Technology Based Strategy for the Future Eight Points for Action

What kind of actions might these be? The dangers of long-term global warming can only be averted if we (1) bring to market a new generation of technologies that will drastically reduce dependence on fossil fuels and/or will capture and sequester carbon, and (2) gain the cooperation of key developing countries to limit their rapidly rising emissions. Fortunately, the two conditions are interrelated: as we achieve the first, we will get the second. As the ozone history amply demonstrated, when cost-effective options start becoming available, developing nations are more likely to join the bandwagon and adopt modern technologies. Technology functions as the "enabler," without which the high emissions reductions required in the latter half of the coming century will not materialize. We need, therefore, a new strategic vision that explicitly addresses the issues of technology research, development, and diffusion.

Not only are the time-consuming negotiations to resolve the flaws of Kyoto not bringing the parties closer to consensus, they actually prevent governments from focusing on more realistic paths. The Kyoto Protocol has become the victim of polarized debate over inconsequential short-term emissions, compounded by large uncertainties about the costs of compliance. The existing treaty provides inadequate emphasis on the technological imperative and on securing the cooperation of developing nations. The current debates distract attention from the real challenge, which is to set the stage for steep cuts needed before the end of the new century.

The combination of a realistic schedule of emission reductions and new technologies would significantly lower mitigation costs, which would otherwise be prohibitive for both North and South. Battelle models suggest that technology can make a difference of trillions of dollars in the global cost of achieving a given concentration goal to mitigate climate change (Edmonds, 1999c). Major near-term cost savings could also be realized by avoiding the "stranding" of assets: existing plants and related infrastructure investments should, therefore, generally be allowed to complete their useful lives. Time is also needed for the development of next-generation infrastructure, e.g., for transport, storage, and distribution of new energy forms.

Companies should be provided with some security that energy-related capital investments will not be made obsolete by new rounds of politically inspired targets that are not firmly based on science. Buying time would permit scientists to make further refinements in climate models and thereby gain more insight into the impacts of climate change, especially their scope, timing, and location. This would help both in mobilizing public support for action, and in providing better guides for policy. The entire process would become politically more acceptable.

Against this background, Battelle has organized an international consortium of research institutes, private companies, and government agencies to develop global energy technology strategies. Using sophisticated computer models and other advanced analytical tools, the initiative aims at better understanding and accelerating the development and diffusion of energy-related technologies, including examining the role of public-private partnerships in this process.

Recognizing that the appropriate technology mix can differ for different regions, several Battelle scientific workshops have already been held in China and India to identify and explore the influence on technological choices of economic, political, institutional, geographical and other factors. A major focus of examination is how policies to promote technology must evolve over long time periods. The project is also studying the potential contribution of such specific technologies as: augmenting soil absorption of carbon through new agricultural techniques; solar, biomass, nuclear fission and fusion energy; the transportation sector; and technologies for adaptation to climate change. This multiyear program could become a paradigm for the type of public-private partnerships that will be indispensable for transforming the world's future energy economy (Edmonds, 1999a).

A technology strategy is only defensible, however, if it does not become an invitation to delay. Much must be done right now to start the process. Here is a possible eight-point program of action for the deadlocked negotiators.

10.1 Revise and Simplify the Emissions Targets

To begin, I recommend that governments streamline the Kyoto emissions commitments to make them more credible. The near-term targets should be revised in magnitude and should focus primarily on gross carbon dioxide emissions. More realistic and verifiable initial targets for industrialized countries would have a better chance of being implemented. Hence, they would be taken more seriously by industry as well as by the onlooking developing world. As new technologies emerge, it will be politically easier to strengthen targets over time.

10.2 Postpone the Sinks

While the attempt to reflect net emissions targets is scientifically justifiable, the complexities surrounding the land-use and forestry provisions of Article 3 are, in my opinion, a formula for delay. Therefore, the comprehensive approach should be abandoned, at least temporarily. The net emissions concept could be reintroduced after technical experts have made it implementable, including prevention of perverse incentives to cut old-growth forests in order to gain or sell emissions credits from replanting. Action on reducing gross carbon emissions should not, however, wait for these refinements.

10.3 Defer Emissions Trading

For all of the reasons enumerated earlier, I would also shelve for the foreseeable future the disputatious negotiations on creating an international emissions trading scheme. Domestic emissions trading would be left open to national decisions.

10.4 Accelerate Technology Transfer and Joint Implementation

Governments and industry in the industrialized countries should become serious—as they were under the Montreal Protocol— about expeditiously transferring new energy-related technologies to the developing world, and should help build indigenous capacity to develop local energy solutions. North-South and West-East joint implementation investments make sense from the standpoints of both economic efficiency and technology transfer. The Clean Development Mechanism (which is the most promising element of the existing protocol) should be activated to promote greater energy efficiency and expansion of renewable energy in the developing nations. The North should provide climate-relevant assistance as a cost-effective form of foreign aid rather than primarily to earn emissions offset credits. All of this would probably be far less costly and more productive than large wealth transfers to buy emissions "rights."

