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Environment: Climate Change Vol. IV [2]
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Environment: Climate Change Vol. IV [2]
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Records of the Council of Economic Advisers (Clinton Administration)
Alicia Munnell's Files
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FOIA Number: 2017-1095-F
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the William J. Clinton
Presidential Library Staff.
Collection/Record Group:
Clinton Presidential Records
Subgroup/Office of Origin:
Council of Economic Advisers
Series/Staff Member:
Alicia Munnell
Subseries:
OA/ID Number:
10103
FolderID:
Folder Title:
Environment: Climate Change Vol. IV [2]
Stack:
Row:
Section:
Shelf:
Position:
S
20
3
2
3
Withdrawal/Redaction Sheet
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001. memo
To Francine Obermiller, Thomas Rhoads from Lisa Branch re: Mtg w/
02/19/1997
b(6)
Robert Repetto, Tues, 2/25, 2pm [PII] [partial] (1 page)
002. memo
To Lisa Branch from Mail Link Monitor, re: Confirmation: Appt
02/21/1997
b(6)
Request for Munnell, Alicia H [PII] [partial] (1 page)
COLLECTION:
Clinton Presidential Records
Council of Economic Advisers
Munnell, Alicia
OA/Box Number: 10103
FOLDER TITLE:
Environment: Climate Change Vol. IV [2]
2017-1095-F
bg238
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a)]
Freedom of Information Act - |5 U.S.C. 552(b)]
PI National Security Classified Information |(a)(1) of the PRA|
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office |(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute |(a)(3) of the PRA|
an agency |(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute |(b)(3) of the FOIA]
financial information |(a)(4) of the PRA
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information |(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA|
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy |(b)(6) of the FOIA]
personal privacy |(a)(6) of the PRA|
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA|
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions |(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA|
RR. Document will be reviewed upon request.
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curr
List of Recipients for the
MM
Periodic Updates from the Climate Talks
Bonn, Germany, 24 Feb to 7 March 1997
Name
Agency
Fax Number
Eilsen Claussen
State
202 647-0217
Rafe Pomerance
State
202 647-0217
Bra:lford Johnson
State
202 647-0191
Erica Keen
State
202 647-0753
Susan Biniaz
State/L/OES
202 736-7115
Jack Shick
State
202 647-0191
Barbara Cates
State/EB
202 647-4037
Alimia Munnell
CEA
202 395-6947
Abraham Haspel
DOE
202 586-3047
Dir. Forrister
DOE
202 586-9987
Mar: Chupka
DOE
202 586-0861
Mar: Nichols/David Doniger
EPA
202 260-5155
David Gardiner
EPA
202 260-0275
Elaine Haemisegger
EPA
202 260-0290
Nancy Kete
EPA
202 233-9598
Charles Rawls
USDA
202 720-5437
Ros:na Birbaum
OSTP
202 456-6025
Steve Seidel
CEQ
202 456-6546
David Sand alow
NSC
202 456-2710
Sally Kane
NOAA
301 427-2073
Jim Rubin
DOJ
202 514-4231
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3
26 February 1997
Memorandum
To:
Please See Attached List
From:
USDEL/Geneva, Mark G. Hamble
Subject:
Negotiations under the Framework Convention on Climate Change
Periodic Update No. 2 for February 25/26, 1997
This message transmits unofficial reflections on activities and developments during the
climate negotiations which are being held in Bonn between February 24 and March 7. 1997. While the
contents are unclassified. this report is intended for use by officials of the the U.S. Government only.
This report covers activities from the afternoon session on Tuesday, Feb 25. through the morning sessions
on Feb 26. We are also including a report on the Feb 25 SBI meetings prepared by DOE's Linda
Silverman, and a copy of "ECO", the NGO rag published with funding from the German and Danish
Environment Ministries. The final paragraphs can be used as a DAR item as desired and appropriate..
Climate Talks. Update N: 2: "The Cauldron Heats Up as Subsidiary Bodies Attack Their Respective
Issues
A Question of Dates
The good news :. that all thrie subsidiary bodies are reporting progress in getting through their
respective agendas. The :ad news is that the cauldron is heating up with regard to certain decisive issues
which will dictate the ma: ner in which these negotiations are brought to finalization. Indicative of this
latter point was the (at fi it glance) innocuous request made by both Tanzania (speaking for the G-
77/China) and by China questing that COP-4 be held in 1998 rather than in 1999 as had been
recommended by the Bur:au. The G-77 argued that this date is in conformance with the Convention which
stares that COPs will be hild annually unless decided otherwise. We see ulterior motives (related to the
review of annexs and of Annex I commitments - both of which must be carried our "no later than" Dec 31,
1998), and are striving to find a compromise. Also indicative of the rough passage that our protocol
framework faces were comments made by China's delegation indicating his strong misgivings with aspects
of our proposal. ((I will leave it to our readers' intuitive sense to determine which ones (which he did not
specify in any case.))
SBSTA and SBI Make Piperess
Both the Subsidi:ry Body on Scientific and Technological Advice (SBSTA) and the Subsidiary
Body on Implementation (SBI) reported forward movement on Feb 25 and 26. The SBSTA contact group
on AU reports that good rogress was achieved and that, despite some complicating maneuvers on the part
of the Philippines. a reporting format had almost been agreed. National communications issues were
disposed of smoothly on Feb 25. while a contact group on methodological issues continued to meet on
Feb 26. The question of i new NGO consultative mechanism was passed from SBSTA to the SBI for
consideration -- despite criticism from the EU that nothing tangible has been forthcoming on this matter
and urging that the Secretariat undertake consultations with NGOs in the near future.
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At the discussion of Annex I communications in the SBI on Feb 25, the British announced that
they have completed their Second National Communications (the first Annex I Party to do so) and bragged
about how they would ntinuc to be below projected largets for the foreseeable future. Financial and
technical cooperation and issues related to the Global Environment Facility provided for some tumultuous
discussion during the Feb 26 debate A paper is to be drafted by & contact group to evaluate the interim
financial mechanlsm.
More vexing debate is expected in the SBI on Feb 27 when various budgetary Issues are raised.
The budget for 1998/99 is projected liD increase substantially over the current one. We have asked the
Secretariat to provide us with the details for the anticipated increase. Among the points of contention is a
proposal to establish FORC liaison offices in both New York and Geneva to assist in communicating with
G-77 representatives. While symathetic to their inability to remain as informed as we are in this process,
we believe that a Canadia n suggestion to ask Secretariat personnel to brief Missions in New York and
Geneva on a periodic basis (as is done by the Biodlversity Secretariat) has some merit and would be much
more cost-effective
AG-13: Moving Towards a Paper
Meanwhile, Britain's Patrick: Szell is moving his AG-13 working group towards consideration of a
an informal chairman's I!Xt outlining some tentative ideas concerning a multilateral consultative process
(MCP). In both session of the group on Feb 25 and 26, discussion focused on the possible elements of a
MCP. These include su:h matter S as characteristics, objectives, institutional arrangements, and
procedures. Szell indicated that he will have a paper available no later than Thursday. Feb 27.
More NGOs and Staffde Due to Arrive
As noted in Update No. I, the current contingent of U.S. environmental NGOs is quite small. We
understand that reinforcements will begin to arrive tomorrow. Business is already here in fairly substantial
numbers and have come () us with a complaint or nwo or for general comments (for example. EEI has
presented us with a detailed exposition on changes they would like to see in both the U.S. protocol
proposal and in Chairma Estrada's "compilation" document.) Relations remain amicable, however. The
scene will liven up by the arrival at the weekend by two Congressional staffer from the House energy
subcomminee, Cathy Va: Way from the majority and Sue Sheridan from the minority. A staffer from
Senator Lieberman's office is also scheduled to attend next week's AGBM sessions, as well.
)
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The following paragraphs can be used as a DAR item as desired or appropriate:
Climate Talks. Update ]: O. 2: "The Cauldron Heats Up as Subsidiary Bodies Attack Their Respective
Issues
The good new: is that all three subsidiary bodies are reporting progress in getting through their
respective agendas. The bad news is that the cauldron is heating up with regard to certain decisive issues
which will dictate the manner in which these negotiations are brought to finalization. Indicarive of this
latter point was the (at rst glance) innocuous request made by both Tanzania (speaking for the G-
77/China) and by China requesting that COP-4 be held in 1998 rather than in 1999 as had been
recommended by the Bureau. The Ct-77 argued that this date is in conformance with the Convention which
states that COPs will be held annually unless decided otherwise. We sce ulterior motives (related to the
review of annexs and of Annex I commiuments - both of which must be carried out "no later than" Doc 31,
1998). and are striving to find a compromise. Also indicative of the rough passage that our protocol
framework faces were mments made by China's delegation indicating his strong misgivings with aspects
of our proposal. ((I will leave it to our readers' intuitive sense to determine which ones (which he did nor
specify in any case.))
Both the Subsidiary Body on Scientific and Technological Advice (SBSTA) and the Subsidiary
Body on Implementation (SBI) reported forward movement on Feb 25 and 26. The SBSTA contact group
on AIJ reports that good progress was achieved and that, despite some complicating maneuvers on the part
of the Philippines. a reporting formal had almost bcen agreed. National communications issues were
disposed of smoothly on Feb 25, while a contact group on methodological issues continued to meet on Feb
26. The question of 1 new NGO consultative mechanism was passed from SBSTA to the SBI for
consideration - despite criticism from the EU that nothing tangible has been forthcoming on this matter
and urging that the Secretariat undertake consultations with NGOs in the near future. At the discussion of
Annex 1 communication; in the SBI on Feb 25, the British announced that they have completed their
Second National Communications (the first Annex I Party to do so). Financial and technical cooperation
and issues related to the Global Environment Facility provided for some rumultuous discussion during
the Feb 26 debate. A pa:er is to be drafted by a contact group to evaluate the interim financial mechanism.
Meanwhile, Britain's Patrick Szell is moving his AG-13 working group towards consideration of a
an informal chairman's IEXI outlining some tentative ideas concerning a multilateral consultative process
(MCP). In both sessions of the group on Feb 25 and 26, discussion focused on the possible elements of a
MCP. These include su:h matter $ as characteristies, objectives, institutional arrangements, and
procedures. Szell indicated that he will have a paper available no later than Thursday, Feb 27. (Hambley)
)
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SB12/25/97
The first session of the SBI dealt primarily with administrative and financial issues: substantive issues were
pushed to later in the week in order 10 give delegates time to read the just-received documents. The session
began with adoption of the report of the 4th session of the SBI, which was held in December 1996. The
Chair then explained that the election of vice-chairs would be delayed because the Latin Americans were
still deciding who their candidate would be. National communications from Annex I parties were
discussed; of the 34 submitted (only Belgium and Lithuania have not completed their first
communications), 31 visits for in-depth reviews have taken place and 20 reports have been issued (and are
available on the web). The UK proudly announced that it has submitted its 2nd national communication,
and that It will be 4-8% below 1990 by 2000 (22% below for methane and 62% below for N20).
The Executive Director :f the FCCC, Michael Zammit Cutajar, provided a broad explanation of various
financial and administrativ matters. First, he indicated the need for predictability in the GEF
replenishment process -- the GEF needs to receive a clear signal from the FCCC regarding what activities it
should fund and there ne=:ds to be certainty with regard to the level of contributions to the GEF. He then
explained that the FCCC has received 85% of its approved budget for 1996, with full contributions from
only 61 countries out of inore than 1.50 countries, including some Annex II countries (the US is fully paid
up). On the program budget for 1998-99, the Secretariat has reconstructed a new work program, based on
2 major programs (science & technology and implementation), with subprograms below each -- the budget
would be between S-10 million DM. depending on how much UN conference services are used. He also
explained that any new pst-Kyoto ad hoc process would need a separate budget.
The only contentious iss. e raised came up at the end of the session regarding the date and venue of COP4.
The G-77/China were in sistent that COP4 be held in 1998, as explicitly stated in the Convention. It
appears that for the G-77. China, this is related to the graduation issue, which must be settled before
December 1998; delaying: COP4 until 1999 would result in the graduation issue being put on the agenda
for COP3. The second r:view of adequacy, which also must be addressed before December 31. 1998,
would be treated similary. The Secretariat requested that Parties interested in hosting COP4 indicate their
interest at the July meeting. On future meetings, the Secretariat gave the Parties the choice of having 2
two-week blocks of mee: ngs each year with the COP running concurrently or 2 rwo-week blocks of
meetings with an addition al one-week COP.
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CLIMATE NEGOTIA TIONS BONN FEBRUARY '96 NGO NEWSLETTER
26
FEBRUARY
MIND-NUMBING
ISSUE
Eco has been published by Non-Gevernmental Environmental Groups at inajor international conferences since the Slockholm Environment
Conference in 1972. This issue is produced co-operatively by CAN groups accending the Climate Negotialions in Bonn. February-March 1997
Canapé Crisis!
Eco has learned the truth about the apparent
food for the event was in (act left over from
copies of national communications. The ruse
stateness of the canapés served at last night's
previous receptions in Geneva - some of it
was only spotted by our contact when he saw
reception. Sources deep within the Secre:wial
even going back as far as COP2 Apparently.
chat, in an oversight one of them had been 13-
who do not wish 10 be identified for fear of
during the move to Bonn it was loaded into
belled as emanating from Belgium, which he
persecution. have exclusively revealed that the
unmarked filing cabiners. disguised as surplus
consinued page 3
C N REPORTS
Owing 10 lack of interest. the rest of today's
SESTA Tuesday Afternoon
tember 1997 as directed by SBSTA in its last
Eco consists entirely of conference reports
SBSTA look up several agenda items in the
session. The IPCC will not conduct any new
and comment.
aftenioon but emphasized cooperation with rel-
research for this paper. but merely synthesize
evant international organizations. Prof. Ben Bolin.
existing data as required for any technical paper.
Chairman of the IPCC. delivered an oral report
Kuwait Nigeria. Venezuela and Saudi Ara-
SBSTA Tuesday Morning
about the status of forthcoming IPCC reports.
bia all insisted that this technical paper should
SBSTA's first session began with the usual and
Two :nore technical papers have been completed
be turned into a special report. but Prof. Bolin
unfortunately quite laborious wask of getting
on simpleclimate models. and on the stabilization
reminded them that the IPCC Plenary already
through the organisational aspects. One panicu-
of atmospheric greenhouse gas concentrations. It
accided that it would be a Technical Paper in
lar concern expressed by delegares was the lack
should be noted that SBSTA does not seem to
Mexico City.
of effective distribution of relevant documenta-
intend to reflect on these significant reports -
The Netherlands. USA. Australia and
lion in good time for the sessions. Following
perhaps they will be considered by the AGBM
AOSIS all urged for the completion of the tech-
accreditation of 13 new NGOs. two cortact
next week. AI the least. it is to be hoped that the
nical paper. using the country submissions as
groups were created: one on All. and another
distinguished delegates of these bodies will try to
guidance. The Marshall Islands contended that
on methodological issues. On substantiv: is-
educate chemselves from these important scien-
"[further] delay is political interference in sei-
sues. discussion focused on cooperation with
lific documents before undertaking further pollti-
entific discourse."
relevant international organisations. WMO DTC-
cal negotiations. Stay tuned for highlights.
Kuwail. using an unwieldy analogy from
sented its summary report. on international co-
Prof. Bolin urged Parties wishing to submit
in Arabic phrase that apparently reads. "Don's
ordinated research and systematic observa ions
further comments regarding the planned struc-
go 10 prayers while you are drunk" accused
programmes. Included in the "possible acti: ns"
ture and content of the Third Assessment Re-
Prof. Bolin's oral repon to SBSTA of being
requested from SBSTA was to consider inviing
port cí the IPCC to contact the Chairman-Elect
"biased. partial and misleading."
the GEF to support the effons of developing
or Secretarial as soon as possible. He also non-
The Chairman chided Kuwait for not being
country parties to improve their systems rci rc.
fied Parties that the special report on regional
polite. He also proposed that SBSTA should
search and systematic observation of climate
impacts will bc available in September 1997.
make a recommendation 10 the IPCC that au-
change. This caused some controversy. while
Sparking yet another intense debate. Prof.
thors take into account the country submits-
some welcomed the suggestion. others CA-
Bolin reviewed the status of the founh technical
stons. as Prof. Bolin promised 10 do. Kuwait
pressed concern that GEF funds should no be
paper on the environmental implications (i.c.
suggested that debate be continued after they
used for "not such a high prionty" issue. The
sea-level rise) of various emission limitation and
consult with their "colleagues."
SBSTA session closed with four delegations
reduction proposals. He stated that. taking into
On national communications. the Secre-
(Malaysia, Zimbabwe. Canada and Swill.cr-
account the recent country submissions. the
tariar made J presentation on country submis.
landi asked to prepare Jr.11 recommendation %.
[PCC will complete this technical paper by Sep-
continued not
ISSUE NO 1
VOLUMEXCV
FREE OF CHARGE
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BONN FEBRUARY '97 NGO NEWSLETTER
continued from fron
the demand for funds to the GEF 10 be predict-
well donc. well done
sions. noting that the UK had already submitted
able if replenishment is to be successful (scc
The secretariat is looking at ways to cut the
their second communication. Then. th: UK
article below). He went on to discuss commu-
volume of documentation. and was given a
made an incervention confirming that the:- will
nications from non-Annex I countries. and de-
mandate to explore with the UN Office in Ge.
meet their stabilization goal or 1990 levils by
scribed a suggested support arrangement which
neva whether time sensitive documents could
the year 2000.
the Secretarial had been discussing with the
bc distributed before they were available in all
Next came methodological issues. which
GEF secretariat.
six languages without contravening the 1981
the Secretarial suggested be dealt will in a
Finally. Mr Zammit Cutajar urged coun-
General Assembly decision.
smaller group. SBSTA then moved on 10 dis-
tries to pay their contributions to the core
The most lengthy item discussed was the
cover that the report on "Mechanisms for Con-
budget of the Convention. pointing out that
programme budget for 1998/9. As the budget
sultation with NGOs" was not ready. so agenda
only 61 out of 150 plus countries paid up in
depends notably on the schedule of sessions.
item was deferred to a later session.
1996. Shockingly. contributions are still
Parties were asked to provide a schedule for
In the most surprising development :f the
awailed from some Annex II countries the
1998/99 ASAP. No decision was taken on the
day SBSTA ended twenty minutes early The
richest countries in the world. Go on. pay up or
budget. as Partics wanted to consider the docu-
next session will be Thursday moming.
we'll name names (we only have to look in
ment at more length. A debate ensued over the
AG13
SBI/1997/CRP.1...)
question whether COP4 should be in 1998 or
The theme of Tuesday's AG13 meeting uis of.
After a brief statement by the Executive
1999. the G77 and China requesting 1998 to
fice furniture. Building on the December ineet-
Secretary on Annex I communications (34 rc-
allow the reviews specified the Convention to
ing's discussion of rotating scats.
ceived so far. but Belgium (!) and Lithuania
take place: the Secretariat. for cost reasons. pre-
debate focused on desks.
still pending). the UK look the floor to say that
ferring 1999. An interesting presentation was
AL the outset of the meeting. the Chair
it had already submitted its second national
the one on the Agends for COP3. The Secre-
shocked the meeting by radically proposing
communication to the Secretarial (where is my
tariat proposes to have the meeting from 1-10
that the Group try to decide something this
personalised copy? Eco Reporter). and that its
December. with the ministerial segment from
time He further recommended that this me-
CO₂ emissions would be 4.8% below 1990 lev-
3-S December. There would be no general
thing" might be the "character" of a mt tilat-
cls in 2000. Well done. well done well done.
statements. to streamline negociations.
eral consultative process. Should it DC admisory
or supervisory or. for that matter, good 01 bad?
Remember the Memorandum
Chile. compounding the complexities faced by
delegates. then made the revolutionary pro-
With little fanilite. Parties at the last meeting of
developing country needs will bc an easy task.
posal that the Group might consider w/ at an
the Subsidiary Body on Implementation (SBI
Some inspiration could be taken from the Mul-
3) adopted an Annex 10 the Memorandum of
tilateral Fund for the Montreal Protocol. which
MCP should actually da.
Entering into the free and casy atmosphere
Understanding between the COP and the GEF
was recently replenished on the basis of work
encouraged by the Chair. China and th: EU
Council. that significantly develops a critical
undertaken by a Technical and Economic Ad.
launched a joint initiative on help desks. Given
part of the relationship between the Convention
visory Panel (TEAP). which estimated devel-
Lacil approval by the meeting on the concept of
and the interim operator of its Financial
oping country demand for relevant investment
desks. this Sino-European alliance began 1 de-
Mechanism.
and technology transfer over coming years
bate on the nature of the help that desks hight
The Annex spells out a process by which
Clearly climate change offers an unlimited
give. whom they might give hclp to. and nder
the COP and the Council will jointly determine
range of investment opportunities considerably
what circumstances.
the amount of GEF funding that will be re-
more challenging to calculate than in the ozoni
It is anticipated that the furniture them: will
quired by developing country Parties to imple-
context. But the process or estimating develop
continue tomorrow. stimulated by today's dis-
men: the Convention.A unique opportunity for
ing country needs over a specific period of time
cussion between the Chair and the USA CII icl-
the Parties 10 test the GEF's responsiveness 10
could help to focus the work of the SBI in de
ephones and how they might be allocated to
its needs but an opportunity that may bc
termining programme priorities and eligibility
desks. how they might bc used CIC.
missed. Delays in the conclusion of MOU may
critcria for Convention funding. and might en
SBI Report
allow the GEF replenishment negotiations to
courage developing countries to develop mor
Mr Zummit Cutajar discussed the review if the
move towards a conclusion before the COP and
concrete measures for their national pro
financial mechanism of the Convention. hich
its subsidiary bodies can make an assessment
grammes.
he described as the "mose important policy is-
of the amount of funds necessary to assist de-
Despite the adoption of the Annex. and th
suc on the SBI agenda." He stressed the need
veloping countries. In the absence of such an
rapid approach of GEF replenishment negotia
for both the flow of funds from the GEF and
assessment. GEF replenishment negotiations
tions. there is little sign of the subsidiary bodie
will be based. as they were in the first GEF
or the secretariat. preparing an assessment C
THANKS
cycle. on how much the Annex 11 Parties care
needs. Thus far the snail's pace of the OF
to contribute. rather than the level of funding
project cycle has maintained a healthy balanc
The Climate Action Network would like 10 thank the
the Convention needs. Under these circum-
in the GEF's accounts. However. as the GEF
Environment Ministries of Germany and the
stances the commitment 10 meet the agreed full
operations begin to operate more smoothly an
Netherlands. who have provided funds and facilities
incremental costs of implementing measures
to process the project proposals in its pipeline
for Eco.
undertaken by developing countries IS greatly
the Parties may have no one lo blame but then
with resources contributed by: APC Ne works
undermined.
selves if funds are exhausted before legitima
and EuroFax.
This is not to suggest that the assessment of
needs are mel.
ISSUE NO1
VOLUME XCV
FREEOF CHARGE
02/26/97 WED 14:36 FAX 2024566474
CEQ
001
Cupy
February 26, 1997
THE
MEMORANDUM FOR DISTRIBUTION
FROM:
ROBERT S. KAPLA
COUNCIL ON ENVIRONMENTAL QUALITY
SUBJECT:
CLIMATE CHANGE DEPUTIES MEETING
Attached is the agenda for the climate change deputies meeting scheduled for this Thursday,
February 27th at 4:00pm in room 472 OEOB. Also attached is a paper on domestic policy
options prepared by the Assistant Secretaries.
DISTRIBUTION:
Charles Curtis, DOE
Mort Downey, DOT
Everett Ehrlich, DOC
Leon Fuerth, OVP
John Garamendi, DOI
Jack Gibbons, OSTP
Jamie Gorelick, DOJ
David Hales, AID
Fred Hansen, EPA
Jeff Lang, USTR
Jack Lew, OMB
Ira Magaziner, DPC
Cynthia Metzler, DOL
Richard Rominger, USDA
Alicia Munnell, CEA
Jim Steinberg, NSC
Larry Summers, Treasury
Tim Wirth, DOS
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CLIMATE CHANGE DEPUTIES MEETING
Thursday, February 27
4:00-6:00pm
OEOB Room 472
AGENDA
I.
International Negotiations
-- current status
-- key upcoming decisions/dates
II.
Economic Modeling Analysis
-- initial output from benchmark runs
-- next steps
III.
Domestic Policy Options
-- Overview Paper
-- next steps
IV.
Outreach Strategy
V.
Relationship of Emissions, Concentrations and Impacts
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Overview of Greenhouse Gas Mitigation Options
Introduction
Over the next century, important shifts in the global economy would be required
to address climate change. (See attachments 1 and 2). While many mitigation options
exist, these policies entail costs (e.g. increases in energy prices or additional federal
spending). Taking no action also involves costs, since global warming can adversely
affect both humans and ecosystems.
This paper lays out the broad policy options available for limiting emissions, but
does not analyze the costs and benefits of particular options. The options fall into three
general categories:
Those that seek to increase the rate at which existing energy efficient technologies are
deployed in the marketplace by overcoming information and other barriers to their
use. The Administration's efforts in the Climate Change Action Plan were designed
to use technology diffusion to reduce emissions to 1990 levels and may reduce as
much as one-fourth of the amount of projected growth to the year 2010.
Those that create new government requirements to internalize the costs of greenhouse
gas emissions in the marketplace. These could take the form of additional standards
and regulations, changes in other government policies that indirectly affect energy
use, and/or an emissions trading program. Such programs typically involve
government imposed limits on emissions that increase the costs of energy or restrict
consumer choice.
Research and Development (R&D). R&D can reduce costs in all periods. However,
it is particularly important in the long term, since controlling warming ultimately
requires adopting an energy system that does not rely primarily on fossil fuels. This
would involve stepping up and refocusing the federal government's R&D program
and reversing the long-term trend of declining government and private R&D
expenditures.
Technology Diffusion Programs
As noted by the National Academy of Sciences (NAS) and the Office of
Technology Assessment, many energy saving technologies already exist, but are not
being implemented. The NAS, for example, stated that the total diffusion of existing
energy efficiency technologies in "reasonable applications" could reduce current carbon
emissions by almost one-fourth.
For an energy efficient technology to be more fully employed, however, potential
buyers of products need to know of the technology, as well as its performance and
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economic benefits. Service providers must have the expertise to appropriately design,
install and operate the technology. Yet, given the transaction costs associated with
obtaining reliable information, potential users may not fully appreciate the potential long-
term net benefits of more energy-efficient technologies.
A number of technology diffusion programs to address these problems are
currently underway. The Administration's CCAP launched over 40 initiatives in 1993.
