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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 88- iii
House of COMMONS
TAKEN BEFORE the
Energy and Climate Change Committee
The road to UNFCCC COP 18 and beyond
Tuesday 22 May 2012
professor michael jacobS, Dr Robert Falkner and Professor Jouni Paavola
Evidence heard in Public Questions 123 - 165
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Taken before the Energy and Climate Change Committee
on Tuesday 22 May 2012
Mr Tim Yeo (Chair)
Dr Phillip Lee
Sir Robert Smith
Dr Alan Whitehead
Examination of Witnesses
Witnesses: Professor Michael Jacobs, Grantham Research Institute on Climate Change and the Environment, LSE, Dr Robert Falkner, Senior Lecturer in International Relations, Grantham Research Institute on Climate Change and the Environment, LSE, and Professor Jouni Paavola, Deputy Director, Centre for Climate Change Economics and Policy, Co-Director, Sustainability Research Institute, School of Earth and Environment, University of Leeds, gave evidence.
Q123 Chair: Good morning, and welcome to the Committee. As you know, we have already had a couple of sessions on this subject in public. Unless you want to, we don’t need a formal introduction. We know who you are and why you are here.
Could I start with a fairly general question about what you think the main objective of the Doha negotiations should be? In any order.
Professor Jacobs: Shall I start?
Chair: Why not.
Professor Jacobs: You do know who I am, but I have an "s" on the end of my name, just for the record.
Chair: It is on my brief. You do have an "s" here. It is only the paper.
Professor Jacobs: The piece of paper wasn’t long enough, clearly. Let me start. Chairman, thank you all very much for having us. Doha looks like it is not a significant COP. It follows a very significant one and these things come in cycles, but in fact at a technical level it is rather important. What was agreed at Durban was a new round of talks but not the completion of the old round of talks, and it is the completion of the old round of talks that is the most important outcome of Doha.
Since Bali we have had two tracks to the negotiations, the Kyoto Protocol track and the Long Term Co-operative Action track, and those two need to be terminated, in the rather brutal language of Durban, with the final decisions that will wrap up their work. In particular Kyoto needs to agree its second commitment period length, it needs to deal with the overhanging AAUs, the assigned amount units, which risk undermining the integrity of the scheme by including hot air, and it needs to finish the work on the accounting rules, particularly land use change and forestry.
So the Kyoto Protocol needs to be completed-that track, the track and negotiations-and similarly with the LCA track. But this is not a foregone conclusion by any means, and people following the negotiations currently going on in Bonn will see that there are a lot of games being played around completing these processes. That is the first big set of decisions that need to be made, which is that the two old tracks need to be wound up-and the creation then of the Durban platform and enhanced action.
The second principal set of decisions or second category of decisions that need to be made in Doha are to ensure that the institutions established at Cancun, and then developed a little bit further at Durban, are actually created and up and running. So, the Global Climate Fund needs to be properly instituted and capitalised, most importantly. The Standing Committee on Finance, the Adaptation Committee, the Technology Centre and Mechanism all need to be fully established and up and running. It will be two years after they were established. It will be quite a failure if those things are not up and running. The capitalisation of the GCF-the Green Climate Fund-is very important. Alongside capitalisation there needs to be some commitment from developed countries to bridging the finance gap between fast start finance, which is meant to end in 2012, and the long-term goal of the $100 billion by 2020. At the moment there are no commitments, except from the British Government, beyond 2012, and that will be very important.
So, although this is all very technical and will be very difficult for the media to report, actually this is a COP with some quite significant decisions to make.
Professor Paavola: Michael has covered a lot of ground that I would have brought up as well, but maybe I would highlight that the new negotiations track will also be an important part of the negotiations. So the mandate that will be managing the negotiations and the timetable for progress in those negotiations will be an important aspect of Doha as well, in developing a stance towards the nature of the next agreement, whether it is a protocol or other vehicle for agreement.
Dr Falkner: I agree with what has been said. All I would like to add is perhaps the background to this, which is that this forthcoming COP is going to open up a new kind of approach to international climate negotiations. We have been in a transition phase, at least since Copenhagen. So, one can talk about this in terms of specific outcomes that will happen in Doha. One can also look at this as an example of this new approach that is based on a symmetry of commitment by developed and developing countries, by the established Kyoto Protocol parties and those that have stayed outside the Kyoto Protocol frame. In essence, what was achieved last year is to break through the old style model and to try something new, and in a sense the success of the forthcoming COP needs to be judged in terms of how it manages that transition and how it keeps us moving forward to a different kind of agreement. That agreement will be based on mitigation commitments, in whatever form, by all major emitters, and that key achievement of the last round-that all parties are now committed to negotiating an outcome, of whatever legal form, that includes commitments by all major emitters-is the key achievement that we have so far. We need to now work on this and develop this further. It is part of that transitional process and we need to, therefore, get some quite specific outcomes of the next COP to make that work.
Q124 Chair: Do you want to say a word about the importance of strengthening MRV?
Dr Falkner: Sure. We have an agreement at Cancun to put in place certain rules on MRV. Monitoring, reporting and verification are important because they create transparency in the process. I would argue that we are unlikely to get firm and specific commitments to reduce emissions that are legally enforceable out of this process-and I have done this in the written evidence-but I don’t think that in itself is a problem as long as we get specific commitments, even if they are not legally binding, even if they are voluntary. However, we do need transparency in the process so that we can then compare the various pledges that are made, so that we can then identify those countries that either live up to their pledges or not, so that we can then put pressure in the negotiations, but also outside political pressure, on those countries that are not living up to these pledges.
I think the MRV regime is a critical one because we will end up in the long run much more in a kind of naming and shaming game, politically speaking, than in a kind of a legal environment where countries make commitments that are then legally enforced. The very notion of enforcement is quite problematic in climate negotiations because, as Canada has demonstrated, you can commit to a legally binding agreement and then just walk away from it. So we are in a more political environment of inducing compliance or encouraging compliance. For that reason the MRV regime is, in my sense, the critical lynchpin of that new political environment. We need clear rules. We need rules that allow comparability between the different pledges that are made. Ideally, that should be one accounting system, which it is not at the moment. On that front I think the next COP should make progress establishing those criteria, those systems for accounting, allowing a comparison of the different pledges.
Q125 Chair: Do you want to give us a bit of guidance on the differences between a protocol, a legal instrument, and an agreed outcome with legal force? For lay people like us, it is a bit-
Professor Jacobs: Yes. It is not actually that difficult, except the third one. The first two the lawyers more or less agree on-a new instrument would be an amendment to the convention, and an amendment to the convention does not require unanimity. There are provisions in the convention for a three-quarters majority. They would prefer consensus. It is meant to be by consensus, but there is a way of doing this. An amendment to the convention is, therefore, probably the simplest legal form. A new protocol would be a new instrument, and to establish it would require unanimity, consensus, and it would have its own entry into force requirements and so on, which amendments would not. An agreement with legal force is the one that people are not clear about, and that was clearly the compromise wording that enabled the final conclusion of the Durban conference. It is assumed by most of the lawyers that I have talked to to mean something more than simply a set of COP decisions, which are regarded as too soft in international law, and therefore would be a set of binding decisions of some kind. So the third one is where there will be lots of creative legal work done as to the exact status, but the first two I think are fairly clear.
What is interesting about the current state of debate is that almost everybody has agreed that this is not the most important thing to do next, and that the exact form of any legal agreement to be concluded by 2015 is not the priority. The priority is closing the emissions gap, sorting the rules out-including MRV-and so on, and the exact legal form in a sense will fall out of the degree of ambition and commitment that countries find themselves in by the time they get to 2015. So, although this is a natural question to ask immediately after Durban, it is not the principal question that will form the concerns of negotiators. Almost everybody agrees on that. In a sense they have parked the language that we have and they will say, "Let’s return to that when we’re a bit clearer about whether we want to do anything at all".
Professor Paavola: To continue on that by taking what Michael said slightly differently, it is important to keep the protocol amendment in the bag of possibilities because, as Michael said, at the end of the day, closer to the crucial negotiations, we will see what is possible. If you now lower the ambitions you are unlikely to hike them up again. So all of the alternatives should be kept in mind, aiming high, while waiting to see what is possible.
