Reflections on the Kyoto Climate Change Convention

  • Simon Upton

Three weeks ago in Kyoto, representatives from 160 nations negotiated themselves into the ground to limit greenhouse gas (ghg) emissions. The upshot was a protocol - a legal instrument - to bind developed countries to reduce their total emissions to 5% below 1990 levels by 2012.

By the end of the process most delegates wore expressions of glazed incomprehension. Several weeks later, commentators and interest groups still can't make their minds up about whether anything useful was achieved. To be sure, there's a piece of paper called the Kyoto Protocol as evidence that the marathon negotiation wasn't just a nightmare. But will it ever come to have any effect?

That depends. To come into force, 55 countries accounting for at least 55% of 1990 developed country CO2 emissions must ratify the protocol. The USA and some European Union countries have already given notice that they will defer ratification until crucial outstanding elements have been negotiated, possibly in Buenos Aires a year from now.

Regardless of the outcome of these negotiations, a significant number of American senators have served notice that they will refuse to ratify the protocol in the absence of matching obligations on the part of developing countries. I ended up at the heart of the negotiations in the last 24 hours. It would be hard to imagine a more unwieldy or shambolic way of taking coherent, long-run decisions.

You might have thought that if only developed countries were being asked to take on extra commitments, it might have been up to them to decide how far and how fast they would go. But that's not the way the Framework Convention on Climate Change (FCCC) works. Instead, all 160 countries had to reach a consensus on the rules that would govern just 39 of them. Faced with that, you might have expected the 39 developed countries to sort themselves out and present a united position in their dealings with the developing world.

But fundamental differences between the US and the EU put paid to that, with European negotiators far more pre-occupied with how they might impose constraints on America than how we might set the stage for a genuinely global treaty that would progressively engage other countries. You might also have expected that, while developing countries would naturally resist any suggestion that they should have to cut emissions, they wouldn't have objected to the possibility that some among their number (the richer ones) might decide voluntarily to curb their growth rates. But you would be wrong again.

Despite the express wish of moderates like Argentina and Mexico to consider playing a greater part, China and a host of other hardliners couldn't even tolerate the possibility. So we have a protocol without provision for any newcomers. With a few honourable exceptions (like the AOSIS countries led by Samoa's Permanent Representative at the UN, Neroni Slade), it was self-interested hard-ball from beginning to end. So what does it mean for us? New Zealand went to Kyoto prepared to commit to a 5% cut on 1990 emissions provided the target included all three principal ghgs, flexibility in how we could respond, carbon sinks (including forestry) and provision for emission trading. To my surprise, the conference signed up not to a uniform target but differentiated targets.

The overall reduction (-5.2%) was almost exactly what New Zealand had proposed, but the individual country targets ranged from an 8% reduction for the EU countries to an 8% increase for Australia. (Iceland was given a 10% increase because it is building an aluminium smelter but it says it still can't manage). New Zealand was allocated a stabilisation (0%) target. Japan screwed itself up from -2.5% to -6%. America (by far the biggest and most profligate emitter in the world) eventually offered a 7% reduction and was understandably bewildered that an offer which risked so much domestic criticism was greeted with cynical indifference by many countries, developing and developed alike.

New Zealand succeeded in gaining recognition for the role forest sinks play in removing carbon from the atmosphere. Furthermore, sinks are counted in the way we have consistently proposed - changes in the 'stock' of carbon sunk at any one time. The protocol does include some rather arbitrary EU inspired restrictions on the amount of 'credit' which can be counted for sinks. Only activities begun since 1990 are recognised. Given the substantial new forest plantings in New Zealand since 1990, this won't be too onerous a restriction.

(Perversely, the decision to exclude pre-1990 plantings means that the harvesting of these forests in due course won't count as an emission). With respect to emission trading, the outcome was a good deal more tentative. Trading gets a mention, but the rules have yet to be negotiated, and a bizarre alliance of developing countries and EU members seems set on emasculating trading as a useful mechanism.

Tradeable emission permits are, in our view, vital to any real progress under the Protocol. Until we know whether the rules on trading are sensible ones, we won't be signing up to a more ambitious target. Permits would involve the same sort of approach we already use with fishing quotas. You allocate however much fish/emissions are available, and then leave fishermen/emitters to buy or sell quotas/permits as they judge necessary. For those who could cut emissions without too much trouble, there would be spare permits available either to cover extra emissions or to sell. For those who face high costs to reduce their CO2 emissions it would be cheaper to buy permits from others.

Over time, as successive negotiations drive down the availability of permits, the price of emissions will rise bringing new, cleaner technologies on stream. That description is brief to the point of being banal. Setting such a system up - and on a global basis - would be a complex and painstaking business. But the USA has pioneered a working model on a large scale as a way of reducing Sulphur Dioxide emissions (responsible for acid rain), so we are confident that it is a practical and flexible way of finding the least costly way of making progress. The need for low cost solutions can't be ignored if we're going eventually to get the whole world on board. It's vital for New Zealand. Economic modelling suggests that it is relatively more costly to reduce emissions here than in most other developed countries.

That's because of our relatively green electricity generation sector. Whereas the Europeans are conveniently closing down clapped-out and inefficient coal-fired power stations, we have a very high percentage of our electricity generated from renewable resources. Unrestricted trading would give New Zealand access to much lower cost abatement opportunities than exist here alone.

It would effectively create a 'world price' for ghg emissions much like any other commodity. The goal of future climate change negotiations should be to raise that price over time by steadily reducing the permissible level of emissions. But will there be any further rounds of negotiations? This is the most troubling aspect of the Kyoto talks. They have generated a protocol. It may even come into force if enough countries ratify it. But without a more economically literate approach, future negotiations will flounder.

Far too many nations arrived in Kyoto with the bizarre view that flexible, low-cost mechanisms were somehow bad and that prescriptive rules and regulations are the only way forward. A number of EU countries excelled themselves on this score. Even worse is the categorical refusal of major players like China even to engage a meaningful conversation about how in due course the world's rapidly developing economies should curb their emissions growth. Singapore once again kept a straight face in describing itself to the world as a 'developing' country despite the fact that it is far richer than New Zealand. If attitudes like this prevail, there is every chance that Kyoto's offspring will be stillborn. The only way forward (and Kyoto didn't find it) is to break out of the rigid developed/developing country division that threatens to poison sensible negotiations.

We need to jump forward to 2050 or even 2100 and ask what long-run level of ghg concentrations we believe is prudent. The answers will only be provisional since a lot more science is needed, but such a target would place future negotiations within a realistic timescale that can accommodate reasonable growth by developed countries and realistic reductions by developed countries.

At the end of the day, it will be technologies not targets that reduce emissions. Those technologies could emerge quickly or slowly depending on how we signal the risk of climate change. Harnessing rather than hindering the dynamism and innovation of the marketplace should be the aim of future climate negotiations.

Kyoto was not a good start.