Climate of Trust project. Climate of Trust is a solution-oriented
collaboration of institutions and individuals from around theworld dedicated to bridging the North-South divide on climatechange. The name reflects the relationship between the research
partners—the collaboration is built upon an equal partnership ofcollegiality and trust.

Center for Sustainable Development in the Americas
Centro Interdisciplinario de Biodiversidad y Ambiente
COPPE, Universidade Federal do Rio de Janeiro
Energy & Development Research Centre

BUILDING ON THE KYOTO PROTOCOL : OPTIONS FOR PROTECTING THE CLIMATE

This World Resources Institute book is a product of theFundacion Bariloche

BUILDING ON THE KYOTO PROTOCOLOPTIONS FOR PROTECTINGT H E C L I M AT E

ENVORK Research & Development
Institut Français de l’Energie
EDITED BY
Instituto Pró-Sustentabilidade
Korea Environment Institute
WRI
World Resources InstituteKevin A. Baumert
with
Odile Blanchard, Silvia Llosa, and James F. Perkaus

Acknowledgments

B UILDING ON THE
K YOTO P ROTOCOL :OPTIONS FOR
PROTECTINGTHE CLIMATE

Edited by
Kevin A. Baumert
WORLD
RESOURCESINSTITUTEOCTOBER 2002

With
Odile Blanchard
Silvia Llosa
James F. Perkausi

ii

Building on the Kyoto Protocol: Options for Protecting the Climate

CAROL ROSEN
PUBLICATIONS DIRECTORHYACINTH BILLINGSPRODUCTION MANAGERMAGGIE POWELLLAYOUT

KAREN HOLMESEDITING

Each World Resources Institute report represents a timely, scholarly treatment of a subject of publicconcern. WRI takes responsibility for choosing the study topic and guaranteeing its authors andresearchers freedom of inquiry. It also solicits and responds to the guidance of advisory panels andexpert reviewers. Unless otherwise stated, however, all the interpretation and findings set forth in WRI
publications are those of the authors.
Copyright © 2002 World Resources Institute.
All rights reserved.
ISBN: 1-56973-524-7
Library of Congress Control Number: 2002113906
Printed in the United States of America on chlorine-free paper with recycled content of 50%,
20% of which is post-consumer.
Photo Credit: Paul Souders/Getty Images

WRI_CC-front.PMD

2

10/9/2002, 2:19 PM

Contents

iii

CONTENTS
Foreword ......................................................................................... v
Acknowledgments ......................................................................... vii
1. Introduction: An Architecture for Climate Protection .............. 1
Kevin A. Baumert and Nancy Kete
2. Continuing Kyoto: Extending Absolute
Emission Caps to Developing Countries .................................. 31
Joanna Depledge
3. Sustainable Development Policies and Measures:Starting From Development to Tackle Climate Change ............ 61
Harald Winkler, Randall Spalding-Fecher,
Stanford Mwakasonda, and Ogunlade Davidson
4. Evolving to a Sector-Based Clean Development Mechanism .... 89
Joséluis Samaniego and Christiana Figueres
5. Reducing Uncertainty Through Dual-Intensity Targets ......... 109
Yong-Gun Kim and Kevin A. Baumert
6. Learning from the Argentine Voluntary Commitment ........... 135
Daniel Bouille and Osvaldo Girardin
7. The Brazilian Proposal on Relative
Responsibility for Global Warming ....................................... 157
Emilio L. La Rovere, Laura Valente de Macedo, and Kevin A. Baumert

iv

Building on the Kyoto Protocol: Options for Protecting the Climate

8. Equal Per Capita Entitlements:
A Key to Global Participation on Climate Change? ............... 175
Malik Amin Aslam
9. Scenarios for Differentiating Commitments:
A Quantitative Analysis ....................................................... 203
Odile Blanchard
10. Conclusion: Building an Effective
and Fair Climate Protection Architecture ............................. 223
Kevin A. Baumert and Silvia Llosa
Bibliography ............................................................................... 237
Glossary and Abbreviations ........................................................ 249
About the Authors ..................................................................... 253

Forewordv

FOREWORD

Now that the 1997 Kyoto Protocol is poised to enter into force, whatcomes next? How can the international community address the growing
threat of climate change in a way that is fair and effective?
In Building on the Kyoto Protocol: Options for Protecting the Climate, Kevin
Baumert and his colleagues analyze a thought-provoking spectrum of possibilities for shaping an international climate change agreement. Seventeen contributors from nine countries offer analyses of options for strengthening the climate protection treaties. They confront the most persistent
challenge of climate protection—designing solutions that include bothdeveloped and developing countries. The options examined range fromthe well-known to the novel. Indeed, some approaches put forth in thisbook have never before been examined in print.
This is a good sign. We need innovation and cooperation if we are tocreate environmentally sound solutions that are economically and politically viable. From the vantage point of the 1992 Earth Summit in Rio deJaneiro, a climate treaty with simple timetables for emission reductions
may have seemed plausible. Some thought a global carbon tax would provide a simple answer. Today, we have a better sense of the limited capacityof our global institutions and national governments to deal with a problem on the scale of climate change. The linkages between economic development and climate change are complex and resist simple fixes. Several of the approaches examined in the following pages tackle development and climate protection simultaneously. The authors use case studies—Mexico, South Africa, and South Korea, for example—to show how
the concepts are applied in national contexts.
What comes after Kyoto? Citizens and governments should not be satisfied with a haphazard round of piecemeal commitments. The dangers ofclimate change are too great, and those dangers fall disproportionately onvi

Building on the Kyoto Protocol: Options for Protecting the Climate

the poor. This book outlines a way forward: a two-track strategy that both
meets the short-term interests of governments and sets in motion processes for developing a more coherent long-term framework for climate
protection. The final chapter distills key lessons that government negotiators and civil society advocates can use for many years to come as theinternational community debates how to protect the climate system fromdangerous human interference.
The origins of this book also help illuminate its content. It grew out ofa unique and compelling collaboration, called the Climate of Trust, founded
in 1998 under the leadership of Bonizella Biagini, Atiq Rahman, Nicolás
di Sbroiavacca, Agus Sari, and Youba Sokona. Like the current Climate ofTrust collaborators convened by WRI, the original partnership firmly believed that it was possible to establish an atmosphere of trust between
developed and developing nations, especially with respect to the urgencyof addressing climate change. The first Climate of Trust report, Confronting Climate Change: Economic Priorities and Climate Protection in Developing
Nations, was published in 2000 by the National Environmental Trust andPelangi. Building on the Kyoto Protocol is the next step, and includes somenew research partners from both developed and developing countries, toexpand the circle of individuals and organizations committed to creating
solutions that span the North-South divide.
Most of the authors contributing to this book are from developing country
research institutes. While the industrialized countries must take the leadin reducing global greenhouse gas emissions, developing countries can andmust play a leadership role in shaping durable and workable solutions toclimate change at the international level. Indeed their future development prospects may depend on such solutions. By building bridges acrossthe North-South divide for research and analysis, this project helps toreduce that real-world divide; to foster trust and spark a broader dialoguethat can serve as the basis for concerted government action.
Support for this book and the Climate of Trust project comes from the
Canadian International Development Agency, the Helen Brach Foundation, the Institut Français de l’Energie, the Italian Ministry of Environment and Territory, the John D. and Catherine T. MacArthur Foundation, the Netherlands Ministry of Foreign Affairs, the Swiss Agency for
Environment, Forests and Landscape, and the Wallace Global Fund. I am
grateful for their generosity and foresight.
Jonathan Lash
President
World Resources InstituteAcknowledgments

vii

ACKNOWLEDGMENTS

This book is the product of a true collaboration. We are especially grateful toall of the Climate of Trust participants that authored the individual chapters of
this book and participated in many aspects of this project. The team of authors—drawn from nine countries—participated in nearly every step of thepeer review, revision, and editing process and adhered to deadlines that, attimes, were tight. The authors also assisted one another by providing input
during the peer review process and during a March 2002 authors’ workshop in
Rio das Pedras, Brazil (where preliminary papers were reviewed and discussed).
The editorial team especially benefited from the authors’ feedback on the
Introduction and Conclusion chapters. It was a privilege to work on an ambitious project with such a dedicated and creative team. It is the actions of the
project participants, more than their written words, that are helping to create
an atmosphere of trust between developed and developing countries.
We owe particular gratitude to several people who helped guide and advise
us on the overall project. Nancy Kete’s core intellectual input provided thisproject with a firm foundation. Her skillful facilitation made the author’s workshop a success. When challenges arose, Nancy was there to point us in the
direction of relief. In addition to being an author, Christiana Figueres also
provided important guidance and advice early in the project, helped moderate the authors’ workshop, and reviewed early draft papers. We owe a special
thanks to Bonizella Biagini—friend, former WRI colleague, and a founder of
the Climate of Trust project. Boni inspired WRI to “build a climate of trust”
through this project and was instrumental in the early development of ourresearch and planning. The Climate of Trust was originally created by a partnership of non-governmental organizations from around the world in 1998,
led by Boni Biagini, Atiq Rahman, Nicolás di Sbroiavacca, Agus Sari, andYouba Sokona. We are grateful for the example that the original Climate ofTrust partners provided for us to follow.
The manuscript benefited enormously from peer review. We are thankful
to the following reviewers for their helpful comments and suggestions: Tomviii

Building on the Kyoto Protocol: Options for Protecting the Climate

Athanasiou, Marcel Berk, Hadi Dowlatabadi, Michel den Elzen, Michael
Grubb, Niklas Höhne, Cathleen Kelly, Karen Lawson, Rodolfo Medina, Aubrey
Meyer, Benito Müller, Cedric Philibert, Michael Philips, Atiq Rahman, Liam
Salter, Anju Sharma, Richard Sherman, Fernando Tudela, and Julio García
Velasco. We are particularly grateful to Jan Corfee Morlot, Elliot Diringer(with Sophie Chou, Christie Jorgé, and Neil Strachan), Jennifer Morgan,
Granger Morgan, and David Victor for investing the time to review all (ornearly all) chapters of the book. The many helpful comments and suggestions
we received substantially improved the manuscript. Any remaining errors andomissions are, of course, the responsibility of the authors and editors.
Many of our colleagues at WRI helped make this book possible. Early versions of the manuscript were reviewed internally by Navroz Dubash, Christine Elias, Suzie Greenhalgh, Tony La Viña, Julia Philpott, and Chris Whaley.
Barbara Haya provided continuous and thoughtful contributions to the Introduction, Conclusion, and several other chapters. Jennie Hommel assisted inalmost all aspects of this project, including the planning and logistics for theauthors’ workshop, organizing the review process, overseeing contracts, andsmoothing the publications process. Alex Ruthman compiled the comprehensive bibliography. Gracie Bermudez and Belle Schmidt made the external
review an efficient and pleasant process. Carol Rosen, Bill LaRocque, andHyacinth Billings advised and guided us during the publication process. Karen
Holmes did a fantastic job editing the manuscript and improving the prose,and Maggie Powell is responsible for layout. Finally, Navroz Dubash morethan capably served as the review steward for this book, helping us to navigate the internal and external review processes. His careful eye and sharp
mind improved the final product. We are grateful to all of our WRI colleagues
and the organizational support we received.
Finally, without financial support, this Climate of Trust collaboration andthe resulting book would not have been possible. We are especially thankful
to the Canadian International Development Agency for their financial support that launched this project. The project also received generous support
from the Helen Brach Foundation, the Institut Français de l’Energie, the Italian Ministry of Environment and Territory, the John D. and Catherine T.
MacArthur Foundation, the Netherlands Ministry of Foreign Affairs, the Swiss
Agency for Environment, Forests and Landscape, and the Wallace Global
Fund.
Kevin A. Baumert
Odile Blanchard
Silvia Llosa
James F. Perkaus

Introduction: An Architecture for Climate Protection

1

1. INTRODUCTION:
An Architecture for Climate Protection
Kevin A. Baumert and Nancy Kete

Walls, windows, floors, and doors are some of the elements used in designing a house. Not just any mix of architectural elements will create a functional home. Although there are many possible designs, making a homefunctional means assembling walls, windows, and other elements into a
compatible whole that meets the needs of its inhabitants. So too, a climate protection treaty has its own set of “architectural elements” thatmust meet the needs of its stakeholders. Elements of a climate protection
treaty include provisions for controlling greenhouse gas emissions, managing economic costs, and promoting accountability, among other things.
While the options for designing a home may seem limitless, the diversityof potentially effective climate agreements is not nearly as constrained as
current international negotiations might lead us to believe. As with homes,
innovation and creativity are needed in treaty design.
Since 1997, the debate over global climate change has focused narrowly
on the Kyoto Protocol—an international treaty to control greenhouse gas
emissions that are trapping heat in the Earth’s atmosphere. The Protocolcalls on industrialized countries to reduce their emissions of greenhousegases by about 5 percent below 1990 levels between 2008 and 2012. Overthe past 5 years, government officials, observers, and experts have beenabsorbed in the arcane details of the Protocol, arguing at great length about
the treaty’s merits and demerits. As the Kyoto Protocol comes to life, thisdebate will shift to include new ideas for future commitments to protect
the global climate system.
This volume explores a set of options for designing an internationalframework for climate protection “beyond Kyoto,” that is, beyond the Kyoto
Protocol’s first commitment period.1 We pay special attention to achieving international cooperation across the so-called North-South divide.
Each approach examined in this volume could embrace both industrialized and developing countries—an eventual necessity for addressing the2

Building on the Kyoto Protocol: Options for Protecting the Climate

problem of climate change. In conducting this study, we hope to promotea better understanding of a wide range of future climate protection options and provide building blocks for further consideration of these ideas
and other alternatives not yet considered. An improved understanding of
future options, we think, will lead to more environmentally effective andfair outcomes under the international climate change negotiations.
We believe now is a particularly opportune time to think expansively,
creatively, and critically about different approaches to protecting the global climate system. With every year that passes, we are wagering the future, betting (or simply hoping) that global warming will not manifest
itself through the worst possible outcomes before humanity finds a collective and effective long-term solution. We need intellectual and creative
resources from across the globe to produce and test ideas. Just as shooting
more arrows at a target provides a better sense of how to hit the bull’s-eye,the more ideas we consider now, the more likely we are to find the rightones.2This chapter offers a guide to the rest of this volume. Section I describes
the problem of global climate change and the challenges of addressing thiscomplex phenomenon in an economically uneven and politically divided
world. The section gives particular attention to the tensions between industrialized and developing countries in the climate change negotiations.
Section II probes the key architectural elements that could collectively
constitute an international climate protection architecture. These elements
include, among others, the legal character of commitments (binding or
non-binding), the type of greenhouse gas limitation commitment (emission target or tax), the scope of the action (sectoral, national, or global),and the use of market mechanisms. The chapter concludes with Section
III, which offers short summaries of the different approaches to climate
protection examined in this volume.
Following this chapter are comprehensive examinations of the different approaches. Chapter 2 examines the Kyoto Protocol itself, which isparticularly important because this agreement provides the starting point
for discussion of future climate protection options. Given its proceduralfeatures, the Kyoto treaty can be adapted to accommodate a variety of
approaches, including those examined in subsequent chapters of this volume. In its current form, the Kyoto Protocol establishes fixed “caps” on
the emissions of industrialized countries but does not include formal emission-limitation commitments for developing countries. Chapter 2 explores
the viability of extending Kyoto’s system of emission caps to developing
countries.

Introduction: An Architecture for Climate Protection

3

Chapters 3 and 4 examine two new approaches for structuring participation in greenhouse gas emission reductions by developing countries—
Sustainable Development Policies and Measures (SD-PAMs) and a Sector-Based Clean Development Mechanism (Sector-CDM), respectively.
Chapter 5 examines “dual-intensity targets,” an alternative method ofdesigning emission limitations, while Chapter 6 recounts Argentina’s unsuccessful attempt to design and implement a voluntary greenhouse gas
target. Chapter 7 looks at the Brazilian Proposal, which calls for emission
reductions to be shared among countries on the basis of their relative responsibilities for global warming. Chapter 8 examines a system for distributing emission entitlements to countries on an equal per capita basis. It is
important to note that these chapters are not a comprehensive cataloging
of approaches: there are others not examined here,3 and indeed others
that have yet to be conceived. However, the approaches that are examined collectively encompass a thought-provoking and wide spectrum of
future possibilities.
Each of these chapters assesses both the advantages and disadvantagesof a particular approach. The authors pay special attention to the international appeal of the respective approaches because any successful climate
protection system must be able to garner international consensus. Thus,
the analyses presented in this volume explore the underlying factors—
such as economic cost, fairness, and development benefits—that ultimately
shape whether approaches are politically acceptable. No single approach
can be designated as most desirable, and, in fact, some of them are mutually compatible, as several chapters illustrate.
Chapter 9 offers a quantitative comparison of three different approaches
to differentiating greenhouse gas limitation commitments across countries. It illustrates how different approaches can deliver widely varying
economic results for a given country. In other words, the disparities among
countries ensure that no single strategy examined in this study (or evenbeyond this study) will be in the best interest of all countries. This analysis
reinforces the need to examine the political viability of a variety of approaches, as is done in Chapters 2 through 8. The volume concludes with
Chapter 10, which summarizes the advantages and challenges of the different approaches, explores some cross-cutting themes, and outlines somelessons that emerge from this study. Chapter 10 also sets out a way forward
for the climate negotiations, incorporating many of the advantages of theapproaches examined in this volume.

4

Building on the Kyoto Protocol: Options for Protecting the Climate

Box 1.1. The Scope of the Global Climate Change Problem
According to the Intergovernmental Panel on Climate Change (IPCC
2001c), climate change is a vastly different problem than other environmental and public policy issues. Below are six characteristics of the problem
that help explain why this is so and militate against easy solutions.
The problem is global. Climate change is related to the concentration ofgreenhouse gases (GHGs) in the Earth’s atmosphere. Emissions from all
sources from all countries determine the concentration of these gases. Somecountries are very large emitters, and others are very small emitters. Acting
alone, individuals and countries that reduce emissions will have a small
overall effect.
The problem is long-term. Emissions of carbon dioxide (CO2), on average,
remain in the atmosphere for about 100 years (some other gases persist for
thousands of years). Thus, GHG concentrations are related to the net accumulation of gases over long periods of time, not to a single year’s emissions.
This raises complicated ethical questions because the future generations
that will be most affected by climate change are not present to participate
in today’s decisions.
Associated human activities are pervasive. GHG emissions are linked to abroad array of human activities, including those related to energy use, industrial activities, and land use decisions. In addition, the wide range ofpolicies affecting technological innovation, economic growth, and population size further shape emissions.

I. Confronting Climate Change
Addressing global climate change is a paramount challenge of the 21stCentury (Box 1.1). Since the beginning of the industrial revolution, atmospheric concentrations of carbon dioxide (CO2), the chief heat-trapping greenhouse gas, have risen 35 percent—from about 275 parts per
million by volume (ppmv) then to 370 ppmv today. This increase is due tohuman activities, primarily from the burning of fossil fuels and from deforestation. Carbon that has been sequestered in the Earth’s crust (in theform of oil, coal, and other fossil fuels) over millions of years has been
extracted, burned, and released into the atmosphere in large quantities
within the past 200 years. Atmospheric concentrations of methane, thesecond leading greenhouse gas, have more than doubled over the past two

Introduction: An Architecture for Climate Protection5

Box 1.1. continued
Uncertainty is pervasive. Many uncertainties exist regarding the magnitude of future climate change and its consequences, as well as the costs,
benefits, and barriers to implementation of possible solutions.
The consequences are potentially irreversible and are distributed unevenly.
Sea level rise and other potential consequences of a global temperature
increase can take more than one thousand years to play out. Likewise, societies differ in their vulnerability to climate change impacts, with poorer
societies less able to adapt to the consequences of climate change.
The global institutions needed to address the issue are only partiallyformed. The 1992 Climate Convention has nearly universal membership(including the United States). This agreement establishes an objective of
stabilizing atmospheric GHG concentrations at a level that would avoid“dangerous” human interference with the climate system. The definition of“dangerous,” however, is left open to broad interpretation by Parties. The
1997 Kyoto Protocol has expanded the decision-making process for climatechange policy, but currently includes only short-term targets for some industrialized countries.
Source: Adapted from Toth and Mwandosya (2001: 606–609).

centuries. These changes in the composition of the Earth’s atmospherehave increased the average global surface temperature by about 0.6° C (1° F)
over the past 100 years. Regional climate changes due to temperature increases have already affected many physical and biological systems, andemerging evidence suggests impacts on human settlements from recent
increases in floods and droughts (IPCC 2001b).
If the trends in greenhouse gas emissions growth are not altered, global
temperatures are expected to rise between 1.4 and 5.8° C (2.5 to 10.4° F)
by 2100, according to the latest assessment of the Intergovernmental Panelon Climate Change (IPCC 2001a). The effects of such temperature changes
on agricultural production, water supply, forests, and overall human development are unknown but will likely be detrimental to a large portion of
the world’s population (IPCC 2001b). To prevent atmospheric CO2 concentrations from exceeding a level of 450 ppmv, global emissions would
need to decrease dramatically during this century. Over the same period,
however, the global population is expected to increase by 40 to 100 percent (from today’s population of six billion) and economic growth is pro-

6

Building on the Kyoto Protocol: Options for Protecting the Climate

jected to climb 10- to 20-fold (IPCC 2000a). The challenge is formidable
and unprecedented; meeting it will require a transition away from a global
economy dependent on fossil fuels to one based on renewable and moreenergy-efficient technologies. Even limiting atmospheric CO2 concentrations to a higher level, such as 550 ppmv, would entail major emission
reductions from projected levels and eventual reductions far below today’semission levels.
Climate change is as much an economic and political challenge as a scientific and technological one. The nature of the problem demands a coordinated approach among the world’s countries. Governments resist acting alone
to rein in their emissions, given that the rising greenhouse gas output inother countries could undermine their own potentially costly efforts. Furthermore, most emissions come from sectors such as electricity generation,transportation, and agriculture, which are important to national security
and economic growth. Powerful vested interests in these sectors will makethe transition to a low-carbon future an uphill political climb.
International cooperation is most important—and most challenging—
between rich and poor countries. Industrialized countries—primarily theUnited States, but also others, such as Japan and Australia—are concernedthat current lack of emission control commitments for developing countries translates into a lack of environmental effectiveness. This concern isdue to rising greenhouse gas emissions in poorer countries as well as thepossibility that, given asymmetric emission control commitments, someenergy-intensive industries might migrate to countries where emissions
growth is unconstrained. Figure 1.1 shows that, although expected growthis large in industrialized countries, CO2 emissions are expected to grow atmuch faster rates in China, India, Latin America, and other developing
regions over the next few decades. Industrialized countries also argue that,through the 1992 United Nations Framework Convention on Climate
Change (UNFCCC) and the subsequent Kyoto Protocol, they have madecommitments to curb their greenhouse gas emissions and provide financial assistance to developing countries, all without any promise of future
action from the developing world. While accepting that richer countries
must take the largest steps, they argue that developing countries musttake—or at least declare an intention to take—smaller steps.
For their part, many developing countries believe that the industrialized countries lack credibility on the issue of international cooperation to
curb greenhouse gas emissions, having done little to address a problem
largely of their own making. Figure 1.2 shows that industrialized countries
are responsible for most of the buildup of atmospheric carbon dioxide over

Introduction: An Architecture for Climate Protection

7

Figure 1.1. Carbon Emissions in 2000 and Projected GrowthMillions of Tons of Carbon

2,100
1,800
Projected increase, 2001–2020

1,500

2000 emissions

1,200
900
600
300
0
U.S .

E.U.

China

Russia

Japan

Latin
America

India

AfricaSource: World Resources Institute, compiled from data in EIA (2002a, b).
Notes: Includes carbon emissions associated with fossil fuel combustion;
calculations are based on EIA reference case scenarios.

the past century created by fossil fuel burning and land use changes (suchas deforestation).4 Specifically, the industrialized countries are responsible
for about 63 percent of human-related carbon dioxide that has accumulated in the atmosphere. The 80 percent of the world’s population living
in developing countries has contributed about 37 percent.
Similarly, although all emissions contribute equally to global warming,large disparities in per capita emission levels reveal a social character ofcarbon emissions that differs widely from country to country. Figure 1.3
shows that the average American, for example, emits about 10 times morecarbon than the average Chinese and 20 times more than the average
Indian. Around the world, most people view CO2 emissions from the UnitedStates as resulting largely from luxuries that are unavailable to most people
in developing nations, whereas they view the emissions of poor nations as
primarily for basic human needs, such as food, warmth, and shelter. Disparities in emissions also reflect an uneven distribution of energy resources
throughout the world, with some countries dependent on coal (a fuel that
releases relatively large amounts of carbon per unit of energy produced),
whereas others rely on less carbon-intensive energy sources, such as natural gas and hydropower.5

8

Building on the Kyoto Protocol: Options for Protecting the Climate

Figure 1.2. Contributors to Climate Change
Percent of Total Accumulated Atmospheric CO2 from Industrial Sources andLand Use Changes, 1900–2000
Industrialized
Developing
U.S. andCanada25%

Europe20%

Developing
Asia, 19%

South and Central
America, 10%

FormerSovietUnion, 12%Pacific Asia,
Industrial, 6%Mid. East and N. Africa, 4%
Sub Saharan Africa
4%Source: World Resources Institute, compiled from data in Marland et al. (2000),
EIA (2002b) and Houghton et al. (2000).
Notes: Data include net CO2 emissions from fossil fuel combustion (1900–2000),
cement manufacturing (1900–1979), and changes in land use (1900–1990), suchas harvesting of forest products, clearing for agriculture, and vegetation re-growth.

Many in the developing world feel that some richer countries are fulfilling neither the letter nor spirit of the Climate Convention and subsequent agreements. The Convention calls on countries to “protect the climate system…on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities.” Morespecifically, it calls on industrialized countries to “take the lead” in protecting the climate (UNFCCC 1992, Article 3.1). Mindful of these principles and the above-mentioned disparities, all countries formally agreed
in 1995 that the first round of legally binding emission controls (to be
adopted through a protocol) should not include developing countries.6 Thisagreement reflects an understanding that the wealthier countries haveIntroduction: An Architecture for Climate Protection

9

Figure 1.3. Carbon Emissions Per Person, 2000
6

U.S.

4
3
2
1

RussiaJapan

Tons of Carbon

5

E.U.
Latin
America

World Average

China

AfricaIndia

0Population
0

Scale

1 billion

Source: World Resources Institute, adapted from Grubb (1989) and compiled
from data in EIA (2002b).
Note: Includes only carbon emissions associated with fossil fuel combustion.

greater financial resources and technological capability to put them on asustainable course.
Developing countries, on the other hand, face more urgent priorities,
such as poverty alleviation and public health. Even when it comes to climate change, the priority for developing countries is generally to reduce
their high levels of vulnerability to the physical impacts of climate change,such as sea level rise and extreme weather events. Rather than controlling
their emissions, developing countries tend to be concerned about how
climate change might have an impact on food production and economic
development.
Despite North-South differences in emissions, wealth, and priorities,
these disparities are not the largest barrier to cooperation. Probably a morepotent obstacle is the enduring and growing lack of trust. Some industrialized countries have legitimate concerns that developing countries may
never come into a climate protection regime or may commit only to limit
their emissions at some remote future date. For some developing countries, wealthier nations’ promises on climate protection seem empty and10

Building on the Kyoto Protocol: Options for Protecting the Climate

faithless. Furthermore, some developing countries are concerned that repeated bids on the part of the industrialized countries (principally, but not
exclusively, the United States) to include emission limitation commitments for developing countries on the negotiating agenda for the Kyoto
Protocol are but thinly veiled attempts to impede poorer countries’ economic development prospects. After all, greenhouse gas emissions are intimately linked to essential aspects of economic development, including
electric power generation, transportation, and industry. For the developing world, addressing climate change is an issue of basic economic development more than environmental protection.
Recent developments in the Kyoto process could further erode trust
and reinforce the North-South stalemate. In March 2001, the United Statesabandoned the Kyoto Protocol, citing two main reasons: lack of developing-country participation and potentially high economic costs.7 Yet, theabsence of U.S. participation in the Protocol is likely to retard future
progress on the very issue that it deemed so important—inclusion of developing countries in an emission limitation regime. In addition to abandoning the Kyoto Protocol, the United States has failed to put a strong
climate policy in its place. The policy announced by President Bush in
February 2002 will, by the government’s own estimates, allow greenhousegas emissions in the United States to grow by 14 percent from 2002 to2012 (WRI 2002).
Fortunately, amid the uphill struggle for global cooperation, some grounds
for optimism can be reclaimed, even in the United States. In July 2002,
the state of California approved a law that will establish the first major
greenhouse gas emission standards in the country. Under this law,
automakers will be required by the end of the decade to limit greenhousegas emissions from new cars and light trucks sold in California; such sales
account for about 10 percent of total U.S. auto sales. Following this action, 11 additional states sent a letter to President Bush asking for federal
measures to limit greenhouse gas emissions.8
Elsewhere in the world, most of the industrialized countries, including
the members of the European Union and Japan, have ratified the Kyoto
Protocol, which is poised to enter into force. With the Kyoto Protocol
coming to life, discussions of what comes next gain increasing legitimacy
and even urgency. Over the next few years, the pressure for a new round ofnegotiations will mount. There is already near-consensus that, in the longterm, protecting the climate will require controlling emissions from bothindustrialized and developing countries. The issues are how, when, andunder what conditions such emissions will be limited. What comes next?

Introduction: An Architecture for Climate Protection

11

How might the Climate Convention and Kyoto Protocol be adapted toconstitute a more effective multilateral environmental regime? These questions are the subject of this volume.

II. Designing a Climate Protection Architecture
Debates on the future of the climate change treaty have focused overwhelmingly on defining emission targets or, alternatively, on how to allocate future greenhouse gas emission rights across countries. Although they
are a central feature of a future climate regime, emission targets are but
one part of a coherent climate protection architecture. The approaches toclimate protection examined in this volume vary widely with respect totheir legal character, geographic scope, use of market-based mechanisms,
and other important elements of a climate protection architecture. Thissection explores each of these elements in greater detail. Table 1.1 summarizes the various elements and options of an international climate protection architecture.
The options discussed in this section could be combined in many ways.
Indeed, there are a multitude of permutations for designing a climate protection regime, and especially for distinguishing between developed andindustrialized country actions. Just as oil and water do not mix, however,some of these options are incompatible.9 For example, the right to participate in international emissions trading is conditioned on a country’s assuming an emission target with associated monitoring, reporting, and review obligations. Without a balance and coherency to rights and obligations, the environmental integrity of the framework would be sacrificed.
As explained in Chapter 2, a proper balance of rights and obligations is astrength of the Kyoto Protocol—access to international emissions trading
is restricted to industrialized countries that have also submitted to a battery of other treaty obligations.
Legal Nature of Commitments
Among observers and analysts, confusion often exists over whether a promised action is voluntary or mandatory in international agreements. Generally, all international treaty commitments are made voluntarily, in thesense that sovereign states themselves decide whether to participate in
the agreement.10 Once the treaty comes into force, specific commitments
may or may not be considered legally binding.11 In actuality, the legal nature of a given commitment will probably fall somewhere along a continuum between legally binding and non-binding, depending on the speci-

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Building on the Kyoto Protocol: Options for Protecting the Climate

Table 1.1. Designing a Climate Protection Architecture:
Possible Elements and Options
Element ofArchitecture

Options

Legal Nature ofCommitment

1. Legally binding
2. Non-binding

Type of GHG
Limitation
Commitment

1. International carbon tax (e.g., $10 per ton)
2. Internationally harmonized policies and measures
3. Fixed emission target: cap on emissions (Kyoto-style targets)
4. Dynamic emission target: limit of emissions in relation to GDP growth
5. Dual emission targets: “safe zone” between a high and a low target
6. Emission target with cost cap: target expands if emission reduction costs
reach a certain threshold (e.g., $100 per ton)
7. Sustainable development policies and measures (not harmonized)

Coverage andScope of Actions

1. Gases (e.g., CO2 only or all six principal greenhouse gases)
2. Geographic (e.g., project, sector, national, regional, global)

Timing and
Triggers

1. Determined by existing Annex (e.g., Annex I of Climate Convention)
2. New thresholds for participation: A certain level of income or emissions
per capita, for example, determines when a country should take an action

Approach toDifferentiating
GHG
Commitments

1. Pledge-based: Kyoto-style negotiations
2. Principle-based: Agree first on principles and then derive subsequent
allocation rules from those principles

ficity of the promised action, the consequences of non-compliance, andthe intentions of governments making the agreement. It is worth bearing
this continuum in mind throughout this volume.
The climate regime, as explained by Depledge in Chapter 2, currently
employs both non-binding and binding commitments. Some provisions,such as the greenhouse gas commitments under the 1992 Climate Convention, are widely considered non-binding pledges.12 This is due to thegeneral phrasing of the requirements and the lack of an accompanying
system of enforcement. The 1997 Kyoto Protocol, however, establishes
legally binding requirements for emission limits in industrialized countries. These emission limits are precisely spelled out in the agreement andbacked by procedures and mechanisms (adopted in 2001) aimed at remedying cases of non-compliance, such as when a country exceeds its emission limit.

Introduction: An Architecture for Climate Protection

13

Table 1.1. continued
Element ofArchitecture

Options

Market-Based
Mechanisms

1. Project- or sector-based trading (e.g., Clean Development Mechanism)
2. International emissions trading (e.g., Kyoto-style allowance trading)Financial andTechnology
Commitments

1. Funding for adaptation, renewable energy investment, sustainable
development policies and measures, technology transfer, etc.
2. Compensation for climate impacts

Accountability
Commitments

1. Non-compliance consequences
2. Measurement, reporting, review

Environmental
Objective

1. Climate Convention objective
2. Agreement to keep a certain stabilization option open in the future
3. A quantitative objective, such as a limit on global emissions,concentrations, or temperature change that is consistent with the
Climate Convention objective

Note: Other potential elements of an international climate-protection architecture exist, but
are not examined here. Likewise, there are other non-treaty-based strategies, such astechnology-driven approaches, which are not examined here.
Abbreviations: GHG (greenhouse gas), GDP (gross domestic product).

Like other environmental agreements, the climate change regime might
successfully incorporate non-binding approaches (beyond those alreadystipulated in the Convention) into its architecture.13 Several approaches
discussed in this volume—SD-PAMs (Chapter 3), Sector-CDM (Chapter4), and dynamic targets (Chapter 5)—might be quite effective in a nonbinding form. Past experience with the Climate Convention, however,suggests that a purely non-binding system is unlikely to prevent dangerous
climate change.14 In the future, the climate regime could adopt mandatory
requirements for all countries or, instead, for a subset of countries, such as
those with greater responsibility for the problem of climate change or thosewith greater capabilities to reduce emissions.
Type of Greenhouse Gas Limitation Commitments
Greenhouse gas limitation commitments will form a central element of afuture climate protection architecture. Here, policymakers have a varietyof options. Some commitments would entail harmonized policies and mea-

14

Building on the Kyoto Protocol: Options for Protecting the Climatesures across countries, such as the removal of fossil fuel subsidies or promotion of renewable energy. Countries could likewise promote climate protection through an international carbon tax. Although theoretically appealing, these kinds of internationally harmonized approaches have had
limited traction in climate negotiations over the past decade. Such proposals suffer from monitoring and enforcement problems and, perhaps mostimportant, tend to intrude into the domestic policymaking sphere in a
way that has proven politically unacceptable.
Emission targets offer several benefits relative to harmonized actions.
First, by their very nature, targets can be differentiated across countries.
The Kyoto Protocol targets, for example, range from a 10 percent increase
above 1990 levels (Iceland) to an 8 percent reduction below 1990 levels(European Union and others). The concept of differentiation, rather thanharmonization, better reflects the Climate Convention’s promise to give“full consideration” to the “specific needs and circumstances” of Parties(UNFCCC 1992, Article 3.2). Second, decisions on how to achieve emission targets are left to the sovereign discretion of countries, without the
intrusion of international rules.15 Generally, the preference for emission
targets (and trading, discussed below) is due to the legal framework underpinning international agreements, which is based on sovereignty and therefore voluntary assent (Wiener 1999). In effect, voluntary assent makes
harmonized approaches—such as a global carbon tax or internationally
coordinated policies—less politically workable than targets. Through astructured negotiating process, countries commit to a target they find politically acceptable with respect to environmental stringency and economic
costs. Third, emission targets are compatible with market mechanisms (seebelow) such as international emissions trading, which can help reduceoverall costs.
One kind of target is a fixed (or, absolute) target, which establishes amaximum level of emissions a country can emit during a specified period.
For example, targets taken by industrialized countries under the Kyoto
Protocol entail fixed emission ceilings during the 2008 to 2012 time frame(Chapter 2). Fixed targets have the advantage of ensuring a particularenvironmental outcome (via a “cap” on emissions)16 and can promote costeffectiveness when coupled with emissions trading.
The difficulty with negotiating fixed targets stems from uncertainties
over future emission levels and the costs of achieving any future emission
target (Baumert et al. 1999, Pizer 1999,Victor 2001). The further into the
future targets are set, the greater the uncertainties. These uncertainties
carry two opposing risks: (1) a target set too stringently can potentiallyIntroduction: An Architecture for Climate Protection

15

constrain economic development, an unacceptable consequence for many
developing countries and (2) a target set too loosely, in contrast, can result in a weakening of other countries’ targets. This second risk is due tothe influence of international emissions trading: for instance, country A’s
excess emission allowances (due to weak targets) might be traded to country B, which would, as a consequence, be able to increase its own emissions. (This phenomenon is often referred to as “hot air” trading.)
At least three ways of designing emission targets could potentially reduce economic uncertainties and environmental risks. The first is a dynamic target. Under this kind of target, a country’s allowable level of emissions is adjusted according to some other variable, such as gross domestic
product (GDP) (CCAP 1998, Baumert et al. 1999, Philibert and Pershing2001). A dynamic target of this sort was proposed by Argentina in 1999
(Chapter 6). Dynamic targets can reduce economic uncertainty in thetarget-setting process and promote environmental integrity (i.e., less unintentional “hot air”), particularly with respect to developing countries.
Yet, dynamic targets pose certain challenges relative to fixed targets, including added complexity and data requirements. These challenges are
explored in greater depth in Chapter 5.
A second way to design emission targets is to use dual targets. Here, acountry has two emission targets, rather than one. The purpose of thelower (more stringent) target is to provide an incentive to reduce emissions, since reductions below this target would enable the country to sellemission reduction allowances. The higher (less stringent) target would
have a punitive function: Exceeding this target puts the country out ofcompliance. Thus, the lower target would be a selling target and the higher
one a compliance target. No penalty would be assessed if emissions fell
between the selling and the compliance targets. That area would be thesafe zone, in which the country is neither out of compliance nor able tosell allowances through international emissions trading. This dual target
concept, as explored in Chapter 5, could be combined with a dynamic
target approach.
The third way addresses cost uncertainties by coupling a fixed target
with a cost cap, sometimes referred to as a “safety valve” or “price cap”
(Pizer 1999, Victor 2001).17 A cost cap places an upward limit on the costsof emission reductions, thereby providing greater up-front certainty about
the potential magnitude of implementation costs for a given target. If abatement costs exceed the cap (e.g., $100 per ton of CO2), the government
may issue additional emission allowances (or purchase them from a central authority), rather than require more costly emission reductions. In

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Building on the Kyoto Protocol: Options for Protecting the Climate

such an instance, using the cost cap would allow greenhouse gases to exceed the target level, effectively transforming a fixed target into a dynamic one. Although not explored in any of the chapters, a price cap
could work in tandem with several of the proposals examined in this volume.
It should be noted that quantitative emission targets—fixed or dynamic—are not a necessary condition for climate protection, especiallyfor countries whose emissions are relatively small. The 49 countries classified as “least developed” by the United Nations contribute approximately
0.5 percent of yearly global CO2 emissions.18 These countries and perhaps
others need not necessarily adopt quantitative emission targets or othercommitments, even over the next few decades, because their current andfuture contributions to global greenhouse gas emissions are small.
Moreover, larger developing countries have demonstrated that they cantake climate-friendly actions in the absence of firm targets. A wide range
of energy efficiency and renewable energy measures are already helping tolimit the growth of greenhouse gas emissions in developing countries, eventhough these measures are being taken for reasons other than climatechange (Reid and Goldemberg 1999, Biagini 2000). Thus, qualitative approaches that advance country-specific sustainable development policies
and measures (SD-PAMs, Chapter 3) could play an important role in developing countries’ future climate protection efforts.
Coverage and Scope of Actions
Future commitments could vary with respect to their coverage and scope.
Kyoto-style targets, for example, are nearly comprehensive in their emission coverage. They encompass all emission sources and certain sinks (i.e.,emission absorption activities) within a country and also address all six
main greenhouse gases (carbon dioxide, methane, nitrous oxide,hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride). In the future, emission limits for some countries could be narrower in coverage,
especially in developing countries where some gases are difficult to measure or monitor and may constitute only a small share of countrywide
emissions.
A treaty could promote action at the project, sector, or countrywide
levels. Project-based emission reductions (which also have sustainable
development benefits in developing countries) are already authorizedthrough the Kyoto Protocol’s Clean Development Mechanism (CDM).
Sector-based commitments might encompass those parts of national economies where greenhouse gas emissions are most prominent, such as heavy

Introduction: An Architecture for Climate Protection

17

industry, land use change and forestry, or electric power production. The
approaches examined in Chapters 3 and 4 of this volume—Sector-CDM
and SD-PAMs—could be channels for such strategies. Other kinds of international cooperation at the sector level might help address competitiveness concerns, particularly in sectors—such as steel or aluminum—
where international competition is often intense.
Internationally, future agreements might entail commitments from aparticular region or limited set of countries, such as those that are thelargest greenhouse gas emitters. The Kyoto Protocol embodies this approach, in that 38 countries are captured (37, counting the U.S. withdrawal) under the emission control system. It further allows regions, suchas the European Union, to achieve their targets jointly through their own
internal agreement on commitments. This same strategy could be employed in the future, including in developing countries (see Chapter 2).19
Finally, a global commitment could cover all countries under the sameemission control system. Proposals such as those calling for per capitabased emission entitlements fall under this category (Chapter 8).
In general, a regime that is broader in scope and coverage will afford
greater opportunity for participants to undertake emission reductions where
they are least costly (see market mechanisms below). At the same time,
however, the broader the scope, the higher a regime’s monitoring and evaluation costs will be.
Timing and Triggers
Future actions could also vary with respect to timing: Some countries could
take action sooner than others. This kind of differentiation is clearly visible in the Kyoto Protocol, as industrialized countries committed to emission controls from 2008 to 2012, with the prospect of additional countries
making commitments in a later period. Since the 1992 adoption of the
Climate Convention, action has been differentiated primarily on the basis of countries’ designation as “Annex I” or “non-Annex I” Parties, categories that correspond roughly to traditional North-South groupings. Sometreaty provisions apply to other categories, including “Annex II” Parties(wealthy countries with a special obligation to provide developing countries with financial and technological assistance on climate change),“economies in transition,” “developing” countries, and “least developed”
countries (see Chapter 2).
For the future, a challenging issue is determining what should trigger anemission limitation commitment for a particular country. A least developed country might be exempt from greenhouse gas commitments of any

18

Building on the Kyoto Protocol: Options for Protecting the Climatekind for several decades, yet a rapidly growing one might not. This issue ofwhen countries should graduate to steeper commitments arises in severalof the approaches examined in this volume. Whereas traditional distinctions (i.e., Annex I/non-Annex I) will be useful and necessary in the future, new categorizations may be needed to differentiate the timing ofactions across countries. For example, the 1987 Montreal Protocol includes
different schedules for phasing out ozone-depleting substances based on acountry’s per capita consumption of certain controlled substances (0.3 kilograms per person) (Montreal Protocol 2000).
Approach to Differentiating Commitments
As noted above, greenhouse gas emission targets can be differentiated acrosscountries, with some countries required to reduce emissions more thanothers. It is useful to consider two different procedural approaches to negotiating emission targets, be they fixed, dynamic, or qualitative. The different approaches examined in this volume, as well as others outside thescope of this study, can be categorized as either pledge-based or principlebased. This distinction is important because it determines a starting point
for negotiations and, more fundamentally, reflects differing and perhaps
conflicting ways of viewing the challenge of climate protection.
Generally, the international negotiating process is best characterized aspledge-based; countries formulate their national positions and negotiate
in their interests, voluntarily making commitments (alone or with othercountries) at their sovereign discretion. Because the international legal
order lacks the ability to require a country to participate, the tradition has
been for countries to “pledge” particular actions in a bottom-up style. These
commitments typically represent (and always purport to make) some divergence from the status quo. (See Box 1.2.) In the Kyoto Protocol negotiations, for example, industrialized countries pledged various emission limitation or reduction targets relative to their 1990 emission levels. This
pledge-based approach reflects the voluntary assent rule and the realpolitik
of international negotiations.
Bottom-up negotiation processes like the Kyoto Protocol have been criticized as ad hoc, with negotiated results shaped mainly by political powerand economic might rather than by objective criteria. Thus, many havecalled for negotiation on overarching principles or rules that, once agreed,
would guide the subsequent emission reduction efforts among nations inan orderly fashion. The Brazilian Proposal (Chapter 7) and per capita allocations (Chapter 8) are two examples of principle-based proposals. The
Brazilian Proposal would apportion emission reduction requirements based

Introduction: An Architecture for Climate Protection19

Box 1.2. Business As Usual: The Challenge of Setting Targets
In determining emission targets, governments will primarily be concernedwith their business-as-usual (BAU, or “baseline”) scenario, which represents the most plausible projection of future emissions.1 BAU embodies thenotion of what would happen, hypothetically, if climate-friendly actions
were not taken. BAU emission estimates can help governments gauge thestringency and economic acceptability of a particular emission target. The
difficulty of estimating BAU patterns stems from trying to forecast the future, a challenge that may be greater in developing and transition countries, which have fewer consistent historical patterns and for which development is more affected by external conditions. Even in mature economiesof the industrialized countries, however, accurately predicting future economic and emission trends is difficult.
Dynamic targets (Chapter 5) represent an attempt to lessen some of the
problems associated with postulating a BAU reference case by introducing
targets that are subject to adjustment according to shifting economic conditions. This was the main appeal of a dynamic target for Argentina (Argentine Republic 1999), which used nine different future scenarios to determine the magnitude and mechanics of the target it ultimately announced.
Chapter 5 introduces the concept of “dual targets”—an innovative way tofurther reduce (but not eliminate) economic uncertainty in establishingemission limitations.
continued on next pageon each country’s relative responsibility for the global temperature increase.
The per capita approach would distribute allowances according to the sizeof a country’s population. There are other allocation-based approaches—
not examined here—that operate similarly.20
Principle-based approaches often are advanced under the mantle of equity, a stated principle of the Climate Convention. (See Box 1.3.) The
most recent IPCC assessment catalogs 13 equity principles and their associated allocation rules (Toth and Mwandyosa 2001), illustrating a diversity of views on what constitutes an equitable allocation of emission allowances across countries. Similarly, many believe that, given North-Southdisparities in negotiating capacity and power, a principle-based approachto negotiating commitments is fairer procedurally. Some developing countries question whether they can ever get a “fair deal” if emission commitments are determined on the basis of raw bargaining power.

20

Building on the Kyoto Protocol: Options for Protecting the Climate

Box 1.2. continued
The concept of BAU is also relevant to other approaches examined inthis volume. The concept of Sustainable Development Policies and Measures (SD-PAMs, Chapter 3) is predicated on taking actions that diverge
from a “conventional development path.” Emission credits under the Clean
Development Mechanism (CDM) or Sector-CDM (Chapter 4) must be“additional” to those that would have occurred otherwise. Both of theseapproaches involve the same slippery concept of business as usual.
Two of the approaches examined in this volume attempt to sidestep the
difficult issue of business as usual, as they are not concerned with the statusquo. An allocation based on equal per capita entitlements, or an approachbased on relative responsibility for global temperature increase (i.e., theBrazilian Proposal), operates according to predetermined principles that do
not involve BAU forecasting. Nevertheless, these approaches do not entirely avoid the morass of BAU. Countries will still be concerned about
assessing the reduction efforts required by a given target, and such assessments typically involve forecasts of future emission levels. The politicalacceptability of a particular target is strongly influenced by the magnitude
of emission reductions required, as well as the associated costs or benefits.
1 Even though Kyoto targets are expressed relative to a base year (e.g., 8 percent
below 1990), the difficulty of meeting them typically involves assessing current
emission levels relative to future emission projections (e.g., a 2010 target mightamount to a 20 percent reduction compared to projected levels).

To be sure, however, the issue of equity should not be associated solely
with the differentiation of emission commitments achieved through principle- or pledge-based negotiations. Equity is relevant to all elements of
the architecture. For example, the Montreal Protocol on Substances that
Deplete the Ozone Layer is widely perceived as fair not only because country
commitments were differentiated but also because industrialized countries
ultimately compensated developing countries for phasing out ozone-depleting substances (Banuri et al. 1996). Developing countries agreed tophase-out schedules only after industrialized countries provided the necessary financing through a multilateral fund. Similarly, the level of acceptable climate change (see “Global Environmental Objective” below)
will have a major bearing on equity because the impacts of climate change
will be unevenly distributed. As suggested by the definition in Box 1.3,

Introduction: An Architecture for Climate Protection21

Box 1.3. Equity and Climate Protection
The Climate Convention stipulates that countries should protect the climate system “on the basis of equity, and in accordance with their common
but differentiated responsibilities and respective capabilities” (emphasis
added). In general terms, the Intergovernmental Panel on Climate Change(following on Flexner 1997) defines equity as “the quality of being fair or
impartial” or “something that is fair or just.” In the narrower context ofinternational environmental issues, Harris defines equity as “a fair and justdistribution among countries of benefits, burdens, and decision-making
authority associated with international environmental relations.” Several
equity considerations are embedded in these definitions, including the following:
Procedural equity concerns the fairness of the negotiating process. Albin
states that during negotiations all Parties should have the opportunity forfair hearing, fair input, fair play, and fair procedures. More specifically, allParties should be given full and equal opportunity in the debates and all
Parties should negotiate in good faith, reciprocate, and adhere to agreed
rules. In addition, decision-making should be transparent and votes representative.
Consequentialist equity refers to the fairness of outcomes or distributive
justice, that is, the distribution of greenhouse gas emission limitations andtheir associated costs and benefits, as well as the burdens associated withadapting to or bearing the physical impacts of climate change.
Consequentialist equity also has a temporal dimension: Intergenerational
equity suggests that actions to protect the climate system are called for in
the near term so that future generations do not suffer from unacceptableclimatic changes.
Sources: Banuri et al. 1996 (IPCC, above), Albin 2002, Harris 2000.

the totality of the climate protection architecture, not just one element,
ultimately will influence whether governments perceive an agreement as
fair. Likewise, achieving an internationally acceptable differentiation ofgreenhouse gas commitments is not just a matter of agreeing on equity
principles. Countries may hold fundamentally different worldviews on climate change encompassing very different notions about the urgency ofclimate protection and the nature of appropriate management strategies(Rayner 1994, cited in Banuri et al. 1996).

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Building on the Kyoto Protocol: Options for Protecting the Climate

Market Mechanisms
Market mechanisms, such as international emissions trading, are increasingly embraced by the international community in efforts to address climate change.21 The primary attraction of market mechanisms is cost-effectiveness, a principle enshrined in the Climate Convention (Article 3.3).
Emissions trading supports this principle by providing incentives for emission reductions to be undertaken where they are the least costly. The merits of emissions trading with respect to cost-effectiveness are extensively
documented in the literature.22
The basic mechanics of international emissions trading are relatively
simple. First, governments must commit to emission limitation targets(discussed above). Second, such targets are divided into discrete, tradable
units. These tradable units are often referred to as allowances, because they
“allow” the holder to emit a specified amount of greenhouse gases, say, one
ton of carbon dioxide or the equivalent amount of another greenhousegas. Governments may choose whether to distribute these allowances todomestic emitting sources. Third, allowances could then change hands inseveral ways—in trades between governments, between a governmental
and a private entity, and between private entities. The party purchasing
allowances is entitled to emit more; the party selling those allowances isrequired to emit less.
As explained in Chapter 2, the Kyoto Protocol incorporates an international emissions trading system, as well as two project-based market mechanisms—joint implementation and the CDM. In addition to lessening thecost of greenhouse gas emission cuts, the CDM aims to promote sustainable development in the developing world. Several other approaches discussed in this volume could also use market mechanisms. SD-PAMs (Chapter 3) could entail access to the CDM. Sector-CDM (Chapter 4) suggests
expanding the scope of the CDM to encompass entire sectors or geographic
regions. Dynamic targets (Chapters 5 and 6), variants of the Brazilian Proposal (Chapter 7), and a system of per capita–based entitlements (Chapter 8) could each use an international emissions trading system. Chapter 9
illustrates the cost-effectiveness benefits that could be realized under awell-functioning trading system.
Financial and Technology Commitments
Financial provisions—such as those for capacity building, adaptation assistance, and technology transfer—are essential to crafting North-South
compromises. For example, the final package adopted as the 2001

Introduction: An Architecture for Climate Protection

23

Marrakesh Accords comprises technical provisions for making the Kyoto
Protocol operational and a financial component, however limited, aimed
at helping developing countries address climate change and adapt to its
physical impacts. This financial package includes an adaptation fund anda least developed country fund for which industrialized countries havepledged a relatively small amount of money.23 Currently, the climate change
regime has designated the Global Environmental Facility (GEF) as its financial mechanism. In addition to managing several funds for the Climate Convention, the GEF finances activities supporting the Convention’s
implementation in developing countries, including capacity building,preparation of national communications and greenhouse gas inventories,
and vulnerability and adaptation assessments.
To the extent that developing countries are asked to take on new greenhouse gas commitments, the design and funding of financial mechanisms
will be critical. According to the Climate Convention, the degree to whichdeveloping countries will effectively implement their commitments depends on the degree to which they receive assistance from the industrialized countries (UNFCCC 1992, Article 4.7). The IPCC further states,“Most analysts…suggest that both equity and efficiency considerations
create a case for large international financial transfers as part of any regime for substantial reductions in greenhouse gas emissions” (Banuri et al.
1996).
Accountability Provisions
Any effective climate protection architecture will require provisions fordetermining whether countries are adhering to their promises. These provisions include national monitoring and reporting as well as the review of
information (such as emissions data) submitted by Parties in order to ensure accuracy and completeness. These requirements are essential conditions for implementing some options for greenhouse gas limitation commitments as discussed above, since a government cannot manage what it
cannot or does not measure. Equally important are the procedures andconsequences to which countries are subject if they fail to comply with
their obligations (or are suspected of non-compliance). Such credibility
mechanisms are already enshrined in the Kyoto Protocol and the subsequent 2001 Marrakesh Accords and will undoubtedly form important building blocks for future climate agreements.

24

Building on the Kyoto Protocol: Options for Protecting the Climate

Global Environmental Objective
To what end is the above-discussed climate protection architecture directed? What constitutes “climate protection”? The Climate Convention(and by association the Kyoto Protocol) establishes, as an ultimate objective, the “stabilization of greenhouse gas concentrations in the atmosphereat a level that would prevent dangerous anthropogenic interference withthe climate system.” The Convention also stipulates that, “Such a levelshould be achieved within a time-frame sufficient to allow ecosystems toadapt naturally to climate change, to ensure that food production is notthreatened and to enable economic development to proceed in a sustainable manner.”
There is currently no agreement on what constitutes a dangerous levelof greenhouse gas concentrations. The IPCC’s most recent assessment report states that, “Given the large uncertainties that characterize each component of the climate protection problem, it is impossible to establish a
globally acceptable level of GHG concentrations today” (Toth andMwandyosa 2001). Yet, an important step to building an environmentallyeffective climate regime would be to achieve greater clarity on a longterm goal (Berk et al. 2001, Corfee-Morlot 2002). A long-term perspective casts the climate protection challenge into sobering relief: Even limiting atmospheric greenhouse gas concentrations to a doubling of pre-industrial levels would likely require a wholesale transition in the world’s
energy economy. A more formal long-term objective might help shape
more effective near-term actions in a way that is consistent with a variety
of future atmospheric stabilization options. One promising approach explored by the COOL Global Dialogue Project is to ensure that global commitments keep future climate protection options open to a stabilization of
CO2 concentrations at 450 ppmv (550 ppmv including all gases) (Berk et
al. 2001).