Dr Falkner: Of course it comes down to a political deal in the end, which is if you have a high level of ambition with quite specific targets written into the agreement, that will lower the chances of having this agreed as a protocol that needs domestic ratification. If you end up with a weak agreement with unspecific commitments or low-level ambition, then that is more likely to be acceptable to the reluctant players in the game as legally binding. It will be part of the final trade-off, where countries will trade ambition with legality or legal strength of the agreement. For that reason it is imperative for the EU and the UK to demand, of course, a legally enforceable agreement until the last moment so as to be able to make them trade.
Q126 Dan Byles: Is UNFCCC still the best mechanism for doing all this? Could one not argue that the fact that emissions have risen substantially since 1992, since this process began, is a sign of failure?
Dr Falkner: I think a Churchillian dictum comes to mind. It is pretty awful as a set of institutions and processes. We wouldn’t probably create it from scratch the way it is today, but it has grown over 20 years. A lot of energy and time has been invested in it, and we simply don’t have any alternative framework. Walking away from the UNFCCC would mean building up another process. We have alternatives, like the G8, G20, and the Major Economies Forum, which have no institutional underbelly. They have no means of implementing any agreement. So, while we have alternatives for political debate, we have no institutional framework to deliver. If the UNFCCC is criticised for not delivering fast enough, no alternative is in place or could be built in the timeframe that is required to replace it. In a sense, we are left with the worst of all outcomes but it is the only alternative on the table.
Q127 Dan Byles: Ultimately, isn’t delivery down to domestic governments? Ultimately, delivery will not be provided by an international or intra-national structure.
Dr Falkner: Sure, I agree. But it is a constant up and down. You agree a target; you provide the financial means to implement it, particularly in developing countries. You then have to have the monitoring and reporting scheme to make sure the commitments are implemented, and so you constantly go back to the institutional framework that the UNFCCC provides in order to make sure that the domestic actions fit together and live up to the promises made. So I think that framework is important. It also generates political response in the countries that are more reluctant. The constant need to report, and the constant need to account for, your action or lack of action is very important in that sense.
Professor Paavola: Continuing with part of your question, if you consider unilateral action by individual nations as an alternative to UNFCCC, the problem there would be that you would effectively jeopardise your co-operativeness by pricing carbon in the domestic market, and you need assurances that others are going to reciprocate. The UNFCCC is, at the moment, the only mechanism that can ensure that some of that burden is shared. Others are facing the same sort of cost pressures to deal with greenhouse gas mitigation. That doesn’t mean that we should only act under the UNFCCC. There are other fora, like G20, WTO, trade negotiation and so on, where you may perhaps remove barriers to making progress under the UNFCCC. One important issue, for example, is consumption-related greenhouse emissions. In the UK the Climate Change Act is going to be essential for delivering alternatives in 20 or 30 years’ time. The majority of the emissions from these countries are from consumption and production, and the current policy instruments don’t really give any leverage over that. So there is a need for looking at ways to expand the realm of activities that we collectively, internationally, are covering. That may mean that you need to act on a number of fronts in order to make progress on the UNFCCC.
Q128 Dan Byles: Is there an argument that trying to get 195 signatories to go along with everything is actually a dampening effect, and that agreement with a small number of the major emitters would have a much larger effect in a much shorter period of time?
Professor Jacobs: Perhaps I can answer this, because I think this goes to the nub of some of the issues that you are dealing with. There is a model, which is the Kyoto model, which remains in some people’s heads about how climate policy is done, in which there is an international agreement whereby the global effort is carved out between countries. Then countries go away from the international negotiation and say, "Well, we now have to do this and then implement it", and that is not a bad description of how Kyoto worked. That is, very little had been done at national policy level before Kyoto was signed. Most national policy followed Kyoto and in a sense was then governed by the agreement that had been reached. That is no longer the case. Countries are now doing climate policy in a variety of different ways and at different levels of stringency. Those are national processes because they are highly economic, highly politically mediated, and so the effort to reduce emissions is national. It is not driven by the international negotiation.
You are absolutely right, if the tenor of your question is, "Isn’t that where the effort should really be going?" That is where the effort actually is happening. The interesting question is what, then, is the relationship with the international level? There are two, I think. One is that there are rules that are created, for example about how you count a tonne of carbon, which are absolutely critical. If you can force countries, in a sense, to adopt a stringent and common set of international rules, that is a very good way of anchoring political decisions at domestic level in a real process.
The second one is there are huge pressures that could be brought to bear on national processes at the international level. There are some countries where those processes don’t work very well, and the US is the outstanding case of a country that responds almost negatively to international pressures. But most countries in the world-and this certainly applies, for example, to China-do respond to international pressure. Therefore, although ultimately, the international agreement will be the sum total of domestic commitments, you can influence domestic commitments by what happens at the international level. Copenhagen is the classic example of this. We are all now familiar with the narrative about Copenhagen, which is that it was a terrible failure. Well, actually it wasn’t a terrible failure because although the negotiations themselves were pretty disastrous, in the six months leading up to Copenhagen, knowing that there was going to be a big meeting and in the end a summit, all the major economies of the world set domestic climate policy commitments, and that is what they are enacting now. Insofar as China now has quite an active programme on this-Brazil, Indonesia, Mexico, Korea, they were all announced in that period because there was a big international conference. The process of mediation between the international level and the domestic national policy is very important. That is why the UNFCCC process, even if the negotiations are not really where the commitments are made, affects the commitments that countries make.
Then I suppose I would just add, everybody has been trying to find some other process because UNFCCC is so messy-195 countries. It is the only one with international legitimacy, and what we saw in Durban was the advantage of 195 countries, which is that it’s the only forum that makes decisions of this kind. In all the other areas where it really matters, the numbers matter. The numbers, of course, are dominated by small, vulnerable countries who are the victims of climate change, and at Durban you saw the pressure that they could apply-almost a kind of moral pressure-on the big emitters, including India, China and the US, who in the end gave in to a group of countries led by Gambia, population 1.8 million, and Grenada, population 200,000, who were able to influence that. So, although it is messy and difficult-and in a way, wouldn’t it be nice to carve it out as a club of the emitters?-I don’t think you should underestimate the extent to which that process creates pressures on the big countries.
Q129 Dan Byles: Do you share Christian Aid’s view that negotiating forums outside of the UNFCCC can leave out the core interests of the poor and vulnerable countries, as they put it?
Professor Jacobs: Yes, absolutely. I think that moral pressure does not have much impact, if we are honest, but it has some. I suppose the only other thing I would want to add is you need to be careful between negotiations and other things. UNFCCC is the only place you do negotiation, but you can do a hell of a lot with other forms of co-operation. Most of the effort now over the next three years will not be in negotiation, which is about the structures, the rules and so on, but in co-operation. Then you can absolutely get co-operative forums outside the UNFCCC. I think trade-based forums, development assistance-based forums, which don’t need to be formal, which can be plurilateral rather than multilateral, are likely to generate considerable progress in getting emissions reductions in countries, but that is not where you negotiate.
Dr Falkner: Just one last addendum. I think it is fair to say that there are two levels at which we negotiate. One is the core deal on mitigation, which could be struck by a group of five countries if we look at the two-thirds of emissions-the EU, the US, China, India and Russia-or a group of 10 to 15 countries, if you go to 70%-plus of the emissions. That deal, the basic political deal, could be struck anywhere, in the G20, outside a major international conference. But to move from that political deal to something that becomes implementable, that becomes accountable, that becomes linked to, for example, carbon finance, to adaptation efforts and so on-for that you need to move it back to the UNFCCC framework, and there is no other mechanism to use. So I think we should be relaxed about where the core of the political deal is struck. To some extent the major emitters will want to ignore the moral voice of those countries that are neither causing the problem nor are going to play a big role in the mitigation effort. That is a fact of global power politics, but it is still important to keep the link alive, and I think it would be a fatal flaw in the reform of the process if we allowed the two elements to disintegrate and drift apart.
Professor Paavola: I wanted to add one thing. I agree that it is important for those countries to be in the negotiations who are going to be impacted. It is a bit like having a case in court without having the victim who suffered the injury there. But if you look at the mitigation side only, developing countries at the moment are among the most energy inefficient countries, so per unit of GDP they use the most energy. Once they grow they are going to continue, roughly speaking, doing that. At the moment the least expensive mitigation alternatives are in developing countries, so if we globally want to reduce greenhouse gas emissions at reasonable cost, some of those original reductions are bound to be found from developing countries. It is inconceivable how you could do a deal making that possible if you don’t have the potential host for those emission reductions involved in the negotiations.
