FEBRUARY 2000

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CICERO WP 1999: 12

PROJECT DEFINITION AND INTRODUCTION TO
SOME KEY CONCEPTS AND ISSUES

The joint CICERO-ECN project on sharing
the burden of greenhouse gas reduction among countries

J.R. Ybema
J.C. Jansen
F.T. Ormel

CICERO
Senter for klimaforskning

Center for International Climate and Environmental Research – Oslo

Acknowledgement
This report is the first Working Paper of the Burden Sharing study project that aims to identify
the most promising rules applicable for differentiation of greenhouse gas emission reduction
burden among countries. The project is carried out jointly by CICERO (Oslo, Norway) andECN (Petten, the Netherlands) under ECN project number 7.7170. The project has started in
October 1998 and will be completed by mid-2000. ISSN number: 0804-452X.
The Burden Sharing study project is financed by the Dutch National Research Programme on
Global Air Pollution and Climate Change and by own contributions from CICERO and ECN
respectively.

Abstract
This Working Paper gives a general introduction to the project. It presents an outline of the setup of the project. In addition, it explains some key concepts and issues on negotiating the distribution of the burden of greenhouse gas mitigation among the signatory countries and regionsof the Framework Convention on Climate Change in the post-First-Budget-Period specified by
the Kyoto Protocol (2008-2012).

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CONTENTS
SUMMARY5

1. INTRODUCTION
1.1 International climate negotiations and differentiation
1.2 The differentiation problem
1.3 Focus and phasing of the Burden Sharing study project1.4 Introduction to Phase I
1.5 Report outline

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2. PRELIMINARY REVIEW OF RELEVANT CONCEPTS
2.1 Introduction
2.2 Basic notions of Burden Sharing
2.3 Regional scope
2.4 Conclusions

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15

REFERENCES

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34ECN-C--00-010

SUMMARYThis report gives an outline of the set-up of the present Burden Sharing study project. Moreover, it gives a first introduction to some key concepts and issues at stake. The project is aimed
at identifying the most promising rules applicable for differentiation of greenhouse gas emission reduction burden among countries.
The project set-up can be outlined schematically as follows:
PhasesPhase 1:
Basic analysis

Activities
a. definitions, concepts and data collection.
b. analysis of existing international burden sharing
agreements.
c. analysis of equity principles.
d. analysis of earlier differentiation proposals.
e. set-up of a database on emission indicators.

Phase 2:
Design of burden sharing rulesa. specification of evaluation criteria of burden sharing
rules.
b. development of burden sharing rules.

Phase 3:a. selection of burden sharing rules for further analysis
Consequences and evaluation of rules
based on results of activity 2a.
b. estimation of costs and economic consequences ofapplying selected burden sharing rules (no-Kyotoinstruments scenario).
c. ditto, but assuming implementation of emission
trading, JI and CDM.
Phase 4:
Dissemination

a. workshop with scientists at the beginning of phase 3.
b. development of computer model M-SHARE.
c. workshop with policy makers.

According to many scientists a substantial reduction in global GHG emissions, compared topresent-day global emission levels, is necessary to effectively address the issue of preventing
human-induced climate change. Yet global GHG emission reduction implies a burden in termsof a major environmental constraint to global economic development and, consequently, interms of worldwide (net) costs to meet the GHG emission constraint. The burden sharing issue
addressed in the present project refers to the issue of how to elaborate on international agreements (FCCC, Kyoto Protocol) regarding the sharing among nations of agreed global GHG
emission ceilings and/or emission reductions and the implied net costs thereof.

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5The following policy considerations may play a role in burden sharing negotiations:• Equity: costs and benefits are to be distributed ‘fairly’.
• Effectiveness: burden-sharing rules should be effective in reaching their objective.
• Efficiency: the goal should be reached at the lowest resource costs possible.
A major issue is the regional scope of burden sharing. Should burden sharing arrangements be
defined by a universal global set of rules or does the application of a distinct set of rules for
each, limited number of country groupings enhance the chance of successful global burden
sharing negotiations? The former approach should be underpinned by principles of equity in the
broadest sense (including full compensation for low-income parties), while in the latter casenational burdens would be determined groupwise with justification by distinct mixtures of
equality, equity, and exemption principles.

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1.