Their goal was to return U.S. greenhouse gas emissions to 1990 levels by the year 2000.
The Administration currently projects that if funding at current annual levels ($183
million) continues, these programs will eliminate as much as one-fourth of the total
growth in emissions through the year 2010 and save over $35 billion in energy expenses
in that year. The Administration proposed higher spending levels years ($305 million)
for each of the past two years. However, Congress cut the requests by 40%.
The following illustrate the kinds of programs underway or that could be pursued
in this category:
Fully funding existing CCAP programs, adding initiatives to further reduce emissions
beyond the year 2000.
Establishing additional information and energy labeling programs for buildings (e.g.,
to redress the asymmetry of information between builders and occupants). This
sector consumes one-third of the nation's energy.
Should a domestic emissions trading system be created, setting aside a reserve of
allowances or a portion of auction revenues to reward new R&D investment and the
production of efficient and renewable technologies. Alternatively, a voluntary early
banking program could be designed to encourage early action.
Creating a secondary market for energy efficiency financing.
Expanding sector-wide compacts in which entire industries could pledge
improvements in emissions and benefit from shared information or R&D on
technologies.
Extending government procurement efforts for energy efficient technologies to state
and local levels.
Mandating through Executive Order the purchase of "green" power by federal
facilities where available.
Standards and Regulations
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Limitations on greenhouse gas emissions could also take the form of standards
and regulations. These would have to be imposed on a wide array of consumer goods and
energy consuming equipment, involving many government actions in which the tradeoffs
among costs, emission reductions, and other product attributes would be contested. The
resulting level of emissions would have to be consistent with the targets established by
international agreement. Since total national greenhouse gas emissions would not be
capped, such compliance would have to be projected based on an analysis of the impacts
of the standards program. Such standards could include:
Direct limits on greenhouse gases: Standards could specify allowable greenhouse gas
emission levels per unit of output (or some other factor). For example, methane from
some landfills is already controlled due to limits on emissions of volatile organic
compounds.
Minimum energy efficiency standards for energy consuming equipment: Historically,
these have targeted appliances and other residential and commercial equipment, as
well as personal transportation (i.e., the Corporate Average Fuel Economy (CAFE)
program). DOE estimates that the federal appliance standards implemented to date
will reduce carbon emissions by 14 million tons in the year 2000. Further
development of standards could result in additional reductions, although recent
bipartisan attacks on implementing new standards under the 1992 Energy Policy Act
have stalled recent efforts to make progress in the appliance standards area.
Emissions of greenhouse gases from the transportation sector account for about one-
third of total U.S. GHG emissions and are expected to grow by about 25% by 2010.
The overall in-use fuel economy of the combined new light vehicle fleet (i.e., cars and
light trucks such as minivans, sport utility vehicles, and pickup trucks) has begun to
decline. In 1994, President Clinton convened a Federal Advisory Committee Policy
Dialogue to assist in the development of measures to significantly reduce greenhouse
gas emissions from personal motor vehicles ("CarTalk"). Although CarTalk ended
without consensus among members of the Committee, the process did result in a
number of proposed policies that could be pursued.
Other Policies Relevant to Emissions
In addition to the standards it sets, government indirectly affects the levels of
greenhouse gas emissions through its policies towards transportation and energy market
regulation. These also offer opportunities to generate reductions in greenhouse gas
emissions. Most prominent among these are:
Electricity Restructuring: States are currently adopting retail competition for the
electricity industry. This trend could be accelerated with federal legislation. Retail
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competition is expected to lower the price of electricity by as much as 20-25% in certain
regions and change the fuel mix of generation. Preliminary EPA and DOE analysis
indicates that utility greenhouse gas emissions could rise by as much as 2-6% as a result.
To mitigate the environmental impacts of competition and maintain the environmental
benefits of current state level renewable and demand side management programs, a
number of options have been adopted at the state level (for states that have already
adopted competition) or are under consideration for the rest of the nation. These include:
A "portfolio standard" for renewable energy or greenhouse gas emissions: This
would require that all generators meet a specified level of renewable generation or
greenhouse gas emission reduction either by undertaking such projects themselves or
purchasing "credits" from others who have.
A social benefit fund: Revenues from a charge on transmission service are used to
subsidize energy efficiency projects, renewables, R&D, or low income consumers.
California has adopted this approach.
Information disclosure requirements: Generators could be required to disclose the
emission profiles of their generation, facilitating the marketing of "green" electricity.
Additional air pollutant requirements: Many states are hesitant to adopt retail
competition because they perceive that differing regional environmental requirements
put their electric industry at a competitive disadvantage and will result in more
pollution being transported into their states. Thus, additional environmental
provisions to "level the playing field" - which could include greenhouse gas emission
reductions - are currently being debated.
The Intermodal Surface Transportation Efficiency Act (ISTEA): This Act establishes the
rules for federal transportation funding to the states. In 1991, ISTEA authorized $140
billion in transportation projects over six years. The Act expires in 1997 and Congress is
now considering options for its reauthorization. These could include provisions that
would indirectly reduce greenhouse gas emissions. Examples include the following:
Congestion Mitigation and Air Quality Improvement Program: Additional funds
could be targeted to transportation projects that reduce air emissions and energy
consumption on a long-term sustainable basis.
Brownfields Restoration: Successful redevelopment of brownfields can help revive
inner city areas and reduce sprawl, thereby reducing vehicle miles traveled. More
funds could be made available for these projects.
Incentive Funds: A new $500 million Fuel Efficiency Incentive Fund could be
established to reward the ten states that are able to reduce fuel consumption, on a per
capita basis, by the greatest amount over the next five years.
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Emissions Trading
Emissions trading is a tool for meeting a total quantity limit on emissions. It
involves allocating or auctioning emissions allowances, and allowing the trading of
allowances in a market with sufficient mechanisms to ensure compliance with targeted
levels. Since emission trading involves the creation of new, marketable assets that can
have substantial value, addressing distributional issues will be an important component of
program design. Allocation rules or auction revenues can be used to address these
distributional issues.
Emission trading systems can offer both static and dynamic efficiency advantages
over more traditional forms of regulation. The potential for static efficiency gains exists
because emitters face different abatement costs. Emissions trading allows those with
high abatement costs to purchase allowances from those whose costs are lower. Total
costs would therefore be lower than through traditional regulations, which require all
polluters to comply with a specific standard. However, it should be noted that such a
program involves people and firms adjusting to higher energy prices.
Under traditional regulation, firms have little incentive to investigate ways of
abating pollution by more than the minimum required to comply with regulatory
requirements. Firms under-invest in pollution control R&D since they can capture
neither the full market benefits from such spending (since others benefit from learning of
their successes), nor the full value of any resulting environmental improvements. Here,
trading offers efficiency gains because of the incentive to continuously improve pollution
abatement technologies in order to create "surplus" allowances for sale.
Experience in the United States has shown that final compliance costs for the
programs that have incorporated emissions trading have, in general, been lower than
predicted - often dramatically lower. While emissions trading is not the sole cause of
this phenomenon, it has contributed to lower abatement costs in the acid rain program,
the phase-out of Chlorofluorocarbons (CFCs), the "criteria" air pollution program, and
the phase-out of lead in gasoline.
An emissions trading program, like any program designed to limit greenhouse
gases, must contain certain elements. First, an agreed upon emissions budget must be
established. A central authority must be given the domestic responsibility for verifying
compliance and must be provided sufficient information to do so. Finally,
noncompliance with allowance limitations or reporting requirements must generate real
consequences, such as penalties or subtraction of allowances.
A program would have to establish permit lifetimes, monitoring and enforcement
provisions, as well as rules for permit banking, borrowing, and trading. Consideration
should also be given to transaction costs, which should be kept as low as possible.
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However, particularly difficult issues involve determining what types of activities require
a permit and how permits should be allocated. The decision for the former should
consider the following:
Coverage: While it may not be necessary to ensure that every ton of greenhouse gas
is accounted for within an emission trading regime, the scope of coverage of the
trading program should be sufficient to ensure compliance with targets set in
accordance with an international agreement.
Administrative and compliance feasibility: The number of sources involved in the
trading program should be small enough to be administratively feasible and large
enough to ensure market competition. In addition, monitoring and verification of
permit compliance must be possible for those included in the program.
Potential to Diffuse Low Greenhouse Gas Technologies: Alternative points of
intervention should be evaluated for their ability to provide incentives for research,
development, adoption and diffusion of low greenhouse gas technologies.
Market Impacts: Any program that limits emissions will affect the bottom line of
firms. The permit program will have economic impacts that vary depending on
program design. For example, exempting certain sizes or categories of sources from
permit requirements because of administrative or equity concerns (e.g., small boilers
or home heating oil) has competitive implications within the energy market.
Since virtually all of the carbon contained in fossil fuel extracted from the ground
(with the possible exception of certain feedstocks) is eventually released to the
atmosphere, a trading program need not focus uniquely on direct emitters, but can be
implemented through other points in the energy market. These include fuel imports, fuel
extraction, processing, refining, distribution, and secondary conversion (e.g., coal to
electricity). In addition, these points could vary by sector. For example, an emission
trading program could focus on the point of final combustion for coal, but on refining for
oil, or distribution for natural gas.
In an emission trading system, some mechanism must be provided for allocating
permits to sources. This could be done on the basis of baseline/historical emissions
(where permits are given to those currently emitting) or through an auction (where
revenues accrue to the government). These two mechanisms might also be combined:
some portion of permits could be allocated on the basis of historical emissions while the
rest are auctioned. In any case, the value of these assets could be large depending on the
permit price, which is determined by the emissions target and the costs of substitutes.
Given that an auction could produce substantial revenues, some decision would have to
be made with respect to what to do with the proceeds.
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Research and Development (R&D)
One of the key issues in developing a domestic climate change policy will be the
emphasis placed on potentially expanding the Federal R&D effort into technologies that
reduce future greenhouse gas emissions and/or lower the cost of achieving a given
greenhouse gas reduction target. Achieving greenhouse gas emission reductions that
would stabilize atmospheric concentrations at "safe" levels will require major advances in
technology in virtually every sector of the economy. These goals will be difficult to
achieve during a time of constrained federal spending and sharp reductions in long-term
private sector R&D. Since 1978, federal investment in energy R&D has declined 75%.
Investment by industry fell 33% from 1983 to 1993.
The President's Fiscal Year 1998 budget requests an increase of $200 to $300
million in relevant R&D over the current level of approximately $1.3 billion. Such an
increase was rejected by Congress last year, and achieving it may require raising the issue
to a higher level in budget negotiations. In the Fiscal Year 1999 budget and beyond,
further increases will be needed, as will a more coordinated effort to target the R&D on
the biggest opportunities for CO2 mitigation.
Achieving greenhouse gas levels that are not harmful to humans or the environment
will require major advances in technology as can be seen from the following equation:
Emissions= Population X Affluence (GDP/capita) X Technology (Emissions/GDP)
From 1990 to 2060, we may well see global population double and affluence increase
by a factor of four. At the same time, the world may ultimately need to lower emissions from
1990 levels, requiring the average emissions-related technology to improve by more than a
factor of ten during the next few decades and be rapidly deployed throughout the world.
The benefits could be enormous, in part because of these technologies serve a number of
other national goals, including reducing the emission of the criteria air pollutants and
decreasing dependence on foreign oil.
Because of the high risk nature of R&D, a number of pathways could be pursued
simultaneously:
Clean Power
The next generation of natural gas technologies, including gas turbines and fuel cells,
could achieve energy conversion efficiencies of 70% or more by 2005.
The next generation of high efficiency coal-fueled power plants, such as integrated
gasification combined cycle perhaps combined with a fuel cell, could achieve efficiency
exceeding 55%, with half the CO2 emission of current plants.
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Renewable technologies-wind power, photovoltaics, biomass power, solar thermal, and
geothermal-have seen sharp cost reductions in the past two decades, some by a factor of
ten. Further R&D, coupled with expanded deployment to achieve economies of scale and
improvements in manufacturing, would likely make one of more these technologies
competitive with fossil fuels in a large number of areas in the next two decades.
Nuclear fission and fusion remain options that could benefit from further R&D, though
these raise significant environmental issues regarding waste handling and disposal.
Energy Efficiency
Transportation
The Partnership for a New Generation of Vehicles (PNGV) is a public-private
partnership to design and build a triple-efficiency clean car by 2004. Multiple technology
paths are being pursued to build a hybrid vehicle that has both an advanced engine (such as a
clean diesel, Stirling or gas turbine) and an energy storage device (such as a battery, fly-
wheel or ultracapacitor). Supporting R&D includes lightweight, super-strong materials such
as composites; high-temperature ceramics; regenerative breaking; and advanced power
electronics. Proton-exchange membane (PEM) fuel cells have perhaps the greatest long-term
potential for reducing transportation CO2.
Biofuels also lower transportation CO2. Continued R&D in bio-engineered
organisms and fast-growing crops is expected to produce ethanol from waste paper, crop
waste, and dedicated crops for under 70 cents a gallon by 2005, competitive with oil at $25 a
barrel.
Industry
The seven most energy-intensive industries-steel, aluminum, petroleum refining,
chemicals, pulp and paper products, glass, and metal casting-account for about 80% of the
energy consumed in U.S. manufacturing and more than 90% of the hazardous waste. They
represent the largest opportunity for reducing industrial CO2 emissions, and the Energy
Department is partnering with them because they significantly underinvest in R&D compared
to the industry average. Key areas that would benefit from expanded R&D include advanced
materials development; separation technology; catalysis; bioprocessing, biocatalysis, and
renewable feedstocks; sensors and controls; and industrial cogeneration of electricity and
heat, which can achieve overall efficiencies of more than 80% and ultimately utilize biomass.
Buildings
The buildings sector consumes one-third of the nation's energy and two-thirds of its
electricity. Key near-term R&D opportunities include improvements in lighting, windows,
design software, high-efficiency applicances, gas heat pumps, insulation and duct systems,
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cooling including gas cooling, solar heating and cooling, daylighting, and urban heat island
mitigation (reflective roofing and road materials). Longer term R&D needs include
electrochromic glazings for windows, building-integrated PV systems, and PEM fuel cells.
Capture and Sequestration
If major reductions in CO2 emissions are necessary, and global reliance on fossil
fuels continues beyond the middle of the next century, then some form of CO2 sequestration
(i.e. capture and disposal) will be needed. A long-term R&D strategy would include
demonstration of a number of sequestration options and research into their possible
environmental impacts; converting CO2 into industrial chemical feedstocks; selectively
permeable membranes for CO2 capture; processes for converting fossil fuels and biomass
into CO2 and hydrogen; development of hydrogen infrastructure technology, including
transportation and storage; and PEM fuel cells. Capture and sequestration has received only
limited funding to date.
Advanced Research
A number of areas of advanced research could prove crucial to responding to climate
change, including photosynthetic mechanisms, biotechnology, fermentation microbiology,
combustion research, polymer and ceramic science, process engineering, supercritical CO2,
new materials synthesis, and nanotechnology. One essential area for expanded basic and
applied R&D is superconductivity, which offers the possibility of nearly loss-less energy
storage and transmission and of highly efficient superconducting motors.
Conclusion
A number of mitigation options exist for controlling greenhouse gas emissions.
These can be organized in three general categories. First, greater efforts could be made to
diffuse underutilized energy efficiency technologies. This could be accomplished
through programs, such as those in the Climate Change Action Plan, to address lack of
information and other market barriers. Second, new government interventions, either in
the form of emissions trading and/or expanded regulatory programs, could be used to
limit greenhouse gas emissions. Finally, additional incentives could be provided for
(both government and private) research and development, since stabilization of
atmospheric concentrations of greenhouse gases can only be accomplished if new non-
fossil technologies are available and adopted.
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Attachment 1: Global Trends in Emissions and Concentrations
Growing emissions of greenhouse gases (GHGs) from industrial activity and land-
use changes are rapidly raising the concentrations of these gases in the atmosphere,
making some degree of climate change virtually certain. Although greenhouse gases
come from many sources, carbon dioxide (CO₂) from fossil fuel use is the source of
greatest concern because of its rapid
Figure 1: Global Anthropogenic Carbon Emissions
historical and projected growth.
Historical and Projected (IPCC (802a)
Atmospheric carbon concentrations are
20
already over 30% higher than their pre-
Total
industrial levels and rising at about 4%
18
Billions Tone Carbon
per decade. The further potential for
Fossil Fuela
human activities to disrupt the natural
10
balance is enormous because hundreds
of years' worth of carbon (at current
#
rates of use) are currently available in
Blots and Solls
proved fossil fuel reserves that could be
.
1980
1879
7880
1025
1954
1978
2000
2018
1083
2078
2100
exploited under current economic and
technological conditions - and even
larger "ultimately recoverable" reserves. In the absence of controls, emissions are
projected to grow quickly as the developing countries experience rapid population growth
and industrial development. These trends are expected to lead to ongoing atmospheric
accumulation and climate change into the indefinite future, with a doubling of
atmospheric carbon concentrations sometime during the second half of the next century
and a resulting long-run increase in average global temperatures by an estimated 1.5° to
4.5°C. Even stabilizing global emissions at 1990 levels permanently will lead to a near
doubling of atmospheric carbon concentrations by the end of the next century.
Climate change is truly a global problem in the sense that emissions from
anywhere will affect everyone everywhere. As a consequence, concerted international
action will be needed to induce all countries to cooperate in reducing emissions.
Nevertheless, cooperation will be hampered by the uneven distribution of past and future
emissions. Simply put, the developed industrial nations have relatively high levels of per
capita emissions and are largely responsible for past emissions, while the developing
nations, whose per capita emissions are currently very low, will be responsible for the
I In total, human activities have already resulted in roughly 250 billion tons of carbon (gigatons of carbon or GtC)
emissions from fossil fuel combustion and perhaps 200 GtC from net deforestation since 1700. In terms of carbon equivalent,
cumulative anthropogenic greenhouse gas emissions since the beginning of the Industrial Revolution have been roughly 570 billion
metric tons of carbon equivalent (GtCe), of which about 450 GtC have been carbon. (Deforestation and other changes in land use
have reduced the amount of carbon stored in biota and soils by perhaps 275 GtC, or around 10%, since the beginning of agriculture.)
More than 75% of all fossil emissions in history have occurred since 1945, and 50% have occurred since 1970. About 40% of total
carbon emissions have accumulated in the atmosphere, raising the stock of atmospheric carbon by nearly 30% from 280 ppm (parts
per million) to over 360 ppm. Somewhat less than half of current emissions are accumulating in the atmosphere, while the rest is
absorbed in natural sinks (the oceans and biosphere) through processes that are as yet only poorly understood. Although most of the
increased carbon will ultimately be absorbed by the oceans, the increased atmospheric concentrations of carbon dioxide and other
greenhouse gases will affect the climate for centuries to come.
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bulk of emissions in the future. 2 Since the developed countries have enjoyed high levels
of emissions now and bear the greatest responsibility for current atmospheric
concentrations, the developing countries have been reluctant to undertake any emissions
reductions at all in the absence of significant emission controls on the part of the
developed countries.
Figure 2: Cumulative Global Anthropogenic Carbon Emissions
Yet, actions taken by the developed
Historical and Projected (IPCC (S92a)
2000
countries alone are likely to have little
1886
effect on cumulative global emissions or
1880
on atmospheric concentrations. Based on
1480
Total
the projections shown in Figures 1 and 2,
Bitlions Mabic Tone Carbo
1200
stabilization of Annex I country³ emissions
seco
BOB
at 1990 levels from 2000 through 2100
ano
would reduce cumulative carbon emissions
480
DECD
by around 8%, and would reduce
100
atmospheric CO₂ concentrations in 2100
.
1960
1875
1000
1923
1980
1978
2008
2030
2680
2976
2100
by less than 5%. In other words, Annex I
emissions stabilization will still lead to
well more than a doubling of atmospheric CO₂ concentrations by 2100. Even stabilizing
total global emissions - which, given anticipated population growth, would require
dramatic reductions in global per capita emissions - will not lead to stabilized
concentrations. Stabilization of concentrations requires global emissions to fall well
below current levels, and ultimately to decline to near zero.
Researchers have examined in some
Table 1: Alternative Carbon Targets and Budgets
Target
Carbon Budget
Reduction from
detail the annual emissions paths required
1991-2100 (GtC)
1500 GtC
to meet atmospheric carbon concentration
450 ppm
630 650
-57% to -58%
targets of 450 to 750 ppm.⁴ As shown in
550 ppm
870 990
-34% to -42%
650 ppm
1030 1190
-21% to -31%
Table 1, all of these targets require
750 ppm
1200 1300
-13% to -20%
significant reductions in cumulative
2 Historically, fossil carbon emissions have come mainly from the U.S. (27% of the postwar total), the rest of the OECD
(22%), and the former Soviet Bloc (24%). The rest of the world, with nearly 80% of the population, is responsible for a mere 27%
of cumulative emissions. On a per capita basis, U.S. emissions are over 5 tons per person per year; the industrial nations of Western
Europe and Japan emit about 2 to 2.5 tons per person; and the nations of the former Soviet Bloc, whose per capita emissions used to
be very high due to the inefficiencies of central planning, have fallen to about 2.5 tons per person. At the other end of the spectrum,
the developing countries of the Americas, Africa and Asia have emissions on the order of 0.2 to 0.6 tons per person.
Despite their relatively low emission levels, developing countries' emissions are growing very rapidly. (Developing
county emissions grew by 21% between 1990 and 1995, and global fossil fuel emissions have been roughly stable during this period
only because of the 30% reduction in former Soviet Bloc emissions associated with the collapse of the centrally planned
economies.) Given current projections of population growth and economic activity, developing countries' share of annual global
fossil emissions should surpass that of the developed countries during the second quarter of the next century. However, their share
of cumulative fossil emissions will remain below that of the developed countries for many years to come, as will their per capita
emissions.
3 The OECD nations plus the former Soviet Bloc.
4
The lower target would limit the projected average global temperature increase to roughly between 0.6°C to 1.75°C; the
higher target would limit the increase to between 1.4°C to 3.5°C.
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projected global carbon emissions; and as shown in Figures 3 and 4, all of them require
dramatic reductions in annual emissions rates sometime during the next century. To
achieve a 450 ppm target - which still represents a two-thirds increase in atmospheric
Figure 3: Alternative Atmospheric
Figure 4: Emission Scenarios to Meet Alternative
Concentration Pathways
Atmospheric Concentrations
1000
20
1000
950
Business as Usual
900
850
15
800
CO₂ concentration (ppmv)
750
750
700
650
600
500
Anthropogenic CO₂ emissions (GtC/yr)
10
650
Current
anthropogenic
550
550
CO2 emissions
5
450
450
1000
400
750
650
550
350
2000
2050
2100
2200
2250
2300
0
450
2150
2350
2000
2050
2100
2150
2200
2250
2300
2350
Year
Year
concentrations over preindustrial levels - annual emissions must begin declining steeply
within the next quarter-century and must fall to less than half the current rate by 2100.
To achieve a 550 ppm concentration target - which represents more than a doubling in
atmospheric concentrations - annual emissions must begin declining steeply during the
second quarter of the century. Furthermore, these budgets must be distributed both across
countries and across time. And while emissions can increase in the near term, higher
growth in emissions in the near term must be offset by increasingly dramatic reductions
later on.
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Attachment 2: U.S. Emission Trends
In 1995, gross greenhouse gas emissions in the U.S. were about 1,674 MMTCe
(million metric tons of carbon equivalent), of which more than 85% were carbon
emissions from fossil fuel combustion. Methane emissions (mainly from landfills and
agricultural activities) accounted for 11%, nitrous oxides 2% and various halocarbons
2%. These emissions were offset by roughly 100 MMTCe of carbon sequestered by the
nation's forests. U.S. greenhouse gas emissions have risen nearly 7% in the past five
years.
Annual U.S. fossil-related carbon emissions have grown from around 620 MMTC
(million metric tons of carbon) in 1950 to about 1430 MMTC in 1996, and are projected
to rise to around 1800 MMTC over the next twenty years. Coal's share of the total has
fallen from 50% in 1950 to 35% in 1996; while oil's share has risen from 36% to 42%
and natural gas' share has risen from 14% to 23%. These shares are expected to remain
fairly steady over the next quarter century.
The electric utility sector's share has grown from 12% in 1950 to 35% in 1996
(500 MMTC), as the American economy has steadily increased its use of electricity.
Over 85% of electric utility sector carbon emissions come from burning coal. Similarly,
the transportation sector's share of fossil-related carbon emissions has grown from 28%
in 1950 to 33% in 1996 (470 MMTC),
Figure 5: U.S. Energy-Related Fossil Fuel Emissions By Sector
1000
Historical (1850-1995) and Projected (1996-2015)
with oil accounting for practically all of
1800
the fuel use in the transportation sector.
1400
Thus, the transportation and utility sectors
Tone Carbon
1200
together currently account for 68% of U.S.
1000
Electric Utilities
fossil-related carbon emissions.
980
Transportation
800
In contrast, carbon emissions from
400
industry (Excluding Electricity)
the residential and commercial sectors'
200
13
D
direct energy use have fallen from 22% of
1950
1980
tere
1880
1890
2000
2010
the total in 1950 to 12% in 1996; while
emissions from industrial direct energy use
have fallen from 38% to 20%. However, if electricity-related carbon emissions are
attributed to the sectors that consume the electricity (rather than to the utility sector which
produces it), the residential and commercial sectors' share has risen from 28% in 1950 to
35% in 1996. In contrast, the industrial sector's share has fallen from 44% in 1950 to
32% in 1996, as industry's share of economic activity has declined and services' share
has risen.
Pre-decisional Draft -- Do Not Cite or Quote
13
02/26/97 WED 14:44 FAX 2024566474
CEQ
1.
016
Attributing electricity-related
emissions to end-use sectors, then, 35% of
Figure 6: U.S. Energy-Related Fossil Fuel Emissions By Sector
carbon emissions are related to households
1800
Historical (1950-1995) and Projected (1996-2015)
and commercial businesses; 33% are
1800
1400
related to transportation, and 32% are
1200
related to industry. These shares are
next twenty to twenty-five years, although
Million Metric Tone of Carbon
1000
Transportation
projected to remain fairly constant over the
BOD
Industry
000
(Including Electricity)
transportation's share of carbon emissions
400
will increase slightly, while electricity
200
Residential & Commercial
(Including Electricity)
generation will account for a slightly
0
1880
1900
1970
tood
1980
2000
2010
increasing share of primary energy
consumption.