Q130 Dan Byles: When Professor Sir David King was before us he advocated a global cap and trade system based on a per capita emissions target. What would your view be on that? Is that a feasible approach?
Professor Jacobs: I am sceptical about at least its short-term feasibility-and certainly a model that tries to do it from the top down to establish a global cap and trade regime. Cap and trade is actually on the way back slightly. Although the European scheme is struggling because of the oversupply of permits, Korea has just announced in the last month that it will introduce a cap and trade scheme, Australia within the last couple of months-and very interestingly China is piloting or is about to pilot, it is not quite there yet, the potential for emissions trading, and I think you have been there and talked with the pilot provinces. These steps are national, they are tentative, they are quite weak, and they could be linked. But linking between national schemes is quite difficult. You need to make sure that you have a link to comparable effort, otherwise you just transfer effort out of one tight scheme into a lax scheme. But it seems to me that cap and trade will develop in that way by developing out of national schemes that will then link with one another, where there is sufficient comparability of effort, rather than a theoretically very nice but rather impractical scheme in which you divide the global cake up per capita. You give countries emission allocations and then introduce a trading scheme. I don’t personally think that is the way it is likely to happen, and I would not, therefore, put a lot of effort into trying to make it happen. But I think it isn’t impossible that emissions trading could build from the bottom up as countries discover that to reduce emissions, it is useful to have a carbon price, and trading is one of the ways of doing it.
Professor Paavola: I very much agree with that. Carbon markets of various kinds will be playing an important role in the next 10, 20, 30 years in greenhouse gas mitigation, but they will not be the only solution that is needed. One reason, for example, is that if you look at the moment at activities that are incorporated into European emissions trading schemes, they are big sources that are relatively expensive to mitigate. If you look at the inexpensive sources in the UK they are in the residential sector, in land use-related things. These probably account for about half of UK emissions. If you then expand globally, the problem is that the transaction costs are preventing cap and trade on the least expensive emission reduction opportunities, so you do need other measures to deal with that.
But then again, we do have interesting and promising initiatives, like forest carbon markets. Carbon markets not only involve new activities but also allow the involvement of developing countries in mitigation efforts, and there is no great fuss about that. Many of them are quite eager to participate through that mechanism.
Q131 Sir Robert Smith: Presumably, you accept the UN Environment Programme’s analysis that, to keep warming below a 2° increase, the current commitments are not enough-that we need stronger commitments.
Professor Paavola: Yes, I agree that definitely they are not sufficient.
Dr Falkner: I think we all agree on that now.
Q132 Sir Robert Smith: Can you see any obvious ways of closing the gap?
Professor Paavola: There are obvious steps that you have to take. Whether they are very easy to agree or implement is another thing. But just starting from the current Kyoto framework, we have important ungoverned sources of greenhouse gases, like aviation and marine bunker fuels and land use change-related emissions, that clearly do need to be covered as a matter of urgency. The other thing is that at the moment the domestic commitments are relatively modest, to put it bluntly. For example, the EU plan of 20%-it has pretty much achieved that already, so promising 20% isn’t any kind of a promise really. Ratcheting up the ambition level to 30% might make very good economic sense in the current world of high energy prices. The cost-benefit ratio of mitigation improves all the time the higher the energy costs we are facing.
Dr Falkner: It is evident that the current pledges on the table are not enough. The process that will take us to 2015, by which time we want an agreement that can then be ratified by 2020, will not deliver the results in a timely fashion. So I think we can accept that almost as a given, but it doesn’t mean that we have lost the race to save the planet. I think the dramatic language around the gap-"We’ll miss the target"-is helpful in illustrating the urgency of the problem, but it is not as if the 2° target is a scientifically set target below which we are safe and above which we are doomed. This is just a rough indicator. We may find that 2° is safe enough or is not safe at all, and so I think what is helpful is to have a temperature target that can then be translated into emissions reduction targets, which can then be measured and compared.
Approaching this issue with that in mind I think is helpful because it shows us how we need to ratchet up the level of ambition, but it is not a kind of, "Are we there or not? Have we lost the race or have we won it?" situation. It is an ongoing process and I think that is what has happened in the climate negotiations. We are beginning to turn this into a cumulative effort.
Professor Jacobs: There are a number of ways to close the gap. The first is that the gap itself has a gap. The gap is 6 to 11 gigatonnes by 2020, and the difference between 6 and 11 is the upper or lower end of the pledges that countries have given, which Robert has mentioned. So the EU question is whether it goes to 30% or not. As has been said, 20% is barely a pledge now, so we should certainly go to 30% and other countries the same. The accounting rules is the other thing that principally accounts for the gap in the range, and the rules need to be tight, not loose. Those are still under negotiation so that is very important.
Jouni has already mentioned aviation and maritime, which are outside the current framework. So that is absolutely crucial. There are other gases, and we need to do much more about short-lived forcers and HFCs, which are subject to different kinds of legal regimes. The Montreal Protocol, for example, still handles HFCs. But there is an enormous amount that could be done there. Methane is another. Those are shorter-lived, and they have different impacts on climate, but they are crucial and they could play a crucial role in this. This is something I think it would be very helpful for the Committee to focus on-what could be done with other gases, particularly HFCs and short-lived forcers.
The last thing to note, which is particularly interesting in relation to Doha, is that the current pledges-which is what makes up the basis of the calculation-only cover 75% of global emissions. The 25% of global emissions where there are no commitments so far belong largely to the Gulf States, one of which is hosting the COP. Therefore, I would very much like to see the countries that have not made pledges-which have considerable emissions of their own, and many of which are in the Gulf-make pledges of their own. That would seem to be an appropriate thing for Qatar to do for itself, and to gather its neighbours around doing.
Q133 Sir Robert Smith: Is the host more likely to make pledges, or is the host then more likely to try to make sure the pledges don’t interfere?
Professor Jacobs: By and large, the way COPs work-and this is another way in which international pressure affects domestic policy-is that having a COP forces you to do more rather than less. We saw that South Africa made a lot of strides in the last six months at domestic policy level in order to have announcements to make to look good and so on. I would have hoped that a little bit of pressure could be applied through global civil society on Qatar to ensure that its reputation is not damaged by hosting a COP without having made the commitment itself.
Q134 Sir Robert Smith: Playing our part, what should our target be by 2020?
Professor Jacobs: The UK’s target?
Sir Robert Smith: Yes.
Professor Jacobs: The UK has a provisional commitment under an EU 30% to go to what would be the expected UK share, which is about a 40%-42% probably-reduction from 1990. I would imagine that if the EU did that we would be happy to follow suit. I do think it should be within the context of the EU. The priority is to make sure that the EU as a whole moves to 30%, and the economic rationale for doing so now is pretty strong. What will get it to 30% is investment. That investment is what the European economy needs now, for economic reasons as well as carbon reasons. The EU ETS desperately needs some allowances removed in order to shore up the price, and that would be a major part of achieving the 30%. So there are many, many arguments for Europe to do this irrespective, frankly, of what other countries are doing in carbon terms.
Q135 Sir Robert Smith: As well as the level, is there any idea of when emissions should peak if we are going to minimise the risk?
Professor Jacobs: The maths is pretty straightforward here. Emissions need to peak as early as possible, because the later they peak the more gases are emitted under the curve and the faster then the pace of reduction needs to be. There are technical and economic limits on the speed you can reduce emissions, even once you are on a downward trajectory, and the longer you leave it the faster that needs to be and it becomes more and more difficult to see how to do that.
Dr Falkner: It is often portrayed as a choice between cutting that now and therefore banking some early successes so that the later mitigation effort is somewhat reduced, or letting the economy and then business-as-usual scenarios run their course and then hoping for some technological breakthrough later on that will make it easier. I am not sure whether that choice is all that relevant, because if we let, for example, business-as-usual emissions and investments run their course, we are going to lock in technology investment in infrastructure that will be around for the next 30 to 40 years-if you think of public infrastructure around transport, development, if you think about the lifetime of coal and oil and gas-fired power plants. Not trying to reach a peak early means we are going to make it so much more difficult for ourselves in the future to produce that sharp decline in emissions, which is why I think everyone who has looked at the economics, but also the technology side of this, argues we should make an effort now because the later mitigation effort will be reduced. But also there will be technological spin-offs that will make it easier later on.
Q136 Sir Robert Smith: We can achieve a peak before 2020?
Dr Falkner: We are probably not the right experts for that. I suspect, having looked at the literature, it is possible but it requires a massive effort around it, and of course the UK’s contribution to the problem is fairly small.