INTRODUCTION

1.1

International climate negotiations and differentiation

In December 1997, the Kyoto Protocol was adopted. The Kyoto Protocol includes legallybinding commitments for Annex I countries (OECD, Eastern Europe) to limit or reduce greenhouse gas emissions. The commitments refer to a period of five years around the year 2010(2008-2012, which is the so-called first budget period) and the commitments are differentiatedper country1.
The Kyoto Protocol was adopted after a long period of intensive negotiations. It was no surprisethat negotiations were difficult and that they took a long time: the commitments of countries toreduce their greenhouse gas emissions can have very significant impacts and the national circumstances of countries differ considerably.
As agreed at earlier Conferences of the Parties, only the Annex I countries took commitments in
Kyoto. The non-Annex I countries, which mainly consist of a group of developing countries,
have no commitments as yet. This is in line with Article 2.3 of the Framework Convention on
Climate Change (FCCC) stating that:‘The Parties should protect the climate system for the benefit of present and future
generations of humankind, on the basis of equity and in accordance with their common
but differentiated responsibilities and respective capabilities. Accordingly, the developed country Parties should take the lead in combating climate change and the adverse
effects thereof.’
Currently, the negotiations under the FCCC are largely dealing with the organisation, structure
and conditions of the Kyoto mechanisms. However, it is expected that at some stage the negotiations will focus on new commitments for time periods beyond 2012 and this will likely include a larger or smaller part of the non-Annex I countries. In line with the Kyoto Protocol it isexpected that such new commitments will also be differentiated.

1.2

The differentiation problem

The differentiation scheme that came out of the Kyoto Protocol was not founded on a specificmethod, but rather based on negotiations given the various interests and national circumstancesof the parties. Yet a more systematic approach to differentiation may well facilitate negotiations
on future commitments. In order to have good prospects to be used in the climate negotiations,burden sharing rules need to meet several criteria. These criteria are addressing relevant differences between countries and refer to principles such as equity, cost-effectiveness and transparency.
Several attempts have been made to design indicator based burden sharing rules (Torvanger,
1999). Some proposals for burden sharing mainly used aggregated indicators, such as greenhouse gas emission per GDP or per capita. Other proposals used more disaggregated, sectoral

1

Another important characteristic of the Kyoto Protocol is that it includes different greenhouse gases in a basket
approach and some kinds of carbon sinks that result from land use. Moreover, it includes the rough features of theso-called Kyoto mechanisms: Joint Implementation, Emission Trade and Clean Development Mechanism. These
characteristics have been important conditions to achieve an agreement in Kyoto.

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indicators. It is noted that one of these latter attempts (Blok et al., 1997) has facilitated importantly the achievement of agreement on internal EU differentiation of commitments.
The simple guide-lines or ethical principles on which such burden differentiation rules are
based, such as, for example, emissions per capita, emission per unit of GDP, cumulative emissions etc., have been extensively researched, both in political science, economics and ethics(see, for example, Ringius 1999; Ringius, Torvanger and Holtsmark 1998; Rose 1992). However, less attention has been paid to identifying those fairness and equity principles, which haveplayed a significant role in the analysis of international environmental negotiations, and to thequestion why these principles mattered.
Information is available, although to a varying extent, on the differences between countries thatmight play a role in formulating burden sharing formulas, such as sectoral energy use, industrial
structure, economic development, potential for emission reduction and abatement costs. However, this information is not necessarily available at the level of detail, quality and comparability needed for defining burden sharing formulas that are useful as a basis for negotiating climate agreements. Moreover, the available information focuses almost exclusively on CO2 emissions from energy use. Data on emissions of other greenhouse gases (GHGs) and on land usechanges - both being items that are covered by the Kyoto protocol - are much less available.

