Brief History of Climate Policy

The question of how climate change might affect human activities appeared on the international agenda in 1979 at the World Climate Conference (WCC).3 The conference issued a declaration calling on the world's governments '(...) to foresee and prevent potential man-made changes in

1 Schneider and Rickel 2002.

2 It can be argued that it is problematic to use the categorization of sceptics and supporters because it is too difficult to capture the complexity of the issue and the diversity of viewpoints by categorizing the debate into two camps. This caveat is important, but it is equally valid to argue that even very differentiated views on climate change will ultimately have to decide upon basic dualistic questions that divide sceptics and supporters, such as whether climate change is influenced by human activities (yes/no), whether climate change will have serious impacts in the future (yes/no), whether governments shall spend money on avoiding climate change (yes/no), and so on. The answers to such questions determine which basic category the respondent belongs to, which still allows for the fact that there can be significant variation within each category.

3 The term 'climate change' is preferable to 'global warming'. The latter refers to the observed heating of the earth's atmosphere; whereas 'climate change' refers to a broader set of alterations in climate patterns, which include warming as well as cooling trends and other meteorological changes. Although some of the changes could be explained as natural climate variability, there is an increasing scientific consensus that climate change in recent history has been increasingly caused by human activities, including the burning of fossil fuels, deforestation and industrial activities such as cement production. These and other anthropogenic activities result in the emissions of GHGs, including carbon dioxide (CO2), chlorofluorocarbons (CFCs), methane (CH4) and nitrous oxide (N2O) and water vapour. Of these gases, carbon dioxide accounts for more than 90 per cent of GHG emissions. About three quarters of annual CO2 emissions result from burning fossil fuels including coal, oil and natural gas (IEA 1997a).

climate that might be adverse to the well-being of humanity.'4 Following this conference, it took many years with further meetings and initiatives before the international community was able to agree on initial steps to deal with the problem.5 In 1988, the United Nations Environment Programme (UNEP) and the World Meteorological Organization (WMO) established the Intergovernmental Panel on Climate Change (IPCC) with the mandate '(...) to assess on a comprehensive, objective, open and transparent basis the scientific, technical and socio-economic information relevant to understanding the scientific basis of risk of human-induced climate change, its potential impacts and options for adaptation and mitigation'.6

The IPCC is a scientific body that includes 2,500 scientists, including eight Nobel laureates. Since its establishment, the Panel released four Assessment Reports in 1990, 1995, 2001 and 2007 (released recently), which summarized the state of scientific knowledge available at that time. These reports formulated a consensus opinion while pointing to areas that are uncertain or controversial and needed further research. In its First Assessment Report released in 1990, the Panel expressed concerns about the growing evidence of a human impact on climate change.7 The report was influential for the development of the United Nations Framework Convention on Climate Change (UNFCCC), which was adopted at the Earth Summit in 1992.8 In this non-binding document, 154 countries, plus the European Community, agreed on the '(...) stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system'.9 To achieve this goal, the countries were divided into two groups: the developed (Annex I) countries were encouraged to cut their emissions of GHGs back to the 1990 levels, while the remaining countries did not have to commit to such reductions, following a principle of '(...) common but differentiated

4 UNEP and UNFCCC 2002, Information Sheet 17.

5 According to UNEP and UNFCCC (2002), the key events were the Villach Conference (October 1985), the Toronto Conference (June 1988), the Ottawa Conference (February

1989), the Tata Conference (February 1989), the Hague Conference (March 1989), the Noordwijk Ministerial Conference (November 1989), the Cairo Compact (December 1989), the Bergen Conference (May 1990) and the Second World Climate Conference (November

6 IPCC 2003, 2007c.

7 Houghton et al. 1990.

8 The Convention entered into force on 21 March 1994, 90 days after the receipt of the 50th instrument of ratification (see UNEP and UNFCCC 2002). An international convention must be ratified by national parliaments in order to be valid under national law.

9 UNFCCC, Article 2.

responsibilities (.. .)'.10 In practice, differentiated responsibilities meant that developed countries were obliged to assume leadership in efforts to mitigate climate change.11

Another significant tenet in the UNFCCC is the precautionary principle.12 Article 3 of the Convention describes the notion as follows: 'Where there are threats of serious or irreversible damage, lack of full scientific certainty should not be used as a reason for postponing such measures.'13 Science may never be able to predict exactly what will happen and where, but it can '(...) provide scenarios and assess the probabilities and consequences of various plausible alternatives.'14 According to the precautionary principle, policy decisions must be made under uncertainty when there is a risk of catastrophic damage. Also, the precautionary principle suggests that many segments of the private sector may be better off if serious costs are avoided by adopting precautionary measures. According to Franklin Nutter, the president of the Reinsurance Association of America, 'The insurance business is first in line to be affected by climate change. It is clear that global warming could bankrupt the industry.'15

The development ofthe UNFCCC and other international environmental treaties was accompanied by the establishment of the Global Environment Facility (GEF) as a joint venture of the United Nations Development Programme (UNDP), (UNEP) and the World Bank. For the past 12 years, the GEF has been one of the main sources of international funding for clean energy and other measures to address climate change. The GEF does not implement environmental projects itself, but it provides grants and concessional funds for projects. Apart from climate change, the GEF also funds projects in areas, such as biological diversity, international waters and the depletion of the ozone layer.