Professor Paavola: The important issue here is that it is not only about technology and political will. The market forces will play a role. If you look at the current situation we are in, most of you will be reading in the newspaper about new cars coming in offering 60, 80 miles per gallon; three, five years ago that was a third less. At the moment there is a favourable economic situation for greenhouse gas mitigation because energy prices are high. On the one hand the high energy prices do incentivise saving energy now as much as you can by all short-term measures, and it also incentivises investment in the right way. This is why long-term domestic policy and international commitments come into play. If you can fix those expectations, that this is going to prevail further into the future, you are encouraging longer term energy efficient greenhouse gas mitigating investments.
So the do-ability has a lot to do with the economic climate, and I think there are a variety of reasons-for example, stimulating the economy so that it grows-which kind of favour substantial mitigation commitments now as a way of having win/win outcomes.
Professor Jacobs: I don’t know whether this point was behind the question or not, but it comes up with 2°, it comes up with peaking years and various other things, which is to take the dates or the thresholds that are now locked into the framing of the issue and then worry about binary achievement or failure, and of course it isn’t binary. If we peak in 2021, that is a little bit worse than 2020 but it isn’t an absolute disaster. Almost my political reluctance to say, "It looks unlikely now", is that if you then get into, "Oh, we’ve missed the targets; we’ve failed" and so on-the same with 2°, as Robert says. In itself, there is a 50% chance of reaching 2° or whatever. Media debate likes success and failure. It likes very stark things, and these are not stark. These are gradients. These are huge improbabilities and uncertainties and so on.
Q137 Sir Robert Smith: You must not give up trying just because you are going to be a day late?
Professor Jacobs: Precisely. The date 2020 is arbitrary, completely arbitrary. It could be 2019, it could be the beginning of 2020, or whatever. So let’s not get binary here. Earlier is better, but later is better than much later.
Q138 Albert Owen: I have listened very carefully to your answers, and in particular, Professor Jacobs, when you said about Kyoto just being a framework and that everything now is national and we move forward. Isn’t it time, therefore, to abandon the Kyoto principles and move forward to the Durban platform?
Professor Jacobs: Nearly time, yes. That is what the system, the negotiations in Durban, has now agreed. Kyoto was given a continuing life in return for the start of new negotiations, but that life is clearly limited. Although people are now trying to talk about third and fourth commitment periods of Kyoto, nobody seriously thinks there will be a third or fourth. The second is going to be the last one. Why was that important and why was that a deal worth striking? It was because the idea that you could institute a new set of negotiations to look towards a legally binding agreement, while simultaneously getting rid of the one that you already have, looked very strange to all those countries that claim to believe in-and many do-legally binding agreements. So I think that was a deal worth doing to say, "Because we believe in a legally binding agreement we will continue with the present one until we can replace it with another one".
In practice, the second commitment period of Kyoto will not have very many countries in it, and it will have their weakest commitment. So Europe will inscribe its 20% not its 30%. If it goes to the 30% then it might put it into Kyoto, and that is not absolutely clear. The rules in Kyoto are quite important. A lot of time has been spent on establishing the rules on how you count emissions tonnes, on the trading arrangements, the Clean Development Mechanism and so on, and they are worth keeping. Again, having a period in which you didn’t have any of those and then try to recreate them in a subsequent deal would have been a mistake. So we should ensure that those rules stay in place. We should keep those mechanisms, but we should then move on to negotiating an agreement in which all countries are represented.
What is I think very striking about the world post-Durban is nobody thinks the Annex I/non Annex I distinction, which obviously is fundamental to Kyoto, will be maintained in a new agreement. There will not be a new agreement if that is the condition. Developed countries won’t sign it. Most of the developing world no longer believes in that in terms of the nature of commitments. So I think we are transitioning out of Kyoto, but it was important not to kill it before we had something else in place. I think, therefore, the result in Durban was about the right one in negotiating terms. The effort does need to transfer. As Robert said, we are transitioning from one to another and we need to get on to the transitioning process, but we still have to finish off the last regime.
Q139 Albert Owen: Any other comments?
Professor Paavola: Just to reiterate, yes, in a sense we have already decided to walk away from Kyoto but it does not mean that it will vanish now. It needs to be clarified and brought to a level of detail that will allow us to run that under the next agreement that is in place, which is probably going to be nearer to 2020 or something like that. It needs to be agreed before, but will come into force later. So yes, we have kind of mentally walked away from it already but it will be the operational framework until the next agreement is in force.
Q140 Albert Owen: How important is that second commitment stage period if major emitters are opting out, and whom should the UK be concentrating on to try to get them on board?
Dr Falkner: I think it is pretty futile to get major emitters to sign on to Kyoto because three of the existing major emitters have already walked away. Canada has formally withdrawn, legally, which was within its rights, and Japan and Russia have already declared that they will not submit quantifiable targets under Kyoto. We could work on Japan and Russia but that would add very little to the environmental effectiveness of that agreement. As Michael said, it is politically important to keep it alive as we transition to another agreement, and for that reason I think Kyoto has delivered some success. If you remember back to the late 1990s and early 2000s, if you go back to those years when Kyoto was agreed, the United States declared that they would not be bound by it-George Bush actually deliberately withdrew the signature of the United States-and it was unclear whether it would actually enter into force because the required ratification numbers weren’t there. So there was a time when people talked about the end of the UNFCCC and Kyoto process because Kyoto would fall apart, it would never enter into force and the whole process would collapse. The US was deliberately trying to shift the forum away from those negotiations, and China and India were very reluctant to make more commitments.
It could have all gone belly-up then. Instead, Kyoto entered into force in 2005. Emissions trading in the EU, which was largely inspired by the Kyoto protocol, was a resounding success politically speaking, because it is the biggest carbon market in the world. It is now being copied around the world from California to China. We are now in a phase where we are building on Kyoto to broaden out the agreement to include all major emitters. So in that sense I think we moved away from the, "Are you for or against Kyoto?" debate towards one of, "How can we build on it and broaden it out?" I think, just to echo Michael’s words, it is important to keep it alive. It won’t have a significant effect on actual emission reductions, but in that sense it was well worth the effort for that.
Q141 Albert Owen: Four of the G8 countries are now outside it. Isn’t that worrying? You said we could work with them-the UK could work with Russia and Japan, I think you said. In what way, conceivably?
Dr Falkner: The key reason they are outside is that Kyoto doesn’t impose any obligations on the rising emitters, China, India, Brazil, South Africa, Indonesia, so that kind of argument is no longer worth engaging in. I think we need to move beyond that Kyoto-style firewall and revive that effort. There is a good moral case to be made for developed countries to take the first step without developing countries taking on any commitment, but we are beyond that. So I think we can bury that argument and simply accept that the Durban platform now provides us with a much more promising political framework agreement to negotiate something, whatever the outcome will be.
Q142 Albert Owen: Can I go back to temperature, and what in your opinion would happen if the UNFCCC assessment of the science concluded that we should aim for a 1.5° target and not a 2° target? You said it wasn’t-to use your words I think-the end of the world if we didn’t reach the 2° target, but what about setting it and having a clause in there reviewing it and looking at 1.5°?
Dr Falkner: I think there are scientific and political reasons to consider here. One is the debate about what is a safe warming threshold. I am not an expert on that, and I read that none of these matters are fully understood, or at least scientists continue to disagree over this. I think there is significant scientific opinion suggesting that the 2° target, as I think you are implying, is probably not safe enough. There are various feedback mechanisms in the global environment that will either accelerate warming or help us to decelerate it, depending on what happens with temperatures in the oceans with the melting of the icecaps. There are a lot of things that we can’t predict carefully enough. For that reason, I think it is better to go to as low a warming target as possible.
So that is the scientific side, and I would not want to comment further on that, but politically we need a target, whatever it is. For that reason I am much more relaxed about 1.5° to 2°, which allows us then to measure the gap that we were talking about earlier, in terms of emissions. For that reason, we need a target that is universally agreed and the 2° target is now universally agreed. So, yes, we can push for the 1.5° target, but I don’t think it is going to give us more leverage in the negotiations. Some people would like to get there for symbolic reasons, but I don’t think that is the key battle to be fought. It is good enough to have the 2° target, because it is going to be difficult enough to implement that.
Professor Jacobs: You said it is not the end of the world. Of course it is the end of the world.
Dr Falkner: It is a question of timelines.