III. Seven Approaches to Climate Protection
Rigid divisions between industrialized and developing countries have beena main feature of the international climate debate (and indeed other debates) over the past decade. To protect the atmosphere from dangerous
climate change, the coming decade must witness the bridging of this divide between richer and poorer nations. Accomplishing this will require,
first and foremost, industrialized country leadership, as called for under
the Climate Convention. New ways of designing international coopera-

Introduction: An Architecture for Climate Protection

25

tion, such as those examined here, will also need to be considered, if not
adopted.
When examining the different approaches, here and in subsequent chapters, it is important to avoid false comparisons. The approaches presenteddiffer in scope, application, and purpose; they represent different elementsof a climate protection architecture. Some of them are mutually compatible, and none of them represents the best or most appropriate approach
for all countries. Chapter 10 explains the elements of a climate protection
architecture that are prominent in each approach.
The Kyoto Protocol
In Chapter 2, Joanna Depledge describes the salient features of the climate protection architecture that currently exist in the 1997 Kyoto Protocol. As the focal point of international negotiations from 1995 to thepresent, the Kyoto treaty is clearly the architecture with which the international community is most familiar and comfortable. No doubt, someelements of the Protocol will persist for decades to come, and other approaches, such as those described in this volume, may even be absorbed
into the Kyoto Protocol framework in the future. Depledge assesses theviability of continuing Kyoto—preserving the existing architecture (e.g.,
fixed targets) but widening its scope to include developing countries. The
author also examines the processes through which the Kyoto Protocol can
expand and embrace some of the other approaches presented in this volume. In the process of articulating the Kyoto Protocol’s architecture andits procedures, Depledge illuminates the historical context of the current
tensions between industrialized and developing countries.
Sustainable Development Policies and Measures
In Chapter 3, Harald Winkler and his colleagues examine Sustainable
Development Policies and Measures, an innovative approach for developing countries to contribute to climate protection. For most developing
countries, climate change is not an immediate priority, and sustainable
development could be a more robust objective around which to organize
action. The SD-PAMs approach harnesses this reality by beginning withthe development objectives and needs of developing countries. If countries act early to move to greater sustainability in their development path,they will start bending the curve of their greenhouse gas emissions downward. The approach’s logic is derived directly from the Climate Convention, which states that countries should promote “sustainable develop-

26

Building on the Kyoto Protocol: Options for Protecting the Climate

ment” through “policies and measures to protect the climate system” (Article 3.4). As the authors point out, the emphasis in the climate negotiations has been to focus on emission reductions rather than sustainable
development. The approach is illustrated through a case study of South
Africa.
Sector-Based Clean Development Mechanism
Chapter 4, by Joséluis Samaniego and Christiana Figueres, examines a
sector-based Clean Development Mechanism and considers its potential
application in Mexico City. This approach builds on the already operational project-based CDM. Currently, CDM rules and institutions are designed primarily to encompass projects that are relatively narrow in scope,such as electric power or energy efficiency projects. The Sector-CDM represents an expansion of the scope of the CDM to cover entire national
sectors (such as cement or power production) or geographic areas (such asa municipality). This approach could support emission reductions and sustainable development benefits—the two expected by-products of the
CDM—across a wider array of activities. This approach could also bringfinancial resources to fund the kind of SD-PAMs discussed in Chapter 3.
It is important to note that this approach differs from others in this volume in that a Sector-CDM is not necessarily a post-Kyoto one. Because
the definition of a CDM project is currently indeterminate, new rules conceivably could make this approach operational in the relatively near future.
Dual-Intensity Targets
In Chapter 5, Yong-Gun Kim and Kevin Baumert explore two distinct
ideas—dynamic targets and dual targets—and how, individually and incombination, they can be used to reduce the uncertainties inherent incommitting to greenhouse gas emission limitations. Establishing greenhouse gas targets is a contentious process. Future emission levels are highly
uncertain (especially in developing countries), and countries are wary of
any commitment that could turn out to be excessively stringent. Yet, weaktargets might not deliver any environmental benefits. Dynamic targets, as
alluded to in Section II of this chapter, could help address these challenges. Dynamic targets differ in two important respects from the fixed
targets adopted in the Kyoto Protocol. First, dynamic targets adjust according to a variable (such as GDP) that typically has a strong influence
on emission levels. The adjustments could be made by using intensity orIntroduction: An Architecture for Climate Protection

27

indexed targets—the two main kinds of dynamic targets. Second, morethan one target can be used. In this regard, Kim and Baumert explore theviability of using high- and low-intensity targets (i.e., dual targets), between which a country would occupy a “safe zone” where it would neither
be out of compliance nor able to sell emission allowances.
Argentine Voluntary Commitment
In Chapter 6, Daniel Bouille and Osvaldo Girardin offer a specific andunique example of a country that sought, and failed, to implement a voluntary commitment based on a dynamic target. In 1998, Argentina declared its intentions to be bound by an emission limitation target andfurther elaborated on the specifics of that target the following year. The
authors illuminate the political context under which Argentina made its
commitment, emphasizing Argentina’s desire to align its foreign policy
objectives with those of the United States. The chapter likewise demonstrates that target setting is a technically complex exercise, in part because of the uncertainty of future emissions and the treatment of gases
other than CO2, such as methane from agriculture. The chapter articulates several lessons learned from the Argentine experience—both in deciding to commit to a voluntary target and in specifying the target’s natureand level—that could be useful to other countries contemplating similaractions.
Brazilian Proposal
In Chapter 7, Emilio La Rovere, Laura Valente, and Kevin Baumert explore the Brazilian Proposal. The most salient feature of this Proposal is its
call for sharing emission reduction burdens on the basis of each country’s
relative responsibility for the global temperature increase. This idea is derived from the “polluter pays” principle and builds squarely on the Climate Convention language calling for all countries to protect the climate
system according to their “common but differentiated responsibilities andrespective capabilities” (Article 3.1, emphasis added). The Brazilian Proposal is the only approach examined in this volume that has been officially proposed to the UNFCCC Parties. The proposal was originally submitted in July 1997, before the adoption of the Kyoto Protocol, and revised in 1999. Although the Proposal played an important role in the
Kyoto negotiations, it did not garner a consensus. It may yet play an important part in future debates on shaping a global climate protection sys-

28

Building on the Kyoto Protocol: Options for Protecting the Climate

tem. Chapter 7 explores various ways that the Proposal could be expanded
to include developing countries and adapted to increase its workability.
Per Capita Entitlements
In Chapter 8, Malik Amin Aslam explores per capita-based emission entitlements, the approach that has gained perhaps the most attention ofany examined in this volume. The per capita entitlements idea is based on
the notion of “equitable” resource sharing and elaborates on the proposition that each person has the right to emit an equal amount of greenhousegases. Although there are many variants of this approach, most begin bysuggesting that overall global emissions must contract to a level that prevents dangerous climate change. Moreover, emissions per person must converge from today’s levels to one that is equal across all countries. The
analysis addresses key issues likely to shape the acceptability and effectiveness of an equal per capita entitlements approach, including issues of
equity and the application of various fairness criteria, the importance ofinternational emissions trading, and the ability to account for diverse national circumstances. The author proposes an alternative that might increase the political appeal of a per capita-based solution.

Notes
1. The Kyoto Protocol’s first commitment period runs from 2008 to 2012. Although
this may sound far away, negotiations for the second commitment period must be
concluded by the end of 2007, according to the Protocol’s own provisions. Negotiations could begin between 2003 and 2005.
2. See Menand (2001, 431) for a metaphor of probabilistic thinking.
3. Indeed, some strategies to protect the global climate system do not even involve aninternational treaty. This volume does not address such strategies.
4. If non-CO2 gases could be included in this figure, the responsibility would shift
somewhat toward developing countries because many developing countries have ahigher share of non-CO2 gases than industrialized countries.
5. Some hydropower installations can result in significant emissions of greenhousegases, particularly dams in tropical countries. See WCD (2000).
6. This agreement, known as the Berlin Mandate, establishes that the protocol orother legal instrument to be negotiated should not include new commitments fordeveloping countries.
7. For treatment of this subject, see Baumert and Kete (2001).
8. For more information, see the Natural Resources Defense Council webpage at http://
www.nrdc.org/media/pressreleases/020722.asp.

Introduction: An Architecture for Climate Protection

29

9. Some of the elements of a climate protection architecture address the rights or
privileges of governments (or their private entities) under the treaty. These include
the right to participate in international emissions trading and the CDM. Other
elements of differentiation address the obligations of countries—what they shouldor must do. Access to particular treaty rights typically comes part and parcel withthe assumption of parallel obligations.
10. “Voluntary” is an ambiguous term. For this reason, we use the term “non-binding”
instead. See Werksman (1999) for a discussion on this point.
11. The case of Argentina exemplifies this distinction (Chapter 6). Although its
commitment was dubbed “voluntary,” Argentina’s communication to the UNFCCC
stated that “the present commitment shall constitute a binding international
commitment once the Conference of the Parties to the UNFCCC implements a
new option that may enable non-Annex I Parties” to assume a target and participate
in the mechanisms (Argentine Republic 1999). If the COP had taken such action,Argentina’s target would be considered voluntary and binding.
12. Experts disagree on this point. Literally speaking, treaty commitments are binding
on Parties. However, the loose phrasing of commitments in the UNFCCC,
according to many, renders them aspirational rather than mandatory commitments.
Article 4.2b, for example, requires industrialized countries to “communicate…
detailed information on its policies and measures… with the aim of returning
individually or jointly to their 1990 levels these anthropogenic emissions of carbon
dioxide and other greenhouse gases.” This differs from Kyoto’s clear emission
reduction requirements and non-compliance procedures.
13. For example, see Levy et al. (1992). When viewed as legally binding regulatory
rules, many agreements will appear as ineffective (e.g., Convention on Long-Range
Transboundary Air Pollution, or LRTAP). Yet, multilateral environmental agreements can establish important norms and principles, increase governmental concern
for environmental problems, and catalyze processes that enhance the capacity of
governments to address environmental problems.
14. Many industrialized countries have not achieved the emission limitation pledges
made in the Climate Convention.
15. Another reason for the preference for trading over taxes (i.e., quantity over priceinstruments) identified by Pizer (1999) is the hope that emission allowances might
be distributed free, whereas a carbon tax would require a transfer of revenue togovernments.
16. Of course, this assumes that countries comply with the target.
17. Like a carbon tax, the level of a cost cap would need to be harmonized acrosscountries.
18. Authors’ calculations, based on EIA (2001a).
19. The European Union, however, is still a special case because both the member states
and the European Union are Parties to the Protocol. The European Union has
strong institutions that can exercise jurisdiction over its members in important
policy areas. Thus, the joint fulfillment of commitments among a regional grouping
will be harder in other cases.

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Building on the Kyoto Protocol: Options for Protecting the Climate

20. For other principle-based proposals, see, specifically, Blanchard et al. (2001),
Groenenberg et al. (2001), Gupta and Bhandari (1999), and Müller (2001b), and,generally, Banuri et al. (1996) and Toth and Mwandosya (2001).
21. Taxes, of course, are also a kind of market-based mechanism. As discussed above,
however, greenhouse gas taxes are more likely to be implemented at the domestic
than international level.
22. See Baumol and Oates (1988) and Tietenberg (1985). For experiences with U.S.
domestic programs, see Carlson and Burtraw (2000), Stavins (2001), and US EPA(1985). At the international level, however, emissions trading is relatively untested.
Achieving the positive results that have been demonstrated in domestic contexts
will require competitive markets and other conditions that may prove elusive,
especially within the confines of international treaty law where participation andcompliance cannot be assured (Baumert et al. 2002). The Kyoto Protocol constitutes the first major experiment in international emissions trading.
23. UNFCCC 2002, Decisions 5/CP.7 and 7/CP.7.

Continuing Kyoto

31

2. CONTINUING KYOTO:
Extending Absolute Emission Caps
to Developing Countries
Joanna Depledge

Introduction
The climate change regime, consisting of the 1997 Kyoto Protocol and its“parent” treaty the 1992 United Nations Framework Convention on Climate Change (UNFCCC), provides the foundation for international efforts to address climate change. (See Box 2.1 for a brief history of theclimate change regime.) Under this regime, while all countries have general obligations to address climate change, only industrialized countries
are subject to specific emission controls, with legally binding caps on theirgreenhouse gas (GHG) emissions established in the Kyoto Protocol. However, the ultimate objective of the Convention and the Kyoto Protocol—
to prevent dangerous human interference with the climate—cannot be
met without also entailing specific controls on the emissions of developing countries. Although the climate change regime is silent on the natureof such controls and how they should be introduced, the default path would
be to continue the Kyoto Protocol’s approach to emission controls, that is,for developing countries to also assume legally binding caps on their emissions. The challenges posed by “continuing Kyoto” in this way make up
the focus of this chapter.
The chapter also draws attention, however, to the fact that the procedural framework of the climate change regime is sufficiently flexible to beable to accommodate any of the alternative approaches to emission controls explored by the Climate of Trust project. Moreover, some of the substantive mechanisms of the Kyoto Protocol—such as its reporting systemand even emissions trading—could also be applied to other forms of emission controls. Kyoto could therefore also continue under a different emission control system, not just one of absolute emission caps. Whatever system is chosen, continuing the framework of Kyoto would have the great

32

Building on the Kyoto Protocol: Options for Protecting the Climate

Box 2.1.

Major Milestones in the Climate Change Regime

1988

UNEP and WMO establish the Intergovernmental Panel on Climate Change (IPCC).

1990

The UN launches negotiations on a framework convention on climate change.

1992

The UN Framework Convention on Climate Change is adopted in New York andopened for signature at the Earth Summit in Rio de Janeiro, Brazil. The Convention
receives 154 signatures and enters into force in 1994.

1995- The first Conference of the Parties (COP 1) in Berlin launches a new round ofnegotiations to strengthen targets for Annex I Parties.
- IPCC second Assessment Report concludes that the balance of evidence suggests a
discernable human influence on the global climate.

1997

COP 3 meeting in Kyoto, Japan adopts the Kyoto Protocol.

1998

COP 4 meeting in Buenos Aires, Argentina adopts the “Buenos Aires Plan of
Action,” setting out a program of work on the Kyoto Protocol’s operational rules andthe implementation of the Convention. The deadline for achieving these rules is set
for 2000.

2000

COP 6 meets in The Hague, but negotiations break down.

2001- January. IPCC Third Assessment Report is released.
- March. U.S. President George W. Bush announces that the United States will not
become a Party to the Kyoto Protocol.
- July. At the resumed session of COP 6, Parties adopt the “Bonn Agreements,” apolitical deal on the Kyoto Protocol’s rules and the implementation of theConvention.
- November. COP 7 in Marrakesh adopts the “Marrakesh Accords,” a set of detailed
rules for the Kyoto Protocol and the implementation of the Convention.

2002- The World Summit on Sustainable Development meets in Johannesburg, South
Africa, to review progress since the 1992 Earth Summit.
- COP 8 is held in New Delhi, India.

Abbreviations: COP (Conference of the Parties; the annual meeting of Parties under the
Climate Convention); UNEP (United Nations Environment Programme); WMO (World
Meteorological Organization, IPCC (Intergovernmental Panel on Climate Change)advantage of building on an architecture that is already in place and understood. The difficult and complex negotiations that were needed to agree
the Kyoto Protocol and, later, the rules for its implementation set out inthe 2001 Marrakesh Accords, should serve as a warning against any moveto negotiate a whole new framework.
The chapter first describes the climate change regime and then analyzes
the procedures in place for its further development, both through individual accession by developing countries to absolute emission caps, as wellas the launch of a comprehensive new negotiating round. The chapter
then considers the advantages and shortcomings of continuing Kyoto

Continuing Kyoto

33

through the extension of absolute emission caps to developing countries.
Finally, the chapter draws conclusions that serve as a launch pad for examining the alternative options discussed in the remainder of this volume. I.

I.

The Climate Change Regime

Principles and Categories of Parties
The climate change regime enshrines a deal that was struck during thenegotiation of the Convention on how to distribute the burden of addressing climate change. This deal is founded on the principles of “common
but differentiated responsibilities” and industrialized country leadership(UNFCCC 1992, Article 3.1), which have precedents in many other international environmental agreements. The Convention reflects an understanding that, while all countries have a common responsibility to address global climate change, the industrialized countries have a special
duty to take the lead, due to their greater historical contribution to climate change, their generally higher per capita emissions, and their moreabundant financial and technological resources to respond to the problem. This does not exempt developing countries from action; the assumption is that, once industrialized countries have taken the lead, developing
countries will follow. By ratifying the Convention, its 186 Parties haveaccepted the principles of “common but differentiated responsibilities”
and industrialized country leadership, and their application to subsequent
agreements in the climate change regime, such as the Kyoto Protocol.
The principles of “common but differentiated responsibilities” and industrialized country leadership broadly underpin the regime’s classification of the world’s states. This classification is carried over to the Kyoto
Protocol from the Convention, which lists 41 countries in its Annex I,
calling these “Annex I Parties.” The remainder of the world’s states, mostly
the developing countries, fall into the category known as “non-Annex I
Parties.” Although, as discussed below, there are procedures in the Convention to enable non-Annex I Parties to “graduate” to Annex I status, inpractice this has proved problematic, and only a handful of countries have
graduated in this way. The division between Annex I and non-Annex I
Parties has thus become rigid, and increasingly fails to reflect the diversityof national circumstances.

34

Building on the Kyoto Protocol: Options for Protecting the Climate

Table 2.1.

Annex I Parties, Subcategories, and Targets

Annex I Party

Sub-category

TargetAnnex II
Annex II
EIT
Annex II
EIT
Annex II
EIT
EIT
Annex II
EIT
Annex II
Annex II
Annex II
Annex II
Annex II
EIT
Annex II
Annex II
Annex II
Annex II
EIT–
EIT
Annex II+8–8 (–13)*–8 (–7.5)
–8
–6
–5
–8
–8 (–21)–8–8–8 (0)–8 (0)–8 (–21)–8 (+25)–6+10–8 (+13)–8 (–6.5)
–6
–8
–8
–8
–8 (–28)

Australia
Austria
BelarusBelgium
Bulgaria
CanadaCroatia
Czech Republic
Denmark
Estonia
European Community
FinlandFranceGermany
GreeceHungary
Iceland
Ireland
Italy
Japan
LatviaLiechtenstein
Lithuania
Luxembourg

Annex I Parties

To date, the Annex I Parties consist of the 24 developed countries thatwere members of the Organization for Economic Cooperation and Development (OECD) in 1992 when the Convention was adopted, along with
the European Community, Liechtenstein, Monaco, and 14 “countries witheconomies in transition” (EITs), that is, the more industrialized countriesof the former Soviet Union and Central and Eastern Europe (see Table
2.1).
The list of Parties in Annex I was drawn up based on membership ofpolitical groups—the OECD and, more loosely, the former Soviet bloc—
rather than any objective indicator. Even the use of OECD membershipproved controversial, with Turkey, an OECD member, arguing that its lower
historical emissions and less advanced economy did not warrant its inclusion in Annex I. Moreover, as there is no reference to OECD membershipin the Convention, this is not currently an accepted criterion for graduation to Annex I. While Mexico and South Korea have become membersof the OECD since 1992, they have not joined Annex I.1

Continuing Kyoto

Table 2.1.

35

continued

Annex I Party

Sub-category

TargetMonacoNetherlands
New Zealand
NorwayPolandPortugal
Romania
Russian Federation
Slovakia
Slovenia
Spain
SwedenSwitzerland
TurkeyUnited Kingdom
UkraineUnited States–
Annex II
Annex II
Annex II
EIT
Annex II
EIT
EIT
EIT
EIT
Annex II
Annex II
Annex II
“special circumstances”
Annex II
EIT
Annex II–8–8 (–6)0+1–6–8 (+27)–80–8–8–8 (+15)–8 (+4)–8*–8 (–12.5)
0–7Notes: Targets represent percentage changes in greenhouse gas emissions during the firstcommitment period (2008–12) relative to 1990 emissions. Targets in parentheses are individual
country targets for the 15 members of the European Union (EU), which redistributed its
collective 8 percent reduction target at the E.U. Environment Ministers Council in June 1998.
* Although they are in the Convention’s Annex I, Belarus and Turkey do not have targets listed
in the Protocol’s Annex B as they were not Parties to the Climate Convention when the Kyoto
Protocol was adopted.
Abbreviation: Economy in Transition (EIT).

Annex I includes two main sub-categories: the EITs on the one hand,
and the OECD members (again, only as of 1992) on the other. The EITs
are identified by a footnote in Annex I and are allowed a “certain degreeof flexibility” in meeting their commitments.2 The OECD members, fortheir part, are also listed in the Convention’s Annex II, which means theymust provide financial assistance to developing countries and technology
transfer to both developing countries and EITs. A third sub-category wascreated in 2001, when formal recognition was given to Turkey’s “special
circumstances” as an Annex I Party.
Non-Annex I Parties

All remaining countries are grouped together as “non-Annex I Parties.”
The only sub-category within this group consists of the least developed
countries, which are granted special assistance and leeway in the submission of their national reports.3 These countries are not listed in the Con-

36

Building on the Kyoto Protocol: Options for Protecting the Climate

vention, the assumption being that the list maintained by the United
Nations General Assembly, currently amounting to 49 countries, will be
used. The Convention also lists types of developing countries particularly
vulnerable to climate change or to the negative impacts of mitigation measures and singles these out for special assistance.4 This category, however,is so general that almost any developing country could argue that it falls
under these terms.
The 145 or so non-Annex I Parties consist mostly, but not exclusively,of members of the Group of 77 (G-77), the developing country negotiating group formed in 1964 that was originally composed of 77 countries but
now comprises 133 members and is active throughout the U.N. system(China is not part of the G-77, but usually is allied with it). The “G-77
and China” covers a wide spectrum of countries at diverse levels of development and with differing interests relative to climate change, from thesmall island states, which are seriously threatened by sea-level rise, to theoil-exporting countries, which fear that GHG emission cuts will damage
their economies. Despite the diverse interests of its members, the G-77
attributes great importance to maintaining unity, for historical reasonsand for accentuating its bargaining strength vis-à-vis the industrialized
world. Its individual members are therefore reluctant to argue against the
G-77 position, not least because they may require G-77 support on otherissues, including those in the broader international arena. Like any group,
the G-77 has its more influential members. These, typically the highest
aggregate or per capita developing country emitters, tend to be the mostwary about taking on formal emission controls.
In addition to the members of the G-77 and China, non-Annex I Parties include the Central Asian countries of the former Soviet Union andseveral Central and Eastern European states—such as Albania, Armenia,
Georgia, and Uzbekistan—along with the new OECD entrants Mexicoand South Korea, and a few others, such as Israel.
The Convention and the Kyoto Protocol typically make reference to“developing countries” rather than “non-Annex I Parties.” The term “developing country,” however, is not defined in the Convention, nor does anofficial definition exist in the U.N. system. This leads to some uncertainty
over the status of countries that are non-Annex I Parties yet do not deem
themselves to be developing countries, such as the countries of Central
Asia and Central and Eastern Europe, many of which consider themselves
to be EITs.

Continuing Kyoto

37

Emission Controls
Emission caps for Annex I Parties

Under both the Convention and the Kyoto Protocol, only Annex I Parties are subject to emission caps. The Convention requires Annex I Parties to take policies and measures “with the aim of returning” their emissions of carbon dioxide and other GHGs to their 1990 levels by 2000.5
The loose phrasing renders this an aspirational goal, rather than a legallybinding commitment. The Kyoto Protocol, however, strengthens the Convention by setting individual, legally binding6 caps on the emissions ofAnnex I Parties. Each Annex I Party must reduce its emissions or, in somecases, limit its emissions growth from 1990 levels by the 2008–2012 commitment period (the EITs may apply to use a different base year). The
individual targets of the Annex I Parties are listed in the Protocol’s Annex
B and amount to a collective environmental goal of cutting total Annex I
Party emissions by “at least 5 percent” below 1990 levels. The European
Union’s (EU’s) 15 members, which each have an 8 percent reduction target listed in Annex B, have redistributed that target among themselves
under a procedure known informally as the “bubble” (UNFCCC 1997a,
Article 4). The bubble procedure, which is also allowed under the Convention,7 is open to any group of Parties that wants to meet its targets
jointly.8
The emission caps of Annex I Parties were assigned in Kyoto through aprocess of political negotiation. A variety of objective criteria were proposed, including emissions per capita, emissions per unit of gross domestic
product (GDP), GDP per capita, and projected population growth. However, negotiators failed to agree on which criteria to use, with most countries supporting whichever would grant them a more lenient target.
The targets cover emissions of six main GHGs: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons (HFCs), perfluorocarbons (PFCs)
and sulfur hexafluoride (SF6). To help meet emission targets, countries
may incorporate limited “sink” activities that absorb GHGs in the landuse, land use change, and forestry sector.9 The precise rules governing theuse of sinks under the Kyoto system, including which activities should becovered and what the limits (if any) should be, were hotly negotiated. The
resulting deal, agreed to as part of the Marrakesh Accords, has been widelyinterpreted as a renegotiation of the original Kyoto targets, granting certain Parties—notably Canada, Japan, and the Russian Federation—a considerable number of additional credits.

38

Building on the Kyoto Protocol: Options for Protecting the Climate

Box 2.2. Key Features of the Kyoto Protocol
Legally binding emission caps for Annex I Parties. Major characteristics:• Fixed caps on emission levels, in some cases allowing limited emissions
growth and in most requiring reductions• Set by negotiation, not objective criteria• Historical base year of 1990, with some flexibility for economies intransition• Five-year commitment period from 2008 to 2012
• Emissions of six greenhouse gases, plus carbon dioxide absorptions
from certain land use, land-use change, and forestry activities. Individual cap on forest management credits.
Flexibility mechanisms include international emissions trading, joint implementation, and the Clean Development Mechanism.
Accountability mechanisms include the measurement, reporting, and review of commitments. The Protocol also includes procedures and mechanisms for dealing with potential cases of non-compliance, as well as mandatory consequences for Annex I countries found to be in violation of certain
commitments.

Key features of the Kyoto emission caps, as well as other features of theProtocol, are summarized in Box 2.2.
Involvement of non-Annex I Parties

While only Annex I Parties are subject to emission targets, non-Annex I
Parties are also deeply involved in the climate change regime. In addition
to hosting projects under the Clean Development Mechanism (see below), non-Annex I Parties have a set of general obligations to address
climate change under both the Convention and the Protocol, including
commitments to implement and regularly update climate change mitigation programs, promote climate-friendly technological development, andreport on emissions and climate policy.10
The Convention states that the extent to which developing countries
will effectively implement their commitments depends on the receipt of assistance from the industrialized countries (emphasis added; UNFCCC 1992,
Article 4.7). Annex II Parties must therefore cover the “agreed full incre-Continuing Kyoto

39

mental costs” of implementing the general commitments of developing
countries, along with the “agreed full costs” those countries incur in preparing their reports.11 Financial assistance from Annex II Parties is mainly
channeled through the Convention’s financial mechanism, operated by
the Global Environment Facility.
Flexibility Mechanisms
The Kyoto Protocol includes three flexibility mechanisms designed to help
Annex I Parties meet their targets as cost-effectively as possible. Under
the first, emissions trading,12 a Party finding it relatively easy to meet its
target may sell surplus emission credits to another Annex I Party finding it
more difficult or expensive to stay under its own cap. It must, however,maintain a defined number of emission credits known as a “commitment
period reserve” that cannot be traded to minimize the danger that it would
then be unable to meet its own target. Through the second mechanism,
joint implementation,13 an Annex I Party may fund a specific project that
reduces emissions (or increases the uptake of GHGs in the land use, landuse change, and forestry sector) in another Annex I Party, and credit those
reductions against its own target.
In practice, transactions under both emissions trading and joint implementation are most likely to take place between the OECD members ofAnnex I as buyers and the EITs as sellers, given that opportunities to reduce emissions are generally cheaper and more plentiful in EITs. Some
EITs—notably the Russian Federation and Ukraine—were granted whatmany consider rather generous emission targets under the Kyoto Protocol.
This has prompted concerns that a large supply of free emission creditsthat do not result from any mitigation action (so-called hot air) could
undermine the environmental goal of the Kyoto Protocol.
The third flexibility mechanism is the Clean Development Mechanism14(CDM), which works in a similar way to joint implementation, but thistime bringing in developing countries as hosts of mitigation projects. The
CDM’s institutional structure is more complex, including an Executive
Board to supervise the system. Its monitoring procedures are also more
stringent to guard against the generation of fictitious credits, given thatdeveloping countries do not have emission targets themselves and often
lack the capacity required to accurately monitor their emissions. In addition to helping Annex I Parties meet their emission targets, the CDM
aims to promote sustainable development in developing countries.

40

Building on the Kyoto Protocol: Options for Protecting the Climate

Accountability Mechanisms
The Kyoto Protocol’s accountability mechanisms15 aim to safeguard theintegrity of the Kyoto system by ensuring that emission reductions are
genuine, and not over- (or under-) estimated through error or fraud. Theybuild on similar, less extensive obligations under the Convention, which
require Annex I Parties to submit GHG emissions data on an annual basis, as well as regular national reports on their climate policies. The annual emissions data and regular national reports are subject to review by
independent “expert review teams” with the power to raise any potential
compliance problems with the Protocol’s Compliance Committee. A complex accounting procedure,16 including registry systems at both the national and international levels, will also record transactions in emission
credits and allowances. The right of Annex I Parties to fully participate in
the three flexibility mechanisms depends on their compliance with theseaccountability mechanisms.
A Compliance Committee17 will review cases of suspected non-compliance and, if non-compliance is proven, impose penalties through its enforcement branch. Annex I Parties failing to meet their emission targets,for example, must make up the difference plus 30 percent in the next
commitment period, must prepare a “compliance action plan,” and arebanned from selling under emissions trading. The compliance system also
includes a facilitative branch and early warning system to help Parties
before they fall into non-compliance.
Protection Against Negative Impacts
The climate change regime responds to developing countries’ fears concerning their vulnerability, both to the adverse effects of climate change
itself and to the possible negative repercussions for their economies ofclimate policies in the industrialized world (e.g., through reduced demandfor oil). To help developing countries adapt to climate change, a levy will
be imposed on CDM transactions and the proceeds channeled to a newly
created adaptation fund, which operates under the Kyoto Protocol.18 Twoother new funds were also set up under the Convention: a special climatechange fund will finance a variety of adaptation and mitigation projects,
including economic diversification for countries heavily dependent on fossil
fuel income, while a least developed countries fund will finance national
adaptation programs of action in least developed countries.19 Several industrialized countries20 have already pledged to donate $410 million a year
in new money to these funds by 2005.

Continuing Kyoto

41

Institutions and Procedures
Debate and decision-making under the climate change regime continues
through the institutions and procedures established by the Convention,
which will also be used by the Kyoto Protocol.
The Conference of the Parties (COP) to the Convention, the main
body that takes decisions on Convention matters, meets annually, bringing together all the Parties to the Convention. Once the Protocol enters
into force, the COP will serve as the Protocol’s “meeting of the Parties”(known as the COP/MOP), but only Parties to the Protocol will havedecision-making power on Protocol issues. The Convention’s two subsidiary bodies—the Subsidiary Body for Scientific and Technological Advice(SBSTA) and the Subsidiary Body for Implementation (SBI)—which usually meet twice a year to carry out more technical work, will also serve theProtocol.
A particular feature of the climate change regime’s procedures is thatvoting rules have never been adopted due to disagreement over what majority should be needed to take decisions. Voting is therefore possible only incases in which the Convention—and, when it comes into force, the Kyoto
Protocol—specifically provides for it, such as the adoption of amendments
to the treaties. Even where voting is allowed, Parties are deeply reluctant to
go to a vote; governments lay great store on achieving global consensus tomove forward on global environmental issues such as climate change, andare loath to openly single out “winners” and “losers” through voting. Decisions in the climate change regime, as with most environmental treaties, aretherefore invariably taken by consensus. The overall effect of such a consensus decision-making rule is to give greater power to small minorities,
which can threaten to veto the agreement of the majority.

II. Procedures for Further Developing the Climate Change
RegimeIt was always clear that the Kyoto Protocol, and its emission caps for Annex I Parties for 2008–12, could not provide the definitive solution toclimate change. The Kyoto Protocol was intended to serve as a dynamic
instrument for long-term climate policy, which could be adapted as Annex I Parties took on stronger targets and non-Annex I Parties assumed
formal emission controls.
Two possible pathways—not mutually exclusive—are set out in the climate change regime for further developing its commitments: (1) the accession of individual non-Annex I Parties to Annex I status and Kyoto-42

Building on the Kyoto Protocol: Options for Protecting the Climate

type emission caps and (2) the launch of a comprehensive new negotiating round, whose outcome could encompass any of the options for emission controls discussed in this volume. Each of these pathways is discussed
below.
Individual Accession
Why would an individual developing country seek to join Annex I andassume Kyoto-type emission caps? The principle incentive—aside frompolitical pressure or a sense of international responsibility—is to enable
the country to participate in emissions trading and thereby potentiallyachieve economic gains. Indeed, this was the main motivation behind
Kazakhstan’s bid to accede to Annex I.
A developing country wishing to join the Kyoto Protocol’s system of
emission caps must take two steps. First, it must become an Annex I Party;
second, it must have its name, along with an agreed emission target, included in the Protocol’s Annex B.
Joining Annex I

A developing country has two possible options to join Annex I for the
purposes of the Kyoto Protocol. The first option is for the country to follow the procedure in Article 4.2(g) of the Convention. Under this Article, any non-Annex I Party may notify the Depositary to the Convention—the U.N. Secretary General—that it wants to be bound by the specific commitment of Annex I Parties under the Convention, that is, totake policies and measures with the aim of returning GHG emissions to1990 levels by 2000. In doing so, the Party would automatically become
an Annex I Party under the Kyoto Protocol (assuming, of course, that it
ratifies the Protocol), as the Protocol’s definition of an Annex I Party
includes any Party that has made a notification under Article 4.2(g)(UNFCCC 1997a, Article 1.7). The Party would therefore be subject toall the rights and obligations of Annex I Parties under the Protocol, including the right to participate in emissions trading once it has taken on
an emission target (subject to its compliance with the accountability
mechanisms, as discussed above).21
The second option is for the country to add its name to Annex I throughan amendment to that annex in the Convention, so that it would become
an Annex I Party under the Convention, as well as the Protocol. The two
options are not mutually exclusive: A country could seek to amend Annex I in addition to making a notification under Article 4.2(g). The pro-Continuing Kyoto

43

cedures for amending the Convention’s annexes are spelled out in Articles 15 and 16 of the Convention.22 These procedures have already been
invoked several times, with mixed results (see Box 2.3).
Inscribing an emission target in Annex B

Even if a non-Annex I Party under the Convention succeeds in becoming
an Annex I Party for the purposes of the Protocol, it must take a second
step in order to assume an emission cap. Its name, along with an agreed
emission target, must be added to Annex B to the Protocol.
This is the stage at which Kazakhstan finds itself in 2002. Having madea declaration under Article 4.2(g), Kazakhstan will be an Annex I Party
under the Protocol, but is not listed with an emission target under Annex
B. This is, in effect, a “no-man’s land.” As an Annex I Party, Kazakhstan
cannot host CDM projects; however, lacking an emission target, neither
can it participate in joint implementation or emissions trading. Belarus
and Turkey may find themselves in a similar situation.23
Procedures for inscribing a Party’s name and emission target under Annex B, however, are more restrictive than for joining Annex I.24 For astart, there is no notification procedure akin to the Convention’s Article
4.2(g) in the Protocol. Instead, the only option open to a new Annex I
Party wishing to add its name and a target to Annex B would be to propose
a formal amendment to the annex. The procedure for amending Annex B
is similar to that for amending the Convention’s annexes, except that any
Party affected by the amendment must also give its written consent.25
While procedures are in place for amending Annex B, the Protocol
does not specify how the emission targets for new Annex B entrants should
be determined. Given that the existing targets in Annex B were decided
through a process of political negotiation, the assumption is that a new
Annex I Party wishing to join Annex B would propose a target, and thenenter into negotiation with others to establish a figure that would enjoy
consensus. Annex B would then be amended to add the Party’s name andits agreed emission target.
Prospects for individual accession

Individual accession to Annex I and Annex B may provide a useful entry
point to assume emission caps for some non-Annex I Parties that feel readyto do so in the near term, especially those that are not properly considered
to be developing countries and are not members of the G-77. These might
include Kazakhstan’s Central Asian neighbors, which would be granted a44

Building on the Kyoto Protocol: Options for Protecting the Climate

Box 2.3. Amending Annexes I and II
Annex I was first amended at the Third Conference of the Parties (COP 3)
in 1997 to add the names of Croatia, Liechtenstein, Monaco, and Slovenia
and to replace the name of Czechoslovakia with those of the Czech Republic and Slovakia. This uncontroversial decision was made on request of theParties concerned, and in accordance with Article 4.2(f) of the Convention, which required Annexes I and II to be formally reviewed before December 31, 1998. The Czech Republic, Monaco, Slovakia, and Slovenia all
previously had made a submission under Article 4.2(g), while Croatia had
declared when it ratified the Convention that it wished to join Annex I.
Also at COP 3, Turkey proposed an amendment to Annexes I and II todelete its name from their lists. Industrialized countries, however, did notwant to delete a country from the Convention’s annexes when their efforts
were instead focused on promoting developing country accession. Negotiations dragged on until COP 7 in 2001, at which time agreement was finallyreached to delete Turkey from Annex II, following acknowledgement that itshould not have to provide financial support to non-Annex I Parties, someof which are wealthier than Turkey. Although Annex I was not amended,
the COP took a decision formally recognizing that Turkey faces special circumstances, which place it in a different situation than that of other Annex
I Parties. How Turkey’s special circumstances will be recognized in practiceis unclear.
In a third case, Kazakhstan proposed to add its name to Annex I throughan amendment to the Annex. This proposal met with opposition when it
was formally considered at COP 5 in 1999, with some influential developing countries fearing the precedent that would be set if Kazakhstan wereallowed to join Annex I. While the new entrants to Annex I at COP 3 were
all countries with advanced economies and strong ties to the European
Union, Kazakhstan’s circumstances are more akin to those of the developing world and the precedent would therefore be more significant. Although
Kazakhstan’s proposal might have prevailed if put to a vote, the reluctanceof Parties to vote under the climate change regime meant this was not politically feasible. After failing to amend Annex I, Kazakhstan took the otherroute open to it and, in March 2000, exercised its sovereign right to make a
notification under Article 4.2(g). COP 7 subsequently recognized that
Kazakhstan would become an Annex I Party under the Protocol, but also
explicitly noted that it would remain a non-Annex I Party under the Convention.

Continuing Kyoto

45

degree of flexibility as EITs. The recognition of Turkey’s special circumstances may also serve as a useful precedent for granting the same status toother prospective Annex I entrants with relatively advanced economies
that are not part of the former Soviet bloc.
Moreover, now that the year 2000 is over and, in practice if not in law,the Kyoto Protocol has effectively superseded the Convention’s specificcommitment to return emissions to their 1990 levels by 2000, the COP
could decide to waive this formal obligation for new Annex I entrants.
This could help alleviate another concern of non-Annex I Parties, forwhich returning emissions to 1990 levels is wholly unrealistic.
Accession, however, is not a promising route for the large-scale entry of
non-Annex I Parties into an emission control regime. Although, in procedural terms, joining Annex I and Annex B need not be insurmountablycomplex, it remains a convoluted process, especially in the face of political opposition from other Parties, as illustrated by the case of Kazakhstan.
Furthermore, if countries do join during an existing commitment period,
this could make it difficult to sustain a collective environmental goal,
especially if the new entrant is granted a generous target and could enter
the emissions trading market as a large seller of permits. From a politicalperspective, the prospect of significant numbers of G-77 members breaking ranks with the Group and individually acceding to Annex I is unlikely. The issue of accession to Annex I has acquired considerable negative political baggage over the years. Non-Annex I Parties may be reluctant to join Annex I for the symbolism it implies of joining a “developed
country” annex, even if their practical concerns were met.
Overall, therefore, the procedures currently included in the climatechange regime for non-Annex I Parties to take on emission controls holdout little promise, by themselves, for the effective future development of
the regime. The procedures could be supplemented, however, by the launchof a comprehensive new negotiating round, as discussed below.
Launching a New Negotiating RoundThe Convention and the Kyoto Protocol both include clauses that could
be invoked to launch a new negotiating round. Both treaties, for example,
mandate their respective decision-making bodies, the COP and the COP/
MOP, to “periodically examine the obligations of the Parties… in the lightof the objective of the Convention.”26 This broad mandate could be raisedat any time, provided the decision-making bodies agreed to do so. The
Convention and the Protocol also include more specific clauses that serve

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Building on the Kyoto Protocol: Options for Protecting the Climate

as hooks to launch new negotiating rounds at a specific time. For instance,
it was such a clause—Article 4.2(d) of the Convention requiring COP 1
in 1995 to “review the adequacy” of Annex I Party commitments—that
triggered negotiations on what became the Kyoto Protocol.
The Convention hook: Second review of adequacy

The review under Article 4.2(d) of the Convention that led to the negotiations on the Kyoto Protocol was not a one-off event. Article 4.2(d) infact called for a second review by December 31, 1998, and thereafter atregular intervals. Industrialized and developing countries, however, disagreed over the scope of the second review, generating a deadlock. Whileindustrialized countries wanted to discuss a process for extending emission
controls to non-Annex I Parties, developing countries preferred to review
the implementation of existing Annex I emission targets. This review process remains “on hold” on the provisional agenda of the COP; despite its
tortuous history, it may still provide an opportunity to launch a negotiation on the future of the regime.
A new negotiation round launched under the Convention need not belinked to the Kyoto Protocol and could result in the adoption of an amendment to the Convention27 or even a new protocol, either for just nonAnnex I Parties or for all Parties.
The Kyoto Protocol hooks: Second commitment period negotiations andgeneral review

Article 3.9 of the Kyoto Protocol calls on the COP/MOP to launch negotiations on targets for Annex I Parties for the Protocol’s second commitment period by 2005. Article 9, in turn, provides for a more general reviewof the Protocol. This general review is not confined to the commitmentsof Annex I Parties and therefore could be used to launch a new negotiating round that would also cover non-Annex I emission controls. The first
general review of the Protocol is to be carried out by the second session of
the COP/MOP. Assuming the Protocol enters into force in 2003, this could
be in 2005. These two processes—the launch of negotiations on second
commitment period targets for Annex I Parties and a general review of
the Protocol—could therefore be held concurrently. Moreover, by 2005,
Annex I Parties must have made “demonstrable progress” in meeting theircommitments under the Protocol (UNFCCC 1997a, Article 3.2). A review of such “demonstrable progress” might provide the opportunity forAnnex I Parties to prove that they have taken the lead required of them inContinuing Kyoto

47

addressing climate change, opening the way to discussing non-Annex I
emission controls.28 The coming together of these various processes points
to 2005 or 2006 as a propitious time for launching a new negotiating round.
The most obvious outcome of a new negotiating round launched under
the Kyoto Protocol would be for the COP/MOP to adopt an amendment
to the Protocol introducing a new set of emission controls—in whateverform—for both non-Annex I and Annex I Parties; as discussed below,
quantified emission controls for developing countries would have to beaccompanied by deeper emission cuts among the industrialized countries.
The amendment procedures for the Kyoto Protocol, which mirror those in
the Convention, are set out in its Article 20.29 Such an amendment could
be combined with the adoption of a new annex—Annex C, for example—
listing non-Annex I Parties and their new emission controls, just as Annex B does for Annex I Parties.

III. The Challenges of Extending Emission Caps to Developing
Countries
The climate change regime is largely silent about its future development,leaving the substantive mandate and eventual outcome of a comprehensive negotiating round completely open. A new negotiation launchedthrough the procedural avenues outlined above could therefore result inagreement on any of the approaches presented in this volume.
Of specific interest for this chapter, however, are the implications ofextending the current system of individual legally binding emission caps tonon-Annex I Parties. The practicalities and challenges associated with“continuing Kyoto” in this way, some of which apply more generally tomany of the alternatives outlined in this book, are discussed below.
How Could Developing Country Emission Caps be Negotiated?
Negotiating individual emission caps for 145 diverse non-Annex I Parties
poses a daunting challenge. A careful analysis of how such negotiations
might work, however, suggests they need not be so difficult. It might bepossible, for example, to agree that the 49 least developed countries be
exempt from at least the first round of emission caps for developing countries. It might then make sense to give the remaining members of the G77 space to negotiate among themselves the emission targets of its members, much as the Annex I Parties withdrew into small backrooms to negotiate their own targets in Kyoto, or as the EU negotiated in private thetargets of its members under the “bubble.” Giving the G-77 space to do

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Building on the Kyoto Protocol: Options for Protecting the Climate

this would fulfill the twin goals of taking the diverse national circumstances of developing countries into account and respecting the desire forunity of the Group. It is likely, however, that the larger developing countries with strong trading links to the industrialized world would be compelled to engage in negotiations on their own targets also with the major
Annex I Parties.
It is probable that natural groupings would emerge among G-77 members that could share similar targets, on a regional basis, for example. Naturalinterdependencies may also emerge, with some countries seeking to peg
their targets to those of their main economic partners or rivals, perhaps
through a formal bubble akin to that of the EU. The South Americancountries that are members of the MERCOSUR trading bloc,30 for example, might choose to peg their targets against each other. This is what
happened in the Kyoto negotiations; along with Switzerland, most EITs
applying to join the EU adopted the same target as the Union. Such groupings and interdependencies would help reduce the complexity of the negotiation.
Negotiations among the other non-Annex I Parties outside the G-77
could take place in a similar fashion. The Central Asian countries would
probably wish to take on similar commitments—much as the European
EITs on the one hand, and the Russian Federation and the Ukraine on theother, did in Kyoto. For their part, Mexico, Israel, and South Korea arelikely to negotiate their targets with their major industrialized economic
and political partners.
Alternatively, targets could be negotiated for just a few non-Annex I
Parties, with additional groups of developing countries gradually joining
the system through new rounds of negotiations over time. While such a
staggered approach may appear simpler to negotiate, as fewer targets would
be under discussion at any one time, the fact that some G-77 members
would have targets and others not would almost inevitably loosen the bondsthat hold the G-77 together. Such a challenge to G-77 unity may prove
politically unacceptable for the Group.
Adapting the System to Developing Country Needs
While the accommodation of diverse national circumstances is inherent
in a system of negotiated emission caps, some further flexibility could also
be granted.

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49

Base year

Non-Annex I Parties could, for example, be allowed to select their own
historical base year, subject to approval by the COP/MOP. A boundary
could be placed around such flexibility by defining a range of years fromwhich Parties could choose.31 Given that developing country economies
are often more volatile than those of industrialized countries, a base period
may prove more suitable than a single base year to help smooth out fluctuations in emissions. Hungary, for example, uses a base period of 1985–87
as part of the flexibility granted to it as an EIT.
Scope of the emission caps

Additional forms of flexibility could also be considered, such as allowing
developing countries to select which gases are covered by their targets;
and whether, and if so how, to also include the land use, land-use change,
and forestry sector. Flexibility may be especially needed concerning reliable data; for instance, such data are often absent for the land use, landuse change, and forestry sector, despite its importance for many developing countries. Moreover, extending the existing rules on the land use, landuse change, and forestry sector to non-Annex I Parties would make for avery complex negotiation, especially as individual caps would need to be
set on credits that could be claimed from forest management activities.
The process of setting these caps for Annex I Parties was riddled with
controversy, and similar difficulties could be expected in negotiating suchcaps for non-Annex I Parties, especially in the face of data scarcity.
An especially important issue surrounding the land use, land-use change,
and forestry sector concerns whether non-Annex I Parties should be permitted to count avoided deforestation against their emission caps, as Annex I Parties currently are. Avoided deforestation was excluded from thescope of the CDM for the first commitment period, partly due to concerns
over the difficulty in calculating “real” avoided emissions and the consequent threat to environmental integrity, along with fears over “leakage,”whereby trees preserved or planted in one region thanks to a CDM projectmight simply trigger equivalent tree-felling in another.
The situation would be more complex if sinks, and especially avoided
deforestation, were included within the scope of developing-country emission caps. Although the threat of “leakage” would be reduced if non-Annex I Parties had overall emission caps covering sink activities, the threat
remains that fictitious credits might be generated, especially in a context
of poor emissions data. The impermanence of sink credits is another broader

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Building on the Kyoto Protocol: Options for Protecting the Climate

concern surrounding the land use, land-use change, and forestry sector;
that is, carbon locked up in trees could be quickly re-released to the atmosphere in the event of a forest fire, for example. These concerns suggest
the need for separate rules on the inclusion of the land use, land-use change,
and forestry sector in developing-country emission caps or, alternatively, arequirement for countries to demonstrate the existence of sound monitoring and high quality data before this sector can be included.
Accounting, reporting and review

A new system of developing-country emission caps could draw on the Kyoto
Protocol’s existing accounting, reporting, and review architecture. However, given that non-Annex I Parties are generally at an earlier stage inthe development of their emissions estimation and monitoring systems, asignificant capacity-building effort would be needed to enable many ofthem to comply with the highly detailed accounting and reporting obligations currently set forth for Annex I Parties. One option would be to draft
less demanding guidelines for non-Annex I Parties under the Protocol,
just as there are separate reporting guidelines for these Parties under theConvention. Alternatively, non-Annex I Parties could use the same accounting and reporting guidelines as Annex I Parties, but with some flexibility in their application; the implementation of these guidelines could
then be introduced gradually among non-Annex I Parties, depending on
their capacities. The aim must be to ensure the maximum possible rigor,
in order to maintain confidence in emissions data and therefore in thevalidity of emission reductions.
Compliance

A related issue concerns the compliance regime under the Kyoto Protocol. Developing countries may call for special consideration by the Compliance Committee in the event of suspected non-compliance; the compliance procedures already make reference to the principle of “common
but differentiated responsibilities.” It is possible to envisage a sliding scaleof such special consideration. At one end of the scale, developing countries could be offered extra assistance from the facilitative branch to help
improve emissions data quality or if the early warning system identifies
potential compliance problems, but no other special consideration in theevent of actual non-compliance. At the other end of the scale, cases of
non-compliance by developing countries would be dealt with only throughthe facilitative branch, without incurring any penalties from the enforce-

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ment branch; this would, in effect, render developing country targets legally non-binding.
Legal nature of the caps

At a broader level, it is questionable whether legally binding emission
caps are indeed appropriate for developing countries, especially for theirfirst round of quantified targets. Annex I Parties themselves built up experience with legally non-binding pledges in the late 1980s and a soft target
under the Convention before they moved on to legally binding caps under
the Protocol. A system of voluntary emission caps may be more acceptable to developing countries at this stage, especially given the uncertainty
in their emissions data and projections. As discussed in Chapter 1, theterm “voluntary” is an ambiguous one, with all commitments in the climate change regime being fundamentally voluntary, in that a sovereignstate cannot be forced to sign on to them, and can withdraw its adherence.
In this case, however, the assumption is that voluntary pledges would bemade that would not be considered as binding obligations and, importantly, would not be subject to penalties under the Compliance Committee’s
enforcement branch. This would have implications, however, for the extent to which developing countries could participate in the flexibility
mechanisms; legally binding emission caps are widely seen as fundamental
to the emissions trading regime under the Kyoto Protocol.
Flexibility mechanisms

Whether and how to integrate non-Annex I Parties into the emissions
trading regime, even if they do take on legally binding emission caps, raises
many issues. On the one hand, a primary incentive for non-Annex I Parties to join an emission control system is to participate in emissions trading. On the other hand, their full participation has the potential for generating “tropical hot air.” If a large number of non-Annex I Parties, or justa few large emitters, enter the emissions trading market with lenient targets—and therefore a ready surplus to sell—this could lead to a flood ofcheap emission credits that could remove any incentive for real climatechange mitigation measures among the remainder of the Parties. A related problem surrounds the generally poorer quality emissions data inmost non-Annex I Parties, which opens up the possibility that fictitious
emission credits might be sold. The combination of potential tropical hot
air and poor emissions data means that full participation of non-Annex I
Parties in an emissions trading regime, especially one that involves unre-52

Building on the Kyoto Protocol: Options for Protecting the Climate

stricted trading with Annex I Parties, could undermine the environmental integrity of the Kyoto Protocol.
These concerns can be alleviated to some extent. Although it would
not solve the potential problem of overly lenient targets, extending thecurrent eligibility requirements for participating in emissions trading to
non-Annex I Parties would mean that they had to meet the existing rigorous accounting and reporting obligations of Annex I Parties before being
able to sell emission credits, thus helping to ensure the validity of these
credits. Extending eligibility requirements in this way would serve as aclear incentive for non-Annex I Parties to improve their data collection
and monitoring systems, although additional financial resources and capacity-building initiatives would be needed to help them make such improvements. Non-Annex I Parties unable to comply with the eligibility
criteria for emissions trading might still be able to participate in joint
implementation, which has its own supervisory committee for host countries not fully meeting accounting and reporting obligations. Under such a
scenario, non-Annex I Parties with emission targets would no longer participate as hosts in the CDM, which would be reserved for any countries
exempt from the emission target system.
These are just examples of what could happen. Exactly how non-Annex I Parties with emission targets would be treated under the three mechanisms would be open to negotiation. While such negotiations would undoubtedly seek to minimize the potential for tropical hot air and fictitious
credits, the political reality is that the availability of a certain number ofcheap emission credits from developing countries may be necessary bothto induce Annex I Parties to commit themselves to deeper emission cuts,and to persuade the United States to re-enter the Kyoto regime. Agreeing
to the levels of non-Annex I emission targets, and any additional rules forthe flexibility mechanisms, so as to fulfill the triple aims of cost-effectiveness, environmental integrity, and attracting both Annex I and non-Annex I Parties into the system, promises to be a difficult balancing act.
Advantages
Familiarity“Continuing Kyoto” by extending individual caps on absolute emissions
to non-Annex I Parties has several advantages. At the most basic level, it
has the virtues of simplicity and familiarity. These are at a premium in the
climate change regime, where introducing new ideas tends to be a labori-

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53

ous process, due to the cultural, political, and linguistic diversity of theParties, as well as the limited capacity of many developing countries—
some of which have only one person working on climate change—to study,
critically analyze, and respond to novel concepts. Continuing with an existing system would bypass the learning process that would inevitably berequired for Parties to develop a common understanding of a new concept.
In an intergovernmental process involving 186 Parties, complexity cankill even the most intellectually brilliant proposal.
Advance knowledge of environmental benefits

From an environmental perspective, a structure of emission caps has theimportant benefit of providing an overall goal consisting of the sum of
individual targets—such as the collective 5 percent reduction in the Kyoto
Protocol—so that the environmental benefits, providing all targets aremet, are known when the targets are agreed. This is not the case withemissions intensity targets, for example, whose ultimate environmental
impact depends on the subsequent level of GDP growth. Unlike a “topdown” atmospheric concentration target, however, the environmental
benefits of a structure of emission caps would not be known when thenegotiations are launched.
Full flexibility in implementation

From an economic standpoint, emission caps, as formulated in the Kyoto
Protocol, have the advantage of granting full flexibility to Parties as regards their climate policy. Parties can determine which policies they will
put in place to meet their targets without restriction, with the only constraint being on the use of carbon sink credits from the land use, land-use
change, and forestry sector, and the need to maintain a “commitment period reserve” to participate in emissions trading. Few other proposals foremission control systems give Parties such broad flexibility.
Respect for national circumstances

Extending the current Kyoto system would imply that emission caps fordeveloping countries were set through a bottom-up process of politicalnegotiation, as they were for Annex I Parties in Kyoto, rather than the
top-down application of any objective criteria. Allowing developing countries to decide for themselves what target they could commit to, in thecontext of their complex cultural, economic, social, and political situa-

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Building on the Kyoto Protocol: Options for Protecting the Climate

tions, and to negotiate that target with others, would certainly be an obvious and direct way of recognizing their diverse national circumstances.
Obstacles
Political complications

The primary obstacle to extending formal emission controls to developing
countries—be they absolute emission caps or any other form of commitment—is the general reluctance of these Parties to assume such controls, bothbecause of the low priority given to climate change in the face of more
immediate development and local environmental concerns, and the absence of serious leadership from the industrialized countries in tackling
their GHG emissions. This is particularly the case among the more powerful G-77 countries. Persuading developing countries as a group to commit
to any formal emission controls will be a difficult task until Annex I Parties give clear signs that they have taken the lead required of them inaddressing climate change. Although the Annex I Parties as a whole probably returned their emissions to 1990 levels by 2000,32 this is largely due tothe dramatic collapse in emissions in the EITs following the fall of theSoviet Union more than a decade ago. Although emissions have shown adownward trend in some OECD countries (notably Germany and theUnited Kingdom), emissions in the OECD as a whole rose by 6.6 percent
between 1990 and 1999, with some countries (including the United States,
Canada, and Australia) experiencing double-digit percentage increases.
For the developing countries, many of which also question the extent ofeffort shown in providing financial assistance and technology transfer, thisdoes not equate with leadership.
Furthermore, in return for assuming formal emission controls, developing countries are likely to insist on two elements: first, deeper emission
cuts from the Annex I Parties, and second, a large increase in financial
and technological assistance, including for adaptation to climate change
impacts. The present obligation on Annex II Parties to fund the “agreed
full incremental costs” of developing-country mitigation measures will
provide a platform for developing countries to argue that the costs incurred in meeting their new emission caps should also be fully funded.
The extent of these costs could be great and hard to delimit. Pressure may
also come from the oil-exporting countries for some sort of compensation
for any economic loss that they may suffer from this further step toward aless carbon-dependent world. This would make the negotiating round an

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55

especially difficult one for the OECD countries; they would be asked totake on larger emission reductions, which many view as costly, and at thesame time commit themselves to disbursing increased financial and technological aid.
Although this may not be made explicit, acceptance of emission controls by developing countries will almost certainly be linked to the reentry of the United States into the Kyoto system. It is difficult to imagine
the larger non-Annex I Parties, notably Mexico, China, and others withstrong trading relationships with the United States, agreeing to emission
controls if the United States remains outside the system, even with a large
injection of U.S. financial support and technology transfer. The linkage
goes two ways, of course, with the United States—at least the current
Bush administration—unlikely to ever re-enter the Kyoto regime without
formal participation by developing countries. In this respect, a clear disadvantage of “continuing Kyoto” in the current political context is the Bushadministration’s rejection of absolute emission caps in favor of emissions
intensity targets, along with the entrenched negative stance toward the
Kyoto Protocol more broadly. “Continuing Kyoto”—even the use of thename “Kyoto” and the political baggage it evokes—may therefore serve toharden the U.S. resolve against the climate change regime rather than
encourage its re-entry into an emission control system.
Lack of authoritative emissions data

Lack of authoritative emissions data may prove to be a significant obstacle
in setting emission caps for many developing countries. As of mid-2002,
more than 60 non-Annex I Parties had not yet submitted their first national reports under the Convention, with the result that no agreed emissions data exist for those countries. Reaching consensus on using any sourceof data other than officially sanctioned national reports would be difficult.
Even these reports often suffer from important gaps in their data sets and,due to differing assumptions and methodologies used, data often cannot
be meaningfully compared across countries. Data scarcity, especially interms of emission projections, would seriously hinder the establishment of
meaningful absolute emission caps. This suggests the need for a massiveinternational effort to improve the collection and analysis of emissions
data in developing countries before the negotiation of their emission controls. The problem of unreliable emission projections, however, is exacerbated by the tendency of developing country economies to be more volatile, an issue discussed further below.

