A change in the climate: will Russia help the Kyoto Protocol come into force?: ENVIRONMENT: The treaty has many shortcomings and its value may depend on whether it paves the way for wider curbs on greenhouse gas emissions, writes Vanessa Houlder
ByLine: By VANESSA HOULDER and ANDREW JACK
The bitter wrangling over the Kyoto Protocol on climate change is approaching
its endgame. There is growing speculation that tomorrow's
Russia-European Union summit could pave the way for Russia's
ratification of the treaty, the final step required to bring it into force.
Russia has, in effect, the casting vote on the controversial 1997 treaty that
was designed to reduce industrialised countries' emissions by at least 5
per cent between 1990 and 2012. Each country is allowed to emit a certain
amount of greenhouse gases. If it emits less than its allowance, it can sell
that emission "credit" to other countries that are over their
limit. The treaty needs Russia's support to come into force because it
requires ratification by enough countries to represent 55 per cent of the
industrialised world's emissions.
The outcome of discussions within Russia over the treaty will have a
far-reaching impact on how the world tackles one of the biggest long-term
challenges it has ever faced.
Russia's internal debate intensified this week, ahead of today's
deadline for state bodies to give Vladimir Putin, Russia's president,
their advice on the treaty. Kyoto's critics focused on its potential
threat to growth, with one adviser describing it as a "death pact"
that will strangle Russia's recovering economy.
Its supporters have pointed to the prospect of large financial gains for
Russia from selling surplus carbon credits to other countries that have
signed the treaty. These surplus credits - resulting from closure of large
swaths of Russian industry in the 1990s, coupled with generous allowances
under the Protocol - could be worth as much as Dollars 10bn. The pro-Kyoto
camp is cautiously optimistic that Mr Putin will confirm ratification in the
next few months because of the surplus credits and the progress Moscow has
made in trade and energy negotiations with the EU.
Confirmation from Mr Putin that Russia plans to ratify the treaty could have
significant political impact. Following its rejection by the US three years
ago, the treaty's survival would be seen as a snub to the Bush
administration and a diplomatic triumph for Europe, its most vocal champion.
Kyoto is seen as a positive step because it is the first international treaty
on the environment to attempt to harness market mechanisms, in which emission
credits can be traded, to achieve its goals in the most cost-effective way
possible. As well as scope for trading credits between industrialised
countries, it creates incentives for investing in "clean"
technology in developing countries.
But whatever its symbolic and political importance, its environmental
significance would be much less clear-cut. The Protocol has several
shortcomings. It is short-term in its outlook, has limited targets and lacks
the participation of the US, which has the largest emissions. The Protocol
would cover less than half the world's greenhouse gas emissions and only
governs emissions over the coming decade. The concessions made during years
of tortuous negotiations and the withdrawal of the US in 2001 mean that the
treaty need have virtually no impact on global emissions.
This problem arises because there is little pressure on developed countries
to cut their emissions; they can simply buy credits from other countries. The
EU, Japan and Canada could achieve their goals simply by buying the surplus
carbon credits of the countries that were formerly in the Soviet Union.
Although this outcome would be politically unpopular, very few countries are
on track to meet their targets through their own efforts on curbing emissions
from factories, homes and vehicles.
Kyoto, like many other policy options such as harmonised carbon taxes or
research and standards protocols, suffers from offering skewed economic
benefits. The way it is designed means that most countries are economically
better off if others reduce emissions and they themselves do not. For the US,
the costs of complying with Kyoto would exceed the domestic benefits of
reducing the damage caused by climate change, says Scott Barrett, a professor
at Johns Hopkins University.
Many economists are sceptical about the validity of cost-benefit analysis in
addressing a problem that is long-term, irreversible, poorly understood and
potentially catastrophic. But Kyoto's chequered history adds credence to
Prof Barrett's concern about the lack of incentives to encourage
countries to participate in the treaty. In addition, he says, countries'
willingness to co-operate is undermined by the absence of tough penalties for
non-compliance.
