Brookings: Topics - Environmental Regulation

A Grand Bargain on Fracking? Lessons from Springfield, Illinois

Barry Rabe — Mon, 10 Jun 2013 11:54:00 -0400

Editor’s Note: A new Illinois statewide policy on shale development and the possible use of hydraulic fracturing (fracking) procedures was just passed with overwhelming majorities in both legislative chambers. Barry Rabe explains the significance of this legislation and how this aspect of the Illinois experience is worthy of national attention.

Paul Simon would likely be very proud. Throughout his long and distinguished service to Illinois in both state government and in Congress, he understood the complexities of combining energy development with environmental protection. This reflected his home base in downstate Illinois, with its significant fossil fuel deposits and extensive environmental treasures.

Simon died a decade ago and so never lived to address the issue of shale development and the possible use of hydraulic fracturing procedures in the very sections of Southern Illinois that he dearly loved. But he clearly would have applauded the type of multi-year effort that brought very diverse stakeholders together to develop a comprehensive new statewide policy on this issue. Indeed, that legislation was just passed with overwhelming majorities in both legislative chambers and was signed into law by Governor Patrick Quinn.

This law neither bans fracking nor tips the scales in favor of development with only modest restrictions. Instead, it reflects some extended and careful elements not found in most other states that have moved more rapidly into shale development. In particular, the new Illinois legislative package includes far more extensive chemical disclosure provisions than are common elsewhere, a severance tax mechanism designed to return some revenues to affected local communities, and expansive citizen participation mechanisms.

Perhaps most significantly, Illinois now will also require water testing before and after any drilling occurs, allowing for careful comparison that is simply not possible in most other states and drilling cases. This testing is coupled with a presumption of liability in the event that water contamination is detected after drilling. The widespread lack of such testing has led to huge uncertainty and controversy around the nation.

This approach secured buy-in from a remarkably diverse, albeit not unanimous, set of stakeholders across Illinois. It reflected significant legislative leadership and endured a number of challenges, including proposed amendments that might have crushed any compromise. And it is designed to provide an overarching governance mechanism for future shale drilling that can simultaneously allow development while going far beyond most states in providing important environmental protections.

Formal restrictions on the application of existing federal statutes for drinking water and waste management to shale drilling have essentially punted this issue to individual states and localities. Yet more than half of the American states have shale deposits, ranging from established state energy development powerhouses like Texas and Pennsylvania to other states that have virtually no prior experience in this area. Many have struggled to develop a credible policy regime and we are indeed beginning to see a patchwork quilt of state-by-state differences. Public opinion surveys find that the citizenry tends to support development but has misgivings about risks, and so supports a series of key environmental protection provisions.

And so Illinois thus takes a lead role in beginning to define what might be possible, particularly through assembling a coalition that takes a careful look at all facets of the issue and attempts to work across partisan lines to create a governance system that might be solid for the long haul.

Ironies abound in this case. It has been rare in recent decades to point to Illinois governance as a model for the nation. The state retains the lowest credit rating in the nation and has just failed yet again to fix a badly-broken system for state pensions. And it continues to hold one of the highest incarceration rates for former elected state officials, including a series of relatively recent governors. So it would hardly seem a likely case to produce a possible model for state best-practice in this emerging area.

But there has always been another side to Illinois, reflected in the life and public service career of Paul Simon. No other state has yet produced such an extensive review and balanced approach to shale development, making this aspect of the Illinois experience worthy of national attention.

Authors

Barry Rabe

Image Source: © Stringer . / Reuters

CO2 Emission Permit Prices Plunge In Europe: What's Up?

Adele Morris — Fri, 17 May 2013 13:47:00 -0400

Recent headlines proclaim "deep trouble" in the European cap-and-trade system for greenhouse gases, evidenced by the decline in allowance spot prices from over $25 per metric ton of carbon dioxide in June 2008 to about $3 this month. Although many press articles have referred to an "oversupply" of emissions permits, suggesting some kind of intrinsic imbalance, the markets are clearing just fine. It's just that the price is lower than forecast.

