will be joined by a few guests who will be blogging about the climate talks, sometimes from Copenhagen itself.

Dan Bodansky of the University of Georgia (and soon to be of Arizona State University) and the author of the book The Art and Craft of International Environmental Law has already sent us a post from Copenhagen (as well as this post and this post from the Barcelona run-up to Copenhagen). We look forward to his further observations.

We are also looking forward to contributions this week from Andrew Guzman of Berkeley Law, co-author (with Jody Freeman) of the recent article Sea Walls are Not Enough: Climate Change and U.S. Interests and author of the forthcoming book Climate Change and the Apocalypse (my kudos on the choice of title). readers may remember that we have previously hosted a book discussion of Andrew’s book How International Law Works.  We welcome him back. 

Finally, we are pleased to have five contributors from the new book Climate Finance: Regulatory Funding and Strategies for Climate Change and Global Development (NYU Press 2009).  The book can be downloaded from the International Climate Finance page of NYU’s Institute for International Law and Justice. The co-editors of the volume Benedict Kingsbury, Richard Stewart, and Bryce Rudyk will all be joining us, as will contributors Arunabha Ghosh and Nathaniel Keohane. I know that at least Benedict and Bryce are at Copenhagen, and I would not be surprised if some of their other colleagues are there as well. 

Benedict Kingsbury is Director of the Institute for International Law and Justice at NYU School of Law. He has written extensively on trade-environment disputes, the United Nations, and interstate arbitration and the proliferation of international tribunals.

Richard Stewart directs NYU’s Center on Environmental and Land Use Law and Global Law School Program. He has formerly served as Assistant Attorney General for Environment and Natural Resources, U.S. Department of Justice, and as Chairman of the Environmental Defense Fund.

Bryce Rudyk is Coordinator of the International Climate Finance Project and Research Fellow at the Center for Environmental and Land Use Law at NYU School of Law. His research focuses on financing climate change mitigation and adaptation.

Arunabha Ghosh is Oxford-Princeton Global Leaders Fellow at the Woodrow Wilson School of Public & International Affairs, Princeton; Associate at the Global Economic Governance Programme, Oxford (see this resource guide to climate change governance issues); and Faculty Associate at the Smith School of Enterprise and the Environment, Oxford. He previously worked as Policy Specialist at UNDP’s Human Development Report Office in New York, where he authored the 2006 HDR and co-authored the 2005 and 2004 editions.

Nathaniel Keohane is Director of Economic Policy and Analysis at the Environmental Defense Fund, and Adjunct Professor at NYU School of Law. He has published articles on environmental economics in numerous academic journals, and is the co-author of Markets and the Environment.

Their Climate Finance project provides some much-welcome “brass tacks” considerations on the financing and regulatory issues of climate change governance. Here’s the short description:

Preventing risks of severe damage from climate change not only requires deep cuts in developed country greenhouse gas emissions, but enormous amounts of public and private investment to limit emissions while promoting green growth in developing countries. While attention has focused on emissions limitations commitments and architectures, the crucial issue of what must be done to mobilize and govern the necessary financial resources has received too little consideration. In Climate Finance, a leading group of policy experts and scholars show how effective mitigation of climate change will depend on a complex mix of public funds, private investment though carbon markets, and structured incentives that leave room for developing country innovations. This requires sophisticated national and global regulation of cap-and-trade and offset markets, forest and energy policy, international development funding, international trade law, and coordinated tax policy.

Thirty-six targeted policy essays present a succinct overview of the emerging field of climate finance, defining the issues, setting the stakes, and making new and comprehensive proposals for financial, regulatory, and governance mechanisms that will enrich political and policy debate for many years to come. The complex challenges of climate ­finance will continue to demand fresh insights and creative approaches. The ideas in this volume mark out starting points for essential institutional and policy innovations.

Remember, you can download the book free of charge from here.

We at Opinio Juris are excited that such a distinguished and varied group of experts will be with us over the next week. We encourage our readers to weigh-in with questions and comments.