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Building on the Kyoto Protocol: Options for Protecting the Climate

A tendency toward excessively lenient targets?

In regard to in a system of negotiated emission caps, the moral hazard33
exists that countries would seek the most lenient target possible. It is already assumed that most developing countries will argue for growth caps.
The precedent of the Kyoto Protocol, with large growth caps granted toAustralia and Iceland and, later, through the EU bubble, to Portugal,
Greece, Ireland, and Spain, along with the widely perceived generous targets of the Russian Federation and Ukraine, will not encourage restraint
among the non-Annex I Parties. Weaker public interest in environmental
issues, along with a scarcity of active environmental nongovernmentalorganizations, could further reduce the pressure on non-Annex I Parties
to take on challenging targets.
While these are real concerns, it would be unwise to assume that negotiated emission caps will trigger a race to the bottom. The target-setting
process would not involve self-selection, but negotiation, including withthose countries most vulnerable to climate change, which are developing
countries and G-77 members. Peer pressure from the most vulnerable G77 members—for example, the small island states and least developed countries—is likely to help shore up the emission targets of the larger developing-country emitters. These most vulnerable countries may not be powerful individually, but they are great in numbers—more than half the G77—and maintaining a united G-77 front would necessitate taking theirinterests into account. The experience of the Kyoto negotiations is again
valuable in this regard; the United States, Japan, and Canada all took on
more stringent targets than they had originally proposed as a result of external pressure and negotiation in Kyoto. Moreover, the COP/MOP would
have to approve the new emission caps through the formal process of adopting any amendment or new annex to the Protocol, thus giving any Parties
concerned over excessively lenient—and indeed unacceptably strong—targets the chance to veto them.
Are absolute emission caps appropriate for developing countries?

A more fundamental concern is whether absolute emissions caps are appropriate as a form of emission control for developing countries. Absolute
caps on emissions are generally viewed, especially by developing countries
themselves, as caps on development, while the Convention itself recognizes that development and poverty eradication are the “first and overriding priorities of developing countries” (UNFCCC 1992, Article 4.7). Other
options for developing-country emission controls that are more explicitlyContinuing Kyoto

57

linked to need (e.g., per capita emission caps, see Chapter 8) or development objectives (e.g., sustainable development policies and measures, see
Chapter 3) may provide more politically acceptable solutions.
Moreover, developing country economies tend to fluctuate more thanthose of the industrialized world because of greater vulnerability to suchfactors as poor weather conditions or global economic trends. This leads
to considerable uncertainty over economic growth rates, and therefore
emission projections. A fixed emission cap, even spread out over a 5-year
commitment period, could therefore prove unmanageable. A country mightfind that its economy grew much more rapidly than forecasted, thereby
overshooting its emission target despite the full implementation of its
planned mitigation measures. Conversely, its economy could slump dramatically, generating a large surplus of excess emission credits that could
potentially be sold on the emissions trading market, even if no mitigation
measures were taken. The combination of uncertainty and fixed emission
caps could also encourage non-Annex I Parties to assume optimistic scenarios of economic growth and rapidly rising emissions when negotiating
their caps, thus increasing the danger that overly generous targets will beset. The converse, that uncertainty and fixed emission caps might resultin excessively tight targets, could lead to widespread non-compliance and,in turn, loss of confidence in the system.
These flaws in the applicability of emission caps to developing countries can be illustrated with reference to Argentina (see Chapter 6). In
1999, Argentina proposed to take on a voluntary target for the first commitment period, once a procedure for doing so was agreed under the climate change regime. Given the absence of any reliable projections of GDP
and therefore of GHG emissions, Argentina chose to set a target for itself
based on emissions per unit of GDP (emissions intensity), rather than acap on the absolute level of its emissions. The economic turmoil Argentina has since encountered points to the benefits of such an approach, andthe dangers of setting a fixed cap on emissions, especially one that is legally binding, when meaningful economic and emission projections cannot be made.

Conclusion
An important lesson of this chapter is that the design of the climate change
regime is, at least in procedural terms, highly adaptable; the institutions of
the climate change regime and the procedures for its further development
could allow almost any type of emission control to be built into the Kyoto

58

Building on the Kyoto Protocol: Options for Protecting the Climate

architecture. Given the effort, resources, and extraordinarily complex negotiations that have gone into designing the current regime, it would makesense for any new emission control system to draw on the existing architecture—including its reporting and review system and, where possible,
its flexibility mechanisms—as much as possible.
This chapter has pointed to several challenges associated with extending emission controls to developing countries that would apply to mostoptions presented in this volume. Political obstacles, notably the absenceof clear leadership from industrialized countries, along with the paucity of
reliable emissions data are particularly important. In terms of “continuing
Kyoto” through legally binding caps on absolute emissions, the attractionof this option lies chiefly in its familiarity and full compatibility with theexisting Kyoto architecture. There are important concerns, however, over
the appropriateness of absolute emission caps for developing countries.
These concerns point to the need to expand the horizon of possible nonAnnex I emission controls beyond the default option. While the Kyoto
architecture should be continued, this need not necessarily be done throughlegally binding, absolute emission caps.

Notes
1. The Czech Republic, Hungary, Poland, and the Slovak Republic have also joined
the OECD since 1992, but they were already included in Annex I as EITs.
2. UNFCCC Article 4.6 and Kyoto Protocol Article 3.6.
3. UNFCCC Articles 4.9 and 12.5 and Kyoto Protocol Articles 2.3 and 3.14, whichreference Article 4.9.
4. UNFCCC Article 4.8 and Kyoto Protocol Articles 2.3 and 3.14, which reference
Article 4.8.
5. UNFCCC Article 4.2(a) and (b).
6. The use of the word “shall” denotes the caps as legally binding. See Kyoto Protocol
Article 3.1.
7. Article 4.2(b), which states that Annex I Parties can aim to return their emissions
to 1990 levels by 2000 “individually or jointly.”
8. Any group wanting to make use of the “bubble,” however, must declare exactly how
they will redistribute their target when they ratify the Kyoto Protocol, and thisredistribution arrangement is then fixed.
9. Limits, for instance, include restricting credits from forest management that an
Annex I Party can apply to its individual cap. See UNFCCC (2002, Decision 11/CP.7).
10. UNFCCC Article 4.1 and 12 and Kyoto Protocol Article 10.

Continuing Kyoto

59

11. UNFCCC Article 4.3 and Kyoto Protocol Article 11.2.
12. Kyoto Protocol Article 17 and UNFCCC 2002, Decision 18/CP.7.
13. Kyoto Protocol Article 6 and UNFCCC 2002, Decision 16/CP.7.
14. Kyoto Protocol Article 12 and UNFCCC 2002, Decision 17/CP.7.
15. Kyoto Protocol Articles 5, 7, and 8 and UNFCCC 2002, Decisions 20-23/CP.7.
16. Kyoto Protocol Article 7.4 and UNFCCC 2002, Decision 19/CP.7.
17. Kyoto Protocol Article 18 and UNFCCC 2002, Decision 24/CP.7.
18. UNFCCC 2002, Decision 10/CP.7.
19. UNFCCC 2002, Decisions 5/CP.7 and 7/CP.7.
20. Canada, the European Union, Iceland, New Zealand, Norway, and Switzerland.
21. The legal peculiarities of the climate change regime, however, mean that Parties
making a declaration under Article 4.2(g) remain formally classified as non-Annex I
Parties for the purposes of the Convention and are not bound by the other Convention
obligations for Annex I Parties, such as reporting requirements. This was done toencourage non-Annex I Parties to take on the Convention’s legally non-binding
emission goal, but without also being obliged to meet often onerous reporting
requirements.
22. Any Party to the Convention may propose an amendment, which must be circulated to all Parties at least 6 months before the session of the COP that will consider
it. The COP can then adopt the amendment by consensus, or, if this is not possible,
it can be adopted by a three-quarters majority of Parties present and voting. The
amendment to the Annex then enters into force automatically 90 days after being
communicated to the Depositary (except for any Parties that notify the Depositary,in writing, that they do not accept it).
23. As they were not Parties to the Convention when the Protocol was adopted, thesetwo Annex I Parties were not included in Annex B. However, Belarus has sinceratified the Convention; Turkey, now that its status has been resolved, is also
expected to do so. When they ratify the Protocol and it enters into force, they will
also be Annex I Parties without an emission target under Annex B.
24. Although the chairman of the Kyoto Protocol negotiations attempted to simplify
the Annex B amendment process, Parties were concerned that, if the process were
too easy, their names might be added or their commitments changed without theirconsent.
25. Kyoto Protocol Articles 20 and 21. In addition, once an amendment has been
adopted, it must be accepted through a written notification to the Depositary by
three-quarters of the Protocol’s Parties before it enters into force. Depending on thenumber of countries that become Parties to the Protocol, this could be a very highhurdle. A procedural means to overcome this hurdle may be for the COP/MOP toagree to provisionally apply the amendment, pending its formal entry into force.
26. UNFCCC Article 7.2(a) and Kyoto Protocol Article 13.4(b).
27. Procedures for adopting amendments to the Convention are the same as for
adopting amendments to the Convention’s annexes, except that amendments to the60

Building on the Kyoto Protocol: Options for Protecting the Climate

Convention itself must be ratified by three-quarters of Parties before they enter into
force, and they only apply to Parties that have ratified them.
28. Reports by Annex I Parties on their demonstrable progress must be submitted by
January 1, 2006, and will likely be considered by the COP/MOP in late 2006.
29. Any Party to the Protocol may propose an amendment. See Note 25.
30. Argentina, Bolivia, Brazil, Chile, Paraguay, and Uruguay.
31. Similar to the possibility under the Protocol of choosing 1990 or 1995 as a baseline
for HFCs, PFCs, and SF6.
32. A full set of data to verify this is not yet available.
33. In economics, the term “moral hazard” refers to the effect of certain types of
insurance systems in causing a divergence between the private costs of a particularaction and the social costs of that action (Pearce 1986).

Sustainable Development Policies and Measures61

3. SUSTAINABLE DEVELOPMENTPOLICIES AND MEASURES:
Starting From Development to Tackle
Climate Change
Harald Winkler, Randall Spalding-Fecher,
Stanford Mwakasonda, and Ogunlade Davidson

Introduction
Climate change is a global problem requiring the cooperation of all countries to be addressed effectively. Emissions from the industrialized North
have thus far been greater than from the developing South, but they are
growing rapidly in the latter.1 The principle of “common, but differentiated responsibilities” between industrialized and developing countries iswell established in the negotiations. However, cooperation between Northand South has been limited in the negotiations under the United Nations
Framework Convention on Climate Change (UNFCCC). Climate change
is not seen as a priority by developing countries, which are preoccupied by
the challenges of meeting basic development needs. As the commitment
period beyond the Kyoto targets (2008–12) draws closer, the question of
how developing countries might participate in the effort against global
warming becomes more urgent.
Participation could take different forms. Participation might range frommandatory requirements, such as quantified emission limitation targets,to pledges to make their development path more sustainable. Dividing a
global reduction target among all countries (in a “top-down” manner) is
only one possible approach (see Chapter 1).2 The alternative approach ispledge-based (in a “bottom-up” matter). The pledge could be to quantified emission targets, as in the Kyoto process,3 or more qualitative in nature. In such an approach, it is clear that countries negotiate in their selfinterest, so each tends to propose indicators most beneficial to itself (Grubb

62

Building on the Kyoto Protocol: Options for Protecting the Climate

et al. 1999). Extending the Kyoto regime globally would involve pledges
by developing countries (see Chapter 2).
This chapter outlines and proposes a pledge by developing countries toimplement sustainable development policies and measures (SD-PAMs).
Development is a key priority for decision-makers in developing countries, and therefore building climate change policy on development priorities would make it attractive to these stakeholders. Starting from development objectives and then describing paths of more sustainable development that also address climate change may be the easiest way formany developing countries to take the first steps in longer-term action on
climate change. The approach has a basis in the Climate Convention,
which, together with a proposed reporting structure, would provide sufficient stringency for a first step.
We begin by outlining the SD-PAMs approach, including its main features and assumptions. In Section II, we apply this approach to South
Africa to illustrate the steps taken in practice. Section III considers how
this approach might be extended to other countries and which kinds ofcountries might find it attractive, particularly compared to other approaches. We then consider the relationship of this approach to the ultimate objective of the UNFCCC in Section IV. The conclusion summarizes the major strengths and weaknesses of the SD-PAMs approach.

I.

What Is the SD-PAMs Approach?

SD-PAMs is a pledge-based approach to developing-country participationin mitigating climate change. The approach focuses on implementing policies for sustainable development, rather than setting emission targets. The
SD-PAMs approach recognizes as a political reality that concerns withclimate change (and, in some cases, even environmental policy more
broadly) are marginal for many developing countries, and lower in national priority than economic and development policies.4 It builds on existing commitments and the right to sustainable development enshrinedin the Convention.
SD-PAMs differs from the existing “policies and measures” requirements
for industrialized countries, which clearly prioritize measures with “impacts in affecting GHG [greenhouse gas] emissions and removals”(UNFCCC 1999). Instead, SD-PAMs starts with the development objectives and needs of developing countries. Countries begin by examining
their development priorities and identifying how these could be achieved
more sustainably, either by tightening existing policy or implementing

Sustainable Development Policies and Measures

63

new measures. The next step is to identify synergies between sustainable
development and climate change, that is, those SD-PAMs that also result
in reductions of GHG emissions. To obtain a realistic picture of the impact of a set of SD-PAMs, those policies and measures that increase GHG
emissions also need to be identified.
Starting from Development, Shifting to Sustainability
The SD-PAMs approach suggests that we work backwards from a desired
future state of development. Key development objectives typically include
poverty eradication, job creation, food security, access to modern energy
services, transport, drinking water, education, health services, and land.
Development is needed because the number of houses to be built, mouths
to be fed, and dwellings to be lit and heated is growing.
Sustainability, for the purposes of this chapter, is taken to mean providing for these basic human needs in a way that can continue over time,
result in less damage to the environment, and provide more social benefits
and long-term economic development. Sustainable development must be
driven by local and national priorities. Although documents such as theUnited Nations Millennium Declaration (UN 2000) and the New Partnership for Africa’s Development (NEPAD 2001) articulate goals at theinternational and regional levels, each country will have its own set ofdevelopment priorities. The meaning of sustainable development is shapedby the values of each society, and no single approach is appropriate for all
economies (Munasinghe 2001, Sachs 1999, Zhou 2001). One of thestrengths of the SD-PAMs approach is that it acknowledges and starts
from the premise that development and sustainability are country-specific.
In meeting these basic development needs, different paths are possible,
and the aim of SD-PAMs is to shift toward a more sustainable path ofdevelopment. In describing sustainable paths for meeting development
objectives, the hypothesis is that, on balance, GHG emissions will also be
reduced relative to a conventional development path (Figure 3.1). Many
developing countries are already avoiding emissions through current policy.
If countries act early to move to even greater sustainability in their development path, they will start “bending the curve” (see Raskin et al. 1998)of their emission trajectory.
This hypothesis is supported by the latest findings of the International
Panel on Climate Change (IPCC 2001c). According to the IPCC, a lowcarbon future is “associated with a whole set of policies and actions that goBuilding on the Kyoto Protocol: Options for Protecting the Climate

Figure 3.1.
Theoretical Impact of
Sustainable Development
Policies and Measures on
Trajectory of Greenhouse
Gas Emissions

Conventional
development

GHG emissions

64

Sustainable
development policies

timebeyond the development of climate policy itself” (Morita and Robinson2001). Moving toward a sustainable development path could avoid burdensome future mitigation efforts and even have a greater long-term impact on emissions than climate change policies. Thus, the major contribution of SD-PAMs lies not in promoting mitigation effort per se, but inchanging the reference scenario of emissions from “conventional” to “sustainable.”5 Likewise, the IPCC also finds that the choice of development
path will have a greater impact than climate policy on equity in energyuse, suggesting an additional benefit of SD-PAMs (Morita and Robinson
2001, Figure 2.19).
The importance of sustainable development, and its relationship to climate change, has long been recognized in the UNFCCC process. Article
3.4 of the Convention states as a principle that:
Parties have a right to, and should promote, sustainable development. Policies and measures to protect the climate system against human-inducedchange should be appropriate to the specific condition of each Partyand should be integrated with national development programmes, taking into account that economic development is essential for adopting
measures to address climate change. (UNFCCC 1992, Article 3.4.,
emphasis added)
The negotiations, however, have tended to focus more on emission targets
than sustainable development, due in part to the predominance of theinterests of Northern countries. The links between sustainable development and climate change have received increasing attention in the recent

Sustainable Development Policies and Measures

65

literature.6 The IPCC’s Working Group III has broadened the analysis ofclimate change mitigation to the context of “development, equity andsustainability” in its contribution to the Third Assessment report (Banuri
and Weyant 2001). The challenge considered in this chapter is to turn theconceptual link between sustainable development and climate change intoa workable approach.
Global Frameworks and National Circumstances
Climate change policy can be designed to achieve a certain desirable levelof atmospheric concentration of GHGs in order to meet the UNFCCC
objective of “the stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system” (UNFCCC 1992, Article 2). Given thisobjective of the Convention, many “top-down” global schemes “backcast”
from an assumed GHG concentration target,7 and then allocate the necessary reductions accordingly across countries.8 To be successful, those
approaches will need to demonstrate how they address the needs of countries and people who face poverty on a significant scale. Such global schemes
work out well mathematically, but may have unacceptable consequences
for some developing countries.
The impacts of allocation schemes on developing countries are directly
correlated with the structure of their energy economies. Primary energy
requirements depend on factors such as level of industrialization, economic
structure (e.g., presence of energy-intensive industries), level of motorization (car density), average climate (space heating and cooling demands),
and domestic energy endowment (predominantly coal, hydro, etc). Thesenational circumstances vary widely among countries and determine national interests and therefore negotiating positions.
The national character of the SD-PAMs approach avoids a “one-sizefits-all” approach to allocating targets. Instead of “backcasting” from afuture climate-policy goal, SD-PAMs starts from a country’s future development needs and then identifies the most sustainable path of meeting
those needs. Starting from a sustainable development perspective “immediately reveals that countries differ in ways that have dramatic implications for scenario baselines and the range of mitigation options that canbe considered” (Banuri and Weyant 2001, 76). The SD-PAMs approach,by design, integrates the national development priorities of the country
into its approach to climate change. The SD-PAMs approach would beparticularly attractive to countries such as South Africa, for which top-66

Building on the Kyoto Protocol: Options for Protecting the Climate

down internationally allocated targets may be difficult to agree to or achieve(Winkler et al. 2001).
As the SD-PAMs approach is national in character, it does not havelinks to international emissions trading. However, implementation of SDPAMs that reduce GHG emissions are likely to be good candidates forinvestment under the Clean Development Mechanism (CDM).9 The CDM
requires that projects reduce emissions and promote the sustainable development objectives of the host country; thus, the CDM has a clear synergy with the SD-PAMs approach. Through the CDM and the tradable
emission credits generated, developing countries would have some link tothe emerging market for carbon credits. The prospect of a Sector-CDM(see Chapter 4) adds further potential because actions under the SD-PAMs
approach would involve broader policies (e.g., changes in prices of energy) that could not currently qualify as CDM projects.
Steps in Applying the SD-PAMs Approach
In practice, a country might undertake five steps in considering its commitment to SD-PAMs:
1. Outline future development objectives,10 where possible quantifying
the expected benefits and possible risks. If a long-term vision has been
articulated, backcasting to immediate action is possible. Otherwise,
the country may outline shorter-term goals.
2. Identify policies and measures that would make the development path
more sustainable, primarily for reasons other than climate change (e.g.,greater social equity and local environmental protection while maintaining or enhancing economic growth). The sustainable development
benefits should be quantified as far as possible. These SD-PAMs may
be the following:a. Existing sustainable development policy that is not fully implemented; or
b. New policies and / or more stringent measures.
3. Quantify the changes in GHG emissions of particular SD-PAMs, whichshould be reported in accordance with the Convention or other reporting provisions.
4. Compare the results from steps 2 and 3 to show which SD-PAMs create synergies between sustainable development objectives and climatechange policy, and which conflict.
5. Summarize the net impact of a basket of SD-PAMs on development
benefits and GHG emissions.

Sustainable Development Policies and Measures

67

Many developing countries already identify development objectives instep 1 through a National Strategy for Sustainable Development, or Agenda
21 plans. To estimate the difference in emissions with and without SDPAMs, a projection of baseline emissions will be needed in the second
step.11 The information relating to climate change benefits will be usefulin implementing and funding SD-PAMs, as those offering greater GHG
emission reductions can potentially attract climate change-related funding. Those with greater sustainable development benefits but no climate
benefits need to attract other funding. The next section applies this approach to the situation in South Africa. The scope of this chapter does
not allow for a full quantification or costing of either the development
objectives or the GHG reductions, but examples are provided.

II. Applying SD-PAMs: South Africa as an Illustrative Example
What will the impact of more sustainable development policies and measures in South Africa be on its GHG emissions? To provide a context forthis discussion, some background on South Africa’s emissions profile isuseful.
Context of South Africa’s Emissions Profile
South Africa is a semi-industrialized country with an emissions profilethat in some respects is not typical of other developing countries. Key
characteristics of its economy and energy sector are not favorable in termsof GHG emissions:• Among major developing countries, South Africa’s emissions intensity
is relatively high; in 1999, it emitted 0.96 kg of CO2 per dollar of GDP,
expressed in terms of purchasing power parity (PPP),12 compared to an
average of 0.61 among other non-OECD) countries.13 Reasons for South
Africa’s high emissions intensity include reliance on coal resources forelectricity production, the comparatively low price of electricity,14 theproduction of synthetic liquid fuels, a high proportion of energy-intensive industry and mining, and the inefficient use of energy (Winkler
and Mavhungu 2001; Spalding-Fecher 2001). Coal-fired power stations
account for 93 percent of South Africa’s electricity generation.15• Similarly, emissions per capita are high at 8.22 tons of CO2 (tCO2) per
capita, four times higher than the non-OECD value of 2.11 tCO2 andhigher than several OECD countries (IEA 2001).
• South Africa’s share of historical cumulative emissions (1915–95) issomewhat lower (1.17 percent) than its share of 1999 emissions (1.51

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Building on the Kyoto Protocol: Options for Protecting the Climate

percent), reflecting more recent industrialization than in the North(Winkler et al. 2001).
• While South Africa’s GDP per capita16 lies below the world average($3,160, compared to the global average of $4,890),17 this figure hides
the gap between black and white, and rich and poor, within the country.
Development Priorities
The first step in the SD-PAMs approach is to identify South Africa’s development priorities. South Africa’s development objectives focus on
growth, job creation, and access to key services (including housing, water,
sanitation, transport, telecommunications, energy services, and land reform). An overview of South Africa’s development objectives was set out
in the African National Congress’ Reconstruction and Development
Programme (RDP) (ANC 1994). It outlined job creation through public
works and meeting a range of basic needs as key priorities. However, a new
macroeconomic policy, the Growth, Employment and Redistribution(GEAR) strategy, has superseded the RDP (DTI 1996). As the name suggests, GEAR emphasizes economic growth and jobs, while still seeking toredistribute resources. The policy highlights the financial constraints onachieving development objectives, departing from the greater emphasis
on social development objectives in the RDP.
Job creation is perhaps South Africa’s most important development
objective, and is closely related to economic growth. The RDP envisagedlarge public works programs, which have not materialized. A key elementof the vision of GEAR is “a competitive fast-growing economy which creates sufficient jobs for all work-seekers” (DTI 1996), aiming at 6 percent
growth and the creation of 400,000 jobs per year.18 GEAR argues thatgrowth of 3 percent per annum fails to reverse unemployment.
To achieve economic growth, the government aims to reform the labormarket, reach inflation targets between 3 and 6 percent, reduce the deficit, accelerate tariff reduction, tighten monetary policy, and limit increases
in private- and public-sector wages. Trade liberalization and theprivatization of state-owned enterprises19 are seen as critical mechanisms
to promote competitiveness and achieve growth. Spatial development initiatives give a regional focus to the overall objective of economic growth.
These initiatives are based in locations where the government hopes tofacilitate industrial development through public-private partnerships, theimprovement of infrastructure, the establishment of strategic anchor

Sustainable Development Policies and Measures69

projects, and the creation of industrial clusters and industrial parks (Davisand Wamukonya 1999).
Key to South Africa’s development objectives is access to services thatmeet basic human needs. For the purpose of illustrating the SD-PAMs
approach, this chapter focuses on two areas from those listed above—energy and housing.20 A more comprehensive analysis would require significant effort by a team familiar with all development sectors. Housing andenergy are two sectors in which development objectives and GHG changes
have been quantified in previous studies. Energy accounted for 78 percent
of South Africa’s total GHG emissions in 1994 (Van der Merwe and Scholes
1998); housing is a sector in which large sustainable development benefits
can be expected.
Energy development priorities

The major objectives of government policy for the energy sector, spelled
out in the 1998 Energy White Paper (DME 1998), are the following:• Increasing access to affordable energy services.
• Improving energy governance.
• Stimulating economic development.
• Managing energy-related environmental impacts.
• Securing energy supply through a diversity of energy sources.
Electrification has been a major means of extending access. The firstphase of the National Electrification Programme (1994–99) increased access to electricity from 36 percent in 1993 to 66 percent by 1999.21 The
program was internally funded by Eskom, the South African national utility, at a total cost of about R7 billion (Borchers et al. 2001). In 2000 and
2001, a further 734,000 connections have been made (NER 2000, MlamboNgcuka 2002). The government plans to take direct responsibility for further electrification in a restructured power sector. Provision of energy services is not limited to grid electricity. An off-grid rural concessions program has been launched, aiming to provide a total of 350,000 solar homesystems in seven concession areas. Proposals have been made to extend
the concept to a package that would also include liquefied petroleum gas(LPG) for cooking and other uses (DME 2001a).
A major change in governance of the energy sector is reform of theelectricity industry. The way in which restructuring happens in the electricity sector will have significant impact on delivery of services, as well as
the future role of energy efficiency and renewable energy (Winkler and70

Building on the Kyoto Protocol: Options for Protecting the Climate

Mavhungu 2001). Opportunities exist for independent power producers
to sell renewable energy, but entry into the market is difficult under thecurrent vertically-integrated monopoly system. Public-benefit energy efficiency is likely to be reduced significantly, since private investors havelittle incentive to invest in measures that reduce revenue (Clark and
Mavhungu 2000, Dubash 2002).
In promoting greater diversity in supply, increasing the percentage of
renewable energy in the electricity generation mix is a particular goal.
The government strategy aims to generate 5 percent of the national gridsupplied power—including import/export—from renewable technologies,
mainly from micro-hydro, biomass-fueled turbines, solar thermal, windturbines, and photovoltaics.22 The target may be included in the government policy in the White Paper, soon to be published.
Housing development priorities

Addressing the backlog of housing is a South African development priority. Estimates of the backlog of houses vary, with Hendler (2000) estimating the number at 2.6 million houses in 1998 and current newspaper reports suggesting a backlog of between two and three million houses (Majola2002). Roughly three quarters of the housing backlog is urban, and one
quarter is rural (Hendler 2000). To meet this challenge, the aim in 1994
was to build 300,000 new units each year of the initial 5-year RDP (ANC1994). The government provided a housing subsidy of R17,500 for firsttime homeowners. The Department of Housing indicates that there were
945,555 “top structures completed or under construction” between April
1994 and July 2000.23 The RDP outlined that houses should meet basic
standards, providing at minimum “protection from weather, a durable structure and reasonable living space and privacy” and access to services, namely“sanitary facilities, storm-water drainage, household energy supply … andconvenient access to clean water” (ANC 1994).
Shifts to Greater Sustainability
Given South Africa’s overall development objectives, its sectoral development priorities, and its emphasis on local community development, a
number of further shifts to sustainability are possible (step 2 of the SDPAMs approach). As illustrated in Figure 3.2, current policy probably lies
somewhere between a conventional development path and sustainability.
Managing energy-related environmental impacts is already part of policy,
for example, and is being implemented through programs to promote en-Sustainable Development Policies and Measures

Conventional
development
Current SA policy(BAU)

GHG emissions

Figure 3.2.
Theoretical Impact ofCurrent South Africa
Policy on Trajectory ofGreenhouse Gas Emissions
Relative to Conventionaland Sustainable
Development Paths

71

Sustainable
development policies

timeergy efficiency and renewable energy—even if progress in some areas isstill slow (Spalding-Fecher 2001, 10–15). Business as usual (BAU) refersin this chapter to development as stated in current policies, already an
improvement on the conventional development path. Emission reductions from BAU therefore do not include GHG changes due to current
policy relative to a more conventional development path.
This section outlines possible SD-PAMs for the energy and housing sectors.
SD-PAMs: Electricity

As discussed, the energy sector is a major focus of the government’s development objectives. SD-PAMs promoting greater efficiency, increasing theshare of cleaner energy, protecting public benefits in liberalizing markets,and providing free electricity can achieve these objectives in more sustainable ways.
i. Efficiency

A national target for greater efficiency in electricity consumption can leadto energy savings, local environmental benefits, and GHG reductions. A
recent study (Laitner 2001), using an input-output model of the South
African economy, showed that a 5 percent increase in electricity efficiency
in 2010 would lead to a net increase of some 39,000 jobs and labor incomeof about R800 million. The primary reason for the increases is that spending is diverted away from sectors with lower wage and salary multipliers

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Building on the Kyoto Protocol: Options for Protecting the Climate

toward construction, finance, and manufacturing, which have higher income multipliers. While not analyzed in detail, a national drive toward
energy efficiency of this scale would reduce emissions of carbon dioxide by
about 5.5 million tons of CO2 (MtCO2) in 2010.24
End-use energy efficiency by electricity consumers is another measure thatsaves energy and also reduces GHG emissions. Where energy efficiency
reduces overall electricity consumption, it also reduces the overall needfor installed capacity.25 Apart from savings of energy costs, industry often
benefits through increased process control and increased productivity.
Analysis of one energy efficiency scenario against business as usual by
Howells (2000) estimated annual CO2 reductions of 8 MtCO2 by 2010
and 19 MtCO2 by 2025.26
An example of a program to improve end-use energy efficiency is Eskom’s
Efficient Lighting Initiative, which aims to install 18 million compact
fluorescent lights (CFLs) to reduce energy demand in the residential sector (Eskom 2000a). Assuming that the CFLs require only 20 percent of
the power for the equivalent incandescent and are used 6 hours per day,Eskom estimates a total energy savings of 4,000 gigawatt-hours (GWh)per year, although this depends on the extent of the “take-back effect.”27
The system average emissions of 0.85 kg CO2 per kilowatt-hours (kWh)(Eskom 2000b) would imply annual savings of 3.4 MtCO2.28
ii. Increasing share of cleaner electricity

The Minister of the Department of Minerals and Energy (DME) has recently re-stated that “renewable energy plays an important role in theenergy mix and increases supply security through diversification” (MlamboNgcuka 2002). Achieving this goal has focused so far on developing theSouthern African Power Pool, planning increased imports of hydropower,and developing gas markets. Future policy might aim at increasing theshare of renewable electricity, which so far has remained in the research,development, and demonstration phase.
A study for the South Africa Country Study on Climate Change(Howells 2000) analyzed the impact on GHG emissions of a cleaner generation mix for bulk energy supply, with a proposed mix consisting of 10
percent nuclear, 10 percent combined-cycle gas turbines, 10 percent imported hydropower, and 1 percent renewables by 2025. Reductions in annual CO2 emissions against a business-as-usual case were estimated to be
33 MtCO2 by 2010 and 70 MtCO2 by 2025. The costs of the new plants
were found to be higher than that of the business-as-usual projection, andSustainable Development Policies and Measures73

the mitigation cost would be about US$2.70 per tCO2.29 The emission
reductions stem primarily from the increased nuclear, hydropower, and gas
capacity, assuming that no GHG emissions are associated with hydropowersources.
A more aggressive policy would be a Renewable Electricity Portfolio
Standard. Such a standard might require a basket of options that meets
the DME’s target of 5 percent of renewable electricity generation by 2010
(Mlambo-Ngcuka 2002). This target may be formalized in a Renewable
Energy White Paper, which was under discussion in 2002. The South African Climate Action Network, a group of nongovernmental organizations (NGOs) concerned with climate change, has called for a renewableenergy contribution of 10 percent to electricity generation by 2012 (i.e.,
within 10 years of the World Summit on Sustainable Development) andat least 20 percent by 2020 (SA-CAN 2002).
A first approximation of the impacts of such targets can start with thesame baseline emission projection for the bulk energy sector used above.
The key assumptions are 2.8 percent annual increase in electricity demand, no climate policy, and new generation capacity, which follow thepatterns of the past (Howells 2000). The BAU scenario departs from such
conventional development in that it already assumes more advanced andcleaner fossil fuel technologies, an increased share of gas, and more imported hydropower. Assuming that the renewable energy for electricity
generation has no emissions and displaces a 2010 generation mix similar
to the present (93 percent coal-fired), then the reduction of CO2 emissions due to 5 percent renewables by 2010 is 10 MtCO2. A shift of 20
percent renewables by 2025 would yield reductions of 57 MtCO2. These
reductions are lower than the cleaner generation mix, since that scenario
assumed 31 percent of energy supply was low-emissions (i.e., nuclear-gashydropower), while this approach proposes increases to only 20 percent.
The reductions are significant in the context of 1999 CO2 emissions fromfossil fuel combustion of 346.3 MtCO2 (IEA 2000). The comparative costsof such a portfolio, as well as the impacts on job creation and local economic development, need to be included in future analysis.
iii. Protecting environmental public benefits under restructuring

Greater sustainability in energy governance means maintaining or enhancing public benefits (both environmental and social public goods) in thecontext of the electric power-sector restructuring process. Determining
the GHG impact of such policy interventions is also necessary. Restruc-74

Building on the Kyoto Protocol: Options for Protecting the Climate

turing must provide for new forms of regulation that promote energy efficiency and renewable energy. Distributors may be required to commit apercentage of their total investment to energy efficiency, although thelack of financial viability makes this unlikely in the short term (Winkler
and Mavhungu 2001). As of 2002, Eskom was conducting a study on its
contribution to sustainability. No estimates of changes in GHG emissions
attributable to these policies are available in the literature.
Restructuring also potentially opens access to the grid to independent
power producers (IPPs) of renewable energy. Policies and measures required
to ensure this happens would include standard contracts for IPPs and nondiscriminatory access to the grid. The adoption of a Renewable Energy
White Paper with quantified targets for renewable energy generation could
set a target.
iv. Providing free electricity—the poverty tariff

The government has committed itself to providing between 20 and 60
kWh of free electricity per month to low-income households. Implementing this “poverty tariff” would provide enough power for poor customers tohave access to lighting and entertainment services. If extended to all customers in a broad-based approach,30 the poverty tariff might at most increase emissions by 0.122 MtCO2, under the assumption that all the freeelectricity would be additional to existing energy use (UCT 2002). In practice, electricity is likely to displace existing use of paraffin, coal, wood,candles, batteries, and other fuels to some extent. This upper-bound estimate represents 0.03 percent of total GHG emissions, but about 1.6 percent of residential sector emissions in 1994.
SD-PAMs: Housing

How could the delivery of housing be achieved in a more sustainable manner? The DME suggested that “50 percent of all new houses built (including RDP houses) … incorporate climate conscious solar passive designprinciples in their construction (thereby eliminating the need for spaceheating and cooling)” (DME 2001b).
A previous study by the Energy & Development Research Centre(EDRC, an academic research institute based at the University of Cape
Town) examined the energy savings, local environmental benefits, and
GHG reductions from energy efficiency interventions in low-cost housing(Winkler et al. 2000).31 The interventions examined focused primarily on
improving the energy efficiency in a standard 30-square-meter house32 andSustainable Development Policies and Measures

75

included installing a ceiling, roof insulation, wall insulation, optimizing
window size, and adding a partition, as well as a package of all these measures. Interventions in row houses and shacks, as well as lighting and water heating, were also included. The additional cost of these interventions
was on the order of R1,000 to R2,000 per household.
The major local sustainable development benefit from these interventions is reduced household expenditure on energy. While small in absolute terms, these savings are significant for low-income households, which
devote a relatively large proportion of household expenditure to energy.
The interventions also contribute to improved health, because they reduce or eliminate indoor air pollution from burning coal or wood, as wellas paraffin fires and poisoning caused by ingestion of paraffin. Energy efficiency may also increase employment if implemented in a labor-intensive
program (Irurah 2000).
Energy efficiency reduces energy consumption, and thereby avoids CO2
emissions from burning fossil fuels, both in homes and in power stations.
Avoided emissions were calculated based on the energy savings at the household level using South African emission factors. Interventions that savethe most energy for the household (ceilings, wall insulation, solar water
heating) also avoid the most emissions.
Taking each intervention and aggregating to the national level, thepotential GHG reduction ranges between 0.05 and 0.6 MtCO2 per year,
depending on the intervention (Winkler et al. 2000). Although this is asmall contribution to potential national emission reductions, the advantage of these mitigation options is their low cost and their significant development benefits.
Changes in GHG Emissions
The third step in the SD-PAMs approach is to consider the changes in
GHG emissions resulting from SD-PAMs. These changes in emissions havebeen outlined for each of the SD-PAMs individually in the previous section and are summarized in Table 3.1. The table also reports the sustainable development benefits and contextualizes the GHG changes, by comparing them with national and, where appropriate, sectoral CO2 emissions in 1999. On the basis of such information, policymakers could choose
the SD-PAMs that best meet multiple objectives.

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Table 3.1.

Summary of Changes in CO2 Emissions for
Selected Sustainable Development Policies andMeasures (SD-PAMs) in South Africa
Percentage of CO2 emissions,
1999

SD-PAM

Sustainable development
benefits

SectoralN/aNational–2%–5% of CO2
from electricity–2%

National electricity
efficiency improved by
5% (2010)

39,000 additional jobs
R800 million additional income

End-use energy
efficiency (2010)

Energy savings and load
management by utility

Share of cleaner
electricity increased by
5% by 2010

Reduced local air pollution andfuel costs, increased diversity

Poverty tariff

Electricity, lighting, andentertainment services from freeelectricity of 20–60 kWh per
household per month for 1.4
million poor households+1.6% ofresidential CO2
emissions+0.2%(upper boundestimate)

Energy efficiency in
low-cost housing

Household energy savings,
reduced indoor air pollution,
improved health, and increased
levels of comfort–0.6% to –7%of residential
CO2 emissions–0.01% to
–0.2%

–3%

Sources: See text on individual SD-PAMs.
Note: The latest estimate of South Africa’s total greenhouse gas (GHG) emissions is for 1994;
thus, more recent emissions data, covering CO2 only, are used. CO2 contributed more than 80
percent of South Africa’s total GHG emissions in both the 1990 and 1994 inventories.

A Basket of SD-PAMs?
The SD-PAMs in Table 3.1 are not a comprehensive set; they focus only
on two sectors and selected policies. From this initial consideration, however, it appears that most SD-PAMs have more potential for reducing GHG
emissions than increasing them. The change in an energy price—that is,
the poverty tariff—is the only example of an increase here, yet its impact
on overall emissions is small. Since SD-PAMs already include a shift togreater sustainability relative to conventional development,33 synergies
are more likely.
The examples of SD-PAMs from the energy and housing sectors haveillustrated some measures with strong sustainable development benefits,some with potential for GHG emission reductions, and some that meetboth objectives. Conducting a complete analysis across all sectors would

Sustainable Development Policies and Measures77

require an interdisciplinary team and significant time and data. Many nonAnnex I countries would require assistance in conducting such analyses.
A number of synergies between shifts in sustainable development and
GHG reductions are apparent in the energy sector. Energy efficiency isthe clearest example, saving on energy costs while reducing GHG emissions. SD-PAMs that promote national electricity efficiency achieve electricity savings, create jobs, add to income, and reduce GHG emissions. A
relatively small additional investment in housing for poor communities
creates more comfort and reduces household energy costs while cutting
emissions from the residential sector.
The poverty tariff provides an example of a conflict between sustainable development and GHG reductions. However, the magnitude of theeffect is uncertain, since the degree to which electricity replaces other fueluse is not well known.
Cost has not been explicitly considered in this analysis. In combining
SD-PAMs in a basket of measures, some measures that require additional
investment have net negative costs over their lifetime. Savings madethrough energy efficiency could potentially be used to promote a cleaner
energy mix. The incremental costs of measures with net costs could beoffset against those with net benefits in a basket of SD-PAMs.
Taking the SD-PAMs Approach Further
The last step in the SD-PAMs approach is to consider the overall effect on
GHG emissions of a basket of SD-PAMs. Given that this initial study has
not covered sectors comprehensively and that some of the SD-PAMs considered here do not have quantified estimates of changes in GHG emissions associated with them, this last step has not been undertaken. Even
without this step, the approach identifies areas in which developing countries could act. If, however, this approach is to be linked to a target ofglobal emissions, then this data-intensive step becomes important.
A refinement of the SD-PAMs approach would be to compare statedpolicy objectives to the country’s track record in implementing policies.
Projecting this forward (including a gap between stated intentions andactual achievement) might create a more realistic future development scenario. Having illustrated the SD-PAMs approach with the South African
example, we consider how this approach could be extended to other developing countries.

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III. Extending and Formalizing the Approach
Formalizing the SD-PAMs approach is important not only to monitor
whether the commitments are actually implemented but also to challenge
perceptions that developing countries are doing nothing on climate change.
The materials to formalize the approach can already be found in the Convention and Protocol. Implementing the approach, however, would require some new provisions, including reporting, oversight, and financing.
The Basis of SD-PAMs Commitments
As described in the introduction to this chapter (and in Chapter 1), developing-country participation can take several forms. The Kyoto Protocol sets targets for industrialized countries in the form of binding emission
reductions or limits. These commitments are subject to strict monitoring
and reporting requirements and mandatory consequences for instances of
non-compliance.34 The SD-PAMs approach suggests a different kind ofpledge. As described above, the “commitment” would be to implementing
and accelerating national sustainable development plans. Such commitments would initially be voluntary, although they could be made mandatory for at least some developing countries.
The basis for such a commitment is found in the Climate Convention,
to which almost all developing countries are signatories. Under Article
4.1(b), all Parties commit themselves to “formulate, implement, publish
and regularly update national and, where appropriate, regional programs
containing measures to mitigate climate change by addressing anthropogenic emissions by sources and removals by sinks of all greenhouse gases.”35
Using SD-PAMs as a pledge to implement policies for sustainable development would be consistent with Article 10 of the Protocol, which reaffirms existing Convention commitments and aims to “advance the implementation of these commitments in order to achieve sustainable development” (UNFCCC 1997a). This commitment is currently not quantified
for developing countries in the same way as for industrialized countries
listed in Annex B of the Kyoto Protocol.
Reporting Provisions
While the SD-PAMs commitment would initially be voluntary, a simple
reporting system should be established to formalize the commitment of
those countries that pledge to implement SD-PAMs. This would require adecision of the Conference of the Parties to establish a registry of SDPAMs, regular reporting by Parties on their SD-PAMs, and support from

Sustainable Development Policies and Measures

79

the Secretariat for maintaining records of implementation. If voluntarycommitments prove successful, a next step would be to make SD-PAMs
mandatory for a group of middle-income developing countries. Some developing countries might view this as intergovernmental control over national policymaking, which could present a political obstacle.
This reporting would be similar in spirit to Article 12.4 of the Convention,36 which says that developing countries may voluntarily propose mitigation projects. The proposed reporting would extend to all SD-PAMs,
including those that are not project-based. If countries choose to pledge
SD-PAMs, they must report on them and open them for review. In order
to assess progress against SD-PAMs pledges, a system of indicators for sustainable development could be adapted from various sources.37
Reporting of SD-PAMs could be included in national communications.
This would have the advantage that the information would be addressedin the in-depth reviews. However, the process of national communications has become highly politicized, in particular around the provision oftechnical and financial resources.38 Given that some developing countries
are not submitting their initial national communications, it might be preferable to separate the register of SD-PAMs from this process.
Financing SD-PAMs: Who Pays?
A key barrier to the implementation of SD-PAMs in developing countries
is the lack of financial resources. Determining who pays for SD-PAMs is
integrally related to the question of formalizing the pledge in the mannersuggested above. Countries are unlikely to fulfill pledges unless they havethe resources for implementation. Under Article 4.3 of the Convention,
developed-country Parties are already committed to paying “full agreed
incremental costs” for implementing measures under Article 4.1. If SDPAMs are adopted under Article 4.1b, the question of payment should in
principle be decided already. Where incremental costs are not sufficient,supplementary funding from multilateral institutions, bilateral aid, foreign direct investment, and domestic investment may be needed. For those
SD-PAMs with no net implementation costs (e.g., some end-use energy
efficiency), only program costs would require funding.39 Costs of reporting
and review should be funded to the “agreed full cost.” The commitment tofunding is repeated in Article 11 of the Protocol. The challenge is to ensure that funds actually flow.
The sources of funding would differ between those SD-PAMs that havesynergies with GHG reduction and those that are neutral or conflict. SD-

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PAMs with GHG reduction potential should receive climate change-related funding, including investment through the CDM and Sectoral CDM,
climate change funds through the Global Environmental Facility (GEF),
and the nascent funds established under the Convention (special climatechange fund, least developed country fund) and Protocol (adaptation).
Some of these funds would be most suited to projects (CDM), others toenabling activities (GEF) or policy changes (e.g., under Sectoral CDM;
see Chapter 4).40 Providing funding for such projects would be a major
incentive for developing countries to take action on climate change. Developing countries could use the SD-PAMs framework to steer financial
flows from multiple sources toward climate-friendly sustainable development projects.
SD-PAMs that do not decrease GHG emissions could not draw on climate change funding. They would depend on funding for sustainable development from multilateral institutions, bilateral aid, foreign direct investment, and domestic investments. SD-PAMs also has the potential toharness domestic investment. Further work is needed on the funding of
SD-PAMs, especially for implementation.
Which Developing Countries Might Be Particularly Interested in SDPAMs?
The SD-PAMs approach should be attractive to all developing countries,
since its starting point is their own development objectives. The approachshould be particularly interesting for developing countries such as South
Africa, for which a global allocation provides no surplus credits to sell(and, hence, little incentive to join the system). These are likely to be
countries that have already industrialized to a significant extent or, as aresult of their particular endowment of energy resources (e.g., large fossil
fuel reserves), have used up significant portions of their share of acceptable emissions in a per capita convergence approach (see Chapter 8).
Two ways of indicating which countries might fall into this group would
be ranking them by emissions intensity (CO2 per unit of GDP) and ordering developing countries by ability to pay (GDP per capita). The political
criteria to apply to such a grouping would be to include only developing
countries and to exclude economies in transition (including the former
Soviet republics). Members of the Organization of Petroleum ExportingCountries (OPEC) would rank high in emissions intensity and ability to
pay but might nonetheless prefer SD-PAMs pledges to mandatory emission limitation targets. In negotiating developing-country participation,

Sustainable Development Policies and Measures81

particular attention should be paid to the fact that “global CO2 mitigation
is likely to negatively affect countries that are largely dependent on coaland oil for energy production or export revenues” (Berk et al. 2001, 18).
SD-PAMs can offer a “just transition” for communities that would be negatively affected by climate change mitigation.
The approach should also be attractive to least developed countries.
The attraction is based on the particularly urgent need for development of
least developed countries. A focus on sustainable development would makemore sense than any commitment to reductions or limitations of GHG
emissions from least developed countries, which are small by international
standards.

IV. Relationship to the Climate Convention Objectives
The SD-PAMs approach is a response to climate change starting fromdevelopment, rather than a commitment to quantified emission limitations targets. While this should be attractive to most developing countries, how does the approach relate to the ultimate objective of the
UNFCCC?
Starting from Development
The greatest strength of the SD-PAMs approach is that it starts from acountry’s development needs and moves toward greater sustainability.
Article 2 of the UNFCCC requires that the path to stabilization of concentrations enable “economic development to proceed in a sustainable
manner” (UNFCCC 1992). Most developing countries are already committed to doing this. Indeed, they are looking for resources to accelerate
this shift.
The approach focuses on the first steps that developing countries mighttake, rather than offering a one-step solution to the global problem ofclimate change. Because it matches countries’ own priorities, it provides
incentives for early action on climate change. Each country would need toconsider its own development policies and how those policies could bemade more sustainable. The process of formulating development objectives and implementation plans will strengthen coordination between organizations. In this way, the SD-PAMs process will build capacity (politically, technically, financially, and institutionally) in developing countries
to tackle policies that reduce emissions. Developing countries can learn
by doing by pursuing innovation, development, and transfer of cleaner
technologies.

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Even within the country, there will be differing views on what the shift
to sustainability should entail. Local community benefits—both environmental and developmental—should drive the approach. Tensions between
the views of stakeholders from government, business, and civil society arelikely to arise. Also, barriers to implementing sustainable practices need
to be overcome.
Internationally, a country-specific approach avoids the drawbacks of topdown approaches, which seek to address all countries in the same way andare, invariably, not appropriate to the circumstances of some countries. Aslong as SD-PAMs can realize the pledge to implementing sustainable development, it has the advantage of starting from each country’s uniquesituation.
Will SD-PAMs Prevent Dangerous Climate Change?
The ultimate objective of the Convention is to prevent dangerous interference with the climate system (UNFCCC 1992, Article 2). This objective is to be achieved in a way that allows ecosystems to adapt, ensures
food security, and enables economic development in a sustainable manner. The SD-PAMs approach clearly meets the last condition of achieving
the ultimate objective, but does it contribute to stabilization of GHG concentrations?
The answer to this question is indeterminate. The South African example showed that a difficult step is to aggregate the impacts of all thepolicies and measures. At a global level, the uncertainty is likely to beeven larger. It not only requires comprehensive analysis across all development sectors but it is also sensitive to assumptions about the path of
future development (which no one knows). This step is critical if one wants
to compare the result from SD-PAMs to other approaches. It is possiblethat SD-PAMs would lead to a reduction from business-as-usual emissions
but not reduce emissions to “safe” levels if pursued indefinitely.41 If thiswere the case, it would undermine the sustainable development of developing countries in particular since they are most vulnerable to the impactsof climate change. Without quantified targets for GHG emission limitations, the SD-PAMs approach cannot guarantee a specific level of global
GHG emissions.
On the other hand, striving for a world oriented toward sustainable
development will make it easier to meet stringent climate goals, as discussed in Chapter 1, Section I (IPCC 2000a; Berk et al. 2001). If SDPAMs are really successful, this may even be all that is needed. There isSustainable Development Policies and Measures

83

good reason to believe that greater sustainability in development paths
will “bend the curve” of emissions. Framing the approach in terms of sustainable development puts incremental decisions in a framework consistent with longer-term targets (see Corfee-Morlot 2002). SD-PAMs can be
pursued, even if the net impact on GHG emissions is unknown.

V. Summary
The major strength of the SD-PAMs approach is that it acknowledges
each country’s unique situation and starts from its own development objectives. The key weakness, from a global climate change perspective, isthat it does not guarantee a global reduction in GHG.
The approach may be a useful first step toward developing country participation in climate change mitigation and a learning strategy. If early
action on sustainable development leads to effective new markets, technologies, and creative policy solutions, developing countries may later be
in a better position to accept other kinds of commitments that quantify
emission limitations.
As outlined in Chapter 2, Annex I Parties themselves initially adopted
non-binding pledges in the late 1980s and 1990s before accepting quantified and legally binding commitments under the Kyoto Protocol. If SDPAMs proves robust and successful in reducing GHG emissions, it may be
all that is needed in the long term. Moving onto a more sustainable pathwill build trust for considering other forms of commitments in the future(e.g., third or fourth commitment period). The approach advocates fordoing what is possible now and working toward a long-term solution througha series of gradual steps.

Notes
1. IPCC (2001c, 89, but note the caution about use of annual emission for comparisonon page 90).
2. Other approaches to developing country commitments are examined in this volume
and previous literature (Baumert et al. 1999, Sari 1998).
3. The political process at the Third Conference of the Parties in Kyoto followed apledge-based approach, rather than a rule-based allocation scheme. Each Annex I
country proposed a commitment it might be likely to adopt and, through horsetrading, agreements were struck to reach the final percentage. Characteristics of theindustrial and energy economy shaped their national interests which in turn drove
their negotiating positions. While arguments were often based on such interests, nosystematic quantified analysis of these influences was undertaken. This allowed someindustrialized countries to negotiate targets greater than 100 percent of 1990 levels

84

Building on the Kyoto Protocol: Options for Protecting the Climate(Australia 108 percent, Iceland 110 percent, Norway 101 percent) (UNFCCC
1997a). The average global reduction of 5.2 percent reflects no systematic assessment but is simply an average of the voluntary commitments of Annex I countries.
4. See, for example, Mwandosya (2000, 147), Sokona et al. (1999), Berk et al. (2001:
11).
5. In the language of the IPCC emission scenarios, implementing SD-PAMs would
help ensure that we are on the path of a more environmentally friendly B1 or B2
world, rather than an A1 world.
6. See, for example, Byrne et al. (1998), Davidson and Nakicenovic (2001), Davidson
et al. (2001), ENDA-TM (2001), Munasinghe (2001), and UCS (2001).
7. The IPCC has not defined an atmospheric concentration of greenhouse gases that
constitutes “dangerous interference.” Different benchmarks are used for illustrative
purposes, sometimes the “doubling of CO2” (about 550 parts per million) or the
450-ppm mark.
8. See, for example, Claussen and McNeilly (1998), Gupta and Bhandari (1999),
Redefining Progress (1999), Sijm et al. (2000), Torvanger and Godal (1999).
9. The CDM allows industrialized countries to meet their emission reduction targets byinvesting in mitigation projects in developing countries, which have no targets.
CDM projects must meet the sustainable development objectives of the developing
country. Credits for emission reductions are effectively sold to the industrializedcountry.
10. The default would be to examine development objectives for all sectors. However,some pre-screening of sectors that are deemed most likely to show synergies between
sustainable development and climate change could help limit the analysis to a moremanageable subset of sectors.
11. Emissions would be reduced in relation to emission projections based on current
policy. The biggest problem with doing this relates to high levels of uncertainty
about future emissions in developing countries. For SD-PAMs that are projectbased, baseline methodologies are being developed through the CDM. For SDPAMs that require sectoral, multisectoral, or national baselines, further methodological work is needed (see Chapter 4 on sectoral baselines). Politically, suchbaselines might be seen as similar to a formal commitment, detracting from thevoluntary nature of SD-PAMs.
12. Purchasing power parity dollars, using 1990 prices and exchange rates.
13. The previous version of the International Energy Agency (IEA) data—for 1998—
showed a more dramatic difference, with South Africa at 1.81 kg CO2 per dollar of
GDP (PPP) compared with a non-OECD average of 0.70 kg CO2. One reason forthe difference may be a change from a base year of 1990 to 1995.
14. Electricity prices in South Africa are low compared with other countries. This does
not, however, take into account external costs or the fact that most investments
have been paid off. Prices are likely to rise in future.
15. Based on net energy sent out; by installed capacity, the coal share is 89 percent(NER 2000).