Professor Jacobs: For the countries that are very low lying, 2° is the end of the world, and that is why they are in favour of 1.5°. We will not get rid of the number 1.5 for that reason-because for the very lowest lying, poorest countries, they literally go under, under the models at 2°, and they could not possibly subscribe to 2°. It is just politically impossible. So we will have that number around. The question is, is there much chance of that becoming the globally accepted number? I am afraid I think the answer is no, because it looks too difficult. In any case, you would have first to get to 2° and then try to get temperature down. In that sense it becomes a subsequent target to 2°, rather than an alternative to it, because we are now on a trajectory that is very likely to take us to 2° or above already. It will be very difficult to hold us within the 2° limit, because of the uncertainties of the models particularly.
So I don’t think it is going away, for those political reasons, but we need to be very careful not to have targets that look as if they are impossible-where the politics and the science appear to be just diverging. Given how difficult 2° will be, I think that would be the risk and it is also the reason why major emitters won’t accept it as the global goal. My own view is we should aim to keep temperature as low as possible. Then, if we find that the impacts are-as many scientists suspect-pretty terrible at 2°, we may well then want to try to take even further remedial measures to bring temperature back down again. That will take a long time.
Q143 Dr Whitehead: The position we appear to be in on legally binding agreements is a sort of Bishop Talleyrand outcome of, "Well, we will think about it but we will pursue it with no zeal". Is that an accurate description of where we are with legally binding agreements, or is there more to it? Could you perhaps expand a little on what the alternatives might look like if legally binding agreements really are parked to the extent that is being suggested?
Professor Jacobs: I don’t think the legal form in the end is the most critical issue, genuinely, because it is emissions reductions that are the most critical issue, and that is primarily determined by national policy. The legal form that countries are willing to agree with one another to embody their national commitments is not ultimately the determinant of whether emissions come down. It will strengthen national commitments, it will create confidence, it will create common rules, and it will make it more likely that commitments last from one administration to another. The big thing is, if you take on a legally binding commitment internationally, you can’t then just renege on what your previous government did-or at least you can but it is harder, as we have seen with Canada.
There are good reasons to want it but I don’t think we should think that is what will get the emission reductions. If a country doesn’t want to enter into a legally binding agreement then that doesn’t necessarily mean it is not going to reduce emissions. That is the current position, which is that many of the larger developing countries now have quite considerable commitments, but they don’t want to enter into them legally. So the reason why I think that it is not unhelpful not to focus on that for the next two or three years is that what we really need to do is to get countries focused on how they reduce their emissions while developing, while taking people out of poverty and while achieving their economic goals. That is a conversation about the kinds of investments and the kinds of policies, the kind of trade arrangements there are between countries, and not about the legal form. It is really only after those discussions have gone on, domestically and internationally, that you will then come to see whether it is possible to bring countries close enough to one another to cement those commitments in a deal that consolidates and strengthens them and removes some of the risk of backsliding and so on, which is what a legal agreement does.
The first thing is it is not the most important thing. It is important and useful, but it is not the most important thing and of itself it doesn’t reduce emissions. The second thing is I think there are varieties of legal bindingness. One option, for example, is an agreement that recognises the legal frameworks that countries have put in place domestically. The legal bindingness arises domestically but is then recognised in an international agreement. That is a different form in which countries could make agreements that are legally binding but which have a different kind of form. The treaty form, which is the classic form we have had of Kyoto, is unlikely to be replicated. We need considerable imagination regarding the form of agreement that achieves what a legally binding one is intended to do, which is to underpin the commitments, prevent backsliding and establish common rules, but which doesn’t turn countries into conservative commitment makers-the point Robert made. The more there is compliance enforcement, the more punitive it looks, the more countries will have difficulty doing it because of sovereignty issues-which many of the developing countries feel in particular-but also the more unwilling they will be to put strong commitments into it because of the consequences.
So I think we need to be very fluid and creative about the form that a legally binding agreement takes. That is why the wording in Durban is actually quite helpful, because it gives us time to think and reflect and create different structures.
Q144 Dr Whitehead: That formula probably semi-permanently excludes certain things that need to be done, which cannot be based on looking at national commitments and aggregating them up, such as aviation, such as shipping. Doesn’t that put them permanently outside the possibility of any serious agreement?
Professor Jacobs: I think aviation and shipping will be done in the IMO and ICAO, because that is where countries have acknowledged the legal legitimacy lies, and then they will be brought inside the UNFCCC. So I think you will get a central agreement in those institutions, not perfect by any means, but you have to do the work where countries want to do it, and then they will be brought inside the agreement if that can be achieved. I think that is quite likely to happen with cap and trade as well.
One of the interesting things that is going on is seeing the UNFCCC as an umbrella under which other kinds of commitments that countries make together, as well as nationally, become broad-that it is a framework agreement that recognises different things occurring that are negotiated or agreed in different places.
Dr Falkner: I think that is what will make it easier to negotiate an agreement: if you park certain controversial issues like aviation or shipping and have them resolved in other multilateral forums. In some ways that is the way the World Trade Organisation works, which is a very strong legally enforceable instrument to regulate trade. But on many issues, from food safety to environmental issues, it delegates authority to other multilateral forums that will set regulatory standards, and it simply says, "You go and sort it out. We’ll leave that to you because you are more capable of doing so, and we will accept that authority".
In a way, the whole climate negotiations need to be re-thought as a process of setting levels of ambitions, putting in place instruments that we use to deal with financing, with adaptation, with accounting, and then building on other elements that are being negotiated in other forums that all add up to, hopefully, one coherent climate regime complex. So it is going to be a bit messy, a bit muddled, but I think that is inevitable in this process. I think it is to be welcomed that we are doing this in a much more deliberate way now.
Q145 Dr Whitehead: How might annex classifications fit into that sort of arrangement, or re-classifications, should we say?
Dr Falkner: I am not sure.
Professor Jacobs: Do you mean Annex I or Annex II?
Dr Falkner: Could you explain what you mean?
Q146 Dr Whitehead: Because you have effectively parked legal agreement, do you also park annex classifications as a result?
Professor Paavola: If you follow Robert’s reasoning that you break down the big challenge into smaller chunks to do with sector or other part-agreements, in a sense, when you negotiate under a different set of rules-say, IMO or whatever-you follow a different set of rules, so those classifications lose meaning when you would negotiate on aviation under another structure. I think the important thing about recognising the possibility of looking at building blocks is that you can increment more success. If certain things are not going forward you can make headway in some other forums. By reducing the magnitude of the challenge, it may become easier to force the commitment and also different countries, different blocs or annex lists have different power and vested interest in different areas, so it is not all happening under the same sort of weighting.
Professor Jacobs: I think the annex distinctions are going and there will not be an agreement if an attempt is made to maintain them. No developed country would sign an agreement now in which China did not take on very significant commitments of comparable legal standing. That is true also of the other major emerging economies, and they want to. We are in a very different world now from Bali, which is where the particular difference was enshrined. We were already in a different world in Copenhagen. The extraordinary thing that happened between Bali and Copenhagen was that in Bali, the developing countries insisted that they would not take on targets, they would not take on-in the jargon, QUELROS-the economy-wide emissions reductions targets that the developed countries had to take on. They would take on nationally appropriate mitigation actions only. We went through all the negotiations up to Copenhagen absolutely clear about that distinction. We were very happy, as developed countries, to run with that distinction. Actually, what did they in fact adopt? They adopted targets of various kinds, and that is because most of them had not worked out what the actions were that they needed to take, and it was easier to adopt a target in the end. So China adopted its emissions intensity target, Brazil adopted an emissions below BAU target, and so on.
We are no longer in a distinction between the kinds of commitments that countries will make. We are simply in a distinction between their strength, and developing countries will want to continue to have rising emissions that are lower than business as usual, and developed countries will have to take absolute cuts. But I think the distinctions are going and I cannot imagine an agreement in which they appear in the same way.
Q147 Dr Whitehead: So, dissolve of their own accord over a period of time?
Professor Jacobs: Yes, because the countries that need to dissolve their status are willing to do so. They want to make commitments because they want to take action on climate change. That is a big shift in the nature of the world. We are no longer in a world where they think it is all our responsibility and they don’t really have responsibilities.
Q148 Dr Whitehead: Rio+20: any handle on that in terms of common sustainable development goals?