Whether this represents trouble or not depends on what you think the goal of the program should be. If the goal is to ensure that emissions in the covered industrial sectors are no higher than the emissions caps, then the program has worked just fine. It just didn't have to work very hard since much of the decline in emissions relative to projections was driven by the multi-year economic crisis. A sputtering EU economy lowered industrial activity and consumer energy demand, and this drove down allowance demand and prices. This makes compliance easier for the remaining emitters just at the time business and consumers are suffering most. This counter-cyclical property might be seen by some as a feature, not a bug.

On the other hand, if you think the goal of climate policy should be to provide stable cost effective long-run incentives to lower emissions relative to what would otherwise occur, then the ETS price plunge is a cautionary tale. First, it illustrates the importance of the design details of the carbon market. The ETS law included no provision to restrict automatically the number of allowances when prices get low. Efforts to withhold allowances failed when, not surprisingly, coal-dependent states balked at the proposed stringency in an economic downturn.

Second, the price volatility shows that the ETS hasn't really fixed the market failure in which fossil energy prices don't reflect their full social costs, including environmental damages. Economists widely advocate a price signal on carbon that would include those external costs, as best we can estimate them, in fuel prices through a carbon tax or a cap-and-trade system. The ETS illustrates one key drawback of a poorly designed cap-and-trade system: fluctuating allowance prices and abatement incentives. Price volatility makes no sense if you're trying to internalize an external cost because there's no reason to think the social cost of carbon fluctuates over the short run, much less drops by 90 percent over five years.

Third, the ETS illustrates the potential for laxity in one carbon market to erode abatement incentives abroad. For example, the Australians plan to convert their carbon tax to an ETS-linked permit program in July 2015. The prospect of linkage to the ETS lowers the expected Australian carbon price well below the current tax of about $25 per ton of CO2. To be sure, low prices in the ETS just amplify the investment-depressing effect of the broader uncertainty around a policy so incompetent one wonders if they'll go through with it.

Finally, the ETS experience reveals the limitations of framing the environmental success of a climate policy solely in terms of emissions levels. Many environmentalists are more comfortable with an emissions cap than a carbon tax because the cap provides more environmental certainty. However, the lower-than-predicted ETS allowance price has made it unexpectedly easy for utilities to fire up coal-powered plants and delay investments in cleaner natural gas and renewables, and this could set back climate efforts in the EU for years.

The fits and starts of the EU carbon market suggest the potential advantage of an enduring and credible incentive to reduce emissions through a carbon tax. Even if the EU had set a tax at the lesser of the estimated damages from emissions and the public's willingness to pay, it would surely have been greater than the current ETS price, suggesting that the policy with the greater environmental certainty has foregone the opportunity for greater environmental benefits.

Policymakers should expect the unexpected and do what they can to establish a climate policy that is robust to changing economic conditions at home and abroad. Compared to the EU's current approach, a modest predictable tax would be more robust to shocks, solidify the payoffs of investments in new technologies and emissions reductions, cost less (especially if the revenue is used wisely), and ultimately do more to protect the planet.

Authors

Adele Morris

Publication: Real Clear Markets

Image Source: © Alessandro Garofalo / Reuters

Wanted: A Noah's Ark for Species' DNA

William Y. Brown — Thu, 25 Apr 2013 11:22:00 -0400

DNA was the topic of U.S. Supreme Court argument on April 15. Can a gene be patented if it occurs in nature—which is generally grounds for exclusion—but has been identified by an individual scientist or company and removed from the cells in which it occurs? Lower courts are split on the matter, and the justices didn't tip their hands.

But whether a gene can be patented will be irrelevant if it disappears before anyone has identified it. That is what's happening now and will continue to happen—at a rate perhaps 100 to 200 times faster than in prehistoric days—due to modern man's outsize influence on nature and encroachment on habitat. Unless we have sequenced a species' DNA, extinction means gone forever and never really known. Preservation of the DNA is the simpler, cheaper route, with sequencing to follow. If the Library of Congress is where every book is stored, the world needs the equivalent for species DNA.

Preserving the DNA of known species would provide genetic libraries for research and commerce and for recovery of species that are endangered—the Armur Leopard and the Northern Right Whale, for example. Preservation would also offer the potential to restore species that have gone extinct. We currently lack preserved DNA for most of the 1.9 million species that have been named, but that is fewer than the number of people in Houston. No doubt additional species exist, but their DNA can be preserved as they are named. The job is doable.