Pre-decisional Draft- Do Not Cite or Quote
14
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001. memo
To Francine Obermiller, Thomas Rhoads from Lisa Branch re: Mtg w/
02/19/1997
b(6)
Robert Repetto, Tues, 2/25, 2pm [PII] [partial] (1 page)
COLLECTION:
Clinton Presidential Records
Council of Economic Advisers
Munnell, Alicia
OA/Box Number: 10103
FOLDER TITLE:
Environment: Climate Change Vol. IV [2]
2017-1095-F
bg238
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRAJ
b(1) National security classified information [(b)(1) of the FOIA
P2 Relating to the appointment to Federal office [(a)(2) of the PRAJ
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information |(a)(4) of the PRA|
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA)
and his advisors, or between such advisors [a)(5) of the PRAJ
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy |(a)(6) of the PRA
b(7) Release would disclose information compiled for law enforcement
purposes ((b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions [(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells [(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
EXECUTIVE OFFICE OF THE PRESIDENT
19-Feb-1997 10:08am
TO:
Francine P. Obermiller
TO:
Thomas A. Rhoads
FROM:
Lisa D. Branch
Council of Economic Advisers
CC:
Jason F. Shogren
(b)(6)
SUBJECT:
Mtg w/Robert Repetio, Tues, 2/25, 2pm
/
The mtg w/Bob Repetto (World Resources Inst) has been scheduled for next Tues,
2/25, @ 2pm, Rm. 314. Topic: Global Climate Change modelling efforts
Unr Car
(b)(6)
SS#
(b)(6)
per Mark 662 2599
EXECUTIVE OFFICE OF THE PRESIDENT
19-Feb-1997 07:47am
TO:
Jason F. Shogren
FROM:
Alicia H. Munnell
Council of Economic Advisers
CC:
Jeffrey A. Frankel
CC:
Lisa D. Branch
CC:
Francine P. Obermiller
SUBJECT:
RE: possible GCC meeting with bob repetto
let's do it.
EXECUTIVE OFFICE OF THE PRESIDENT
18-Feb-1997 04:55pm
TO:
Jeffrey A. Frankel
TO:
Alicia H. Munnell
TO:
Lisa D. Branch
TO:
Francine P. Obermiller
FROM:
Jason F. Shogren
Council of Economic Advisers
SUBJECT: possible GCC meeting with bob repetto
robert repetto from world resources institute has called to say that they have
done a meta analysis on the GCC modelling efforts. he wants to set up a half
hour meeting to discuss their findings next tuesday or wednesday. jeffery
hunker from commerce suggest that he contact us.
are you interested in meeting with him about this or do you want me to talk with
him?
if you do not know him, he has been a local dc policy economist working on
environmental issues for the last 20 years. he led a lot of the work on green
gdp during the 80s and 90s.
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
002. memo
To Lisa Branch from Mail Link Monitor, re: Confirmation: Appt
02/21/1997
b(6)
Request for Munnell, Alicia H [PII] [partial] (1 page)
COLLECTION:
Clinton Presidential Records
Council of Economic Advisers
Munnell, Alicia
OA/Box Number: 10103
FOLDER TITLE:
Environment: Climate Change Vol. IV [2]
2017-1095-F
bg238
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA)
P2 Relating to the appointment to Federal office |(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute |(a)(3) of the PRA|
an agency [(b)(2) of the FOIA
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute |(b)(3) of the FOIA]
financial information |(a)(4) of the PRAJ
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy |(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA|
b(7) Release would disclose information compiled for law enforcement
purposes |(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions [(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
EXECUTIVE OFFICE OF THE PRESIDENT
21-Feb-1997 10:43am
TO:
Lisa D. Branch
FROM:
Mail Link Monitor
Office of Administration, IST
SUBJECT:
CONFIRMATION: APPT. REQUEST FOR MUNNELL, ALICIA H
FROM:
WAVES OPERATIONS CENTER - ACO:
(b)(6), (b)(7)c, (b)(7)f
Date:
02-21-1997
Time:
10:38:22
This message serves as confirmation of an appointment for the
visitors listed below.
Appointment With:
MUNNELL, ALICIA H
Appointment Date:
2/25/97
Appointment Time:
2:00:00 PM
Appointment Room:
314
Appointment Building:
OEOB
Appointment Requested by:
BRANCH LISA D.
Phone Number of Requestor:
55879
Comments:
WAVES APPOINTMENT NUMBER: U99364
If you have any questions regarding this appointment,
please call the WAVES Center at 456-6742 and have the
appointment number listed above available to the
Access Control Officer answering your call.
TOTAL NUMBER OF NAMES SUBMITTED FOR ENTRY : 2
TOTAL NUMBER OF NAMES OF CLEARED FOR ENTRY: 2
AUSTIN, DUNCAN
-
REPETTO, ROBERT
(b)(6)
STATE OES/EGC
02/25/97 15:49
202 647 0191
25-02-97 18:42
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0049 228352878
INSEL HOTEL BONN
CO: TAF 15 2
Lisl of Recipients for
Periodic Updates from the Climate the TAIKS
Bonn, Germany, 24 Feb to 7 March 1997
Name
Agency
Fax Number
Eileen Claussen
State
202 647-0217
Rafe Pomerance
State
202 647-0217
Bradford Johnson
State
202 647-0191
Erica Keen
State
202 647-0753
Susan Biniaz
State/L/OES
202 736-7115
Jack Shick
State
202 647-0191
Barbara Cates
State/EB
202 647-4037
Alicia Munnell
CEA
202 395-6947
Abraham Haspel
DOE
202 586-3047
Dirk Forrister
DOE
202 586-9987
Marc Chupka
DOE
202 586-0861
Mary Nichols/David Doniger
EPA
202 260-5155
David Gardiner
EPA
202 260-0275
Elaine Haemisegger
EPA
202 260-0290
Nancy Kete
EPA
202 233-9598
Charles Rawls
USDA
202 720-5437
Rosina Birbaum
OSTP
202 456-6025
Steve Seidel
CEQ
202 456-6546
David Sand alow
NSC
202 456-2710
Sally Kane
NOAA
301 427 - 2073
Jim Rubin
DOJ
202 514-4231
02/25/97
15:50
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002/004
INSEL HOTEL BONN
0049 228352878
25-02-97 18:49
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25 February 1997
Memorandum
To:
Please See Attached List
From:
USDEL/Gencva, Mark G. Hambley
Subject:
Negotiations under the Framework Convention on Climate Change
Periodic Update No. 1 for February 24/25, 1997
This message transmits unofficial reflections on activities and developments during the
climate negotiations which are being held in Bonn between February 24 and March 7. 1997. While the
contents are unclassified. this report is intended for use by officials of the the U.S. Government, only.
This report covers activities from Monday, Feb 24, through the morning sessions on Feb 25. The final
puragraphs can be used as a DAR item as desired and appropriate..
Climate Talks, Update No. 1: "Learning the Ropes" Takes Precedence Over Substance as Subsidiary
Bodies Start their First Deliberations in Bonn
Monday Consultations with JUSCANZ and the Europeans
Most of the action on Monday, Feb 24, took place in three meetings. The first was one involving
the officers of both the IPCC and the UNFCCC In what is called the "Joint Working Group." Topics
discussed included the status of the IPCC's technical papers, including the technical paper on the
implications of different emisslon limitation proposals by Annex I Parties: the division of labor between
the IPCC and the bodies of the convention related to methodologies: the status of IPCC workshops and
cooperation with the Conventioin on Migratory Species..
Perhaps the point of grreatest general interest was the summary provided by IPCC Chairman, Dr.
Ben Bolin, on the information to be contained in the technical paper on the implications of different
emissions limitations proposals by Annex 1 Purties on projected temperature increases, sea level rise, and
other changes. The technical paper will be made available after approval by the Bureau of the IPCC in
September 1997. (More on this follows below.)
The second meeting, one involving the members of JUSCANZ dealt primarily with the key
process issue faced by the forthcoming AGBM meeting: what kind of document is to be prepared for
circulation by the June 1st deadline? One option being considered (which is attractive to many JUSCANZ
members but not to the Europeans for the most part) is to use the compilation paper on proposals, as
revised at this meeting. as the formal text. with the Secretariat being given the task of providing a more
stream-lined version for use as the basis for negotiation More off-line discussions of this issue will
continue throughout the two weeks ahcad.
Aspects of the negotiations and various government reactions to outstanding proposals was the
focus of the Feb 24 meeting of the Common Interest Group ((chaired by Canada and including JUSCANZ.
the EU. and --in climate -- the economics in transition (only Hungary appeared to be present, however)).
On the question of joint implementation, both Germany and the Netherlands insisted that there is not
enough time TO work out J1 with credit prior to Kyoto. Our position was strongly supported by Canada
STATE OES/EGC
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and Norway. Mosi other countries remained silent on this issue. On emissions trading, the Germans
(Cornclia Quennett-Thielan) again expressed misgivings about our emphasis on trading (similar to her
comments in Tokyo in January). This time, her remarks were echoed by the Netherlands. Speaking for the
latter, Bert Metz also repeatedly failed to make a distinction berween emissions trading and JI an
oversight which could casily have bcen quite deliberate ON his part.
The Australians made their now familiar pitch for differentiatioin. In response, Metz dismissed
the concept as "too complicated." and said there is not enough time to work out an effective and equitable
differentiation scheme by next Decemeber. On Article 4.1, Canada raised the issue of compensation
(which is being pushed by Iran).. Speaking for the EU, Ben Metz initially indicated that to open a debate
on this topic would be absurd. However, upon reflection, he Indicated that the matter is worth considering
and that a more reasoned response may be appropriate.
On the technology front, it was apparent from the discussion that the EU has given little thought to
this important topic. However, it also appears that the Japanesc have done so. They have suggested
several different proposals which we will be discussing with them. More on this in due course.
Opening Joint Plenary Contains Warm Words of Welcome from the Lord Mayor and a Restatement
of Germany's Position from Merkel's Representative
The Lord Mayor of Bonn issued a warm word of welcome at the short, opening plenary.
Apologizing for the "informal" nature of the hall in which the meetings are being held, she indicated that
Bonn is striving to become another UN city with a focus on the environment and development. German
Environment Minlster Mcrkel's representative (the Permanent Parliamentary Secretary for the
Environment) restated Germany's call for 10 percent CO2 reductions by 2005 and for 15/20 percent
reductions by 2010. Remarking on the cramped facilities and the tent being used for this meeting, the
Permanent Secretary claimed that the atmosphere should make negotiations "easier."
(Comment: One delegate, remarking on the increased warmth and stuffiness in the main plenary hall,
noted that it will be even "warmer" next week during the AGBM talks. In any event, Bonn is certainly
striving to be a good host. Aside from a wide range of materials on the city and the vicinity which is
available at the "Bonn Info Center" outside the main hall, Bonn is also offering bus/subway tickets at a
bargain rate of DM 11 marks for the two weeks of the conference. Considering it costs DM 3.20 for the
train trip from Bonn to Bad Godesberg, where the conference is being held, this is a real bargain. End
Comment.)
SBSTA Begins its Deliberations A1 Its Usual Pace
The Subsidiary Body for Technical and Scientific Advice (SBSTA) began its deliberations on Feb
25. With Kuwait insisting that decisions not be gavelled through (as. the delegate initimated. had occured
in the past) without giving delegations a time to reflect on the issue at hand, the meeting began discussing
the item on its agenda dealing with relations with other relevant international bodies ((including the World
Metrological Organization (WMO) and the Intergovernmental Panel on Climate Change (IPCC)). IPCC
Chairman Ben Bolin, in his report to the session, commented on the technnical paper on the implications
of emissions limitations and reduction proposals which will be prepared by September, based on
submissions on this issue made by January IS of this year.. Bolin noted that it is possible to illustrate some
of the aspects of the outcome of such an analysis relying on information received by the IPCC to date. He
concludes, from a graph complilation of this data, that it is "obviuus" that no reasonable future reductions
by Annex I countries would stabilize global emissions.
SBSTA Chair, Tibor Farago of Hungary. also announced that the two contact groups established
in December to deal with activities implemented jointly (AID and with methodological issues will be
reconvened to continue their work (progress in both was stymied by the G-77/China in the former and by
STATE OES/EGC
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the OPEC countries in the latter). The All group will be co-chaired by Argentina and the Czech Republic
(both are good choices). while the methodologies group will be co-chaired by Mauritius and Norway.
AG-13 Also Re-Activates
Meanwhile, AG-13 chairman, Patrick Szell, started off his Feb 25 meeting on his quest to define a
role for this working group as some kind of a "consultative mechanism." Szell suggested, in a discussion
on Feb 24. that it would be unlikely that the working group can finish its work this year. He indicated that
it might only be possible to complete a status report by COP-3 in December. He said his goal is to table a
framework compiling the views of Parties in Kyoro (although, as one wag remarked after hearing the
mornings first round of turgid discussion, Mr. Szell is more likely to compile a series of "non-views" on
this topic).
NGOs Here in Strength (At least on the Industrial Front)
Thus far, there are only a handful of U.S. environmental NGOs present in Bonn. More are
expected for the AGBM talks next week. However, the Global Climate Coalition and its more moderate
business associates appear here in good numbers. The Climate Council's Don Pearlman appears to be
actively courting the Russians again, although his particular spin is not known. We will endeavor to find
out!
Our first meeting with the NGOs is scheduled for Thursday evening. Industry has suggested that
we hold a joint briefing with both them and the environmentalists. The latter have balked at this proposal
in the past and bitched when it has been done for reasons of expediency. On balance, it is probably better
to keep the groups separate if it sustains the environmental groups' belief that they have our undivided
attention -- which, of course, they do - at least during these briefings.
Feb-24-97 01:36P Climate Change Task Force
ford
kepin 2poroz
CC: Am JAF
White House Climate Change Taskforce
February 24. 1997
MEMORANDUM FOR DISTRIBUTION
Noted JS
FROM:
DIRK FORRISTER
SUBJECT:
CLIMATE CHANGE OUTREACH
There will be a meeting on climate change outreach on Wednesday. February 26 from 2:00 to
3:00 in the new offices of the White House Climate Change Taskforce at 734 Jackson Place. The
agenda will be:
1.
Communication Plan for Interagency Analysis Effort
2.
Initial Draft Outreach Workplan for the year
Due to space constraints, attendance will be "principals plus one." Please call Mary Washington
at 343-1060 to RSVP although no clearance is required for this building.
02/24/97
10:56
2026470217
4.
003/005
United States Department of State
Bureau of Oceans and International
Am
Environmental and Scientific Affairs
Washington, D.C. 20520
cc.
JAF
JS TR
February 21, 1997
TO:
Distribution
FROM:
OES - Eileen B. Claussen Eile-
SUBJECT:
Climate Change Work Program
Attached is a revised version of the work program that was agreed at the meeting
held on Wednesday, February 19. Please note revisions to some of the agencies
designated to lead the drafting efforts. Also note the addition of two new items: (1) on
the issue of entry into force (which we did not discuss, but which will need additional
fleshing out; and (2) on the issue of grandfathering of early actions. I do not believe
either of these will need to be completed prior to the April 1 deadline.
I anticipate that specific drafting assignments on all of the recommended papers
will be made in the IWG/GEA Climate subgroup; please direct staff in your agencies to
complete drafting on these papers as expeditiously as possible. Also, I note that we
agreed to defer publication of the U.S. Climate Action report until after the April 15
deadline; this will allow for a one-month public comment period. However, we can only
meet this new timetable if all agencies are diligent in completing their drafting and
reviewing of assigned chapters. Please insure that this work is given a high priority.
02/24/97
10:57
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CLIMATE CHANGE: FURTHER WORK
(Based on A/S discussion of 2/19/97)
1. * Budget (White House with support of IAT)
Initial budget level and period?
2. Emissions Trading (DOE and EPA)
How to operationalize trading in the protocol (e.g., whether there will need to
be a new international oversight group under the Protocol; the units in which
trades might occur; how to address "problem" countries which may not be in
domestic compliance or have inadequate monitoring capability)?
3. Developing Country Initiative (AID with State, DOE, EPA and CSP/USIJI)
U.S. carrot to encourage developing countries (funding of US program,
including continuing/expanding the USIJI and the Country Studies
program/Support for National Action Plan (CSP/SNAP) efforts; incentives to
bring developing countries into the fold)?
4.
* Joint Implementation (EPA and DOE)
Additional provisions on calculation, measurement, monitoring, verification,
review and reporting?
5. Reporting/Compliance (State with EPA, Justice, DOE and USTR)
*
Consequences of non-compliance (possible provisions on sanctions against
non-Parties, non complying Parties or minimally complying Parties)?
National reporting, review mechanism, multilateral consultative process and
compliance procedures
6. Annex C gases/sectors (OSTP with EPA, DOE, USDA and NOAA)
*
What GWPs will be used?
What gases/sectors will be included (requires an assessment of what can be
monitored - may need to be considered on the basis of agreed criteria)
7. * Non-Annex C gases /sectors (Article 2, para. 7) (EPA, DOE, USDA)
What measures will be proposed to address these?
8. * Annex B commitments (State)
Candidate countries and potential commitment(s)?
9. Borrowing (State)
Possible additional constraints (e.g., limiting the amount allowed to be
borrowed, limiting the countries which can borrow or phasing in/out the
borrowing option)?
02/24/97
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10. Entry into Force (State)
What provisions should be made for the number of countries (or the
percentage of global emissions they represent) required for the agreement to
enter into force?
11. "Grandfathering" (DOE and EPA)
Should the international agreement include provisions ensuring that early
reduction efforts be credited against a future obligation? If so, how, and
would such provisions be established differently in a domestic process?
* INDICATES WORK THAT MUST BE DONE BEFORE APRIL 1
Format for Work Products
All papers should follow the following structure: Issue, Background, Options (if
appropriate), Recommendation(s), and Draft Text (for inclusion in U.S. Protocol
Proposal). Papers should be no more than 5 pages in length, shorter when possible.
02/24/97
10:55
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United States Department of State
Bureau of Oceans and International
Environmental and Scientific Affairs
Washington, D.C. 20520
DATE: 2/24/97
NUMBER OF PAGES TO FOLLOW:
3
FAX TO:
See Distribution List Attached
TELEPHONE:
FAX:
OFFICE:
FAX FROM:
Eileen Claussen
TELEPHONE: 647-1554
FAX: 647-0217
OFFICE:
MESSAGE:
Memo on Climate Change Work Program
02/24/97
10:56
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CLIMATE CHANGE MEETING ASSISTANT SECRETARY EILEEN CLAUSSEN
Commerce
Everett Erhlich
482-0432
Jeffrey Hunker
482-4636
OSTP
Rosina Bierbaum
456-6025
CEA
Alicia Munnell
395-6958
NEC
Elgie Holstein
456-2223
Treasury
Joshua Gotbaum
622-2633
Justice
Lois Schiffer
514-0557
Interior
Brooks Yeager
208-4561
NOAA
Terry Garcia
482-6318
OMB
T.J. Glauthier
395-4639
USTR
Jennifer Havercamp
395-4579
Agric
Charlie Rawls
720-5437
DOE
Dirk Forrister
586-9987
DOE
Mark Chupka
586-0861
EPA
Mary Nichols
260-5155
David Gardiner
260-0275
DOT:
Frank Kruesi
366-7127
OVP
Pete Jordan
456-9500
CEQ
Steve Seidel
456-6546
NSC
David Sandalow
456-2710
1400 16th Street, NW
Fax 202.797.6501
EIO
Suite 330, Box 5
Email [email protected] or
Washington, DC 20036-2266
[first initial]+[lastname]@acpa.com
Phone 202.797.6500
Web http://www.igc.apc.org/eic
Environmental
Information
CA: JAF
Center
TR JS
Friday, February 21, 1997
Alicia Munnell
Member
Council of Economic Advisers
OEOB Room 314
17th St. and Pennsylvania Ave, NW
Washington, DC 20502
Dear Ms. Munnell:
As you probably know, in January, five preeminent economists -- Kenneth Arrow, Dale
Jorgenson, Paul Krugman, William Nordhaus and Robert Solow -- signed the enclosed
"Economists' Statement on Climate Change," and circulated it to their colleagues. The
Statement has now been endorsed by eight Nobel Prize-winning economists and over
2,300 economists around the country. Never before, even in the case of the Smoot-
Hawley Tariff Act, have so many economists endorsed a consensus declaration.
This remarkable consensus has garnered significant attention in the press. For example,
Peter Passel of the New York Times commented that "the nation's movers and shakers
would do well to pay attention" to the statement. The Washington Post discussed the
Statement in a Sunday editorial that concluded that a "near-term date" should be set for
reducing greenhouse gas emissions and that the consequences of inaction on climate change
"are likely to be dire." We have enclosed copies of these and other press reports on the
Statement.
We expect that the same special interests who continue to dispute the science of climate
change will also continue to claim that climate change cannot be mitigated without adversely
impacting Americans' standard of living. We believe, however, that the consensus
expressed in the Economists' Statement makes such claims untenable, and we hope that the
Administration's consideration of mitigation strategies is based on sound economics, just
as its consideration of climate science has been based on sound science.
We would welcome the opportunity to discuss any aspect of climate change mitigation with
you in greater detail. Please call either of us at (202) 797-6500.
Sincerely,
George Abar Ah
Day Kedull
Doug Kendall
Enclosures
ECONOMISTS' STATEMENT
ON CLIMATE CHANGE
Endorsed by Over 2000 Economists
including six Nobel Laureates
I.
The review conducted by a distinguished international panel of scientists
under the auspices of the Intergovernmental Panel on Climate Change has
determined that "the balance of evidence suggests a discernible human influence on
global climate." As economists, we believe that global climate change carries with it
significant environmental, economic, social, and geopolitical risks, and that
preventive steps are justified.
II.
Economic studies have found that there are many potential policies to
reduce greenhouse-gas emissions for which the total benefits outweigh the total
costs. For the United States in particular, sound economic analysis shows that
there are policy options that would slow climate change without harming
American living standards, and these measures may in fact improve U.S.
productivity in the longer run.
III.
The most efficient approach to slowing climate change is through market-
based policies. In order for the world to achieve its climatic objectives at minimum
cost, a cooperative approach among nations is required-such as an international
emissions trading agreement. The United States and other nations can most
efficiently implement their climate policies through market mechanisms, such as
carbon taxes or the auction of emissions permits. The revenues generated from such
policies can effectively be used to reduce the deficit or to lower existing taxes.
Sponsored By
REDEFINING PROGRESS
One Kearny Street
4th Floor
San Francisco, CA 94108
Phone: (415) 781-1191
Fax: (415) 781-1198
EMail: [email protected]
January 3rd, 1997
Dear Colleague,
As you may know, representatives of the world's nations will cónvene in Kyoto in December, 1997
to negotiate an international agreement addressing the threat of global climate change due to
greenhouse gas emissions. This presents a significant opportunity for the United States to exercise a
leadership role in ensuring our long-term well-being. Conversely, a failure on the part of the U.S.
government to put forward a well-reasoned position would be a major environmental, economic,
and diplomatic setback.
As the climate debate unfolds, it is imperative that public policy be guided by sound economics
rather than misleading claims put forward by special interest groups. For this reason, we invite
you to join us in endorsing the attached non-partisan consensus statement on the economics of
climate change.
Once this statement has been signed by a large number of economists, it will be widely
disseminated to leaders in the public and private sectors, and to the general media. This effort is
being coordinated by Redefining Progress, a non-partisan, non-profit public policy organization.
Attached please find an endorsement form for your consideration. This letter and endorsement
form are being sent to the membership of the American Economic Association. Please feel free to
circulate it to your colleagues in case they are not on the AEA mailing list.
We thank you for your prompt attention to this critical issue.
Sincerely,
Nemoth I Arrow anow
Dean Joye
Pal R24
Dale W. Jorgenson
Paul R. Krugman
Wiman D. Northaus
Robert M. Sobur
William D. Nordhaus
Robert M. Solow
NOBEL LAUREATE SIGNATORIES
Kenneth J. Arrow
Stanford University
Gerard Debreu
University of California at Berkeley
John C. Harsanyi
University of California at Berkeley
Lawrence R. Klein
University of Pennsylvania
Wassily Leontief
New York University
Franco Modigliani
Massachusetts Institute of Technology (Emeritus)
Robert M. Solow
Massachusetts Institute of Technology
James Tobin
Yale University
ECONOMISTS' STATEMENT ON CLIMATE CHANGE
Among the over 2,300 economists who have endorsed the Economists' Statement on
Climate Change are the following, they include scholars at top universities and
economists from top corporations.
Michael C. Barth
ICF Kaiser
Laurence J. Kotlikoff
Boston University
William J. Baumol
New York University
Anne O. Kreuger
Stanford University
Steven Neil Braun
Council of Economic Advisers
Mordecai Kurz
Stanford University
W.A. Brock
University of Wisconsin, Madison
Steven G. Lanning
Bell Labs-Lucent Technologies
Martin Bronfenbrenner
Duke University
Lester Lave
Carnegie Mellon University
John P. Brown
KPMG Econmic Consulting Services
David Lui
Southern California Edison
R. Thomas Burge
Proctor & Gamble Pharmaceuticals
Paul W. MacAvoy
Yale School of Management
Dallas Burtraw
Resources for the Future
Gerald M. Meiser
Stanford University
Trudy Ann Cameron
University of Los Angelos California
John R. Meyer
Harvard University
Jian Cao
AT&T
Christopher J. Monroe
AT&T
Carl F. Christ
Johns Hopkins University
Richard R. Nelson.