Sustainable Development Policies and Measures85

16. GDP per capita is not directly part of the emissions profile, but it is a key characteristic shaping a country’s ability to pay for mitigation and adaptation.
17. Reported as GNP per capita using exchange rates, based on 1999 dollars, by theWorld Bank Atlas method (World Bank 2000). South Africa was ranked 86th by thismethod and 69th when purchasing power parity is used.
18. This objective has not been achieved in past years. The unemployment rate wasofficially estimated at 25.8 percent for September 2000 (South Africa Reserve Bank
2001), with 11.9 million people employed in February 2000 (Majola 2002).
19. The focus of privatization is on the four big parastatals: Eskom (electricity utility),
Transnet (transport), Telkom (telecommunications), and Denel (arms).
20. Several other objectives, for example, providing all citizens with 50 to 60 liters ofclean, safe water per person per day; or redistributing 30 percent of land and settlingland claims, are not elaborated here. A complete study would need to gather data on
all sectors, in particular to complete the fifth step of evaluating the net effect of abasket of SD-PAMs.
21. Access in 1999 remained lower in rural areas (46 percent) than in urban areas (80percent).
22. The Department of Minerals and Energy produced a draft strategy for Renewable
Energy, which is currently being turned into a White Paper (DME 2001b).
23. Department of Housing website, http://www.housing.gov.za/Pages/Indicators/
July%202000/wpeD.gif
24. Laitner (2001) gives the figure in units of carbon, that is, 1.5 MtC.
25. In some cases, households may spend energy savings on increasing their consumption, a phenomenon known as the take-back effect. See note 27.
26. A business-as-usual scenario assumed a 2.8 percent increase in demand per year, no
climate policy, and new generation capacity following the trends of the past
(Howells 2000).
27. One of the major challenges to energy efficiency analysis, especially for the
residential sector, is the question of the “take-back,” or “rebound,” effect: Because
energy-efficiency interventions essentially decrease the price of energy services,
consumers might spend some of their savings on more of that energy service—soenergy consumption may not decline nearly as much as would be predicted on thebasis of the technical potential of an intervention. In many developing countries,
and particularly in their poorest communities, the level of energy services in poor
households is often very low with inadequate lighting, space-heating, and otherservices, so the rebound effect could be high (Davidson and Sokona (2001),
Mehlwana and Quase (1999), Roy (2000), and Simmonds and Mammon (1996)).
For the energy-efficient lighting program, the households already have incandescentelectric lighting. Given that lighting is often the only electricity service that isaffordable for the poor, and that even poor households have several bulbs perhousehold, take-back would be expected to be relatively small (Spalding-Fecher etal., 2002).

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Building on the Kyoto Protocol: Options for Protecting the Climate

28. The baseline against which energy savings from the efficient lighting project aremeasured would make a significant difference. An earlier study considering different
baselines (weighted average or 10th percentile; fuel-specific or sectorwide) foundsavings ranging between 0.8 and 37 MtCO2 per year. The simple calculation shown
here falls toward the low end of this range.
29. R15 per ton of CO2, converted by the exchange rate for the base year of the data,
1998—R5.53 per dollar (South Africa Reserve Bank 2001)—is the equivalent of
US$2.71 per ton of CO2.
30. The study also considered scenarios in which the poverty tariff is extended only to
self-targeted households, resulting in lower incremental emissions.
31. Winkler et al. (2000) is part of a larger research project (Irurah 2000).
32. The standard for RDP houses was initially 30 square meters, but due to strong
householder resistance to small units, slightly larger homes (e.g., 42 square meters)
have also been built.
33. This argument is strengthened if we consider SD-PAMs against baselines that allow
growth. This is explicitly allowed in the CDM rules (UNFCCC 2001, para. 46, p.
37), since the “specific circumstances” of developing countries require development.
Analysis of baselines at the project level has suggested that credit should be given
for reductions in a situation of suppressed demand (Winkler and Thorne 2002).
34. Monitoring and reporting provisions are outlined in Articles 5, 7, 8, and 18 of theProtocol and have been the subject of detailed negotiations since 1998.
35. UNFCCC (1992, Article 4.1b). The heading of Article 4 is “Commitments.”
36. Article 12 deals with national communications, and paragraph 4 reads, “Developing
country Parties may, on a voluntary basis, propose projects for financing, including
specific technologies, materials, equipment, techniques or practices that would beneeded to implement such projects, along with, if possible, an estimate of all
incremental costs, of the reductions of emissions and increments of removals ofgreenhouse gases, as well as an estimate of the consequent benefits.”
37. Existing work on indicators for sustainable development in the climate change
context includes guidelines and methods developed by the Commission on
Sustainable Development (CSD 1995). There is also an ongoing process in the
UNFCCC negotiations on “good practices” in policies and measures. For the energy
sector, the Helio network has developed and applied sustainable energy indicators(Helio International 2000). A practical method applied to CDM projects (Thorneand La Rovere 1999) could potentially be extended to use at the national level.
Chapter 1 of the IPCC’s Working Group III Third Assessment Report summarizes
the broader debate on sustainable development and climate change, and Chapter 10
focuses on decision analytical frameworks (IPCC 2001c).
38. See the language in UNFCCC (1992, Article 12.7).
39. SD-PAMs would not all be no-regrets or negative-cost options. Indeed, the point of
SD-PAMs is to switch the primary focus from emission reductions to sustainable
development. This implies assessing cost-effectiveness not only in terms of emissions, but rather in terms of socioeconomic and local environmental benefits.

Sustainable Development Policies and Measures87

40. CDM investment is linked to projects and therefore unlikely to fund policy changes,
for example, energy policy reforms or industrial strategy. Yet, such policy changes
may well be critical to limiting GHG emissions. The Sectoral CDM approach(Chapter 4) would overcome this limitation.
41. Berk et al. (2001, 25) make a similar, but more quantified, argument in relation to
the emissions intensity approach: “If the group of countries adopting quantified
commitments after the first commitment period would be limited to middle income
developing countries, and these countries would initially only take on efficiency
improvement targets, and if this would set a precedent for relatively poor, but major
developing countries like India and China, CO2 stabilisation levels of 550 ppmv orlower may be out of reach.”88

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4. EVOLVING TO A SECTORBASED CLEAN DEVELOPMENTMECHANISM
Joséluis Samaniego and Christiana Figueres

Introduction
In examining the different options that may be available to shape futureclimate protection strategies, it is important to recognize the great deal ofwork that has gone into the current climate regime, based on the United
Nations Framework Convention on Climate Change (UNFCCC) and the
Kyoto Protocol. Given the fact that the long-standing North-South dynamic will inevitably accompany any further development of the climate
regime, it may be advisable to build on existing agreements and current
architecture. Chapter 2 explores the default next step of the Protocol:
legally binding caps for developing countries. This chapter presents another option for building on the Protocol. Instead of focusing on the commitments assumed by industrialized countries and raising the question of
how to integrate developing countries, this chapter focuses on the current
avenue for developing country participation, the Clean Development
Mechanism (CDM), and explores its possible further evolution. In so doing, this chapter takes the Sustainable Development Policies and Measures (SD-PAMs) approach presented in Chapter 3 and explores its fullinsertion into the international carbon market through an enhanced CDM.
The Sectoral CDM (S-CDM) approach would maintain some basic elements of the current CDM, but would also allow for the development of
CDM projects without pre-established limitations in terms of territorial
coverage or enabling instruments (private and public policies and measures). S-CDM “projects” could be sectoral (e.g., electricity, transport, forestry), territorial (entire cities or regions), or a combination of these (suchas transport and lighting in a particular city).
This chapter first recounts the evolution of the CDM and its current
interpretation. It then presents the envisioned S-CDM, identifying the

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similarities to the CDM and discussing the contrasting elements. After an
examination of the strengths and weaknesses of the S-CDM approach,the chapter profiles a case study of a potential S-CDM project for Mexico
City.

I. The Clean Development Mechanism
The CDM is the only flexibility mechanism in the Kyoto Protocol open todeveloping-country participation. It was established under Article 12 of
the Kyoto Protocol and adopted by the Third Conference of the Parties(COP 3) in December 1997. The CDM has a double purpose: to assist
developing countries in achieving sustainable development and to help
industrialized countries cost-effectively reach the emission reduction commitments they assume under the Kyoto Protocol during the first budget
period (2008–12).
Although the CDM was first defined in 1997, the idea is older than theConvention itself.1 In 1991, Norway introduced the concept of “joint implementation” (JI) during the negotiations that resulted in the UNFCCC.
Though termed the same as one of the three flexibility mechanisms later
adopted under the Kyoto Protocol, Norway’s proposal was broader in definition and constituted a generic term for emissions trading. The concept
stemmed from the recognition that the costs of greenhouse gas (GHG)
abatement activities vary significantly among countries, and global costs
can be reduced if countries form partnerships in their GHG reduction
efforts (Dixon 1999). This led to the inclusion of JI in the Climate Convention: “…[P]arties may implement such policies and measures jointly withother Parties and may assist other Parties in contributing to the achievement of the objective of the Convention[…]” (UNFCCC 1992, Article
4.2(a), emphasis added). Although the Article does not make explicit
which countries are meant by “other Parties,” the marked difference inabatement costs between industrialized and developing countries soon led
to the conclusion that cost-effectiveness would best be served by implementing projects in developing countries or economies in transition.
During the negotiations leading up to COP 1 to the Convention in
1995, representatives of developing countries began to question the valueof JI. Some saw it as an attempt by industrialized countries to buy their
way out of reduction commitments, particularly if credits for JI projects
were to be available before binding targets for domestic emission reductions were in place for the industrialized countries (a step that was nottaken until the Kyoto Protocol was adopted). Critics feared that by using

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JI projects to achieve low-cost GHG reductions in developing countries,
industrialized countries could avoid investments at home and, in this manner, maintain their environmentally unsustainable economies. In addition, some developing countries were concerned that JI projects would
exhaust their “cheap” reduction options, so that if emission reductions
were to be established for developing countries at a later date, the targets
could only be achieved at higher costs (Michaelowa and Dutschke 2000).
Costa Rica was the only developing country that embraced the concept
and declared itself available for JI projects as early as 1994. During COP 1,
Costa Rica garnered consensus in the G-77 and China group for a compromise proposal. Under a name variation suggested by Malaysia, the “Activities Implemented Jointly” (AIJ) program was established in 1995. A
pilot phase was introduced to promote “learning by doing” and boost cooperative international efforts. As part of the compromise, no internationally tradable credits would be awarded during the pilot phase, which wasto last until the end of the decade.
Between 1995 and 2000, several industrialized countries—in particular,
the Scandinavian countries, the Netherlands, Switzerland, and the UnitedStates—actively supported the goals and principles of AIJ. They established national AIJ offices and invested in capacity-building activities(Dixon 1999). However, at COP 3 in 1997, the AIJ pilot phase was evaluated and found unsatisfactory. Only a small number of projects had been
conducted, due to the lack of incentives in the form of emission reduction
credits. Projects were geographically concentrated in Latin America andEastern Europe and focused mainly on the renewable energy and forestry
sectors (Grubb et al. 1999). Neither the distribution nor the mix of projecttypes was considered representative. In addition, transaction costs werevery high, and Parties could not come to a consensus on technical issues.
Nevertheless, the concept was not abandoned, but rather was transformed once again. In Kyoto, Brazil suggested the introduction of a penalty system that would subject industrialized countries to a fine if theyfailed to reach the proposed emission targets. Industrialized countries would
have to pay fines in proportion to their degree of non-compliance. The
fines would then be channeled into a “Clean Development Fund” andused to support GHG emission-mitigation projects in developing countries and adaptation measures in countries most adversely affected by climate change. Industrialized countries in general, and the United States inparticular, were opposed to such a system. The Brazilians were encouraged
to change their proposal to a non-punitive concept. The resulting “Clean
Development Mechanism” would function as a market-based instrument

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to channel sustainable development resources to developing countries.
Industrialized countries could purchase emission reductions achieved byprojects under the CDM to partially meet their reduction commitments.
The proposal was backed by G-77 and China, and ultimately approved by
the Conference of the Parties under Article 12 of the Protocol.
Designing the CDM was not an easy task. From 1997 to 2000, a widearray of stakeholders around the world developed proposals for the guidelines and modalities of the CDM. As the various proposals were widely
discussed and carefully considered, convergence of opinions began toemerge. Agreement on the basic rules and regulations was eventuallyreached at COP 7 in November 2001. At that time, the first members of
the CDM Executive Board were elected and the Board was tasked withwriting the detailed rulebook for the CDM. Yet, the decision for a “prompt
start” to the Mechanism led to the acceptance of CDM crediting as earlyas the beginning of the year 2000, and many CDM projects are being prepared as of 2002.
Over the next 10 years, developing countries will be experimenting with
the CDM and learning about their mitigation potential. This learning canconstitute an important building block for the further development of theclimate regime in general, and for the CDM in particular.2

II. Sectoral CDM
In looking at ways to strengthen the climate protection regime, this chapter proposes an enhanced CDM as an evolutionary step through whichdeveloping countries can increase their participation in the regime.
Characteristics
Under the S-CDM, developing countries would be encouraged to develop
regional, sectoral, sub-sectoral, or cross-sectoral projects that may be theresult of specific sustainable development policies, measuring the attained
reductions, and selling those on the international emission reduction market. Thus, a Sectoral CDM project could be the modernization of the entire cement industry in a country as a result of a government policy, and across-sectoral S-CDM project could be achieving a certain efficiency standard in all industrial motors as a result of new standard setting. Table 4.1
provides examples of various types of potential S-CDM projects. Like theSD-PAMs approach in Chapter 3, the S-CDM would involve national or
local sustainable development policies. However, in contrast to SD-PAMs,

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Table 4.1.

Examples of Sectoral Clean Development
Mechanism (S-CDM) Projects

Sectoral
Sub-Sectoral

Modernization of a country’s cement industry
Conversion of all natural gas-fueled electricity generation plants tocombined cycle
Combination of cleaner transportation and more efficient lighting in one
city
Departure from the business-as-usual emission scenario in one city or othergeographic region

Cross-Sectoral
Regional

the viability of S-CDM—like that of the CDM—is predicated on an explicit link to the international carbon market.
The S-CDM is thus not envisioned as an alternative to the CDM, butrather as a complementary option open to interested countries. S-CDM
would build on the current CDM and would have to comply with most of
the following existing CDM requirements and design elements:• Funding: As in the CDM, emission reductions achieved through the
S-CDM would be sold on the international market to industrializedcountry entities. In both cases the achievement of emission reductions
is financed not by the developing country but rather by offset purchaseson the part of an industrialized country entity. Financial institutions
that recognize the monetary value of the offsets could fund the implementation. Once attained and certified, the emission reductions could
be sold on the international market, becoming part of the project’s
income flow.
• Sustainable development: As in the CDM, the developing country
would determine its own sustainable development priorities.
• Project cycle: S-CDM projects would undergo the same project cycle
as the current CDM. Projects would have to be (1) designed by project
participants, (2) approved by the designated national authority, (3)validated by a designated operational entity (third party) and registered by CDM Executive Board, (4) monitored by project participants,and (5) verified and recommended for certification. As a final step, theExecutive Board would issue emission reduction certificates (UNFCCC
2002).
• Additionality: The Kyoto Protocol establishes that CDM projects may
only count emission reductions that are “additional to what otherwise
would have occurred in the absence of the certified project activity.”
As in the CDM, one important goal of an S-CDM project would be the94

Building on the Kyoto Protocol: Options for Protecting the Climate

reduction of emissions or enhancement of absorption relative to a business-as-usual scenario.
• Verifiability: As in the CDM, emission reductions or absorptions need
to be real, measurable, and verifiable. This demands the use of internationally recognized quantification methodologies and the existence of
inventories and reliable projections.
• No target: As in the CDM, the S-CDM would operate without legallybinding targets for developing countries. In a CDM project, a businessas-usual scenario is defined as the reference case, and emission reductions or absorptions actually generated by the project are measured
with respect to that baseline. There is no prior agreement on a target
emission level to be achieved, and the developing country can sell all
the achieved emission reductions irrespective of its overall emission
level. In that sense, the S-CDM does not operate as a “sectoral target”(Philibert and Pershing 2001), but rather as an enhanced CDM.
The S-CDM would build on the current CDM and incorporate many of
its characteristics. However, three elements of the current CDM would
clearly need to evolve for purposes of the S-CDM (Table 4.2).
Project boundary

While final decisions on what constitutes a project boundary under the
CDM have not been made, there is a general assumption that the CDM
will only consider single projects (or at most, the bundling of “like”
projects). For the time being, the tendency is to prepare and present single
projects.
The S-CDM would require a different concept of project boundary. An
S-CDM project would have multiple components, not needing boundary
definition around each component, but rather around the entire project.
The boundary of a sectoral project (e.g., the cement industry) would beeasier to determine, as it would include all cement production plants inthe country or region. The boundary of a geographically based S-CDM
project would be in principle the city or region to which the policies are
directed. However, it is entirely possible that not all sectors in a city would
be subject to emission reduction policies. For example, the government
may choose to include public but not private transportation, or industrial
but not residential uses of energy, and so forth. Furthermore, there is thechallenge of transboundary emissions (e.g., vehicles traveling in and outof the city). The dispersed nature of mobile sources makes data collection

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Table 4.2.

Boundary
Additionality
Baseline

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Contrasting Elements of the Clean Development
Mechanism (CDM) and the Sectoral Clean
Development Mechanism (S-CDM)
CDM

S-CDM

Single project
Investment in technology upgrade
Project-based

Sector or region
Policies and measures
Multiple projects,
sectoral or regional

both difficult and expensive (OECD/IEA 2001). Geographically based
projects will require further conceptual and technical work on the concept of boundary.
Additionality

The establishment of additionality under the CDM has been the focus
of intense debate. Typically, CDM projects introduce a cleaner or more
efficient technology or practice. The impetus stems from the project owner’s
decision to upgrade a specific project with the introduction of state-ofthe-art technology. The investment necessary for this GHG upgrade lends
the CDM project its additionality.
One of the contentious issues under the CDM is whether a project implemented as a response to a national policy is additional. An example could
be the recent switch to natural gas in the public transportation system in
New Delhi. A stringent interpretation of additionality would render theinvestment for the conversion non-additional and thus not eligible for
the CDM, reasoning that because the switch was mandated by the government, it would have occurred without CDM intervention.
This interpretation of additionality would not prevail under S-CDM,
where such a project might be typical. Just as in the CDM, reduction activities under the S-CDM could be performed by private- or public-sector
representatives, but the stimulus to implement the reduction or absorption project would typically arise precisely from a public-sector policy ormeasure (or even a private sector-led initiative) that pursues both economic development and environmental protection. For the S-CDM towork, sustainable development policies and measures would lead to, andin fact be the basis of, a project’s additionality. Under the S-CDM, theexpectation is to see many projects reflecting sectoral transformation, such

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as the above-mentioned New Delhi transport example. The incentives
provided by the S-CDM could help trigger these kinds of transformative
policies in developing countries sooner rather than later.
Baseline

One of the most difficult issues in the CDM has been, and continues to be,
the setting of the baseline—the level of GHG emissions that would haveoccurred without implementation of the project. During the Kyoto negotiations, developing countries insisted that the CDM be a project-based
mechanism, with boundaries and baselines established on an individual
project basis. Developing countries feared that multi-project or sectoral
baselines could become the backdoor entry to national reduction commitments and were thus determined to keep the CDM clearly on a projectby-project basis. The CDM offers several options for the establishment ofa baseline,3 but all methodologies assume a single specific project.
The S-CDM would have to go beyond single project baselines. The
GHG reductions resulting from S-CDM projects that are implemented in
response to those policies and measures would have to be measured against
an agreed baseline: the emission level or future trend prior to the adoptionof the policy or measure within the boundary of the project, be that sectoral,
regional, or both.
In some cases, the challenges of baseline setting are exacerbated relative to CDM; in others, the baseline definition is simplified. For example,
in the case of a geographically based cross-sectoral project, multiple
baselines would probably be necessary, one for each of the components inthe project. Here the difficulties of a single project baseline are compounded. On the other hand, in the case of a simple sector-wide project,sector baselines might be easier to establish and monitor. Baselines covering a sector-wide project would also be less prone to leakage; in otherwords, the project would be able to account for instances in which emission reductions from one facility lead to emission increases in another.
Advantages
The enhancement of the CDM as an avenue for increased contribution ofdeveloping countries to global climate mitigation strategies has many advantages.

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Environmental protection

The S-CDM could provide incentives for transforming entire sectors, thus
helping to accelerate and deepen the decarbonization of developing country economies. It is unlikely that the current CDM would be able to promote this type of transformation. Current CDM investment is linked to
specific projects and therefore is unlikely to promote broad policy changes,
such as industrial strategy, more efficient transportation, or cleaner energy
mix, as pointed out by Winkler et al. in Chapter 3. Under the S-CDM, theincentive of selling emission reductions at a significant scale may makeviable some large, broad-based projects that otherwise would not be undertaken.
As the S-CDM is not based on national targets, it would avoid the moral
hazard4 of developing countries setting lenient targets in order to produce“tropical hot air.” The complex procedural structure of the CDM, which
would also apply to the S-CDM, is cumbersome and costly but has theadvantage of ensuring real, measurable reductions. The S-CDM would
help to phase in concrete sector- or region-wide mitigation activities. It is
entirely possible that in the short term these activities could deliver more
real reductions than if developing countries assumed inflated targets.
Multi-component S-CDM projects could enable GHG emission reductions to take place where costs are very high but the activity is particularly
beneficial to national development. Each of the reduction activities included in a multi-component S-CDM project would have different reduction costs. An internal “clearinghouse” mechanism could discover the
average reduction cost over the whole project. The single S-CDM project
could then place all reductions on the market at market price. Thus, thecheaper reduction components of the project could cross-subsidize the more
expensive ones. This kind of mechanism could enable projects that deliver additional, non-climate environmental and social benefits.
North-South equity

One of the key elements of further progress in the climate regime is, indisputably, the acceptance of deeper emission cuts on the part of industrialized countries. The S-CDM reinforces the principle of “common but differentiated responsibilities” by designating industrialized countries as leadersof the mitigation effort. Their future greater reduction commitments are
precisely what would create the demand for the S-CDM, a demand thatwould have to be higher than the current demand for CDM. Thus, the98

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developing countries’ increased levels of contribution to climate change
mitigation would follow the level of effort of industrialized countries.
In Chapter 2, Depledge points out that under the default option in the
Protocol, industrialized countries would likely be asked to take on costly
emission reductions, while at the same time being expected to commit
increased financial and technological aid for developing countries to meettheir increased obligations to the climate regime. The S-CDM presents awin-win option. Industrialized countries are more likely to support a market-based flow of resources to developing countries than increased financial aid. And industrialized countries could assume deeper cuts, as the costof those cuts would be reduced by the availability of offsets from the SCDM.
Gradual capacity building

Developing countries need to strengthen their data-gathering and management capabilities. Even if it were politically feasible, it would be difficult in the near term to establish meaningful emission targets for developing countries because of data scarcity and economic uncertainty (see Chapter 5). The S-CDM encourages countries to build up reliable data, sector
by sector. Over time, technical capacity, sectoral inventories, and nationwide data can be developed, making any type of future emission controls
easier to monitor.
Cost-effectivenessCurrently, the identification, design, negotiation, monitoring, and certification of CDM projects involve high transaction costs. The aggregation
or escalation of projects could reduce transaction costs and maximize domestic opportunities for cost-effective reductions. Broadening participation in the market improves the cost-effectiveness of the regime and themarket itself.
Adaptation funding

Agreements on the CDM currently stipulate that 2 percent of the proceeds be invested in an Adaptation Fund. The Fund will help defray someof the costs of adaptation in those countries most vulnerable to climatechange. If the adaptation share of proceeds in the CDM is held constantfor the S-CDM, the higher volume of emission reductions could substantially enhance the funding available to the most at-risk countries.

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Compatibility with the Kyoto Protocol

S-CDM is compatible with the present Kyoto Protocol architecture andbuilds on developing countries’ experience. The S-CDM approach could
promote a learning process that gradually phases in the participation ofdeveloping countries in global climate change mitigation. It could become an important incentive for key developing countries, proportionate
to and dependent on increased industrialized country efforts. It could be
implemented without major alterations to the structure of the Protocol as
it currently stands.
Challenges of Implementation
Despite its advantages, the S-CDM may not be technically feasible or politically viable. By going beyond the CDM, the S-CDM would require anamendment or expansion in the rules governing project boundary, baselines,
and additionality in terms that have been discussed. The successful implementation of the S-CDM would have further requirements at both thenational and international levels.
At the domestic level, there are two types of challenges to the implementation of the S-CDM.
Technical

Most developing countries are unprepared for the S-CDM, as they have
yet to develop the technical capacity needed:• They must have a functional Designated National Authority with thecapability of providing rigorous emissions inventories and projections
in order to develop sectoral baselines and monitor aggregated projects.
• Host countries will most likely require an internal “clearinghouse”
mechanism, an institutional capacity not common in developing countries.
• Countries must have a reliable GHG accounting system. If S-CDM
projects were adopted in a region or sector where an existing CDM
individual project is already in operation, the GHG benefits from thesingle CDM project would have to be excluded from the larger S-CDM
project in order to avoid double counting. A clear GHG accounting
system is crucial to protecting the credibility of the CDM, and is particularly critical to the S-CDM.

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Collaboration

To make some projects viable, domestic institutions not accustomed tocollaborating on shared goals would have to develop cooperative strategies. An S-CDM project affecting several sectors in a city—cutting acrossa wide variety of activities and perhaps even requiring different policy
decisions—requires the commitment and political will of a broad set ofstakeholders in both the public and private sectors. In addition, the broader
the reach of the project, the more important it is to include the participation of civil society in the decision-making process.
At the international level, the S-CDM may face opposition from various negotiation blocs for different reasons.
Developing countries

The CDM has been perceived by some developing countries as weakening
the joint effort of industrialized countries to face their climate responsibility.5 It follows that those same developing countries could perceive the SCDM as an even greater loophole for industrialized country efforts. Afterall, the challenges associated with proving additionality in the CDM are
not remedied in the S-CDM. The larger scale of the S-CDM raises thestakes of being wrong about the true additionality of a project.
Furthermore, only a few developing countries will have the capacity todesign and implement S-CDM projects in the near future. Those countries might command the lion’s share of tradable offsets, which otherwise
might be distributed among a greater number of countries. This concentration of offsets could exacerbate the inequity between developing countries that receive CDM investment and those that do not, and might cause
opposition on the part of those countries that see themselves as disadvantaged by the approach.
Industrialized countries

Industrialized countries might also oppose the S-CDM, since it may haveto be concurrent with more stringent emission targets for them. In fact,
the viability of the S-CDM may depend on an increased demand fromindustrialized countries for emission reduction offsets.6 If industrializedcountries remain at the emission limitation levels accepted under the Kyoto
Protocol, there would be insufficient demand for a CDM with a supply
potential larger than the current one.
Furthermore, this acceptance of deeper cuts on the part of industrialized countries would have to be accompanied by a continuation of theEvolving to a Sector-Based Cleam Development Mechanism

101

exemption from legally binding targets for developing countries. Industrialized countries may oppose this. If the S-CDM produced a significant
amount of emission reductions, industrialized countries would be using
their resources to reach their own domestic reduction targets as well as tohelp developing countries achieve significant reductions. This arrangement flies in the face of the expectation held by some industrialized countries that developing countries, particularly the larger ones, should selffinance their contributions to global climate-change mitigation.
The strengths and weaknesses inherent in the S-CDM are evident in aneffort being considered in Mexico City, based on interlinking cross-sectoral
GHG mitigation options. If advanced, the effort might well be considered
the first S-CDM experiment.

III. S-CDM in Mexico City: A Case Study
Air Pollution and Rising GHG Emissions
Despite some progress achieved in the closing years of the last century, air
quality in Mexico City continues to be a major problem affecting the healthof a growing population (currently 18 million people). In the late 1990s,
the city developed and implemented “PROAIRE,” an air-quality improvement program based on cleaner industry, cleaner transportation, urban
zoning, and environmental restoration. The first phase of PROAIRE ended
in 2000. Its results have been positive on the whole, but much remains to
be tackled.
The metropolitan area is a major source of GHG emissions. Annual
CO2 emissions in the Federal District of Mexico, which encompasses muchof greater metropolitan Mexico City, amount to about 51 million tons(mt) of CO2, higher than that of many countries. Projections suggest an
increase to 56 mtCO2 by 2005 and to 63 mtCO2 by 2010, a growth rate ofabout 10 percent between 2000 and 2005 and of 23.5 percent over the
decade. In all future scenarios—high, medium, and low growth—the metropolitan area expects large increases in the number of inhabitants which,in turn, will raise both energy consumption and CO2 emissions. The sectoral
trends for the next decade show intensified energy use, especially in transportation but also in the industrial and residential sectors.7
The capital area represents a large share of Mexico’s national totals inboth emissions and energy use. The metropolitan area consumes 13 percent of all fossil fuels in Mexico and 17.3 percent of all electricity.8 The
increase in sectoral activity, especially in transportation, is expected to102

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overwhelm the air quality measures undertaken under PROAIRE as wellas lead to rising GHG emissions. Despite progress, the policy approach
followed so far clearly has to be strengthened. The S-CDM could help
provide the financial impetus to strengthen policies and achieve local andglobal benefits.
Some initial steps are already being considered. As noted above, thefirst phase of air quality improvements (PROAIRE) was completed in 2000.
In preparation for a second phase of the air quality improvement program,the Government of the Federal District (GDF) has also begun to develop
a climate change strategy and, in so doing, has shown openness to the SCDM approach. Under the leadership of Claudia Sheinbaum,9 the Secretariat of the Environment of the Federal District is well aware of climatechange-related issues and of the synergies between GHG mitigation, pollution prevention, and control of urban sprawl. In August 1999, the GDF
publicly recognized the need to mitigate climate change on various fronts.
In 2000, the new administration established the goal of developing a climate change strategy.10 Specifically, the GDF has already commissioned
studies focusing on specific sectors that could have important emission
reduction potentials with local, regional, and global benefits.
The S-CDM Project
From the actions taken thus far, several aspects of the project are alreadyclear:• First, the potential S-CDM project would have the Federal District as
its geographical boundary and would seek to reduce the rapid future
emission level rise expected in the District over the next decade.
• Second, these future emission projections would constitute the project’sbaseline, against which additionality would be assessed. While there
would be no fixed emission target, any decrease in expected growth,through the implementation of specific policies and measures acrossseveral sectors, would constitute the creditable emission reductions.
This benefit would be quantified, monitored, and verified for purposesof the S-CDM.
• Third, the project would capture the positive synergistic effects of policies and measures in support of the S-CDM project undertaken by the
GDF. This makes the project different from the simple sum of mitigation actions that might be undertaken by individual sources. Without
the S-CDM, a comprehensive, citywide strategy that includes climatechange mitigation may be neither feasible nor attractive.

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103• Fourth, the project would create a local clearinghouse to facilitate reduction of individual efforts within and across sectors.
To advance the possibility of such a project, several concrete steps arebeing taken. The first important step is developing an inventory of GHGs.
The current inventory encompasses the entire urban area within the Valley of México (which is larger than the Federal District). Urban sprawl
has caused the metropolitan area to grow beyond the Federal District into
the surrounding states of México and Hidalgo. The GDF, however, is responsible for the Federal District only. To have a baseline restricted to theFederal District, the inventory is now being adjusted to identify the shareof emissions within the greater metropolitan area that corresponds to theFederal District. Within that geographical boundary, the current emissions from each sector are also being determined.
The second step being implemented is a series of pilot projects. These
include an initiative to test fuel cell-powered buses for public transportation (presently in its initial stage) with the aim of introducing this technology more broadly. Other initiatives include the pilot use of solar water
heaters, introduction of efficient lighting on a massive scale, testing ofelectric vehicles, and a carbon sequestration project in the south of theFederal District. However, these efforts are for learning purposes only. They
are disjointed and are not achieving their full potential. The GDF is considering an array of measures to integrate the various efforts into a comprehensive mitigation strategy, which could become a coherent plan for apotential S-CDM project.
The potential S-CDM project might encompass simultaneous action inseven sectors within the Federal District: energy efficiency in public andprivate buildings, industry, new housing, transport, public services, waste
management, and reforestation.
1. Energy efficiency in buildings. The aim would be to increase the energy efficiency in hotels, hospitals, and other large buildings. Studies
show that measures such as insulation, motion-sensor lighting, and efficient water heaters could produce a reduction in energy consumption
equivalent to 25.2 megawatts of installed capacity (Government of
Mexico 2001).
2. Industry. Industrial production in the Federal District contributes to
air pollution, but not significantly (relative to transport). However, ondays when the health index for air quality reaches emergency levels,
industry is forced to shut down. Industry has expressed its willingness

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to improve its emission performance and buy the right to continue
production processes, through payments for other mitigation efforts,such as reforestation. This willingness to pay opens the possibility ofsynergizing two sectors in a broad S-CDM project.
3. New housing. The GDF is planning to build 10,000 new low-cost homes
per year and to remodel 15,000 homes annually. Each home could save
5,000 tons of CO2 per year through the elimination of liquefied petroleum gas leaks and the installation of solar water heaters. Furthermore,
homes are planned with efficient lighting and efficient water pumping.
The incremental cost of these new homes has impeded implementation of the planned upgrade.
4. Transportation. The Federal District has 105,000 taxis and 21,000 buses.
Each taxi emits 75 kilograms of CO2 per day; each bus emits 230 kilograms of CO2 per day. The GDF is planning to promote the retirementof old taxis and buses with a subsidy per vehicle replaced. The newvehicles would be more fuel-efficient (in the case of gasoline- or dieselpowered vehicles) and/or feature the use of an alternative fuel, namely
natural gas. CO2 emissions could be lowered by 31 percent in taxis andby 85 percent in buses. In addition, consideration is being given to theintroduction of management measures, such as exclusive lanes for public transport and non-motorized vehicles and feeding systems for highdensity public transport.
5. Public services. General areas of potential emission reductions havebeen identified, including electricity generation and distribution, water pumping, and wastewater treatment. No specific policies or activities have yet been identified.
6. Solid waste management. Both the quantity and the composition of
the city’s solid waste lend themselves to the possibility of recovering
methane emissions for energy generation. Potential is being considered.
7. Reforestation. There are a variety of opportunities for reforestation,
particularly in the rural southern parts of the Federal District.
These actions incorporate two of the S-CDM challenges: boundary definition and technical capacity to define multi-sectoral baselines. Fortunately, Mexico has already developed much of this capacity, which is not
the case in all developing countries. The baseline for the Federal District
would need to be grounded in the behavior of each sector and would becontractually binding under the S-CDM project. To verify additionality,
actions undertaken in the past would have to be measured and discounted.

Evolving to a Sector-Based Cleam Development Mechanism

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Offsets would be only issued ex post and in an amount equivalent to thedeparture from the business-as-usual curve minus the already initiated activities. The reductions resulting from the S-CDM project could also bemeasured as improved intensity (emissions per unit of local GDP) or as adecrease in the Federal District’s rate of emissions growth, depending on
the availability of data gathered from additional technical analysis.
Another area for future consideration is the sharing of offsets by project
participants. Sharing would need to take place according to predetermined
criteria, and the GDF would need to play a central role. The GDF could
also use other means (besides offsets) to compensate implementation costs
or to provide incentives for emission reductions under the S-CDM project.
The Role of Public Policies and Measures
As a part of an S-CDM project and in pursuit of the implementation of acomprehensive climate change policy, the GDF could establish a range ofincentives linked to improved emission performance. Some of these policies and measures could be applicable to specific CDM projects, and others may be generic to the S-CDM approach, but many could gain versatility and reach by being included in the S-CDM approach. Most of themwould have impacts on other air pollutants and could be implemented
with the double purpose of lowering GHG emissions and improving air
quality.
Changes in fuel pricing policies, fiscal incentives (on cars, investments,and so forth), and changes in traffic management policies are a few of thepolicies and measures possible under an S-CDM project in the Federal
District. The GDF Secretariat of Economics has recently considered tax
discounts to stimulate desirable environmental behaviors. Another measure that could be considered is establishing a cap on conventional air
pollutants or fossil fuel consumption within the Federal District air basin.
The potential S-CDM project in the Federal District harmonizes national and global needs. From the national perspective, urban air quality isa priority. However, previously considered or temporarily implemented
policies have not been sufficient to sustain improved air quality and increased health conditions. A well-integrated set of climate change policies, which are important from the global perspective, could catalyze air
quality improvement and raise the urban standard of living, if their implementation is at least partially funded by the sale of achieved GHG reductions.

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Building on the Kyoto Protocol: Options for Protecting the Climate

IV. Conclusions
The S-CDM represents a natural evolution of the current climate regime.
It would allow developing countries to make serious contributions to theglobal mitigation efforts without having to take on emission targets. Like
the current CDM, S-CDM would offer developing countries the opportunity to pursue GHG-reducing activities with a financial incentive provided by industrialized countries, through either ex ante investment or thepurchase of resulting tradable offsets. From the perspective of developing
countries, other approaches to their increased participation in the climate
regime (such as absolute reductions, growth targets, or intensity targets)
may appear as a step backward since they call for a reduction-absorption
effort funded by domestic resources. From that perspective, S-CDM would
maintain the “polluter pays” principle of the CDM, while significantly
expanding its scope for emission reductions.
Chapter 2 refers to the “virtues of simplicity and familiarity, which areat a premium in the climate change regime.” This points to the potentialof the S-CDM, which clearly builds on the learning process of developing
countries and obviates the need to introduce a new concept or a new logic
into the carefully crafted architecture of the existing regime. Should thearchitecture be revised in the future, the S-CDM will have served as abridge toward more demanding approaches and will have given developing countries the opportunity to gain significant mitigation experience.
Some developing countries (Mexico and others that are like-minded)
would like to see the S-CDM be a natural enhancement of CDM allowed
during the Kyoto Protocol’s first commitment period. In principle, this
could be possible if the Executive Board does not make decisions thatwould explicitly impede regional, sectoral, or cross-sectoral projects. If, on
the one hand, the COP does not restrict the scale, aggregation, or boundaries of projects in the CDM, the whole idea of proposing a sectoral CDM
may be a non-issue. If, on the other hand, the COP decides to explicitly
allow CDM projects in which emission reduction offsets result from a setof policies and measures, and not just from a specific technological improvement or infrastructure investment, S-CDM would not be a negotiation point but rather a policy to be fostered by developing countries when
designing and operating CDM projects.
However, in the past, when faced with choices on issues such as
supplementarity, nuclear energy, and sinks, the COP has shown a clear
tendency toward cautious approaches.11 Therefore, it is likely that the CDM
Executive Board will lean toward a narrow (less controversial) definition

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107

of project boundary and baseline setting for the first commitment period.
Even if the S-CDM is not adopted for the first commitment period, itshould still be considered as an option for the future. A number of otherfuture options, including some discussed in this volume (e.g., SD-PAMs)
are compatible with the S-CDM. A country that has an emission limitation target could even host an S-CDM project, in the same way that an
Annex I country can now host a JI project. Generally, the S-CDM could
serve as a valuable transitional mechanism toward future increased participation of developing countries in the global climate change regime.

Notes
1. Portions of this section are adapted from Figueres (2002).
2. The Kyoto Protocol clearly distinguishes the CDM from the other two flexibility
mechanisms. Under the Protocol, the term “joint implementation” refers exclusively
to the project-based mechanism under which Annex I countries can trade resulting
emission reduction units among themselves. These countries also have access to“emissions trading,” the buying and selling of emission allowances among themselves. The CDM is the only Kyoto mechanism that involves developing countries.
3. In the CDM, project participants establish the baseline in accordance withinternationally approved methodologies. According to the Marrakesh Accords, thebaseline can be derived from any of three approaches: existing actual or historicalemissions, emissions from a technology that represents an economically attractive
investment, or the average emissions of similar project activities undertaken in theprevious 5 years under similar circumstances and whose performance is among the
top 20 percent of its category.
4. In economics, the term “moral hazard” refers to the effect of certain types of
insurance systems in causing a divergence between the private costs of a particularaction and the social costs of that action (Pearce 1986).
5. It is important to keep in mind that the reductions or absorptions have benefited
the Earth’s atmosphere regardless of where they occur. If they are achieved indeveloping countries, they also contribute to the mitigation of global warming. In
this sense, the loophole argument is a subordinate one to the distribution of theeffort and not to the outcome of humankind’s loading of the atmosphere.
6. There is something of a circular causality in the regime as presently structured. The
CDM is the one market instrument that achieves reductions outside of Annex I
boundaries, and therefore the only one that, if successful and scalable, could
facilitate more decisive efforts among the Annex I countries.
7. Secretariat of the Environment of the Government of the Federal District, personalcommunication.
8. Secretariat of the Environment of the Government of the Federal District, personalcommunication.

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9. The Secretary of the Environment of Mexico Federal District, previously a memberof the Engineering Institute of the National Autonomous University, is a wellknown author on energy and climate change issues.
10. Secretariat of the Environment of the Government of the Federal District, personalcommunication.
11. One clear exception is the fast track of small-scale CDM projects, where the
Executive Board is issuing streamlined procedures including sectoral baselines.
Experience with these sectoral baselines could serve as a platform for a gradual movetoward the S-CDM.

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5. REDUCING UNCERTAINTYTHROUGH DUAL-INTENSITYTARGETS
Yong-Gun Kim and Kevin A. Baumert

Introduction
Under the Kyoto Protocol, developed countries committed to reduce theiremissions from 2008 through 2012 to approximately 5.2 percent below
their emissions in 1990. Under this approach, emission constraints of individual countries take the form of fixed greenhouse gas (GHG) targets.
Such a fixed-target approach may be excessively rigid in the face of shifting economic situations, particularly for developing countries. In unstabledeveloping country economies, reliably forecasting future economic and
GHG emission growth is especially difficult. Because of these twin uncertainties, a fixed emission target approach could result in “hot air” in thecase of lower-than-expected economic growth or potentially severe constraints on economic development in the case of higher-than-expectedeconomic growth.
This chapter explores two distinct ideas—dynamic targets and dual targets—and their combination, each of which might help reduce these uncertainties. First, dynamic targets, where an emission target adjusts in response to another variable, have been proposed for developing countries
as a possible future alternative to the Kyoto Protocol’s fixed target approach (CCAP 1998, Baumert et al. 1999, Argentine Republic 1999,
Philibert and Pershing 2001). Dynamic targets may perform better than
fixed targets for economies facing considerable uncertainty, particularly indeveloping countries. Second, rather than a single target, a target range
could be established; this approach is called dual targets. This chapter examines the viability of dual-intensity targets—which combine the ideas
behind both dynamic and dual targets. Operating together, dual-intensity
targets could further reduce the dangers (e.g., severe reduction burdens orunintended “hot air”) stemming from the economic uncertainty in emis-

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Building on the Kyoto Protocol: Options for Protecting the Climatesion target-setting. This approach might also improve the likelihood ofreaching a consensus in the climate change negotiations.
Section I of this chapter illustrates the concept and rationale for dynamic targets in general and dual-intensity targets in particular. Section II
analyzes economic and emission uncertainties and investigates what these
uncertainties imply for dual-intensity targets. It includes a regression analysis illustrating the application of dual-intensity targets for the Republic ofKorea (South). Section III discusses several implementation issues, including an analysis of the compatibility of dynamic targets with international emissions trading and other advantages and disadvantages of dynamic targets (and dual-intensity targets specifically).

I. The Dual-Intensity Target Approach
To understand the concept and mechanics of dual-intensity targets, it isnecessary to first explore the more general notion of dynamic targets. Thissection explains several kinds of dynamic targets and elaborates on one
kind of dynamic approach—dual-intensity targets. In doing so, this section makes frequent comparisons between dynamic targets and fixed targets, such as those established in the Kyoto Protocol.
The Concept of Dynamic Targets
The most salient feature of dynamic targets is that they do not establish an
absolute cap on a country’s allowable emission level. Instead, the allowable emission level for dynamic targets is a function of a predeterminedvariable; in other words, instead of being fixed, allowable emissions fluctuate in response to some other measure. One can envision the use ofnumerous variables—including population, previous emissions, and exports. However, economic growth, expressed as gross domestic product(GDP), is the most likely variable because of its substantial influence on acountry’s overall GHG emissions output. The extent of GDP’s influence
on overall emissions depends on factors such as the structure of an economy(e.g., predominance of services or industry) and energy mix.
GHG intensity targets

There are at least two kinds of dynamic targets. One is often termed anemission “intensity target” (Baumert et al. 1999). Here, the target itself isexpressed not in terms of an absolute measure, such as tons of GHGs, but
in terms of an emissions intensity—a ratio between GHG emissions andeconomic output:

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111

Intensity Target, I = Emissions/GDPα
where I is the emissions intensity target—a constant, expressed in tons of
GHGs per unit of GDP. Emissions is the country’s allowable emission level
during the target period. GDP is the country’s aggregate gross domestic
product during that period, and α is a multiplier that determines the manner in which the allowable emission level changes in response to GDP. If
α is equal to 1, then the relationship is linear: a 1 percent increase in GDP
will increase the allowable emissions by 1 percent (because I is constant).
In the case of Argentina (Chapter 6), α was set at 0.5 (i.e., the square rootof GDP).
This formula can also be expressed as Emissions = I × GDPα. Here,plugging the actual GDP value into the equation will yield the allowable
emissions amount, because I and α are constants.
Indexed targets

A second kind of dynamic target uses indexing to adjust the allowable
emission level (Frankel 1999). Like intensity targets, indexing adjusts theallowable emission level according to changes in GDP. Here, the agreed
target (i.e., the allowable emissions) would be accompanied by an assumed
annual average rate growth (AAARG) of GDP. Deviations from this assumed rate of GDP growth would trigger adjustments in the allowable
emission level. For example, country Z adopts an emission target that limits its emissions to 100 units during a particular period. Z’s target assumes
that the average rate of GDP growth will be 4 percent annually (i.e.,
AAARG = 4 percent). If actual GDP growth exceeds 4 percent per year,
the target is adjusted upward. An annual rate of GDP growth of, for instance, 6 percent (i.e., 2 percent in excess of the assumed rate) mightenable the emission level to increase by 2 percent for every year between
the negotiation and compliance dates. Conversely, if actual GDP growthis less than 4 percent per year, the target is adjusted downward.
For indexed targets, the adjustments do not need to be linear, just as, inthe case of intensity targets, α does not have to equal 1. For example, GDP
growth of 1 percent higher than the AAARG could result in an increase inemissions of 0.75 percent; growth of 1 percent less than the AAARG might
result in a decrease of 0.50 percent in allowable emissions.
It is important to note that, while “intensity targets” and “indexed targets” may appear different, they are essentially the same. Under each, the112

Building on the Kyoto Protocol: Options for Protecting the Climate

Table 5.1.

Analyses and Proposals on Dynamic Targets

SourceTarget indicator

Other characteristics

CCAP (1998)

Growth Baseline:
Emissions/GDP
Intensity target:
Emissions/GDP“Carbon efficiency” (C/GDP) target between
BAU and a no-regrets baseline
Reduction in intensity relative to BAU,
measured from a historical base year
Reduction in emissions of between 2 and 10
percent relative to BAU (nine scenarios);
legally binding if emissions trading is allowed.
Target established at the BAU level or lower(approaching a “break-even” level, where gains
from trade equal domestic costs).
Possible use of price cap or other measures toenhance flexibility

Baumert et al.
(WRI 1999)
Argentine
Republic (1999)

Emissions/√GDP

Frankel(Brookings 1999)

GDP-indexed target

Philibert(IEA/OECD
2002b)
U.S.
Administration(2002)*
Lutter (2000)

GDP-indexed target

Intensity target:
Emissions/GDP

Reduction in greenhouse gas intensity by 18
percent (relative to 2002) over 10 years;
voluntary agreement

Emission/[(lagged emission)0.5×(lagged GDP)0.6×(lagged GDP per capita)0.06]* For U.S. administration, see White House 2002. Abbreviations: GDP (gross domestic
product), BAU (business as usual).

allowable emission level fluctuates with economic activity. Table 5.1 summarizes the different dynamic targets that have been analyzed or proposed.
Economic uncertainty

Future GHG emission levels are highly uncertain in developing countries(a topic explored in greater detail below). This situation can lead to serious technical difficulties in establishing a future GHG emission limitation using a fixed target. Achieving a specific future level of GHG emissions might be very easy under conditions of low economic growth, industrial stagnation, and population decline. That same GHG goal, however,might be exceedingly difficult to reach if economic growth were insteadrobust and population were increasing. Thus, fixed GHG goals can entail
widely varying levels of effort, depending on underlying socioeconomic
conditions (especially GDP growth), which tend to have a powerful influence on emission levels.
This represents a serious problem. Experience suggests that when countries are proposing or evaluating a potential emission target, they are particularly concerned with economic impacts. In other words, countries wantto know the impact that a particular emission control target will have on

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113

their domestic economy, including the overall costs and benefits, potential job losses and gains, and changes in international competitiveness. If
a developing country were to agree to a fixed emission target, potential
economic impacts are likely to be highly uncertain. Dynamic targets attempt to address this uncertainty by adjusting to economic reality andtherefore reducing the economic uncertainty associated with taking a particular target. They allow faster-growing economies more emissions andcontracting economies fewer emissions.
Governments are risk-averse with respect to economic considerations,such as growth, jobs, and competitiveness. This is especially the case indeveloping countries, where climate change is not a priority. If a developing country contemplates a GHG target, it will be important that thistarget does not unreasonably impinge on its development prospects. Given
their risk aversion, developing countries might avoid GHG targets thathave the potential to adversely affect economic growth, even if that potential is small.
Environmental uncertainty and environmental effectivenessWith dynamic targets, reduced economic uncertainty comes at the expense of environmental certainty. Unlike Kyoto-style fixed targets, dynamic targets do not guarantee any particular environmental outcome,although they will deliver environmental outcomes within a relatively
predictable range.
It is important that the reduced upfront environmental certainty of dynamic targets is not equated with weaker environmental outcomes. Dynamic targets could actually facilitate more stringent emission limits, due
to the reduced economic uncertainty of such targets, discussed above(Baumert et al. 1999, Philibert 2002a). Given governments’ risk aversion,a fixed target could create an incentive for a developing country to settle
only on a weak target that ensured no economic harm. Weaker emission
limits are a serious drawback of fixed targets, especially given the links
between emission targets and international emissions trading. Weak targets for one country (inadvertent or not) can reduce the environmental
effectiveness of the entire regime by allowing other countries to purchaseand use excess emission allowances that otherwise would not be used. Such
excess allowances are often referred to as “hot air.” Although hot air can
be a political creation (from negotiating emission limits in excess of futureneeds), it can be enhanced by unexpected declines in economic activity
after a fixed target has been negotiated.1 Overall, dynamic targets do not114

Building on the Kyoto Protocol: Options for Protecting the Climate

eliminate the risk of negotiating hot air targets, but they do provide upfront transparency that will at least help Parties identify whether a target
is likely to generate hot air.
In addition, dynamic targets could enhance environmental effectiveness by promoting wider participation in the international emission control system. Fixed targets might be simply unacceptable for many developing countries. Given the unsettling choice in the target-setting process—between weak targets (which would do little to help the global environment) and strong targets (which could have deleterious effects on theirdomestic economies), developing countries might opt for no commitment
along these lines. Wider participation also supports environmental effectiveness by reducing the incidence of emission “leakage” from countries
with emission constraints to those without.
Sustainable development

Another compelling feature of dynamic targets is their compatibility withsustainable development because they are geared toward achieving emission reduction relative to economic development rather than achieving
absolute reductions in emissions (Baumert et al. 1999). Intensity indicators might better reflect the real climate challenge in developing countries—decoupling economic growth and emissions growth. Philibert(2002b) also states that dynamic targets could be considered most compatible with the environmental strategy adopted by the OECD, which ismainly based on the concept of “de-coupling environmental pressures from
economic growth.”
The Concept of Dual Targets
As discussed, dynamic targets are considered more appropriate than fixedemission targets with respect to accommodating uncertain economic
growth rates, especially in developing countries. However, many difficulties and uncertainties remain in establishing emission targets for developing countries, whose economic growth is highly unpredictable.
Just as with fixed targets, a developing country would have an incentive
to overestimate its “business-as-usual” (BAU) emissions intensity (to justify a weaker target) while other, rival negotiating countries would havethe opposite incentive. In fact, if a country hypothetically tried to establish a target representing its BAU emission levels, even with a dynamic
target there would likely be some degree of either hot air or economic
burden. Thus, this section explores the possibility of establishing dual tar-

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115

gets that, taken together, cover a range of future scenarios. This approach
might improve the effectiveness of target setting and make consensus easierto reach.
The concept of dual targets is not new. Philibert and Pershing (2000)
proposed to establish two national targets with differing legal characters:
one non-binding, the other binding. The binding target would allow a
relatively high level of emissions to prevent the risk of undue constraints
on economic growth. The non-binding target would be established at amore stringent level, in order to reduce the risk of hot air. This non-binding target would be the “selling target,” while the binding target would bea “buying target.” Although Philibert and Pershing did not consider thedual-target concept as an option for dynamic targets, it deserves to beextended and generalized to a wider policy design context. Dual targets
could be applied to either fixed or dynamic targets. The dual-intensity target proposal in this chapter effectively combines the intensity-target approach and dual-target concept.
Combining the Concepts: Dual-Intensity Targets
Under the dual-intensity target approach, two emissions-intensity targets
are established for a single country. The two targets have separate purposes. The lower (more stringent) target provides an incentive to reduce
emissions: reductions below this target would enable the country to sellemission allowances. The higher (less stringent) target would have a punitive function: Exceeding this target would require the country to purchase excess emission allowances in order to remain in compliance. Thus,
the lower target would be the “selling target” and the higher one termed
the “compliance target.” No penalty applies if the emissions intensity of
the country lies between the selling and the compliance targets. That is,there is a “safe zone” in which the country is neither out of compliancenor able to sell allowances through international emissions trading. Thisapproach is illustrated in Figure 5.1 (the “safe zone” is the dark shaded
rectangle between the selling and compliance targets). Mathematically,
the two formulas would take a form similar to the intensity formula described above:
Selling Target: Emissions = I 1 × GDP α
Compliance Target: Emissions = I 2 × GDP α , I 1 ≤ I 2

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Building on the Kyoto Protocol: Options for Protecting the Climate

Figure 5.1. Graphical Illustration of Dual-Intensity Target

GHG Emissions

Compliance Target
Uncertainty
in futureemissions
Selling Target

Historical
Trend

Negotiation
Negotiation
Date

Compliance PeriodTime

I1 denotes the lower (selling) intensity target and I2 the higher (compliance) intensity target. This formulation is general enough to encompass awide range of alternatives. If we set “ I 1 = I 2 ,” it is identical to a single
intensity target. If we set “ I 2 = ∞ ,” it implies an incentive-only intensity
target where there is no obligation to limit emissions (but also no trading,unless the selling target is reached). Therefore, the concept of dual-intensity targets gives us a general and flexible framework for commitments.

II. Analysis of Uncertainties and Implications of DualIntensity Targets
An underlying premise of dual-intensity targets is that uncertainty in future GHG emission levels impairs the process through which emission
targets are set. Thus, it is worth illustrating the underlying economic andemission uncertainties in more detail and showing how dual-intensity targets help policymakers manage this uncertainty. This section analyzes historical and projected data in an attempt to derive implications for the
performance of dynamic targets, particularly dual-intensity targets. First,
the uncertainties in future projections of both emissions and emissions
intensities are compared. Also, examples of past longer-term projections
are scrutinized to see how those forecasts tend to change significantly over

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Reducing Uncertainty through Dual-Intensity Targets

time. Finally, the result of a regression analysis for the case of Korea ispresented and a potential application of dual-intensity targets is described.
Uncertainty of Forecasts: Experiences from Past Projections
One can evaluate different indicators by analyzing the reliability of past
forecasts and the uncertainty of future projections. Table 5.2 shows CO2
emissions and intensity (i.e., CO2/GDP) projections to 2020. These projections, undertaken by the U.S. Energy Information Administration(EIA), include three scenarios: a reference scenario (i.e., BAU), a highGDP-growth case, and a low GDP-growth case. The table shows therange between the high and low emissions and intensity scenarios. This

Table 5.2.

Summary of Energy Information Administration(EIA) Projections for CO2 Emissions and Gross
Domestic Product (GDP), 2020

Uncertainty Range between
High and Low Projections, 2020
(percentage points, relative to the reference case)

Change in Projections,
EIA 2001 v. EIA 1999
(percentage point difference)

Country
United States

CO2
13.6

Intensity
27.4

GDP
30.6

CO2
3.3

Intensity–20.9

CanadaUnited Kingdom
FranceGermanyJapan
Former Soviet Union
China
India
Korea (South)
MexicoBrazil

21.1
16.1
20.0
16.5
24.4
42.0
56.1
40.0
36.6
27.1
45.8

20.0
24.8
21.1
24.8
17.1
48.4
29.1
19.9
26.9
13.0
14.7

5.7
5.7
4.1
–7.3
–9.9
35.5
9.2
13.5
2.0
6.6
8.1

–1.1
6.1
8.9
–6.6
–1.4
14.9
–17.1
–3.8
–23.9
28.5
13.4

–6.4
0.4
4.6
0.7
9.5
–15.2
–24.1
–15.3
–25.4
20.6
4.9

Total Industrial

16.7

24.4

9.0

3.5

–5.1

Total Developing

47.7

17.8

9.8

–5.4

–13.8

Total World

34.0

16.0

9.5

–0.6

–9.2

Source: Compiled from EIA (2001b and 1999).
Notes: The uncertainty range is the percentage point gap between the high growth scenario andthe low growth scenario compared to the reference scenario. EIA’s change in GDP projections for
the United States is not a typographical error. Long-term growth rates were increased from 2.2 to
3.0 percent per year.