Dr Falkner: Expectations are reasonably low, so we can all go away from Rio with some modest level of success. I think there will be some discussion around setting new targets, sustainable development targets, which will be useful because they will integrate debates around climate and environment with development debates. There will be some talk about finance and institutional reform, but I don’t think that for the purpose of this discussion there will be much coming out of Rio+20 that will signal any breakthroughs. If anything, I fear, because of the peculiar setting of the sustainable development debates in the Rio process, there will be a bit of pushback coming from some developing countries who do not want to see those kinds of sharp divisions that we have set up in climate change eroded. So I suspect that the linkage will not be that strong.
The one thing we have to remember is that when the UNFCCC was signed in 1992 the Cold War had come to an end; it seemed as if a new world order, as the American President promised, would be created, and it seemed as if we could be generous with the kind of commitments we all take on. I think most developed countries at that time did not quite foresee that those divisions between who will take action and who will not take action would persist for 20 years and beyond and that the balance of emissions would shift so dramatically, especially since 2000 when China and India’s economic growth took off so spectacularly. So I think in a sense what we are doing here is correcting a historically unique position that was agreed in 1992 that would no longer be agreeable in the current climate.
Q149 Dr Whitehead: Although effectively the impetus towards a legally binding agreement has been parked-and we have discussed the reasons why that may be useful and appropriate right now-are we saying that 2015, four COPs to go, is still a reasonable point at which that issue might be revived; or is that really just decided on the basis of what happens as we go along?
Dr Falkner: As I tried to state quite unambiguously in the written evidence, if we mean by legally binding an agreement that has specific targets, that includes all major emitters and that is then legally binding in the sense that it is to be ratified domestically, if all three are to apply then my prediction is that we will not get that outcome for the simple reason that, if we start with the United States alone, domestically it will not be possible to write that into US law. They do not even have a domestic climate law, let alone an internationally imposed law. So, in a sense, the sequence in American politics has to be the other way round; domestic laws first and then agreement for international commitment. So I think that is off the table.
But, as Michael was saying, that is not a binary choice that we have. This would be the ideal, all-conclusive, all-powerful instrument. That is not what we are really aiming for. We are aiming for a broad political agreement that all major emitters take on commitments. We are then going to try to make these as ambitious as possible and we are then going to try to ratchet up the bindingness of those agreements as far as we can. There may be some variation in terms of how binding they are with regard to developed and developing countries. There may be some clever legal ambiguity around the way in which they have to be or don’t have to be ratified. So I think there is a lot of scope for making them yet tougher, but ultimately there will be a political agreement and they will require domestic support. I do not think we can force that domestic support through an internationally binding legal agreement. That is the fundamental crux in climate negotiations. It has to be based on domestic consensus to take those tough decisions. We can help that consensus along through international negotiations but only up to a point.
Professor Jacobs: Can I add something to the 2015 point, Chairman? I am rather glad we have found something we might disagree on, because we at least sounded as if we all agree and that is dull.
I think 2015 does need to be the year in which we nail an agreement, but not because it is necessarily the best year to do it. I am sure that it would be easier to do it a little bit later, although there are good reasons for 2015. China will at that point be thinking about its next five-year plan. We know that that is the basis of domestic policy in China, so for it to be thinking about that in the context of some of the international pressures that will come is useful. If Obama wins again, that is probably the best year he has to try to introduce something, and he has said he wants to. He has said that on the campaign trail, remarkably. The European Union will have a chance of raising its targets and so on, I think, in that period. So it is not a bad year; it could be quite a good year.
The reason why I think it is important is the Copenhagen effect, which is that you need a focus. You need to force countries to get to grips with this issue and you have to pick a year and say that is when we are going to do it. That is what I mean about using international processes to pressure domestic ones. That is what Copenhagen did and to some extent that is what each COP does, and we see this pressure applying as we approach a COP.
So I am in favour of saying let’s make 2015 into a big year. It is high-risk because it might not work, and we might get there and find that we can’t do it in the way we wanted to. We need to be careful not to set it up to fail, but my view is that countries need to be pressured to do this. Every country can find a reason to do less and not to do this, and I think you need that international pressure. So, personally, even accepting the prediction that Robert would make-I don’t think we are only in the business of prediction; we are also trying to change the world, as a philosopher once famously put it-my view is that making 2015 into a date that matters is more likely to get countries to commit.
Professor Paavola: This brings us, I think, back to Doha. I think it is important to agree on the road map of how are we going to aim for 2015, because there is time to make 2015 a big year. If we want to have an ambitious agreement in force not that much later, we need to have a goal. We need to aim for that, and it is do-able if we start making incremental progress in the next COP later this year.
Q150 Christopher Pincher: Let’s see if we can tease out some disagreement. My apologies for being a little bit late. If is any consolation, I was at a green energy seminar.
Can we talk about climate mitigation and adaptation finance? Professor Paavola, you have said that we need multiple solutions for climate finance rather than an overarching solution. But Sir David King takes the view that multiple instruments will create a bureaucracy and he favours an overarching global cap and trade system. So why is he wrong?
Professor Paavola: It depends what you mean by an overarching approach.
Christopher Pincher: I am simply quoting him.
Professor Paavola: Yes. Let’s start from the current system. My interest is primarily on the adaptation side, where most of my research is focused. At the moment the adaptation finance structure is based on countries making voluntary pledges and then thinking whether they want to dispense with the money or not-and then they are not particularly willing to do that. The money is channelled through a few channels controlled by the World Bank and the GEF to the host countries, who are not authorised to undertake their own projects. They need to have agreed-upon implementation solutions in place. All of the money at the moment goes through to capacity building in the public sector and planning for adaptation.
Governments are not the actors that are going to adapt. Businesses, communities, local authorities, and households are going to do the adapting, and these entities that have to do the thing on the ground will have no access to this money. I can’t see very easily how these channels, which are bureaucratic in nature because they have to create transparency, accountability and so on, would serve the financing needs of those actors who primarily have to adapt. So my view is that you do need to have a set of sources of funding, some of which can be donors giving funding bilaterally to recipient countries who are then allocating that to different adaptation projects. Some of it can be about carbon markets-say, forest carbon markets which are generating revenue to host communities-those who are managing projects, which can be used both for decarbonising activities, but also increasingly to weatherproof local livelihoods and activities on the ground.
The reason why I am promoting multiple solutions is that if you only opt for market solutions, you are then effectively risking the outcomes by exposing them to the market uncertainties. If you opt for top-down political structures, then they are subject to political uncertainties. In a sense, you have a more robust system if you build a mixture of solutions that source the funding from different origins and dispense that to different recipients on different grounds.
Dr Falkner: Just quickly on Sir David King’s idea of a global emissions trading system, a global market, my suspicion is that he is not enough of an economist to understand what he is implying here. He seems to think that this would be a low-level, not very intrusive way of dealing with the problem, as if a market would be created that would replace the need to regulate with top-heavy, top-down regulation.
What I think he misunderstands is that to create a global market in emission rights would require a massive effort to build up institutions, because what you are doing is effectively creating global property rights which do not exist in any other regulatory context, at least not on that scale. You would need to ensure that whoever buys a right to emit under a global scheme would be able to enforce that contract against countries that operate in a very different jurisdiction, in a different region altogether. So you would need a fully integrated regulatory environment that all major countries are subject to, with penalties if, for example, the contracts are not kept. That would be on a scale that would be unimaginable. No other global governance scheme exists of that size.
So I think Sir David King is perhaps labouring under the illusion that the global carbon market that he wants to create would be instead of the kind of regulatory framework we are talking about. As Michael was saying earlier, these emissions trading schemes are built up in the context of domestic legislation and then they are brought up to a regional level, as we have done in the EU, and then they can be linked up. But to do it the other way round, to impose it on a global level, would require an institutional support that does not exist. So I just think it is a non-starter.
Q151 Christopher Pincher: You are right to say that the EU has done its part and of course has stepped up and spent, in COP 15 for example, the amount of money that it was asked to spend of the $30 billion of additional funding. Other industrialised countries have not done that. Professor Jacobs, you were saying earlier on that the thing that COPs do is make countries do more. Do you not think what they actually do is make countries commit to do more, and then the getting them to do so is a much more difficult process, as evidenced by COP 15 and COP 17, where I think, Dr Falkner, you said that there are concerns about the $100 billion of funding coming forward?
Professor Jacobs: I would not disagree with your characterisation that it is easier to make pledges-and there is then a subsequent process of implementing the pledges, and the world of international aid is full of promises being made at international meetings which are then not followed through. So, you are absolutely right. The question I suppose I would say is, are you more likely to get the pledges, if they are not made at an international meeting, at all followed through? I don’t think you would get them at all.