Just a small fraction of species are maintained as living organisms in cultivation or captivity or are kept frozen as viable seeds or cells. These are the best, because whole, reproducing organisms can be grown from them by planting or cloning. Botanical gardens and zoos keep the living stuff. The Millennium Seed Bank at Kew Gardens in England is on a course to preserve frozen seeds of all vascular plant species, and the Svalbard Seed Vault in Norway is taking seed duplicates from other facilities. The San Diego "Frozen Zoo" has some 20,000 viable cell cultures representing 1,000 vertebrate species, including "Lonesome George," the last Pinta Island Galapagos tortoise, which expired last year. Its DNA would have disintegrated if the Frozen Zoo hadn't made a heroic mission after the tortoise's death to get a sample.

The American Museum of Natural History in New York keeps 70,000 samples in liquid nitrogen, the Academy of Natural Sciences in Philadelphia has frozen samples for 4,000 bird species, and the National Museum of Natural History at the Smithsonian has embarked on an ambitious course to freeze species tissues.

For a fraction more species, DNA is kept at low temperature in dead cells or extracted form. The American Museum of Natural History in New York keeps 70,000 samples in liquid nitrogen, the Academy of Natural Sciences in Philadelphia has frozen samples for 4,000 bird species, and the National Museum of Natural History at the Smithsonian has embarked on an ambitious course to freeze species tissues.

Yet the DNA of most species is still not preserved. We need a plan. One might think that preserving the DNA of life on earth would cost a moonshot of money. But a viable cell culture in liquid nitrogen for a species at the Frozen Zoo costs only $200 to $300 to establish and just $1 a year to maintain. Multiplying $250 per species by 1.9 million species comes to $475 million, ignoring what has already been done. The U.S. pays more than twice that daily on the national debt. But let's be real, nobody is throwing new money around, even when the priority is obvious.

There is another way that could work, and would be much cheaper. First, we could develop a website to track progress on preservation whose key information is managed directly by contributing facilities. It would be a "wiki" site for DNA repositories, and many keepers would be delighted to share information if they could manage it themselves. They could both update holdings and let people know what species they will take and under what conditions.

Second, we can establish new incentives and mandates for contributing specimens, including grant, publication and permit requirements. Some grant makers and publications already require that DNA information be shared with a genetic information bank kept by the National Institutes of Health. Why not tissue too?

Third, donors who care could help develop and fund "citizen science" projects of museums and nonprofit groups to collect, identify and contribute specimens to repositories. The collections would grow, and so might public connection to nature. At the end of it all, we will preserve what we appreciate. And patent lawyers will be happy too, because they'll have something to fight about.

Authors

William Y. Brown

Publication: Wall Street Journal

Image Source: © Henry Romero / Reuters

Climate Policy Across the Globe: Lessons Learned and Key Challenges

Mon, 15 Apr 2013 16:00:00 -0400

Event Information

April 15, 2013
4:00 PM - 5:30 PM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

While global climate negotiations are stalled, a surprising development is underway. In the last decade, regional, national and subnational actions to combat climate change have proliferated. Governments are making it possible to build new, clean sources of energy, regulating industries for greater energy efficiency and encouraging better land-use practices. Their accumulated experience can provide lessons on how to combat climate change faster and more cheaply. Climate Policy Initiative, a global policy effectiveness analysis and advisory organization led by Thomas C. Heller, explores this experience in five key emissions regions—the U.S., China, India, Brazil and Europe—in the inaugural edition of “The Policy Climate” report. Focusing on the most emissions-intensive industry sectors in these regions, the report presents three decades of evidence on emissions trends, economic and industry drivers of emissions, and policy activity.

On April 15, Global Economy and Development at Brookings and Climate Policy Initiative hosted a discussion on “The Policy Climate” and how findings from the report can influence future global climate policy. Climate Policy Initiative Senior Director David Nelson gave a short presentation, followed by a panel discussion. Panelists included Thomas C. Heller, CPI executive director; Heather Zichal, deputy assistant to the president for Energy and Climate Change in the White House Office of Energy and Climate Change Policy; and Jennifer Morgan, director the Climate and Energy Program at World Resources Institute. Brookings Senior Fellow Katherine Sierra moderated the discussion.