118

Building on the Kyoto Protocol: Options for Protecting the Climate“uncertainty range” is the percentage point gap between the high-growthand low-growth scenarios, compared with the reference scenario.
Future emission uncertainties (for the year 2020) are extreme in developing countries, with an uncertainty range of about 48 percentage points.
This means that in 2020, according to EIA, emissions in developing countries could be anywhere between 3,490 and 5,697 million tons of carbon—
a band of uncertainty that is larger than all developing country emissions
in 1999 combined. When forecasts are expressed using an intensity indicator, this uncertainty is lowered to about 18 percentage points. In thecase of Korea, the uncertainty (or range of forecasts) in absolute levels of
CO2 emissions is 36.6 percentage points, while the uncertainty range forthe emissions intensity of CO2 relative to GDP is 26.9 percentage points,
a reduction of 9.3 percentage points. Figure 5.2 shows a comparison of theuncertainties, expressed in absolute levels of emissions and emissions intensities, for various developed and developing countries.
Future emission levels in industrialized countries, on the other hand,
are less uncertain. Table 5.2 shows an uncertainty range of about 17 percentage points between the high and low CO2 scenarios (relative to thereference case). It is interesting that future uncertainty in industrializedcountries is actually greater when expressed using an intensity indicator
than an indicator based on absolute emission levels (about 24 percentage
points versus 17 percentage points, respectively).
Future projections for a given year (e.g., 2020) are also subject to continual, and sometimes major, revision over time. Lutter (2000) analyzes
EIA’s past projections of U.S. emissions and finds that nearly 87 percent of
the forecasts turned out to be too low. Although the forecast errors are notthat significant in the U.S. case, the situation for developing countries isdifferent, as shown in Table 5.2. In the case of Korea, EIA forecasted GDP
2 percent higher in 2001 than in 1999, while the projection of CO2 emissions decreased by 23.9 percent between the 2 years. As a result, the forecast of Korea’s intensity decreased by more than a quarter. This phenomenon is not unique to EIA projections. In 1990, the Korea Energy Economics Institute (KEEI 1990) predicted that CO2 emissions from the energy sector in 2010 would be 126.5 million tons of carbon. A decade later,
KEEI (2000) predicted 2010 emissions to be about 170.6 million tons, anincrease of about 35 percent.
Analysis of these forecasts—and comparisons between indicators—suggests several policy implications. First, CO2 intensity targets (and dynamic
targets in general) are likely to be superior to fixed CO2 targets for developing countries, due to the reduced risk that the target would turn out toReducing Uncertainty through Dual-Intensity Targets

119

Figure 5.2. Projected CO2 Uncertainty in the Republic ofKorea: Absolute Emissions versus Emissions per unit of GDP
400
High GDP Scenario
350

Emissions
Uncertainty
Range

Low GDP Scenario

Index 1900 = 100

300
250
Absolute Emissions
200
150
100

Intensity
Uncertainty
Range

Emissions per unit GDP
50
0
1990

1995

2000

2005

2010

2015

2020

Source: World Resources Institute, compiled from data in EIA (2002a).
Abbreviations: GDP (gross domestic product).

be overly stringent. Second, fixed targets could be better for some industrialized countries or economies in transition. For industrialized countries,
future projections of intensities tend to be even more uncertain than foremissions. Furthermore, analysis by Lutter (2000) shows that CO2 emissions in larger economies are less variable from year to year. A 10-foldincrease in the size of the economy leads to a decrease in variability of
approximately 7 percentage points. On the basis of this, Lutter shows that
forecast errors decline as the size of an economy grows.2
Finally, and more generally, uncertainties persist using both indicatorsand in all countries. There seems to be considerable uncertainty that is
unavoidable, even with the intensity approach. Such uncertainties indicate that negotiators and advocates should be very cautious about using a
BAU forecast as a benchmark or a baseline for determining targets, whether
fixed or intensity.
In spite of the large uncertainties, future forecasts are indispensable innegotiating emission targets. The reduction burden of any given target isthe gap between BAU and that target; this is related not to past performance but to the future commitment period. Therefore, the inherent un-

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Building on the Kyoto Protocol: Options for Protecting the Climate

certainty of BAU forecasts may harm the negotiations due to differing
perceptions or estimations, not to mention possible strategic misrepresentation by Parties. Because dual targets accommodate a range of BAU forecasts, rather than a singular BAU point estimation, they might perhaps
help negotiators reach agreement more quickly and easily. This topic will
be revisited in Section III.
Regression Analysis: Case of the Republic of Korea
Using data from the Republic of Korea (South), this section illustrates thepotential formulation of a dual-intensity target. Regression analysis is helpful because it assess how much certain factors (independent variables), in
this case GDP, explain changes in emissions (the dependent variable).3
Specifically, regression analysis is used here to determine the two intensity
formulas (I1 and I2) as well as the GDP coefficient (α).
We derived a regression equation to relate emissions to GDP over thesame time period. The results are summarized in Table 5.3. The R-squared
value is 0.974, meaning that there is a strong relationship between thedependent (CO2 emissions) and independent (GDP) variables. (An Rsquared value of 1.00 would mean that 100 percent of the variation inemissions is explained by changes in GDP.) The coefficient for the GDPvariable is estimated to be about 0.955, indicating an almost linear relationship between GDP and emissions. The equation derived produces atypical form of target emissions under the intensity approach as follows:
Emissions (t) = 1.239 × GDP(t) 0.955, (1)where t is the time frame for the commitment period, emissions(t) are theallowable emissions during the commitment period, and GDP(t) is theactual GDP during the commitment period. The above formula shows a
GDP multiplier of 0.955, which is close to 1. The multiplier would be

Table 5.3. Regression Analysis of CO2 Emissions in South Korea
Regression Formula:Ln(Emissions) = Constant + α • Ln(GDP)Adjusted R2Standard Error

constant

α0.974

0.06640.2144p-value (0.3170)

0.9554(2.78 X 10-14)

Note: The regression analysis covers the years 1981 to 1998.

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Box 5.1. Calculating the Values of the “Dual” Intensities
The standard error (difference between the realized emissions and the BAU
forecast) from Table 5.3 is 6.6 percent. Assuming the forecast error has anormal probability distribution where the mean equals zero and the standard deviation equals the standard error, the 95 percent confidence interval for the model is then calculated as follows:
projected emission × [1±1.96 × (standard error)]
An equation for the dual-intensity target can be derived from equation (1).
Let us consider a situation in which a dual-intensity target for 2008 is predicted in 1998 on the basis of equation (1) and we want to limit the possibility of emissions turning out to be either higher than the compliance target or lower than the selling target by less than 5 percent. In other words,
the possibilities of hot air and unintended reduction burden should notexceed 2.5 percent, respectively. By applying equation (1), we get the following result:
Emissions (2008) = 1.239 × GDP (2008)0.955, (2)An interval for the dual-intensity target for 2008 can be described as follows:
Intensity (2008) =Emissions (2008)= 1.239 × [1±1.96 × 0.0664]
GDP (2008)0.955

Intensity targets for compliance and selling can be derived from equation (2).
The former equals 1.369 and the latter 1.109. In other words, Korea would beallowed to sell extra permits if the intensity defined in equation (2) turns out
to be lower than 1.109 and is obliged to buy emission permits from abroad toensure its intensity does not exceed 1.369. The number of permits Korea isallowed to sell in 2008 can be calculated as “actual GDP powered by 0.955
and multiplied by 1.109” minus “actual emissions.” And the number of permits Korea is obliged to buy in 2008 is calculated by “actual emissions” minus“actual GDP powered by 0.955 and multiplied by 1.369.”

different depending on different countries’ economic situations. It is 0.5
in case of the Argentine Republic (1999, and Chapter 6 of this volume),
and Lutter (2000) proposes a value of 0.6 for universal application to all
countries. The multipliers could be developed and applied through indepth, country-specific studies. Box 5.1 indicates how values for the dualintensity targets are calculated. (Note that this box is not indicative ofany future commitment by Korea and should be understood as a hypo-

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thetical example only. Furthermore, the year 2008 used in this example
also should not be understood as any indication of the appropriate timingof commitment.)
Above, we derived dual-intensity formulas using historical data (1981–98) in a regression analysis. An alternative methodology might be to investigate the pattern between emissions and GDP under various futurescenarios. According to EIA (2001b) projections, the rate of emission
change tends to be larger than GDP in the low, reference, and high economic growth scenarios. This implies that the multiplier on GDP in theintensity formula is likely to be higher than 1 and that the GDP elasticity
of emissions is greater than 1. However, this is not true in the case of theArgentine Republic (1999) and other countries. Therefore, additional indepth analysis of the appropriate form for the intensity formula is needed.

III. Implementation Issues
As discussed in Section I, the main advantage of dynamic targets in general and dual-intensity targets in particular is that they can reduce economic uncertainty in the target-setting process, especially for developing
countries where future uncertainties are more significant. However, theabsence of a fixed environmental outcome under dynamic targets can create several implementation challenges. These challenges include interactions with international emissions trading, monitoring and verification ofGDP, and complexity of the negotiating process. Except where noted, theseissues are associated with dynamic targets in general and are not specificto dual-intensity targets.
Linkage to International Emissions Trading
To ensure environmental effectiveness and cost-effectiveness, a smoothinteraction between emission targets and international emission tradingis needed. Thus, the dual-intensity approach (and dynamic targets in general) needs to be fully compatible with emissions trading. It is also important for trades to be possible between countries (or private entities) using
fixed targets and those using dynamic ones. Two key issues are associatedwith the compatibility of dynamic targets and international emissions trading.
The first issue concerns the overarching stability of the emissions trading system. Some of the “risks” of international emissions trading are systematically under-appreciated in climate change policy debates and may
be challenging to manage in the future (Baumert et al. 2002). For in-Reducing Uncertainty through Dual-Intensity Targets

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stance, overselling of allowances, excessive uncertainty over market prices,and trading ineligibility could plague a trading system.
Given these risks, dynamic targets could offer an advantage over fixed
targets, mainly in that dynamic targets are less prone to creating hot air, as
discussed earlier. Lowering the risk of hot air (or, conversely, of overly
stringent carbon constraints) could reduce the volatility of market prices
by better balancing supply and demand, thus increasing liquidity. Dynamic
targets also enhance market stability, in that some countries, under extreme circumstances, might be unwilling to comply with fixed targets that
do not accommodate their economic realities.
The second compatibility issue between dynamic targets and trading isdefining and managing the tradable unit. The tradable unit with dynamic
targets is identical to that of fixed targets—“allowances” denominated inunits of CO2 (or carbon) equivalent. However, the quantity of these units
available to a country is not known until the end of the compliance period
because the allowable emission level is linked to actual GDP levels. Thissystem differs from fixed targets, where the number of allowances is determined ahead of time and does not change. Thus, dynamic targets can add
uncertainty and complexity to the emissions trading system.
There are several ways to enable trading to take place with dynamic
targets. First, and most obvious, is a post-verification trading system,
whereby transfers take place after emissions and GDP are verified (during
a “true-up” period, such as the one adopted under the Kyoto Protocol).
Here, some of the dynamic cost-reducing benefits of trading could be lost.
However, earlier trades could take place through various derivatives (e.g.,
futures, options) and insurance contracts. A second way of addressing trading shortcomings is by determining the country’s allowable emissions justprior to the commitment period, based on GDP projections for the commitment period. These projections could, in turn, be updated annuallyduring the commitment period, and then reconciled at the end of thecommitment period so that allowable emission levels reflect actual GDP
changes.
Contrary to conventional wisdom, however, fixed targets encounter similar uncertainty: Countries do not know the total number of allowances
available to sell (or needed to buy) ahead of time. Indeed, this uncertainty
is structural. Because of time lags in determining actual emission levels, acountry will not know its surplus or shortage of allowances until 2014 orlater. Philibert and Pershing (2001) even state that, if the link between
emissions and GDP holds, “the uncertainties on both will essentially compensate. In fact, the uncertainty regarding the availability of124

Building on the Kyoto Protocol: Options for Protecting the Climate[allowances]…would likely be reduced, not increased, by dynamic targets
in comparison to fixed targets.”
Furthermore, the 2001 Marrakesh Accords contain numerous provisions suggesting that, with respect to emissions trading, targets are alreadydynamic. First, the Marrakesh Accords established a “commitment period
reserve” system to guard against the risk of overselling. This commitment
period reserve already envisions annual adjustments to a country’s reserve
level.4 Second, the Accords created a “removal unit” (RMU) that can beissued annually on the basis of a net removal of GHGs that results from anapproved set of activities (UNFCCC 2002, 59–60). RMUs will essentially
increase a country’s allowable emission level, yet the quantity of RMUs
created will be known only ex post and will be subject to myriad requirements.5 Provisions for RMUs and commitment-period reserves demonstrate that the amount of GHGs a country is allowed to emit and trade canalready shift during the commitment period.
Given the wide-ranging uncertainties with respect to availability of tradable allowances, it is not clear that dynamic targets will pose additional
problems, other than adding complexity. It is likely that a significant
amount of trading activity will take place during the so-called “true-up”
period during which emission quantities are known, RMU units have been
issued, commitment-period reserves are solidified, and (in the event ofdynamic targets) GDP values are established.
Finally, it should be noted that dynamic targets in general—and dualintensity targets in particular—can also be used for S-CDM initiatives(see Chapter 3), should they be allowed under the Protocol. Under asectoral dual-intensity approach, selling targets could serve as a baseline
for generating tradable “certified emission reductions,” which would makea compliance target unnecessary.
Gross Domestic Product: Choice of Currency
Along with emissions trading, the use of GDP as part of an emissions target has sparked some criticisms and concerns that should be taken seriously. The first relates to choosing a currency.
There are several ways to measure GDP. It is measured primarily in local currency; once this is done, it can then be converted into U.S. dollars(using market exchange rates) or international dollars (using purchasing
power parities) to facilitate comparisons across countries. Also, each of thesecurrencies (with the usual exception of PPP) can be measured in either“constant” or “current” terms (i.e., adjusted for inflation or not adjusted

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for inflation). The purpose of using constant currency is to facilitate comparisons across time.
Dynamic targets would, in all likelihood, express GDP in terms of domestic currency (Baumert et al. 1999). The first reason for this is that there
is no need to compare intensities across countries. Comparisons of intensity levels across countries are not suggestive of the relative stringency ofcommitments, just as absolute emission levels were not used in Kyoto togauge stringency. Rather, percentage reductions for each country, relative tohistorical levels or BAU, are typically compared to gauge relative stringency. The second reason is that values expressed in other currencies (suchas U.S. and international dollars) are derivative of domestic currencies.
Converting domestic currency would create unnecessary controversy regarding the proper exchange rate and PPP conversion factors. Also, thedomestic currency would be expressed in constant terms because of theneed to compare across time. The proposal by the Argentine Republic(1999, see Chapter 6, this volume) used constant domestic currency (1993
pesos) for calculating GDP.
Finally, what really matters for dynamic targets are annual rates of change,rather than absolute levels of GDP.6 Rates of change are not strictly tied tocurrencies and might be easier to agree on and verify, since different measurement methodologies might yield the same rates of change. There is noneed to engage in debates about what constitutes the “true” GDP of acountry.
Gross Domestic Product: Monitoring and Verification
A second concern about GDP relates to monitoring and verification of
GDP. Dynamic targets increase the data requirements for participating
countries. Greenhouse gas emissions are already subject to a wide range ofmeasurement standards, reporting requirements, and review provisions. If
GDP were used to adjust emission targets, GDP would also need to be
subject to scrutiny.
Generally, most countries and international institutions have more expertise on and experience with national economic statistics such as GDP
than they do with measuring GHG emissions. The standards and methods
for national income accounting have been developing for more than 50
years and are periodically updated by international institutions, such as
the International Monetary Fund (IMF) and the United Nations Statistical Commission. The table in Appendix 5A offers a comparison of thesystems for measuring, reporting, and verifying GHG emissions and GDP.

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For each system that has been set up to account for GHGs, one or moreanalogous systems for GDP accounting are already in place. These systems
need not be duplicated by the Climate Convention. In fact, the Conference of the Parties may, according to the Climate Convention, “seek andutilize, where appropriate, the services and cooperation of, and information provided by, competent international organizations and intergovernmental and non-governmental bodies.”7 The IMF, for example, could playa role in providing GDP data or verifying the data provided by countries
through its existing “surveillance” and oversight processes.
Despite the availability of standards and oversight systems, many countries still do not report timely, internationally reliable GDP estimates (similar to the gaps in GHG reporting). The Milestone Assessments of the
System of National Accounts show that many developing countries are
not reporting GDP data. In addition, some countries, especially China,
have been accused of purposefully inflating their GDP statistics. The mainstream press has repeatedly reported experts’ suspicions that China overstates its economic growth (typically reported as 7 percent per year ormore) to promote foreign direct investment.8 In many countries, including China, statistical agencies are not functionally independent and canbe subject to political influence.
Intentionally inflating, or “gaming,” GDP is a legitimate concern because it would weaken emission targets. However, it is difficult to imagine
that climate change policy could motivate such actions. GDP is used for a
myriad other purposes, including by international organizations to determine eligibility for loans, aid, or other funds. GDP and derivatives of GDP(such as debt/GDP ratios) are used frequently as part of the terms andconditions for obtaining commercial loans. GDP also is used to determine
financial contributions that support international institutions, such as the
UNFCCC Secretariat. If a country wanted to cheat using a dynamic target, it would probably be more tempting to purposefully understate emissions rather than overstate GDP.
Overall, most emission reporting (under Article 12 of the Convention)
is now insufficient to support binding emission targets; the same is true forGDP. If a country were to adopt a dynamic target, better reporting andindependent verification (for which guidelines and institutions alreadyexist) would be required for both emissions and GDP. This suggests theneed to improve in-country capacity in both areas.

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Inclusion of Non-CO2 Gases and Non-Energy-Related Sectors
The analysis in Section II of this chapter includes only CO2 emissions fromfossil fuel consumption. For these emissions, correlations with GDP typically are extremely high. However, if a target included other gases and/or
sectors (e.g., methane from agriculture), dynamic targets might not be aseffective in reducing uncertainty. This is illustrated in Chapter 6, as
Argentina’s emissions from the agricultural sector typically did not adjust in
response to GDP changes. Similarly, CO2 from land use change (a major
source in some developing countries) would likely correlate poorly with GDP.
This poor correlation suggests that precision in target setting will beeven more elusive and uncertainty even harder to reduce. It also suggests
a greater need for a dual-target approach to better account for these rampant uncertainties in the target-setting process.
Complexity and Capacity in the Target-Setting Negotiating Process
Generally, dynamic targets may make negotiations more complex, especiallywhen attempting to differentiate commitments among many countries. Not
only might counties adopt different percentage reduction commitments (asin Kyoto), they might also adopt different GDP adjustment provisions fortargets (in other words, different α coefficients, in the case of intensity targets, or different emission adjustment percentages, in the case of indexedtargets). Negotiations might become exceedingly complex, to the point that
non-specialists, or indeed anyone other than the negotiators themselves,
would have difficulty understanding proposed commitments.
With respect to dual-intensity targets, it is difficult to predict how theadded complexity would affect the negotiating process. Using a dual-target
concept might actually help countries reach agreement more easily. Negotiations would not need to reach a consensus on a single target; instead,they would focus on agreeing to the selling and compliance target intensities described above (I1 and I2). One can conceive of a two-step negotiating process under which a country proposes its own compliance target and
the Protocol Parties collectively (or representatives from other countries)
suggest the country’s selling target.9 Because the Convention requires consent from the country in question as well as Protocol Parties collectively,
the distance between the two targets may converge to a reasonable level.
Overall, dual-intensity targets make assumptions and political decisions
more transparent during initial target-setting. This reduces the likelihoodof surprises that might lead a country to defect from its commitment, possibly improving the prospects of agreement.

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Complexity also points to capacity needs. Country delegations would
need the training and skills to understand and assess various dynamictarget options. Thus, this approach might be best suited to the more advanced developing countries. To make things simpler, the negotiation process might benefit from an initial agreement on several different dynamictarget formulas to provide some standardization in methodologies (e.g., a
few different GDP coefficients, α).
Determining the Stringency of Reduction Commitments
Some approaches to target setting, such as the Brazilian Proposal and per
capita entitlements, include provisions for determining the proportionality of emission limitation requirements among countries (Chapters 7 and
8). (For the examples noted above, these provisions are based on relative
responsibility for existing climate change and on population size, respectively.) In other words, the stringency of a country’s reduction commitment is partially10 determined by the approach itself. Dynamic targets aredifferent in that the stringency of the reduction target is separate from theapproach. Generally, the stringency of such a target is an equity issue. This
topic begins to exceed this chapter’s scope, not because it is less important, but because it is more political than theoretical and could be considered independently without altering the essential elements of this approach.
In principle, a variety of equity criteria could be applied to an intensitytarget approach in order to determine the stringency of country targets.
This approach, however, would most likely be employed through a pledgebased process, whereby countries suggest their own target(s), and negotiate this target(s) with the rest of the Parties.
Nevertheless, several proposals for dynamic targets do address the issueof how to determine the stringency of short-term reduction targets. CCAP
(1998) suggested a growth baseline where the target intensity is set to belower than the BAU level but higher than an intensity that can be achieved
through “no-regrets” measures. They also suggested that countries of similar circumstances could be grouped together, with a common rate of intensity improvement required of all countries in a particular group. Fourcriteria would be considered in defining the groups: fuel mix, economic
growth, technology level, and policy framework.11 Frankel (1999) points
out that a dynamic target set at BAU levels would have environmental
and economic benefits for all countries involved (assuming, of course, theexistence of an international market for emission reductions). He suggeststhat negotiations could settle near a “break-even” level, where overall

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gains from trade equal overall domestic costs, and that richer developing
countries could take deeper targets than poorer ones.
In the case of Argentina (see Chapter 6), the target implied an emission reduction between 2 and 10 percent across the assessed scenarios.
Besides Argentina, the United States is the only country to propose adynamic target, albeit a non-binding one that is not linked to international emissions trading. The U.S. proposal of an 18 percent voluntary
reduction in GHG intensity, announced in 2002, suggests future emission
levels that are similar to historical trends (WRI 2002), implying little, ifany, additional effort.
Internationally, it is unlikely that a single rule could guide the targetsetting process. To make it fair, polluter-pays and egalitarian principles
could play a role in burden sharing, and therefore cumulative and percapita emissions could be used to help determine target intensities. Ability to pay and capacity to reduce could also play a role in target setting;thus, per capita GDP and marginal abatement cost characteristics would
be considered. Marginal abatement costs are widely known to vary significantly among countries.

IV. Conclusion
The usefulness of dynamic targets and dual targets depends on the problem to be solved. In the past, countries have been extremely concernedwith the magnitude and attendant economic impacts of taking an emission target. Yet, determining the economic impact of a fixed target is hard.
Targets are negotiated 10 to 15 years in advance of their implementation,
making it extremely difficult to gauge the level of effort inherent in any
single target. Negotiating emission controls is challenging precisely because of pervasive uncertainties: Countries do not actually know what
they are agreeing to. Dynamic targets and dual targets (perhaps combined)
may have compelling advantages over fixed targets in that they can help
reduce the problem of uncertainty.
Similarly, in negotiating future emission targets, a developing country
might want to be protected from the possibility of having to be a net buyerof emission reductions.12 Here, dual targets could be especially useful andcould be combined with fixed or dynamic targets. The compliance target,on the one hand, could be set conservatively (or not at all) to ensure that
under most any scenario, the country’s BAU emissions would not exceedthat level. The selling target, on the other hand, could be set more stringently to create an incentive to reduce domestic emissions (and capture
benefits through international emissions trading).

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An inevitable consequence of using dynamic or dual targets is a lack ofenvironmental certainty. Considering the long-term nature of the climatechange issue, however, short-term environmental certainty may be lessimportant than the overall stringency of the reduction target. If an intensity target could provide more stringent reduction objectives, it may be
more desirable to have such a stringent target even with the attendantlack of environmental certainty.
Key conclusions of this chapter include the following:• Dynamic targets can be more effective than a fixed target in reducing
the risk of “hot air” from weak targets or of non-compliance from unintentionally burdensome targets. This conclusion holds primarily formany developing countries, although not necessarily for industrializedcountries. In industrialized countries, projecting absolute emission levels might be more reliable than projecting intensities.
• Dual targets could further reduce the risk of undesirable hot air or noncompliance. The concepts of dual and dynamic targets can be combined through the use of dual-intensity targets, for example. Dual targets could also be used with fixed targets.
• Dual-intensity targets would increase the complexity of the negotiations. Paradoxically, however, they might also facilitate a ratifiable consensus. Again, this conclusion applies primarily to negotiating developing country targets and not necessarily industrialized countries.
• Dual-intensity targets address only one part of a climate protection
architecture. Other elements also are integral to the overall framework. They include monitoring and verification of both GDP and emissions data. International emissions trading which, we believe, is sufficiently compatible with dynamic targets, is also critical to an international policy framework.
• Dynamic targets are not a burden-sharing approach. Rather, they are a
way of shaping a target. To promote the real application of this approach, additional decisions would need to be made on the acceptablestringency of country targets.
• As with almost any approach, to make dynamic targets operational,
serious country-level analysis is required (including decisions on gases
and sectors to be covered), as Chapter 6 of this volume illustrates.
For many developing countries whose unstable and uncertain economic
growth exacerbates emission uncertainties, dual-intensity targets may be
the best option—a low-risk strategy for participating fully in global climate protection.

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Appendix 5A.

REPORTING

METHODOLOGIES AND STANDARDS

Table 5A.

Measurement, Reporting, and Review of Information:
Greenhouse Gases and Gross Domestic ProductGreenhouse Gases

Gross Domestic ProductKyoto Protocol (Art. 5,
par. 2): Requires the use ofemissions (and absorption)
estimation methodologies
that are accepted by theIntergovernmental Panel on
Climate Change and agreed
on by the Conference of theParties.

System of National Accounts (SNA)• SNA is a common set of concepts, definitions,classifications, and accounting rules used in economic
analysis and policymaking for all countries. The SNA
provides a comprehensive conceptual and accounting
framework for analyzing and evaluating economic
performance.
• Updated periodically through a working group that, toensure consistency and comparability, includes the United
Nations, Statistical Commission, the International
Monetary Fund (IMF), the Organization for Economic
Cooperation and Development (OECD), Eurostat, and theWorld Bank.

Intergovernmental Panel on
Climate Change (IPCC)
provides guidelines and goodpractice methodologies for
estimating greenhouse gas
emissions.

IMF Article IV consultations. Data gathering through Article
IV consultations relies on an internal IMF process and it
responds to specific informational needs of the IMF such as fordata on gross domestic product (GDP).
IMF's Special Data Dissemination Standards (SDDS) guides
countries in the dissemination of financial statistics (in orderto promote access to international capital markets). The
SDDS includes standards in the following areas (1) data:
coverage, periodicity, and timeliness (or reporting); (2) publicaccess to data; (3) integrity of the disseminated data; and (4)quality of the disseminated data.

United Nations Framework
Convention on Climate
Change (Art. 12). Periodic
reporting of national
communications, including anational emissions inventory
Kyoto Protocol (Art. 7).
Annual emissions
inventories and necessary
supplementary information
to ensure compliance.

SNA. The U.N. Statistical Commission sends aninternational questionnaire to be filled out by members
voluntarily on an annual basis.
IMF Article IV Consultations (surveillance), contrary to the1993 SNA, a member country (of the IMF) has the obligation
to provide the information requested by the IMF’s staff asstated in IMF’s Article IV. The country itself, though, decides
the public availability of this information to avoid thedisclosure of sensitive information. IMF surveillance activities
are conducted annually.
SDDS. See above.

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Table 5A.

continued

CAPACITY BUILDINGMONITORING, REVIEWAND VERIFICATIONGreenhouse Gases
Kyoto Protocol (Art. 8). The
information submitted by each
Annex I Party shall be
reviewed by expert review
teams

Gross Domestic Product
IMF Article IV Consultations. See above.
IMF Reports on the Observance of Standards and Codes
assess the extent to which countries subscribing to the
SDDS observe international standards
Milestone Assessment of the Implementation of the SNA
is a system for monitoring and assessing the performance ofcountries. The system includes six milestones that indicate
different levels of national accounts development.
Generally, the SDDS promotes dissemination,transparency, and public access to data. These data canthen be reviewed and assessed by financial institutions (e.g.,creditors) and others.

National Communications
Support Programme. Provides
technical support to enhance
the capacity of non-Annex I
parties in preparing their initialnational communications,
including in the preparation ofgreenhouse gas inventories.
CC:Train. Jointly created by
the Climate Convention
Secretariat and the United
Nations Institute for Training
and Research in 1994.

The IMF’s General Data Dissemination Standard (GDDS)
focuses on education and training to improve data quality.
GDDS includes a process for needs evaluation for data
improvement and priority setting. Nine regional seminars
for country officials have been held to date.
IMF Reports on the Observance of Standards and Codes
aim to assist countries in identifying areas wheretransparency can be further enhanced.
IMF Article IV Consultations. See above.

Notes
1. The case of Russia under the Kyoto Protocol illustrates both kinds of hot air—intentional and inadvertent. At the time of negotiation, it was probably envisionedthat Russia’s economy would recover more rapidly.
2. Lutter (2000) argues that for forecast errors that are one period ahead, a 1 percent
increase in GDP is associated with a reduction in the forecast error of about 0.1
percent.
3. This analysis uses “reduced form” regression models of the log-linear equation, using
data from the IEA (2000) on two key variables, CO2 emissions and GDP, for theperiod 1971 to 1998.
4. UNFCCC (2002, 54): “Each Party included in Annex I shall maintain, in its
national registry, a commitment period reserve which should not drop below 90 per
cent of the Party’s assigned amount calculated pursuant to Article 3, paragraphs 7
and 8, of the Kyoto Protocol, or 100 per cent of five times its most recently reviewed
inventory, whichever is lowest.”

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5. UNFCCC (2002, 62–63). Regarding restrictions on RMU eligibility, consider theuncertainty inherent in the following chain of conditional requirements: “EachParty included in Annex I shall issue in its national registry RMUs equivalent to the
net removals of anthropogenic greenhouse gases resulting from its activities under
Article 3, paragraph 3, and its elected activities under Article 3, paragraph 4,
accounted in accordance with decision -/CMP.1 (Land use, land use change andforestry) as reported under Article 7, paragraph 1, following completion of thereview in accordance with Article 8, taking into account any adjustments applied inaccordance with Article 5, paragraph 2, and resolution of any questions of implementation related to the reported net removals of anthropogenic greenhouse gases.
Each Party shall elect for each activity, prior to the start of the commitment period,
to issue such RMUs annually or for the entire commitment period.”
6. Indexed targets explicitly use rates of change, and intensity target formulas could be
algebraically rewritten to use rates of change.
7. Article 7, paragraph 2(l).
8. For example, see Waldron (2002).
9. From the game-theoretic perspective, one can see a strong incentive for a country toincrease both selling and compliance targets. A game rule needs to be designed tomitigate such strategic behavior. The proposed rule is one example where thebargaining power is distributed such that the country in question is given a primary
opportunity to set its compliance target (which may determine the financial burdenin case of lower performance) and other countries (e.g., the COP/MOP) have therole of setting the selling target.
10. Of course, the stringency of the targets also is partially determined by the overall
environmental goal.
11. CCAP (1998) classifies 12 high-emitting developing countries into five categories.
China and Iran are included in the group with “high no-regrets potential” andSouth Africa is classified in the “medium-high” group. India, Indonesia, Saudi
Arabia, South Korea, Taiwan, and Thailand are classified in the “medium” potential
group, and Mexico and Venezuela are evaluated as having “medium-low” potential.
Brazil is classified in the “low potential” group.
12. This scenario is, of course, only viable if industrialized countries are likely to be net
sellers.

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6. LEARNING FROM THE
ARGENTINE VOLUNTARYCOMMITMENT
Daniel Bouille and Osvaldo Girardin

Introduction
An unprecedented event took place at the Fourth Conference of the Parties (COP 4) to the United Nations Framework Convention on Climate
Change (UNFCCC) in 1998 in Buenos Aires. The host-country president, Carlos Menem of Argentina,1 announced his government’s commitment to establish a voluntary greenhouse gas (GHG) emissions target for2008 to 2012 and to formally commit to this target the following year
during COP 5. This was the first time a developing (non-Annex I) country had agreed to meet a quantified GHG limitation target.
However, the two principal legal instruments of the climate change regime—the Climate Convention and the Kyoto Protocol—have not established provisions for voluntary emissions targets. This poses numerous
questions for the future of climate negotiations. How should voluntarycommitments be incorporated into the UNFCCC and Kyoto Protocol?
What are the advantages and disadvantages of voluntary commitments
for countries not immediately obligated to take targets, particularly in lightof reticence on the part of industrialized countries to implement initiatives to meet their own commitments? What are the economic and environmental implications of the Kyoto Protocol mechanisms—specifically,
the Clean Development Mechanism (CDM)—for a country making a
voluntary commitment, considering the uncertainties about the size andimpact of the carbon market for a developing economy?
This chapter synthesizes and analyzes the process through which Argentina developed its voluntary commitment, focusing on the technicalaspects of the proposal, the likelihood of effective implementation, thetarget definition process, and the level of participation of different actors
in this process.

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Section I of this chapter examines the national and international context in which the commitment process took place. Section II explains thedifferent target types (i.e., fixed and dynamic) and emission reduction levels considered by Argentina. This section also explores whether the target
methodology would be useful to other developing countries. Section III
focuses on the main implications of adopting this target within the framework of the Climate Convention and Kyoto Protocol, as well as the relationship to development priorities in Argentina. Section IV presents conclusions and lessons learned.

I.

The Decision: Process and Justification

To understand why Argentina proposed a voluntary commitment, it isnecessary to examine both the international and domestic pressures facing the COP 4 host country.
International Context
Since the Climate Convention’s adoption in 1992 industrialized (AnnexI) countries have pressured developing (non-Annex I) countries to makequantified emissions commitments.2 In July 1997, the U.S. Senate adopted
the Byrd-Hagel Resolution, which placed two conditions on any U.S. ratification of a binding protocol: The agreement must not threaten the U.S.
economy, and “key developing countries” had to take on binding targets
to limit emissions during the same commitment period.3 The Kyoto
Protocol’s adoption in December 1997 further increased the pressure on
developing countries to agree to emission limitation targets.4
Why did Argentina propose a voluntary target to limit GHG emissions?
Argentina’s foreign policy during the Menem Administration aimed atdeveloping a closer alliance with the United States, which was evidenced
by deepening bilateral relations and support of U.S. international policy.
Argentina’s adoption of a voluntary target to limit GHG emissions must
be understood within this context, in which pressures on developing countries to voluntarily commit were combined with Argentina’s foreign policy
goals. Within the context of bilateral negotiations, this entailed a significant alliance with U.S. foreign policy in diverse forums and, regarding
climate change, the Argentine proposal appears to be designed to explicitly support the U.S. position.
President Clinton’s official visit to Argentina in October 1997 represented a major milestone in cementing this relationship. Presidents Clintonand Menem signed the Presidential Declaration of Bariloche, which pro-

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posed cooperation between the United States and Argentina on environmental matters, including global climate change.5 This declaration underscored the need to establish a realistic and obligatory target based on flexible cost-effectiveness criteria, as well as the need to mobilize private sector resources for economic development projects in developing countries.
These “joint implementation” (JI) projects would permit the reduction of
GHG emissions. Both parties recognized that the response to climatechange must be global and that all countries (developed and developing)should be involved.6
During the Kyoto negotiations (COP 3), Argentina’s representatives
agreed to promote voluntary commitments for developing countries in
the Protocol.7 However, there was no consensus on the so-called Article
10, which called for such voluntary commitments. Specifically, the Groupof 77 (G-77) and China—the main developing-country negotiating bloc—
found this provision categorically unacceptable. The proposal to include
voluntary commitments was revisited the next year during COP 4,8 although in the end it was not included in the conference agenda or discussed during the meetings leading up to the conference (UNFCCC 1998).
Again, this opposition was led by the G-77 and China.9, 10
Argentine delegation officials later stated that they did not expect that
their proposal on voluntary commitments would be accepted. However,they wanted to ensure that it was discussed as a way to free up negotiations
and overcome the arguments against ratification of the Kyoto Protocolpresented by Annex I countries.11 From the start, the proposal’s politicaland legal feasibility was dubious, since it required an amendment to theProtocol, which was not widely supported and not legally possible giventhat the Protocol had not yet entered into force.
Domestic Context
Domestically, the only actors in Argentina who entirely supported theadoption of an emissions target were those represented by political andtechnical officials who both made the decision at the highest levels anddesigned the proposal, as well as some civil society individuals. These actors, within the then-Secretariat of Natural Resources and Sustainable
Development (SRNDS), strongly backed the announcement, development,
and adoption of the target. The main argument they presented was thatthe voluntary commitment would open up the possibility of gaining access to all the flexibility mechanisms of the Kyoto Protocol. This misunderstanding about the accessibility of all the mechanisms to a developing
country may have been the main error in the call for a voluntary target.

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In internal discussions, national authorities argued that Argentine competitiveness in one of the Protocol’s flexibility mechanisms, the CDM,
was limited vis-à-vis the large non-Annex I emitters, such as India andChina. However, two other mechanisms, emissions trading and JI, could
provide access to markets in the medium to long term. By adopting a voluntary commitment, Argentina sought to gain access to emissions tradingand JI—which were designed exclusively for Annex I countries—to attract investment, create new employment, and improve local environmental conditions without losing its non-Annex I status.12 The magnitude of such investment was, however, unknown. This proposal became
known as the “third way.” Some Annex I countries, such as Canada, expressed interest in it, although recognizing that the rules for this third way
had yet to be negotiated (Government of Canada 1999).
It is unlikely that the Argentine proposal stemmed from sustainabledevelopment interests. Rather, Argentina was mainly interested (however erroneously) in accessing all of the mechanisms to overcome what
was perceived as an obstacle to developing countries in the Protocol, andthus gain access to the derived business opportunities. In addition to theprivate sector, some NGOs were interested in adoption of the emissions
target. The NGOs believed that the commitment of Argentina, an important country in the region, could be helpful to other developing countries
in evaluating voluntary target taking.
The main national actors that were consulted for this evaluation ofArgentina’s decision13 viewed the adoption of the commitment as an isolated measure. They believed the target was not part of an integrated plan
linking climate change to other local, regional, and global environmental
issues, nor was it part of a strategy for general and sectoral policies. Rather,most of them agreed that the Menem Administration’s position was motivated by the aforementioned desire to establish a close alliance with theUnited States in terms of international policy. If there was a plan, it was
based on vague principles and proposals regarding the advantages of avoiding conflict with the United States and developing actions that showedthat Argentina was a strategic ally in international policy.14
At the time, academics and some industry sector representatives expressed their reservations about the establishment of a voluntary emissions target for the first commitment period. They did not see the point ofsuch action when most of the main Annex I countries still had not madeany significant advances in compliance with the Kyoto Protocol and had
not even ratified it. They also did not agree with the decision to link thetarget to an aggregate indicator such as gross domestic product (GDP),

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given the large share of Argentine emissions coming from the livestock
sector. The growth of this sector depends more on international prices andexchange rates than on GDP growth. Also, the supply structure of theArgentine energy sector had a low carbon intensity.
Establishing the Target
The process of quantification and adoption of the emissions target had
two phases. First, the decision for Argentina to adopt a target was made at
the highest levels of government without consulting other interest groups
or even other areas of the government. It was made behind closed doors
and within the President’s closest circle. Second, with the promulgationof Decree Number 377/99 on April 16, 1999, work on the target type andquantification began through creation of the National Commission for
the Elaboration and Proposal of a Greenhouse Gas Emissions Target. The
Commission fell under the purview of the SRNDS of the Presidency.
The SRNDS, headed by Maria Julia Alsogaray, was the clear leader inthis process, as it had the highest political backing and represented theposition closest to that of the Clinton Administration. Participation byother government entities varied significantly. Those most engaged werethe Secretary of Foreign Relations and Latin American Affairs (in the
Ministry of Foreign Relations, International Trade, and Culture); the Energy Secretary and the Secretary of Agriculture, Livestock, Fisheries, andNutrition (both within the Ministry of the Economy and Public Worksand Services); and the Secretary of Science and Technology (in the Ministry of Culture and Education). The other government entities involved15
did not participate in any significant manner, as was the case for representatives of provincial governments, indicating the lack of climate change
and environment-related issues on the agendas of diverse public entities
at all levels—national, provincial, and municipal.
The private sector participated through an Advisory Committee, madeup of representatives from the business sector, science, and academia (bothpublic and private), as well as from NGOs specializing in issues linked to
the Commission’s goals.
A technical team was formed to carry out baseline studies to elaborate
targets for various sectors, principally the calculation of the GHG inventory for 1997, the elaboration of socioeconomic scenarios and sectoral
emissions, and the identification of mitigation options. The technical teampresented the partial and final results of these studies to the Commission
and the Advisory Committee in different meetings. Their comments andsuggestions were incorporated into the studies in some cases.

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II. Taxonomy of the Target
Argentina’s target aimed to maintain net anthropogenic GHG emissions(measured in tons of CO2 equivalent) at a level that did not exceed thequantity defined as the “National Emissions Target.” This target was expressed by the equation Ep(t) = K * √GDP(t), where the emissions target
is equal to a constant (K = 151.5) multiplied by the square root of GDP (at1993 prices), averaged over the 5-year commitment period. If implemented,
the target would deliver an emission reduction between 2 and 10 percent(relative to business as usual, BAU) depending on actual GDP growth andother factors affecting the base scenario.
Between March and August 1999, the technical team advising the Commission and Advisory Committee carried out studies to support the definition (i.e., the type), quantification (i.e., the magnitude), and decision
to reach the mitigation target in compliance with Decree 377/99. They
began formulating the target with an elaboration of the business-as-usual,or base, scenarios. First, based on information on GHG emissions in 1990
and 1994, they developed a simplified inventory for 1997. Second, they
developed future socioeconomic scenarios (i.e., GDP projections). The
agricultural sector (including livestock) required special consideration. In
1997, it accounted for more than 40 percent of Argentina’s total emissions, and its growth is not dependent on GDP changes but rather moreclosely tracks exchange rates and international prices (Argentine Republic 1999).16 Thus, activity-level projections were developed separately forthe agricultural sector for the 2008–12 period. This exercise produced nine
scenarios reflecting the entire spectrum of different emission possibilities
given different GDP and agricultural sector assumptions (see Table 6.1).
To identify ways of reducing emissions, the technical team carried out
mitigation studies in the energy, agriculture, forestry management, andwaste sectors. These studies produced absolute and relative estimates ofpotential reduction or increase in sequestration of GHGs, all essential
information to define the voluntary commitment.
The Commission chose the type and level of target on the basis of information from inventories, emission projections, product research (sectoraland aggregate), and mitigation-options studies considering both magnitude and feasibility.
In deciding which approach to use and in determining the level of thetarget, the Commission considered the following key factors: (1) the behavior of the agricultural sector (for the reasons noted above), (2) theneed to avoid creating an obstacle to sustainable development, and (3)Learning from the Argentine Voluntary Commitment

Table 6.1.

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Estimated Greenhouse Gas Emission Reductions
for Argentina Under Three Different Targets,
2008–2012
Change in Emissions Relative to Baseline Scenarios

GrowthScenarios for
GDP andAgriculture

BAU Emissions,annual meanvalue MtC

Fixed Target
MtC(percentage)

Intensity
Target MtC(percentage)

Square Root
Target MtC(percentage)

Low GDP –Low Agro

95.6–4.82 (–5.0)

8.03 (8.4)

1.89 (2.0)

Medium GDP –Medium Agro

105.2

4.81 (4.6)

4.64 (4.4)

4.85 (4.6)

High GDP –High Agro

122.3

21.87 (17.9)–0.24 (–0.2)

11.54 (9.4)

Low GDP –Medium Agro

96.0

–4.38 (–4.6)

8.48 (8.8)

2.33 (2.4)

Low GDP –High Agro

102.4

1.96 (1.9)

14.82 (14.5)

8.67 (8.5)

Medium GDP –Low AgroMedium GDP –High Agro

104.8

4.37 (4.2)

4.19 (4.0)

4.41 (4.2)

111.6

11.16 (10.0)

10.98 (9.8)

11.20 (10.0)

High GDP –Low Agro

115.5

15.09 (13.1)–7.03 (–6.1)

4.76 (4.1)

High GDP –Medium Agro

115.9

15.53 (13.4)–6.58 (–5.7)

5.20 (4.5)

Source: Derived from Argentine Republic (1999).
Notes: The “reference case” scenario is in bold. Abbreviations: BAU (business as usual), MtC(millions of tons of carbon equivalent).

the need to avoid generating “hot air.”17 Table 6.1 shows the nine scenarios used in the Argentine target analysis, as well as the three different
types of emissions targets considered. Each scenario represents a particular
set of assumptions about growth in GDP and the agricultural sector.
In any of the above scenarios, emissions are expressed by the equation18
E BAU (t) = α * GDP(t) + β * A(t) (1)where EBAU (t) is the emission level resulting from a lack of mitigation strategies (i.e., BAU), A(t) is the indicator of agricultural activity (prices andaccess to international markets), and α and β are indicators of the intensity of emissions.

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By multiplying the emission intensities (α and β) by activity levels(GDP(t) and A(t)), the equation yields a business-as-usual emission level,
expressed in tons of CO2 equivalent.
The reduction of emissions can be expressed as
RE(t) = E BAU (t) – E p(t) (2)where RE(t) is the reduction of emissions and E p(t) is the emission level
permitted to meet the target.
E p(t) can be defined in various ways. In Argentina’s case, the Commission
initially evaluated two possible kinds of target:
1. A fixed target expressed as an absolute reduction.
2. A dynamic target based on an index of emission intensity.
The fixed-target option required a “reference scenario” to effectively
monitor compliance with the commitment. In the Argentine case, thisreference scenario is median GDP growth and high activity in the agricultural sector. The fixed-target approach implies defining the volume of permissible emissions (E p(t)) and setting it as a ceiling for all scenarios.19 It
was estimated that reductions of up to 10 percent could be achieved inthis scenario, where total GHG emissions were equivalent to 111.6 million tons of carbon equivalent (MtC). The third column of Table 6.1 shows
the results of adopting a fixed target under each of the nine scenarios considered. However, the adoption of a fixed target could entail two difficulties. Low-growth scenarios might generate phantom reductions (“hot air”),
while high-growth scenarios would require very sharp emission reductions(in percentage terms).
Given these disadvantages, the Commission considered another option:a dynamic target, expressed in emission intensity (i.e., the ratio of emissions to GDP). Internationally, various emission intensity proposals havebeen developed, including one by the Bush Administration in February
2002. A target based on emission intensity is attractive because it does notentail limits on growth and also assumes “growing efficiency” in the socioeconomic system, thus generating additional benefits. Therefore, given a
gradual percentage reduction of the intensity coefficient, the absolutemagnitude of allowable emissions (and hence reductions) then depends
on the level of activity.
In the Argentine case, the problem with an emission intensity target isrelated to the emissions from the agricultural sector which, as noted, tendLearning from the Argentine Voluntary Commitment

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to change in response to factors other than GDP. A target linked solely to
GDP could introduce a serious risk of non-compliance. If GDP turned out
to be relatively low, while agricultural activity turned out to be high, trying to comply with the target would exert significant socioeconomic pressures. At the same time, important changes in the GDP’s structure could
have devastating effects on the emissions commitments or on achieving
greater efficiency. In this case, the risk of generating “hot air” is low, while
greater GDP growth would facilitate compliance with the commitment.
On the other hand, if the intensity of emissions is established as a fixed
relationship with respect to the reference scenario, the result may be permissible emissions that generate hot air (if GDP growth is high, and agriculture activity is low). The fourth column of Table 6.1 shows the results
produced by this alternative.
In developing countries, variations in the GDP’s sectoral structure makeit difficult to adopt dynamic commitments based on an aggregate economic measure such as GDP. Other difficulties involve the difference in
the intensity of emissions of these sectors, as well as the links to and dependency of certain sectors on international markets.
Given the difficulties posed by Argentina’s economic and emissions structure, technical experts explored other options for a dynamic target anddeveloped a proposal based on an emissions index and square root of GDP.
According to Barros and Conte Grand (1999), “The adoption of an index
that utilizes the square root of the GDP means that the index itself empirically adjusts to the evolution of past Argentine emissions, as well as projected future emissions.” In other words, the Commission selected the index to meet the objective of defining a formula that both accurately accounted for past emissions and produced reductions of up to 10 percent of
future emissions.
The equation was formulated as follows:
Ep(t) = K * √GDP(t) (3)where
K = (1– ρ) ER BAU (t) / √GDPR (t),ρ is equal to the percentage of emission reductions with respect to thereference scenario ER, and ERBAU (t) is the emission level in the reference
scenario.
This equation can be applied to any of the nine scenarios of growth in
GDP and agriculture, but probably is only relevant to Argentina. In the144

Building on the Kyoto Protocol: Options for Protecting the Climatecase of Argentina, ρ = 0.1 and the resulting emission reductions varied
between 2 and 10 percent, while total emissions grew between 22 and 44
percent, relative to 1997 levels. The intensity of emissions would be reduced between 12 and 25 percent compared to 1997, depending on thesocioeconomic scenario (Barros and Conte Grand 1999).
The Argentine formula is an option tailored to match local circumstances, particularly regarding the agricultural sector. It could not be applied in other countries except as a model for adapting emission intensity
to a specific situation based on relevant criteria.
The reference scenario (medium GDP growth and high agricultural sector growth) results in a 10 percent reduction in emissions compared to the
BAU emission level. This target would allow Argentina to comply withthe commitment (based on identified mitigation options), generate tradable gains, and avoid the creation of hot air.
The equation, its formulation, and its K value were chosen not on
principle but on output, as some authors and expert observers have argued. It is difficult not to subscribe to this point of view given that thetechnical experts were tasked with finding a formula that accomplishedthe following:• Reflected the historical evolution of emissions and their relation toGDP.

• Achieved a 10 percent (approximate) reduction with respect to themost probable or desirable scenario (shown in bold in Table 6.1).

• Guaranteed that under no scenario would hot air be generated.
• Guaranteed that under no scenario would the percentage of emission
reductions be greater than 10 percent.
The formula taking the square root of GDP as the variable is the one thatmeets all these conditions, as long as the constant parameter (K) is 151.2.
The volume of allowable emissions for the reference scenario (10 percent (ρ) reduction in relation to BAU) was predetermined. Given the results of economic and agricultural scenarios, K and the relation with Ep(t)that guarantees a 10 percent reduction from the reference case while generating positive values that do not exceed 10 percent for the rest of the
scenarios, were thus established. The incorporation of additional scenarios
based on other hypotheses could lead to different values for K and a different relation to GDP. Therefore, the equation could be adjusted and used
for a series of specific hypotheses and not just for the Argentine case, as canbe inferred from the spectrum of scenarios and the combination of possible
options for GDP’s evolution and agricultural-sector activity levels.

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III. Implications of the Adoption of Emissions Targets
Linking the Target to the UNFCCC and the Kyoto Protocol
As discussed, neither the Kyoto Protocol nor the UNFCCC contains provisions for voluntary commitments, such as the one presented by Argentina
at COP 5. Argentina’s announcement did not include a strategy for legally
operationalizing its target within the international negotiation process. Yet,
the voluntary commitment itself was conditional on an action by the COP“to present a new alternative that empowers non-Annex I countries, whichlike Argentina would like to adopt an emissions target, to participate in themechanisms established in Articles 4, 6, and 17 of the Kyoto Protocol” (Barros
and Conte Grand 1999). Two possible options for making the commitment
operational included an amendment to the Kyoto Protocol or the consideration of other legal instruments (i.e., another Protocol) possibly involving
another negotiating phase. Neither option was promising.20
The only way for Argentina to take a target that would grant it access tothe mechanisms was by joining Annex I of the UNFCCC and Annex B of
the Kyoto Protocol. In addition to access to JI, emissions trading, and the“bubble” (Article 4 of the Protocol) mechanisms, this could entail someadvantages, such as additional “flexibility” similar to that accorded toeconomies in transition. Yet the drawbacks were significant, and would
entail a long delay. Procedurally, entry into Annex I would require amending the Convention (Article 16) or declaring Annex I status under Article 4.2(g). The Protocol would also have to be amended for Argentina tojoin Annex B. Article 21 of the Kyoto Protocol states that amendments toAnnex B (such as accession) must be adopted at a meeting of the Protocol
Parties, which cannot occur until after the Kyoto Protocol enters into
force. This requirement would entail a considerable delay for the effective
application of the amendment and undermines the argument thatArgentina’s commitment was presented as a way to contribute to the ratification of the Kyoto Protocol.
Overall, the benefit of accession to Annexes I and B is not evident. In
addition to the above difficulties, inclusion in Annex I also implies exclusion from the CDM, which is the only mechanism that allows credit accumulation before 2008.21 Moreover, gaining Annex I status may lead others
to question Argentina’s receipt of foreign aid as a developing country. Proposing an amendment would also be politically problematic, since otherdeveloping countries opposed voluntary commitments. Many analysts believed that international negotiating conditions for developing countries

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would worsen if discussions were to begin on possible amendments to theProtocol and Convention.
Fortunately, the officials who formulated this target did not contemplate this option. The difficulties and uncertainties associated with existing options motivated Argentine officials to explore an entirely new approach, which they called the “third way.” Voluntary target taking wasseen as a potentially more attractive route for developing countries to enjoy some of the advantages of the Kyoto Protocol, without losing theirstatus as non-Annex I countries.
The officials who set Argentina’s target believed it was possible to leada group of countries interested in establishing emission limits over a long
period of time. However, these officials did not take into account that thiswould significantly change the Kyoto Protocol architecture, and that theiridea could not be implemented without a radical modification of the treaty
or an agreement on a new protocol. It implied a “flexibility of the flexibility mechanisms” to allow these countries to have access to all three mechanisms, not just the CDM. The hope that a subgroup of countries within
the Kyoto Protocol and the UNFCCC would take on voluntary commitments (and perhaps establish another Annex) never materialized. Even if
other countries were interested, there was still no procedure for altering
the architecture of the Protocol prior to its entering into force.
The idea was not properly developed or explored in depth. Since there
are no prior experiences in the UNFCCC or the Kyoto Protocol with thistype of approach, it would require considerable effort to develop and implement within the framework of international negotiations. In the end, thevoluntary target was shelved. The COP has neither accepted nor rejected it.
Long-Term Development Priorities
It is not very easy to identify the consistency between Argentina’s development priorities and the setting of the emissions target. There are at least
three reasons for this inconsistency.
First, the decision to commit to limiting emissions was based on international political objectives, without an analysis of the national economic
impact. Second, the government’s development priorities and policies havenever been explicitly and systematically defined in strategic plans and planning processes. This has meant that climate protection and sustainable
development lack any identifiable policy linkages. Third, within the context of a prolonged economic crisis, the progressive weakening of state
institutions aggravated this situation, particularly among institutions dedicated to environmental matters.

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Argentine officials hoped that the adoption of a target and the possibility of participating in the Kyoto mechanisms would help create new sourcesof employment, attract and channel investment into diverse sectors, andproduce spin-off benefits for the entire economy. Yet, the lack of a detailed, systematic evaluation of all potential effects of the voluntary commitments makes it very difficult to determine whether the target is consistent with Argentina’s long-term interests or to evaluate the conditions
under which such a commitment could benefit the country.
Most of the relevant actors agreed that the adoption of an emissions
target was not a national priority. This was true at the time, and is eventruer today, with the deepening of the economic recession and the financial crisis that has followed in Argentina. In the past 2 years this crisis has
dramatically changed priorities in Argentina, compared to the 1990s.
However, the actors consulted still believe it makes sense to graduallyadopt policies and measures that naturally lead to limiting emissions, aslong as doing so does not affect economic growth.
Generally in Argentina, there is little public awareness of environmental matters. This is true in political, technical, and business circles; in the
media; and in particular among opinion-makers, as well as among the general public. Achieving the target would entail not only creating greaterawareness in the population but also developing a political agenda and an
environmental strategy on climate change. Meeting a commitment would
require strengthening the institutions that foster participation, a problemof public policy in general, not only environmental policy. Although civilsociety should potentially play a fundamental role in defining policies related to climate change—such as elaborating mitigation proposals andturning these proposals into norms, standards, and planning—no procedures to assure its participation are in place.
The complexity and ever-evolving nature of the UNFCCC negotiation
process make it difficult for sectors such as academia to systematically follow and monitor the negotiations, as they do not have the necessary financial support. The result is that the academic sector’s relationship tothis process is intermittent, which blocks the possibility of greater participation in the process.
Until the population’s everyday subsistence problems are resolved, it
will be very difficult to raise public awareness of climate change or improve public participation in the elaboration and definition of policies.
Only then will the average citizen have the time and space to reflect on
issues that do not seem urgent when compared with meeting basic dailyneeds.