Columbia University
Gerard Debreu
University of California at Berkeley
Richard B. Norgaard
University of California at Berkeley
Stephen J. DeCanio
University of California at Santa Barbara
Charles Plott
California Institute of Technology
Robert Dorfman
Harvard University
Richard E. Quandt
The Andrew W. Mellon Foundation
Franklin M. Fisher
Massachusetts Institute of Technology
Roy Radner
New York University
Peter J. Francis
CNA Corporation
Gordon Rausser
University of California at Berkeley
Victor R. Fuchs
Stanford University
Kenneth Rogoff
Princeton University
Claudia Goldin
Harvard University
David Romer
University of California at Berkeley
Edward Gramlich
University of Michigan
Michael Rothschild
Princeton University
Jerry R. Green
Harvard University
Daniel Rubinfeld
University of California at Berkeley
Frances Hammond
General Motors Corporation
Vernon W. Ruttan
University of Minnesota
John C. Harsanyi
University of California at Berkeley
Jeffrey Sachs
Harvard University
Oliver Hart
Harvard University
Thomas Sargent
University of Chicago
James J. Heckman
University of Chicago
F.M. Scherer
Harvard University
Albert O. Hirschman
Institute for Advanced Study
T. Paul Schultz
Yale University
Jack Hirshleifer
University of Los Angelos California
M.M. Shahjahan
PEPCO
Robert Hunt
World Bank
Steven Shavell
Harvard University
Leonid Hurwicz
University of Minnesota
A. Michael Spence
Stanford University
Christopher Jencks
Harvard University
Robert Stavins
Harvard University, Kennedy School
Gale D. Johnson
University of Chicago
Bruce Stram
Enron Corporation
Carl Kaysen
Massachusetts Institute of Technology
James Tobin
Yale University
Robert Kirchner
PEPCO
Gordon Tullock
University of Arizona
Lawrence R. Klein
University of Pennsylvania
Hal R. Varian
University of California at Berkeley
J. Kmenta
University of Michigan
W. Kip Viscusi
Harvard Law School
Oliver E. Williamson
University of California at Berkeley
The Washington Pos
C6 SUNDAY, FEBRUARY 16, 199
Staying Cool
E NOW KNOW that the old saying
W
administration accepted, in principle, the no-
attributed to Mark Twain-"We all
tion of binding targets. Now nations are negoti-
grumble about the weather but nothing
ating those targets-amounts and dates-hop-
is done about it"-is not quite true. By virtue of
ing to reach agreement at yet another
the coal we burn and the gasoline we use and in a
conference in Kyoto in December.
thousand other ways, we all have a great effect
Opponents of meaningful action, led by parts
on the weather. The earth has grown warmer by
of the energy and utilities industries, have
about one degree, on average, during the last
shifted their strategy from attacking the scien-
century, and scientists believe the process is
accelerating. If nothing is done to slow global
tists to warning of dire economic consequenc-
es. But last week more than 2,000 economists
warming, the consequences in the next century
are likely to be dire. Much turns on decisions the
signed a statement challenging the industry
government must take this year.
claims. The broad array of economists, led by
After years of debate, few now dispute that
Nobel-Prize winners Kenneth J. Arrow and
the burning of fossil fuels releases gases into
Robert M. Solow, said that measures to reduce
the atmosphere which then trap more of the
greenhouse-gas emissions need not harm the
sun's warmth than the planet would otherwise
economy-and "may in fact improve U.S. pro-
retain. The effects of this are more complex
ductivity in the longer run." That's because
than the term "global warming" suggests.
there are many innovative and energy-efficient
Some parts of the earth are likely to become
technologies just awaiting the right financial
colder, others drier; monsoon and hurricane
incentives to enter the market. In many such
paths may shift; storms may become more
fields, U.S. industry leads the way.
extreme; sea levels will rise. Many small
The key, then, is for the United States to set
islands and low-lying coastal areas, such as
a goal that's not pushed off to some distant date
Maryland's Eastern Shore, are at risk. Rela-
like 2020 or beyond. A near-term date would
tively small temperature changes could have a
send the signal industry needs to begin serious-
dramatic impact on agriculture and even the
ly investing in more efficient technologies, and
spread of disease.
the commercialization of such technologies
At the 1992 Earth Summit in Rio de Janeiro,
would offer an alternative path for development
the United States-which produces something
to giants like China and India. Their economies
like one-quarter of the world's greenhouse-gas
are sure to grow in coming decades; and if they
emissions-vowed to reduce them to 1990
follow the U.S. path to prosperity, we will all be
levels by the year 2000. It seemed a modest
doing more than just grumbling about the
goal, but it won't be met. So last year the
weather.
THURSDAY, FEBRUARY 13, 1997
Economic Scene
Peter Passell
stitutions to enforce the targets is in the talking
Yawn. A global-warming alert.
stage.
That's where the economists' statement fits in.
"We wanted to be there early," said Stephen
But this one has solutions.
DeCanio of the University of California at Santa
Barbara, "before governments and politicians
TERNLY worded petitions and ringing
were locked into positions." Specifically, the state-
S
screeds of principle are as much a part of
ment is intended to give the Clinton Administra-
campus life as grade Inflation - which Is
tion some help in pressing the idea of creating an
why Washington rarely takes them seriously. But
international market in emissions permits at the
the nation's movers and shakers would do well to
next global meeting on climate change, set for
pay attention to a statement on global warming by
Kyoto, Japan, in December.
some 2,000 mostly academic economists.
The idea is simple. If and when world leaders
For one thing, the signatures collected by Rede-
start to deal with the practical issues, they are apt
fising Progress, a group of policy-minded social
to set national targets for containing emissions
scientists based in San Francisco, range from the
hindre
that will be very expensive to meet in the rich
newish left (Duncan Foley of Barnard College) to
industrial economies, and probably won't be hon-
the skeptical center (James Heckman of the Uni-
Niculae Asclu
ored in the large emerging economies like China,
versity of Chicago) to the libertarian right (Gor-
Russia, India and Indonesia.
don Tullock of the University of Arizona). "Mar-
policy options that would slow climate change
Creating an emissions trading system that al-
ket-based approaches to coping with climate
without harming American living standards."
And what might these policy options be? Here,
lows already rich economies to pay the emerging
change generate as much consensus among econo-
economies to use less energy and less carbon-
mists as free trade," explains Paul Krugman of
the drafters stake out a position that seems almost
Intensive fuels as they develop offers a double
M.I.T., one of the organizers of the statement.
obvious to economists, but has barely entered the
dividend. It reduces the cost for developed coun-
More important, the statement focuses on what
consciousness of environmental policy makers. "A
tries, in turn reducing the chances their legisla-
is now regarded by insiders as a make-it-or-break-
cooperative approach among nations is required
tures will balk. And it creates a pool of capital to
it Issue in slowing atmospheric warming: design-
- such as an international emissions trading
be used as an Incentive to push emerging econo-
ing an international system that permits rich
agreement," the statement asserts.
economies to contribute cash in lieu of emissions
To understand where the economists really
mies toward environmentally benign growth.
Translation: Getting, say, China or India to
reductions. "Allowing some to pay others to re-
want the diplomats to go, consider where we are
dure greenhouse emissions could reduce the total
now. Current rates of deforestation and combus-
switch from coal to natural gas, or to encourage
cost by 80 to 90 percent," estimates William
tion of carbon-based fuels - coal, oil, gas - are
energy conservation by charging world market
Nordhaus, an economist at Yale and another or-
adding carbon dioxide into the atmosphere faster
prices at home would be a lot easier if they were
than the oceans can absorb it. The higher carbon
paid billions of dollars each year to do it.
gahizer of the statement.
dioxide concentrations trap solar energy. Rising
temperatures will likely change weather patterns
Not every economist who favors emissions trad-
Like any committee looking for consensus, the
drafters of the climate statement cast their net
radically and raise the level of the oceans.
ing signed the statement. "I'm worried it will be
widely. "We believe that global climate change
Governments of all the major economies are
used at Kyoto to commit America to useless,
carries with it significant environmental, econom-
vaguely committed to containing greenhouse gas
expensive unilateral actions in reducing emis-
ic,"social and geopolitical risks, and that preven-
emissions before once-a-century hurricanes be-
sions," says Robert Hahn, an economist at the
tive steps are justified," the unshocking Introduc-
come an annual event in the Caribbean, Kansas
American Enterprise Institute.
turns into a dust bowl and the Bay of Bengal
But Mr. Nordhaus has very different worries.
tion reads.
Those who read on, however, will discover there
doubles in size at the expense of Bangladesh. But
"Economists haven't been important players in
is meat on these bones: "Sound economic analy-
the emphasis is on the vague: the process of
environmental policy over the last 30. years," he
setting emissions targets or creating political in-
said. "This time we could make a difference."
sis," the authors argue, "shows that there are
D2
FINANCIAL TIMES
4
FRIDAY FEBRUARY 14 1997
Economists back call for new carbon taxes
By Mark Suzman in Washington
that would slow climate change
bating global warming ahead of
across the country by Redefining
revenues generated from such poli-
without harming American living
the international conference on
Progress, a non-partisan, non-
cies can effectively be used to
More than 2,000 US economists,
standards, and these measures
the issue in Kyoto, Japan, next
profit public policy organisation
reduce the deficit or to lower exist-
including six Nobel laureates,
may in fact improve US productiv-
December.
based in San Francisco.
ing taxes," it says.
yesterday endorsed an unprece-
ity in the long run," the statement
The administration recently
The statement cites scientific
Mr Stephen DeCanio, senior eco-
dented statement calling for new
says.
indicated its support for emissions
evidence from the United Nations-
nomic fellow with Redefining
taxes on carbon use and an inter-
Although there are still some
trading but has backed away from
sponsored Intergovernmental
Progress, said the statement is
national emissions trading agree-
sceptics, the overwhelming con-
the idea of a carbon tax.
Panel on Climate Change in 1995
aimed at persuading the US to
ment to help control global
sensus among economists is a
The statement was drafted by
to argue that "preventive steps are
take an international lead in com-
warming.
blow for energy companies and
five prominent economists, Mr
justified" to combat the "signifi-
bating global warming.
The economists argue that using
other lobby groups which have
Kenneth Arrow and Mr Robert
cant environmental, economic,
"Some groups have asserted that
such market-based policies to limit
managed to derail previous
Solow, both Nobel prizewinners,
social and geopolitical risks" asso-
we cannot address the global cli-
the growth in greenhouse gas
attempts to introduce such a car-
Mr Dale Jorgenson of Harvard Uni-
clated with global warming.
mate change problem without
emissions could ultimately prove
bon tax on the grounds that it
versity, Mr Paul Krugman of the
Specifically, it calls for the US
incurring serious economic harm."
beneficial for the economy.
would be prohibitively expensive.
Massachusetts Institute of Tech-
and other countries to co-operate
he said. "These 2,000 economists
"For the United States in partic-
It will also put pressure on the
nology and Mr William Nordhaus
on reforms such as carbon taxes
have said essentially the opposite
ular, sound economic analysis
Clinton administration to come up
of Yale University.
and the auction of internationally
- that the greatest risks lie with
shows there are policy options
with concrete proposals on com-
It was circulated to economists
tradeable emission permits. "The
inaction."
THE WALL STREET JOURNA,
THURSDAY, FEBRUARY 13, 1997 B7
Group of Economists Seeks
Treaty on Global Warming
By a WALL STREET JOURNAL Staff Reporter
WASHINGTON - A group of 2,100
economists signed a statement calling for
international controls to prevent global
warming, asserting that such controls
would not harm Americans' standard of
living and "may in fact improve" the
nation's economic productivity.
The statement - to be announced here
today - takes issue with a letter by more
than 100 chief executives of U.S. compa-
nies sent to President Clinton in Decem-
ber that warned that a global treaty
"could have serious economic and com-
petitive consequences."
The proposed treaty would control
emissions of carbon dioxide and other
"greenhouse gases" that many scientists
believe are slowly warming the planet by
trapping sunlight. In their letter, the
CEOs also warned the president to avoid
making "premature commitments" be-
cause of "scientific uncertainties" that
require further study.
But Kenneth J. Arrow, a Nobel Prize-
winning economist at Stanford Univer-
sity who helped shape the agreement
among the economists, said they believe
there now is enough scientific research to
establish that man-made causes of global
warming will have a "significant" detri-
mental effect on climate.
The Washington Pos
FRIDAY, FEBRUARY 14, 1997 A3
Economists
Urge Reduced
U.S. Emissions
Reuter
More than 2,000 economists said in a state-
ment yesterday that the United States would
be able to reduce its industrial emissions to
slow global climate change without damaging
its economy.
Prepared by five leading economists, the
statement said well-designed policies relying
on market mechanisms "may in fact improve
U.S. productivity in the longer run."
Spokesmen for industries that depend
largely on fossil fuels such as oil and coal have
argued that the threat of climate change from
heat-trapping industrial emissions is over-
blown, and countries should wait for more sci-
entific proof of global warming before imple-
menting policies to slash emissions.
But the economists, who released the state-
ment at a news conference, said climate
change "carries with it significant environmen-
tal, economic, social and geopolitical risk," and
that "preventive steps are justified."
They endorsed a system of "market mecha-
nisms, such as carbon taxes or trading of mar-
ketable emissions permits among countries."
Revenues from carbon taxes or emissions
credits could be used to reduce budget deficits
or lower taxes to benefit the economy, said
the statement drafted by Nobel laureates Ken-
neth Arrow and Robert Solow, as well as Dale
Jorgenson of Harvard University, Paul Krug-
man of the Massachusetts Institute of Tech-
nology, and William Nordhaus of Yale Univer-
sity.
Fr, 10'm
mm
THE WHITE HOUSE
WASHINGTON
JAF
February 20, 1997
MEMORANDUM FOR DISTRIBUTION
FROM:
ELGIE HOLSTEIN
DAVID SANDALOW
SUBJECT:
Climate Change
There will be a meeting tomorrow, Friday, February 21 from 1:00-2:30 in OEOB Room 231. We
will start promptly at 1:00.
The agenda is:
1. Next Steps on Economic Analysis
2. Next Steps on Domestic Policy Development
3. Hill Modeling Briefing
4. Concentrations/Emissions Paper
Everyone on the attached list has been cleared into the building. If you have questions
concerning clearance, please call Wendy Philleo (456-6224).
022
CEG
02/20/97 THU 14:51 FAX 2024566474
02/20/97 THU 14:51 FAX 2024566474
CEQ
1.
001
DISTRIBUTION:
Organiz.
Name
Fax #
State
Eileen Claussen
647-0217
Rafe Pomerance
Commerce
Everett Erhlich
482-0432
Jeffrey Hunker
482-4636
OSTP
Rosina Bierbaum
456-6025
CEA
Alicia Munnell
395-69581
Jeff Frankel
Treasury
Joshua Gotbaum
622-2633
Justice
Lois Schiffer
514-0557
Interior
Brooks Yeager
208-4561
NOAA
Terry Garcia
482-6318
OMB
T.J. Glauthier
395-4639
USTR
Jennifer Haverkamp
395-4579
Agric
Charlie Rawls
720-5437
DOE
Dirk Forrister
586-9987
Mark Chupka
586-0861
Joe Romm
EPA
Mary Nichols
260-5155
5155
David Doniger
David Gardiner
260-0275
DOT
Frank Kruesi
366-7127
OVP
Pete Jordan
456-9500
CEQ
Steve Seidel
456-6546
USAID
David Hales
703-875-4639
DOL
Andrew Samet
219-5980
02/20/97 14:06
202 252 0275
OPPE
MUNNELL
4.
001/010
as: JAF
FAX TRANSMISSION
JS
U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF POLICY, PLANNING AND EVALUATION
401 M STREET SW
WASHINGTON, DC 20460
202-260-4332
FAX: 202-260-0275
To:
Assistant Secretaries Climate
Date:
February 20, 1997
Change Group Group
(see attached list)
Fax #:
See attached list
Pages:
10, including this cover sheet.
From:
William N. White
Special Assistant to David
Gardiner
Subject: Emissions, Concentrations and Consequences paper
COMMENTS:
Please find attached the latest draft of the paper entitled "Emissions, Concentrations and
Consequences" This is the first part of a two part fax. The second part will be sent by
Rosina Bierbaum of OSTP later today. Please review this paper to prepare for a discussion at
tomorrow's meeting of the Assistant Secretaries' Climate Change Group. Please call me or
Diane Anderson at 260-4332 if you do not recive a complete transmission.
02/20/97 14:07
202 252 0275
OPPE
MUNNELL
3
003/010
Emissions, Concentrations, and Their Consequences
Concerns about the potential effects of human induced climate change lead to the
signing of the Framework Convention on Climate Change (FCCC), whose ultimate
objective is to achieve stabilization of greenhouse gas concentrations in the
atmosphere at a level that would prevent dangerous anthropogenic interference with the
climate system." Concentrations of greenhouse gases have already risen significantly
above those of the preindustrial era as a result of past emissions: concentrations of
carbon dioxide, methane, and nitrous oxide have risen by about 30%, 145% and 15%
respectively. Concurrently, global mean surface temperatures have increased 0.6 to 1.2°F
since the late 19th century. In the absence of emissions control policies, concentrations
are projected to rise further yet. For example, by 2100 the concentration of carbon
dioxide is projected to be 30 to 150% higher than today's level. The projected increases
in concentrations of carbon dioxide and other greenhouse gases are estimated to further
warm the surface of the earth by an average of 1.6 to 6.3°F by 2100. This rate of warming
is probably greater than any sustained rate of warming of the last 10,000 years, or since
the innovation of agriculture (IPCC, WG I Summary for Policy Makers, 1995).
Most estimates of the effects of climate change are those associated with a
doubling of the preindustrial concentration of carbon dioxide to approximately 550 parts
per million (ppm), or an increase in all greenhouse gas concentrations that together would
have an equivalent capacity to trap heat. Little information is available on the effects
associated with other concentration levels.
The climatic changes that would result from an equivalent doubling of greenhouse
gases would have pervasive effects, some of them irreversible, on the environment and
human societies. Unfortunately, the tools and information available to predict specific
impacts and convert them into monetized damages are limited at this time, hampering the
ability to undertake a more comprehensive cost-benefit assessment of climate change
policies. Nevertheless, some impact analyses have indicated substantial possible costs
associated with inaction, providing an important context for considering the economic
costs associated with policies to reduce greenhouse gas emissions.
Health Effects
Climate change will affect the health of human populations in diverse ways and
adverse effects are likely to outweigh beneficial effects substantially (WHO, 1996). One
source of adverse effects is illness and death from summertime heat stress. In 44 US
cities, summer heat related deaths are estimated to increase 70-150% by 2050, even if
people adjust physiologically and behaviorally to changing climate conditions and make
some adjustments to urban infrastrure (Figure 1, Kalkstein and Greene, 1997). The
Pre-decisional Draft - Do Not Cite or Quote
1
02/20/97
14:08
202 252 0275
OPPE
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004/010
elderly are at greatest risk in the US and urban populations in developing countries are
also especially vulnerable to heat stress.
1500
Average Annual Excess Weather-Related Mortality for
The incidence of
1230
1993, 2020 and 2050 Climate
1000
infectious diseases, which are
still the world's leading cause of
DEG
fatalities, may increase as a
see
result of climate change.
480
New York City
100
Climate change may extend the
geographic ranges of disease-
Los
Angeles
carrying vectors such as
1993
mosquitos, which can increase
2020
the populations exposed to
2050
diseases such as malaria, dengue
Sourses) Kalasisia And Green (1997) Clientrat et ML(1995)
OFDLB9 Climate Change Secredio
&EPA
Name: Includes both SHIPTING and winter morality. Assemes full applimation 16 changed climmo
and yellow fever. In North
America, the arca of potential
Figure 1
malaria transmission may
expand as a result of 2xCO2
climate change (Figure 2). Globally, the population potentially exposed to malaria could
increase by one-third, with a possibility of 50-80 million additional malaria cases per year
relative to a baseline of 500 million cases (IPCC, WG II Report, 1995). The incidence of
water borne infectious discases such as cholera and diarrheal diseases may also increase
due to the effects of climate change on water supply, water quality, and sanitation (WHO,
1996).
Climate change can reduce air quality and increase levels of air borne pollen
and spores which exacerbate
respiratory disease, asthma,
and allergic disorders. In
addition, controls to reduce
Changes in Potential Malaria Transmission
greenhouse gas emissions
would simultaneously reduce
atmospheric concentrations of
air pollutants such as fine
particles, NOx, ozone, and
Mo Materia -
heavy metals including
Malaria sisk before and
CAN
Mks chests
mercury. For example,
Maleur the ANDREWS in at
- our clanse accure
capping CO2 emissions at
1990 levels has been
CHANGE becomeles general resinds.
Surence Malew and Letter (IV))
GPTH. OFFICE Cass. out and HEMO
SEPA
estimated to yield co-control
reductions of up to 2.3 million
Figure 2
tons of NOx emissions and
0.9 million tons of SO2
Pre-decisional Draft - Do Not Cite or Quote
2
02/20/97
14:08
202 252 0275
OPPE
MUNNELL
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emissions in 2010. Co-control reductions in these pollutants would bring local air quality
and health benefits that would add to and be more immediate than the climate related
health benefits of greenhouse gas emission reductions.
Water Resources
Human welfare is also placed at risk by changes in the availability of fresh water
that may result from climate change. Changes in precipitation and increased
evapotranspiration due to higher temperatures from 2xCO2 climate change can be
expected to cause large changes in water runoff in some regions, affecting the quantity
and quality of water supplies for domestic and industrial uses, irrigation, hydropower
generation, navigation, stream ecosystems and water based recreation. Increased
variability in the hydrologic cycle is expected to result in more severe droughts and/or
floods in some places but less severe in others (IPCC, WG I Report, 1995).
Areas of greatest vulnerability are those where water supplies and quality are
already problems, such as arid and semi-arid regions of the world and some low lying
coastal areas, deltas and small islands. In some cases these areas coincide with conflict
prone areas which are highly dependent on water originating in areas outside their borders
such as Cambodia, Syria, Sudan, Egypt and Iraq (IPCC, WG II Report, 1995).
In the United States, the Colorado River Basin would suffer decreased summer
runoff, coinciding with peak demand for irrigation, unless precipitation also increases
substantially. Reductions in runoff of up to 25 percent in the basin are projected under
some scenarios of 2xCO2 climate change. Runoff losses of this magnitude in water short
regions such as the Colorado River basin are likely to adversely affect water deliveries,
exacerbate salinity problems, reduce hydropower generation, and reduce water storage in
reservoirs (Nash and Gleick, 1993).
Forests and Natural Areas
Climate change can dramatically alter the geographic distributions of individual
tree species and of forest and vegetation types (see Figure 3). One-third of the Earth's
forests would undergo a major change in the type of vegetation that could be supported as
a result of CO2 doubling. In boreal forests, which are the forests most vulnerable to
climate change, two-thirds of the currently forested area may undergo a change in
vegetation type. In some instances, a change in vegetation type will result in a loss of
forest area as the land converts to grassland or shrubland. Globally, forested areas may
decline 10 percent after forests reach a new equilibrium under a new climate (IPCC, WG
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II Report, 1995).
of
B
C
Present and future geographical range for sugar maple. A: Present raige (from Fowells, 1965). B 2XCO2 clumate-space in
2090 A.D. under the OISS scenario. Black 6104 is the predicted special range; stippled alea 15 potential range. C: EXCO2
climate-space in 2090 AD. under the OFDL ocenario. Black area IF the predicted species range. stippled UTI is potential
range.
Somme: USEPA, 1989
Figure 3
In the United States, western conifer forests could decrease in area and be
replaced by broadleaf forests; eastern deciduous forests may be replaced by grasslands
along their western boundary. Total forested area in the United States could either
increase or decrease after forests reach a new equilibrium with a 2xCO2 climate.
Projections of decreases are as high as 15 percent (VEMAP, 1995).
Wildlife habitat could be altered
Loss of Habitat for Brown Trout from a
Doubling of CO.
substantially with repercussions for
wildlife abundance, local species
survival, and global species survival.
For example, a potential change from
boreal forest to northern hardwood in
the Boundary Waters Canoe Area would
result in an area currently suitable for
moose changing to one more suitable for
No Brown Truel
1-48% Leas
60-100% Lass
Now of in Future
white-tailed deer (Botkin, 1989). As
Bource CPA, 1026
Climate Charge Number
another example, increases in water
Figure 4
temperatures of rivers and streams
would change the types of fish that
could be supported and potentially result in losses of habitat for cold water fish species
such as Brook, Brown, Rainbow and Cutthroat trout (Figure 4).
Wetlands represent another critical set of ecological systems at risk from climate
change. For example, the IPCC found that precipitation changes and salt water intrusion
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from sea level rise could adversely affect the ecological communities of the Florida
Everglades and degrade the habitat for many species of wading birds. The wetlands of
the prairie pothole region of North America, which supports half the waterfowl
population of this continent, could diminish in area and change dramatically in character
in response to climate change according to the IPCC. Although not specifically assessed
by the IPCC, such changes could be devastating to migratory bird populations and
species survival.
Coastal Areas
With a doubling of CO2, sea level would continue to rise for several centuries,
with the best estimate of the equilibrium rise being at least seven feet. In the next
century, sea level is projected to rise about 20 inches, which is over three times the 6 inch
rise experienced over the last century. Along most of the U.S. Atlantic and Gulf Coasts,
sea level is projected to rise one foot in the next fifty years and two feet in the next
century. The IPCC estimates that a 50 cm rise in sea level would increase the population
at risk from storm surges from roughly 45 million at present to over 90 million world
wide.
Rising sea level erodes beaches and coastal wetlands, causes the gradual
inundation of low lying areas and increases the vulnerability in coastal areas to flooding
from storm surges and intense rainfall. A one foot rise could erode ocean beaches 100-
150 feet over the next fifty years, which would threaten the first few rows of houses along
many barrier islands and other resorts. A two foot rise would inundate 3000 to 7000
square miles of coastal lowlands and 20-45 percent of U.S. coastal wetlands. Rising sea
level and lower river flows will increase salinity levels in aquifers and estuaries, tentially
harming drinking water supplies in California's Central Valley, Philadelphia, New York,
and Miami. Rising sca level could also change the character of coastal areas. For
example, along the
Blackwater National Wildlife Refuge (Maryland)
Surface Classification: 1938 and 1980
Chesapeake Bay and other
estuaries, the small sandy
beaches and wetland shores
could gradually be replaced
with walls of steel, rock,
wood, and concrete.
BEPA
Figure 5
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Agriculture and Food Supply
Climate strongly affects crop yields and projected changes under a CO2 doubling
can exceed 30 or 40 percent for some crops and locations (Figure 6). But despite the
potentially large changes in yields, global food production is not expected to change
substantially. This is because farming practices are considered to be highly adaptable to
different climates, because production of important food crops can shift to new locations
in response to changes in climate, and because CO2 has beneficial effects for plant
photosynthesis and water use efficiency that can offset deleterious effects of changes in
climate. Regional food production, however, may be substantially affected. Agricultural
production could decline significantly in developing countries while being only slightly
affected in developed countries. Production decreases in developing countries have been
estimated to increase the population at risk from hunger by 5 to 50 percent, or 40 million
to 300 million persons (Rosenzweig, Parry and Fischer, 1995).
Percent Change
from Baseline
Source: Bacod on data supplied by Rosenzweig, 1996.
No data
40-30
-20
-10
0
10
20
30
Figure 6 Estimated change in average wheat yield for GISS 2xCO2 scenario.
In the United States, total agricultural production and income generated in
agriculture would most likely change only slightly under a doubling of CO2. The
aggregate effects, however, mask regional differences in the impacts of climate change on
agriculture. For example, eastern and southern areas of the United States are projected to
experience losses in agriculture under a number of scenarios, while northern and western
areas are projected to benefit (Adams et al., 1995).