The Illegal Trade in Wildlife in Southeast Asia and Its Links to East Asian Markets

Vanda Felbab-Brown — Fri, 05 Apr 2013 13:45:00 -0400

Editor's note: In this book chapter from An Atlas of Trafficking in Southeast Asia (I.B. Tauris 2013), Vanda Felbab-Brown traces how increasing demand for wildlife and wildlife products has devastated regional and global ecosystems in Asia. Underlying the unsustainable and ill-regulated wildlife trade has been the limited progress to curb exploding demand for wildlife products.

Introduction

Mainland Southeast Asia, with its linkages into the larger Asian market that includes China, Indonesia and India, is one of the world’s ‘wildlife trade hotspots’ – that is, a region where unsustainable and ill-regulated trade in wildlife poses a disproportionally large threat to biodiversity and species preservation. Both the volume and diversity of traded and consumed species have increased to phenomenal and unprecedented levels. Wildlife is currently being extracted from Southeast Asia’s tropical forests at six times the sustainable rate. The region is a key supplier of the international market in wildlife, legal and illegal. Increasing global buying power, population growth and globalisation have led to a rise in demand for wildlife in developed, emerging and developing countries alike. However, Southeast and East Asia today probably represent the areas of the most intense legal and illegal trade in wildlife, with China as one of the biggest (if not the biggest) consumers of wildlife products in the world. China’s exploding demand, a result of the increasing affluence of its expanding middle class, has turned the country into a great vacuum, sucking natural environments empty of wildlife – not only from China’s and her Southeast, South and East Asian neighbours, but also from across the ocean in Africa and elsewhere.

Law enforcement efforts and public awareness of the ecological harms in Southeast and East Asia have been inadequate even to reduce the scale of the threat. Yet the need for vastly increased effectiveness of policy action is urgent. Unlike other illegal economies, such as the drug trade, that exploit resources that can be renewed, and thus can be conducted infinitely, the illegal trade in wildlife is drastically depleting its marketable products, unfortunately at an irretrievable cost to humankind and the world’s ecology. Once endangered species are extirpated at the hands of poachers and traffickers, they are gone and there is often no bringing them back.

Learn more about the book »

Authors

Vanda Felbab-Brown

Publication: I.B. Tauris

Image Source: © Stringer Bangladesh / Reuters

The Jagged Edge: Illegal Logging in Southeast Asia

Vanda Felbab-Brown — Fri, 05 Apr 2013 00:00:00 -0400

Editor's note: In this book chapter from An Atlas of Trafficking in Southeast Asia (I.B. Tauris 2013), Vanda Felbab-Brown presents an overview of the current state of illegal logging in Southeast Asia, a critical international hotspot of biodiversity. As demand for timber increases, the absence of effective policing and rule of law mechanisms to enforce the legality and sustainability of timber extraction and biodiversity protection poses unprecedented threats to forest ecosystems and global warming mitigation.

Introduction

One of the world’s most important hotspots of biodiversity, Southeast Asia is unfortunately also an area of the most intense deforestation in the world, with devastating and irreparable effects on its and the world’s forests and ecosystems. With illegal logging accounting for a very large portion of forest destruction in the region, Southeast Asia has the highest rate of deforestation of any major tropical region: 1.2 per cent of forest lost yearly, followed by Latin America (0.8 per cent) and Africa (0.7 per cent). At current rates, by 2100, Southeast Asia will have lost three-quarters of its forests and 42 per cent of its biodiversity. Increasing efforts since the 1980s to regulate timber extraction and make it sustainable have also resulted in the emergence of intense illegal logging throughout a region where there used to be free-for-all unrestricted forest felling.

Paradoxically, solving the problem of sustainable supply of timber does not equal solving the problem of how to sustain forest ecosystems and their biodiversity. This is because timber in general, though far from all species of trees and bamboo, is renewable through reforestation and plantation promotion, but the forest ecosystem overall is not. Plantations and reforestation can achieve neither the original forest’s structure or complexity nor its biodiversity. Yet in Southeast Asia the measures adopted have been geared primarily toward assuring a sustained supply of timber or mitigating other detrimental environmental effects, such as flooding, but not the preservation of natural, especially primary, forests.