This could derail Doha, and indeed the next three years’ negotiations, completely. If the developing countries basically look at what is being offered in financial terms from the developed world and say, "You are not making the commitments you promised earlier and that we are owed", the whole negotiating process could easily break down. This is very alarming because obviously we are in a world now where those pledges are very difficult to make at domestic level. The British Government, the coalition, I think has done very well to maintain those commitments that have been made by the previous Government, but many countries found the original commitments difficult and do not feel as if they have the political legitimacy at home to do it. But this is a disaster waiting to happen for the negotiating process because it just destroys the trust of the developing countries when the money does not flow. Of course, we are now at the end of the fast start finance period, so commitments need to be made for 2013, 2014 and 2015. Given that there is a target that was committed to, which is much higher by 2020, developing countries are expecting a trajectory. They are expecting to go from $30 billion to $100 billion in some kind of process. So this is a disaster waiting to happen now in the negotiations.
Q152 Christopher Pincher: On that trajectory to 2020, where are we in terms of the $100 billion of spend? Do you have any estimate of how much money has come forward?
Professor Jacobs: I am not on top of the current figures for fast start finance. I think you rightly said that the European Union has maintained its commitment, which is good. Not all other countries have. I think the US probably has. Obama, I think, took it pretty seriously. It was a commitment that he made reluctantly in the run-up to Copenhagen, but did make. But I don’t know about other countries.
The $100 billion is still subject to definitional dispute because the language of $100 billion in Copenhagen was public and private. There is no question but that the developing countries think it is all public or a little bit of private; and the developed countries, particularly the US, would like to think that much of it, if not most, is private. The private flows are potentially much bigger than that. So $100 billion bears very little relationship to private flows of climate-relevant money, because once you start investing seriously in mitigation in developing countries you get well beyond those figures in fact. Clearly much mitigation expenditure, and a little bit of adaptation expenditure, is investment that has a lot of private motivation behind it and can certainly have more. So there are a lot of definitional disputes around this.
Unfortunately even if you said, "Let’s say half and half", at the moment there is no trajectory from the $10 billion in 2012 to even the $50 billion-half and half-in 2020. There is no trajectory at all. This is dangerous for the negotiations, because it breeds terrible mistrust.
Q153 Christopher Pincher: If the funding is half and half, what can governments do using public money to unlock further private investment? Are there any mechanisms that governments can use to massively increase private money?
Professor Jacobs: They certainly can and they are beginning to do so. The British Government, again, is working reasonably hard to try to identify those kinds of methods. For example, using the multilateral development banks gives you a capital multiple so you have the calling capital and then they can borrow and lend more than that. What are also now being designed are instruments that basically take some of the risk from a private investor and use public finance to cover a partial risk, which then means that you are more likely to attract the private investment. For example, the British Government has been working with the Asian Development Bank to develop the so-called CP3 partnership, which is an attempt to use public money to take some of the risk away from private investment and to attract it.
So those kinds of risk-mitigation measures, which include guarantees, co-investments and so on, look to be a very promising way to unleash the private investment that can go into productive investment in mitigation, and indeed some into adaptation. That is beginning to happen. There is a lot of work to do with the private finance institutions to get them to understand the different risks in different classes of assets in different sectors and different countries. But that work is beginning to be done and the UK Government, through its own International Climate Fund, is showing quite a lot of interest in that, which I think is very good.
Q154 Christopher Pincher: Earlier on in the evidence that you were giving you made the suggestion that the very complex, intricate negotiations and issues around aviation and shipping should be parked. Does that not dry up opportunities for finance from those particular sectors?
Dr Falkner: I don’t think we meant parked in the sense of stopped-parked as part of the UNFCCC negotiations, as in removed from their fold and perhaps dealt with in another context, and that is where finance could be generated. I think it would be feasible to say that that should be counted as part of the commitment being made, and that is where I think a lot of creativity is needed to, in a sense, create incentives for the participants in these sectoral or regional schemes to generate extra funding streams.
Nick Stern recently went on record to point out that we should think about not just the north-south flows that will happen but the south-south flows. A lot of the finance to make climate mitigation and adaptation happen will arise in China and India and will be invested in China and India. One of the things we need to do is not get locked into the north-south debate again but think about how to create, for example, investment vehicles and banks in China, perhaps involving sovereign wealth funds too, that are willing to invest. Of course, that would not help us with the $100 billion target necessarily, but it would have a much bigger impact in terms of size, in terms of where it is being invested.
But I think that is where much more creativity is needed to work out solutions where interested parties are willing to make the investment-for example, if the aviation industry can be offered a deal that includes all the major airlines, and that does not tilt the competitive field in favour of one or other region. That is exactly what is needed, to find the right group of actors that are willing to go for a collective action solution and then press them on that, rather than have the beta players that exist in all these sectors all come in on the big negotiations and gang up against the outcome. I think in finance as much as in negotiations, it is about carving out those areas where solutions can be found.
Q155 Christopher Pincher: In terms of the balance between adaptation and mitigation, do you think the balance is right? Do you think enough funding goes into, for example, climate change adaptation?
Dr Falkner: I think the general wisdom is no, in the sense that adaptation has only arisen recently on the international agenda as a deserving recipient of funding. But we have now an adaptation fund and I think there is a wider recognition that that needs doing. Interestingly enough, a lot of adaptation efforts that have started up already are not that expensive. So it seems to me that in preparing societies for the onset of massive changes in terms of rising temperatures, rising sea levels, a lot can be done without massive investments initially. This is perhaps on a different scale in some parts of the world to what is needed at the mitigation level.
We have an ability here to link up with other policies that are on the way that are providing solutions. So I think the adaptation challenge is not an isolated one-nothing will happen without the funding flowing. It is something that can be done through other means, and I think that is where the two funding challenges are quite different. I think one can leverage a lot more funding on the adaptation front from other sources. Multilateral development banks are getting into that act very strongly.
Professor Paavola: If I can follow on from that. The adaptation mitigation efforts are, economically speaking, different. You adapt and basically reap the benefits by yourself. Whether you are a business, a local community or nation state, you would undertake adaptation that is reducing your experienced damages compared to "business as usual". Then the question becomes one of finance. Here in Europe, and in the developed world in general, the financial sector exists and offers you sources of funding and if your business case is tight, you are all right. The problem that developing countries experience is that their financial sectors are not there and only the biggest corporations and actors can operate in those markets. This has to do with the availability of credit and availability of insurance, and in those contexts these kinds of market-driven solutions do not necessarily work as such. You need to think about something else. That is where the shortfall of adaptation funding at the moment is perhaps most acutely felt, and there is not an obvious way to overcome that.
Q156 Christopher Pincher: But what then can be done to encourage greater recognition of an investment in adaptation? Essentially, what you seem to be saying-and forgive me if I am putting words into your mouth-is that mitigation is essentially dead money, whereas adaptation from an investment point of view is live money because it can generate greater wealth.
Professor Paavola: It is not so black and white. My colleagues in Leeds have just looked at the costs and benefits of mitigating in city region scale in the UK, and their results are suggesting that basically you will get your money back at commercial rates in the space of eight to 12 years from significant mitigation effort. So it is a money saver; it can leave you better off in the reasonably short term as well.
On the adaptation side, yes, there is an important possibility for not only adapting to climate change but improving your economic wellbeing, and this is what we can see in some of the development-related work. For example, when we look at soil degradation, land use-related initiatives that would climate-proof farmers in the developing world, they can at the same time reduce their exposure to risks and increase their incomes. The problem is that the capital to invest is not there, and there is not an obvious market solution for making that funding available. So, on the one hand you do need to have the money raised and channelled from somewhere; and on the other hand have access to that funding to actually do that. But there is a clear possibility for win-win, supporting development and climate proofing activities in the developing world.
Q157 Sir Robert Smith: One of the big sources of greenhouse gas emission is deforestation and forest degradation, estimated at something like 17%. The REDD-plus scheme is designed to try to tackle that. Reuters reported there were difficult decisions about REDD-plus finance being put off until COP 18. What are those difficult decisions?