1.3

Focus and phasing of the Burden Sharing study project

The NRP2 Burden Sharing study project aims to identify the most promising rules applicablefor differentiation of greenhouse gas emission reduction burdens among countries. The projectis carried out jointly by CICERO (Oslo, Norway) and ECN (Petten, the Netherlands). The project has started in October 1998 and will be completed by mid-2000.
Burden sharing rules will be designed with the purpose to facilitate future international climatechange negotiations, especially negotiations in the FCCC framework on the second and subsequent budget periods. Differentiation of burdens should be based on relevant differences between countries. These differences may well relate, for example, to differences among nationsin the existing energy supply and demand structure and in the level and structure of economic
development. Burden sharing arrangements emanating from application of alternative burden
sharing rules with a wide appeal among negotiators can assist in starting up successful international burden sharing negotiations. Evidently, the full responsibility for the final negotiation
outcomes rests fully with the official negotiators and may well deviate from the burden sharing
rule (BSR) arrangements on the negotiation table at the outset of the negotiations
The project comprises four phases:• Phase 1: basic analysis. In this phase elements, rules, and considerations relevant for the design of burden sharing rules are reviewed and structured. Besides, data are collected that
may be used in actual burden sharing rules.
• Phase 2: design of burden sharing rules. Based on the structured considerations of phase 1,
several burden sharing rules will be designed which are expected to hold out fair chances ofbeing used in upcoming negotiations. Criteria for the evaluation of burden sharing rules will
be considered explicitly.
• Phase 3: consequences and evaluation of rules. In this phase the emission targets per country
that result from the burden sharing rules will be calculated and the cost consequences will be
estimated.
• Phase 4: dissemination. The developed burden sharing rules will be presented in two workshops to experts and to policy makers inviting comments to select and further improve theburden sharing rules.
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NRP stands for Dutch National Research Programme on Global Air Pollution and Climate Change.

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The project set-up can be outlined schematically as follows:
PhasesPhase 1:
Basic analysis

Activities
a. definitions, concepts and data collection.
b. analysis of existing international burden sharing
agreements.
c. analysis of equity principles.
d. analysis of earlier differentiation proposals.
e. set-up of a database on emission indicators.

Phase 2:
Design of burden sharing rulesa. specification of evaluation criteria of burden sharing
rules.
b. development of burden sharing rules.

Phase 3:a. selection of burden sharing rules for further analysis
Consequences and evaluation of rules
based on results of activity 2a.
b. estimation of costs and economic consequences of applying selected burden sharing rules (no-Kyotoinstruments scenario).
c. ditto, but assuming implementation of emission trading, JI and CDM..
Phase 4:
Dissemination

a. workshop with scientists at the beginning of phase 3.
b. development of computer model M-SHARE.
c. workshop with policy makers.

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9The different elements of the study and the general line of the research project are depicted by
Figure 1.1 below.
DIFFERENCES
IN POTENTIALTO REDUCE
EMISSIONSDIFFERENCESIN EMISSIONSEARLIERPROPOSALS FOR
DIFFERENTIATION
IN CLIMATE NEGO.

CAUSES OFEMISSION
DIFFERENCES

GENERAL ISSUESOF BURDEN
SHARING

INDICATORSMULTIPLE
CRITERIA
DECISION MAKINGBURDENSHARING RULES(BSRs)

PAST EXPERIENCES
WITH BURDENSHARINGEQUITY AND
FAIRNESSCRITERIA
ABATEMENTCOST DATAEVALUATION ANDCONSEQUENCES
OF BSRs

DISSEMINATION

Figure 1.1 Different elements and the general line of the NRP Burden Sharing project. The
elements that are covered in the first phase are presented with dashed lines.

1.4

Introduction to Phase I

Phase 1 of the Burden Sharing study project includes several activities:a) an overview of emission and cost indicators that may be included in burden sharing rules,b) an analysis of equity principles,c) an analysis of other international agreements with differentiation elements,d) an analysis of different ways to combine indicators,e) an analysis of earlier proposals for differentiation in the international climate negotiations,f) set-up of a database on emission indicators and country specific data.
The Phase I activities a through e will be reported upon in Working Papers numbers 2 and 3.
The insights gained from these activities will be embedded into the design of new burden sharing rules. Activity f is a supporting activity that allows quantifying emission targets based on
the burden sharing rules.

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The primary aim of Phase I is to collect, and to perform a preliminary analysis of, information
on indicators that are likely to have relevance for the design of burden sharing rules. The indicators considered relate to emission figures per country, per gas, per source, data on energy efficiency, allowance factors for differences in emission levels, and information on the cost to reduce emissions of greenhouse gases. The kind of questions that will be addressed in Phase I are:
• Which principles of fairness do matter for negotiating burden sharing?
• What are the main elements of burden sharing proposals launched during the Kyoto Protocol
negotiations?
• What indicators and allowance factors have been suggested in earlier differentiation proposals? What are the most important greenhouse gases?
• Which greenhouse gases have large uncertainty ranges in emission figures?
• What are the primary driving forces of emissions of greenhouse gases?
• What kind of information sources of emission figures is available? Which information
sources are preferable to be used?
• At what level of detail should emission figures be explained?
• What is the value of aggregate emission indicators such as emissions per capita and emissions per GDP?
• For which indicators are emission data available?
• Can greenhouse gas abatement cost indicators be considered in burden sharing rules?
• Can the potential to abate emissions be included in burden sharing rules?
• What are key aspects of promising burden sharing rules?