Similarly, even effectively addressing the problems of illegal logging and timber smuggling, as difficult as they are, does not necessarily preserve sustainability. As demand continues to expand, it remains to be seen if timber extraction and consumption – whether legal or illegal – can be made compatible with biodiversity preservation.

However, there have been some positive developments. Various measures to address illegal logging and maintain forest biodiversity, such as certification of sustainably and legally logged timber and forest management plans, are increasingly being adopted in Southeast Asia and elsewhere. In some cases there are signs of at least their partial effectiveness in preserving timber and even forests. The question remains whether these measures, including demand reduction efforts, can be developed, adopted and enforced fast enough to avoid a major collapse of the world’s natural forests and irretrievable species loss.

Learn more about the book »

Authors

Vanda Felbab-Brown

Publication: I.B. Tauris

Relocation Across Borders: A Prescient Warning in the Pacific

Jane McAdam — Fri, 15 Mar 2013 00:00:00 -0400

Editor's Note: This piece is adapted from the author’s article, 'Caught Between Homelands,’ which originally appeared in Inside Story.

The possibility of moving entire Pacific island communities is often raised in discussions about the impacts of climate change, but it is usually assumed to be a novel, even futuristic idea. However, almost 70 years ago, in quite different circumstances, two island communities were relocated across international borders to new homes in other Pacific islands. In December 1945 the population of the island of Banaba (also known as Ocean Island) in present-day Kiribati was moved to Rabi island in Fiji on account of on-going phosphate mining by the British Phosphate Commission, a joint British, Australian and New Zealand enterprise. Two years later, in October 1947, part of the population of Vaitupu, an island of present-day Tuvalu, bought and settled another Fijian island, Kioa, coincidentally close to Rabi.

A major difference between the two cases, which has undoubtedly impacted enormously on the subsequent development of the two communities, is the degree of choice involved. The Banabans say they were forced to move, whereas the Vaitupuans made the decision themselves. When I recently interviewed some of the original settlers and their descendents on Rabi and Kioa, they offered important insights into the potential effects of any future efforts to resettle Pacific populations. Their experiences provide some of the best evidence we have about the likely conceptual and pragmatic challenges of relocation in the context of climate change.

But the migrations to Rabi and Kioa are rare cases of whole communities moving to “empty islands” in another country to create a new home, administered by a community-run local council.

Mobility is a feature of Pacific history. For centuries, islanders have moved in response to changing environmental, political or social conditions. During the colonial period, the government of the Gilbert and Ellice Islands Colony (which became Kiribati and Tuvalu in the late 1970s) pursued a formal policy of resettlement because of “land hunger”. Groups of islanders were sent to “colonise” parts of the Solomon Islands, for example, where they gradually integrated into the local community. But the migrations to Rabi and Kioa are rare cases of whole communities moving to “empty islands” in another country to create a new home, administered by a community-run local council.

Soon after A-grade phosphate was discovered on Ocean Island in 1900, mining began. Within a decade, the Pacific Phosphate Company (later the British Phosphate Commission) was agitating to have the Banabans relocated from their homeland so that the island could be mined more efficiently and extensively. By the time mining operations ceased in 1979, twenty-one million tons of phosphate had been removed – thirteen million tons of it scattered across the farms of Australia. The Banabans received a 15 per cent share of the profit.

Almost all of the official records in these early years acknowledged the Banabans’ right to remain in their traditional homeland and benefit from the proceeds of any resources taken. However, in the communication that was to secure their fate, the colonial administration noted that while it would be “repugnant” to “evict a native tribe” simply “to afford wider opportunity of gain to a rich commercial corporation,” in this case the greater good of the empire was at stake. “Indeed,” wrote Britain’s high commissioner for the Western Pacific, C.H. Rodwell, in 1919, “the interests of the Empire seem to demand that the process of development on Ocean Island should be allowed to continue until the whole island is worked out.”

Yet it was not until after the Japanese occupation of the Ocean Island in World War Two that the Banabans finally moved. They were informed by the colonial authorities that their homeland had been rendered uninhabitable and another island had been found for them in Fiji – Rabi.