The purpose of the GEF is to fund reduction and adaptation measures both in countries in transition and in developing countries.16 According to Martinot and McDoom:

GEF climate change projects represent an emerging body of experimental, case-oriented information on innovative approaches to promoting energy efficiency

10 UNFCCC, Article 3

11 This is the first of five guiding principles laid down in Article 3 of the UNFCCC.

12 The precautionary principle is also discussed in Section 12.2.2.

13 UNFCCC, Article 3

14 Schneider and Rickel 2002.

15 Innovest 2002a, 15.

16 Martinot and McDoom 2000, 16.

and renewable energy technologies in developing countries and countries in transition. Although much project information exists in published and electronic form, no systematic review of these projects exists.17

Since its establishment in 1991, GEF has allocated more than USD 4 billion in grants and mobilized a further USD 12 billion in co-financing. So far, more than 1,000 projects have been supported by the GEF in transition economies and in developing countries. The GEF is supported by a large number of governments, which replenish the funds every three to four years. At the latest replenishment in August 2002, almost USD 3 billion were pledged to finance GEF activities until 2006.18

Although USD 3 billion is a significant sum, it translates to less than USD 1 billion a year, which is spread across many countries and multiple environmental problems. To assess the level of funding, compare USD 1 billion, for example, to USD 80 billion provided by the US Congress in March 2003 as a first instalment for the war in Iraq. In light of the scale and severity of global environmental problems, GEF funds by themselves cannot make a major difference. Since it is unlikely that governments will dramatically increase their allocations for the global environment in the foreseeable future, greater priority must be placed on devising ways to mobilize private capital to complement public funding.

A strong regulatory framework can help increase private financing of sustainable development by providing clear signals and by reducing regulatory uncertainty. However, it appears that the current frameworks are woefully inadequate. Although 186 countries have so far ratified the UNFCCC19 since its adoption in 1992, the goal of limiting emissions in 2,000 to the 1990 levels was not achieved, mainly because the Convention was not binding.

At the Rio meeting, a process was put in place to strengthen the regime over time. The participants agreed that the supreme decision making body of the UNFCCC and the Conference of the Parties (COP) would meet regularly to discuss further steps to mitigate climate change. At its first session, which took place in Berlin in 1995, the COP concluded that the 1992 UNFCC commitments were insufficient and that there was a need to establish compulsory targets. In December 1995, just in time for COP2, the IPCC released its 'Second Assessment Report', which was written and reviewed by about 2,000 scientists. The report reaffirmed that '(...) the

17 Martinot and McDoom 2000, 12.

19 UNFCCC 2003.

balance of evidence suggests that there is a discernible human influence on the global climate'. The report also noted '(...) the availability of the so-called no-regrets options and other cost-effective strategies for combating climate change'.20

The confirmation of the evidence on climate change galvanized policy makers into action. The Kyoto Protocol21 was adopted on 11 December 1997 at the COP3. The Protocol for the first time set legally binding emission targets for a group of countries listed in Annex I. In Article 3 of the Protocol, Annex I countries committed to reduce their emissions of GHGs by at least 5 per cent below the 1990 level by the years 2008-2012.22 Individual commitments differ from this guideline in both directions. The 5 per cent group target would be achieved through the following cuts:

• Eight per cent by Switzerland, most Central and Eastern European states, and the European Union (EU). The EU will meet its group target by distributing different rates among its member states;

• Seven per cent by the US which in 2001 withdrew from the Kyoto Protocol; and

• Six per cent by Canada, Hungary, Japan and Poland.

In contrast, Russia, New Zealand and Ukraine are to stabilize their emissions, while Norway may increase emissions by up to 1 per cent, Australia by up to 8 per cent, and Iceland by up to 10 per cent.23 The Kyoto Protocol focuses on six GHGs: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6). These gases are to be combined in a basket, with reductions in each gas translated into CO2 equivalents that are then added up to produce a single figure.24

According to Article 25 of the Kyoto Protocol, the agreement becomes valid:

20 UNEP and UNFCCC 2002, Information Sheet 17.

21 The full name is The Kyoto Protocol to the United Nations Framework Convention on Climate Change.

22 Emission reductions need not be achieved by a fixed year, but the average of the committed five-year period will determine whether the Kyoto targets are achieved.

23 A list of reduction commitments of the parties can be found in Annex B to the Kyoto Protocol.

24 The concept Global Warming Potential (GWP) is used to calculate CO2 equivalents according to the IPCC methodology (see IPCC 1995).