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Taking Advantage of Opportunities in an Eventual Emissions
Market: The Tradeoff between Mechanisms and Targets
Future opportunities for non-Annex B countries have been discussed inmeetings and in documents on the flexibility mechanisms and on the future markets for trading GHG emission credits. Although countries could
benefit by taking advantage of the Kyoto mechanisms and taking “early
action” on climate change, they differ in their capacity to influence emission reductions markets and thus benefit from the mechanisms.
In this sense the opening of a global market to trade emission credits
would create opportunities for the large suppliers (e.g., China, India, andeconomies in transition). Together these countries could supply more than
80 percent of the demand. The remaining 20 percent could be distributed
among 130 other countries, including Brazil, Mexico, Indonesia, Malaysia, and Korea.22 It is also undeniable that “hot air” will serve to depress
price levels, and consequently reduce the range of viable mitigation options for developing countries such as Argentina. Due to higher mitigation costs in Argentina, low market prices mean that Argentina would
not be able to take advantage of opportunities to reduce emissions throughthe CDM, with the possible exception of carbon sinks. So-called no-regrets mitigation projects are one option for Argentina, although many
believe that no-regrets options will be harder to get approval for under theCDM.23 These options, however, would be available if Argentina had access to the rest of the Kyoto mechanisms.
Argentina would have to assume the costs for all actions resulting fromvoluntary commitments. Emission reductions in compliance with the voluntary commitment cannot be traded (as they are a part of the commitments assumed). The most rational approach to compliance would be tocarry out the cheapest measures first, or those with a negative cost, andtake advantage of the most favorable situations. Keeping in mind the “noregrets” concept, it would be worthwhile to voluntarily reduce only thoseemissions that imply assuming an incremental cost that is negative or zero.
Yet, Argentina’s voluntary commitment was so ambitious as to eliminate
the possibility of generating surplus emission reductions. A lesser commitment would have meant a greater available surplus. The real benefits ofmaking such a commitment stem from the possibility of trading the surpluses.
To be economically rational, the price anticipated from the eventual
sale of offsets in the market should be higher than the cost of generating
the emission reductions. This includes both the possibility of using noregrets measures, as well as the possibility of taking other actions and en-Learning from the Argentine Voluntary Commitment

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acting measures with positive costs (again, so long as these costs are lessthan the selling price of offsets in the market). The act of making a voluntary commitment should be based on an exhaustive evaluation of diverse
possible scenarios and of the evolution over time of the variables involved
to ensure that no economic losses result.
To evaluate whether a non-Annex I country should carry out early mitigation actions, the government should compare the opportunity cost of
sacrificing the cheapest mitigation options today with the cost of having
to carry out more expensive mitigation options in the future (as the resultof commitments that may have to be made down the line). Obviously,
these calculations involve high levels of uncertainty due to the behavior
of diverse variables. They should be based on discounting the cost of future actions and comparing them with present mitigation actions that could
be implemented.

IV. Final Considerations
Argentina’s experience in proposing a target yields valuable lessons forothers considering a voluntary target. A developing country contemplating making such a commitment should carefully and cautiously evaluate
the target’s type and level, as well as the conditions set for real compliance. The most salient considerations should include the following:
Need for thorough technical assessment. In the specific case of Argentina, the decision to adopt emissions targets was eminently political. Moretechnical and economic studies were needed to support such a decision.
The few studies done on Argentina’s potential participation in an emissions market, and the magnitude of this market, did not provide serious
arguments on which to base the adoption of the target. In Argentina’s
target evaluation exercise, resources and political will were needed tomobilize and enhance the existing capacity. Developing countries considering target taking should ensure they have adequate and proven methods, methodologies, and modeling capacity to ensure proper analysis.
Argentina’s target proponents underlined the positive effects that “early
action”—that is, target taking—would bring. Early action was expected toprovide (1) access to more modern, cleaner technologies; (2) the possibility of qualifying for entry into more environmentally demanding markets;(3) development of the institutional capacity necessary to implement suchinitiatives; (4) greater knowledge of technologies; (5) accelerated development; and (6) a reduction in the costs of all these factors. However,these advantages or benefits were not quantified or estimated.

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Energy-intensive industry flocked to Argentina in the 1980s, which could
occur again in the future, considering the country’s natural resource endowment. The transfer of energy-intensive manufacturing activities todeveloping countries is thus an important issue that should be included in
an assessment. The assessment should also evaluate the relevance and applicability of emission reduction measures undertaken by other countries
to its own domestic setting. The transferability of the measures may belimited as each country’s circumstances are different. Countries should
not assume that what works in one context would work in their own.
Need to carefully consider country-specific emissions conditions. Although target proponents were careful to select a type of target appropriate to Argentina’s circumstances, the wisdom in volunteering a target atall, given Argentina’s GDP and energy structure, may be questionable.
As a result of the institutional and regulatory reform of Argentina’s energy system and the country’s dependence on international markets, there
is a close tie between the prices of energy and agricultural products andthe evolution of the prices of these “commodities” in international markets. The uncertainty of future price scenarios and their impact on theinternal activity level of the sectors with the greatest emissions creates anadditional difficulty for a possible emission-limitation initiative. Even
within a legal and regulatory framework, the volume of emissions depends,
in Argentina’s case, on exogenous factors that internal policies do notcontrol. A low level of activity in the agricultural sector would imply thatemissions grew at a lower rate than GDP, while a high level of activity inthis sector would imply a rise that is more than proportional to GDP growth.
Neither of these scenarios would reflect increased or decreased efficiency;
they would be a function simply of GDP structure.
In the 1990s, the institutional and regulatory structures of Argentina’s
energy system were transformed. The resulting changes included alteration
in behavior during the decision-making process (new actors), growth ineconomic efficiency with a subsequent impact on prices, the introductionof technologies (which, although more efficient, emit more than the technologies they replaced), and the substitution of primary energy sources.
The impact of these changes has been an increase in GHG emissions as aresult of greater energy consumption and greater penetration of natural
gas in electricity generation, as gas has been substituted for non-emitting
sources, such as hydropower and nuclear. Although these changes are recent, initial evidence suggests that emissions in key segments of the energy sector, such as electricity generation, will grow, increasing emissions

Learning from the Argentine Voluntary Commitment

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intensity as well as the absolute level of energy consumption and thus
impeding implementation of the proposed reductions target.
Need to be conservative in economic projections. Argentina’s adoptionof an emissions target was based on expectations of a more favorable future economic situation. Despite the nine emission projections undertaken,
it is clear that, given the current economic collapse in Argentina, theseprojections were based on overly optimistic assumptions. Developing-country caution in making commitments in the short term and, particularly,
within the context of volatile emerging markets and a lack of sustained
economic development over prolonged periods, seems justified given theArgentine experience.
Need to leave room for growth. Argentina, like other developing countries, has development needs that could be sacrificed through the implementation of target taking. Energy consumption depends on the demand forservices and for energy use related to greater comfort, mobility, communications, and entertainment, among others. In many developing countries, ahigh percentage of the population cannot meet even its basic energy needs,
making it logical that growth in income will also mean a concomitant risein energy consumption. As a result, increase in income per capita could
mean a non-linear increase in energy consumption per capita. A proposal toreduce emission intensity, therefore, could become an impediment to improving the population’s welfare since this might translate into limits on theability to satisfy energy needs.
For target taking, analysis should have taken into account the structure ofArgentina’s GDP and its vulnerability to significant cyclical shifts. Moreover, the industrialization process, even when based on efficient technologies, implies growth in emission intensity, as industry makes up an increasing share of economic production relative to other, less energy-intensive,
sectors. Over the past 15 years, Argentina has gone through a process ofdeindustrialization that must be reversed in order to address the country’s
main economic and social problems (including unemployment, poverty,
inequity, trade deficit, and external debt). The recovery of industrial growthis likely to increase emissions. This example is relevant to many developing
countries that, like Argentina, are experiencing economic deterioration,rising poverty, low GDP levels, and increasing inequity. The reversal of thisprocess could have an impact on emissions intensity.
Need for realistic assessment of technology and emissions-related markets. In a developing country such as Argentina, the greatest potential for

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improving efficiency depends on incorporating technologies developed byindustrialized countries, which are delaying compliance with their emission reduction commitments, and thus slowing the pace of technologicaldevelopment. Stable, or even lower, fuel prices are anticipated, which do
not provide an incentive for the development and incorporation of more
efficient technologies, particularly if they require significant additional
investments.
Need for domestic policy relevance and buy-in. It is not enough to makevoluntary commitments within the context of international pressure, particularly when those commitments imply actions and policies affecting all
productive sectors and civil society. The absence of a broad and democratic debate and the lack of support from different social actors for thetarget demonstrate that its implementation would face numerous obstacles.
At best, the commitment will become a voluntary posture that will neverreally be put into action.
While it is true that the social, economic, and environmental dimensions are interconnected, in reality issues such as short-term material andsocial welfare are a much higher priority for civil society. In Argentina,
members of civil society (with the exception of environmental interest
groups and academics) have hardly participated in discussions on environmental issues, and representatives of productive sectors and the government in general have also shown little interest. This clearly shows thatthe environment is the concern of a small group of actors with a certain
level of knowledge and understanding of the climate problem’s importance, rather than a national priority. Environmental issues are becoming
even less of a priority in the wake of country’s deepening economic andsocial crisis.
Although the effort to include broader government and public participation in the target-taking exercise was insufficient, it represents a firstattempt toward gathering disparate sectors and actors in such an exercise.
The process clarified the need to set a national long-term strategy combining climate concerns and economic development. As such, the effort
in Argentina was worthwhile and unusual for a developing country.
Need for long-term view. The selected actions also need to fit within theframework of long-term state policies. Otherwise a change in administration will yield policy changes that do not provide continuity. Argentina’s
announcement was made in the context of short-term politics and was
not linked to longer-term sustainable development policies. The best evidence of this is the lack of agreement, even among state entities respon-Learning from the Argentine Voluntary Commitment

153

sible for relevant sectors. This reality is clearly evident in the lack of concurrence and support from the energy sector.
Need for realistic understanding of international order. It is importantto reemphasize that the administration, at the time it made the commitment, tried to portray Argentina as a country that shared the reality ofindustrialized countries, rather than emphasizing its status as a developing
country. Other actions, such as applying for entry into the OECD andrumors of incorporation into Annex I, all reinforced this discourse. Perhaps this posture was based on the belief that the country was an important international player.24
As regards international negotiations on climate change, neither theConvention nor the Kyoto Protocol contemplates this type of commitment. This presents serious obstacles and a significant negotiation challenge, as any modification of the Kyoto Protocol is perceived as threatening by many developing countries concerned that change would lead tomore unfavorable conditions for them. While searching for answers to a
global problem, everything seems to indicate that it is advisable to staywithin the framework of agreements and consensuses reached and to avoid
creating conflictive situations. Many observers viewed Argentina’s proposal as an attempt to destroy the consensus inside the G-77 and Chinaor, at least, as more of a confrontational position than a conciliatory one.
In addition, Argentina’s close alliance with the United States entailed
serious problems in its relationships with its natural allies, such as themain trading partners in the MERCOSUR regional integration agreement.
The national circumstances of each Party imply that proposals and formulas cannot easily be adapted to each country’s situation. Perhaps justcertain key elements could be identified that should be included in thedesign of any voluntary commitment. The adoption of different targets
that take into account the different national circumstances of each country could make the participation of developing countries easier, even if itmakes the monitoring and verification of the commitments more complex. It could be more attractive for some developing countries to makevoluntary commitments in order to take advantage of certain business
opportunities resulting from the Kyoto Protocol, as long as these can bepositively linked to each country’s development strategy.
Some authors maintain that the principal error in Argentina’s proposal
is that it rests on trying to gain access to mechanisms reserved for the
Annex I/Annex B countries, while also retaining access to the CDM. This
would imply opening up discussions on the Kyoto Protocol’s modification

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or the possibility of creating other instruments that other key developing
countries would not support.
Finally, the lack of serious initiatives from Annex I countries and donors is the context in which Argentina’s proposal and proposals from otherdeveloping countries should be analyzed. The actions of these actors havenot encouraged developing countries to participate in the process. The
pressure of certain Annex I countries on developing countries to commit
seems paradoxical: Those that are pressuring have already agreed to obligatory quantified targets, and yet many are not taking concrete actions tocomply. Thus, for a developing country to seriously consider taking on atarget, industrialized countries must overcome their resistance to implementing the reductions needed to meet the commitments to which they
have agreed.
The need for a serious and viable plan to integrate developing countries
into the quest for climatic sustainability is a permanent and open challenge. It will not be resolved through isolated formulas, indices, or commitments that are difficult to verify and monitor. Such measures would
lack the necessary international consensus and, thus, would have dubious
impact on solving this problem.
In the end, the Argentina proposal was inconsistent, unworkable, andlacked policy coherence and domestic support. It provides, however, an
excellent case study about how a developing country—with its own mix
of political, economic, social, and environmental forces—grappled withthe complex challenge of non-Annex I states to participate meaningfullyin the Kyoto Protocol. So conceived, it may begin to serve as a repository
for “how to” and, equally important, “how not to” undertake internationaland domestic policy discussions about the adequate articulation to theglobal effort to prevent climate change.

Notes
1. Dr. Carlos Saúl Menem was President of Argentina from July 1989 though December 1995 and from December 1995 through December 1999 (second period). During
his entire mandate, Engineer Maria Julia Alsogaray (President of COP 4 in Buenos
Aires) was in charge of the Secretariat of Natural Resources and Sustainable
Development (government environmental agency in Argentina). This secretariat is
a ministry and is directly dependent on the executive branch. Alsogaray was incharge of all environmental matters and had a very close relationship with the
President, receiving preferential treatment.
2. New Zealand also presented a proposal at an opportune moment, asking forcommitments from all Parties. During COP 4, developing countries had heatedLearning from the Argentine Voluntary Commitment

155

discussions with the United States, when it tried to force them into making
voluntary commitments.
3. Even before the Kyoto Protocol, U.S. industries launched a campaign to convince
the public that a strong agreement on climate change would increase prices of all
goods and that countries such as China, India, Mexico, and South Korea would
become “free riders,” while U.S. industry would lose its competitive edge.
4. On December 10, 1997, when celebrating the agreement reached in Kyoto, the U.S.
President stated that important challenges remained, particularly in ensuring
meaningful participation of developing countries in mitigation efforts. He said thatindustrialized countries had already taken firm steps in terms of emissions mitigationby accepting quantitative commitments, noting that, “We do not accept binding
obligations unless key developing countries meaningfully participate in this effort.”
On August 12, 1997, then-Vice President Al Gore reiterated that in order to ratify
the treaty and send it to the Senate, developing countries would have to participate
in a significant manner. The problem is that “meaningful participation” is a vague
concept that has not been defined, allowing the U.S. to reject any efforts by arguingthat they are insignificant.
5. Declaration of Intention of the Governments of the Republic of Argentina and theUnited States of America on Cooperation for Sustainable Development, Joint
Implementation and Jointly Implemented Activities to Reduce Greenhouse Gas
Emissions. Signed on October 16, 1997 in the city of San Carlos, Bariloche by
Guido Di Tella (then Argentine Foreign Minister) and Madeleine Albright. Diario
Clarín, October 17, 1997, Buenos Aires; Diario Río Negro, October 17, 1997,
Viedma, Río Negro, Argentina. It should be kept in mind that this declaration was
signed before COP 3 and the establishment of the Kyoto Protocol.
6. The Bariloche Presidential Declaration. Diario Río Negro, October 17, 1997.
7. Argentina explored this alternative and led a consultation group made up of Latin
American countries during the seventh meeting of the Ad Hoc Group on the Berlin
Mandate (AGBM7). However, these consultations on a new proposal did not
produce any concrete results.
8. The president of COP 4 was Engineer María Julia Alsogaray, who was also theSecretary of Natural Resources and Sustainable Development of Argentina.
9. See CSE (1998). As an example, the Brazilian delegation declared that it would not
accept the inclusion of voluntary commitments on the agenda of the COP 4
meeting, and G-77 and China both supported this argument. These countries
expressed their views in the conference with the Indonesian ambassador (chair of
the G-77 and China at that time). See Ministry of Science and Technology (1999),
http://www.mct.gov.br/clima/ingles/negoc/interv6.htm. The Brazilian position was
ratified during various public presentations by its delegations. For example, see
United Nations (1998), http://www.un.int/brazil/speech/98d-2com-clima.htm. It is
important to consider Brazil’s position on this matter and to keep in mind that it isArgentina’s main trading partner in MERCOSUR, along with Uruguay andParaguay, and that the productive structures of both countries are integrated(particularly the automotive sector).

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10. It should be recognized that María Julia Alsogaray’s intention was extemporaneous,
since this matter had already been decided in 1997 and was revisited just before
COP 4. It was not politically feasible to present this issue once again in November
1998.
11. Castellini (1998). It was argued that the creation of commitments was not theoriginal intention and that these commitments were not meant to be obligatory.
The idea was to permit countries to do so if they wished, and voluntary commitments were intended just to limit emissions, not eliminate emissions. However, theproposal was not even discussed.
12. See Gobierno de la República Argentina (1999) concerning the Argentine
situation, and Zhang (2000, 2001), referring to the global situation.
13. The actors consulted include individuals from academia, NGOs, business, government, and interest groups, as well as the officials responsible for the design anddevelopment of the target.
14. Diverse military actions, such as the immediate participation with peace-keeping
forces and support for the Gulf War (sending of military aircraft), as well as votes invarious international forums, are all notorious examples of this alliance.
15. In addition to the government bodies mentioned in the text, the Commission
included the Secretary of Economic and Regional Programming; the Secretary ofIndustry, Commerce, and Mining; and the Secretary of Transport, all within the
Ministry of the Economy and Public Works and Services.
16. The level of agricultural activity is strongly influenced by the international meatand grain market. As a result, emissions produced by this activity do not depend on
the behavior of local economic variables but on the expected international context
for future prices of primary products.
17. As Table 6.1 shows, the method of the square root target in all the cases (scenarios)
guarantees a positive emission reduction, both in absolute value and in percentage,in comparison with the BAU scenario.
18. Barros and Conte Grand (1999).
19. In this case, the emissions permitted during the commitment period total 100.4
million tons of carbon equivalent.
20. This issue was analyzed in Gobierno de la República Argentina (1999), based on apaper by Embree and Wilkinson (1999). Also see Girardin (2000).
21. This is the main reason for the insistence on maintaining access to the CDM.
22. MIT (1997), cited in Gobierno de la República Argentina (1999) and Girardin(2000).
23. Although there are many documents on this topic, we recommend Reid andGoldemberg (1999).
24. Another telling example is the pretension to mediate in the Middle East conflict.

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7. THE BRAZILIAN PROPOSAL ON
RELATIVE RESPONSIBILITYFOR GLOBAL WARMING
Emilio L. La Rovere, Laura Valente de Macedo,
and Kevin A. Baumert

Introduction
This chapter examines the policy implications and future potential of theBrazilian Proposal for establishing limitations on greenhouse gas emissions.
Considerable confusion surrounds this Proposal, in part because the term
“Brazilian Proposal” has two meanings. One refers to the specific proposal
introduced in the United Nations Framework Convention on Climate
Change (UNFCCC) negotiations prior to the 1997 adoption of the Kyoto
Protocol (UNFCCC 1997b). Like other proposals put forward during Kyoto
negotiations, the Brazilian Proposal offered a concrete option for structuring the Protocol’s emission limitation requirements. The other meaningrefers to elements of the Brazilian Proposal that have persisted since theProtocol’s adoption. The most notable of these is the burden-sharing
scheme, which apportions greenhouse gas (GHG) emissions targets according to each country’s historical responsibility for the global temperature increase. As such, the burden-sharing scheme can be understood as a
general methodological framework for determining emission limitationcommitments among states. This aspect of the Brazilian Proposal is verymuch still alive; research and analysis continues (MCT 2000; UNFCCC
2001).
This chapter has three sections. Section I describes the basic features ofthe original Brazilian Proposal as presented in the Kyoto negotiations. It
also explains the proposal’s political significance in the negotiations. Section II discusses the Brazilian Proposal’s methodology in a policy context,
including various ways of determining historical responsibility. Section III
analyzes the future implications of adopting the proposal’s methodology
under the Climate Convention and, in particular, the pros and cons of158

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using its burden-sharing scheme to establish emission targets for the Kyoto
Protocol’s second commitment period and beyond. This section suggests
some modifications to the Brazilian Proposal that could make it more feasible in the future.

I.

The Context and Features of the Original Brazilian
Proposal

In 1995, the first Conference of the Parties (COP 1) to the Climate Convention adopted the Berlin Mandate, which stated the need to establish
GHG emissions reduction targets for industrialized and transition (Annex I) countries and affirmed the implementation of the Convention’scommitments for developing (non-Annex I) countries. The negotiation
process aimed to adopt a protocol to the Climate Convention at COP 3,
in Kyoto, Japan, in 1997. In the run-up to Kyoto, the process invited proposals from all Parties on how to shape “quantified emission limitation
and reduction objectives” for Annex I Parties. Many proposals included
indicators—or a combination of indicators—such as per capita emissions,gross domestic product, and energy intensity, among others (UNFCCC
2000c). The idea of a Brazilian proposal was developed between 1996 and1997 by experts from the government and the national scientific community and, particularly, by Luiz Gylvan Meira Filho and José Domingos
Miguez from Brazil’s Ministry of Science and Technology, in consultation
with Luiz Pinguelli Rosa, professor at COPPE/UFRJ.1 In July 1997, theBrazilian government presented its proposal to base emission reduction
requirements on an industrialized country’s relative responsibility for the
global temperature rise (currently about 0.6° C higher than pre-industrial
levels).
Specifically, the Brazilian Proposal called on Annex I countries as a
bloc to reduce their GHG emissions 30 percent below 1990 levels by theyear 2020. The proposed reduction target covered the three main GHGs
(carbon dioxide, methane, and nitrous oxide) and extended from 2001 to2020 (using a succession of 5-year commitment periods).
The Proposal’s most innovative feature was the method used to distribute emission reduction burdens among countries—according to eachcountry’s relative responsibility for the global temperature increase. The
Proposal included a complex methodology for determining this responsibility for individual Annex I countries, as well as for determining the associated targets (the target methodology was not applied to developing countries in the Brazilian Proposal). It also suggested the need for an “agreed

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159

climate-change model” for estimating each country’s contribution to global temperature increase and, as an illustration, included a “policymakermodel” for estimating country targets (UNFCCC 1997b).
One consequence of the Brazilian Proposal’s approach and methodology was that countries that industrialized earlier tended to incur the largest emission reduction requirements in percentage terms. For example, inthe original Brazilian Proposal, the indicative target for the United Kingdom was a 66 percent reduction below 1990 levels by 2010, while thetargets of the United States and Japan were about 23 and 8 percent, respectively, reflecting the fact that they industrialized more recently thanthe United Kingdom (UNFCCC 1997b). However, these targets and others presented in the original Proposal were illustrative only and were latershown to have some methodological shortcomings (see Section II). The
Proposal incorporated flexibility into targets by allowing individual targets to be negotiated among Annex I countries. In other words, Annex I
Parties would be bound by the collective target and could trade individual
targets among themselves.
Another important element of the proposal was the Clean Development Fund (CDF)—a punitive and financial mechanism to be managed
by the Global Environment Facility. Failure on the part of industrializedcountries to achieve their required reductions would result in a fine, payable to the CDF. The value attributed to the fine was set at US$10 per tonof carbon emissions exceeding the target. The distributive criterion for
the fund corresponded to the Brazilian Proposal’s rationale of proportionality: Non-Annex I countries could apply for funds according to their relative contributions to atmospheric warming. The funds would finance GHG
abatement projects, and up to 10 percent would be used for adaptation
projects. The primary objective of the proposed fund was to promote climate protection, including through the transfer of clean technologies andallowing for the participation of non-Annex I Parties.
With these features, the Brazilian Proposal addressed two key issues that
pre-Kyoto negotiations were attempting to address (UNFCCC 1997b, 9).
First, it addressed the issue of “the future level of emissions to be tolerated
from the Annex I Parties” (i.e., the “cap”). Second, the Proposal suggesteda “criterion for the sharing of the burden” among industrialized countries(i.e., by historical responsibility for temperature increase). The Proposal
also dealt with the issue of developing-country participation in a mannerconsistent with the Berlin Mandate (which called on industrialized countries to take the first quantitative commitments). Accordingly, the Brazilian Proposal did not call for developing-country commitments, but rather

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for developing countries to share the CDF’s proceeds in order to implement “clean development” projects.
The COP in Kyoto did not adopt the Proposal. Industrialized countries
considered the methodology for estimating past emissions to be biased(see Section II)2 and insisted on negotiating targets in a bottom-up, pledgebased fashion. Some industrialized-country Parties felt that the Brazilian
methodology unfairly punished countries for actions in the past, when theconsequences of emitting GHGs were unknown.
The CDF was rejected because, among other reasons, it was a punitive
instrument entailing financial penalties, making it an unlikely instrument
in an international treaty. The allocation of resources from the CDF todeveloping countries was also considered questionable. As noted above,
the resources would be distributed to non-Annex I countries in proportion to their relative contribution to global temperature increase. In otherwords, the higher their contribution, the more resources they would receive. According to the simulation undertaken in the Proposal, China
would receive the largest share of the funds, about 32 percent (UNFCCC
1997b). In light of these shortcomings, the Kyoto Protocol negotiations
subsequently modified the CDF into what is now known as the Clean
Development Mechanism (CDM), which earned widespread support fromindustrialized and developing countries alike.
Over and above the CDM, the Brazilian Proposal played a significant
role in the Kyoto negotiations, and it should be understood within that
historical context. Despite the fact that the 1995 Berlin Mandate called
for quantitative commitments for industrialized countries only, the UnitedStates and some other developed countries were pressing hard in the Kyoto
negotiations for such commitments from developing countries. The Brazilian Proposal helped defuse the arguments posed by the United Statesand others that developing countries should adopt emission limits. In ahighly political debate, the Proposal used scientific considerations, thewell-established polluter-pays principle, and the Climate Convention principle of responsibility to argue, if implicitly, against developing-country
commitments.
Moreover, the Proposal helped to further engage developing countries
in the debate over the emission commitments of Annex I. The analysis
included in the Proposal illustrates that developing countries have an important stake in precedent-setting quantitative commitments adopted byAnnex I (UNFCCC 1997b). Given the imbalances in negotiating power
between industrialized and developing countries, the Brazilian Proposal
framework held the potential to inject transparency and objectivity in

The Brazilian Proposal on Relative Responsibility for Global Warming

161

target setting, which might improve the future likelihood of developing
countries receiving fair treatment.

II. Defining Responsibility for Climate Change
The Brazilian Proposal is more than a proposal presented in the Kyoto
negotiations, it is a framework for allocating emission reduction burdens
across countries and a subject of continued debate and analysis. After COP
3, the Brazilian Proposal was referred for further methodological analysis
to the Subsidiary Body for Scientific and Technological Advice (SBSTA).
The SBSTA review includes an effort by the Secretariat of the UNFCCC
to promote debate and information sharing.3 The Secretariat has organized expert meetings to review the Proposal, aiming to “identify issues
relating to the scientific and methodological aspects of the Brazilian proposal, including those that need further consideration and areas of futurework” (UNFCCC 2001). Although this assessment does not directly address policy implications, the Brazilian Proposal is currently the only suchproposal being officially considered by the Parties.
Two policy-related questions are important to the ongoing review andstudy of the Brazilian Proposal methodology. First, how well does the Brazilian Proposal methodology capture the relative contributions to warming? Second, are relative contributions to warming the appropriate measure of country “responsibility?” The remainder of this section examines
these two issues in detail.
Methodology of the Brazilian Proposal
In response to scientific and technical concerns raised by experts, the Brazilian government revised the calculation method that accompanied its
original proposal in 1999. The latest calculation methods for the Proposal(dated January 2000) are available on the websites of the Brazilian Ministry of Science and Technology and the Climate Convention Secretariat.4
In its review of the Proposal, SBSTA is systematically investigating scientific and methodological issues. A background paper by the UNFCCC(2001) Secretariat identifies a host of scientific and methodological considerations worthy of consideration.
The Brazilian Proposal has already been the subject of considerable scientific study.5 A landmark report by the Dutch research institute RIVM
(Elzen et al. 1999) reviewed both the original and revised versions of theBrazilian Proposal. The study found that the revised version was “a major
improvement with respect to the original version but still contains a few

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Table 7.1. Regional Contribution of Greenhouse Gas Emissions to1990 Temperature Change, percent of total
Country
or Region

CO2
from Fossil Fuels Only

Methane, Nitrous Oxide, andCO2 including CO2 fromLand-Use Change

Canada2.3

2.0

United States
Western Europe
Eastern Europe
Commonwealth of
Independent StatesJapan
Latin America
AfricaWestern Asia
India
China
Oceania
Annex I
Non-Annex I

31.2
21.7
5.8

21.7
16.3
5.0

14.8
4.2
4.3
2.5
1.8
1.9
7.0
1.2
81.2
18.8

11.9
2.8
10.9
5.7
2.6
6.9
10.8
1.7
61.1
38.9

Source: Elzen et al. 1999.
Note: Results are derived from the EDGAR-HYDE data set and the meta-IMAGE model, notthe Brazilian policymaker model.

shortcomings. The revised model still ignores the terrestrial part of the
carbon cycle, and only focuses on the slow (oceanic) carbon dynamics”
and contains some other characteristics that “seem to differ from those ofother climate models.” The overall effect, according to the RIVM study, is“an overestimation of the contribution of Annex I countries to temperature increase. These deficiencies can all be improved by corrections or byimporting techniques and processes already available in other models.”
In this regard, Elzen and colleagues analyzed the Brazilian Proposal withrespect to the sensitivity of incorporating various GHGs and sources. Because of limited data availability, the original Brazilian Proposal considered only CO2 emissions from fossil fuel sources. Table 7.1 shows that therelative responsibilities of countries and regions can change significantly
when all sources of CO2 (including from land use changes) as well as twoother GHGs (methane and nitrous oxide) are included. The incorporation of all sources of CO2, methane, and nitrous oxide reduces the collective responsibility of Annex I countries for temperature increase from 81

The Brazilian Proposal on Relative Responsibility for Global Warming163

to 61 percent. Scientific and model uncertainties can also strongly influence relative responsibilities (Elzen and Scheaffer 2002). Interestingly,
however, Elzen and Schaeffer show that if the relative responsibilities arecalculated for Annex I countries only (consistent with the original Brazilian
Proposal), the results are remarkably insensitive to modeling uncertainties and the inclusion of gases and sources beyond CO2 from fossil fuels.
This is partly due to the fact that developing countries have a much larger
share of CO2 emissions from land use changes and non-CO2 emissions
than from fossil fuel-related CO2 (where industrialized countries dominate).
Indicators of Responsibility
Conceptually, the Brazilian Proposal is built on the “common but differentiated responsibilities” and “polluter pays” principles. These are important principles enshrined in the 1992 UNFCCC. Although these principles are widely accepted, the Brazilian Proposal is not without controversy. Responsibility is a normative concept with competing viewpoints.
To illustrate, Figure 7.1 shows a representation of the chain of causality
linking emissions to climate change and impact (Enting and Law 2002).
Each stage of the chain involves some degree of delay; thus, the farther
down the chain one goes, the greater the delay between actions and theireffect. Indicators of responsibility
could be considered at different
points along this chain. Locating
Figure 7.1. A Chain of
responsibility farther down the
Causality in Global Warming
chain (e.g., sea-level rise) will difA Chain of Causality in Global Warming
fer considerably from locating it onSocietal Actions
the top part of the chain (e.g., emissions). It is important to realize that
Emissionsindustrialized countries will show aConcentrations
larger share of responsibility using
indicators late in the chain—such
Radiative Forcing
as temperature change and sea-level
Warmingrise—mainly because of the longer
average “age” of their emissions in
the atmosphere. Countries with
Sea Level Rise
Other Impacts
more recent emissions will therefore
Source: Enting and Law (2002).
show smaller shares of responsibility late in the chain because their

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Building on the Kyoto Protocol: Options for Protecting the Climate

emissions have quite some time before reaching their full global warming potential.
These time delays are shown in
Figure 7.2. The top frame shows ahypothetical “pulse” of emissions at
a given point in time (with no emission before or after this pulse). Thisemission pulse leads to an immediate increase in atmospheric concentrations (middle frame), which deTime
clines over time as the gas is slowly
removed from the atmosphere (e.g.,through decay out of the atmosphere). Finally, the temperaturechange (bottom frame) resulting
Timefrom the pulse continues into the
future, even as the concentration is
declining. Understanding these delays is essential to understanding theBrazilian Proposal and how it relatesTime
to other indicators of responsibility.
Time lags explain why the BraSource: Adapted from Höhne andzilian
Proposal has such different
Harnisch (2002); Elzen et al. (1999).
consequences than measuring responsibility with emissions or concentrations. To illustrate, Table 7.2 shows the relative responsibilities ofAnnex I and non-Annex I countries using three different indicators. The
first is annual emissions (1990) and the second is contributions to increases
in CO2 concentrations, which is a function of historical emissions over time.
Finally, the contribution to temperature increase (i.e., actual warming) isshown for 1990 and projected for 2010 and 2020.6 Each of these indicators
shows that industrialized countries are primarily responsible for climatechange. However, industrialized country responsibility is largest when expressed in terms of temperature increase, due to the long atmospheric residence time of CO2 and the past warming influence of CO2 that is no longer
in the atmosphere. Even though most emissions from 100 or more years
ago are no longer present, their influence on global temperature lingers.
Under these different indicators of responsibility, the date at which developing- and industrialized-country responsibilities reach parity varies draTemp. Change

Concentration

EmissionsFigure 7.2. Temporal
Relationship between
Emissions, Concentrations,and Temperature Change

The Brazilian Proposal on Relative Responsibility for Global Warming

Table 7.2.

165

Relative Contributions of Annex I and
Non-Annex I Countries to Global Climate Change
Percentage Shares

Indicator of Contribution

Annex I

Non-Annex I

Emissions in 1990
Concentrations in 1990

75
79

25
21

Temperature increase:in 1990in 2010in 2020

88
82
79

12
18
21

Source: Adapted from Pinguelli Rosa et al. (2001).
Note: Includes only CO2 from the energy sector.

matically. Using annual emissions, the IS92a scenario of the Intergovernmental Panel on Climate Change (IPCC) suggests that developing and industrialized countries will reach parity at about 2037. Yet, under the original
Brazilian Proposal methodology, Annex I and non-Annex I responsibilities
reach parity in 21477—a delay of more than 100 years compared to calculations based on annual emissions. More recent estimates using different models
and data sets suggest different dates. Analysis by Elzen and Schaeffer (2002)
suggests convergence of Annex I and non-Annex I contributions in 2015
for CO2 emissions, 2045 for CO2 concentrations, and 2055 for temperature
increase. Austin et al. (1998) estimate annual emissions parity at 2015 andconcentration parity at 2057 (or 2038 if CO2 emissions from land use areincluded). As explained in the previous section, if emissions from land usechanges (e.g., deforestation) and all gases are included in the analysis, thedate at which industrialized and developing countries reach parity under
any indicator moves closer to the present.
Proponents of the Brazilian Proposal (UNFCCC 1997b), however, argue adamantly against formulating responsibility using annual emissions:
It is often implied that…most of the responsibility for climate change in the
future will tend to be attributed to non-Annex I Parties, the year when the
non-Annex I emissions equals those of Annex I Parties being taken as theyear when the respective responsibilities become equal. This approach for
implicit differentiation of responsibilities overestimates the non-Annex I Parties share of responsibility, as it does not take into consideration the different
historical emission path resulting from very different industrialization process
and consumption patterns in time of both groups.

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Because climate change is caused not by emissions but by the rising concentration of GHGs in the atmosphere over time, the argument against
using annual emissions as an indicator of responsibility is a strong one.
Nevertheless, the Brazilian Proposal’s representation of responsibility is
not without controversy. The Proposal takes into account only the temperature increase that has already occurred. It does not consider the extent
of future warming that the present increase in atmospheric concentrations has committed us to. For this reason, the Brazilian Proposal weights
past emissions significantly more heavily than emissions in recent years.
Yet, recent emissions will undoubtedly have an effect on future warming.
In this regard, Höhne and Harnisch (2002) suggest than an appropriate
indicator for responsibility should be not only backward-looking (such as
the Brazilian Proposal) but also forward-looking. Similarly, according toElzen et al. (1999), “It might make sense to include some form of ‘forwardlooking’ assessment in the analysis of countries’ responsibility for global
mean temperature increase. In such an approach, not only would the current effect be evaluated [as in the Brazilian Proposal], but also the future
effect of greenhouse gases emitted in the present and the past.”

III. The Future Potential of the Brazilian Proposal: The
Burden-Sharing Scheme
This section analyzes the future implications of possibly adopting principles of the Brazilian Proposal within the UNFCCC framework, withparticular attention as to whether its burden-sharing scheme could be used
to set emission targets in subsequent rounds of the negotiation process for
the Kyoto Protocol.
Continued Validity and Usefulness
Like most proposals made before the Kyoto Protocol’s adoption, some partsof the original Brazilian Proposal are no longer applicable to the current
negotiations. For example, the adoption of the CDM and the non-compliance procedures (through the 2001 Marrakesh Accords) suggest that the
CDF will have little applicability in the future negotiations.
The Brazilian Proposal’s burden-sharing scheme, however, continues tobe a useful idea and could offer an approach to bring non-Annex I countries aboard the emission control system. So far, negotiations on developing-country emission limitations under the Climate Convention have been
deadlocked. Developing countries insist on establishing a connection between the Climate Convention goals and sustainable development throughThe Brazilian Proposal on Relative Responsibility for Global Warming167

mechanisms that transfer financial resources and technology from North
to South. In contrast, Annex I countries focus on their economic losses
due to mitigation of GHG emissions and emphasize the need for developing countries to come aboard to achieve the Convention’s objective ofpreventing dangerous climate change. The Brazilian Proposal supplies astarting point to break this deadlock. While focusing on the main goal ofstabilizing the global climate, it quantifies the different individual contributions of each Party to the existing global temperature increase and, consequently, to the required efforts to solve or minimize the problem.
The proposed approach is science-driven. This is good news, as it avoids
a burden-sharing scheme based solely on the bargaining power of Parties
sitting at the negotiations table. Arrangements driven by sheer negotiating power are subject to all kinds of asymmetries and imperfections, as
illustrated in the process leading to the establishment of Kyoto targets.
However, it should be noted that the Brazilian Proposal’s approach to establishing responsibility is not free of dissension, as discussed above.
Finally, the adoption of the Brazilian Proposal’s burden-sharing scheme
would be compatible with the Kyoto flexibility mechanisms, allowing forthe deployment of market forces to help the scheme become easily operational. In fact, the Brazilian Proposal mainly addresses the establishmentof targets for limiting the emissions of the UNFCCC Parties (i.e., theburden-sharing scheme) and can leave delicate implementation issues, suchas compliance and limits to emissions trading, open for future negotiations.
Main Difficulties of Application and Possible Adaptations
The Brazilian Proposal’s burden-sharing scheme faces some major difficulties that hamper its capacity to be immediately operational in the Climate
Convention negotiations. These obstacles are discussed here, together withsome possible adaptations that could improve the overall feasibility of adopting the general principle of the Brazilian Proposal in the next Kyoto rounds.
Complexity

As pointed out by Depledge (Chapter 2), “complexity can kill even themost intellectually brilliant proposal.” This is a challenge for the Brazilian
Proposal’s burden-sharing methodology, which would require an agreementthat incorporates complex scientific models and other technical considerations. One way to simplify would be to use the cumulative GHG emissions of individual countries from some given year in the past (to be nego-

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tiated). This would avoid the need to use, and agree on, a particular climate model. The scientific rationale for doing so is based on the literaturefindings and recent IPCC work (IPCC 2000a), which has shown that cumulative emissions supply a reasonable “proxy” for the relative contribution to global warming of different Parties to the Climate Convention,
when considered in a time period limited to a few decades. Actually, theAnnex I/non-Annex I crossover dates for GHG concentration in the atmosphere (a function of cumulative emissions) and temperature increase
are relatively close (e.g., only 10 years apart, 2045 and 2055, according toElzen and Schaeffer (2002)).
Outreach and education efforts could also be used to overcome the complexity barrier. A systematic strategy is needed to better explain the methodology in terms accessible to wider audiences. This would include building on sparsely available previous attempts (e.g., La Rovere 1998). Throughworkshops and materials, the strategy would then disseminate the “userfriendly” information via an outreach campaign to stimulate public education and international awareness in a few target audiences in particular.
Data

Going back to the 19th Century presents serious problems because of theneed for reliable GHG emissions data from individual countries to serve
as a basis for negotiating future targets. CO2 emissions from fossil fuels
would be the least controversial data set to agree on. Elzen et al. (1999)
show Brazilian Proposal calculations using three different fossil-fuel CO2
data sets. The resulting sensitivity analysis shows relatively small differences in results. Even so, it may be difficult to reach a consensus on figures
for the distant past. Experience with in-depth reviews of emission inventories has shown a number of difficulties in estimating emissions even forrecent years. (See, for example, UNFCCC 2000a.) Furthermore, the Kyoto
Protocol negotiations illustrate the political need to base decisions on official data supplied by each government rather than on the estimates ofinternational organizations or research institutes or on the worldwide estimates of single government agencies.
The data challenges would be greatest for CO2 from land use change
and emissions of non-CO2 GHGs. Again, the inclusion of these sourcesand gases will have a considerable impact with respect to attributing responsibility for warming at the global level (Elzen and Schaeffer 2002).
Here, it seems difficult to even reach an agreement on accurate data for
current years (see IPCC 2000b), and insurmountable obstacles might arise

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169

in determining what figures to use for the 18th and 19th Centuries. One
possible remedy to this difficulty would be to conduct extensive sensitivity analyses for different historical data sets of CO2 from land use change
and non-CO2 gases. These analyses might identify the most significant
discrepancies and enable analysts to develop estimates for use in the negotiations. Currently, however, very few historical data sets exist for thesesources and gases at the country level. In any case, substantial improvement in the quality of land use change and forestry data, as well as nonCO2 data, would be required at the national level.
Of course, data reliability problems would be reduced if the starting year
for the accounting of cumulative emissions were established in the 20th
Century: the closer to the present, the higher the quality of data. From1990 on, this problem can be solved through proper review of inventories
presented as part of national communications to the Climate Convention. However, the acceptability of such a late starting year for accountingof cumulative emissions remains to be proved at the negotiations table(see La Rovere 2002). Finding a balance to these data issues seems a daunting challenge.
Acceptance of responsibility for pre-1990 GHG emissions

The issue of responsibility for past emissions was first raised by a group ofIndian scientists, under the leadership of the late Anil Agarwal, during
preliminary discussions on the creation of the Climate Convention. Annex I countries then dismissed this argument, maintaining that they could
not be blamed for their past GHG emissions’ negative impact on world
climate when they did not know about the consequences of burning fossil
fuels at the time. According to this view, the first year to be taken into
account would be 1990, when the IPCC published its First Assessment
Report warning that GHG emissions could have been contributing to global warming. On the other hand, many countries have laws and regulations embracing the legal principle of “objective responsibility”; for example, in the United States and Brazil, a polluter cannot escape a penalty
by claiming unawareness of the environmental damages caused.
Once again, a possible solution to this problem would be to use contributions to cumulative emissions from 1990 to the present, with a continuous update. Of course, this approach would favor Annex I countries, compared to the burden-sharing approach currently espoused in the Brazilian
Proposal. Alternatively, a compromise could be reached if an earlier starting year were established, based upon previous warnings about the gravity

170

Building on the Kyoto Protocol: Options for Protecting the Climateof the climate change menace from the scientific community or government reports (e.g., the 1960s report to the U.S. government from a commission of scientists chaired by R. Revelle et al.).
Bringing aboard developing countries

The Brazilian Proposal was originally devised as a burden-sharing scheme
to be applied solely to Annex I countries. An important characteristic of
the approach is that it yields emission targets in terms of absolute reductions. The Proposal does not currently allow for growth targets. This isproblematic for any global application of the methodology. As outlined in
Chapter 1, developing-country emissions will need to grow to meet economic development needs. Moreover, these countries’ emissions are historically low and have contributed to climate change only in a small way.
Imposing emission reduction targets on most (if not all) developing countries in the near and medium terms would be viewed as unfair and politically impossible.
One remedy might limit the application of the methodology to Annex
I countries and shape commitments for developing countries on other bases(policies and measures, for example). Another possibility might be to use
contribution to temperature increase or to global cumulative emissions as
the starting point for negotiating targets for reducing emissions relative toa dynamic baseline (of the business-as-usual kind), rather than to a baseyear (this idea is illustrated in Chapter 9 of this volume). Additionally,
individual or collective (non-Annex I countries as a whole) thresholds
can be negotiated, below which countries would not need to commit toemission targets. Along these lines, Berk and Elzen (2001) examine a “participation threshold” based on income per capita.
Through these modifications to the Proposal, annual GHG emissions
from Annex I countries as a whole would be required to decline continuously, while those from non-Annex I countries would be allowed to increase during an initial period, eventually stabilize, and finally decline
until the end of the century. This kind of “safe-landing” analysis can buildon the recent IPCC reference scenarios (IPCC 2000a) and the corresponding stabilization scenarios (IPCC 2001c). Informed by these scenarios, theduration of the grace period for non-Annex I countries to be free frommitigation targets would be negotiated.
Another option is to delay the participation of all developing countries
until the relative responsibility of developing countries exceeds that of
the industrialized countries. Prior to this date, the developing countries

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171

would have a grace period. The IPCC Special Report on Emission Scenarios (IPCC 2000a) estimated the dates when cumulative CO2 emissions
since 1800 from non-Annex I countries as a whole would overtake thosefrom Annex I countries, according to different global reference scenarios.
The results cover a wide range of possible pathways and outcomes, withthe cross-over dates varying from the year 2040 (under the A1 scenario)
to 2050 (A2 and B1 scenarios) and 2110 (B2 scenario). Similar analyses
could be easily undertaken for cumulative GHG emissions since 1990,
and the corresponding dates could be anticipated. When cross-over occurred, emission-reduction commitments could be established for nonAnnex I countries on the basis of each country’s relative contribution to
cumulative GHG emissions since 1990. This approach could also provide
an incentive to Annex I countries that are taking the lead, as the sooner
they start implementing mitigation actions, the sooner non-Annex I countries will be brought aboard.
Alternative approaches are also possible. For example, before Annex I/
non-Annex I cross-over occurs, some individual non-Annex I countries(those that really matter in terms of contribution to climate change) mightreach a given threshold of relative responsibility. Such a threshold could
mark the end of the individual grace period to which they are entitled.
Once a country reaches such a threshold, it would then be required to takea mitigation target, provided that a corresponding financial compensation is established under the Convention. The specific level of such athreshold could be negotiated and settled according to different criteria.
Again, the analysis of long-term global and national GHG emission scenarios would provide useful inputs to this discussion.
The Need for Further Research
Taking the Brazilian Proposal’s burden-sharing methodology as a starting
point, further research could explore long-term global GHG emissions
scenarios to illustrate the combined effects of different trajectories of Annex I and non-Annex I GHG emissions. This analysis would supply useful
insights to the negotiations on the initial date of non-Annex I countries’commitment to mitigation targets, according to different targets for longterm stabilization of GHG concentrations in the atmosphere. The comparative modeling effort sponsored by the UNFCCC already provides anappropriate framework to explore this research agenda.

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IV. Summary and Conclusion
The Brazilian Proposal was a positive influence on Kyoto Protocol negotiations. Although it was not adopted, the Proposal continues to influence
the debate over the contentious issue of developing-country commitments
and the shape of what has become the CDM. Moreover, its burden-sharing principle—a core element of the original Proposal—is the subject ofcontinuing review and study by experts under the direction of SBSTA.
This chapter suggests several adaptations to the Brazilian Proposal approach that might increase its acceptability and effectiveness. First, expressing responsibility in terms of cumulative emissions over time would
reduce the need for complex scientific models and associated uncertainties. Complexity and uncertainty are likely to be major barriers to adoption. Second, governments might consider reducing the time frame during which responsibility is assessed. One option is to begin assessing responsibility in 1990, the date of the first IPCC Assessment Report. This
could also address some of the political challenge of agreeing on data sets
(especially non-CO2 data and CO2 from land use changes) from distanttime periods that are not gathered or verified by governments. Third, tobecome operational on a global scale, an approach such as the Brazilian
Proposal needs adapting to allow for growth targets. This need might beaccommodated by shaping reduction commitments relative to a businessas-usual projection, rather than from a base year. Fourth, because many
developing countries contribute little to global warming, it might be prudent to adopt a threshold for participation. For example, until a country
reaches a certain level of responsibility or level of income, it would not be
required to adopt emission limits.
Overall, these changes would preserve the original spirit of the Brazilian Proposal while making it more acceptable to Climate Convention
Parties. These suggested changes would deliver a strong incentive to nonAnnex I countries, which would be rewarded by any early action toward alower-carbon development profile, as they would face milder mitigation
targets in the future, no matter when such commitments came into force.
Linking the end of non-Annex I Parties’ grace periods to the emission
reductions achieved by Annex I Parties could also provide an incentive
for Annex I leadership.

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173

Notes
1. Instituto Alberto Luiz Coimbra de Pós-Graduação e Pesquisa de Engenharia/
Universidade Federal do Rio de Janiero – Universidade do Brasil.
2. Bert Metz, personal communication, 2001.
3. The Secretariat has assembled a wide range of materials relating to scientific andmethodological aspects of the Brazilian Proposal on the Internet (http://unfccc.int/
sessions/workshop/010528/documents.html).
4. The updated Proposal (Ministry of Science and Technology 2000) expands
Appendix I of the original Proposal, adding new components to the formulas toreflect the climate system more accurately, but also retaining the simple version, the“policymaker model,” as “the Brazilian Proposal.” In addition, it includes a discussion of the concept of global warming potentials (UNFCCC 2001). Hard copies of
the updated calculation methodologies may be obtained from Ministério da Ciência
e Tecnologia, Gabinete do Ministro, Esplanada dos Ministérios, Bloco E - 3 Andar Sala 398, 70067-900 Brasilia, Brazil.
5. See http://unfccc.int/sessions/workshop/010528/ for documents and other materials
related to the Brazilian Proposal.
6. The scientific justification for the variables chosen in terms of projections andscenarios is based on the Intergovernmental Panel on Climate Change’s (IPCC’s)
Second Assessment Report.
7. The original version of the Proposal (still located on the UNFCCC website as oflate 2002) states that parity would be in 2162. After submitting the Proposal in May
1997, the authors realized that some of the calculations needed revision and asked
the Secretariat to change this part of the document after the deadline. They sent thecorrected version, but only the chart was included, not the table and the text with
the new results. The new calculations demonstrate this parity date to be 2147 (JoséDomingos Miguez, personal communication, 2002).

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Equal Per Capita Entitlements

175

8. EQUAL PER CAPITA
ENTITLEMENTS:
A Key to Global Participation on
Climate Change?
Malik Amin Aslam

Introduction: The Kyoto Baggage
Ensuring broad participation among countries—including developing countries—is necessary to effectively address global climate change. Countries
spanning the political divide acknowledge this, and almost all policy research carried out on the subject bears it out. Building on the principles
agreed to under the 1992 United Nations Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol stipulates a framework forthe reduction of greenhouse gases (GHG) by the developed (Annex I)
countries, while allowing the developing (non-Annex I) countries space
to increase their emissions. At the same time, the Protocol charts a pathway for global cooperation via market-based regulatory instruments, especially international emissions trading (see Chapter 2 in this volume).
The Kyoto Protocol framework has two implications particularly relevant to any discussion of broad participation in climate mitigation. First,
the Protocol uses in part the grandfathering principle by recognizing the1990 emission levels of the developed countries as a basis for determining
emission limitation targets. Grandfathering enabled national targets to benegotiated without any discussion of a long-term, environmentally sound,collective target. Second, no clear rule emerged to help differentiate targets between Annex I countries.1 Targets were overwhelmingly shaped by
the sheer force of bargaining power, exhibiting a system based on “negotiated justice” (Bierman 1999). However, what the Protocol fails to provide
is a replicable framework based on any rationally defined criteria. This
severely limits the ability of the Protocol to extend participation to developing countries in the future.

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Current emissions of developing countries, as Chapter 1 points out, arevery low compared with those of industrialized countries, but are rising
rapidly. This places developing countries at a severe disadvantage when it
comes to negotiating emission control targets that are based on a
grandfathering system (which tends to establish targets in relation to abase year). Even in endeavoring to establish emission rights based on negotiated justice, the developing countries are handicapped by well-known
global power imbalances: The developed world dominates the major controls on global capital, military prowess, and human capital. To the extent
that the pure force of bargaining power has its way, the prospects thatclimate change negotiations will reach an equitable outcome are dubious.
Thus, the Kyoto framework carries certain “baggage,” which adversely bears
upon many proposals for global participation.
The absence of an acceptable framework for expanding participation
within the Kyoto Protocol—coupled with the necessity of involving developing countries for any future success of the climate regime—has compelled researchers to develop a variety of proposals attempting to expand
participation while honoring the underlying Climate Convention principle of “differentiation” among countries. One of the most debated andcontroversial of the approaches focuses on equal per capita entitlements.
A large bloc of developing countries steadfastly supports this approach.
Against this backdrop, the following sections describe the conceptualbasis of an equal per capita entitlements approach and trace out the historical evolution of the idea. The analysis then gauges the strengths andweaknesses of the approach, as well its future applicability at the global
level. Finally, the conclusion attempts to carve out a new proposal, a variant that attempts to keep per capita integrity while adding traits that neutralize or reverse traditional weaknesses.

I.

Defining Per Capita Indicators and Entitlements

Generally speaking, “per capita” implies a number divided equally between
a certain number of individuals. “Per capita” has two basic applications—as an indicator and as an entitlement. Most widely used, per capita is anindicator to represent, for example, the economic output or emissions ofeach individual in a particular country. As an entitlement, per capita isused as a measure to determine how much each country should be allowed
to emit.

Equal Per Capita Entitlements

177

Per Capita Indicators
Dividing total economic output (i.e., gross domestic product), income,national debt, number of schools, and so on by the total national population generates indicators for use in comparing performance among countries. Such indicators have many uses; within the environmental sector,
per capita indicators have been applied to the management of natural
resources, such as freshwater and energy.
Within the climate regime, per capita indicators are used in various
ways. First and most generally, per capita indicators help evaluate emissions disparities among countries. For example, the 2001 Marrakesh Accords state that industrialized countries “shall implement domestic
action…with a view to reducing emissions in a manner conducive to narrowing per capita differences between developed and developing country
Parties” (UNFCCC 2002). Second, per capita indicators are often used inpolicy debates relating to the timing of commitments to be taken by countries. For example, a per capita emissions indicator could be used to definea threshold for initiating developing-country participation into an emission control regime (much like the Montreal Protocol’s staggered commitments for controlling ozone-depleting substances). Third, per capita
emissions (and per capita GDP) are often proposed as an indicator fordifferentiating emission commitments between countries (Table 8.1). In
brief, per capita indicators (emissions or GDP) can help facilitate an acceptable emissions-related burden-sharing agreement among countries.
As mentioned above, per capita indicators have already been incorporated into a number of proposals. Table 8.1 outlines proposals made byParties during the Kyoto Protocol negotiation process2 and evidences wide
acceptance as well as use of this indicator in the negotiation process.
Although proposed per capita indicators as a “trigger” for participation
and as part of burden-sharing schemes have remained relatively
uncontroversial and uncontested, proposed “resource-sharing” schemes forshaping emission entitlements have stimulated intense debate and controversy, especially across the North-South divide. Under this approach,
the global atmosphere—or, more precisely, the “limited assimilative capacity” of the Earth’s atmosphere with respect to GHGs—is considered a
global resource to which every human being is equally entitled. The remaining sections of this paper investigate this particular approach.

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Table 8.1. Proposals from the Kyoto Protocol Negotiations

ProposalDate of
Proposal

Main Feature

Emission/
capitaFranceDecember 1996

Convergence

Y

Switzerland

December 1996

Convergence

Y

March 1997

Convergence

Y

NorwayNovember 1996

Multi-criteria

YY

IcelandJanuary 1997

Multi-criteria

YY

European Union

GDP/capita

Australia

January 1997

5 Indicators

Japan I

December 1996

Indicator choiceYYJapan II

October 1997

Indicator choice

Y

PolandMarch 1997

4 Indicators

Y

Estonia

March 1996

2 Indicators

Y

South Korea

February 1997

3 Indicators

Y

YY

Source: Ringius et al. (2000).
Notes: Negotiations are from the Ad Hoc Group on the Berlin Mandate, prior to the Kyoto
Protocol adoption. The table indicates that the per capita GDP indicator has been used as one of
the indicators in some multi-criteria proposals.

Resource Sharing: Per Capita Entitlements
This approach first establishes an allowable level of global emissions, termed
an emissions budget. The emissions budget (i.e., the total “environmental
space,” as Tynkkynen (2000) terms it) reflects the ultimate level at whichto stabilize GHG concentrations over time, or the amount of GHGs thatcan be safely emitted in the atmosphere while meeting the ultimate objective of the UNFCCC.3 This emissions budget is then distributed equally
among the global population, thereby implying an equal right to the atmosphere, with each country getting an entitlement proportional to its
population. These global budgets and the subsequent per capita entitlements can also be changed over time as new scientific information becomes available (Table 8.2).
Although there are some operational variants of this pure per capita
approach,4 this chapter focuses attention on the “convergence” scheme,
which, in political and research circles, has become synonymous with thisapproach. In any case, all notable variants of this idea follow the genericapproach outlined above.
The convergence scheme suggests that all countries participate in theemissions commitment scheme after the first commitment period of the
Kyoto Protocol, with the ultimate objective of converging to equal per

Equal Per Capita Entitlements

Table 8.2.