In fact, the colonial government had purchased Rabi in 1942 with the proceeds of Banaban mining royalties, following protracted negotiations with Banaban elders. Although the elders had resisted relocation for decades, in 1940 they began to agitate for a “new home, Banaba No. 2”. They were worried that “the younger generation of Banabans was growing up in too Europeanised an atmosphere and that, if they were to preserve their racial identity and culture, it was necessary to continue that culture elsewhere.” For this reason, they desired a new home where they could “resume native cultivation, mat-making and fishing.” They stressed that this new place would not be a replacement for Banaba, but rather a second home.

The majority of the population was relocated to Rabi in December 1945. They landed in the middle of hurricane season and had to live in canvas tents beside the beach, with only two months’ rations and little knowledge of how to plant the island and become self-sufficient. The move was to be for a two-year trial period, and if they then chose to return to Banaba they could do so free of charge. The colonial administrators thought it unlikely that they would choose to remain on Rabi permanently. The decision to grant the Banabans a degree of autonomy in managing their affairs on Rabi, with “as nearly as possible the same Government organisation and powers of self-Government as they enjoyed and were used to in Ocean Island”, was a key factor in their decision to stay.

The degree to which the Banabans gave informed consent to their ultimate move to Rabi is unclear. Banabans today say that they were misled about where they were going and what they could expect on arrival. They articulate a complex story about loss of homeland, deprivation of resources and the destruction of identity. At its heart, the story is about the loss of self-determination and the power to shape one’s destiny.

When Kiribati became independent in 1979, the colonial authorities determined that Banaba would remain part of its territory. This was (and remains) a point of great contention. Although Kiribati’s constitution gives the Banabans a special status, with guaranteed parliamentary representation, an “inalienable right to enter and reside in Banaba,” and a veto power over any constitutional amendments relating to their interests, most Banabans don’t regard themselves as I-Kiribati and view the relationship with Kiribati as an uneasy one. Many say that they should be independent, and from time to time they have agitated to have Banaba Island recognised as an independent State.

The story of Kioa is very different. Not only did the Kioans choose to move, but only a part of the community relocated. During World War Two, some of the men from the Kioans’ home island of Vaitupu in Tuvalu assisted the American military in the Pacific. At the end of the war, they decided to pool their war savings to invest for the benefit of the Vaitupuan community as a whole. A New Zealander who had been a school teacher on Vaitupu suggested that they purchase Kioa in Fiji as an insurance policy against overpopulation and land scarcity.

I spoke to the sole remaining survivor from the original group of settlers, eighty-eight-year-old Siapo Paka. She explained that at first, no one wanted to move. Eventually, thirty-five people volunteered to undertake the journey. In the first years of settlement, they had to clear the land, construct houses for each family group one by one, and eventually plant crops.

The Kioan story is one of community survival and pioneering spirit. They talk about the unity of their people and say that they have two homes — Kioa, the homeland, and Vaitupu, the motherland. Many people identify as both Fijian and Vaitupuan, whereas all the people I interviewed on Rabi described themselves as “Banaban”. Indeed, they typically distinguished between their formal citizenship (Fijian) and their sense of personal identity (Banaban). Perhaps because Vaitupu continues to sustain a large community, there is more openness among the Kioans towards adopting two identities.

Today, on both Kioa and Rabi, descendants of the relocated islanders acknowledge that their new Fijian homes provide abundant food and water, sustaining far larger populations than their home islands ever could. They also note that young people have access to better educational and economic opportunities.

However, founding narratives are central to the creation and maintenance of identity, and the extent to which relocation is forced or voluntary has a major impact on how a community understands itself and its relationship to the world. Even though everyone I interviewed recognised that everyday life was better in Fiji, the Banaban story is still marked by a history of injustice. One interviewee described a “psyche of injustice” that has been “burned into our memories.”

It is not difficult to imagine how a similar story of injustice could develop now, in the context of climate change, if the inhabitants of small island states are resettled elsewhere without extensive prior consultation, negotiation and compensation. The element of coercion is likely to entrench a sense of victimhood, injustice and disempowerment. If group relocations are to be considered in the future, then the rights of those affected (both in the sending and receiving countries) must be protected, and the legal status and organizational structures of the relocated group in the new country must be planned meticulously.