(...) on the ninetieth day after the date on which not less than 55 Parties to the Convention, incorporating Annex I Parties, which account for at least 55 per cent of the total carbon dioxide emissions for 1990 from that group, have deposited their instruments of ratification, acceptance, approval or accession.25

In March 2001, the United States, which represents about one quarter of global carbon dioxide emissions, withdrew from the Protocol. As of April 2003, 84 Parties had signed and 106 Parties had ratified or acceded to the Kyoto Protocol. This meant that the Protocol has 43.9 per cent in disposition. With the United States' withdrawal, Russia's ratification became pivotal for reaching the 55 per cent threshold for bringing the Protocol into force.

The 'Third Assessment Report', which was published in 2001, reported the findings from three task forces: Working Group I dealt with the evidence on climate change, Working Group II focused on possible consequences and Working Group III examined mitigation options. The models of Working Group I found that in the course of the 20th century 'globally averaged surface temperatures' have risen 0.6°C, with a margin of error of ± 0.2°C. According to the IPCC Special Report on Emission Scenarios (SRES), the globally averaged surface air temperature is projected to increase between 1.4°C and 5.8°C by 2100 relative to the 1990 levels.26

The Working Group II identified different scenarios for the potential consequences that could follow from the range of projected increases in temperature. It also presented the consensus of the group as to their level of confidence with its predictions. The Working Group II confirmed that overall harmful impacts of climate change are likely to overshadow positive impacts. One prediction is that, as a result of the melting of the polar icecaps, the volume of the world's oceans will increase, probably somewhere between 0.09 and 0.88 metres by 2100. The result could be coastal flooding that may dislocate up to several hundred million people world-wide.

Other possible consequences of climate change include more frequent and extreme weather-related events, such as heat waves, droughts, fires, floods and storms, which could damage economies and result in negative impacts on human health. The scientists in Working Group II notes that a rise:

(. ) in the frequency or intensity of heat waves will increase the risk of mortality and morbidity, principally in older age groups and the urban poor

25 UNFCC 2003.

26 IPCC 2001b, 2007c.

(high confidence) (...). Any regional increases in climate extremes (storms, floods, cyclones, and so on) associated with climate change would cause physical damage, population displacement, and adverse effects on food production, freshwater availability and quality, and would increase the risks of infectious disease epidemics, particularly in developing countries (very high confidence/ well established).27

While shifting climate zones could exacerbate food shortages, climate change could also bring localized benefits to some regions, for example, the potential to grow wheat in Siberia. Alexander Bedritski and Yuri Israel, climate scientists in Russia, argue that a warming trend would be beneficial for their country. According to their model, Russia will enjoy high yields of potatoes and grains and thus the nation's welfare will be increased.28

Working Group III, which assesses various climate change mitigation options, concluded that a wide range of policy instruments should be considered in order to stimulate participation of various stakeholders in climate change mitigation. Firms and financial institutions are among the main stakeholders to be targeted by policy measures. The IPCC experts believe that a broad selection of instruments enlarges the number of no-regrets options and help to fit policies to short-, medium- and long-term goals.29 The Working Group estimated that about half of the total GHG emissions reductions attained by 2020 could be profitable, based on discount rates ranging from 5 to 12 per cent, which are in line with public sector discount rates.30 At the same time, they note that 'Private internal rates of return vary greatly, and are often significantly higher, affecting the rate of adoption of these technologies by private entities.'31

The third volume of the fourth assessment report of the IPCC has been approved on 4 May 2007. According to the report, between 1970 and 2004, global emissions of CO2, CH4, N2O, HFCs, PFCs and SF6, weighted by their GWP, have increased by 70 per cent, from 28.7 to 49 Gigatons of carbon dioxide equivalents. The largest growth in global GHG emissions has come from the energy supply sector (an increase of 145 per cent); transport, 120 per cent; industry 65 per cent; and land use; land use change and forestry 40 per cent. A range of policies, including those on climate

28 Brown 2003.

29 IPCC 1995.

30 As we will note in the next chapter, public sector discount rates are controversial in the climate area.

IPCC 2001a, 2007b.

change, energy security, and sustainable development, have been effective in reducing GHG emissions in different sectors and in many countries. The scale of such measures, however, has not yet been large enough to counteract the global growth in emissions. The report,32 which is a consensus document put together by 600 scientists and agreed by representatives of 113 countries, predicts continued warming of 0.2 °C per decade for the coming few decades. Over the 21st century it predicts a range of 1.1—2.9 °C warming in a scenario with low emissions of greenhouse gases, and 2.4—6.4 °C in a high-emissions scenario. The warming is expected to be the greatest over land, and the chance of heat wave increasing in frequency is greater than 90 per cent.33

The IPCC suggested enhancing the consideration of cross cutting issues, to involve more scientists from developing nations and economies in transition and to use more un-English literature. The IPCC also recommended developing better interactions with industrial and NGO sectors to help mobilize private capital for climate change mitigation in furtherance of the IGCC and Kyoto Protocol goals of achieving cost-effective emissions reductions.

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