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Catastrophic Events, Surprises and Rates of Change
There are various feedback effects between the atmosphere, oceans, and terrestrial
systems that amplify or dampen changes in climate that are projected to result from
human emissions of greenhouse gases. Uncertainties about these effects are largely
responsible for differences in the warming projected by different models for a doubling of
carbon dioxide. But because of the complexity and non-linearity of the processes and
interactions, abrupt, large and unpredicted changes in climate and/or sea level are
possible.
There are also potentially significant feedbacks not accounted for in climate and
sea level rise projections. For example, the rates of warming projected to result if no
further actions are take to control greenhouse gas emissions would cause suitable climates
for many tree species to move polewards at rates that are an order of magnitude greater
than the species can migrate (IPCC, WG II Report, 1995). This could cause significant
losses of forest productivity and dieback of forests. As a result, enormous quantities of
carbon could be released to the atmosphere and significantly amplify the warming.
Though the probabilities of such events are considered to be low, they are expected to
grow the more rapid is the rate of warming (IPCC, WG I Report, 1995).
Emissions
While little can be said about the effects associated with concentrations other than
550 ppm CO2 equivalent, it is likely that uncontrolled emissions will result in higher
concentrations. While 550 ppm is approximately the concentration of CO2 that would
result if current global emissions were permanently capped at the current emission level
of 6 billion tons, the mid-range estimate of the IPCC projects growth of CO2 emissions to
13 billion tons by 2050 and 20 billion tons by 2100.
Greenhouse gases include carbon dioxide, methane, nitrous oxides,
hydrofluorocarbons (HFCs), poly-perfluorocarbons (PFCs), and sulfur hexafluoride
(SF6). Gases differ both in their atmospheric lifetimes and in their ability to trap heat in
the atmosphere. In addition, carbon is not only emitted through the combustion of fossil
fuels, but is also absorbed by "sinks" such as trees and soils.
Although greenhouse gases come from many sources, carbon dioxide (CO₂) from
fossil fuel use is the source of greatest concern because of its rapid historical and
projected growth. Human activities have already resulted in roughly 250 billion tons of
carbon (gigatons of carbon or GtC) emissions from fossil fuel combustion and perhaps
200 GtC from net deforestation since 1700. In terms of carbon equivalent, cumulative
anthropogenic greenhouse gas emissions since the beginning of the Industrial Revolution
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have been roughly 570 billion metric tons of carbon equivalent (GtCe), of which about
450 GtC have been carbon. 1
Historically, fossil carbon emissions have come mainly from the U.S. (27% of the
postwar total), the rest of the OECD (22%), and the former Soviet Bloc (24%). The rest
of the world, with nearly 80% of the population, is responsible for a mere 27% of
cumulative emissions. On a per capita basis, U.S. emissions are over 5 tons per person
per year; the industrial nations of Western Europe and Japan emit about 2 to 2.5 tons per
person; and the nations of the former Soviet Bloc, whose per capita emissions used to be
very high due to the inefficiencies of central planning, have fallen to about 2.5 tons per
person. At the other end of the spectrum, the developing countries of the Americas,
Africa and Asia have emissions on the order of 0.2 to 0.6 tons per person.
Despite their relatively low emission levels, developing countries' emissions are
growing very rapidly - 21% between 1990 and 1995. Global fossil fuel emissions have
been roughly stable during this period only because of the 30% reduction in former
Soviet Bloc emissions associated with the collapse of the centrally planned economies.
Given current projections of population growth and economic activity, developing
countries' share of annual global fossil emissions should surpass that of the developed
countries during the second quarter of the next century (Figure 6). However, their share
of cumulative fossil emissions will remain below that of the developed countries for
many years to come, as will their per capita
Figure 21 Cumulative Global Anthropogonic Carbon Emissions
emissions.
Historise and Projected pee (****)
3100
1688
More than 75% of all fossil
-
emissions in history have occurred since
1480
Total
1945, and 50% have occurred since 1970.
I I I
1700
THE
About 40% of total carbon emissions have
...
accumulated in the atmosphere, raising the
600
stock of atmospheric carbon by nearly 30%
400
DECO
from 280 ppm (parts per million) to over
300
P
360 ppm. Somewhat less than half of
year
says
1000
THAT
TOTA
THE
1814
0190
current emissions are accumulating in the
Figure 7
atmosphere, while the rest is absorbed in
natural sinks (the oceans and biosphere)
through processes that are as yet only
poorly understood. Although most of the increased carbon will ultimately be absorbed by
the oceans, the increased atmospheric concentrations of carbon dioxide and other
greenhouse gases will affect the climate for centuries to come. Once emitted, carbon
dioxide will remain in the atmosphere for 150-200 years.
I
Deforestation and other changes in land use have reduced the amount of carbon stored in biota and solls by perhaps 275 GtC, or
around 10%, since the beginning of agriculture.
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DISTRIBUTION:
Organiz.
Name
Fax #
State
Eileen Claussen
647-0217
Rafe Pomerance
Commerce
Everett Erhlich
482-0432
Jeffrey Hunker
482-4636
OSTP
Rosina Bierbaum
456-6025
CEA
Alicia Munnell
395-6958
Jeff Frankel
Treasury
Joshua Gotbaum
622-2633
Justice
Lois Schiffer
514-0557
Interior
Brooks Yeager
208-4561
NOAA
Terry Garcia
482-6318
OMB
T.J. Glauthier
395-4639
USTR
Jennifer Haverkamp
395-4579
Agric
Charlie Rawls
720-5437
DOE
Dirk Forrister
586-9987
Mark Chupka
586-0861
EPA
Mary Nichols
260-5155
David Doniger
David Gardiner
260-0275
DOT
Frank Kruesi
366-7127
OVP
Pete Jordan
456-9500
CEQ
Steve Seidel
456-6546
USAID
David Hales
703-875-4639
DOL
Andrew Samet
219-5980
Fm:Rosina
2/13 DRAFT PRE-DECISIONAL DRAFT --
DO NOT QUOTE OR CITE
THE LONGER-TERM VIEW: THE RELATIONSHIP OF
EMISSIONS TO ATMOSPHERIC CONCENTRATIONS
Most discussions have focused on what steps might be taken in the medium term (2010-
2020) to reduce emissions of greenhouse gases. Such actions represent only an initial step and,
by themselves, would fall far short of significantly reducing the risks of climate change. Much
more long-term planning will be necessary to achieve the goal of the Framework Convention on
Climate Change:
"stabilization of greenhouse gas concentrations
at a level that would prevent
dangerous anthropogenic interference with the climate system. Such a level
should
allow ecosystems to adapt naturally to climate change; ensure that
food production is not threatened; and enable economic development to proceed
in a sustainable matter.
This paper describes emissions paths that would be necessary to achieve various longer-term
goals of stabilizing atmospheric concentrations of greenhouse gases. It also explores the
implications that a longer term goal has for shaping near-term policy decisions.
Several aspects of the climate change issue underscore its long term nature, but also
suggest a need for beginning action now:
-- Once emitted, carbon dioxide will remain in the atmosphere for 150-200
years.
-- Lags in the climate system result in temperatures increasing for several decades
and sea level rising for centuries after greenhouse emissions have ceased
to increase.
-- Uncertainties in scientific understanding of climate change and its relationship
to long-term costs and benefits make selecting any specific ultimate
concentration goal somewhat speculative at this time.
-- It has taken decades for the infrastructure of fossil-fuel based technologies to
develop. A transition to alternative sources of energy will also require
many decades, but will only begin in earnest if research and development
is begun now and if proper incentives are provided.
I. GLOBAL EMISSIONS AND ATMOSPHERIC CONCENTRATIONS
In the absence of any actions specifically to limit carbon dioxide emissions, the
Intergovernmental Panel on Climate Change (IPCC), as shown in Figure 1, estimated that current
emissions (as shown by the 2 upper lines labeled Business as Usual [BAU]) of 6 billion tons of
carbon per year could grow to between 15-25 billion tons of carbon by 2050 and continue to
increase through the end of the next century.
Global CO2 Emissions & Concentrations
Emissions
Concentrations
50.0
45.0
(1990) ech)
1000
DAla(Techt)
40.0
WRE 550
Constant 1990
800
35.0
30.0
600
PgC/yr
25.0
ppmv
20.0
400
15.0
BAU(1990)
BAU(Tech+)
10.0
200
WRE 550
Constant 1990
5.0
0
0.0
1990
2010
2030
2050
2070
2090
1990
2010
2030
2050
2070
2090
Figure 1
Figure 2
Figure 2 shows the impact of these emissions scenarios on atmospheric concentrations.
For context, preindustrial levels of carbon dioxide were about 280 ppm, and have increased to
today's levels of about 360 ppm. The BAU "1990 tech" scenario assumes technology remains
constant at 1990 levels in the future. The BAU "tech+" scenario assumes technology improves
substantially and results in lower costs for alternative fuels and enhanced energy efficiency; this
latter scenario represents the "central case" developed by the IPCC and is sometimes referred to
as "IS92a". In both of these scenarios, emissions grow substantially over time and
concentrations far exceed a doubling of preindustrial levels before the end of the next century.
If it were possible to cap global emissions in both developed and developing countries at
1990 levels, figure 2 (line labeled "constant 1990") shows that concentrations would nonetheless
continue to rise throughout the next century and beyond, eventually exceeding a doubling of
preindustrial levels. (Note that the other greenhouse gases make the effective concentration
about 20% higher than indicated by CO₂ alone.)
Figure 3 shows the projected long-term atmospheric concentrations if emissions were
stabilized at different levels. The figure shows that if emissions were stabilized at current levels
(6 PgC/yr), atmospheric concentrations would grow to almost 500 ppm by 2100 and continue
increasing thereafter. It also shows that if worldwide emissions are frozen at 10 PgC/yr,
roughly 33 percent higher than today's level, then atmospheric concentrations would more than
double from pre-industrial levels by 2100, and continue to increase thereafter.
CO2 Concentrations Associated with BAU(Tech+) and Alternative
Energy Related Emissions Stabilization Levels
1000
900
800
BAU(Tech+)
10 PgC/yr
9 PgC/yr
700
8 PgC/yr
600
7 PgC/yr
6PgC/yr
500
ppmv
400
2 X Preindustrial
300
200
Preindustrial
100
0
2100
1990
2040
2090
2140
2190
2240
2290
Figure 3
Table 1 shows how various concentration targets relate to emissions pathways. For
example, to meet a 550 ppmv concentration goal, global emissions must begin to deflect from the
business-as-usual curve by 2013. In this scenario, emissions would peak at 9.7 PgC/yr in 2033
and drop rapidly thereafter.
Researchers have examined in some detail the annual emissions paths required to meet
atmospheric carbon concentration targets of 450 to 750 ppm. These targets require significant
reductions in cumulative projected global carbon emissions; and as shown in Figure 3, all of
them require dramatic reductions in annual emissions rates sometime during the next century.
To achieve 450 ppm target - which still represents a two-thirds increase in atmospheric
concentrations over preindustrial levels - annual emissions must begin declining steeply within
the next quarter-century and must fall to less than half the current rate by 2100. To achieve a 550
ppm concentration target - which represents about a doubling in atmospheric concentrations -
annual emissions must begin declining steeply during the second quarter of the century.
Furthermore, these budgets must be distributed both across countries and across time.
The relationship between CO2 concentrations and emissions pathways
(energy emissions only)*
Steady State Concentration
450
550
650
750
ppmv
ppmv
ppmv-
ppmy
Deflection Date BAU (Tech+) a
2007
2013
2018
2023
Maximum Emission Date
2011
2033
2049
2062
Maximum Emission b
8.0
9.7
11.4
12.5
a
The deflection date is the year in which emissions first fall below BAU emissions.
B
Maximum PgC/yr fossil fuel carbon emissions. If other greenhouse gases were included, emissions would be effectively
20% higher; thus, reductions would have to occur sooner than the deflection date noted to achieve a given concentration.
16
14
12
450 ppmv ceiling
550 ppmv ceiling
650 ppmv ceiling
10
750 ppmv ceiling
PgC/yr
8
6
4
2
Gobal Net Carbon-Emissions to the Atmosphere from Fossil Fuel
Burning, Cement Manufacture, and Net Deforestation
0
1990
2015
2040
2065
2090
2115
2140
2165
2190
2215
2240
2265
2290
* - note: the curves in the graph represent slightly different values than those in the table because the graph takes cement
manufacture and deforestation into account in addition to energy emissions.
Figure 4
II. DEVELOPED AND DEVELOPING COUNTRY EMISSION TRENDS
Figure 5 presents current and projected emissions of carbon dioxide for developed and
developing countries. Of the current emissions of roughly 6 billion tons, approximately two-
thirds are from developed and one-third from developing countries. The U.S. is currently the
largest emitter of carbon dioxide, with China the second largest source. However, on a per
capita basis, the U.S. emits about 5 tons of carbon per capita, compared to an average of
approximately 4 tons per capita in Japan and Western Europe, and 0.4 tons per capita for
developing countries. Figure 6 shows per capita emissions for the BAU case out to 2100.
While per capita differences remain large over time, by the middle of the next century,
developing countries would become a source for more than half of total global emissions.
Annex I and Non-Annex I Fossil Fuel Carbon Emissions:
BAU(Tech+)
20.0
15.0
PgC/yr
10.0
Non-Annex-Annex I
5.0
AnnexA nnex
0.0
1990
2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
2100
Figure 5
Per Capita Carbon Emissions By Region: BAU(Tech+)
7.0
6.0
5.0
4.0
PgC/yr.
USA
3.0
AnnexI
China
Non Annex I
2.0
World
1.0
0.0
1990
2010
2030
2050
2070
2090
Figure 6
III. ILLUSTRATIVE EMISSION REDUCTION SCENARIOS
Limited mid-term actions to reduce emissions by developed countries alone have little impact on
shifting the atmospheric concentrations curve. The top line in Figure 7 shows the small change
in concentrations if Annex I (developed countries) freeze emissions at 1990 levels in the year
2010. Successive lines show what a coal ban in various parts of the world (beginning in 2020)
might do to emissions and concentrations. Without the participation of developing countries,
concentrations will not stabilize.
Global Paths for BAU(Tech+), Annex I Emissions Stabilization, Coal Bans
Concentrations
Emissions
800
25.0
700
2x Preindustrial CO2 Concentration 560
BAU(Tech+)
pparv
20.0
Annex I, stabilization
600
Annex II coal ban
Annex I coal ban
Annex I & China coal ban
500
15.0
Awdd
400
PgC/yr
300
10.0
Preindustrial C02 Concentration 280
200
pporv
5.0
100
0
1990
2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
2100
1990
2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
2100
Figure 7
Annex I Fossil Fuel Carbon Emissions: BAU(Tech+), and
2.5%/Decade, & 7.5%/Decade Reductions
7.0
6.0
5.0
PgC/yr
4.0
3.0
2.0
BAU(Tech+)
2.5%/decade Case
1.0
7.5%/decade Case
0.0
1990
2010
2030
2050
2070
2090
2.5%/Decade Case assumes that Annex I nations stabilize emissions at 1990 levels in 2010 and then reduce emissions at 2.5%/decade
through the year 2100.
7.5%/Decade Case assumes that Annex I nations stabilize emissions at 1990 levels in 2010 and then reduce emissions at 7.5%/decade until
they are 50% of 1990 levels after which time they are held constant
Figure 8
Figure 8 illustrates two possible emissions profiles for developed (Annex I) countries.
Both scenarios assume a freeze in emissions at 1990 levels in 2010. On the hatched line,
emissions are then reduced by 2.5% per decade and in the lower line they are reduced at 7.5% per
decade. The highest line is the business-as-usual (TECH+) scenario from the IPCC.
Figure 9 is based on the Annex I pathways described in Figure 6. They show the pathway
developing countries would need to follow to stabilize concentrations at 450 ppm, 550 ppm and
650 ppm. These figures show that to achieve stabilization at 550, developing countries would be
able to emit on their currently projected path until about 2020 before significant reductions
would be required.
Figures 10 and 11 show the per capita emissions for both developed and developing
countries that result from the scenarios described in the previous two figures. They show that
under these scenarios, developed country emissions stay substantially greater than those in
developing countries (which rise to 1 TC/person only in the 650 ppm case).
Allowable Non-Annex I Emissions if Annex I Countries Stabilize then Reduce
Emissions: 450 ppmv, 550 ppmv & 650 ppmv CO2 Ceilings
14.0
650ppmv, +7.5%/decade
650ppmv, +2.5%/decade
12.0
550ppmv, +7.5%/decade
550ppmv, +2.5%/decade
10.0
450ppmv, +7.5%/decade
450ppmv, +2.5%/decade
8.0
BAU(Tech+)
6.0
4.0
2.0
0.0
1990
2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
2100
Figure 9
Per Capita Emissions
Various CO2 Concentration Ceilings--Annex I 2.5%/Decade
Emissions Reductions
4.0
Assumes Annex I
Returns to 1990
3.0
Emissions levels in
Tonnes C/person/year
2010 and then reduces
2.0
emissions at
5%/decade
1.0
thereafter.
0.0
1990
2010
2030
2050
2070
2090
Annex I, 2.5%/Decade Case
450 Ceiling, non-Annex I
550 Ceiling, non-Annex I
650 Ceiling, non-Annex I
750 Ceiling, non-Annex I
Figure 10
Per Capita Emissions
Various CO2 Concentration Ceilings--Annex I 7.5%/Decade
Emissions Reductions
Assumes Annex I
4.0
Returns to 1990
3.5
Emissionsilevels in
3.0
2010 and then
Tonnes C/person/year
2.5
reduces emissions at
2.0
7:5%/decade.until
1.5
emissions are 50%
below 1990levels
1.0
after which they
0.5
remain constant
0.0
1990
2010
2030
2050
2070
2090
Annex I, 7.5%/Decade Case
450 Ceiling, non-Annex I
550 Ceiling, non-Annex I
650 Ceiling, non-Annex I
750 Ceiling, non-Annex I
Figure 11
IV. THE ROLE OF TECHNOLOGY AND IMPACTS ON COSTS
As suggested in Figure 1, the rate of technological change can play a very important role
in determining the level at which atmospheric concentrations can be stabilized. Figure 11 looks
specifically at the costs associated with different technology cases. It looks at three specific
cases:
-- 1990 tech: assumes no technological change from 1990
-- 1990 tech +: assumes significant improvements in reducing the costs of
alternative fuels and in improving efficiency;
-- Advanced tech: assumes even further advances and cost savings.
A description of key assumptions for the latter two cases is included as Appendix 1.
Figure 11 shows for each of these technology cases, the total costs associated with
achieving three different levels of atmospheric concentrations: 550, 650 and 750 ppm. The
estimated costs under the assumption that no technological progress is possible were found to be
about $12 trillion or 1.2% of total world GDP, compared to $1 trillion or 0.12% of GDP
assuming substantial progress in reduction technologies. In the advanced technology case, which
assumes very substantial non-fossil alternatives will be available by 2020, the costs are greatly
reduced. However, the assumed cost and performance of the alternative technologies would only
become achievable with significant increases in research and development investments. For
example, funding in conservation and renewables is about half of what it was 15 years ago,
despite substantial proposed increases each year of the Clinton Administration.
The Relationship Between Technology and Minimum Cost of
Stabilizing the Atmosphere Below Various Ceilings
$14,000
$12,000
$10,000
Present Discounted Cost, Billions of 1990 US
$8,000
$
$6,000
$4,000
750
$2,000
650
Steady-State CO2
$0
550
Concentration
BAU(1990)
BAU(Tech+)
(ppmv)
advanced technology
Technology Assumption
Figure 12
Substantial technological progress aimed at reducing the costs of emission reductions is
critical for several reasons. It would result in lower costs to the U.S. economy, both in terms of
reductions made domestically and in the costs of a reductions obtained abroad through any
emissions trading regime. Reducing the costs of alternatives is also critical to limiting future
emissions from developing countries, particularly those with large fossil fuel reserves. Finally,
expanding the technological frontier offers U.S. industry significant potential opportunities for
expanding our industrial base both at home and abroad.
APPENDIX
Key Assumptions about Technology Scenarios:
IS92a (Tech+)
End-use (AEEI) Improves at 1%/yr.
Conventional Fossil Fuel Power Generation Improves at 1%/yr.
Non-Fossil Power Sources Improves at 4.5%/yr, 1990 to 2025, 1.25%/yr thereafter.
Biomass Energy Improves at 1%/yr.
Advanced Energy Technology
Advanced solar/wind/fusion
- The cost of solar/wind power reaches a busbar cost of $0.04/kWh by 2020 and
- the cost decreases at 0.5 %/year thereafter.
Low cost biomass
- By the year 2020, 20% of the biomass resource is available at $1.40/GJ and
- 80% is available at $2.40
Advanced liquefied hydrogen fuel cells for transport
02/20/97 THU 21:41 FAX 2024566474
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001
THE WHITE HOUSE
WASHINGTON
CC: JAF 55
new
February 20, 1997
MEMORANDUM FOR DISTRIBUTION
FROM:
ELGIE HOLSTEIN
DAVID SANDALOW
SUBJECT:
Climate Change
Please see attached for discussion at our meeting tomorrow.
02/20/97 THU 21:41 FAX 2024566474
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003
2/20/97
CLIMATE CHANGE WORKPLAN
The overview paper on domestic policies has now been circulated to the Deputies. The
next step is to begin a more detailed assessment of the major policy alternatives described in that
paper.
I. DOMESTIC POLICY OPTIONS
1. Emissions trading program design: Develop and evaluate options for auctions,
allocations and combinations of the two. Options should also include a comprehensive trading
regime and one that is limited to sectors. Where feasible, options should be evaluated through
the Interagency Analytical Team (IAT) models to assess economic impacts including impacts on
key sectors.
LEAD: EPA with DOE, Commerce
2. Technology diffusion: Develop options for expanding technology diffusion programs,
drawing on the experience of such programs to date and on existing analyses (e.g, post-2000
analyses). Efforts should focus on options that could result in significant reductions and should
include estimates of costs and potential greenhouse gas reductions or enhancements of sinks by
sector.
LEAD: EPA with DOE, USDA and Commerce
3. Regulatory and standards approaches: Develop and evaluate the costs and impacts of
policies that would achieve substantial reductions in greenhouse gases in significant sectors.
Analysis should not duplicate work already done (e.g., options examined in the context of Car
Talk) and should include options in areas where legislation is pending.
LEAD: DOE with EPA, USDA and Commerce
4. Auction revenue options: Develop and evaluate options related to the reflow of
revenues that would be generated if an emissions trading regime were instituted and designed to
include auctions. This work should be coordinated with the emissions trading design options
and with the IAT modeling.
LEAD: Treasury with DOE and EPA
5. Sectoral impacts: This paper will draw from the work described above and present
policy options, with estimated costs and emissions reductions, by sector.
LEAD: Dept of Commerce with OSTP, DOE, USDA, and EPA.
02/20/97 THU 21:41 FAX 2024566474
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1.
004
Timetable: Draft of papers with a first cut on costs and impacts of options by March 14 for
Assistant Secretary review. Revised papers for Deputies by March 31. This schedule recognizes
that detailed proposals will require a longer period to develop and would be prepared with
guidance from the Deputies.
II. TECHNOLOGY RESEARCH AND DEVELOPMENT
A range of options are being developed on climate technology research and development
for possible inclusion on the agenda at the upcoming G-7 meeting. CEQ will be chairing a senior
meeting on this topic next week.
III. LONG-TERM CONCENTRATIONS/EMISSIONS AND IMPACTS
OSTP is completing a redraft of its paper on the emissions and concentrations and will
present it at the Assistant Secretaries meeting on Friday, February 21. An initial paper on health
and environmental impacts has been prepared and circulated by EPA. A more extensive paper
reflecting additional work underway at a number of agencies in response to a request from the
Vice President is being coordinated by OSTP and should be available in several weeks.
IV. PUBLIC OUTREACH
EPA will circulate a draft Federal Register notice based on the overview paper, seeking
public input in the form of written comments. Work is underway to prepare a Hill/NGO briefing
on the economic analysis. A public outreach plan will be presented to the Assistant Secretaries
in the near future.
02/20/97 THU 21:41 FAX 2024566474
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002
DISTRIBUTION:
Organiz.
Name
Fax #
State
Eileen Claussen
647-0217
Rafe Pomerance
Commerce
Everett Erhlich
482-0432
Jeffrey Hunker
482-4636
OSTP
Rosina Bierbaum
456-6025
CEA
Alicia Munnell
395-69581
Jeff Frankel
Treasury
Joshua Gotbaum
622-2633
Justice
Lois Schiffer
514-0557
Interior
Brooks Yeager
208-4561
NOAA
Terry Garcia
482-6318
OMB
T.J. Glauthier
395-4639
USTR
Jennifer Haverkamp
395-4579
Agric
Charlie Rawls
720-5437
DOE
Dirk Forrister
586-9987
Mark Chupka
586-0861
Joe Romm
EPA
Mary Nichols
260-5155|
David Doniger
David Gardiner
260-0275
DOT
Frank Kruesi
366-7127
OVP
Pete Jordan
456-9500
CEQ
Steve Seidel
456-6546
USAID
David Hales
703-875-4639
DOL
Andrew Samet
219-5980
EDF
ac: JAF
JS
ENVIRONMENTAL
DEFENSE FUND
TR
Capital Office
1875 Connecticut Ave., N.W.
Washington, DC 20009
(202)387-3500
Fax: 202-234-6049
February 19, 1997
Dr. Alicia Munell
Council of Economic Advisers
OEOB - Room 315
17th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20500
Dear Dr. Munell:
The Clinton Administration's January 17, 1997 proposal for the structure of an
international protocol or other legal instrument for addressing climate change marks a
significant and positive step in the effort to tackle the global warming problem. In the
context of the January 17 proposal, we thought you might find of interest the enclosed
recent paper, "Emissions Budgets: Building an Effective International Greenhouse Gas
Control System".
As the evolving policy debate on an international agreement to reduce greenhouse gas
emissions moves forward. we hope you will find this paper useful in considering the
development of credible compliance and enforcement mechanisms, which we believe to
be fundamental to the environmental effectiveness of the agreement. At the same time,
we hope that the paper may be of assistance in the effort to elaborate further a number of
the key elements of the U.S. January 17th proposal.
If you or your staff have any questions or would like to discuss this paper. please do not
hesitate to contact us.