Authors

Jane McAdam

Image Source: © Reuters Photographer / Reuters

Environmental Outlook: Air Pollution In China

Kenneth G. Lieberthal — Tue, 05 Mar 2013 00:00:00 -0500

Editor's note: In an interview with NPR's Diane Rehm, Kenneth Lieberthal to talk about the catastrophic air pollution crisis in China. Read an excerpt below.

Diane Rehm: Ken Lieberthal, to what extent are Chinese leaders, number one, taking this into account, number two, acknowledging it publicly and number three trying to do something about it?

Kenneth Lieberthal: Public acknowledgement has increased a lot just over the past year. Interestingly, that was largely forced by the U.S. Embassy's measuring air pollution at the embassy compound in Beijing and putting out a Twitter feed live all the time that tells you what that rating is.

And what it turned out was that the official statistics put out by the Chinese Ministry of Environmental Protection were systematically, dramatically lower than those of the embassy so that caused an uproar. The Chinese then improved their game.

They began measuring those very dangerous pollution, the small particulate pollution and they began giving more accurate figures with more measurement. That is now a Cause célèbre in China.

In terms of what they're doing about it, though, frankly it is fundamentally a combination of their approach to economic development, which is to drive GDP growth every day all the time. With most of that GDP growth being in manufacturing and in construction and with officials everywhere benefiting the most when they can build big projects and drive GDP growth by big capital, intensive projects, those tend to be the most polluting things out there.

And they're supported by things like cement and aluminum and so forth, all of which are highly polluting. So at the end of the day, this is a model of development just built into the genetic code of the current political system. And they need to change that model of development dramatically as part of the solution to this catastrophic air pollution. So this is not going to happen quickly or easily.

Authors

Kenneth G. Lieberthal

Publication: NPR's The Diane Rehm Show

A Climate Diplomacy Proposal: Carbon Pricing Consultations

Adele Morris, Warwick J. McKibbin and Peter J. Wilcoxen — Fri, 08 Feb 2013 10:19:00 -0500

I. Introduction

Climate talks in December 2012 in Doha, Qatar, wrapped up lines of negotiation that were begun years before in Bali. Negotiators resolved contentious questions about the future of the Kyoto Protocol and finally put the constraints of the Bali agenda behind them. Now they will turn to developing by 2015 a new agreement under the United Nations Framework Convention on Climate Change (UNFCCC) to cover the post-2020 period. At the same time, the Major Economics Forum (MEF) needs a new thrust of engagement, having developed the Clean Energy Ministerial into an enduring venue for technology discussions.[1] This momentary opening for new agenda items offers an excellent opportunity to expand the dialogue to include technical aspects of the one policy approach that would actually address the climate problem cost effectively: pricing carbon and other greenhouse gases (GHGs).

Negotiators should take this opportunity to establish a Carbon Pricing Consultation (CPC) process: a detailed, pragmatic, and ongoing discussion of the implementation details of domestic cap-and-trade and GHG taxes. A CPC process would address a glaring gap in climate talks to date. Negotiations have tackled national emissions targets, global temperature targets, technology transfer, assistance to poor countries for adaptation and mitigation (a.k.a. “finance”), clean energy, forest preservation, compensation for countries affected economically by mitigation measures, and many other topics. Carbon pricing, however, has received little multilateral attention. It has generally been considered to be a national-level policy—to be adopted at the discretion of individual governments—and therefore outside the purview of international talks. However, much could be gained by bringing countries together to discuss carbon pricing. A CPC process would provide an opportunity for negotiators, as well as the administrators of national pricing policies, to discuss how to induce, practically and efficiently, the broad economic shifts required to de-couple emissions and economic activity.

Why focus on carbon pricing? A carbon price, arising either via a cap-and-trade market or a carbon tax, creates broad, efficient incentives to reduce greenhouse gas emissions. Done well, it would gradually shift consumer demand, production methods, new investment, and technology development towards less emissions-intensive goods and services without unduly burdening poor households. A carbon tax or auctioned cap-and-trade allowances can also raise revenue to fund government outlays or reduce other, more distortionary, taxes. Finally, a carbon price can promote economic growth by replacing less efficient tax, regulatory, and spending policies. For these reasons, there is nearly universal agreement among economists that a price on carbon is a highly desirable step for reducing the risk of climatic disruption. Most would also agree that to be effective in the long run, any significant carbon policy will have to involve a price signal.