179

Emission Budgets and Per Capita Entitlements for
Various Concentration Targets

Atmospheric
Concentration Target(CO2 parts per million
by volume)

Emissions Budget
1991–2100(millions of tons ofcarbon)Average Annual
Budget(millions of tonsof carbon)

Per Capita
Entitlement(tons ofcarbon)

350
450
550
650
750

300–430
630–650
870–8901030–1190
1200–1300

2.7–3.9
5.7–5.9
7.9–8.1
10.3–10.8
10.9–11.8

0.5–0.7
1.00
1.3–1.4
1.7–1.8
1.8–2.0

Source: Adapted from Agarwal et al. (1999).

capita emissions over a stipulated time. As stated earlier, population size is
a proposed criterion for determining how many entitlements each country
is allocated. This scheme was first introduced by the nongovernmental
Global Commons Institute (GCI) in 19905 and has been refined further
into what is popularly termed “contraction and convergence.” The approach has been consistently advocated at the sidelines of climate politics
and, over the years, has received increasing support from some NGOs andgovernments.6 However, to date, it has not been successful in breaking
into mainstream climate negotiations.
GCI’s approach starts off by defining a tolerable level of climate change
based on the scientific assessments of the Intergovernmental Panel on
Climate Change (IPCC),7 which could be adjusted in the future to respond to improved scientific information. Based on such an ecologicallysustainable target, a yearly global carbon budget is devised, which “contracts” gradually over time. This contraction continues toward a level where
the per capita emission levels of participating countries “converge” toward an equal level. Thus, convergence claims to allocate shares of thebudget to the emitting nations on an equitable basis (GCI 1999), whereby
the per capita entitlements of the developed countries decrease while thoseof most developing countries increase. After reaching convergence, allcountries would contract their emission entitlements equally until the requisite global emissions budget is reached. According to GCI, it is not possible to tackle the climate issue without adhering to these two key elements—contraction (environmental integrity) and convergence (equal
per capita entitlements) (Meyer 2000).

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The concept of a transition phase aims at softening impacts for Annex
I countries. This staggered approach has been advocated by the Center for
Science and Environment (CSE), an NGO, as a steady phase-in toward
convergence (Agarwal et al. 1999). Gupta and Bhandari (1999), on theother hand, propose a scheme that differentiates between the short andthe long term. While equal per capita entitlements are taken up as thelong-term scheme, the approach is differentiated in the short term forAnnex I countries by allowing them a transition period for adjustment.
During this period, Kyoto Protocol commitments are fulfilled (until 2012),
followed by targets in proportion to the efficiency of their production until 2025. After 2025, per capita entitlements are established. However,instead of aiming for an equal per capita convergence, Gupta and Bhandari
suggest convergence toward a “sustainability corridor” (TERI 1997) of 0.5
to 0.75 tons of carbon per capita, which could accommodate the diversityof participating countries.
All proposed schemes, however, advocate the same underlying egalitarian concept of equal per capita entitlements for all human beings and seek
acceptance of the principle within the context of the climate negotiation
process. Before proceeding to analyze various aspects of this general approach, the next section briefly traces the evolving history of the entitlements approach.

II. History and Evolution of the Per Capita Entitlements
Approach
The idea of equal per capita entitlements is older than the Climate Convention. In its treatment of equity and social considerations, the IPCC’s
Second Assessment Report (Banuri et al. 1996) cites Grubb (1989),
Bertram (1992), Epstein and Gupta (1990), and Agarwal and Narain(1991) as some of the progenitors of the idea. Other early work on the idea
includes Bertram et al. (1989), Smith and Ahuja (1990), and Smith et al.
(1990).
Interest in equal per capita-based solutions intensified around the timeof the initial report of the IPCC in 1990, which indicated the prospect ofhuman interference with the global climate. This marked a watershed forthe manner in which the atmosphere was viewed and signaled a rethinking of old paradigms. Whereas the view of the atmosphere as a global
commons is not new, this report highlighted the atmosphere’s finite assimilative capacity for tolerating GHGs from human activities. ExceedingEqual Per Capita Entitlements181

the assimilative capacity of the atmosphere was one of the major factors
influencing the accelerated changes in global climate patterns.
Thus, it was scientifically realized that there was a certain limit to the
expansion of the global economy and attendant GHG emissions into theglobally common atmosphere. This realization stimulated the associateddebate on the sharing of scarce atmospheric resources, that is, establishingequitable access to this limited space, as the right to emit implies scarcity,and therefore economic value. As stated earlier, the suggestions for equal
per capita entitlements were voiced. GCI and CSE continue to be theleaders on this front, although there are differences in their approaches.8
While the idea of equal per capita allocations was one of the core issues
as negotiations began in 1991 to establish the Climate Convention, thetime was not yet ripe for this approach. Convention negotiations shifted
the focus toward differentiation of commitments within the developed countries. Guided by the principles of precaution, differentiated responsibilities, and efficiency, the Climate Convention called for Annex I countries
to “take the lead” in controlling GHG emissions and deferred emission
limits on developing countries, in recognition of their right to sustainablegrowth. Annex I differentiation was more fully achieved at Kyoto in 1997,
through the ad hoc method described earlier. Many developing countries
feared that this would set a precedent that would prejudice any equitablebasis for future allocations.
The idea of equal per capita entitlements, however, was refined anddeveloped along the peripheries of the mainstream negotiation process.
Various formats, outlined above, evolved over time. The inevitability ofdeveloping countries coming into the emissions control regime at somestage and the need for an acceptable strategy for global participation fueled support for and further development of this concept. This includes
support within governments. The Indian government was one of the first
to officially adopt the equal per capita entitlements approach; at the First
Conference of the Parties to the Climate Convention (COP 1) in 1995,
the Indian government called for “implementing a program for convergence and sustainable par values for consumption on a per capita basis”(GCI 1999). This was followed by the Africa Group, which presented theContraction and Convergence proposal in 1997, calling for “reducing theemissions of Annex I” and ensuring a “controlled growth of future emissions of non-Annex I” while being guided by the overall principle objective of “per capita emission rights” (GCI 1999).
The issue of per capita allocations arose repeatedly during the Kyoto
negotiations in the context of emissions trading. Some developing coun-

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tries argued that the emission entitlement or permit should be clearly defined for an initial global allocation before launching any sort of trading.
Quite clearly, the system of emissions trading whereby developing countries participate through the Clean Development Mechanism does notdefine emission entitlements or establish emission rights. China and India
called for “equitable allocations” of emission entitlements on a per capita
basis as a prerequisite for allowing trading to commence. Subsequently,
the European Parliament has also adopted a resolution on climate change,
which advocates a global limit of 550 parts per million by volume (ppmv)
of CO2 equivalent, supported by “progressive convergence towards an equitable distribution of emission rights on a per capita basis by an agreed
date in the next century.” The Indian government has recently reiterated
its support for this concept by stating that “equal per capita is an equitablenorm and the per capita criterion is central to the determination of emission entitlements” (UNFCCC 2000b). Thus, the concept has managed toprogressively expand its support base in the years since its introduction.

III. Analysis of the Approach: Searching for the Elusive
Solution?
Having outlined the evolution and conceptual basis of the per capita entitlements approach, we endeavor in this section to carry out a dispassionate analysis gauging its future applicability within the climate change arena.
This is done by organizing a qualitative framework based on some of the
key questions surrounding the perplexing issue and analytically addressing
them to draw out some useful conclusions.
Is the Atmosphere an Allocatable Natural Resource?
This question forms the conceptual foundation for advocacy of a per capita
entitlements approach as well as the basis for establishing and shaping any
such entitlement. Thus, the issue merits examination from the outset.
Before proceeding to address the issue it is important to clarify the resource in question. Usually termed as the “global atmospheric resource,”
what it actually alludes to is the “limited assimilative capacity” of the Earth’s
atmosphere with respect to GHGs.9 As mentioned earlier, the IPCC provides guidelines on defining the tolerable limits that seek to define thisresource, or the GHG assimilative capacity of the atmosphere.
The next paragraphs endeavor to assess whether the “global atmosphericresource” in question can also stand up to some defining attributes. A
resource is literally defined as “a stock or reserve, which can be drawn on

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when necessary.”10 By inference, a resource should possess a reserve “value”
and could be quantifiably “drawn on” in case of need (or should possess
the capacity of being quantified and allocated).
The first defining attribute, the reserve “value” possessed by any resource, is also linked to the economic concept of scarcity. In the particularcase of the atmospheric resource, this scarcity is driven by the idea of alimited assimilative capacity of the atmosphere for anthropogenic emissions of GHGs that carves out this finite resource. As mentioned above,
when the atmosphere is discussed in the context of climate change, whatreally is being discussed is the capacity of the atmosphere to absorb GHG
emissions above pre-industrial levels. Also, through international negotiations and the use of climate science and climate models, it can be agreed
what level of GHG emissions and associated impacts we as a global community are willing to limit ourselves to and accept. This limitation extends the “scarcity” reserve value to the atmosphere.
Moreover, this scarcity value has been intrinsically recognized, quantified, and capitalized through the scheme of emissions trading. This scheme
enables the “atmosphere” to satisfy the second defining attribute, that is,the capacity of being quantified and allocated.
By definition, allowance trading11 establishes de facto user rights thatprovide an incentive to protect the environment (Rose and Stevens 1998).
Any option to trade is contingent on having first attained this right. Within
the climate context, countries are granted the right to consume a certain
portion of the limited assimilative capacity of the atmosphere for a certain
period of time. The price of emission permits can, thus, be considered as afee to be paid for the temporary right to use the atmospheric commons
beyond its sink capacity. Thus, the price is paid not for owning a piece of
the atmosphere in perpetuity, but for obtaining a user right (Ott and Sachs
2000) for a certain predetermined period of time. This user right gives therequisite quantifiable value to the atmospheric resource in question, andimplies an ability to support future economic development.
The rights to emit, established by agreements such as the Kyoto Protocol, constitute the practical manifestation of allocating the scarce global
atmospheric resource in question and allow it to be quantified for storing,placing in reserve, or banking for future use or sale as and when required.
The definitional conditions of a resource thus seem to be met for the global atmosphere. Thus, as outlined above, the global atmosphere can betermed as a resource entailing a “scarcity” value that can be quantified forallocation as well as monetarily capitalized, by utilizing certain economic
tools, such as emissions trading.

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Is the Equal Per Capita Entitlements Approach Equitable?
Equity may be defined as the “quality of being impartial” or “somethingthat is fair and just” (Banuri et al. 1996). Operationalizing impartiality or
fairness in the context of differentiating future GHG limitation commitments has entailed the application of various traditional equity principles.12
To this end, different overlapping typologies have been used to present
relevant equity principles as they apply to questions of distributive justice(IPCC 2001c).13 As is generally acknowledged, the whole issue of equity
cannot be equated only with the principle of egalitarianism, denoting thatevery human has an equal right to use the atmosphere. Nevertheless, egalitarianism appears consistently in all the research representations, thus establishing it as an important criterion for assessing equity. For instance,
Rose and Stevens (1998) include it among five alternate fairness criteria
within global warming policy (Table 8.3).
Egalitarianism resonates. It appeals to the hearts and minds of many
people the world over. This is why equal per capita entitlements is so consistently recognized. The ethical underpinnings of egalitarian justice areanchored in the international community’s ethical standards and legal
codes. Prime examples are the United States Constitution as well as theUnited Nations Charter and its Universal Declaration of Human Rights.
All of these furnish strength to the need and desire for applying the egalitarian principle when dealing with the atmospheric common resource,which lies outside the legal purview of individuals or states (Baer et al.
2000):• The UN Convention on the Law of the Sea requires common ownership of deep-sea resources for the benefit of all humanity (Articles 16
and 17).14 This establishes the principle of joint sharing of these resources
and their associated benefits across the global population.
• Protocol on Environmental Protection to the Antarctic Treaty (Article 7) prevents appropriation of a region’s mineral wealth by any individual nation. This requires that the common rights to the resource should
not be usurped by any individual nation.
Although not explicitly extending equal per capita allocations, the above
illustrate how strongly the principle of shared rights and responsibilities
applies with respect to managing common resources beyond the territorial
jurisdiction of any single country. They not only set the foundations forthe advocacy of per capita schemes, but make it difficult to ethically justify any unequal or disparate claims to a global commons, such as the atmosphere.

Equal Per Capita Entitlements

Table 8.3.
Fairness
Criterion

185

A Selection of Alternate Fairness Criteria for
Global Warming Policy
Basic Definition

Operational Rule

Sovereignty

All nations have equal rights to pollute
and to be protected from pollution

Cut back emissions in a
proportional manner acrossall nations

Egalitarianism

All people have an equal right to polluteor to be protected from pollution

Allow emissions inproportion to population

Ability to Pay

Abatement costs should vary directly withnational economic well being

Equalize abatement costs
across nations

No Harm

Some nations should not incur costs

Poor countries should not be
required to abate emissions

Ad HocAbatement costs should be sensitive tounique circumstances

Give special consideration toeconomic, health, fossil fueldependence, etc.

Source: Rose and Stevens (1998).

Overall, equity and fairness principles are indispensable for the establishment and effective sustenance of any global climate change regime.
But their practical manifestation has remained uniformly elusive. The
absence of a universally established equity doctrine—coupled with thevarying economic implications of applying alternate equity principles acrosscountries—has confounded negotiators and advocates with regard to whatreally is just and fair. As mentioned above, the egalitarian principle does
remain a key equity determinant, but at the same time it cannot be theonly determinant. What the many insightful studies demonstrate is that
equity cannot be reduced to any single factor: it is rather a complex concoction of sometimes incompatible, but selectively justifiable, principles.
In this regard, the principle of per capita entitlements possesses a strong
and easily comprehensible ethical argument, which lends support to its
application. Another important conclusion is that the whole issue of judging equity cannot be selectively narrowed down to the egalitarian principle; it remains just one of the many determinants that can be used forassessing equity within the climate change policy process. Finally, althoughsome valid concerns exist regarding the application of the per capita approach, it remains very difficult to ethically justify any unequal claims to a
global commons such as the atmosphere.

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What Are the Linkages with International Emissions Trading?
It is an established fact that the overall cost-effectiveness of internationalemissions trading is enhanced by increasing the number of participants,
and particularly by including those countries (and their private-sector
entities) with relatively lower abatement costs. In the context of climatechange, this implies that cost-effectiveness is significantly enhanced by,
first, using the low-cost mitigation options available in developing countries and, second, committing these countries to emission reduction targets at some future date (Rose and Stevens 1998). In this context, an
allocation rule that catalyzes the above as early as possible would improvethe cost-effectiveness that emissions trading brings to participants.
In terms of relative benefits, many developing countries generally standto gain more, as already noted, under a per capita allocation regime thanunder other approaches. It follows, logically, that they may be much more
inclined to join such a regime. Thus, it is likely that a per capita scheme
would be able to attract the earliest possible entry of developing countries,
thereby allowing emissions trading to maximize net benefits. This has been
corroborated by various models, which suggest that per capita (convergence) offers the best opportunities for capitalizing on cost-reduction options as all Parties can fully participate in emissions trading (Berk andElzen 2001).
Another pertinent observation emerging from various analyses is thattrading is not merely good for the per capita scheme, but also that an equal
per capita entitlements approach is no good without trading. A recent
modeling study (Bohringer and Weisch 2000) indicates that the per capita
approach entails significant global welfare costs that, without trading, canbe several times higher than other allocation schemes. Chapter 9 finds
similar results when focusing on emission reduction costs instead of welfare costs. Thus, trading has a direct bearing on the efficacy and efficiencyof the per capita approach.
Thus, whereas the per capita approach has the potential to maximize
the trading benefits through early developing-country participation, theinclusion of trading is also deemed essential for enhancing the relative
success and appeal of this approach. Given this finding, the chapter now
addresses some other associated questions.
Concerns about hot air? Within any trading regime, the potential exists
for issuance of excess emission allowances above business-as-usual levels
to certain countries (popularly termed “hot air”). Such inflated targets
could threaten to undermine the environmental integrity of the system

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187

and allow for reductions on paper rather than actual carbon-reducing trades.
However, as stated, this issue is associated with allocation and trading in
general, and is not specific to the per capita approach. In fact, the potential for creating hot air in a negotiated regime like the Kyoto Protocol oran approach seeking the voluntary opt-in of developing countries (Aslam
2001) is even more problematic than under an approach like equal per
capita entitlements. A number of factors are at play.
First, the per capita approach is an objective one that allocates entitlements according to a formula based on two indicators: population andemissions. Both these indicators are widely used and reported, and there isa limited scope for any major manipulation. Second, the chosen target in
the case of a per capita approach is one of annual contraction as well as
cumulative convergence that is similar for all the participating entities.
Third, hot air is largely viewed as a political incentive that could extend
relaxed and generous commitments to developing countries in exchange
for early participation. While hot air can be used to provide political incentives for participation within a negotiated or voluntary participation
regime, it is at least controlled and limited in an equal per capita entitlements approach seeking simultaneous participation from large blocs ofdeveloping countries. Thus, the chance of “negotiated” manipulation issignificantly reduced when dealing with a top-down approach like per capita
that apportions entitlements based on an indicator and strives for global
participation.
Finally, corrective measures can still be undertaken to better manage
hot air, such as giving the suspect countries the right to trade away only acertain fixed percentage of their unused emissions while banking the rest
for future domestic use (Agarwal et al. 1999).
Associated obligations? The inclusion of developing countries in an emissions trading regime would not come without a cost. Trading is a conditional and not an absolute right. Instituting and implementing a domestic
system to conform to the dictates of the international trading regime would
carry a number of associated requirements and obligations, such as emission measurement and verification. The Kyoto Protocol stipulates most ofthese requirements, which Box 8.1 outlines.
What is certain is that significant domestic human and institutional
capacity would be required in order to conform to these emissions trading
requirements. Also, this capacity would need to be supported with available, reliable, and credible emissions data, capable of withstanding international audit and scrutiny. All of this poses a challenging task, even for

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Box 8.1. Treaty Obligations for Countries Engaging inInternational Emissions Trading
Greenhouse gas emissions target. The allocation of the right to emit automatically creates an obligation not to exceed that limitation. So, all participating countries would have an emission limit set over specified time frames,
and this obligation must include some mandatory consequences for noncompliance.
National systems for greenhouse gas inventories. Such systems for inventories need to stipulate institutional arrangements, quality control mechanisms, information management systems, reporting systems, etc. The system must also require the country to accommodate audits and inspections.
National registries would be required to record and track the transfers andacquisition of emission allowances.
Reporting. Countries would need to submit annual greenhouse gas inventories according to agreed international standards. In addition, countries needto supply other important information, such as descriptions of their national
inventory systems and national registries as well as transactions undertaken
through international emissions trading or project-based mechanisms.
Review of information. Countries would need to provide auditing teams
with data and information necessary for assessing whether the country has
conformed to technical requirements and international standards of goodpractice in their national systems, reporting, and registries.
*Additional domestic regulations. To the extent that countries wanted toallow domestic companies to participate in international emissions trading,
additional domestic laws or regulations would be required. Participatingcompanies would be subject to emission limitations and corresponding responsibilities to measure and report emissions in a standardized manner.
Source: Baumert et al. (2002).

developed countries. This issue is not directly related to the per capita
approach but, as stated, becomes relevant owing to the fact that trading isessential to ensure the effectiveness and successful implementation of the
per capita approach.
Some of the obligations, however, such as monitoring and reporting ofemission inventories under the National Communications, are alreadyobligations for developing countries under the Climate Convention, although with a lower degree of intensity and enforcement. The advent ofEqual Per Capita Entitlements

189

emissions trading would naturally raise the requirements for ensuring credibility and transparency.
Finally, emissions trading is firmly established as the instrument of choicewithin the current climate mitigation architecture, as outlined under the
Kyoto Protocol. As such, its application within any other future expansion regime can also be logically expected. Thus, prior to burdening any
trading-related liability on the per capita approach, it would be essential
to investigate the consequences of avoiding trading under the other possible allocation approaches as well as assessing the comparative data andinstitutional requirements for them. This has to be an essential consideration for any comparative analysis of the allocation schemes.
In any case, owing to the nascent state of the carbon market and therequirement to build it from scratch, the costs associated with instituting
the requisite architecture could constitute a significant barrier in the short
to medium term. The capacity to respond to these obligations would depend on a host of factors influenced mainly by national circumstances,such as political will, domestic preparedness, and the possibility, certainty,
and extent of any financial benefits. As the analysis has already suggested,
there are significant country variations with respect to per capita emissions. Thus, a scheme of temporal graduation could enhance the acceptability and institutionalization of these obligations in the long term.
Overall, this section’s analysis testifies first that a successful and effective implementation of per capita-based regime is linked inescapably tointernational emissions trading, which is deemed essential to ensure costeffectiveness and environmental efficiency. Secondly, there exist certain
issues of concern related to trading per se, which are not solely a challenge
for this particular approach. However, given the strong reliance upon trading, any risk of trading failure could be accentuated under this scheme, tothe detriment of the environmental effectiveness and cost-effectivenessof the regime.
Is the Approach Flexible?
Owing to the nature of the climate change issue and its associated complexities and uncertainties, any effective approach needs to be flexible toboth incorporate any future scientific developments as well as accommodate the disparities among countries. As already discussed, a per capita
convergence approach is able to readjust to tighten or relax yearly contraction budgets, as well as realign its overall reduction trajectory (convergence) to respond to any change in carbon concentration target.

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However, the per capita approach’s flexibility to account for the differing national circumstances is limited. Quantified emission levels, such as
the ones used for the per capita approach, do not account for the social
quality of these emissions—that is, to distinguish between “luxury” and“survival” emissions (Agarwal et al. 1999). Similarly, such simplified indicators also fail to consider factors such as geographical/climatic conditions or the structure of the respective economy and energy supply, each ofwhich has an important bearing on the variance of emissions among countries. For instance, a high endowment of hydro resources (e.g., in Norway
and Brazil), high dependence on nuclear energy (e.g., in France), a highlevel of industrial efficiency (e.g., in Japan), or an exceedingly cold climate (e.g., in Iceland) can have correspondingly favorable or adverse influences on the per capita emission levels. The per capita approach does
not address these disparities, and potentially creates unwanted distortions,such as taxing countries with efficient economies or punishing countries
with limited access to renewable resources (e.g., hydropower) that would
tend to reduce their emission levels.
In the presence of large differences between countries, this limitation
can be a major factor impeding progressive acceptance of equal per capita
entitlements. Recognizing this shortcoming, some proposals deviate fromthe pure per capita convergence approach (Gupta and Bhandari 1999).15
These proposals adjust the approach through the inclusion of allowancefactors, such as those mentioned above, which can allow for country-specific characteristics that contribute significantly to variations in emissions
per capita (Ybema et al. 2000). The concept of graduation, which allows
increasing participation in this regime, does offer a restrained enhancement of flexibility in terms of different starting points.
Is the Approach Consistent with the Provisions of the Climate
Convention and Kyoto Protocol?
As outlined earlier, the Climate Convention and the Kyoto Protocol provide the policy framework for international cooperation in the field of
climate change. Any differentiation proposal, such as the per capita approach, needs to be consonant with the Convention’s basic provisions,
including the ultimate objective of trying to “stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous
anthropogenic interference with the climate system.” In addition, otherpertinent principles of the Convention guiding any expansion of commit-

Equal Per Capita Entitlements191

Box 8.2. Guiding Principles Established Under the Climate
Convention• All Parties to act “on the basis of equity and in accordance with theircommon but differentiated responsibilities and respective capabilities.”• Give full consideration to Parties that “would have to bear a disproportionate or abnormal burden under the Convention.”• Developed-country Parties to take the lead.
• Right to promote sustainable development.
• Allow for growth of the share of global emissions from developing
countries.

• Strive for the widest possible cooperation.
• Account for specific needs and special circumstances of developing
countries and vulnerable parties.

• Developing-country Party commitments conditional upon successful
developed-country implementation of commitments related tofinancial resources and technology transfer.
Source: UNFCCC (1992, Articles 3 and 4).

ments as well as developing-country participation are summarized in Box
8.2.
The per capita approach begins by setting an ultimate collective target,
based on current IPCC estimates. Thus, it endeavors to conform to theultimate objective of the Convention while retaining a readjustment flexibility, which aims to ensure that the environmental target is ultimately
met.
The approach then applies the principles of “common but differentiated responsibilities” and “need for growth of developing country emissions” by allowing most developing countries’ per capita emissions to grow,while demanding a reduction of most developed countries’ per capita emissions. Thus, it also encourages the developed countries to “take the lead”
in cutting their emissions while extending space for sustainable growth ofthe developing countries.
The approach in its pure form, however, falls short when it comes toaccounting for particular country circumstances, such as difference in Parties’ “starting points and approaches, economic structures and resourcebases, the need to maintain strong and sustainable economic growth, available technologies and other individual circumstances” (UNFCCC 1992,

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Article 4.2(a)). As stated earlier, some variants of the approach have endeavored to address this shortcoming by phasing the participation of bothdeveloped and developing countries. However, none of these variants has,so far, managed to successfully work across the diversity of country circumstances and enhance the political palatability of this approach.
Thus, as far as the Convention is concerned, the approach adheres tomost of the guiding principles but falls short when it comes to incorporation and consideration of particular country circumstances. Along with
the Convention, however, it is also important to assess whether it can
carry the Kyoto baggage described earlier.
If the Protocol enters into force, the precedent of ad hoc quantitative
targets based on politically negotiated justice and the absence of any objective formula is the baggage that would need to be accommodated byany expanding regime. The Kyoto architecture, along with the associateduse of international emissions trading, should be practically acceptable, atleast in the short to medium term. Thus, any effective regime for expanding participation and commitments should be able to amalgamate thisreality.
The per capita approach is not at odds with such an eventuality. In fact,
it offers the possibility of a two-track approach.16 Some have proposedcontinuation along the Kyoto track for Annex I until after the first or
second commitment periods, while allocating per capita-based entitlements
to the developing countries. Alongside this, the Kyoto-based allowances,already apportioned to Annex I countries, and the per capita entitlements
could be fungible to promote cost-effectiveness through emissions trading. Such a two-track approach allows for a “soft transition” of Annex I
countries while also allowing for the possibility of a “phased graduation”
for developing countries. Various other adjustments (such as use of an
efficiency index) have also been suggested and were elaborated on earlier.
Also, as described above, the market-based architecture enshrined in the
Kyoto Protocol through the concept of emissions trading can be adopted
by an equal per capita entitlements approach. In fact, doing so is essential
to the successful implementation of this approach. Thus, it promotes andreinforces the market-based framework, which forms the linchpin of theProtocol.
The per capita approach, thus, has the design capacity to carry the Kyoto
baggage and does not necessarily demand a revolutionary revamping of
the current architecture, but rather a gradual amalgamation toward eventual equal per capita entitlements.

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193

What Is the Potential for Global Acceptability of the Approach?
Broad global acceptability is logically considered a prerequisite to the success of any approach for differentiation of future commitments. The potential for acceptability is, however, determined by a combination of factors having political and ethical as well as economic dimensions. Egalitarian equity, as shown above, formulates the ethical basis for this judgment.
The other factors are mostly influenced and driven by national interest
and circumstance, which may not always be aligned with accepted ethicalnorms. Negotiation theory, in fact, generally assumes that actor behavior
is primarily motivated by self-interest, and suited principles of fairness are
selectively invoked in order to defend this interest. Thus, to gauge thepotential for global acceptability of this approach, it would be useful to
explore the nexus of self-interest and fairness. Doing so can help judge
both the diversity among states as well as its influence on their views about
equity within climate negotiations.
It is no secret that countries differ greatly in terms of size, resource endowments, population, wealth, GHG emissions, vulnerability, and ability
to respond to climate change. Table 8.4 shows some of the disparities between countries, including emissions per capita, which are generally muchhigher in the developed countries than in the developing ones.
Given these disparities, various studies and models have analyzed theimpacts of different burden-sharing rules on a country or regional basis.17
Although various models use different time frames, parameters, and methodologies, they can nevertheless provide some general indicators of theoutcomes. The comparative analyses suggest that benefits are likely to be
skewed within the per capita approach. Appendix 8A provides comparative results of three such studies with regard to their application to the percapita approach. Countries with large and growing populations or withlow emissions stand to benefit more than the others. In all cases, however,China, India, and sub-Saharan Africa (excluding South Africa) come out
as consistent gainers under a per capita approach. The oil-producing andmore developed of the developing countries—such as Singapore, United
Arab Emirates, Argentina, and South Africa—are relatively disadvantaged
among the non-Annex I countries. Chapter 9 shows similar results. It comesas no surprise that some of these developing countries are not vociferous
advocates of this approach.
As discussed above, the major proponents of the per capita approach inclimate change negotiations have been India, China, and Africa, which
also happen to be the major beneficiaries. With less intensity and greater
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Table 8.4. Regional Variation in Key Economic and Emissions
Indicators, 2000
Population(millions)World
Annex I

IncomePer Capita(PPP, int'l dollars)

CarbonEmissions Per
Capita (tons)

6,057

7,415

1.1

1,170

22,377

3.3

United States

286

33,633

5.6

European Union

378

23,612

2.4

Japan

127

26,7552.5

Eastern Europe

281

7,926

2.5

Non-Annex I

4,888

3,834

0.5

China

1,269

4,089

0.6

India

1,016

2,358

0.3

Other Asia

1,103

6,225

0.8

South Africa

43

9,401

2.5

Sub-Saharan Africa

659

1,598

0.2

Argentina

37

12,3771.0

Latin America

512

7,181

0.7

Source: Based on data from EIA (2002b) and World Bank (2002).
Notes: Includes carbon emissions from fossil fuel combustion only.
Abbreviation: Purchasing Power Parity (PPP).

term convergence toward equal per capita entitlements, while Japan has
advocated it as one of the two indicator options to choose from, in its
proposals at various COP meetings (see Table 8.1). While not beneficiaries vis-à-vis India, China, and Africa, these countries do come out as arelative beneficiaries within the context of Annex I due to their relatively
low per capita emissions (about half the per capita emissions of the UnitedStates and lower than the Annex I average; see Table 8.4). This makes it
relatively convenient for these countries to embrace an otherwise strong
ethical position. The main opponents of the scheme would likely be theUnited States and Russia, as they would carry the brunt of the wealthtransfer from any shift to equal per capita entitlements (Table 8.5).
Table 8.5 suggests the presence of a positive nexus between national
self-interest and the choice of equity principle. This analysis suggests thateach country can be expected to argue for a scheme that suits its national
circumstances, which effectively selects the preferred equity. In addition,owing to the fact that some relative beneficiaries suggest this approach,there is evidence to suggest an acceptable ethical foundation of equal per

Equal Per Capita Entitlements

Table 8.5.

195

Self-Interest ~ Fairness Nexus

Country / Region
China
India
AfricaJapan (choice option)
France(long-term convergence)
European Union(long-term convergence)
United States
Former Soviet Union
South Africa
Argentina

Advocate of
Per Capita approach

Beneficiaries

Yes
Yes
Yes
Yes

Yes
Yes
Yes
Relative Yes

Yes

Relative Yes

Yes
No
No
No
No

Relative Yes
No
No
Relative No
Relative No

Notes: The positions indicated above are based on the Kyoto Protocol negotiation process(Ad-Hoc Group on the Berlin Mandate).

capita entitlements, especially as a long-term guiding principle. In the
short term, however, the significant disparities between countries challenges the notion of applying simple, fixed, top-down allocation schemes,such as the per capita allocation. The analysis highlights the difficulty of
proposing a single composite formula that can satisfy the strong and diverse national self-interests.
Thus, in the short to medium term,18 it seems to be politically unrealistic and procedurally difficult to adopt a rule such as equal per capita entitlements. Even with a strong ethical foundation, it runs counter to theself-interest of some pivotal actors, such as the United States, Russia, andparts of the OECD. The potential of its acceptability by a critical mass ofactors within the climate negotiations process is, therefore, likely to belimited in the short to medium term. This is especially the case because afew key participants can hold the process hostage. With some key negotiating countries, such as the United States, Australia, and Russia, not likely
to be the main beneficiaries under this approach, as earlier indicated, thepotential for stalling the process remains threateningly present. This threat
becomes all the more potent owing to the procedural rule in Climate Convention decision-making, which is based on consensus (i.e., the absenceof dissent).

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Would Equal Per Capita Entitlements Encourage Population Growth?
Before closing, it is worth addressing the concern expressed by some critics that equal per capita entitlements would promote population growth.
This concern stems from the fact that per capita entitlements, by compensating for large populations, may deliver more entitlements to countries with increasing populations. (To alleviate this concern, proponents
advocate the use of a population base year.)
At a fundamental level, this concern seems to be based on flawed assumptions. First, the notion that additional “entitlement dollars” would
offset all the other economic repercussions of burgeoning populations is
far-fetched. Any effect by allocation of entitlements could be negligible
compared to other factors necessitating population control, such as poverty alleviation and resource constraints. Second, any enhancement of
the entitlement quota would imply a correspondingly larger number ofpeople sharing it (Agarwal et al. 1999), which could quickly outstrip any
associated benefits. Of all the concerns about equal per capita entitlements, this seems the least significant.

IV. Conclusions
As the above analysis shows, the per capita approach endeavors to bring a
multidimensional solution to a complex problem. The merits and demerits of the equal per capita entitlements approach are summarized below.
Merits• Simplicity of concept• Strong ethical basis• Flexibility to accommodate changing scientific evidence• Enhancement of efficiency of global trading• Offer of incentives for developing-country participation• Consistency with the major guiding principles of the UNFCCC• Amalgamates well with the Kyoto architecture
Demerits• Limited global acceptability• Limited flexibility for accommodating varying country circumstances• Linkage with trading essential for success• Associated issues of hot air and obligation costs

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Given the above demerits, a number of variants to the pure per capita
approach have been suggested. The primary aims of such modifications
have been to enhance global acceptability and accommodate varying country circumstances by extending a transition phase or phasing out requisite
emission reductions through some “allowance factors” or “soft landing scenarios” (Blanchard et al. 2001). So far, however, none of these adjustment
proposals has been able to delicately balance the conflicting interests andethical philosophies in a politically palatable fashion.
Nevertheless, per capita’s ethical foundation has a strong defining power,
which is likely to shape long-term approaches, and we can certainly expect the concept to be invoked with a growing degree of legitimacy in the
future. However, its time may not yet have arrived. In the short to medium term, the process may need to be more adaptive rather than immediate (Toman and Cazorla 2000); during this time frame, political realism
tends to lead toward a system of “adjusted egalitarianism” (Ott and Sachs
2000). Such a scheme could include explicit provisions for country-specific circumstances, as well as possible amalgamation with some of theother proposals for expansion of commitments, in an effort to enhance
global appeal. In the long term, the idea has the potential to be a guiding
principle toward an eventual convergence of global per capita emissions—
if not on an absolutely equal level,
then at least within the confinesof a defined and globally acceptedBox 8.3.
“sustainability corridor” (TERI
Emission Entitlement1997).
of the Future?
Given the constraints cited
above, it might be possible to conV ARIABLE
stitute a future GHG emissions
portion accounts forcountry-specificentitlement by combining somecircumstances andof the merits of the per capita apother approaches
proach with other approaches inan endeavor to overcome some ofthe stated shortcomings. In thisrespect, a practical manifestationof an entitlement of the future
F IXED
could be envisioned, as shown inper capita entitleBox 8.3.
ment portion based
Such a compromise could beon allocation ofgin by first defining and then“survival” emissions
quantifying a per capita level of

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Building on the Kyoto Protocol: Options for Protecting the Climate

survival emissions that are required by each human being to sustain a reasonable standard of living. This minimum per capita level could then be
distributed across the countries according to their respective populations
and would provide the fixed portion of the entitlement. The remaining
flexible, varying portion of the entitlement could then be defined by accounting for particular country circumstances.19 This accounting and quantification would also need to utilize other useful approaches in order togain maximum political acceptance across the globe. The above are justsome preliminary thoughts on what could possibly shape a future emission
entitlement—driven by environmental effectiveness, motivated by economic efficiency, and packaged by political compromise.

Equal Per Capita Entitlements

199

Appendix 8A.
Table 8A.

Country/
RegionUnited States

Comparative Analysis of Per Capita Allocations
Egalitarian Allocation-1(2020-Bn of
1
US$1990)

Egalitarian
Allocation-2
2(C/pop in %)estimated minimum cost to
implement per capita
allocation of carbon
emissions in 2020

estimated percentageof global per capita
allocation of carbon
emissions

354.5

Japan
Canada/Western
EuropeEuropean Union
Other OECD
Eastern Europe/
Former Soviet Union
China
Middle East
Energy-exporting
countries
AfricaNigeriaSouth Africa
Latin America
BrazilArgentina
Southeast Asia
Dynamic Asia
India
Rest of World

Egalitarian
Allocation-3(% of 1995
3
emissions)estimated per capita
allocation of carbon
emissions in 2015

4
2

29.9
5
65.3

2

345.5

2

–109.1
1.1

20

145

16
–226.3
466
51
56.6
3

237
102

37.2
3
-----

16

382

22

Sources: 1 Rose et al. 1998; 2 Reiner and Jacoby (1997); 3 Winkler et al. (2001).
Abbreviation: Organization for Economic Cooperation and Development (OECD).

Egalitarian allocation-1 enlists the results of a model that attempts to quantify the minimum cost of implementing the per capita allocation rule. The
analyses of the cost allocations were performed for three future years (2005,
2020, and 2035) and the costs were discounted to a 1990 present value. As
the table shows, the model indicates widely disparate outcomes, with wealthtransfers mainly from the United States and the former Soviet Union to
Africa, China, and Asia.
Egalitarian allocation-2 starts by totally discounting historical emissions
and then allocating permits according to the per capita approach. How-

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Building on the Kyoto Protocol: Options for Protecting the Climate

ever, even after discounting all historical liability, the model suggests that
the United States and OECD countries would receive a small percentageof the global allocation, with the major share going to India and China.
In egalitarian allocation-3, the model compares the outcome of the allocation based on equal per capita across five developing countries in theyear 2015 for a global reduction target of 4 percent below 1995 levels. The
results are shown as a percentage of 1995 emissions. The outcome suggests
a wide variance even among developing countries, with the more developed but less populated countries—South Africa and Argentina—receiving relatively fewer entitlements. (South Africa is, in fact, in deficit compared to its 1995 emissions level.) On the contrary, the more populated
countries receive higher entitlements.

Notes
1. However, the “common but differentiated” and “polluter pays” principles formed asolid basis for differentiation between Annex I and non-Annex I countries.
2. Ad Hoc Group on the Berlin Mandate.
3. To stabilize GHG concentrations at a level that would prevent dangerous anthropogenic interference with the climate system.
4. Such as the “sinks” scheme, advocated by the Center for Science and Environment,
which distributes the estimated global GHG absorptive capacity, as well as the“moving” entitlements scheme, which assigns ad hoc an initial per capita entitlement subjected to periodic reviews.
5. Second World Climate Conference.
6. Such as France, Switzerland, and the European Union. See Torvanger and Godal(1999).
7. One the most widely quoted scenarios sets the level at a concentration target of 450
ppmv (parts per million by volume) of CO2 by 2100.
8. Although both advocate the idea of convergence, there is a difference in theapproaches. While GCI counts convergence to an equal level of emissions as the
final goal of a per capita framework, CSE views the approach as a means to
incentivize a transition to renewable energy technologies in developing andindustrialized countries.
9. Thus, the term “global atmospheric resource,” as used in this chapter, always implies
the GHG assimilative capacity of the atmosphere.
10. Müller (2001a). The source of definition is the New Shorter Oxford English Dictionary.
11. The kind of trading allowed between Annex 1 countries within the Kyoto regime
and what is suggested as the associated trading regime with “per capita” entitlements
scheme.

Equal Per Capita Entitlements

201

12. In the climate change arena, the issue of equity has been focused primarily within
the narrow context of the differentiation of future commitments. This focus isinequitable itself, as it unjustly ignores the issue of “adaptation burdens,” which is
crucial for a large number of vulnerable developing countries. However, in thecontext of this analysis, this chapter will focus on the application of equity to the
expansion of future developing-country participation and allocation of mitigation
burdens as they relate to the per capita approach.
13. This refers to the allocation of collective benefits and burdens among the membersof a community on local, national, or global levels. See IPCC (2001c) for acomprehensive listing of the various equity typologies.
14. “Desiring by this Convention to develop the principles embodied in resolution
2749(XXV) of 17 December 1970 in which the General Assembly of the UN
solemnly declared inter alia that the area of the sea-bed and ocean-floor and thesubsoil thereof, beyond the limits of national jurisdiction, as well as its resources, arethe common heritage of mankind, the exploration and exploitation of which shallbe carried out for the benefit of mankind as a whole, irrespective of the geographicallocation of states.”
15. The Tata Energy Research Institute (TERI) scheme mixes per capita allocatedentitlements to non-Annex I countries with reductions to Annex I countries
adjusted by an efficiency index.
16. For instance, TERI, CSE, and GCI all propose this sort of a “two-track” approach.
17. Toman and Cazorla (2000) provide a summary of the various analyses.
18. “Short to medium term” can be taken to mean until the second commitment period.
19. UNFCCC Article 4.2(a) could be used as guidance.

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Scenarios for Differentiating Commitments

203

9. SCENARIOS FOR
DIFFERENTIATINGCOMMITMENTS:
A Quantitative Analysis
Odile Blanchard

As emphasized in the latest Intergovernmental Panel on Climate Change(IPCC) report, stabilization of greenhouse gas (GHG) atmospheric concentrations is needed in order to delay and reduce damages from climatechange (IPCC 2001d, Q6.9). The previous chapters in this volume qualitatively discuss paths toward future global participation in this effort tomitigate climate change. Various proposals are analyzed, ranging from principle-based allocation methods to more pledge-based, country-tailoredapproaches. All of them could contribute to achieving the ultimate goalof the 1992 United Nations Framework Convention on Climate Change(UNFCCC), which is to stabilize GHG concentrations at a safe level.
This chapter examines three worldwide scenarios of differentiated commitments from a quantitative perspective. Each scenario is drawn from a
proposal analyzed in this volume. The Per Capita Convergence scenario
allocates emission allowances to countries based on population. The Relative Responsibility scenario shares emission reductions according to thecountries’ respective responsibilities for climate change. The EmissionsIntensity Target scenario frames the mitigation effort on the basis of reductions in carbon intensity. Based on a long-term concentration stabilization goal, each scenario focuses on the period 2010 to 2030. The POLES
model (described in Appendix 9A) is used to investigate the carbon dioxide (CO2) emission limitations needed to meet an intermediary environmental goal in 2030, and their distribution across countries.1
This chapter shows how differentiating commitments based on various
proposals could be translated into operational terms and used to induce
Annex I countries to further take the lead in a global participation framework to limit CO2 emissions. It illustrates several issues raised in the previous chapters and may provide useful information for future climate change

204

Building on the Kyoto Protocol: Options for Protecting the Climate

negotiations. The findings show how the three differentiation scenarios yieldvarying CO2 emission allowances and abatement costs across countries.
Section I presents the assumptions and methodology used in the analysis throughout the chapter. Sections II, III, and IV discuss the distributionof emission allowances implied by each scenario. Section V compares the
scenarios with respect to emission allowances and permit trading.

I.

Assumptions and Methodology

The environmental goal at the center of this analysis is stabilization of
atmospheric CO2 concentration between 450 and 550 parts per million by
volume (ppmv) by 2100. This long-term target range corresponds to thelowest CO2 concentration targets adopted in the emission mitigation scenarios examined in the latest IPCC report (IPCC 2001c). This represents,
at most, a doubling of CO2 atmospheric concentrations compared to preindustrial levels. Stabilization at such a level could still entail potentiallyserious damages attributable to climatic changes.
Consistent with a 450 to 550 ppmv CO2 stabilization goal, an intermediary goal is set at 9.4 billion tons of carbon equivalent (GtC) for 2030.
This constitutes the maximum level of annual world CO2 emissions. The
reason for this intermediary target stems from the trajectories for CO2
emissions from fossil fuel combustion drawn in the IPCC Third Assessment Report, from 1990 onward (IPCC 2001c). To achieve concentration
stabilization between 450 and 550 ppmv, most of the fossil fuel CO2 mitigation scenarios reviewed by the IPCC show similar inverted U-shaped
emission trajectories. The inverted U-shaped emission trajectories mean
that, after a period of growth, emissions reach a maximum between 2020
and 2060, stabilize for a time, and finally decline at a different rate (IPCC
2001c, 130, 150). The maximum emission level ranges from 6 to 15 GtC
per year in the IPCC review. The maximum emission level of 9.4 GtC in
2030 is in the lower range of these trajectories.
This analysis uses the POLES model, a partial equilibrium model of theenergy sector, and the ASPEN software.2 Thus, only CO2 emissions fromfossil fuel combustion are taken into account.3 Countries are consideredeither individually or on a regionally aggregated basis. The assumptionsfor 2010 emissions are designed to reflect current conditions (Box 9.1),
with global emissions reaching approximately 7.8 GtC in 2010. Between
2010 and 2030, CO2 emissions increase from 7.8 GtC to nearly 12 GtC.
This reflects a business-as-usual (BAU) trajectory, whereby no action istaken to mitigate CO2 emissions.4

Scenarios for Differentiating Commitments

205

Box 9.1. Assumptions for 2010 Emission Levels• All Annex I countries except the United States and the economies intransition are assumed to reach their Kyoto targets.

• The United States is assumed to achieve the Bush administration’s
target, which is to cut the greenhouse gas intensity of economic
production by 18 percent between 2002 and 2012 (White House
2002).
• The emissions of the former Soviet Union and other Eastern European
countries are assumed to equal the business-as-usual (BAU) projections(which are far below their Kyoto targets, due to economic slowdown).
• Non-Annex I emissions follow the model’s BAU projections, because
non-Annex I countries do not have binding targets under the Kyoto
Protocol.

The intermediary environmental goal of limiting global emissions to
9.4 GtC by the year 2030 thus represents an overall reduction of emissionsof nearly 2.6 GtC in 2030, relative to the BAU case. This chapter examines how this reduction may be distributed among countries according to
the three differentiation scenarios and the associated economic outcomes.
As with most models, the results in the following sections are best interpreted in relative terms rather than absolute figures.

II. The Per Capita Convergence Scenario
As pointed out in Chapter 8 of this volume, the distribution of emission
allowances based on a per capita rule is a resource-sharing issue, namely, a
global emission budget to be equally allocated among all the people of theworld. The Global Commons Institute and the Center for Science andEnvironment have played important roles in developing and advocating
per-capita-based approaches since the early 1990s (See Meyer 2000,
Agarwal and Narain 1991).
Given the wide discrepancies among countries’ current levels of percapita emissions, convergence to an equal per capita allowance level may
require a few decades to become politically acceptable to today’s high per
capita emitters. The Per Capita Convergence scenario sets the emission
convergence year at 2050, meaning that by then, per capita emission allowances will be the same in all countries: 0.95 tons of carbon equivalent(tC) per year. The transition period—2011 to 2049—is divided into three

206

Building on the Kyoto Protocol: Options for Protecting the Climate

Box 9.2. Countries’ Emission Allowances Under the Per Capita
Convergence Scenario
For each year, the calculation is completed in two steps:
1) Calculation of country i’s emission share
The calculation is based on one of the equations proposed by the Global
Commons Institute (GCI 2002) to achieve convergence to a standard value.1

Siy = Siy-1 - (Siy-1 - Piy)* exp(-a*(1-t))
where
Siy is the emission share of country i in year y.
Piy is the population share of country i in year y.
a is the “convergence coefficient” (set to 4). The higher the value, thelater the convergence occurs. Setting a to 4 corresponds to a convergence trend beginning between 2020 and 2030.
t is the elapsed time ratio between starting year (2011, t=0) and convergence year (2050, t=1).
2) Calculation of country i’s emission allowance
Aiy = Siy * By
where
Aiy is the emission allowance of country i in year y.
Siy is the emission share of country i in year y.
By is the global CO2 emission budget of year y.
Source: Adapted from GCI (2002).
1 The exponential convergence function was chosen in the present Per Capita

Convergence scenario because it makes the transition smoother in the early years.
GCI also proposes a linear convergence function, which is simpler and “removes
the arbitrary and possibly contentious speed-of-convergence parameter ‘a’ fromthe model.” See GCI (2002).

subperiods and reflects the most common curve identified by the IPCC foremission trajectories in concentration stabilization scenarios. From 2010
to 2030, global emissions grow in a linear fashion from 7.8 to 9.4 GtC.
They stabilize for the next 10 years and finally decrease by 1 percent per
year from 2040 to 2050. Thereafter, these yearly carbon budgets are thenallocated to countries on the basis of population. The calculation of acountry’s emission allowance is described in Box 9.2.

Scenarios for Differentiating Commitments

207

Table 9.1. Emission Allowances in the Per Capita Convergence
ScenarioBAU

Per Capita Convergence Scenario

2030 Emissions
(MtC)

2030
Allowances(MtC)

Reduction (–) or
increase (+) inemissions relative
to 1990 (%)

1,951
1,067
331
158
944
282
210

878
598
202
64
466
181
90

–34
–31
–31
–19
–51
–34
–35

BrazilMexicoIndia
South Asia, excl. India
China
South Korea
Southeast Asia
AfricaGulf States
Non-Annex I, all others

226
183
1,180
179
2,395
249
921
716
473
516

230
156
1,333
501
1,777
96
789
1,231
293
516

+322
+93
+713
+2130
+173
+48
+270
+626
+111
+195

World

11,981

9,400+66Countries
Annex I
United States
European Union
Japan
Australia and New ZealandFormer Soviet Union
Other Economies in Transition
Annex I, all others
Non-Annex I

Source: Calculated using POLES model.
Note: See Appendix 9B for the definition of geographic regions.
Abbreviations: Business as usual (BAU), millions of tons of carbon equivalent (MtC).

Table 9.1 shows the emission allowances by 2030 and compares themwith BAU emission levels and the relative change since 1990. As expected,
considering their current high emissions per capita, Annex I countries
would have to considerably reduce their emissions relative to both the
BAU case and 1990 levels.
Within the non-Annex I countries, the situation is different: The 2030
allowances would be greater than the 1990 emissions, which would givethem an opportunity to expand their economies and subsequent emissions
to meet some of their development expectations. Some of the countries
would need to reduce their emissions compared to 2030 BAU levels.5 Others, currently low per capita emitters, would have allowances greater than208

Building on the Kyoto Protocol: Options for Protecting the Climate

the 2030 projected BAU emissions. In other words, they would be allocated more emission allowances than the model projects they will need.
This is due to a combination of factors, such as their low current levels ofemissions per capita, their future economic prospects as estimated in themodel, their population growth pattern, and the level of the convergencetarget by 2050.

III. The Relative Responsibility Scenario
The Relative Responsibility scenario distributes required yearly emission
reductions according to an indicator of relative responsibility for climatechange. This scenario is similar to the variant of the Brazilian Proposal
suggested in Chapter 7 of this volume; it defines responsibility on the basisof cumulative CO2 emissions, rather than in terms of contribution to global
warming, as in the original version of the Brazilian Proposal. Here, cumulative emissions since 1900 are used as a proxy to assess historical responsibility for global warming, partly because the CO2 emissions estimates
exist (from fossil fuel use only) and may be used with reasonable confidence.6 In addition, as pointed out in Chapter 7, “expressing responsibility in terms of cumulative emissions over time... reduces the need for complex scientific models and associated uncertainties….” Relative to theBrazilian Proposal approach to determining responsibility, this scenario
places a somewhat greater burden on countries that industrialized early.7
Several other features of this scenario are also consistent with modifications of the original Brazilian Proposal as suggested in Chapter 7. First,
this scenario is applied to all countries of the world, not just industrializedcountries. Second, it is based on emission reductions relative to the BAU
case to reach the 2030 environmental target of 9.4 GtC. This target waschosen because the original Brazilian Proposal is only conducive to absolute emission reductions (not to increases), and the 2030 intermediary environmental goal used here leads to an increase in emissions relative to
1990.
The yearly global emission budgets are the same as those used for the
Per Capita Convergence scenario.8 This allows a comparative analysis
between scenarios. The yearly global CO2 emission reductions are thus
the difference between the global BAU yearly emissions and these yearly
global budgets. The yearly global reductions are then distributed to eachcountry in proportion to their relative responsibility for CO2 emissions
since 1900 (see Box 9.3).

Scenarios for Differentiating Commitments209

Box 9.3. Distributing Emission Reductions Based on Relative
Responsibility: An Example
The following steps are used to calculate the emission reductions that theUnited States would have to achieve in 2030.
1) Calculating estimated 2030 global CO2 reductions:2030 business-as-usual (BAU) global emissions (POLES model) = 11,981
million tons of carbon equivalent (MtC)
2030 emission budget = 9,400 MtC2030 global reductions = 2030 BAU global emissions – 2030 emission
budget = 11,981 – 9,400 = 2,581 MtC
2) Calculating 2030 U.S. relative responsibility:
U.S. cumulative emissions from 1900 to 2020: 111.3 GtC
World cumulative emissions from 1900 to 2020: 421 GtC
U.S. cumulative emissions as percentage of the world cumulative emissions from 1900 to 2020 = 26. 43%
3) Calculating the U.S. emission reductions relative to BAU in 2030:
It is the product of global reductions and the ratio of U.S. relative
responsibility = 2,581 * 26.43 % = 682 MtCRelative responsibility is measured as the ratio of the cumulative emissions of a country to the world cumulative emissions. As in the original
Brazilian Proposal, it is updated every 5 years. The 2005 responsibility
ratio for a country accounts for emission reductions from 2011 to 2015,
the 2010 ratio is used for reductions between 2016 and 2020, and so on. By
using the 2005 ratio to define reductions from 2011 to 2015, the methodology reflects the lag between actual emissions and their official inventory
and reporting.
Unlike the Per Capita Convergence scenario, this allowance allocation
requires all countries to reduce their emissions below BAU by 2030 (Table
9.2). Annex I countries, however, bear a greater responsibility for cumulative emissions and thus have more stringent reductions to achieve. The
earlier- and/or more heavily-industrializing countries bear the brunt of therequired reduction. Simultaneously, the 2030 emission allowances for the
non-Annex I countries are greater than their respective 1990 levels, giving them room to achieve development goals.

210

Building on the Kyoto Protocol: Options for Protecting the Climate

Table 9.2.

Emission Allowances in the Relative Responsibility
Scenario
BAU

Relative Responsibility Scenario
Reduction (–) or
increase (+) inemissions relative to1990 (%)

2030
Emissions
(MtC)

2030
Allowances
(MtC)

1,951
1,067
331
158
944
282
210

1,269
570
236
126
654
173
146

–5
–34
–19
+59
–32
–37
+6

BrazilMexicoIndia
South Asia, excl. India
China
South Korea
Southeast Asia
AfricaGulf States
Non-Annex I, all others

226
183
1,180
179
2,395
249
921
716
473
516

199
152
1,078
165
2,101
220
830
634
408
439

+264
+88
+557
+635
+223
+239
+289
+274
+194
+151

World

11,981

9,400+66Countries
Annex I
United States
European Union
Japan
Australia and New ZealandFormer Soviet Union
Other Economies in Transition
Annex I, all others
Non-Annex I

Source: Calculated using the POLES model.
Note: See Appendix 9B for the definition of geographic regions.
Abbreviations: Business as usual (BAU), millions of tons of carbon equivalent (MtC).

IV. The Emissions-Intensity Target Scenario
Dynamic targets can be expressed in various forms (see Chapters 5 and 6).
This chapter refers to emissions intensity, defined as the ratio of CO2 emissions to gross domestic product (GDP). This scenario does not demonstrate how intensity targets reduce cost uncertainties (see Chapter 5), butrather illustrates how differentiated commitments can be defined in termsof intensity targets. The scenario is built on country-level targets expressed
as relative changes to BAU emissions intensities, rather than absolutechanges. If such a scheme were under discussion in the international climate negotiations, absolute levels of emissions intensities would not need

211

Scenarios for Differentiating Commitments

Table 9.3.