Sincerely,
Daniel Dudek
Joseph Goffman Goffma Annie AmPAZ Petsonk
Senior Economist
Senior Attorney
International Counsel
National Headquarters
257 Park Avenue South
5655 College Ave.
1405 Arapahoe Ave.
128 East Hargett St.
1800 Guadalupe
New York, NY 10010
Oakland, CA 94618
Boulder, CO 80302
Raleigh. NC 27601
Austin, TX 78701
(212) 505-2100
(510) 658-8008
(303) 440-4901
(919)821-7793
(512) 478-5161
100% Post-Consumer Recycled Paper
EMISSIONS BUDGETS
Building An Effective
International Greenhouse Gas
Control System
EDF
ENVIRONMENTAL
DEFENSE FUND
February 1997
TABLE OF CONTENTS
EXECUTIVE SUMMARY
-1-
INTRODUCTION
-3-
REVIEW OF THE EMISSIONS BUDGET POLICY
FRAMEWORK
-7-
INTERNATIONAL GREENHOUSE GAS TRADING:
COST-SAVING AND SOVEREIGN COMPLIANCE
-9-
Reporting
-11-
Debt-Carryover and Discount
-12-
The Discount
-13-
THE IMMUTABLE IDENTITY BETWEEN TRADING AND
COMPLIANCE
-16-
Setting the Budgets
-17-
Mechanics of Reporting, Accounting and Trading
-18-
Trading
-20-
Compliance
-22-
JOINT IMPLEMENTATION AND PARTICIPATION
-22-
CONCLUSION
-27-
EXECUTIVE SUMMARY
For over a decade, the Environmental Defense Fund (EDF) has been engaged in
the design, development, and implementation of markets for environmental protection.
These activities have ranged from the creation of markets for water savings from
conservation investments to reduce irrigation to the acid rain allowance trading system of
the Clean Air Act Amendments of 1990. Since 1985, EDF has been concerned about the
problem of global climate change and has been working to develop both a scientific
understanding of the problem as well as practical solutions. This paper represents our
current thinking concerning a framework for an international protocol that could deliver
both the environmental and economic benefits desired.
The concept of emissions budgets were first introduced by EDF at the meeting of
the Ad Hoc Group on the Berlin Mandate (AGBM) in February of 1996 in Geneva at the
request of the Netherlands. The fundamental strategy of emissions budgets is to establish
a dynamic framework of review and learning over time by harnessing in tandem a continual
process of scientific and technical review to a process of emissions control within a legally
binding framework which allows parties to trade extra emissions reductions. Of course,
such a system must ultimately be guaged against the goals it aims to achieve. EDF
believes that credible environmental goals would include:
a first period of emissions reductions that begins by 2005 and ends not later than
2014
an ultimate concentration objective of 450 ppmv (CO₂ equivalent), inclusive of all
greenhouse gases (GHG)
a transient constraint to limit the warming rate not to exceed 1° C per century.
The foundation of emissions budgets are legally binding obligations for OECD
nations and economies in transition established on the basis of historic emissions
baselines and set as a cumulative emissions budget for 10 years. For other nations,
comprehensive GHG inventories and reporting would be required. Also critical to the
foundation are the transparent and verifiable annual national reports covering all gases,
sources and sinks by sector and including all transacted international GHG reductions by
country and vintage. The plan for this construction is given by the continuing review and
evaluation process to set new budget levels which on a 10 year cycle would:
assess the science
review the progress of the Parties
review the development and adoption of technologies.
The bricks resting upon this foundation are the emissions reductions produced by
Parties and their transaction through international greenhouse gas emissions reduction
trading. Parties' performance in meeting their emissions obligations would be durable with
savings for early reductions and automatic debt carryover for any shortfalls. Performance
would be evaluated for all GHG emissions by sources, uptake by sinks, and transactions in
terms of 100-year global warming potentials (GWPs). Joint Implementation, for credit, is
an essential element for addressing both graduation and economic competitiveness
concerns. For nations that have not taken a budget, project-by-project crediting of
reduction investments with the possibility of international review would be the primary
trading path. For nations with a budget, full international trading of reductions is available.
In addition, for those non-Annex I Parties that opt to take an emissions budget, an explicit
growth allowance should be provided. Such growth allowances would be made available
under a formula by which they would decline over time so as to reward early participation.
The mortar holding the system together is the incentives for sovereigns to meet
their underlying emissions commitments. These include:
All GHG reduction obligations remain until discharged
For Parties with cumulative net emissions greater than the budget but less than
110%:
all emissions greater than budget automatically deducted from next
budget
dispremium charged on emissions over budget (e.g., 1.2 to 1.0)
For Parties with cumulative net emissions greater than 110% but less than
120%:
Above Plus automatic discounting of the non-complier's sold GHG
reductions that have not yet been used by other countries for compliance
beginning in the year of first occurrence (discounting to be in proportion to
amount of non-compliance)
For Parties with cumulative net emissions greater than 120%:
Above Plus mandatory COP review of Party's noncompliance
Prohibition on further sales of reductions as of the date of noncompliance
Under the emissions budget approach, each nation would be free to meet its budget
and earn savings in any way, consistent with its own sovereign priorities, that it chooses.
Each Party would determine whether it would participate in international emissions trading
and who would be empowered to do SO. The approach is designed to capitalize on our
greatest asset in addressing the global threat of climate change -- human ingenuity.
Emissions budgets reward early adopters, innovators, savers, and cost reducers. EDF
believes that emissions budgets provide a straightforward, uncomplicated policy framework
with clear environmental goals and easy to measure perfomance that is sufficiently flexible
to consistently capture these assets over time.
INTRODUCTION -1-
Under the "Berlin Mandate" adopted at the first Conference of the Parties (COP),
signatories to the United Nations Framework Convention on Climate Change (FCCC) have
committed to develop a protocol to control greenhouse gas (GHG) emissions by their third
Conference, to be held in Kyoto, Japan in late 1997. In the atmosphere, these pollutants,
the byproducts of fundamental economic activities like energy production, transportation
and agriculture, can lead to accelerated warming resulting in dangerous changes to the
earth's climate system. Analyses produced by the Intergovernmental Panel on Climate
Change (IPCC) indicate that failure to limit the emissions of these gases are expected to
be damaging to natural ecosystems and costly to the many human societies that have
developed during the 10,000-year period of relative climate stability leading up to the
present. -2-
At the same time, because of the link between GHGs and activities fundamental to
both industrialized and developing economies, many anticipate, or at least fear, that the
costs of limiting their emissions will be high. For the same reason, others question the
capacity of any international agreement to establish a truly durable and efficacious regime
for limiting these emissions. This doubt is intensified by the fact that an international GHG
regime could exist only as the artifact of a voluntary agreement between and among
sovereigns, often in competition with each other, and representing the widest possible
diversity of economic needs and resources and political and cultural aspirations. As a
result, the tools that can be used to induce or enforce compliance by sovereigns with their
GHG emissions obligations may be limited - and downright meager when contrasted with
those that domestic authorities can bring to bear to ensure that private firms comply with
domestic emissions limitation requirements.
In view of these circumstances, an international program must meet a set of
exacting tests of equity, economic efficiency and responsiveness, durability in terms of
legally binding commitments, flexibility and, above all, environmental efficacy - if it is to be
credible. In addition, the international regime should function as a framework that can
encompass the inevitable variety of domestic policies and measures -- ranging from
emissions taxes and technology standards to emissions cap-and-trade systems - that
1
This paper was written by Dr. Daniel J. Dudek, senior economist, and Joseph Goffman,
senior attorney, of the Environmental Defense Fund's New York and Washington offices
respectively. EDF is a not-for-profit, non-governmental organization that combines
science, law and economics to solve environmental problems. The authors can be
reached at 257 Park Avenue South, New York 10010, telephone (212) 505-2100 or 1875
Connecticut Avenue, NW, Washington, D.C. 20009, telephone (202) 387-3500. In
addition, EDF's international counsel, Annie Petsonk, can be contacted at the Washington
office.
2 See Intergovernmental Panel on Climate Change, Science of Climate Change; Impacts,
Adaptation and Mitigation of Climate Change: Scientific-Technical Analyses, Cambridge
University Press, 1996.
-1-
each nation will adopt in the exercise of its sovereign decision-making for the purpose of
meeting its international obligations. Equally important, the protocol must be designed to
create a reliable mechanism of accountability for nations' performance of their GHG
emissions obligations.
Finally, the FCCC itself introduced and codified a distinction between nations
characterized by advanced industrial economies (denominated as "Annex I Countries" in
the parlance of the FCCC) and those at all other stages of economic development. It is all
but certain that this distinction, or some form of it, will inform at least the initial structure of
the commitments and obligations propounded in Kyoto, with few, if any, emissions
limitations imposed on the developing countries. Nevertheless, because of rapid economic
growth and other conditions, the latter category of countries are expected to contribute an
ever increasing proportion of global anthropogenic emissions of GHGs. Consequently, the
international regime must be sufficiently dynamic to induce those nations ultimately to
participate in a worldwide effort to limit GHG emissions. This inducement is key both to an
environmentally effective agreement and to limiting economic advantage from
non-participation.
In response to these challenges, EDF first introduced the concept of emissions
budgets at the February 1996, meeting of the Advisory Group on the Berlin Mandate
(AGBM) in Geneva at the invitation of the Netherlands. Emissions budgets are the building
blocks both of a verifiable and legally binding protocol and an effective international
emissions trading regime. This paper builds on that earlier work to elaborate particularly
on the critical reporting and compliance elements of this policy approach.
In July, 1996, at a meeting of the second COP in Geneva, U.S. Undersecretary of
State Tim Wirth announced U.S. support for negotiations that would lead to legally binding
GHG emissions limitation and reduction obligations. Because it marked a watershed shift
in U.S. position, Undersecretary Wirth's statement transformed the international debate on
climate change by making the prospect of success for the Berlin Mandate plausible,
perhaps for the first time. At the same time, Undersecretary Wirth's statement linked
acceptance of such obligations to the availability of flexible, cost-reducing mechanisms of
international emissions trading and joint implementation for credit.
During the December, 1996 meeting of the AGBM the U.S. government offered a
document containing a preliminary description of a system of national emissions limits and
international GHG emissions trading including the option of emission budgets. The U.S.
followed its December submission with proposed draft protocol language on January 17,
1997 embodying the concepts included in the earlier document, but now focusing on
emissions budgets. The proposed draft language provided further detail, but contains, as
3 See Dudek, Daniel J., "Emission Budgets: Creating Rewards, Lowering Costs and
Ensuring Results", Proceedings Climate Change Analysis Workshop, Springfield, Virginia,
June 6-7, 1996, 18 pp.
-2-
the U.S. itself has indicated, a number of gaps that remain to be developed in order to fully
develop the mechanics of a comprehensive global GHG budget and trading system.
For the COP to succeed in negotiating a viable GHG emissions protocol and for
such protocol to succeed, in turn, in curbing GHG emissions such a vision is necessary. If
designed in a way that included and integrated the necessary elements of accountability
and flexibility, a GHG emissions budget and trading system would open the best --
perhaps, the only - path to a global GHG regime that could meet the challenging array of
tests confronting such a regime. However clear and well-aimed the U.S. documents have
been in presenting a general outline, they also highlighted the crucial task of identifying the
critical elements of such a system and of integrating those elements that must be
accomplished by participants in the process leading up to and through the upcoming Kyoto
Conference.
This report seeks to lay out EDF's current thinking on these critical elements and
their integration. Specifically, it proposes an emissions budget and trading system for
greenhouse gases that includes the following:
national budgets
covering all sources and sinks
expressed as total GHG emissions over a decade-long period
and in terms of carbon equivalent units (CEUs).
ESSENTIAL ELEMENTS OF AN
INTERNATIONAL AGREEMENT
Legally Binding Obligations
Transparent Reporting
All Sources and Sinks
International Emissions Trading
Joint Implementation for Credit
Savings
EDF
Nations could meet their decadal budget obligations by trading CEUs with each
other and by "saving" CEUs whenever their decadal GHG emissions total was less than
their total budget. Such CEUs could be used to offset GHG emissions in subsequent
decadal periods and even earn "premiums" in the form of increases in their emissions
-3-
value.
TRADING ELEMENTS
10 Year Cumulative Budget
Carbon Equivalent Units (CEUs) Denominated in Tons
Issued by Country by Year
Annual Reporting of Emissions by Gas and Sector,
Transactions by Country and Vintage, and Domestic
Offsets
A
Savings and Premium
Deficits Beyond Limit Trigger Ratchet Then Review
True-up through Automatic Deficit Deduction
EDF
To ensure compliance, countries would be obligated to furnish detailed annual
reports of their current and cumulative emissions and of the acquisition and/or sale of their
CEUs. Countries exceeding their budgets would be subject to a two-pronged automatic
sanction. The emissions value of any CEUs such countries had exported would be
discounted upon their use by those holding such CEUs. In addition, cumulative GHG
emissions in excess of a country's decadal budget -- adjusted to reflect CEUs acquired or
exported by the country -- would be deducted --again, automatically - from the country's
budget for the decadal period immediately following.
Finally, each decade's emissions budget for affected nations would be established
during the course of an ongoing review process undertaken by the Secretariat. Emissions
budgets for upcoming decades would be announced at the 5-year point of the current
decadal period after assessments of the atmospheric and climate science and of
technology developments as well as of the performance to date of the overall regime.
A simple exposition of these elements by itself does not reveal the underlying logic
that dictates their necessary integration. Consequently, in addition to reviewing the
importance of using an emissions budget and trading approach as the bulwark of an
international GHG regime, one of the aims of this report is to distill the inextricable linkage
between accountability and flexibility that these specific elements embody and that is
indispensable to the success of a global GHG control strategy.
-4-
REVIEW OF THE EMISSIONS BUDGET POLICY FRAMEWORK
EMISSIONS BUDGETS
A
Decadal Approach
A
No Single Year Target
Reduces Uncertainty
A
Provides Flexibility
A
Reduces Cost
EDF
The fundamental definition of compliance -- i.e., in the form of an explicit quantity
of emissions for which each nation is accountable -- parallels the experience of the U.S.
under the Clean Air Act. Historically, Clean Air Act programs have imposed a variety of
requirements on pollution sources, but only rarely have these made the sources directly
or expressly accountable for their total emissions. As a result, these programs have
tended to achieve fewer emissions reductions than intended or desired. In contrast, to
combat acid rain, Congress amended the Clean Air Act to reduce emissions of sulfur
dioxide from power plants. Here, each plant was held legally accountable for meeting a
specific total emissions limit. This feature, together with the inclusion of emissions
trading, has made this program one of the most successful of U.S. environmental policy
initiatives.
Equally critical to the ultimate success of an international GHG regime is the
integration of flexibility elements with express accountability on the part of each nation
for meeting an explicit emissions limit. First, structuring each nation's budget as a
10-year cumulative obligation not only reflects the cumulative aspect of the effect of
greenhouse gases on climate warming, but it also offers economic actors and nations'
economies the temporal framework in which they can rationalize their response to the
simultaneous demands of meeting their GHG emissions obligation and of inevitably
dynamic economic conditions. As a result, sources and nations will be able to minimize
the costs associated with budget compliance. At the same time, the 10-year budget
period still creates a time horizon short enough to signal meaningful accountability so
that nations and firms will feel compelled to manage their GHG emissions to meet the
budget.
-5-
WHY SUPERIOR TO
SINGLE YEAR APPROACH
Cumulative Approach
A
Compensates for Boom and Bust
Savings
Major Incentive
EDF
Second, the inherent opportunity for year-to-year "saving" of unused increments
of each nation's GHG emissions budget within each decadal budget period creates an
explicit incentive for early reductions. Since it is the cumulative effect of GHGs in
dangerously accelerating the rate of warming and of resulting climatic and ecological
change that represents a critical aspect of the threat posed by global climate change,
honing incentives for early reductions is essential. For this reason, an effective regime
should permit "savings" of unused increments of a nation's emissions budget to be
carried forward for use in later periods.
BUDGETS AND SAVING
Establishes Management Over Time
Creates Rewards for Early Reductions
Stimulates Innovation
Provides a Hedge for Emissions
Intensive Sectors
EDF
To augment the value of such "savings" and thus intensify the incentives for
early reductions, nations or firms that create and save unused budget increments or
-6-
CEUs should be able to earn a small premium that would increase the GHG emissions
value of CEUs carried forward over time. Again, ecosystems - and human society --
are critically sensitive not only to the extent of climate warming but also to the rate at
which climatic change occurs. Offering an emissions-value-increasing premium for
emissions savings parallels the environmental protection value that early reductions
create by slowing the rate of climatic warming and avoiding ecological damage.
In addition to direct environmental considerations, among the effects created by
both the opportunity for nations and sources to manage emissions over time and the
resulting incentives for early reductions is the stimulation of innovation in reducing or
avoiding GHG emissions. Successful innovation not only lowers cost but it is further
rewarded through the economic value garnered by traded or "saved" CEUs. Increasing
investment in environmental innovation opens an ongoing flow or supply of the
technologies and innovations necessary to sustain, and ensure the economic
affordability and environmental efficacy, of a long-term global commitment to curb GHG
emissions.
Finally, the importance of temporal flexibility embodied in both cumulative
budgets and the availability of "saving" is vividly illustrated by examining their
significance for the emissions-intensive sectors and activities that dominate, at least in
part, most industrialized and developing country economies. Since nations will accept
to make the transition to low-emissions economies only if they can do so while
maintaining robust economies, the predominance of these sectors dictates that nations
have the flexibility needed to manage this transition over time. Similarly, the
ineradicable economic self-interest of the firms that operate in these sectors demand
that they, too, be afforded the tools needed to meet their emissions obligations while
remaining viable. The ability to trade and save CEUs for future use provides precisely
the mechanism for accommodating continued activity by these firms and sectors while
allowing nations to meet the obligations of GHG emissions budgets.
INTERNATIONAL GREENHOUSE GAS TRADING:
COST-SAVING AND SOVEREIGN COMPLIANCE
Intra- and inter-budget-period savings is but one of two iterations of emissions
trading. In addition to the "trading" of emissions between years and budget periods that
savings allows, the budget system also permits trading between and among sovereign
nations and firms in different countries. The set of benefits provided by inter-temporal
trading through saving also emerges from international emissions trading. Since such
trading confers an affirmative economic value upon actions that produce surplus
reductions, the emissions trading market rewards environmental innovators and any
firm or sovereign that overcomplies with its emissions reduction responsibility. In
addition, emissions trades, almost by definition, allow the trading firms or nations to
achieve the same net emissions reduction at a cost lower than that which they would
-7-
have incurred in making their reductions in the absence of the trade. That firms - and
sovereigns - can resort to trading in addition to whatever other emissions reduction
strategies might be available guarantees that they will enjoy increased flexibility in
integrating their economic needs and their GHG compliance requirements.
At the same time, it is the economic dynamics of the emissions trading market
that can provide the key to unlock the riddle of sovereign compliance with an
international GHG emissions reduction protocol. Regardless of whether a protocol
imposed quantitative emissions limitations or required specified technologies or taxes,
the challenge of ensuring sovereign nations' compliance with a GHG protocol is one of
the central environmental challenges in designing such a protocol.
To illustrate why this challenge is so daunting, the enforcement tools afforded
the U.S. Environmental Protection Agency under the federal Clean Air Act make a
revealing contrast with the remedies practically available in an international context in
which the accountable party is a sovereign. For example, Title IV of the Clean Air Act,
which established the emissions trading program for sulfur dioxide (SO₂) reductions
requires firms to pay an automatic penalty of $2,000 for each ton of excess SO₂ emitted
and to suffer an automatic deduction in their future allowable emissions. in addition,
they are subject to a full panoply of civil and criminal sanctions. The availability of
these remedies and the ability of enforcement officials to bring them to bear against
firms reflects a widespread and highly durable consensus that permeates virtually every
sector of U.S. society, a consensus, in turn, that, together with the threat of these
sanctions, elicits compliance from the vast majority of regulated firms.
Similar tools are not nearly so readily available in an international context, nor is
there likely to be a comparable consensus amongst sovereigns in the foreseeable
future. Consequently, even with the third COP in Kyoto less than a year away, many
governments and interested parties appear to be stumped by this question: if, at the
end of each budget or compliance period, there are nations whose GHG emissions
exceed their budgets, what happens? Environmentally, the atmosphere will continue to
be subject to unacceptable levels of GHG emissions. By the same token, from the
point of view of the integrity of a protocol purporting to embody "legally binding
commitments", the credibility of such an agreement would be destroyed if, instead of
having an ongoing obligation, those nations simply are permitted to start with a "clean
account" in the next budget cycle.
At the other extreme, remedies and sanctions that excluded such nations from
the GHG emissions budget and trading system or imposed general trade sanctions
would, if imposed without any intermediate compliance/enforcement measures, also
render any agreement non-credible on environmental grounds. Simply banishing
non-compliers from the trading system would be self-defeating as a first-order sanction,
since those countries would continue to emit GHGs at excessive levels. In fact, one of
the key functions that the protocol's compliance strategy must serve is ensuring that
countries facing difficulties in complying are provided a mechanism or path that eases
-8-
their achievement of compliance. A first-resort exclusion of these countries from the
trading system would be environmentally counterproductive.
As for an approach that relied on general trade sanctions, the recent history of
trade sanctions demonstrates that nations are extremely reluctant to administer such
sanctions. Their imposition as a first-order measure requires a degree of political will
that is unlikely to exist in the GHG context in the near term. Moreover, the
environmental objectives of a protocol --not to mention the economic competitiveness
concerns of nations with GHG emissions budget obligations -- strongly suggest that
the protocol should seek to engender a dynamic that will encourage those nations in
the developing world, which initially may not be subject to legally binding GHG
reductions obligations, to assume such obligations eventually. General trade
sanctions, however, may discourage, rather than encourage, other parties from taking
on budget obligations. It is hard to imagine that nations considering accepting legally
binding GHG obligations would choose to do so if the result were to expose them, as a
first-order sanction, to the economic losses created by trade sanctions.
Ultimately, such sanctions will have to be included as sanctions in a protocol, but
it is hard to see them serving any role other than that of last resort. On the contrary,
the effectiveness of any GHG emissions limitation regime will depend on structured,
automatic and readily usable first- and second-order measures. To accomplish this,
the Kyoto protocol must build a "compliance tripod" of measures, fashioned as an
extension of the emissions trading and banking system itself, which would both ensure
inter-temporal environmental compensation for excess emissions and create an
inherent disciplinary feedback against nations' noncompliance. The three legs of the
tripod are: 1) annual reporting, 2) automatic GHG emissions debiting with interest for
those countries exceeding their GHG emissions budgets and 3) automatic discounting
of GHG emissions reductions exported by nations that are significant violators.
Reporting
The annual reporting of each nation's GHG emissions, internal offsets and
international GHG emissions trading activity is an obvious, as well as indispensable,
instrument of accounting for each nation's compliance performance. By the same
token, the reporting system should also serve as the formal instrument for tracking, and
therefore formally effecting, the exchange of emissions between sovereigns and each
sovereign's "savings" and carrying forward of increments of its emissions budget
through the achievement of early reductions. These mechanics will be discussed in
more detail, in the section on "Mechanics", below.
-9-
ANNUAL EMISSIONS BUDGET REPORTING
Imported Reductions
Costa
Czech
Mexico
Netherlands
Russian
Rica
Republic
Federation
2,000
500
1,500
1,000
5,000
ANNEX I PARTY B
Emission
Domestic
Domestic
Exported
Imported
Emission
Budget
Emissions
Offsets
Reductions
Reductions
Savings
(average
(contitative)
annual)
150,000
175,000
15,000
5,000
10,000
(5,000)
EDF
Debt-Carryover and Discount
The concept of inter-temporal flexibility underlying banking -- which produces the
benefit of early reductions -- must be applied to the likely event that some nations,
including those not generally regarded as "bad actors", may simply miss their budgets.
By imposing an automatic but limited debt-carryover with interest, the protocol would be
able to harness that behavior by ensuring that it is environmentally compensated for -
rather than being either "forgiven" or subject to sanctions so draconian as to be
unimplementable in the international context.
AUTOMATIC DEFICIT DEDUCTION
A
Limit to a Fixed Percentage of
Existing Emissions Budget
A
A Critical Element of Sovereign
Accountability
A
Necessary to Maintain
Environmental Integrity
A
Necessary for Market Feedback
and Discipline
EDF
-10-
The debt-carryover would be implemented by automatically deducting from the
ensuing period's budget the full amount of the nation's excess emissions at the
conclusion of the current budget period. This automatic deduction would be
augmented in size by an additional percentage of sufficient size to ensure that the
mechanism itself -- which, in effect, is a form of "borrowing" an increment of a future
budget and "repaying" the increment with "interest" - would not be used as a routine
compliance option. Rather, as a remedy for what would be treated as an initial instance
of noncompliance, this debt-carryover would be a first-tier response, which could be
followed by more stringent sanctions in the event the nation exceeded its net budget in
the following period.
In addition to ensuring that each nation's accountability was truly continuous
from budget period to budget period, the automatic debiting of nations' consecutive
budgets for excess emissions would serve two other functions intrinsic to the integrity of
the global GHG emissions budget and trading system. First, these debits would ensure
that the environment was compensated both for the GHG emissions reductions initially
lost and, through the additional "interest", for the delay in achieving those initially lost
reductions. Second, in the absence of an automatic deduction for excess emissions,
CEUs transferred by non-complying nations could be used to offset emissions
generated by the firms or nations acquiring the CEUs notwithstanding the fact that such
CEUs did not represent surplus emissions reductions. By offsetting the non-complying
nation's excess emissions, however, the automatic debit would ensure that GHG
emissions reductions transferred by the non-complying nation were surplus or
ultimately became surplus. The automatic debt-carryover is an essential element of
both the protocol's system of accountability and to its environmental integrity.
The Discount
Though indispensable, mandatory debt-carryover alone is not sufficient to
reward compliers and sanction non-compliers in a credible, effective and reliable way.
In fact, the debt-carryover offers a partial answer at best to the question of what it is
that the protocol can use or create to compel or induce a sovereign to achieve
compliance with its GHG emissions budget. Certainly the prospect of an automatic
deduction, augmented by "interest", in the immediately following budget period signals
nations that an "emit now, pay later" strategy for managing their GHG emissions over
time would be inevitably expensive and potentially risky.
For nations whose commitment to, or capacity for, compliance is only marginal,
however, the budget deduction can prove to be little more than a mere restatement of
the nation's future obligation, an obligation that in itself has little credibility unless
backed by something more than attenuated threats of eventual sanctions. Since, as
discussed above, a compliance strategy that relies primarily on the imposition of
sanctions is simply not credible in this context -- and could even be self-defeating, the
protocol needs to incorporate a mechanism that will lead sovereigns to prefer
-11-
compliance over noncompliance even if they are not persuaded by the possibility of
sanctions.