1.5

Report outline

This report presents the outline of the present Burden Sharing study project, especially on
Phase I (Chapter 1). Further information on this study and an introduction to some relevant
concepts and definitions are presented in Chapter 2.

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2.

PRELIMINARY REVIEW OF RELEVANT CONCEPTS

2.1

Introduction

This chapter gives an introductory and preliminary overview of some major concepts and principles relevant to this study. Some definitions of burden sharing found in the literature aresummarised and their appropriateness for the purposes of the present study are discussed in
Section 2.2. Issues of regional scope are discussed in Section 2.3. Section 2.4 presents the main
findings. A more rigorous treatment of principles of fairness and justice will be presented in
Project Working Paper no. 2.

2.2

Basic notions of Burden Sharing

In the literature several connotations of the concept ‘burden sharing’ can be found. Burden
sharing can refer to the way in which a group of countries benefiting from a collective good
agree to share the costs of providing the collective good (Ringius, 1996). It is noted that thisdefinition explicitly refers to the cost implications of providing a collective good, notably in thepresent context: a global climate that is not substantially altered by anthropogenic activities.
We refer with burden sharing to the way a group of countries agrees to share the emission targets. Cost will result to the respective countries resulting from the latter burden sharing andthey matter. However, other consideration matter as well for our burden sharing rule, such as
the need to emit to be able to perform all kinds of activities, the relative contribution of countries to causing the problem and earlier attempts to combat emissions.
It is important to be clear about what the object of burden sharing analysis is (Rose, 1992).
Some authors restrict the burden sharing issue to global GHG reduction as such. For example
Ridgley defines the burden sharing issue as the issue for what share of the desired global GHG
reduction should each nation or region be accountable (Ridgley, 1996). The predilection for theformer definition in the present study relates to the view that a broad international agreement on
GHG mitigation commitments can only be reached if due consideration is given to the cost implications of such an agreement in a way that is acceptable to all the signatory nations. Hence,both the limit of total GHG emissions and the total emission reductions to be agreed uponamong the signatory nations as well as the cost implications of reaching the agreed limit form
the basis for burden sharing.
The time frame does also matter. Collier makes a distinction between short term and long term
goals (Collier, undated). For example, theoretical ideals of equity can only serve as an allocation mechanism in the long term. In the short term, emissions have to be reduced - at least to
some extent - within the existing infrastructures, as otherwise prohibitive costs would have to
be borne.
The idea of introducing burden sharing in negotiations on trans-national environmental issues isusually justified by referring to one or more of the three following policy considerations:• Equity principles
Refer to ‘the quality of being fair or impartial’ (Flexner as cited by Banuri et al, 1996, p.
85). Equity refers to a normative evaluation, or value judgement, of the social desirability of
economic and non-economic disbursements, both positive and negative. Several allusions toequity are made in the Framework Convention on Climate Change. E.g. the Convention’s financial mechanism should ‘have an equitable and balanced representation of all Parties
within a transparent system of governance’ (Article 11.2). Burden sharing rules that seek to12