Professor Paavola: They primarily have to do with measurement and monitoring issues-how you can establish the common baseline against which you are deeming how much carbon would be sequestered, or how much you can avoid emissions by undertaking a specific set of management activities. There are real problems in that area but the importance of REDD-plus should not be underestimated, because it is one of the important policy areas where the co-operation of developing country parties to the convention is going to be acquired, or not. Whether you get to a fully functioning system or whether you can make credible progress towards it is, I think, what the trade-offs really are about. So you should not, in a sense, park the whole thing if you can’t come up with a fully functional solution to deal with those issues. Making progress, even it is just incremental and not taking you all the way there, is going to be helpful, but you have to negotiate on wide adoption of emission-reduction commitments and so on.
Q158 Sir Robert Smith: Are the barriers technical in the sense of understanding how you would measure, or are they more political in terms of where people would get the best advantage?
Professor Paavola: They are both. Forest ecosystems are quite varied. How they can store carbon, what kind of management activities will do what, vary from context to context and there is a relatively thin evidence base at the moment from all types of ecosystems. Then you have the accountability, transparency issues-if you have a scheme in place, can you trust that what is on paper is what you get in real life? That is not unique to REDD. If you look at the CDM scheme and how it operates, I don’t think that we have a very clear account of how well it is functioning, but there is anecdotal evidence that suggests that there are problems in its functioning as well. But is that then to say that the whole scheme is not worth having? We need far more of an evidence base to say whether it is delivering, in the main, reasonable outcomes or not.
Q159 Dr Whitehead: You have cautioned against making the safeguards over-burdensome. What would be the downside? Any burden is obviously, by definition, a bad thing, I suppose.
Professor Paavola: It is one of these things. On paper you can mandate very strict processes, strict protocols, but in reality can you monitor whether those safeguards are implemented? So, on the one hand if you opt for very strict safeguards you are reducing the uptake in the scheme, and on the other hand you can’t necessarily guarantee the enforceability, the enforcement and implementation of those safeguards. Finding something that is workable and generates reasonable outcomes is more important than having an optimal scheme that is not really delivering the goods.
Q160 Dr Whitehead: Does the UK have a role in getting this sorted? Is there some action we can take?
Professor Paavola: Yes. I think if you look at the Durban experience, the UK was capable of fostering alliances with BASIC countries and developing countries, and I think it is in a relatively good position at the moment to broker relationships within different groups of people and show goodwill by promoting directly related issues. It does also mean the availability of relatively inexpensive emission mitigation opportunities for British businesses and European businesses if the carbon markets are expanding to forests and so on, and related mitigation.
Q161 Dr Whitehead: Do you see the private funds that have been spoken about as playing a crucial role in delivering this becoming available?
Professor Paavola: Yes. At the moment the forest carbon market operates in the area of the voluntary carbon market, so if you decide to offset your flight, carbon emissions and what have you, some of that offsetting may end up in a forest-related mitigation project somewhere in Costa Rica or sub-Saharan Africa, or what have you. So this is a market that is already functioning. The question is, does it get the recognition that is formalising it as part of the international effort to mitigate greenhouse gas emissions? If it does, it will mean increased financial flows and increased delivery of projects on the ground. The evidence today is that it is showing some promise.
Q162 Chair: Do you think the pattern of bringing in the big political hitters at the end of the COP meetings, when the presidents and prime ministers arrive for the last few days, is fit for purpose?
Professor Jacobs: The heads of governments in general have only done it once, which was Copenhagen. One or two heads of government turned up in Durban, but by and large it was the normal roster of environment ministers.
I don’t think there is any question but that both the political skills and instincts that the politicians bring to bear, which the professional negotiators do not have-they have neither the authority nor the motivation-make a huge difference at the end of COPs, and there is enormous progress made once the ministers start arriving. In a sense, the whole thing is set up so that there are various options that they then take charge of. A well managed COP-as Cancun was, and Durban I think one would say was well managed because in the end it was successful; I am trying to be careful-can use those ministerial few days to make the difference between a continuing logjam between the negotiators and some kind of outcome. So, yes, I think that is important.
You may have been shown an article that I wrote in Nature earlier this year. I have said that 2015 should not only be the focus year but there should be a summit that year, but I don’t think it should be the UNFCCC COP. What a COP agrees, particularly at the end of a process, is a very complex piece of negotiated machinery, and I don’t think heads of government are very good at that. It is not what they normally do. The extraordinary scenes in which I participated at Copenhagen in which the leaders negotiated the agreement opposite one another line by line was unprecedented and not to be repeated except in unusual circumstances.
So my view is that leaders ought to be addressing this issue. I don’t think the kinds of momentous geopolitical issues that are involved here can be done without leaders, but I would do it in a separate summit in which the broad outlines, the broad levels of commitment of ambition, and the commitment to try to do a deal with one another were agreed at heads of government level at a summit and then the negotiators and the ministers were left to do the deal later. So I would split the two events. But I do think that the historical records show that when really big decisions are needed and when countries need to be pushed towards one another, you get that with the engagement of heads of government, and I think we will need another moment of that kind.
Q163 Chair: Do you think there is any prospect of getting the US ever to ratify an agreement on this?
Professor Jacobs: No. There is very little prospect but that does not mean that you can’t have an agreement that it abides by. The interesting thing about international environmental treaties, and indeed in other areas-Robert knows this much better than I do-is that the US will abide by a treaty that it has been unable to ratify. Therefore, US ratification is not the final hurdle that we need to get over and you can have an agreement that the US does not ratify but does abide by.
Dr Falkner: I think it is now a fact that is widely recognised that the United States has not ratified a single environmental treaty of major consequence since the Rio earth summit in 1992. So if the US Senate decided to start ratifying environmental treaties it would probably choose some less demanding and less intrusive ones than the climate treaty that is to be negotiated.
I think it is a peculiar situation in the United States that the political leadership in the White House, the current one definitely but even a Romney-led administration, might be more willing to do a global deal but it is the domestic situation that prevents that from happening. On a number of occasions the US administrations, together with business leaders, have advocated ratifying international treaties, because not being inside a treaty disadvantages the US in terms of being able to negotiate the further development of a regime or in terms of implementing it in the way they would like to do, and they have never managed to get around the Senate. There are some strong views among key Senators about the need to preserve American sovereignty and not let international treaties intrude on US policymaking, which is a somewhat ironic position for Senators to take, given the leadership the US provided in the post-war era in setting up the multilateral system and making it as strong as it is in a number of areas such as trade.
So, I believe that there is no way around that. However, that should not stop us from doing it. It would be just a fig leaf for inaction on our part if we took that as an excuse for not pushing for an international agreement. There are many ways around that problem.
Q164 Chair: Going back to the global cap and trade, which has come up once or twice-and I can see the difficulties about introducing a global scheme top-down-it is quite possible to envisage the self-interest of different countries gradually moving towards a situation where they want to link with other systems: Korea, Australia, maybe China in due course. The EU is well established; it is not yet cutting emissions, but at least the system operates. So you could see it building over perhaps a 10-year period quite effectively on an international basis. If that were to happen, it would then presumably become very much in the self-interest of the United States to join such an international scheme, if they had some of the biggest trading blocs in the world.
Professor Paavola: There are some reasons to suggest that they would be a major beneficiary from such an agreement because their economy is less carbon efficient than the European one. If they had a trading system and it combined with the European one, the financial flows would be from Europe to the United States to undertake inexpensive mitigation activities there. So if that unification happened, they would clearly be beneficiaries of it.
Dr Falkner: I think the problem will be that when there are different national and regional trading systems in place, they will each have their own carbon price. They will each have their own rules as to whether there is a price floor or a price ceiling. So there is going to be some unevenness in the global system. The linking is attractive because it might help to even out these differences. It might create a more globally integrated carbon price. I think that is the main attraction. One could otherwise just leave each and every trading system on its own, and there would not be much of a problem with that.
The other problem we should bear in mind is that most emissions trading systems can only cover up to 50% of the emissions that are generated in that jurisdiction, because domestic households are not included, because land use changes are not covered, deforestation is not covered. So it can never be the sole instrument that we rely on in that context. A far preferable system would be carbon taxation on a global scale, but I don’t think in the current climate this Committee would want to go down the route of advocating a UN-based global tax on all energy. However, economists tell us, at the LSE and elsewhere, that that would be far preferable because you would capture, apart from land use changes, virtually all forms of emissions in one big swoop.
Q165 Chair: You would still have the problem that you could not predict the elasticity of the response. We would pile the fuel tax on-
Dr Falkner: You would know the price but not the outcome in terms of emission reductions, yes.
Chair: Thank you very much. We have had a long session, but we are very grateful to you all.