ENSURING TRADING
SYSTEM INTEGRITY
A For Cumulative Net Emissions Greater Than Budget
But Less Than 110%:
All Emissions Greater Than Budget Deducted From Next Budget
Dispremium OR Offset Ratio (e.g. 1.2 1.0)
A For Cumulative Net Emissions Greater Than 110% But
Less Than 120%:
Above Plus All Non-Tendered Exported CEUs Discounted by Proportional
Amount of Excursion Beginning in Year of First Occurrance
A For Cumulative Net Emissions Greater Than 120%:
Above Plus Mandatory Review of Party's Non-Compliance By COP
Prohibition of Sale of Further Exported CEUs
EDF
It is from the inherent economic dynamics of the GHG emissions trading market
that such a preference must come. In fact, the protocol should seek to rely directly and
explicitly on the emissions trading market as the mechanism for delivering that
preference. To do so, the protocol should include an automatic and immediate
imposition of discounts on GHG reductions exported by nations whose annual reports
show that the combination of their emissions and their exported reductions is putting
them over their GHG budgets. In those cases, the protocol should require that,
beginning in the year - within any budget period -- in which this first occurs,
governments applying those reductions to their own budgets automatically discount, by
the proportion of the exporting country's excess GHG emissions, the exported
reductions' tonnage value for emissions offset purposes.
This automatic discount is necessary because without it, exported GHG
reductions from non-complying nations would be available to offset in full other nations'
actual emissions notwithstanding the fact that the exported reductions or CEUs did not
represent actual surplus reductions. Although the automatic debt-carryover addresses
this issue as well, the remediation it provides does not occur until the subsequent
budget period.
Equally important, this automatic discounting would force the market to value
various countries' exported reductions differently based on their compliance.
Reductions from compliers would earn more than those from non-compliers at least in
proportion to the tonnage-value discount imposed on the latter. At the same time, firms
and nations buying exported reductions would exercise preference for reductions from
-12-
complying nations, and invest effort in ensuring that reductions they acquired were from
countries in compliance or on a course for compliance. Thus, by sending a market
signal back to nations that fail to manage their emissions reduction obligations, this
discount provision fulfills the capacity of the "compliance triangle" to impose a discipline
both on these sovereigns and their firms and on their emissions trading partners.
Because one critical attribute of the automatic discount is its shifting of some risk
-- and, therefore, incentive - to buyers, the discount enhances the integrity of the
emissions trading system in another way. Buyers' preference will be for reliable trading
partners who can deliver CEUs that will retain their full value in offsetting emissions in
the context of buyers' own compliance obligations. As a result, a preponderance of the
CEUs transacted in the global emissions trading market may be those that in the first
instance are highly likely to represent truly surplus reductions.
At the same time, in contrast to a regime in which non-compliers were excluded
from the emissions trading market de jure, the fact that it would be the market, in
exercising its preferences, that produced the effective exclusion of non-compliers from
emissions trading comports with an overall strategy of using the market to elicit
compliance. In this instance, the loss of economic opportunity resulting from this
exclusion could act as a spur to drive non-compliers to take the actions necessary to
achieve compliance. In fact, firms and other entities seeking to generate surplus GHG
emissions reductions and sell them in the global market would become constituents for
compliance within their own countries. In the face of the limitations that characterize an
international enforcement regime, the protocol must rely on using the incentives
inherent in a global GHG emissions trading market to mobilize constituents in favor of
compliance.
From a superficial perspective, an approach, such as an automatic discount,
which exposes buyers to uncertainty as to the use-value - in this case, the
emissions-tonnage value -- of their acquisition would seem to be incompatible with an
active exchange market. However, a simple comparison to currency markets, or, for
that matter, to any transaction involving currencies that are "foreign" to one of the
parties, and which regularly fluctuate in value in comparison to the party's "domestic"
currency, demonstrates that this uncertainty is a routine part of international commerce.
Moreover, it is easy to imagine that transaction partners and intermediaries would find a
variety of hedging or insurance instruments readily available to manage such
uncertainty. Only if it resulted in the full confiscation of a CEU's offset value would a
discount system fatally inhibit the development of an international emissions trading
market.
In this case, no such confiscation would be necessary. The concurrent presence
of the debt-carryover mechanism would render surplus, at least eventually, exported
reductions, even from initially non-complying countries. Consequently, the
emissions-offset value of such reductions would not have to be discounted to zero. By
the same token, the discounting would be applied only for those CEUs presented for
-13-
use in meeting the buyer's compliance obligations after the selling nation's budget
exceedance emerged in annual reporting. CEUs that had been used prior to that time
would not be discounted, thus avoiding the imposition of retroactive liability for
purchasers of a sort that could inhibit emissions trading activity.
Without both an automatic debt-carryover to subsequent budget periods and an
automatic discount applied within each budget period for CEUs exported by nations
demonstrably exceeding their budgets, an international GHG protocol would lack
adequate mechanisms for ensuring both nations' accountability for compliance and its
own credibility. Without the ability to rely, in any but the most extreme circumstances,
on the kinds of remedies, sanctions or other coercive measures typical of domestic
pollution control laws such as the U.S. Clean Air Act or, in some instances, the general
system of international commercial trade, a GHG protocol must develop a fully
integrated set of incentives to motivate compliance.
That is why implementing nations' GHG emissions obligations through a system
of emissions trading is so indispensable to the success of a GHG protocol. An
emissions trading market is virtually the only mechanism that can provide such
incentives. At the same time, the emissions trading and compliance regime must be
carefully designed to hone these incentives. Just as the opportunity to create early
reductions and "save" them for future use intensifies incentives for early action and for
the development of environmental innovations, features like a discount applied to the
GHG emissions reduction exports of non-compliers are essential to perfecting those
incentives that can effect nations' -- and their firms' - preference for compliance.
Moreover, such a discount does more than provide a tangible instrument for delivering
such incentives. Without a discount, the emissions budget and trading regime will lack
important mechanisms that can be readily usable in the first instance to perform the
function -- traditionally served by penalties and similar remedies in domestic legal
programs - of disciplining sovereigns that stray from the path of compliance.
THE IMMUTABLE IDENTITY BETWEEN TRADING AND
COMPLIANCE
In a GHG emissions budget and trading system, the mechanics of accountability
must be carefully designed. Fortunately, it is possible to create a unified system
through which sovereigns can effectuate emissions trading and, at the same time, to
design it so as to establish their accountability for meeting their GHG emissions
budgets.
-14-
Setting the Budgets
PERIODIC BUDGETING PROCESS
A Science Assessment
A
Technology Assessment
A
Review Progress
A
Establish Decadal Budget
EDF
The key specification for each budget period is setting the numerical value of
each nation's decadal budget. Presumably, since the initial commitments of the
industrialized nations under the FCCC were expressed in terms of 1990 emissions
levels, the protocol will establish each nation's initial budget as a function of its 1990
emissions. For purposes of setting the initial budget as well as each subsequent
budget, the Parties should rely on the resources of international institutions such as the
Intergovemmental Panel on Climate Change, under the direction of the Secretariat, to
focus on three major components.
First, as the IPCC has done continuously since before the signing of the FCCC
in 1992, the IPCC should provide an ongoing assessment of all scientific developments
relevant to climate change. Inevitably, this will include a dual focus on tolerable
concentrations of GHGs in the atmosphere and tolerable rates of climatic change.
Second, technological advances and innovations are likely to progress at an
accelerated pace in the wake of the establishment of a GHG protocol and in response
to the incentives it engenders. These, as well as technological costs and limitations,
should also be carefully assessed. Finally, nations' performance under the protocol as
that performance develops needs to be assessed as well.
These assessments should inform the setting of the budget for the immediate
subsequent period as well as projected reduction trajectories over a
multi-budget-period horizon. An equally critical element of the budget-setting process
is timing. Specifically, each budget should be established and announced no later that
the end of the fifth year of the current budget period. By following this schedule, the
protocol's budget-setting process will afford nations and firms the time necessary to
-15-
anticipate their upcoming compliance obligations and to integrate them with their overall
economic responses.
PERIODIC BUDGETING
Announcement of Third
Decadal Budget
2.75
Tons of CEUs (Billions)
2.7
2.65
Announcement of Second
2.6
Decadal Budget
2.55
2.5
2.45
2005 2007 2009 2011 2013 2015 2017. 2019 2021 2023
FIRST DECADAL BUDGET SECOND DECADAL BUDGET
EDF
This budget-setting schedule also contributes to the protocol's ability to establish
a credible system of accountability. A five-year separation between the establishment
of the ensuing period's budget and the application of remedies such as an automatic
debt-carryover can help ensure that the budget-setting process will not be
compromised by efforts to ease non-complying nations' obligations under the
debt-carryover provision. As a result, the carryover will represent a true net deduction
from a budget that is not inflated to defeat the effect of the carryover.
Mechanics of Reporting, Accounting and Trading
One of the innovations introduced by the SO₂ emissions trading program under
the U.S. Clean Air Act was that the SO₂ emissions "allowance" served - all at the same
time - as i) the currency of trading, ii) the instrument of compliance for affected sources
and iii) the regulatory mechanism applied by the U.S. EPA for ensuring sources'
accountability and for "tracking" emissions trades. Similarly, the protocol can establish
a single, simple sovereign accounting system that performs the same multiplicity of
functions for an international GHG emissions budget and trading regime. At the same
time, this system would be able to succeed without relying on the allocation of
emissions "allowances" or marketable permits.
This is critical, since in the context of a GHG protocol a compliance
accountability infrastructure must be designed to meet several constraints as well as
-16-
the demand that it work. First, the protocol, and its compliance and trading accounting
method, must be able to accommodate every possible policy approach -- e.g., pollution
taxes, technology standards, research and development subsidies, marketable permits
-- available to sovereigns in adopting their respective domestic strategies to meet their
GHG emissions budget obligations. A system that presupposed the adoption of certain
measures and the exclusion of others would be untenable to the extent that it would
necessitate the forfeiting by sovereigns of at least a portion of their own policy-making
prerogatives.
By the same token, reliance on the creation of elaborate or powerful new
international institutions for the purpose of implementing a protocol could doom such a
protocol, for, here, too, demanding that sovereigns surrender significant elements of
their authority may be a prospect even more daunting than inducing them to agree to
curb their GHG emissions. Finally, an international system for accounting for, and
tracking trades in, each nation's GHG emissions must be simple, reliable and durable.
Fortunately, the FCCC itself already has laid the foundation for such a system in
its existing requirements that countries file annual reports of their GHG emissions. To
implement each nation's GHG emissions budget requirements and effectuate the
application of GHG emissions trading they may have engaged in in meeting their
respective emissions budgets, the protocol should require each nation to file an annual
report with the following information:
EMISSIONS, REDUCTIONS, AND
TRADING REPORTING
Annex I Party B
Emission
Domestic
Domestic
Exported
Imported
Emission
Budget
Emissions
Offsets
Reductions
Reductions
Savings
150,000
175,000
15,000
5,000
10,000
(5,000)
150,000
185,000
17,500
2,500
15,000
(10,000)
150,000
190,000
20,000
1,000
15,000
(16,000)
150,000
200,000
25,000
10,000
10,000
(41,000)
150,000
185,000
25,000
15,000
5,000
(61,000)
150,000
180,000
20,000
15,000
5,000
(81,000)
150,000
175,000
20,000
15,000
2,500
(98,500)
150,000
145,000
20,000
30,000
D
(103,500)
180,000
130,000
20,000
40,000
0
(103,500)
150,000
140,000
20,000
35,000
0
(108,500)
EDF
1. Emissions Budget, expressed in annualized terms by multiplying its decadal GHG
emissions budget by 0.1.
2. Actual Domestic Emissions Reported in Total and By Sector.
-17-
3. Domestic Offsets. In this category, a nation could report surplus GHG emissions
reductions generated as a result of actions in GHG emissions sectors not regulated
under its domestic programs and not used by its sources in meeting compliance under
those programs.
4. Exported Reductions. These would be reported expressly in terms of the year of
their vintage, as well as being identified by their country of origin. In the case of the
vintage year, this information is necessary for the purpose of calculating the
emissions-value "premium" that could be earned for reductions that were "saved" and
held unused over time. Since reductions, or CEUs, exported by nations whose annual
reports revealed that they were exceeding their budgets would be discounted, in terms
of their emissions value, before they could be applied to the importer's domestic
compliance program, the identity of the country exporting the CEUs would have to be
maintained.
5. Imported Reductions, also reported expressly in terms of vintage year and country
of origin for the same reasons.
6. Emissions Savings and End-of-Period Net. These would be the annual net of the
other five entries. Of course, if in any year a nations emissions exceeded its
annualized budget as adjusted to reflect domestic offsets, exports and imports, then
such savings would be expressed as a negative value. In addition, to reveal each
nation's performance relative to its GHG emissions budget obligation, and thus
expressed as either a net savings to be carried forward for future use or a net debit to
be deducted immediately from the ensuing period's budget, reports at the end of each
budget period would state a net sum of the nation's savings, either positive or negative.
This reporting approach would provide a unified mechanism for compliance and
trading. It would be through each year's report that the mechanics of compliance would
be automatically triggered while at the same time international emissions trading would
be effectuated.
Trading
Through this approach, which is, in effect, one of double-entry record-keeping,
the international emission trading system can accommodate GHG emissions trading
between and among private firms in different nations while ensuring both the integration
of private and sovereign trading and the full GHG emissions budget accountability of all
nations. In addition, it does not presuppose any particular set of policy approaches that
participating nations may use on a domestic level, nor does it rely on developing
extensive new institutional authorities internationally.
-18-
ANNEX I EMISSIONS TRADING
Policies
and
Policies
Measures
and
Allowances
Measures
Carbon Equivalent Unit Market
EDF
Sources OECD 1996
In fact, under this system, virtually any firm operating under virtually any
domestic policy regime can transact the international sale of purportedly surplus GHG
emissions reductions. Meanwhile, the integrity of the system of accountability remains
assured. This approach achieves this by requiring nations to report annually all
emissions exports, whether initiated by the sovereign itself or any private firms
operating within sovereign borders. Even private firm sales transactions, therefore, of
necessity will have to be effectuated through both their being reported to the
government of the selling firm and a corresponding deduction being taken from that
sovereign's budget.
To ensure that this occurs with every such transaction, the sovereigns whose
firms are purchasing such reductions - presumably for the purpose of using the
reductions to offset their own emissions and thus comply with domestic obligations -
would agree not to recognize or accept such reductions for such compliance purposes
in the absence of a demonstration that the exporting sovereign had acknowledged the
transfer and made the deduction from its own budget. Of course, in accepting such
purchases, the importing sovereigns would be able to report either a net increase in
their own budgets or a net decrease in their emissions. This approach thus makes all
international GHG emissions trading take the form of inter-sovereign trading of
increments of the sovereigns' GHG emissions budgets. As a result, this approach
guarantees that, by definition or as a creation of the accounting mechanism itself, all
trades are for surplus reductions. In effect, certifying that a traded reduction is surplus,
often a prohibitively cumbersome process in other trading approaches, is a seamlessly
built-in feature of the accounting mechanism.
-19-
Compliance
The reporting mechanism is also a crucial trigger for the protocol's two key
compliance mechanisms. Since the tenth annual report in each budget period will
include a summing of each nation's "savings", both positive and negative, those reports
that indicate a net deficit -- that is, emissions in excess of a nation's net budget as
adjusted to reflect trades -- will trigger an automatic deduction from the affected
nations' budget for the ensuing period.
Similarly, at any time during the course of a budget period a nation's annual
report may reveal that its cumulative emissions exceed 110% of its total decadal
budget. In that case, the discount requirement would be automatically triggered for
application by every other sovereign whose firms held reductions, or CEUs, exported
by that nation. Again, the discount, would be applied to those CEUs that were
presented by the firms that had acquired them for use in offsetting their own emissions
and thus meeting their domestic emissions obligations or were otherwise used by the
sovereigns themselves to augment their budgets or offset their emissions. However,
the discount would take effect only beginning in the first year after a nation's "budget
deficit" was revealed and would affect only those CEUs or reductions that were
submitted subsequently. Nevertheless, the ability of the annual reports to reveal,
essentially immediately, the creation of nations' "deficits" before the end of the budget
period would allow the protocol to require that the discount be applied automatically by
all participating sovereigns.
JOINT IMPLEMENTATION AND PARTICIPATION
In its January submission to the international negotiating process, among the
items emphasized by the U.S. were the details of a strategy for ensuring the ultimate
participation by developing countries in an GHG emissions protocol. The key elements
in the U.S. proposal included a proposed requirement that these nations adopt "no
regrets" policies to curb GHG emissions and that they prepare annual reports on their
emissions and on measures adopted to control such emissions. In addition, the U.S.
called for the establishment of a date certain for negotiations which would result in
developing countries' accepting GHG emissions obligations and that included
mechanisms for the eventual strengthening of those obligations.
The U.S. proposal's focus on these countries and their emissions is especially
compelling from both an environmental and economic competitiveness perspective.
GHG emissions from the developing world are rapidly reaching or exceeding par with
those generated by the industrialized and Eastern bloc nations. Their emissions
trajectory corresponds to their economies' increasing importance and activity in the
-20-
global marketplace. In fact, unless a GHG protocol creates a robust structure for
encompassing these nations and their GHG emissions it will lack environmental - and
economic - credibility, a conclusion recognized, much to its credit, by the U.S.
proposal.
These ideas will need to be developed further in order to provide a more
comprehensive answer to the question of how the developing nations will come to
agree to their inclusion in a GHG emissions budget regime. Certainly, as climate
science advances the threats posed by climate change will be of concern to those
societies whose relative economic disadvantage may render them more vulnerable. At
the same time, the traditional tools of diplomacy, which may include outright pressure
from the industrial powers will play a role as well. Nevertheless, the same factors that
limit the ability of the international community to compel routine compliance with a GHG
emissions budget regime pose analogous challenges to securing the full-fledged
participation of developing countries in such a regime.
NON-ANNEX I EMISSIONS TRADING
EMISSION
BUDGET
EDF
Here, too, then, the economic dynamics a global GHG emissions trading market
must be enlisted in meeting these challenges. Ostensibly, the most effective way of
using the emissions trading market to create incentives for developing countries to
participate in an international GHG regime is to condition their ability to engage in
transactions in the emissions trading market on their agreement to subject themselves
to a GHG emissions budget. Under this approach, "joint implementation", understood
as a method by which developing countries without GHG emissions budgets can sell
GHG emissions reductions, would not be available as a compliance option for firms and
sovereigns subject to a GHG emissions budget.
-21-
Erecting such a barrier to developing nations' participation in trading may prove
to be too crude and risky a strategy, however, while also denying opportunities for
achieving environmental and economic gains. In contrast, permitting international GHG
emissions trading for and with nations prior to their accepting GHG emissions budget -
that is, joint implementation -- may offer a smoother path by which developing countries
can "graduate" to full participation in the emissions budget regime. Such an approach,
in actuality, may enable the incentives represented by the opportunity to participate in
emissions trading to function more effectively. In addition, it may create a stream of
economic revenue tied to environmental investments during the current period when
many developing economies are stepping up investment in long-term energy and
transportation infrastructure. Furthemore, we believe that the incentives for
participation can be inreased by offering non-annex I Parties that take a budget a
growth allowance. With a budget explicitly accomodating growth, Parties opting in
would enjoy the full benefits of international greenhouse gas trading without the
transactions costs that may dominate joint implementation.
Typically, the kinds of international transactions that would result in the transfer
of GHG emissions reduction credits would have the mutual economic benefits to buyer
and seller characteristic of trading: sellers would gain a new, additional sources of
revenue and buyers would be able to achieve compliance at lower cost. Moreover,
these transactions would bring a host of benefits crucial to the credibility, durability and
environmental performance of a GHG protocol. First, the very opportunity afforded
firms and sovereigns in the industrialized world to meet their GHG emissions budgets
at reduced cost and with greater flexibility would enhance the acceptance and
credibility of an international GHG regime.
At the same time, those developing economies experiencing the greatest growth
in the current economic time horizon are making substantial infrastructure investments
whose environmental consequences, including GHG emissions, could have long-lasting
effects for good or ill. Investments of the sort that yielded transactable GHG reductions
for the host economy or the foreign investor simultaneously would help direct the host
countries' economic growth along paths that were less, rather than more, GHG
emissions-intensive. In addition to the environmental benefits that would result directly
from this outcome, achieving growth in this way would make it that much easier for
these countries to accept, eventually, a GHG emissions budget. As a result, the implicit
gradualism in this strategy could speed and facilitate these countries' graduation to
more rigorous international GHG obligations. In contrast, an approach which barred
these countries from participating in international GHG emissions trading or joint
4 For a more detailed discussion of this point see Dudek, Daniel J. and Jonathan
Wiener, "Joint Implementation and Transaction Costs", paper prepared for the
Environment Directorate, Organization for Economic Cooperation and Development,
Paris, 1996, 69 pp.
-22-
implementation until after they had accepted a GHG emissions budget could actually
result in developing countries' finding it more difficult to accept such budgets.
By the same token, allowing developing countries to reap the benefits of
engaging in GHG emissions trading even before they agreed to GHG emissions
budgets could enhance the effectiveness of the incentive created by the promise of
participation in trading following the imposition of a GHG emissions budget. Direct
experience in the international GHG emissions trading market and direct enjoyment of
the benefits of participation in the market could help persuade developing countries to
move into the budget regime and to do so more quickly.
TRANSACTION COSTS
A
Search
A
Negotiation
A
Approval
A
Monitoring
Enforcement
Insurance
EDF
At first blush, this would seem to be a paradoxical result. Presumably,
developing countries would be only too happy to reap the rewards of emissions trading
without bearing the burden of a GHG emissions budget. In fact, participation in the
emissions trading market under these circumstances inevitably will be significantly less
advantageous and less lucrative for the exporting country than it would be for those
countries that engage in trading while subject to a GHG emissions budget. It is this
differential, which inevitably will be substantial, that will create the incentive for
developing countries to adopt GHG emissions budget; yet, it is initially allowing
countries to participate in emissions trading in the first place that will make the incentive
more vivid and compelling.
This differential will arise from the contrast in transactions costs associated with
trading where both affected sovereigns are subject to budgets and those associated
with trades where the exporting nation is not subject to a budget. In the former case,
as discussed at length above, the universal accounting and reporting system, backed
by the discount and debt-carryover mechanisms, for countries subject to GHG
-23-
emissions budgets will render all transacted reductions surplus. As a result, firms and
sovereigns engaging in such trades will have to incur few if any costs related to
demonstrating that the reduction in question is surplus.
In the case of reductions exported by countries without GHG emissions budgets,
however, the trading participants will be forced to incur significant costs in establishing
that the reductions in question are truly surplus and can be used to offset emissions
subject to GHG emissions budget requirements. This will be the case no matter how
liberal the protocol may be or how dominant the constituencies seeking to encourage or
facilitate joint implementation may be. In addition to meeting tests that may seek to
establish not only "additionality" but "but for" causality as well, joint implementation
projects may be required to demonstrate also that their emissions reductions are not
merely the result of shifting emissions generation to other firms or activities.
Proponents of joint implementation transactions will also incur the costs associated with
seeking the approval of as many as three authorities -- that of the host country, that of
the country against whose compliance requirements the reductions are being offered
and possibly that of an international body that may be created for the purpose by the
protocol itself.
NON-ANNEX I EMISSIONS GROWTH BUDGET
1,350
1,300
1.250
1,200
1,150
1,100
1,050
1.000
2001
2003
2005
2007
2009
2011
2013
EDF
Meanwhile, thanks to the certification that reductions are surplus that is built into
the very mechanics of reporting, parties to GHG trading in the emissions budget
context will face none of these burdens and costs. As a result, they are likely to seek
reductions from countries subject to GHG emissions budgets as a first preference and
offer prices commensurate with the reliability and minimization of transactions costs
characteristic of that context. In competing against that preference, sovereigns and
firms without budgets will suffer smaller demand and lower prices for their reductions.
-24-
With experience, these nations will come to identify an economic advantage that the
emissions trading market can confer on those that accept budgets.
To facilitate developing countries' response to this incentive, the protocol should
specify a fixed formula to be universally applied to developing countries when they elect
to adopt a GHG emissions budget. While the formula can include an advantage for
those nations that act more quickly, applying a pre-established set of specifications,
and thus eliminating case-by-case negotiations, will ensure the integrity of the system
of budgets imposed on developing countries. As a result, this approach can be tailored
to address the pressing demand of developing countries: that the perceived need for
rapid economic growth, comparable to that enjoyed by industrialized nations earlier in
their economic history be accommodated. Specifically, for the initial budget period or
periods developing countries can be subject to "growth budgets" calculated, for
example, as a function of current emissions with a small-percentage margin for
increase over a certain time horizon. At the end of the horizon, which can be set at a
length that would be greater for those nations that begin their budget commitments
earlier, they would be subject to the same reduction path applicable to all nations.
CONCLUSION
THE VALUE OF FLEXIBILITY
14
$0.5 Trillion
12
BILLION TONS OF CARBON
10
8
6
4
2
0
2000
2010
2020
2030
2040
2050
2075
2100
2125
2150
2175
2200
YEAR
Source: Manne and Richets) Richels and Edmonds
EDF
This paper has attempted to articulate the framework for an international
greenhouse gas trading regime and to elucidate the importance of the elements of that
framework for its effective functioning. As the international community rapidly moves
toward the adoption of a protocol to limit greenhouse gas emissions, building an
international understanding of the practicality and desirability of emissions trading is
-25-
essential if agreement is to be reached in Kyoto. Only a system of international
emissions trading can effectively span the diversity of national interests, legal systems,
norms, implementation strategies, and preferences represented among the community
of nations. The very essence of emissions trading is choice -- the ability to choose
when, where, and how much.
At the same time, only emissions trading has the capacity to modulate both total
cost as well as the distribution of costs among nations. Economic analyses of
greenhouse gas control are remarkably uniform in ascribing huge cost savings to
emissions trading. The key to delivering these cost savings is the creation of a
framework for trading which reduces transactions costs, provides environmental and
financial credibility, and rewards innovation. This paper has identified the minimum
elements necessary.
-26-
GLOBAL CLIMATE COALITION
GROWTH GLOBAL )
CC.AW
IN
A
19 February 1997
TR
Dear Member of the Interagency Taskforce on Climate Change Policy:
Attached for your information is a letter from the Global Climate Coalition to
Assistant Secretary Eileen Claussen outlining several concerns expressed by
Coalition members with the January 17 "U.S. Draft Protocol Proposal."
Also attached are questions that the GCC believes need further clarification so
that sound climate policies can be developed.
I hope you find this information useful.