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build on equity principles can be allocation based and outcome based. Allocation based
rules are defined in terms of initial allocation of emission rights and are directly related tothe distribution of emission rights or to the distribution of the direct (gross) abatement costs.
Outcome based rules take into account the incidence of net welfare changes due to global
warming policy as projected by models with macro-economic feedback mechanisms (generalequilibrium models). Outcome based rules relate e.g. - on a per capita basis - the net welfarechange to national income levels. Modelling outcome-based rules tends to be a complex exercise, while the results are highly sensitive to rather sweeping assumptions.
• Effectiveness
Burden sharing rules should be effective in reaching the goal the rule is meant to achieve.
This goal can be defined in terms of limiting the total amount of global emission to a levelthat will prevent dangerous anthropogenic interference with the climate system (Kawashima,
1996). This maximum allowable global emission level should be provided by scientificfindings on the projection of climate change. However, this goal would severely curtail theroom for burden sharing arrangements as it is not clear if the goal suggested by Kawashimalies within the solution space set by the boundary conditions (such as for instance politicallyfeasibility). In this study effectiveness will be defined as achieving a particular, well-definedgoal. This goal can be e.g. an overall percentage reduction for the whole group of nations included in a burden-sharing rule. At any rate, for evaluating the effectiveness of the burdensharing rule the goal to be achieved has to be clearly set. Preferably the goal determination is
to be complemented with an indication of why the goal concerned is chosen. At any rate, any
burden-sharing rule should make at least some contribution towards meeting the ultimate
objective of the FCCC, i.e. the prevention of dangerous anthropogenic interference with theclimate system.
• Efficiency
Achieving a goal at the lowest resource costs possible. This notion is also referred to in amore narrow connotation as cost-effectiveness.
There is no fundamental conflict between the policy goals of effectivity and efficiency on the
one hand and most concepts of equity on the other. But the application of economic concepts
may give rise to differences in opinions based on diverging ideas and, explicit or implicit, assumptions on how individual utility functions should be defined compared and aggregated(Banuri et al. 1996). Therefore, the link between costs and equity will have to be treated cautiously in this study. There should be clarity about how these principles are treated and when
one prevails over another one. Likewise, Ridgley (1996), referring to a seminal book on policy
design (Tinbergen, 1952), points out that in burden sharing rules effectiveness, equity and efficiency should be treated separately by distinct indicators and/or policy instruments.

2.3

Regional scope

An important issue in making a burden-sharing rule is how to deal with different regional
scopes. The FCCC recognises the principle that poor countries can ill-afford to bear serious
cost consequences of GHG emission limitations. On the other hand, in some countries per capita income is rapidly rising towards a level commonly found in OECD countries. This brings up
the issue of graduation, i.e. the question how to specify under which conditions nations should
become contributors to the cost of global GHG emission limitation. It is, therefore, relevant todesign burden sharing rules (BSRs) that will allow for entrance of new countries into the groupof nations that accept a negotiated contribution to the agreed total GHG emission limitation.
Whenever a BSR is in place a number of countries will fall under the jurisdiction of such rule,
while others may choose not to participate (yet). Hence, a BSR should be designed in a flexible
way, providing a clear key to the determination of rights and obligations for countries that wish
to join a burden sharing agreement after its implementation has already started.

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Two alternative approaches present themselves to include countries with widely varying economic conditions and welfare levels. One approach is to design one universal BSR that makes
due allowance for the daunting gaps in welfare levels and economic orientations between theworld family of nations. A second, alternative approach would be to design specific BSRs for
specific groupings of countries with more or less homogeneous among-group economic conditions. The first approach defines the countries included in this study as a concentric set, thesecond defines them as members of disjunct sets (see graph below).

EU

Other
OECD

EU
Other OECD
Eastern Europe

EasternEuropeDeveloping
countries

Developing countries

Figure 2.1 Schematical representation of the ‘universal approach’ and the ‘regional diversity
approach’Turning to the second approach, for each of the groups of countries there should ultimately be
one burden-sharing rule. Moreover, there should be an additional BSR that distributes theglobal burden between groups. The within-group BSRs could be a reflection of the country
share in the group burden concerned, while the second between-groups BSR may indicate absolute burden figures. An advantage of the second approach over the first one is that each
within-group BSR might well be simpler than a universal BSR for all (participating) countries.
On the other hand, appealing features of a universal approach are:a. Unequal treatment of countries in different groups with similar welfare levels are avoided.
b. It is appealing as such that all (participating) countries would be judged by exactly the same
standards for determining their net (positive or for poor countries possibly negative) burden.
c. Avoidance of difficult post-treaty graduation negotiations with regard to developing countries that will achieve high post-treaty standards of living for its population as a result of
rapid economic development.
Evidently geographic location is only one criterion for defining different groups of countries.
Other criteria could be e.g. the national resource base with respect to hydrocarbon fuels. The
OPEC versus non-OPEC countries would provide a very crude indication to make the second
criterion operational. National welfare would be an obvious alternative criterion. E.g. a very
crude way to operationalize the third criterion might be the groups of ‘affluent’ OECD versus‘poor’ non-OECD countries. Even within the OECD it might be considered to define more homogeneous subgroups of affluent countries. A priori, it would seem that the upshot of groupingof nations for BSRs has to be:• Not too many groups, say no more than 4 or 5.
• A major part of the overall variance in scores on the discriminate variable(s) used for splitting up the nations of the world can be statistically explained by between-group differences,while within-group variances should be moderate.