Emission Allowances in the Emissions-Intensity
Target Scenario
BAU

Emissions-Intensity
Target Scenario

2030
Emissions
(MtC)

2030
Allowances(MtC)

Reduction (–) or
increase (+) inemissionsrelative to 1990
(%)

1,951
1,067
331
158
944
282
210

1,257
584
198
83
623
186
102

–6
–33
–32
+5
–35
–32
–26

BrazilMexicoIndia
South Asia, excl. India
China
South Korea
Southeast Asia
AfricaGulf States
Non-Annex I, all others

226
183
1,180
179
2,395
249
921
716
473
516

205
166
1,068
161
2,167
225
833
648
428
467

+275
+105
+551
+620
+233
+248
+291
+282
+209
+167

World

11,981

9,400+66Countries
Annex I
United States
European Union
Japan
Australia and New ZealandFormer Soviet Union
Other Economies in Transition
Annex I, all others
Non-Annex I

Source: Calculated using the POLES model.
Note: See Appendix 9B for the definition of geographic regions.
Abbreviations: Business as Usual (BAU), millions of tons of carbon equivalent (MtC).

to be compared across countries, obviating the need to agree on an international measurement unit for GDP (see Chapter 5). GDP could be measured in national currencies, rather than U.S. dollars or by using purchasing power parities.
Many simulation options achieve the 2030 emissions target of 9.4 GtC.
For example, Annex I countries could improve emissions intensity by 4
percent annually relative to BAU, allowing non-Annex I countries to follow their BAU paths. However, this does not meet the initial assumptionthat all countries participate in the mitigation effort.

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Building on the Kyoto Protocol: Options for Protecting the Climate

A simulation that meets this participation criterion is one in which
Annex I countries improve their emissions intensity by approximately 2
percent9 annually from their BAU activities, while non-Annex I countries improve their emissions intensity by 0.5 percent. This would amountto a 34 percent improvement in emissions intensity from BAU levels forAnnex I countries, and almost 10 percent for non-Annex I countries by2030.
Improving emissions intensities by 2 percent yearly relative to their BAU
levels would imply an approximate 3 percent annual reduction in carbon
intensity for most Annex I countries. Intensity changes required to meet
the targets in non-Annex I countries would vary more widely, ranging
from a 0.5 percent annual intensity increase to a 2 percent decrease. Still,on average, most countries would have to reduce their emissions intensity
by around 1 percent annually.
The emission allowances for each country based on this scenario are
outlined in Table 9.3. As in the Relative Responsibility scenario, all countries would have to reduce their emissions compared with their BAU levels by 2030. Annex I countries, except Australia/New Zealand, would needto reduce their emissions below 1990 levels,10 whereas non-Annex I countries could allow their emissions to grow, but at a lower rate than the BAU
path.

V. Comparative Assessment
Although the 2030 global emission budget remains unchanged (9.4 GtC),
the three scenarios yield different distributions of emission allowances
between Annex I and non-Annex I countries (Table 9.4). Namely, Annex I countries would be allocated one quarter of the total global emission
budget under the Per Capita Convergence scenario, whereas they would
receive approximately one third of all allowances under the other two
scenarios. Given the assumptions adopted for each scenario, in all cases
Annex I countries need to achieve a greater reduction in their emissions
than non-Annex I countries.
As a result of deeper emission reductions in Annex I countries, anddespite faster population growth in non-Annex I countries, the 2030 per
capita CO2 allowance for Annex I countries would diminish in all scenarios relative to 1990, while that of non-Annex I countries would increase (Table 9.5). For example, the European Union’s per capita allowance would be about 1.6 to 1.7 tC in any of the scenarios, whereas it was
2.4 tC in 1990 and would be 2.8 tC in the BAU case by 2030. In contrast,

213

Scenarios for Differentiating Commitments

Table 9.4.

Distribution of CO2 Emission Allowances Under Three
Allocation Scenarios
1990

2010

2030

2030 allowances

ActualEmissions

Projected
Emissions

Projected
Emissions(BAU)

Per Capita
Convergence
Scenario

Relative
Responsibility
ScenarioEmissionsIntensity
TargetScenario

Annex I (%)

69

51

41

26

34

32

Non-Annex I (%)

31

49

59

74

66

68

Total (MtC)

5,679

7,832

11,981

9,400

9,400

9,400

Source: Calculated using the POLES model and ASPEN software.
Abbreviations: Business as usual (BAU), millions of tons of carbon equivalent (MtC).

India’s 2030 per capita allowance would range between 0.8 and 1 tC in all
scenarios, compared with 0.2 tC in 1990 and 0.8 tC in the 2030 BAU
case.
From large divergences in projected per capita emissions in 2010, thethree scenarios exhibit a trend toward convergence. This result constitutes evidence that per capita convergence may be achieved through various emission-limitation patterns.
The analysis also compares the three scenarios using emission permit
trading (Table 9.6). Based on the respective marginal abatement costs ofthe various countries, and assuming the market in emission permits has
opened by 2030, the model calculates a permit price of $97 per ton ofcarbon equivalent.11 Countries with marginal abatement costs higher thanthe permit price would buy allowances to meet their target, while countries with lower marginal costs would sell allowances up to the level atwhich their marginal cost equals the permit price. The “trade volume” inTable 9.6 refers to the number of allowances (in millions of tons of carbon
equivalent) that would be traded. The “total cost to meet the target” corresponds to the cost of reductions achieved domestically and the value ofallowances traded. The total cost at the world level is the same in thethree scenarios because the global emission target (the environmental goalby 2030) is the same.
The “gains from trade” represent the costs avoided (or, in some cases,
benefits generated) with trading. They stem from the difference between
the costs that the countries would bear if they achieved their targets solely
by reducing emissions domestically and the cost of meeting their targets
using emissions trading (“total cost to meet target” in Table 9.6).

214

Building on the Kyoto Protocol: Options for Protecting the Climate

Table 9.5 Per Capita CO2 Emissions Under Three Allocation Scenarios
1990

tons of carbon per capita
2010

2030

Allowable amount of CO2 emissions
Relative
Per Capita Responsi
Convergence-bility
Scenario
ScenarioEmissionsIntensity
TargetScenario

ActualEmissions

Projected
Emissions

Projected
Emissions
BAU

5.1
2.4
2.4

5.6
2.4
2.4

5.8
2.8
2.8

2.6
1.7
1.7

3.8
1.6
2.0

3.7
1.6
1.7

3.0
3.3
2.2
3.5

3.1
2.0
1.9
3.8

3.8
3.2
2.5
4.1

1.6
1.6
1.6
1.7

3.1
2.2
1.5
2.8

2.0
2.1
1.6
2.0

BrazilMexicoIndia
South Asia, excl. India
China
South Korea
Southeast Asia
AfricaGulf States
Non-Annex I,
all others

0.4
1.0
0.2
0.1
0.6
1.5
0.4
0.3
1.2

0.6
1.1
0.5
0.2
1.1
2.8
0.6
0.3
1.6

1.0
1.4
0.8
0.3
1.6
4.7
1.2
0.5
1.9

1.0
1.2
1.0
0.8
1.2
1.8
1.0
0.9
1.2

0.9
1.1
0.8
0.3
1.4
4.2
1.1
0.5
1.6

0.9
1.2
0.8
0.3
1.5
4.3
1.1
0.5
1.8

0.6

0.7

1.0

1.0

0.9

0.9

World

1.1

1.1

1.5

1.2

1.2

1.2

Annex I
United States
European Union
Japan
Australia and
New-ZealandFormer Soviet Union
Other EITs
Annex I, all others

Non-Annex I

Source: Calculated using the POLES model and ASPEN software.
Note: See Appendix 9B for the definition of geographic regions.
Abbreviations: Business as usual (BAU), economies in transition (EITs).

Table 9.6 shows that, in general, Annex I countries would buy allowances, while non-Annex I countries are the sellers in each scenario. The
total cost to meet the target is typically higher in Annex I countries thanin non-Annex I countries, be it in absolute terms or expressed as a percentage of GDP. Annex I countries are required to undertake more stringent reductions and frequently face higher marginal abatement costs thannon-Annex I countries.
These generalizations do not apply to all countries in each group. A few
exceptions may be noted. In the Relative Responsibility scenario, theAnnex I countries of Australia/New Zealand would be sellers. In the Per
Capita Convergence scenario, among non-Annex I countries, the Gulf

108.2(1586)

World

0.11

–0.06
0.04
–0.35
–1.89
0.13
0.67
0.03
–1.38
0.63
–0.05

0.48
0.21
0.24
0.49
1.27
0.40
0.47

421.6

1.6
0.1
28.6
32.9
0.2
31.6
1.4
55.6
13.6
3.5

81.9
47.1
26.9
6.3
66.9
3.6
19.9

Billion $Gainsfrom trade

(717)

4
–2
–161
–15
–365
–14
–106
–17
–17
11

165
297
66
–21
93
56
26

MtC

108.2

1.5
1.3
–3.9
–0.2
–7.2
0.4
–1.7
2.4
1.9
3.9

36.9
35.9
7.7
0.1
17.4
7.7
4.1

0.11

0.06
0.06
–0.05
–0.01
–0.04
0.02
–0.02
0.06
0.09
0.06

0.24
0.23
0.17
0.01
0.62
0.44
0.20

Billion $ % GDP

Total costto meet target

111.4

0.0
0.0
5.5
0.5
12.2
0.3
3.4
0.2
0.2
0.1

4.9
60.7
11.4
0.6
5.0
5.0
1.3

Billion $Gainsfrom trade

Relative responsibility scenario
Trade
Volume

(824)

–2
–15
–150
–12
–431
–19
–109
–30
–37
–17

177
283
104
22
125
43
70

MtC

108.2

0.9
0.0
–2.8
0.1
–13.6
–0.1
–2.0
1.1
–0.1
1.2

38.1
34.5
11.4
4.3
20.5
6.5
8.3

Billion $

0.11

0.03
0.00
–0.03
0.01
–0.07
0.00
–0.03
0.03
–0.01
0.02

0.24
0.22
0.24
0.35
0.73
0.37
0.41

% GDP

Total costto meet target

144.7

0.0
0.4
4.8
0.3
16.5
0.5
3.6
0.6
1.0
0.3

5.8
53.6
28.6
1.3
9.8
2.8
14.6

Billion $Gainsfrom trade

Emissions-intensity target scenario
Trade
VolumeSource: Calculated using ASPEN software. Notes: Monetary values are expressed in constant 1995 dollars, using purchasing power parities. A negative sign inthe volume of trade corresponds to permit sales. A negative sign in the total cost corresponds to a benefit. See Appendix 9B for the definition of geographic
regions. Abbreviations: Millions of tons of carbon equivalent (MtC), gross domestic product (GDP).

–1.6
0.9
–28.6
–32.9
24.2
12.5
2.3
–55.6
13.0
–3.5

–28
–6
–415
–351
–42
110
–65
–613
97
–66

Non–Annex I
BrazilMexicoIndia
South Asia, excl. India
China
South Korea
Southeast Asia
AfricaGulf States
Non–Annex I, all others

75.1
33.1
11.0
6.1
35.7
7.0
9.5

557
269
100
41
281
48
82

Billion $ % GDP

MtC

Annex I
United States
European Union
Japan
Australia and New ZealandFormer Soviet Union
Other Economies in Transition
Annex I, all others

Total costto meet target

Trade
VolumePer capita convergence scenario

Comparison of Economic Impact of CO2 Emissions Trading Under Three Allocation Scenarios, 2030

Permit price: $ 97

Table 9.6.

Scenarios for Differentiating Commitments

215

216

Building on the Kyoto Protocol: Options for Protecting the Climate

States and South Korea would be permit buyers and have the highest cost
relative to their GDP.
Interestingly, both the Relative Responsibility and the Emissions-Intensity Target scenarios display similar gains from trading. The Per Capita
Convergence scenario would induce the highest global volume of trade inemission allowances and therefore the greatest financial gains from trading. This is mainly because emission reductions required from Annex I(and some non-Annex I) countries are higher in this scenario than in theothers. As the permit price is the same in all three scenarios, the level ofdomestic reductions is the same.12 Thus, on the one hand, in the Per Capita
Convergence scenario, these countries would buy more allowances on thepermit market to achieve their more stringent reductions. On the other
hand, some non-Annex I countries would have opportunities to sell surplus allowances (those beyond their BAU emission projections), thus providing the allowances needed by the buyers.
These countries with surplus allowances gain a net benefit compared toa situation in which there is no climate change mitigation action (that is,their “total cost to meet target” is negative). In the Per Capita Convergence scenario, trading would lead to important monetary transfers to some
non-Annex I countries that are less well off (South Asia and Africa). These
results reaffirm Aslam’s assertion in Chapter 8 that the “inclusion of trading is… deemed essential for the relative success and appeal of the [percapita convergence] approach.” However, the comparative results showthat emissions trading is important to reducing costs in all three scenarios
examined.
Finally, Table 9.6 also shows that the three differentiation scenarios yieldvarying abatement costs across countries. Some countries would incur thelowest cost in the Per Capita Convergence scenario, others in the Relative Responsibility scenario, and the remaining in the Emissions-Intensity Target scenario.

Conclusion
This chapter illustrates how a few emission allocation proposals may beformalized. Based on the assumption that emission reductions from BAU
are needed to reach a predetermined CO2 concentration level, it shows
how the various proposals can help in the near term to meet a long-term
environmental outcome. The same emission reduction target from a BAUlevel is set to allow comparisons among the scenarios.

Scenarios for Differentiating Commitments

217

In the three scenarios considered, Annex I countries must make larger
emission reductions than non-Annex I countries. In the Per Capita Convergence and the Relative Responsibility scenarios, this is due to the current and historically higher levels of emissions of Annex I countries, whilein the Emissions-Intensity Target scenario, it is a result of how the model
is formulated. Non-Annex I countries receive a larger portion of the carbon budget in all scenarios, enabling these countries to continue developing.
Emissions trading reduces abatement costs, allowing all countries tobenefit from trading. In general, Annex I countries are the buyers andnon-Annex I countries are the sellers. In terms of the costs (relative toGDP) incurred to meet the target, costs are higher in Annex I countries
than in non-Annex I countries.
It must be remembered that these results are dependent on the assumptions adopted. First, they rely on the BAU assumptions of the model used,
as well as on the model structure. Second, they relate only to CO2 emissions from the energy sector. The overall picture would inevitably change
if all GHGs were included. Furthermore, trade is assumed to occur in aperfectly competitive market at the international level. However, achieving a well-functioning trading market might be challenging (Baumert etal. 2002). The costs presented are only for emission reductions and do notinclude transaction costs from trading or costs associated with reportingand monitoring emission inventories. Finally, the regional coverage adopted
in this chapter (see Appendix 9B) may hide large disparities across thecountries that compose each region. For example, within Africa, the economic structures and the emission levels of oil-producing countries, suchas Algeria and Libya, are very different from those of sub-Saharan countries. Adopting the more extensive regional disaggregation of the POLES
model (38 countries/regions) would partially overcome this drawback.13
Still, it may be necessary to undertake country-specific analyses for thosecountries not individually covered by the model, such as the analysis done
for South Africa by Winkler et al. (2001).
Some issues were intentionally omitted from the analysis in this chapter; for example, the practical implementation of any of the scenarios or
how countries would meet domestic emission reductions internally. The
assumption is that these factors would not have changed the outcome of
our analysis.
The results show that the three scenarios examined yield varying abatement costs across countries. This has important political implications, as
countries tend to be more prone to accept the solution that is the least

218

Building on the Kyoto Protocol: Options for Protecting the Climate

costly for them. The analysis provides information to countries on theorder of magnitude of emission reductions and the associated costs, depending on the scenario used. This information may be helpful to countries in shaping their own negotiating positions. For some countries, noneof the scenarios considered may be acceptable from a sustainability standpoint. Of course, the whole spectrum of options for global participation ina climate change mitigation effort is much wider than those analyzed here.
Approaches such as Sustainable Development Policies and Measures or
the Sectoral Clean Development Mechanism (addressed in Chapters 3
and 4) may also contribute to emission reductions in some countries, whilebringing them other development benefits.
This analysis could be further developed to explore the consequences of
exempting some countries from emission limitations. The exemption could
apply to those countries whose emissions and GDP per capita are very low
and that do not significantly contribute to the build-up of global CO2
emissions.

Scenarios for Differentiating Commitments

219

Appendix 9A
The POLES Model:
Prospective Outlook on Long-Term Energy Systems
The POLES model was developed at Institut d’Economie et de Politiquede l’Energie in Grenoble, France, under research programs funded by theEuropean Union. Operational since 1997, it has been used for policy analyses by various European Commission’s-Directorates General (e.g. DGResearch, DG-Environment) and by the French Ministry of Environment.
POLES is a world simulation model for the energy sector. It works in a
year-by-year recursive simulation and partial equilibrium framework, withendogenous international energy prices and lagged adjustments of supply
and demand by world region. GDP and population are the main exogenous variables.
POLES model structureInternational Energy Markets
Coal

Oil

Gas

Prices(t+1)
Imports/
Exports (t)Regional
EnergyBalances220

Building on the Kyoto Protocol: Options for Protecting the Climate

In the current geographic disaggregation of the model, the world is divided into 38 countries or regions. For each region, the model articulates
four main modules dealing with the following:

•
•
•
•

Final energy demand by key sectors
New and renewable energy technologies
The conventional energy and electricity transformation system
Fossil fuel supply

The main outputs are the following:• Detailed world energy outlooks to 2030, with demand, supply, and priceprojections by global regions.
• CO2 emission marginal abatement cost curves by region, and emissions trading systems analyses.
• Technology improvement scenarios—exogenous or with endogenous
features—and analyses of the value of technological progress in thecontext of CO2 abatement policies.
The main advantages of the POLES model rely on the high disaggregation levels of energy demand sectors, energy technologies, and geographic
regions. The detailed representation of the energy sector allows it to endogenously capture the various changes, such as the development andimplementation of economically efficient new technologies. The geographic breakout delivers detailed insights on energy variables and CO2related emissions for many countries. This feature allows the model tobetter illustrate the challenges of many countries, and may be useful in thecourse of the climate negotiations.
See European Commission (1996) for a comprehensive description of
the POLES model.

Scenarios for Differentiating Commitments

221

Appendix 9B
Regional Breakdown
The regional breakdown indicates how the 38 countries or regions of the
POLES model are aggregated for the purpose of this chapter. A “+” signmeans that the countries are grouped to constitute a single element.
United States: United States of America.
European Union: Includes Austria, Belgium+Luxemburg, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom.
Japan
Australia and New ZealandFormer Soviet Union
Other Economies in Transition: Includes Poland+Hungary+the Czech
Republic+Slovenia, Rest Eastern Europe.
Annex I, all others: Includes Canada, Rest Western Europe.
BrazilMexicoIndia
South Asia, excluding India
China
South Korea
Southeast Asia
Africa: Includes North Africa non-OPEC, North Africa OPEC, Egypt,
Sub-Saharan Africa.
Gulf States: Includes OPEC countries in the Persian Gulf.
Non-Annex I, all others: Includes Rest Central America, Rest SouthAmerica, Rest Middle East, and Turkey.

222

Building on the Kyoto Protocol: Options for Protecting the Climate

Notes
1. “Countries” is used in this chapter as a generic term covering individual countries aswell as geographic regions.
2. The Analyse des Systèmes de Permis d’Emissions Négociables (ASPEN) software
was also developed at Institut d’Economie et de Politique de l’Energie (IEPE) in
Grenoble, France. It computes regional CO2 emission allowances according to agiven differentiation approach. It then uses the POLES marginal abatement costs tocompute the emission permit price and trade flows for any configuration of theemission permit market.
3. Thus, net CO2 emissions resulting from land-use change activities as well as theemissions of other GHGs are not considered.
4. As in any model, the BAU case is built on many assumptions. For example, theprojected GDP annual growth rate of each country, determined exogenously, leads
to a worldwide average yearly GDP increase of 2.9 percent between 2010 and 2030.
5. South Korea would obviously have a tremendous challenge.
6. The data source used in the chapter is the World Resources Institute, gathered fromEIA (2002b) and Marland et al. (2000).
7. This is because the method used in this scenario does not account for the decay ofemissions over time. See Chapter 7.
8. As stated in the previous section, the budgets are defined so that from 2010 to 2030,
the global emissions grow linearly from 7.8 to 9.4 GtC.
9. The precise rate is 2.059 percent.
10. Australia/New Zealand and the United States would be in a comparable situation by
2030. Their reductions relative to 1990 levels would not be as stringent as for theother Annex 1 countries because their assumed departure point in 2010 is above
1990 levels (as opposed to the other Annex 1 countries).
11. The permit price may seem high. This may be explained by the fairly high volume ofemission reductions.
12. Buying countries will reduce their emissions domestically as long as the marginal
cost of these reductions is lower than or equal to the permit price. They will turn tothe international permit market for those additional reductions whose marginal
cost, if taken domestically, would exceed the permit price.
13. Regional disaggregation results obtained using the POLES model are not presented
in the chapter, but can be provided upon request.

Conclusion: Building an Effective and Fair Climate Protection Architecture223

10. CONCLUSION:
Building an Effective and Fair Climate
Protection Architecture
Kevin A. Baumert and Silvia Llosa

As the Kyoto Protocol comes into force, the climate protection debate
will focus increasingly on improving and expanding the regime’s architecture in the era beyond Kyoto’s first commitment period. Official negotiations could begin between 2003 and 2006. The approaches to climate protection analyzed in this volume suggest a wide variety of future possibilities for the evolution of the climate regime, some of which are examined
here for the first time.
Crafting future agreements will require governments to converge on amutually agreeable course of action, as decisions are made by consensus
under the Climate Convention. Yet, as several studies in this volume reflect, governments act in their own interests, even in trying to address a
global problem such as climate change. Aslam illustrates in Chapter 8that climate protection proposals tend to primarily benefit their proponents, rather than strive to meet the needs of all countries. Reconcilingthese realities with the need to slow and eventually reduce global greenhouse gas (GHG) emissions over the coming decades is a paramount challenge. What might the features of a successful climate protection architecture look like? Is there a winning combination of elements among theoptions and approaches outlined in this volume? This chapter responds tothese questions.

I.

Interests and Architecture

To begin, none of the approaches examined can satisfy the interests andconcerns of all countries. Table 10.1 amply illustrates this, presenting theadvantages and disadvantages of various approaches as catalogued by theauthors of this volume’s respective chapters. The results should not be
surprising. Disparate economic conditions, demographic profiles, values,
and other unique factors prevent any single approach from suiting the224

Building on the Kyoto Protocol: Options for Protecting the Climate

Table 10.1.

Summary of Major Advantages and Disadvantages of
Selected Climate Protection Approaches
Major
Advantages

Disadvantages/
Challenges

Kyoto Protocol-Style
Targets
Extending fixed targets todeveloping countries withlinks to flexibility andaccountability mechanisms

Familiarity and simplicity
Advance knowledge of environmental
benefits
Flexibility in implementation
Respects national circumstances

Limited politicalacceptability
Data requirements
Incentives to establish
weak targets

Sustainable Development
Policies and Measures(SD-PAMs)
Voluntary action oriented
around sustainable
development

Builds on national sustainable
development priorities
Respects national circumstances
Easily integrated into Kyoto Protocol
No emissions cap

Ensuring action andaccountability
Measuring climate
benefits
Financing

Sector-Clean
Development Mechanism(Sector-CDM)
Sector-wide market
mechanism

Familiarity and compatibility with theProtocolDevelopment benefits
Rests on the polluter pays principle
Gradual capacity building
Cost-effectivenessNo emissions cap

Relies on Annex I
investment
Technical requirements
and capacity
National coordination
effortPolitical opposition

Dual-Intensity Targets
Two dynamic targets withlinks to flexibility andaccountability mechanisms

Reduced economic uncertainty inestablishing targets
Reduces risk of hot air targets
Potentially easier to agree on dual
targets

Data requirements
Complexity
Interactions withinternational emissions
trading
Lack of environmental
certainty

Adaptation of Brazilian
Proposal, as suggested in
Chapter 7
Fixed target, global allocation
scheme with links to flexibility
and accountability
mechanisms

Procedural fairness and simplicity
Science-driven
Rests on established principles
Compatibility with Kyoto Protocol
mechanisms
Rewards of early developing country
actionData requirements
Limited global
acceptability
Limited flexibility forvarying country
circumstances

Per Capita-Based
Entitlements
Fixed targets, global
allocation scheme with links
to flexibility andaccountability mechanisms

Procedural fairness and simplicity
Strong ethical basis
Enhances cost-effectiveness throughglobal trading
Incentives for developing country
participation
Amalgamates well with the Kyoto
architecture

Limited global
acceptability
Limited flexibility forvarying country
circumstancesHigh dependence on
trading for successApproachcircumstances and interests of all countries. Chapters 8 and 9, for example,
show that allocation approaches, such as those based on a relative responsibility or per capita principle, tend to distribute benefits and burdens in a
way that some countries might find unacceptable, at least in the near term.

Conclusion: Building an Effective and Fair Climate Protection Architecture225

The differences in national circumstances and interests are evident inthis volume’s case studies on Sustainable Development Policies and Measures (SD-PAMs), Sector-Clean Development Mechanism (Sector-CDM),
and dual-intensity targets. South Africa, for instance, would likely farepoorly if emission-limitations commitments were determined through relative responsibility or per capita-based differentiation principles. However,given its social and economic situation—including political commitments
to sustainable development—South Africa might be favorably inclined
toward an approach such as SD-PAMs. Mexico’s commitment to improving local air pollution—as well as the high concentration of emissions in
the capital area—makes Sector-CDM attractive. South Korea has a rapidly growing economy where future emissions are highly uncertain; hence,the suitability of dual-intensity targets.
Avoiding false comparisons, however, is important. Although this volume analyzes different approaches side by side, none of them articulates acomplete architecture.1 Rather, the approaches generally depict one or a
few elements that could form part of a broader near- or long-term climate
protection architecture. Fixed and dual-dynamic targets (Chapters 2 and5), for example, address the form, or type, of commitment that governments might adopt, but not how that commitment might be differentiated from other countries’ commitments. Furthermore, some approaches
also vary by the time frame under which they could be made operational.
Thus, a coherent architecture is not a matter of picking one of the approaches examined in this volume, just as a homebuilder would not want
to choose between using doors and windows. Table 10.2 matches the approaches examined in this volume with their respective, sometimes overlapping, architectural elements. These elements were described in detailin Chapter 1.
Likewise, the approaches examined attempt, in most cases, to address
different problems or challenges. For example, for many developing countries, climate protection is not a priority. Thus, sustainable development
might be a more compelling issue around which to organize action, as
illustrated in Chapter 3 on SD-PAMs. Table 10.3 shows the different challenges that the approaches seek to address, including investment needs(Sector-CDM), the reduction of cost uncertainties (dual-intensity targets),
procedural fairness, and differentiation of commitments (principle-based
allocation approaches). Each one of the approaches examined in this volume is relevant for thinking about how best to overcome particular obstacles that are important to different countries.

226

Building on the Kyoto Protocol: Options for Protecting the Climate

Table 10.2.
Element ofArchitecture
Legal Nature ofCommitment
Type ofGreenhouse-Gas
Limitation
Commitment
Coverage andScope of Actions

Approach toDifferentiating
Commitments
Financial andOther
Commitments
Use ofMarket-Based
Mechanisms

Elements of a Climate Protection Architecture
Found in Selected Approaches
Options and Examples (chapter number)
1. Binding: emission targets (2, 5, 7, 8)
2. Non-binding: SD-PAMs (3); Sector-CDM (4); targets (2, 5)
1. Fixed target: Kyoto Protocol (2); Brazilian Proposal (7); per capita
entitlements (8)2. Dynamic target: Dual-intensity targets (5); Argentine target (6)3. Dual target: Dual-intensity targets (5)4. Sustainable development: SD-PAMs (3)1. Project: Kyoto Protocol’s CDM (2)2. Sector: Sector-CDM (4)3. National: Targets (2, 5)
4. Global: Responsibility-based targets (7); per capita-based entitlements (8)1. Pledge-based: fixed (2) and dual-intensity (5) targets; SD-PAMs (3)2. Principle-based: Brazilian Proposal (7); per capital entitlements (8)Funding for implementation: SD-PAMs (3); implicit in other approaches

1. Project or sector-based trading: Kyoto Protocol (2); SD-PAMs (3);Sector-CDM (4)2. International emissions trading: Possible with fixed (2) and dualintensity targets (5); Brazilian Proposal (7); per capital entitlements (8)Notes: There are other elements of the architecture not shown above, such as environmental
objective and gases covered, where all of these approaches are flexible.
Abbreviations: Sustainable Development Policies and Measure (SD-PAMs),
Clean Development Mechanism (CDM).

II. Designing a Menu of Near-Term Options
An overarching lesson emerging from this volume is that the climate protection architecture can be designed to accommodate multiple, sometimes
conflicting, interests and national circumstances. In this regard, governments might consider adopting several options for country participationin the near term. Some of the approaches may operate simultaneously in a
way that supports a menu-based strategy. Such a strategy could at once
address the needs of many different countries, but through different channels of participation.
For example, the SD-PAMs and Sector-CDM could be mutually reinforcing mechanisms. The former provides a platform for promoting cleaner
development, while the latter could encourage investment in specific sus-

Conclusion: Building an Effective and Fair Climate Protection Architecture

227

Table 10.3. Key Challenges Addressed by Selected Climate
Protection Approaches
Approach

Major Challenge(s) Addressed

Fixed, Kyoto Protocol-Style Targets(Chapter 2)
Sustainable Development Policies andMeasures (Chapter 3)
Sector-Clean Development Mechanism(Chapter 4)
Dual-Intensity Targets(Chapter 5)
Brazilian Proposal (Chapter 7)
Per Capita Entitlements (Chapter 8)

Ensuring environmental certainty
Promoting sustainable development in developing
countries
Financing emission reductions and sustainable
development in developing countries
Reducing cost uncertainties
Promoting procedural fairness; differentiating
greenhouse-gas limitation commitments at thecountry leveltainable development policies that also deliver climate benefits. Similarly,
fixed and dynamic targets could operate in different countries simultaneously. Dual-intensity targets (one kind of dynamic target) might provide a safety valve for some middle-income countries, while fixed targets
might be best suited for mature, industrialized economies. Both types oftargets could support the use of cost-saving market mechanisms. To be
successful, developing countries would need to play an active role in defining the contents of the menu, rather than simply reacting to the proposals of industrialized countries.
Such a menu-based approach would have several advantages. First, it
may be the best hope of harnessing the limited political will that currently
exists for climate protection. A menu of multiple options might comprisevarious items and choices through which countries could exercise theirpolitical will. A single option (e.g., fixed targets) might be too limiting
and, consequently, the flexibility of multiple options might mobilize maximum emission reductions.
Second, a system featuring multiple options may enable Parties to gain
experience, capacity, and added confidence to support greater long-term
action on climate change. It might take 100 or more years to achieve the
Climate Convention’s ultimate objective of preventing dangerous climatechange. Countries need to improve their abilities to measure, report, andmanage GHGs if this objective is to be reached. SD-PAMs, Sector-CDM,
and dual-intensity targets (with no compliance target, for example) could
help build experience and capacity in developing countries through concrete action. A modest start could yield even larger long-term payoffs.

228

Building on the Kyoto Protocol: Options for Protecting the Climate

III. The Need for a Principled, Long-Term Framework
The near-term trust-building described above is especially important because, in all likelihood, a menu-based system is unlikely to be sufficient toaddress climate change over the long term. Rather, achieving theConvention’s objective may require a principle-based framework, as exemplified in the Brazilian Proposal and per capita-based approaches. Several interrelated factors suggest this long-term need.
The first factor is procedural equity, which will become an increasingly
important issue as the climate regime expands to cover more countries
under GHG limitation commitments. A system of pledged, negotiatedcommitments (exemplified in the present regime and in the approaches
discussed in Chapters 3 and 5) might place some developing countries at
an inherent disadvantage because of the sheer bargaining power of theindustrialized countries, and even other developing countries. The significance of this disadvantage depends, of course, on what is being bargainedfor. If the subject is legally binding emission limits, then many developing
countries may justifiably seek a more objective framework within whichto negotiate those commitments. Otherwise, doubts may persist overwhether the process can deliver fair results. Even though the Brazilian
Proposal and the per capita approaches do not represent universally agreedon principles, they are nonetheless the kind of approaches that might help
level the playing field and combat the underlying power structure of theinternational order.
A second factor is complexity. As pointed out by Depledge (Chapter 2),
the climate regime is already highly complex. Including multiple options
for participation would undoubtedly increase this complexity. Even a single
approach, such as dual-intensity targets, could be complicated, perhaps
characterized by country-specific indexes for target adjustments. Whether
the Convention process could cope with the added complexity would depend on the time frame for reaching agreement, the capacities of the negotiating parties, and the number of countries seeking to exercise the various options. Complexity, when combined with the weak negotiating capacity of many governments, can lead to defensive negotiating postures
and a culture of mistrust.
At some point, complexity can become the enemy of environmental effectiveness. Complexity reduces transparency and allows countries to conceal weak negotiating positions in a shroud of numbers, terminology, andother obscurities that are beyond the understanding of all but a few insiders. This, in turn, reduces the ability of governments and civil society toConclusion: Building an Effective and Fair Climate Protection Architecture229

expose weak negotiating positions. This phenomenon is already evident
in the Kyoto Protocol. The complexity of the accounting rules for emissions and absorptions from the land-use change and forestry sectors, forexample, prevents the media and the public from exercising scrutiny over
government positions.
A principled, long-term framework might include a more definite overall objective (e.g., aiming for atmospheric stabilization of CO2 at 450
ppmv), a system for differentiating GHG limitation commitments, andmore robust financial commitments, among others. Such a framework is
not an impossible goal, and it is one that governments and civil society
should promote and analysts should explore. However, such a long-term
framework would need to overcome some of the persistent barriers identified in this volume, especially with respect to differentiating GHG limitation commitments. Grubb et al. (1999) describe such proposals as offering“a logical, top-down and long-term resolution in the context of a politicalprocess that is inherently illogical, bottom-up and mostly concerned withthe current or next round of commitments.” Countries tend to adopt nearterm commitments that they deem economically acceptable. Some
overarching principles may even conflict with other established principles,such as the need to take into account specific national circumstances, aprinciple that is firmly embedded in the Climate Convention. Furthermore, various principles and formulas—sometimes invoked under the guiseof equity or fairness—are often designed to serve the interests of particularcountries.2
Thus, an important area of future research is to explore how a long-term
framework might better take into account national circumstances and thus
gain wider acceptability. Two preliminary ideas emerge from this project.
First, as Aslam suggests in Chapter 8, a scheme such as per capita-based
entitlements could have two components—a “fixed,” equal per capita component and a second, “variable” one that accounts for national circumstances or incorporates other principles. Countries could even invoke thefairness principles they endorse in articulating the variable portion of theiremission target. Second, other elements of the architecture could compensate for commitments that are overly burdensome for some countries.
Technology transfer, clean energy funds, or other financing provisions could
be created (or existing systems expanded) to assist countries in meeting
their commitments. This approach was used in the Montreal Protocol’s
architecture for protecting the stratospheric ozone layer. The Montreal
Protocol adopted uniform reductions of ozone-depleting substances from
historical levels (although with a grace period for developing-country

230

Building on the Kyoto Protocol: Options for Protecting the Climategroups) and then created a multilateral fund to finance those phase-outs
in developing countries. The acceptability was due not to the targets per
se but to the mixture of the targets, a grace period, and a credible financial
mechanism.
Overall, the preceding analysis suggests a two-track strategy. A nearterm component might leave open several options for country participation. Yet a parallel strategy that aims at a more coherent and principled
long-term framework for climate protection should accompany this strategy. For example, an agreement on a near-term menu approach might beaccompanied by a timetable for negotiating a principled, longer-term framework. In both tracks, promoting equity and environmental effectivenesswill require using a suite of elements in the climate protection architecture, including financial commitments for investment in clean energy orcompensation for adverse climate impacts suffered by the poor. Here, creativity and innovation are possible and indeed may be necessary.

IV. Lessons for Building an Effective and Fair Climate
Protection Architecture
Key lessons that emerge from the above discussion and the entire volumeof studies include the following:
The current regime provides a solid foundation on which to build.
Both the Convention and the Kyoto Protocol include the necessary foundations for further developing the climate regime. These include provisions both for developing countries to individually accede to fixed emission targets and for the launch of a comprehensive negotiating round,
whose results could encompass any of the options discussed in this volume(and others not examined here). Even if new options for GHG limitationcommitments are adopted in a new negotiating round, the Protocol’s reporting and review systems, as well as its flexibility mechanisms, provide asound basis for future development.
The climate regime needs stronger leadership and U.S. participation.
The weakness of industrialized country leadership—especially the UnitedStates, which has repudiated the Kyoto Protocol—is the greatest barrier
to fruitful North-South cooperation. Without greater action by the UnitedStates, the approaches examined within this volume are unlikely to be
viable. Specifically, Sector-CDM requires deeper emission cuts from in-Conclusion: Building an Effective and Fair Climate Protection Architecture

231

dustrialized countries to generate demand for Sector-CDM projects in developing countries. Implementation of SD-PAMs would depend on industrialized-country funding. Emission targets (fixed or dynamic) are not remotely feasible in developing countries without a prior demonstration ofindustrialized country leadership, as called for in the Climate Convention. Generally, the actions of the United States illustrate the broader
limitations of the international legal order. There are simply no tools readily
available to force recalcitrant countries into more climate-friendly behavior. In this way, international negotiations are no different than geology:
time and pressure are needed to drive change.
While industrialized-country leadership is needed, this requirement
should not preclude developing countries from exercising their own leadership. In fact, there is a route out of the current stalemate—the UnitedStates, other industrialized countries, and some high-emitting developing
countries might participate together in the next round of mitigation commitments, albeit under a differentiated system in which industrialized countries make the most substantial commitments. Waiting for the UnitedStates to re-engage may be in no one’s interest. There is an opportunity fordeveloping countries to help define the terms of their future participation,
to shape their involvement in a way that promotes their development
objectives while slowing emissions growth. In fact, the ideas and insights
in this volume are largely those of analysts from developing countries, andmany of the approaches examined can be shaped in a way that would
support development objectives.
Information systems and capacity in developing countries needstrengthening.
Another major barrier to expanding the climate regime to include GHG
limitation commitments in developing countries is the paucity and poor
quality of climate change-related data and information. Sound decisions
require a strong information base. As Depledge pointed out in Chapter 2,
many developing countries have not yet submitted their first national reports under the Convention. This highlights the need for a massive international effort to improve the collection and analysis of emissions data indeveloping countries. The weak information base also extends to national
mitigation and adaptation assessments. The sharing of benefits and burdens is central to the negotiation of a climate protection architecture andspecific national commitments. Yet, it is difficult to talk about sharing
burdens and benefits without more information about their actual magni-

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Building on the Kyoto Protocol: Options for Protecting the Climate

tude. Progress on information systems will require capacity building andfinancial and technical assistance.
For Argentina (Chapter 6), the formulation of a voluntary target showed
the importance of domestic capacity in economic modeling and emissions
inventories, among other areas. Estimates by outside experts are unlikely
to be sufficient to shape important national decisions that might entail
future obligations and associated costs. Approaches such as the SectorCDM or non-binding targets might support capacity building at the national level. Targeted and effective North-South transfers (financial resources, skills, etc.) are clearly needed to support future actions by developing countries. However, successful capacity building also requires developing countries to make political commitments that mobilize and enhance the existing expertise, as Chapter 6 makes clear.
Successful implementation requires domestic buy-in and acceptance.
Argentina’s experience with a voluntary target highlights the importanceof national buy-in for internationally agreed measures. Without domestic
public understanding of the issue, as well as support and coordination among
the multiple sectors involved, implementation of an international commitment may fail. Had Argentina’s voluntary commitment been acceptedby other countries, the lack of domestic support, coupled with the economic crisis and changes in political leadership, would have made implementation difficult or impossible. Garnering support from different political constituencies, key industries, provincial governments, and the public
will improve the viability of any approach. The difficulty of achieving
buy-in on a relatively low-priority issue such as climate change highlights
the broader challenges of North-South cooperation. A climate proposal’s
acceptance in a developing country will likely be based on its contribution to domestic priorities. Thus, approaches that can provide such tangible benefits while also assisting in climate protection—such as SD-PAMs
and Sector-CDM—may be more likely to find domestic support in thenear term.
In the North and the South, governments and civil society have important roles to play in increasing public concern for the issue of climatechange and articulating the relationship between climate protection andother important priorities, such as local pollution and poverty. Greaterinterest in and concern for climate protection in general will help enable
the public to make informed contributions to national strategies for climate protection.

Conclusion: Building an Effective and Fair Climate Protection Architecture233

Simplicity is a virtue.
Simplicity promotes transparency, fairness, and good-faith negotiating. A
drawback of the menu approach described above is that the complexity of
the negotiations could become overwhelming. There is an apparent tradeoff between simplicity and meeting Parties’ diverse interests. One hope forlimiting the complexity of a menu-based approach is to promote simplicity within each of the menu’s options. For example, if countries decide topursue dual-intensity targets, they should settle on a few transparent options for target adjustment. Otherwise, each country will formulate its
own target, devising formulas that few others will understand, similar tothe case of Argentina (see Chapter 6).
Another possible way to promote simplicity would be to establish a trigger (or multiple triggers) that would signal the need for a country to takegreater action. Under any number of triggers—based on capability, responsibility, or even current GHG emissions—most developing countries
would probably be exempt from serious actions. Establishing these kindsof participation thresholds could help focus attention on the relatively
few countries that are large current or future contributors to climate change.
As pointed out in Chapter 1, many developing countries have made very
little contribution to the buildup of GHGs in the atmosphere.
A two-track future approach might best balance interests, simplicity,and fairness.
Different approaches to climate protection tend to address one or severalof Parties’ key concerns or interests, such as the need to reduce uncertainty, promote investment, account for national circumstances, establish
procedural fairness, and differentiate GHG limitation commitments acrosscountries. Through different elements of the architecture, many of theseinterests can be accommodated simultaneously. As described earlier inthis chapter, combining some of the approaches (e.g., different kinds oftargets, Sector-CDM, and SD-PAMs) could help constitute a near-term
strategy that responds to the diverse interests and circumstances of Climate Convention Parties. One element of the architecture—financial
mechanisms (e.g., funds for technology transfer, clean energy, and compensation)—will be critical for acceptable compromises and might becoupled with emission targets or other commitments.
Over the longer term, complexity and procedural equity suggest theneed for a simpler, more coherent framework. This framework could be
explored and developed in parallel with a near-term response strategy.

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Building on the Kyoto Protocol: Options for Protecting the Climate

However, no such long-term framework exists (although the Brazilian Proposal is being discussed officially), and it is uncertain what an acceptable
one might look like. This constitutes an important area for future research.
The most important prospective element of such a framework might begreater clarity on a long-term environmental goal. Other important elements include a framework for shaping emission limits or other commitments for countries with diverse national circumstances and a financialtransfer mechanism that addresses mitigation and adaptation needs. To
the extent that countries adopt near-term actions that build confidence
and trust, the viability of such a long-term climate protection strategy
increases.
From the vantage point of the 1992 Earth Summit in Rio de Janeiro, where
the Climate Convention was born, one might have looked ahead 10 years
and imaged a relatively simple evolution of the climate change regime.
Such an evolution might have been similar to other multilateral environmental agreements, perhaps characterized by relatively fixed emission reductions and financial mechanisms. After all, even by 1992, governments
had a fair bit of experience and success in dealing with transboundary air
pollution and ozone-depleting gases.
Such a view seems naïve today. Climate change is a highly complex
issue, characterized by pervasive scientific and economic uncertainties,
long time horizons, potentially irreversible change, and a common atmospheric resource shared by 6 billion people and nearly 200 countries. Likewise, climate change mitigation is tethered to economic development andhuman welfare issues as well as entrenched political interests. Althoughmany of these characteristics of the problem were known 10 years ago,
today we have a better sense of the limited capacity of national and global
institutions to respond effectively to the challenge. Because today’s institutions are relatively poorly equipped to deal with a problem of this scale,creativity and innovation may be needed in designing future solutions.
This might be especially true in the near term, where building confidence
and experience with emission reductions might pave the way for more
effective longer-term solutions. This is the primary reason for examining adiversity of options for a pragmatic, fair, and environmentally effective
climate future.

Conclusion: Building an Effective and Fair Climate Protection Architecture

235

Notes
1. The exception, of course, is Chapter 2, which describes the current climate
protection regime.
2. An interesting example of how principles and formulas are invoked to serve country
interests can be found in the recent World Trade Organization (WTO) debate on
agricultural subsidies (Blustein 2002). The United States has made a proposal thatindustrialized countries reduce their “trade-distorting” agricultural subsidies under
the WTO according to a particular formula (specifically, to 5 percent of a country’s
farm output). This formula would require the United States to reduce its subsidies
from $19 to $10 billion per year, while the European Union (EU) and Japan would
be required to cut subsidies from $60 to $12 billion and from $33 to $4 billion,
respectively. According to U.S. Trade Representative Robert Zoellick, “Those withthe highest barriers and subsidies must cut the most, as is only fair” (emphasis
added). This formula is not considered “fair” by the EU in this context. Likewise, asimilar approach applied in the context of reducing GHG emissions (“those withthe highest, cut the most”) might not be considered fair by the United States.

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Building on the Kyoto Protocol: Options for Protecting the Climate

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Glossary and Abbreviations
Annex I Parties. The industrialized and transitioning countries listed in thisAnnex to the Climate Convention. These countries accepted emission targets
for the period 2008 to 2012 in Annex B of the Kyoto Protocol.
Annex II Parties. The wealthy countries listed in this Annex to the Climate
Convention that have a special obligation to help developing countries withfinancial and technological resources. They include the 24 original members of
the Organization for Economic Cooperation and Development (OECD) plus
the European Union.
Annex B. An Annex to the Kyoto Protocol that lists agreed emission targets
taken by the industrialized and transitioning countries for the so-called firstcommitment period, which runs from 2008 to 2012.
AOSIS. Alliance of Small Island States. An ad hoc coalition of 42 low-lying
and island countries that are particularly vulnerable to sea-level rise and sharecommon positions on climate change.
BAU. Business as usual. A scenario that represents the most plausible projection of the future. BAU embodies the notion of what would happen, hypothetically, if climate-friendly actions were not taken.
Berlin Mandate. An agreement reached in 1995 in Berlin, Germany, at the first
Conference of the Parties to the Climate Convention, in which the industrialized countries first agreed to take on targets and timetables for quantified
reductions and limitations on greenhouse gas emissions.
Capacity Building. Increasing skilled personnel and technical and institutional
abilities.
CDF. Clean Development Fund. An element of the original Brazilian Proposalthat was adapted to become the Clean Development Mechanism of the Kyoto
Protocol.
CDM. Clean Development Mechanism. A project-based emissions trading
system under the Kyoto Protocol that allows industrialized countries to use
emission reduction credits from projects in developing countries that both
reduce greenhouse gas emissions and promote sustainable development.
Climate Convention. See UNFCCC.
COP. Conference of the Parties to the Climate Convention. The supreme bodyof the Convention. It currently meets once a year to review the Convention’s
progress. The word “conference” is not used here in the sense of “meeting” butrather of “association,” which explains the seemingly redundant expression“fourth session of the Conference of the Parties.”

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COP/MOP. Conference of the Parties serving as the Meeting of the Parties to
the Protocol. The Kyoto Protocol’s supreme body, which will serve as theProtocol’s meeting of the Parties. The sessions of the COP and the COP/MOP
will be held during the same period. This will improve cost-effectiveness andcoordination with the Convention.
CO2. Carbon dioxide, a naturally occurring gas. It is also a by-product ofburning fossil fuels and biomass and other industrial processes as well as land usechanges. CO2 is the principal anthropogenic greenhouse gas affecting the
Earth’s temperature.
EIT. Economy in transition. EITs typically include the countries of Central andEastern Europe (e.g., Poland), the former Soviet Union (e.g., Russia), andCentral Asian Republics (e.g., Kazakhstan).
EU. European Union. Includes 15 member states.
GDP. Gross domestic product. The total value of goods and services produced
by an economy.
GEF. Global Environment Facility. The designated financial mechanism forinternational agreements on biodiversity, climate change (i.e., the UNFCCC),
and persistent organic pollutants. Established in 1991, the GEF helps developing countries fund projects and programs that protect the global environment.
Global Warming Potential (GWP). An index that allows for comparison of thevarious greenhouse gases. It is the radiative forcing that results from theaddition of 1 kilogram of a gas to the atmosphere compared to an equal mass ofcarbon dioxide. Over 100 years, methane has a GWP of 21 and nitrous oxide of310.
Greenhouse Effect. The effect produced as greenhouse gases allow incoming
solar radiation to pass through the Earth’s atmosphere but prevent most of theoutgoing long-wave infrared radiation from the surface and lower atmospherefrom escaping into outer space. This envelope of heat-trapping gases keeps the
Earth about 30° C warmer than if these gases did not exist.
GHG. Greenhouse gas. Any gas that absorbs and re-emits infrared radiation
into the atmosphere. The main greenhouse gases include water vapor (H2O),
carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O).
G-77. Group of 77. Founded in 1967 under the auspices of the United Nations
Conference for Trade and Development (UNCTAD); seeks to harmonize thenegotiating positions of its 133 developing-country members.

Glossary and Abbreviations

251

Hot Air. A term developed by the nongovernmental community to describe
the gap between a country’s emissions target agreed to under the Kyoto Protocol
and its actual emissions, when its emissions have been reduced due to reasons
unrelated to climate change mitigation. The changes in the economies ofreunified Germany, Russia, and other economies in transition, for example,
have resulted in emission trajectories that are below their Kyoto targets.
IMF. International Monetary Fund. An international organization of 184
member countries established to promote international monetary cooperationand foster economic growth.
IPCC. Intergovernmental Panel on Climate Change. An organization established in 1988 by the World Meteorological Organization and the United
Nations Environment Programme. It conducts rigorous surveys of the worldwide technical and scientific literature and publishes assessment reports widely
recognized as the most credible existing sources on climate change.
JI. Joint implementation. The mechanism established by the Kyoto Protocol
whereby an Annex I country can receive “emissions reductions units” when it
helps to finance projects that reduce net emissions in another Annex I country.
Kyoto Protocol. An international agreement adopted by all Parties to the
Climate Convention in Kyoto, Japan, in December 1997.
LDC. Least developed country. A category of countries (currently 49) deemedby the United Nations to be structurally handicapped in their development
process, facing more than other developing countries the risk of failing to comeout of poverty as a result of these handicaps, and in need of the highest degreeof consideration from the international community in support of their development efforts.
Marrakesh Accords. A set of detailed rules for implementation of the Kyoto
Protocol, adopted in 2001 at the seventh Conference of the Parties inMarrakesh, Morocco.
OECD. Organization for Economic Cooperation and Development. An
international organization consisting of the major industrialized countries. The
OECD includes Mexico and the Republic of Korea, which are non-Annex I
countries under the Kyoto Protocol.
Party. A state (or regional economic integration organization, such as theEuropean Union) that agrees to be bound by a treaty and for which the treaty
has entered into force.
PAMs. Policies and measures. The promotion of renewable energy, energy
efficiency, forest conservation, or other actions for the reduction or limitationof greenhouse gases or for sustainable development.

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ppmv. Parts per million by volume. A unit of concentration for a particular
substance (e.g., CO2).
PPP. Purchasing power parity. An international dollar “currency” for GDP thathas the same purchasing power over local GDP as a U.S. dollar has in the
United States.
SBI. Subsidiary Body for Implementation. An official body of the Climate
Convention, open to all Parties, that makes recommendations on policy andimplementation issues to the Conference of the Parties and, if requested, otherbodies.
SBSTA. Subsidiary Body for Scientific and Technological Advice. An official
body of the Climate Convention, open to all Parties, that serves as the link
between the information and assessment provided by expert sources (such as
the Intergovernmental Panel on Climate Change) on the one hand, and thepolicy-oriented needs of the Conference of the Parties on the other.
S-CDM. Sector-Based Clean Development Mechanism. An approach toexpanding the Clean Development Mechanism to encompass entire sectors,
geographic regions, and combinations of sectors and regions. See Chapter 4.
SD-PAMs. Sustainable Development Policies and Measures. An approach toclimate protection that builds on sustainable development priorities. See
Chapter 3.
Sequestration. Absorption of carbon dioxide from the atmosphere through theprocess of photosynthesis.
UNFCCC. United Nations Framework Convention on Climate Change(Climate Convention, or Convention). A treaty signed at the 1992 Earth
Summit in Rio de Janeiro by more than 150 countries.
Website Sources: UNFCCC (http://unfccc.int/siteinfo/glossary.html);
UNCTAD (http://www.unctad.org/ldcs); World Bank (www.worldbank.org/
data/); Center for Sustainable Development in the Americas (http://
www.csdanet.org/English/publications/glossary.htm).

Glossary and Abbreviations

253

About the Authors
MR. MALIK AMIN ASLAM is the executive director for ENVORK, a Pakistan-based research and development organization focusing on climatechange-related issues.
MR. KEVIN A. BAUMERT is a senior associate in the Climate, Energy and
Pollution Program at the World Resources Institute.
DR. ODILE BLANCHARD is an associate professor of economics at the University of Grenoble, France, and a researcher at Institut d’Economie et dePolitique de l’Energie (IEPE). With the support of Institut Francais del’Energie, Dr. Blanchard was a Visiting Fellow at WRI during 2001-2002.
DR. DANIEL BOUILLE is vice president and senior researcher at the Institute for Energy Economics at the Bariloche Foundation in Argentina. Dr.
Bouille participated in defining the voluntary target for Argentina.
DR. OGUNLADE DAVIDSON is professor of engineering and director of Energy and Development Research Centre at the University of Cape Town,
and also the co-chair of Working Group III (Mitigation) of the Intergovernmental Panel on Climate Change.
DR. JOANNA DEPLEDGE is honorary research fellow at the Department ofGeography, University College London. She is a former staff member of
the UNFCCC Secretariat.
MS. CHRISTIANA FIGUERES is the executive director of the Center for Sustainable Development in the Americas (CSDA).
DR. OSVALDO GIRARDIN is director of the Environmental and Development Program at the Bariloche Foundation in Argentina. Dr. Girardin
participated in defining the voluntary target for Argentina.
DR. NANCY KETE is a senior fellow at WRI and co-director of EMBARQ—
the WRI Center for Transport and the Environment.
DR. YONG-GUN KIM is a research fellow in the Global Environment Research Center at the Korea Environment Institute.
MS. SILVIA LLOSA was formerly an associate in the Climate, Energy and
Pollution Program at the World Resources Institute.

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Building on the Kyoto Protocol: Options for Protecting the Climate

DR. EMILIO LA ROVERE is professor of the Energy Planning Program andcoordinator of the Center for Integrated Studies on Climate Change andthe Environment at COPPE/UFRJ.
MR. STANFORD MWAKASONDA is a senior researcher at the Energy and Development Research Centre at the University of Cape Town, focusing onenergy and climate change.
MR. JAMES F. PERKAUS is a fellow in the Climate, Energy and Pollution
Program at WRI and a Ph.D. candidate in international relations at Tufts
University’s Fletcher School of Law and Diplomacy.
MR. JOSÉLUIS SAMANIEGO is director of the Center for Sustainable Transport of México City and Commissioner for International Affairs in theInterdisciplinary Center for Biodiversity and Environment (CeIBA).
MR. RANDALL SPALDING-FECHER is a senior researcher at Energy and Development Research Centre at the University of Cape Town, focusing onenergy, efficiency and environmental policy issues.
MS. LAURA VALENTE DE MACEDO is the Climate Change programme coordinator at Instituto Pró-Sustentabilidade (IPSUS) in São Paulo and theLatin America and the Caribbean Coordinator of the Cities for Climate
Protection program at ICLEI in Rio de Janeiro. She is the former coordinator of the Brazilian Climate Change Forum.
MR. HARALD WINKLER is a senior researcher at the Energy and Development Research Centre at the University of Cape Town, focusing on climate change (economics, mitigation, and policy) and environmental
economics.

Bibliography

237

About WRI
The World Resources Institute is an environmental think tank that goesbeyond research to create practical ways to protect the Earth and improve
people’s lives. Our mission is to move human society to live in ways that
protect Earth’s environment for current and future generations.
Our program meets global challenges by using knowledge to catalyze
public and private action:• To reverse damage to ecosystems. We protect the capacity of ecosystems
to sustain life and prosperity.
• To expand participation in environmental decisions. We collaborate withpartners worldwide to increase people’s access to information and influence over decisions about natural resources.
• To avert dangerous climate change. We promote public and private action to ensure a safe climate and sound world economy.
• To increase prosperity while improving the environment. We challenge theprivate sector to grow by improving environmental and community
well-being.
In all of our policy research and work with institutions, WRI builds bridges
between ideas and action, meshing the insights of scientific research, economic analysis, and practical experience with the need for open and participatory decision-making.

Climate of Trust project. Climate of Trust is a solution-oriented
collaboration of institutions and individuals from around theworld dedicated to bridging the North-South divide on climatechange. The name reflects the relationship between the research
partners—the collaboration is built upon an equal partnership ofcollegiality and trust.

Center for Sustainable Development in the Americas
Centro Interdisciplinario de Biodiversidad y Ambiente
COPPE, Universidade Federal do Rio de Janeiro
Energy & Development Research Centre

BUILDING ON THE KYOTO PROTOCOL : OPTIONS FOR PROTECTING THE CLIMATE

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BUILDING ON THE KYOTO PROTOCOLOPTIONS FOR PROTECTINGT H E C L I M AT E

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Institut Français de l’Energie
EDITED BY
Instituto Pró-Sustentabilidade
Korea Environment Institute
WRI
World Resources InstituteKevin A. Baumert
with
Odile Blanchard, Silvia Llosa, and James F. Perkaus