Kyoto's critics say that it fails to address the sharp rise in emissions
expected from developing countries. Moreover, its mechanisms are unlikely to
broaden co-operation from key developing countries over time.
The need to broaden co-operation has proved one of the most fundamental
difficulties facing international climate negotiators. The Kyoto Protocol was
built on an understanding that it was not morally defensible or politically
realistic to expect developing countries to act before their living standards
have risen and wealthy countries have started to deliver real reductions. But
fears that developing countries would gain an unfair competitive advantage
prompted US senators to vote unanimously in 1997 against any climate
agreement that did not involve developing countries taking on emissions
targets. ven if Kyoto does not come into force, it would still leave an
important legacy. The EU and Canada have voluntarily promised to take action
to meet their Kyoto targets regardless of the treaty's legal status. In
the most ambitious policy yet put forward, the EU will in January launch an
emissions trading scheme that will curb the emissions of 15,000 factories.
Ultimately, this trading scheme could link up with others established in
different regions and states.
In the US too, many states have rejected their government's approach as
inadequate (see below). More than 20 states have passed or proposed
legislation on greenhouse gas emissions or developed carbon registries or
similar measures. California is now imposing curbs on vehicle emissions of
greenhouse gases that could have a significant impact on the US motor
industry.
But, in practice, climate policies would inevitably be weakened by a failure
to ratify Kyoto. Participants in Kyoto have already seen support for taking
tough actions to curb emissions eroded. Germany and the UK, which have taken
strong political stands in favour of Kyoto, have recently been forced to make
concessions to industry in their approach to the EU trading scheme.
Many manufacturers are strongly opposed to unilateral action that would
increase their energy costs. "Why should we damage our competitiveness
for something that will not have environmental benefits?" asks the EEF,
a UK manufacturers' trade body.
A failure to ratify the treaty would also undermine negotiations on a
post-Kyoto agreement due to start next year. Ultimately any assessment of
Kyoto's value depends less on its short-term impact than on whether it
lays the foundations for the deeper, wider curbs on greenhouse gas emissions
that are required over the coming decades.
Developing countries might refuse to become involved unless there is clear
evidence that the industrialised countries have taken action. A decade or
more could be lost in the effort to reach an international agreement.
Mr Putin is clearly aware of these considerations and has been using them as
a bargaining chip in negotiations over Kyoto and other issues. The current
tensions around the Kyoto Protocol are a classic case of diplomatic
negotiations Russian-style. Officials rarely draw official linkages, but they
are skilled in indicating how other concessions by the other side could prove
helpful in reaching agreement on the issue.
The EU has argued with increasing vehemence that Russia should meet its
commitment, made in 2002, to ratify the treaty. As a result, it has provided
Russia with a lever to seek other concessions such as support for its bid for
entry into the World Trade Organisation, easier transit to and from its
Kaliningrad enclave on the Baltic coast, and tariff and quota modifications
ahead of EU enlargement.
In theory, there are benefits for Russia in pushing its industry towards
energy-saving measures. But with only slow progress towards the
liberalisation of domestic electricity and gas prices, it is the incentive of
EU concessions on other matters that is likely to provide Moscow with the
greatest motivation to match its previous positive words with action.
Even if Russia ratifies the Protocol, a follow-up treaty will need to be much
more flexible. Flexibility and a sensitivity to the politics of individual
countries will be crucial in securing a successful future agreement,
according to a study by the Pew Center on Global Climate Change, a US
thinktank.
Raul Estrada, the former Argentine ambassador to China, who played a decisive
role in securing agreement for the Kyoto Protocol six years ago, has argued
that it is "imperative" to begin thinking about a broader approach
that could draw in non-participants. A single protocol might prove
insufficient, he says. It might be necessary to have two or three protocols,
with different sets of commitments to meet countries' different needs.