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2.4

Conclusions

According to many scientists a substantial reduction in global GHG emissions, compared topresent-day global emission levels, is necessary to effectively address the issue of preventing
human-induced climate change. Yet global GHG emission reduction implies a burden in termsof a major environmental constraint to global economic development and, consequently, interms of world-wide (net) costs to meet the GHG emission constraint. The burden sharing issue
addressed in the present project refers to the issue of how to elaborate on international agreements (FCCC, Kyoto Protocol) regarding the sharing among nations of agreed global GHG
emission ceilings and/or emission reductions and the implied net costs thereof.
The following policy considerations may play a role in burden sharing negotiations:• Equity: costs and benefits are to be distributed ‘fairly’.
• Effectiveness: burden-sharing rules should be effective in reaching their objective.
• Efficiency: the goal should be reached at the lowest resource costs possible.
A major issue is the regional scope of burden sharing. Should burden sharing arrangements be
defined by a universal global set of rules or does the application of a distinct set of rules for
each, limited number of country groupings enhance the chance of successful global burden
sharing negotiations? The former approach should be underpinned by principles of equity in the
broadest sense (including full compensation for low-income parties), while in the latter casenational burdens would be determined groupwise with justification by distinct mixtures of
equality, equity, and exemption principles. As both approaches have their pros and cons, thisissue will be further investigated in the next stages of the present study.

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15REFERENCES
Banuri, T. et al. (1996): ‘Equity and Social Considerations’. In: Bruce, J.P., Lee, H. and Haites,
E.F., eds., Climate Change 1995: Economic and Social Dimensions of Climate Change,
Cambridge University Press, New York/Melbourne, 1996.
Blok, K., G.J.M. Phylipsen and J. W. Bode, (1997). ‘The Triptique Approach: Burden
Differentiation of CO2 Emission Reduction Among European Union Member States’.
Department of Science, Technology and Society, Utrecht University, Utrecht, theNetherlands, 1997.
Collier, U. (undated). Allocating emission reduction targets in the European Union.
Unpublished paper.
Kawashima, Y. (1996): Possibility of Differentiating Targets - Indices and indexing proposals
for equity. Paper submitted at a workshop of the Royal Institute of International Affairs,
London. 6-7 June, 1996.
Ridgley, M.A. (1996): ‘Fair sharing of greenhouse gas burdens’. Energy Policy, Vol. 24, No.
6, pp. 517-529, 1996.
Ringius, L., A. Torvanger and B. Holtsmark (1998): ‘Can multi-criteria rules fairly distributeclimate burdens - OECD results from three burden sharing rules’. Energy Policy, Vol.
26, No. 10, pp. 777-93, 1998.
Ringius, L. (1999): ‘Differentiation, Leaders, and Fairness: Negotiating Climate Commitmentsin the European Community’. International Negotiation 4 (2) (Summer 1999): pp. 133166, 1999.
Rose, A. (1992): Equity Considerations of Tradable Carbon Emission Entitlements. In:
Combating Global Warming. Geneva, UNCTAD, 1992.
Rose, A., B. Stevens, J. Edmonds and M. Wise (1998): International Equity and Differentiationin Global Warming Policy. Environmental and Resource Economics, Vol. 12, No. 1,
pp. 25-51, 1998.
Tinbergen, J. (1952): On the Theory of Economic Policy. Amsterdam, 1952.
Torvanger, A. and O. Godal (1999): A Survey of Differentiation Methods for National
Greenhouse Gas Reduction Targets. Forthcoming as ‘Temanord Report’, Nordic
Council of Ministers, Copenhagen, and as CICERO Report, Oslo, 1999.
Ybema, J. R. (1997): ‘Differentiation of CO2 targets for the OECD countries based on the
Triptych approach’. Draft ECN publication. Petten, Netherlands, 1997.

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