10.5 Get Serious about Policy Measures

In a test of political will, any emissions target should be reinforced— or even preceded—by harmonized policy measures. Indeed, policy measures, as in the Montreal Protocol example discussed earlier, provide a test of what targets might be feasible in the short run. Stricter vehicular fuel-efficiency standards (which everyone, including the automakers, knows are feasible) and energy-related government procurement policies are examples of measures that could provide strong impetus to innovation. Existing market distortions and subsidies that favor fossil fuels should finally be eliminated. Incentives should be adopted to promote further development and market penetration of renewable energies, in order to realize economies of scale that would make them more competitive. Up until now, the half-hearted performance of most governments with respect to policy measures has not matched their political rhetoric about the urgency of the climate problem. A requirement for transparent and rigorous reporting on such measures could, as demonstrated by experience in the IMF and OECD, provide an additional stimulus.

10.6 Adopt Technology-Based Objectives

This approach could reorient energy planning. Battelle analysts are examining possible technology-based goals that (initially, Annex I) governments could employ to stimulate future-oriented R&D. Since virtually all carbon in modern energy economies flows through power generation and fuel refining/processing, such policies could be quite specific in their focus. For example, new power generation plants constructed after a certain date could be required either to use renewable energy, or to capture and dispose of carbon byproducts. Similarly, new fossil fuel refining and processing facilities after a given date would also have to be carbon neutral. (To encourage R&D before the phaseout deadline, interim targets could be scheduled for new plants, as well as credits provided for early compliance.) Net imports of carbon-based fuels could gradually be phased down. Additionally, fossil fuels could be employed as a feedstock for hydrogen, but any carbon releases would have to be sequestered. Because these measures apply to sizable industrial facilities, they are conducive to transparency, reporting, and monitoring for compliance. Such actions are feasible and would provide the market with strong signals for focused research and innovation (Edmonds and Wise, 1999; Edmonds etal, 1999.).

In addition, Annex I technology targets could provide a convenient bridge to subsequent developing country commitments by delinking their participation from difficult negotiations focused on their per capita income or per capita emissions. It could take decades for a China or an India to catch up with per capita income of even the poorest member of OECD. But if the industrialized nations agree to technology goals as described above, it is reasonable to assume that the technologies will be available by the target date. Per capita indices then become irrelevant, as they proved to be in the case of the ozone treaty. Instead, the problem is limited to assuring that these technologies are transferred and deployed in developing nations. To provide developing countries with some security, their obligations could be made dependent on the effective transfer of new technologies and the financing of incremental costs, as was successfully accomplished under the Montreal Protocol.

10.7. Invest in a Technological Revolution

Most important of all, governments must ensure that sufficient financial resources are made available to achieve the needed technological revolution. Reaching a critical mass of R&D is basic to fostering technological breakthroughs. Governments cannot stand back and expect that the private sector, with its relatively short time horizon, will make all the required long-term R&D investments. Although credible targets and policy measures can help to stimulate industry's creativity, the scale of the climate/energy challenge requires that the public sector take the lead. A small carbon tax could raise substantial revenues for funding new technology research. For example, a tax of four dollars per ton of carbon in the U.S., representing only one cent per gallon of gasoline, could generate approximately $5.6 billion and enable current public sector energy R&D to grow more than threefold.

OECD members should commit themselves to raising their grossly inadequate level of basic and applied energy research by a significant and annually rising percentage of civilian research programs. And they should collaborate in R&D, especially with developing nations and with the private sector. Given the stakes, energy research arguably merits a degree of public sector commitment comparable to that devoted not long ago to aerospace and telecommunications. Promoting technology should not prove politically unpopular because it creates economic growth and job opportunities. The expected leverage from such research in reducing the costs of addressing climate change makes it an eminently sound investment.

10.8. Negotiate in a More Efficient Forum

In the interest of speeding the process, most if not all of these actions— especially the research initiatives, policy measures, technology transfer, and technology goals — could be negotiated and implemented by a relatively small number of like-minded nations, North and South, outside the FCCC context (and perhaps later presented to the larger forum). It is imperative to closely involve the handful of developing nations whose emissions are critical. There is no moral stricture, however, that requires concerned governments to negotiate every relevant action within the unwieldy context of over 170 nations and thousands of observers. The OECD and the Asia-Pacific Economic Cooperation Forum come to mind as plausible alternatives where new options could be explored; the latter body includes countries as diverse as Chile, China, Indonesia, Mexico, Russia, and the United States.

Taken together, the above efforts would greatly increase the likelihood of making existing renewable energy more competitive, making carbon capture and sequestration more feasible, creating the future energy sources that are indispensable, and motivating developing nations to limit their emissions. Perhaps by making a fresh start with new concepts we could achieve the progress that has been so elusive up until now.

While these ideas present undoubted challenges for political will and for diplomacy, I seriously question whether the current course, which has meandered for years, has better chances of success.

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