The political difficulties posed by Kyoto are likely to be dwarfed by the
difficulties of deciding what it should lead to. "There is no getting
around national interest," according to Eileen Claussen, president of
the Pew Center. "Climate change is a common challenge, but countries
will engage in collective action only if they perceive it to be in their
interest."
Additional reporting by Andrew Jack
Companies take early action The business community is usually cast as the
villain in the debate on global warming. Corporate lobbyists across the world
successfully have diluted and delayed climate policies.
But a small but influential group of companies has taken a different
approach. These companies have made voluntary cuts in carbon emissions and
have campaigned for regulations that would force others to follow suit.
Johnson & Johnson has become the largest corporate user of wind power in
the US. Swiss Re, the reinsurer, is going "carbon neutral" over the
next 10 years by cutting emissions and investing in World Bank carbon
sequestration projects. Lafarge is reducing its emissions from its cement
kilns by using innovative fuels, such as sewage treatment sludge.
They are partly motivated by a desire to enhance their reputations. But they
are also driven by a belief that carbon constraints are inevitable. By taking
action early, they will secure technological and marketing advantages.
Last month, about 20 companies joined forces with a number of city, state and
national governments in the Climate Group, a non-profit organisation working
to pool expertise on cutting emissions. Practical action, the participants
argued, could not wait for an international agreement.
There is a longstanding gap between the attitudes of the small group of
environmentally conscious companies and the rest of the business community,
however.
A study of FT500 companies published by the Carbon Disclosure Project, an
institutional initiative backed by the Rockefeller Foundation, concluded that
many companies remain firmly "behind the curve".
Despite this, the CDP detected "an increased sense of urgency with
respect to climate risk and carbon finance". This was being driven by
pressure from financial market authorities, expectations of rising wholesale
electricity prices under the European Union's emissions trading scheme
and the high cost of last year's weather-related disasters.
Companies are increasingly conscious that climate change will bring new risks
and opportunities.
Axa, the French insurer, argues that climate risk - which it said would
affect about 20 per cent of global gross domestic product - is more important
than interest rate or foreign exchange risk.
Some investors are also becoming more assertive about the potential risk that
climate change poses to their portfolios. In the US, 13 public pension fund
leaders managing assets of nearly Dollars 800bn called on the Securities and
Exchange Commission to "eliminate any doubt" that companies should
be disclosing the financial risks of climate change in their securities
filings.
Companies and investors ignore climate risks at their peril, says Phil
Angelides, California State Treasurer. "In global warming, we are facing
an enormous risk to the US economy and to retirement funds which Wall Street
has so far chosen to ignore."
FOCUS ON TECHNOLOGY HAS FEW SUPPORTERS OUTSIDE US Many countries promote the
need to curb greenhouse gas emissions in terms of morality. But the US
administration prides itself on having environmental policies that are
"grounded in reality". The centrepiece of Washington's climate
strategy is its emphasis on technological innovation, which it sees as
"the only acceptable cost-effective option" to reduce greenhouse
gas emissions. It is spending more than Dollars 4bn a year on targeted tax
credits and climate-related research and development directed at nuclear
fusion, fission, renewable energy and hydrogen fuels. It is also exploring
the prospect of carbon sequestration - capturing and storing carbon dioxide
in deep saline aquifers - which would pave the way for zero emissions from
coal-fired power stations. Carbon sequestration could play a vital role, the
US argues. Given the abundance and relatively low cost of coal, the most
carbon-intensive of fuels, it is unrealistic to assume that it will be left
in the ground. "There are tremendous amounts of coal available in the
world, especially in China and India, and they are going to be used,"
said a US official last week. But the US has largely failed to convince the
rest of the world of the merits of its approach. Critics say that its
emphasis on research and development is valuable in finding new ways to lower
emissions, but that alone it is inadequate. It would do virtually nothing to
curb emissions in the short term and would not stimulate the industrial
sector to develop and Use new technologies, which is crucial to delivering
technological change on the scale needed to tackle climate change.
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