Sincerely,
William F. O'Keefe
Chairman
1331 Pennsylvania Avenue, NW Suite 1500 - North Tower Washington, DC 20004-1703
Telephone: (202) 637-3162
Fax: (202) 638-1032
Fax: (202) 638-1043
GLOBAL CLIMATE COALITION
ENVIRONMENT
GROWTH A GLOBAL
February 14, 1997
The Honorable Eileen Claussen
Assistant Secretary of State for Oceans
and International Environmental
and Scientific Affairs
Room 7831
U.S. Department of State
2201 C Street, NW
Washington, Rileen DE. 20520
Dear Ms Claussen:
On behalf of the Global Climate Coalition, I want to thank you and other State
Department officials for the time you set aside January 17 to brief interested
parties about provisions in the "U.S. Draft Protocol Proposal" to the Framework
Convention on Climate Change. In the interest of continuing that dialogue, I
want to express several general impressions and to pose a number of questions
prompted by this latest U.S. proposal and its predecessor last December.
First, we note the impressive effort evident in the proposal's elaborate policy
architecture, given the short time allowed by the Secretariat to submit such
documents. However, it is difficult to analyze the draft protocol and its
implications until we are fully informed about the Administration's proposed
target, timetables and policy tools-such as emissions trading-that have been
proposed to implement a Kyoto agreement. The lack of detail denies the
American public, labor and industry groups such as ours the ability to fully
assess the merits of the U.S. draft protocol proposal, especially its implications
for our nation's economic well-being. In our view, any protocol of this nature,
were it ratified, may well result in policies, regulations and other measures
many times more costly than they need be. Certainly, the growing body of
economic analyses argues strongly against early actions that would be many
times more costly but would produce no greater benefits than policies that were
based on optimal timing.
As you know, our members strongly share the view that developing nations
need to be part of any new Kyoto agreement. We have attached questions on
1331 Pennsylvania Avenue, NW
Suite 1500 - North Tower
Telephone: (202) 637-3162
Washington, DC 20004-1703
Fax: (202) 638-1032
Fax: (202) 638-1043
The Honorable Eileen Claussen
February 14, 1997
Page Two
this matter, as well as others. It is vitally important to establish in advance of the
Kyoto meeting appropriate criteria for including developing countries and the
resolve not to support any agreement that does not involve a specific schedule
for active developing country participation. There is a political and equity.
argument why developing countries must be included in any new commitments.
Would Americans accept a U.N. agreement that requires substantial personal,
economic and lifestyle sacrifices, yet allows environmental gains, however
distant or few, to first be marginalized and then completely overrun by the
absence of active participation by developing nations, which will be the major
emission sources in the next century? We think not, and urge the Administration
to stand firm on developing country participation in any new agreement. At
home, we urge you to make public as soon as possible the economic analyses on
which your draft protocol proposal is based.
The GCC is encouraged by the stipulation that all greenhouse gases be included
in any new agreement and by the attention given to the "free rider" problem.
However, the GCC believes a number of points in this document require
additional comment so that policymakers and the public may more precisely
understand what U.S. representatives are preparing to negotiate in Kyoto.
For example, how are the results of the Administration's economic analyses
linked to the policy choices outlined in this draft protocol proposal? What, if
any, institutional organizations need to be created or strengthened to implement
the proposed tradable permits initiative? If international oversight is not
contemplated, how would the integrity of such a system be protected, and by
whom? Given the myriad of proposals now before the Parties, is the
Administration concerned that important issues will not be resolved at the
December meeting in Kyoto? If key issues are left unresolved, would the "Kyoto
Agreement" be contingent on the satisfactory resolution of those issues by a time
certain?
In short, we are encouraged by the Administration's January 17 effort to clarify
its position regarding post-2000 greenhouse gas emissions, but we also are
concerned by the important questions the draft protocol raises and does not
answer. Rather than dwell on those concerns here, we enclose a list of some of
the questions that we hope you can respond to before or after the Bonn meeting
late this month.
The Global Climate Coalition appreciates this opportunity to comment on the
U.S. draft protocol proposal. Be assured we will continue to participate
The Honorable Eileen Claussen
February 14, 1997
Page Three
constructively in this national and international debate seeking to identify
realistic, flexible climate policies whose benefits are commensurate with costs.
Sincerely,
fir William F. O'Keefe
Chairman
Attachment
CC: Federal Interagency Group on Climate Change Policy
February 14, 1997
GLOBAL CLIMATE COALITION ENCLOSURE
RE: SOME ISSUES CONCERNING U.S. NON-PAPER OF DECEMBER 1996
AND U.S. DRAFT PROTOCOL FRAMEWORK OF JANUARY 17, 1997
In asking these questions, we, of course, recognize that, in some cases, (such as Articles
2.7 and 4.6) you have not had an opportunity to spell out all of the details in the draft protocol
and, of course, the specific target and timetable are absent. However, in other Articles, the lack
of details raises issues and serious concerns. Our primary interest is in understanding what you
intend or what you were thinking in crafting any particular Article, Annex, or provision in order
for industry, labor and others to better understand the impact of the draft U.S. proposal and how
it would be implemented from a practical sense should it or elements of it combined with
proposals by other Parties be adopted in Kyoto.
Article 1 - Definitions
A.
The draft defines "Party" to mean a "Party to the Protocol". Annex A includes the
Annex I Parties to the Convention that sign and ratify or accept the Protocol and Annex B
includes such non-Annex I Parties to the Convention that want to be included in Annex
B. Article 5.5 and 5.6 seem to suggest that other Convention Parties may become Parties
to the Protocol. Is that intended? If the U.S. draft protocol or significant elements
thereof are agreed to in Kyoto, could non-Annex I Parties to the Convention sign and
ratify or accept the Protocol, have equal voting rights, and also not agree to be included
in either Annex A or B?
Article 5 - Advancement of the Implementation of Article 4.1 of the Convention
B.
As drafted, Article 5 of the draft Protocol only applies to those Convention Parties who
become Parties to the Protocol. Since Article 5 seems to impose new requirements or
obligations, which you presumably believe are consistent with section 2.(b) of the Berlin
Mandate Decision, on Protocol Parties in regards to Article 4.1 of the Convention, what
is the incentive for non-Annex I Parties to the Convention (i.e. developing countries) to
become Parties to the U.S. draft protocol and be subject to such requirements?
C.
Article 5.5 applies to non-Annex A and B Parties, while Article 5.7 applies to all Parties
to the draft Protocol. Both include the words "no regrets measures" which are not
defined. What are such measures? Is it true that "no regrets measures" are not
necessarily "no risk measures"? Does Article 4.1 of the Convention provide for or
require "no regrets measures" for any Party? If not, what is the application of Article
5.7(b) to Parties not subject to Article 5.5 of the draft Protocol?
Article 16 - Evolution
D.
There is concern that greenhouse gas emissions are growing rapidly in developing
countries and that the Berlin Mandate precludes any new commitments applicable to such
countries in any AGBM protocol or other legal instrument with the result that any such
CLMTENCL.DOC
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February 14, 1997
instrument will not be fully global, will create economic and competitive disadvantages
and will not be environmentally sound. We think a provision like Article 16 is needed
for the developing countries, although we realize that it is only an agreement to agree. It
does not, for example, include even a hint as to whether the agreement might, as
minimum, be patterned after Article 5 of the Montreal Protocol. However, we are
concerned that Article 16 (which, as drafted, now applies only to Protocol Parties) will
not apply to developing country Parties to the Convention unless they become Protocol
Parties and become Annex B Parties. Is it your intention that Article 16 should apply to
developing country Parties to the Convention? What if they are not included in Annex B
of the Protocol? Would that intention be better achieved by converting Article 16 to an
amendment to the Convention?
E.
Do you contemplate that the process of implementation of Article 16 would be spelled out
in a decision at COP3 by the Convention Parties or by the Parties to the Protocol at their
first meeting after entry into force? Are you concerned that some Parties to the
Convention might delay signing and ratifying the draft Protocol until they see the results
of the process under Article 16, particularly if the delaying Parties are developing
countries with significant growth in greenhouse gases?
F.
Annex B states that it includes Convention Parties "not listed in Annex A" that "indicate"
they want to be "included" in Annex B. One country that immediately comes to mind
because of its recent accession to the OECD would, based on Administration testimony in
the House Commerce Committee last September, seem to be Korea which is a U.S.
trading partner. However, we understand that an OECD document entitled "Korea's
Accession Revised Draft Report to the Council" and dated last August states in paragraph
24 of an Annex entitled "Korean Undertakings" that: "For purposes of future
negotiations and agreements, Korea would not choose to be classified as a developing
country, except in the areas of agriculture and the UN Framework Convention on
Climate Change." If the U.S. draft protocol was agreed to in Kyoto, is Korea committed
as an OECD member to becoming a Party subject to Articles 5 and 16, but not Annex A
or B, or does it mean that, as a developing country Korea could choose not to become a
Protocol Party?
G.
As you know, non-Annex I Parties are participating in negotiations for new commitments
for Annex I Parties, while they enjoy an exemption from new commitments. However,
Article 16 provides no similar exemption for Annex I Parties. Why should Article 16
which calls for new and progressive "quantitative greenhouse gas emissions obligations"
based on some future "agreed criteria" be applicable to Annex A Parties to the Protocol,
including the U.S., since the U.S. draft of the Kyoto protocol otherwise applies to them
and imposes new obligations on them beyond those in Article 4.1 and 2 of the
Convention? What new obligations for Annex A Parties do you contemplate in the
Article 16 process? Does, for example, this mean that under Article 4.1(b) Annex I
Parties, like the U.S., by signing the Protocol are agreeing to reductions beyond the
requirements of Article 2 of the draft protocol?
CLMTENCL.DOC
2
2/14/97
February 14, 1997
Article 2 - Emissions Budgets
H.
We observe that Section III of the December Non-Paper called for "focusing"
negotiations on a "binding, medium-term emissions target" and expressed interest in
working toward a "longer-term concentration goal". However, Article 2.3 appears to
call for a second target or "budget period" before there is an agreement by non-Annex A
and B Parties to the Protocol that are developing countries to negotiate "quantitative
greenhouse gas emissions obligations" under Article 16 and to adopt such obligations by
[2005]. Does this second target send the wrong signals to the developing countries who
agree to become Parties to the draft protocol and are subject to Article 16? Why is it in
the best economic and competitive interests of the United States to offer a second target
and timetable before negotiations with all Parties to the Convention in the AGBM begin
and before the U.S. analysis and assessment and its assumptions are provided to
Congress, industry, labor, environmentalists, and others? What is the need?
I.
The Non-Paper states that the U.S. "strongly urges consideration of banking" and that
multi-year averaging would give Parties "important flexibility". However, Article 2.5
seems to weaken that support for banking by providing that emissions of tonnes "may"
(not "shall") be carried over and added to the "next budget period". That leaves
uncertainty for industry and suggests that a Party like the U.S., might retire such tonnes
rather than bank them which could have future economic and competitive consequences.
Why did you take this discretionary approach? Why not follow the mandatory approach
of Article 2.6? The Article does not specifically mention multi-year averaging. Why? Is
it implied?
Article 6 - International Emissions Trading
J.
As the chief proponent of an emissions trading program, the U.S. in its December Non-
Paper said it was "critical" that provisions for "international" emissions trading "be
included in the Kyoto agreement." When Title IV of the Clean Air Act (CAA) was
signed into law, it spelled out in great detail the allowance program for existing and new
electric utility units, including the timetable, the target, the cap, the trading system, the
nature of the allowances, the rights of allowance holders, the tracking system, and the
limitations. Upon enactment, the utility industry knew the program details and could
plan their future. That program, which applied equally to all covered units of the electric
utility industry, is for one industry with an identified and limited number of sources and
it is a national trading program. Presumably, an international trading program will cover
many industries, sectors, and gases on an international scale. However, our review of
Article 6 of the draft protocol provides none of the details of an international trading
program. It merely authorizes trading between Annex A and B Parties that establish a
"mechanism" for certifying and verifying trades. It does not require that a trading
program be established by all such Parties or that such a "mechanism" be put "in place"
or that it be operated uniformly. All the important details are missing.
CLMTENCL.DOC
3
2/14/97
February 14, 1997
Do you intend to include these "critical" provisions in the protocol to be adopted in
Kyoto or do you plan to defer development of such provisions to a post Kyoto_ legal
instrument, to a decision of the Parties to the Protocol after it enters into force, to
bilateral negotiations between Parties, or some other means?
K.
Article 6 provides that a Party "may authorize" any domestic entity to participate in
actions "leading to transfer" of tonnes. What "actions" do you have in mind for this
entity? In the case of the CAA, the trades are between utilities with reporting to the
Environmental Protection Agency. Is that same approach likely to be accepted on an
international scale if the domestic entity is a non-governmental organization in one
country and a government agency in another?
L.
As noted, Article 6 authorizes trading between Parties. However, unlike the CAA no
mention is made of trading by private sector entities that will likely need such trading to
operate. Also, unlike the CAA it does not allocate, or provide for an allocation of, the
initial tonnes for various industries and sources to operate or indicate whether such
industries and sources will be faced with penalties for continuing to operate without such
allocation if such a program is initiated.
It only allows private sector entities, after receiving authorization from a Party, to
"participate in actions leading to transfer and receipt... of carbon equivalent emissions.
Therefore, it appears that private sector entities can only suggest to Parties that certain
emissions trading transactions take place. This imposes significant constraints on private
sector international emissions trading, establishes a bureaucracy involving two separate
governments or their designees between the private sector and the completion of trades,
lowers any possible expectation that private sector entities would receive any benefit from
trades, and makes the private sector subservient to the political and policy whims of
governments in order to carry out what industry does best, i.e., produce goods and
services and employ workers.
The wording of Article 7 on Joint Implementation carries the same structure and
constraints. Under Article 7.1, any Party can generate tonnes of carbon equivalent
emissions. Under Article 7.5, only Annex A or B Parties may acquire those tonnes of
carbon equivalent emissions. And under Article 7.6, private sector entities, even after
receiving authorization from a Party, are limited to "participat[ing] in actions leading to
generation, transfer and receipt under this Article of tonnes of carbon equivalent
emissions." Again, the private sector entities cannot, themselves, engage in emissions
trading.
The proposed construction of Articles 6 and 7 and lack of details would appear to
virtually eliminate the functioning of an international market in tradable permits. Instead,
trading, as noted, can occur only between governments. The type of trading activity that
would occur between governments, as a practical matter, would likely bear little
resemblance to the trading activity that would be expected to occur in a private sector
international tradable permits market if the program works as its proponents contend. Is
the Administration intending an international governmental trading system? Who will
CLMTENCL.DOC
4
2/14/97
February 14, 1997
make the trades, pay for the tonnes, and receive the tonnes and money? If not, when will
we learn the details for evaluation by industry, labor, and others?
Article 3 - Measurement and Reporting
M.
Article 3.5 suggests that the transfers of tonnes of carbon equivalent emissions under
Articles 6 and 7 would be reported to the Convention Secretariat annually. Do you
intend that the Secretariat would perform the role in trading that EPA does under Title IV
of the CAA and if so is annual reporting adequate? If not, what entity should perform
that role and what is the purpose and need for a Party to also report to the Secretariat?
What are the advantages and disadvantages to the U.S. of an international entity
performing the EPA-type role in trading?
Article 7 - Joint Implementation (JI)
N.
Article 7.2(b) uses the term "additional" which is not defined or explained. The
definition of "additional" and the methodology for calculating greenhouse gas reductions
from JI projects must be determined in order to estimate the magnitude of the cost
savings due to JI. How will the Administration obtain this information in order to factor
the cost savings of JI into its economic analysis?
CLMTENCL.DOC
5
2/14/97
February 14, 1997
GLOBAL CLIMATE COALITION ENCLOSURE
RE: SOME ISSUES CONCERNING U.S. NON-PAPER OF DECEMBER 1996
AND U.S. DRAFT PROTOCOL FRAMEWORK OF JANUARY 17, 1997
In asking these questions, we, of course, recognize that, in some cases, (such as Articles
2.7 and 4.6) you have not had an opportunity to spell out all of the details in the draft protocol
and, of course, the specific target and timetable are absent. However, in other Articles, the lack
of details raises issues and serious concerns. Our primary interest is in understanding what you
intend or what you were thinking in crafting any particular Article, Annex, or provision in order
for industry, labor and others to better understand the impact of the draft U.S. proposal and how
it would be implemented from a practical sense should it or elements of it combined with
proposals by other Parties be adopted in Kyoto.
Article 1 - Definitions
A.
The draft defines "Party" to mean a "Party to the Protocol". Annex A includes the
Annex I Parties to the Convention that sign and ratify or accept the Protocol and Annex B
includes such non-Annex I Parties to the Convention that want to be included in Annex
B. Article 5.5 and 5.6 seem to suggest that other Convention Parties may become Parties
to the Protocol. Is that intended? If the U.S. draft protocol or significant elements
thereof are agreed to in Kyoto, could non-Annex I Parties to the Convention sign and
ratify or accept the Protocol, have equal voting rights, and also not agree to be included
in either Annex A or B?
Article 5 - Advancement of the Implementation of Article 4.1 of the Convention
B.
As drafted, Article 5 of the draft Protocol only applies to those Convention Parties who
become Parties to the Protocol. Since Article 5 seems to impose new requirements or
obligations, which you presumably believe are consistent with section 2.(b) of the Berlin
Mandate Decision, on Protocol Parties in regards to Article 4.1 of the Convention, what
is the incentive for non-Annex I Parties to the Convention (i.e. developing countries) to
become Parties to the U.S. draft protocol and be subject to such requirements?
C.
Article 5.5 applies to non-Annex A and B Parties, while Article 5.7 applies to all Parties
to the draft Protocol. Both include the words "no regrets measures" which are not
defined. What are such measures? Is it true that "no regrets measures" are not
necessarily "no risk measures"? Does Article 4.1 of the Convention provide for or
require "no regrets measures" for any Party? If not, what is the application of Article
5.7(b) to Parties not subject to Article 5.5 of the draft Protocol?
Article 16 - Evolution
D.
There is concern that greenhouse gas emissions are growing rapidly in developing
countries and that the Berlin Mandate precludes any new commitments applicable to such
countries in any AGBM protocol or other legal instrument with the result that any such
CLMTENCL.DOC
1
2/14/97
February 14, 1997
instrument will not be fully global, will create economic and competitive disadvantages
and will not be environmentally sound. We think a provision like Article 16 is needed
for the developing countries, although we realize that it is only an agreement to agree. It
does not, for example, include even a hint as to whether the agreement might, as
minimum, be patterned after Article 5 of the Montreal Protocol. However, we are
concerned that Article 16 (which, as drafted, now applies only to Protocol Parties) will
not apply to developing country Parties to the Convention unless they become Protocol
Parties and become Annex B Parties. Is it your intention that Article 16 should apply to
developing country Parties to the Convention? What if they are not included in Annex B
of the Protocol? Would that intention be better achieved by converting Article 16 to an
amendment to the Convention?
E.
Do you contemplate that the process of implementation of Article 16 would be spelled out
in a decision at COP3 by the Convention Parties or by the Parties to the Protocol at their
first meeting after entry into force? Are you concerned that some Parties to the
Convention might delay signing and ratifying the draft Protocol until they see the results
of the process under Article 16, particularly if the delaying Parties are developing
countries with significant growth in greenhouse gases?
F.
Annex B states that it includes Convention Parties "not listed in Annex A" that "indicate"
they want to be "included" in Annex B. One country that immediately comes to mind
because of its recent accession to the OECD would, based on Administration testimony in
the House Commerce Committee last September, seem to be Korea which is a U.S.
trading partner. However, we understand that an OECD document entitled "Korea's
Accession Revised Draft Report to the Council" and dated last August states in paragraph
24 of an Annex entitled "Korean Undertakings" that: "For purposes of future
negotiations and agreements, Korea would not choose to be classified as a developing
country, except in the areas of agriculture and the UN Framework Convention on
Climate Change." If the U.S. draft protocol was agreed to in Kyoto, is Korea committed
as an OECD member to becoming a Party subject to Articles 5 and 16, but not Annex A
or B, or does it mean that, as a developing country Korea could choose not to become a
Protocol Party?
G.
As you know, non-Annex I Parties are participating in negotiations for new commitments
for Annex I Parties, while they enjoy an exemption from new commitments. However,
Article 16 provides no similar exemption for Annex I Parties. Why should Article 16
which calls for new and progressive "quantitative greenhouse gas emissions obligations"
based on some future "agreed criteria" be applicable to Annex A Parties to the Protocol,
including the U.S., since the U.S. draft of the Kyoto protocol otherwise applies to them
and imposes new obligations on them beyond those in Article 4.1 and 2 of the
Convention? What new obligations for Annex A Parties do you contemplate in the
Article 16 process? Does, for example, this mean that under Article 4.1(b) Annex I
Parties, like the U.S., by signing the Protocol are agreeing to reductions beyond the
requirements of Article 2 of the draft protocol?
CLMTENCL.DOC
2
2/14/97
February 14, 1997
Article 2 - Emissions Budgets
H.
We observe that Section III of the December Non-Paper called for "focusing"
negotiations on a "binding, medium-term emissions target" and expressed interest in
working toward a "longer-term concentration goal". However, Article 2.3 appears to
call for a second target or "budget period" before there is an agreement by non-Annex A
and B Parties to the Protocol that are developing countries to negotiate "quantitative
greenhouse gas emissions obligations" under Article 16 and to adopt such obligations by
[2005]. Does this second target send the wrong signals to the developing countries who
agree to become Parties to the draft protocol and are subject to Article 16? Why is it in
the best economic and competitive interests of the United States to offer a second target
and timetable before negotiations with all Parties to the Convention in the AGBM begin
and before the U.S. analysis and assessment and its assumptions are provided to
Congress, industry, labor, environmentalists, and others? What is the need?
I.
The Non-Paper states that the U.S. "strongly urges consideration of banking" and that
multi-year averaging would give Parties "important flexibility". However, Article 2.5
seems to weaken that support for banking by providing that emissions of tonnes "may"
(not "shall") be carried over and added to the "next budget period". That leaves
uncertainty for industry and suggests that a Party like the U.S., might retire such tonnes
rather than bank them which could have future economic and competitive consequences.
Why did you take this discretionary approach? Why not follow the mandatory approach
of Article 2.6? The Article does not specifically mention multi-year averaging. Why? Is
it implied?
Article 6 - International Emissions Trading
J.
As the chief proponent of an emissions trading program, the U.S. in its December Non-
Paper said it was "critical" that provisions for "international" emissions trading "be
included in the Kyoto agreement." When Title IV of the Clean Air Act (CAA) was
signed into law, it spelled out in great detail the allowance program for existing and new
electric utility units, including the timetable, the target, the cap, the trading system, the
nature of the allowances, the rights of allowance holders, the tracking system, and the
limitations. Upon enactment, the utility industry knew the program details and could
plan their future. That program, which applied equally to all covered units of the electric
utility industry, is for one industry with an identified and limited number of sources and
it is a national trading program. Presumably, an international trading program will cover
many industries, sectors, and gases on an international scale. However, our review of
Article 6 of the draft protocol provides none of the details of an international trading
program. It merely authorizes trading between Annex A and B Parties that establish a
"mechanism" for certifying and verifying trades. It does not require that a trading
program be established by all such Parties or that such a "mechanism" be put "in place"
or that it be operated uniformly. All the important details are missing.
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Do you intend to include these "critical" provisions in the protocol to be adopted in
Kyoto or do you plan to defer development of such provisions to a post Kyoto. legal
instrument, to a decision of the Parties to the Protocol after it enters into force, to
bilateral negotiations between Parties, or some other means?
K.
Article 6 provides that a Party "may authorize" any domestic entity to participate in
actions "leading to transfer" of tonnes. What "actions" do you have in mind for this
entity? In the case of the CAA, the trades are between utilities with reporting to the
Environmental Protection Agency. Is that same approach likely to be accepted on an
international scale if the domestic entity is a non-governmental organization in one
country and a government agency in another?
L.
As noted, Article 6 authorizes trading between Parties. However, unlike the CAA no
mention is made of trading by private sector entities that will likely need such trading to
operate. Also, unlike the CAA it does not allocate, or provide for an allocation of, the
initial tonnes for various industries and sources to operate or indicate whether such
industries and sources will be faced with penalties for continuing to operate without such
allocation if such a program is initiated.
It only allows private sector entities, after receiving authorization from a Party, to
"participate in actions leading to transfer and receipt..." of carbon equivalent emissions.
Therefore, it appears that private sector entities can only suggest to Parties that certain
emissions trading transactions take place. This imposes significant constraints on private
sector international emissions trading, establishes a bureaucracy involving two separate
governments or their designees between the private sector and the completion of trades,
lowers any possible expectation that private sector entities would receive any benefit from
trades, and makes the private sector subservient to the political and policy whims of
governments in order to carry out what industry does best, i.e., produce goods and
services and employ workers.
The wording of Article 7 on Joint Implementation carries the same structure and
constraints. Under Article 7.1, any Party can generate tonnes of carbon equivalent
emissions. Under Article 7.5, only Annex A or B Parties may acquire those tonnes of
carbon equivalent emissions. And under Article 7.6, private sector entities, even after
receiving authorization from a Party, are limited to "participat[ing] in actions leading to
generation, transfer and receipt under this Article of tonnes of carbon equivalent
emissions." Again, the private sector entities cannot, themselves, engage in emissions
trading.
The proposed construction of Articles 6 and 7 and lack of details would appear to
virtually eliminate the functioning of an international market in tradable permits. Instead,
trading, as noted, can occur only between governments. The type of trading activity that
would occur between governments, as a practical matter, would likely bear little
resemblance to the trading activity that would be expected to occur in a private sector
international tradable permits market if the program works as its proponents contend. Is
the Administration intending an international governmental trading system? Who will
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make the trades, pay for the tonnes, and receive the tonnes and money? If not, when will
we learn the details for evaluation by industry, labor, and others?
Article 3 - Measurement and Reporting
M.
Article 3.5 suggests that the transfers of tonnes of carbon equivalent emissions under
Articles 6 and 7 would be reported to the Convention Secretariat annually. Do you
intend that the Secretariat would perform the role in trading that EPA does under Title IV
of the CAA and if so is annual reporting adequate? If not, what entity should perform
that role and what is the purpose and need for a Party to also report to the Secretariat?
What are the advantages and disadvantages to the U.S. of an international entity
performing the EPA-type role in trading?
Article 7 - Joint Implementation (JI)
N.
Article 7.2(b) uses the term "additional" which is not defined or explained. The
definition of "additional" and the methodology for calculating greenhouse gas reductions
from JI projects must be determined in order to estimate the magnitude of the cost
savings due to JI. How will the Administration obtain this information in order to factor
the cost savings of JI into its economic analysis?
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