Why international consultations? First, outside of finance issues, few countries have sufficiently included their finance and trade ministries in climate negotiations. Thus the perspectives and expertise most familiar with the economics of market-based emissions approaches have been missing in the talks. Second, many countries have recently adopted carbon pricing policies, so there is increasing experience to analyze and discuss. Third, some countries that have not yet adopted carbon prices, such as the U.S., have considerable expertise in efficient administration of excise taxes and could provide valuable advice. Fourth, talks to date have focused on emissions targets, both collectively and by country, divorcing the dialogue from the economic realities of achieving those commitments. It is much easier to reach consensus on the goal of containing global mean temperature increases to 2 degrees centigrade than to grapple with the potentially high price signals on carbon that would may necessary globally to achieve the goal. Until negotiators directly address the levels of economic effort involved and how to minimize the cost, collective commitments to stabilization targets will remain both theoretical and infeasible, however compelling they may be scientifically. Fifth, disparate carbon prices across different countries can shift emissions, production, investment, and trade patterns, and mutual understanding of these cross-border effects is of interest to all parties. Finally, the vehement opposition to the EU’s efforts to price carbon in aviation fuels suggests that unilateral approaches to carbon pricing can undermine cooperation and climate policy progress. Not least, it shows the critical relationship between carbon pricing and international commerce and bolsters the case that this topic is a natural basis for a new climate diplomacy.

II. Towards Carbon Pricing Consultations

The international community should establish a CPC to provide a much needed place to discuss, laud, and understand efforts by countries to price greenhouse gases. It would differ from most talks under the United Nations Framework Convention on Climate Change (UNFCCC) in that the agenda would focus specifically on administrative, economic, and trade-related aspects of policies that price carbon and other GHGs. For example, discussions could include an exchange of countries’ views, experience, and methodologies related to:

how cap-and-trade and/or carbon tax systems work administratively;
administration of excise taxes on carbon content of fuels, including ways to identify taxable entities, establish a tax base (emissions and sources), set reporting requirements for firms, track revenue, minimize administrative costs, and ensure compliance;
ways to harmonize tax administration across countries to foster compliance by multi-national firms and prevent tax gaps and double-taxation;
the potential economic benefits to developing countries of carbon pricing as a low carbon growth strategy and efficient revenue instrument;
the environmental and economic effects of alternative carbon tax levels and tax trajectories;
mechanisms for managing allowance markets and registries, and distributing allowances or allowance auction proceeds;
the design and implementation of border carbon adjustments;
approaches to taxing carbon in bunker fuels;
the feasibility of including non-CO₂ gases, agriculture- and forest-related emissions, and process-related CO₂ emissions in a carbon pricing system;
the role of sub-national approaches;
the macroeconomic and trade impacts of carbon pricing;
the distributional effects of a price on carbon, such as effects on poor households or disproportional regional effects, and how to address them;
approaches to pricing carbon in imported and exported fossil fuels and closely-related products;
experience with the environmental performance of carbon pricing;
other fiscal reforms made in conjunction with carbon pricing (such as budget deficit reductions or reductions in other taxes), and their impacts;
approaches to fiscal cushioning (such as reducing other energy taxes while establishing a price on carbon);
how to report on carbon pricing policies so that measures can be compared across countries;
the relationship between carbon pricing and other policies, such as energy efficiency standards and renewable energy subsidies; and
efficient implementation of carbon pricing in large, complex, federalist systems.

The goal of these international discussions would be to build mutual comfort and confidence in carbon pricing, share views, prevent disputes and trade disruptions, identify and replicate successful approaches, learn from one another’s mistakes, build institutional capacity, and generally promote mutual cooperation on serious, economically efficient, measures to mitigate emissions.

The CPC could also consider how to guide resources and activities of existing bilateral consultations, multi-lateral development banks, the Green Climate Fund, other institutions, and private sector entities towards efficient carbon pricing. One particular option could be to find ways to assist developing countries in their efforts to reduce fossil fuel subsidies and adopt a carbon tax or cap-and-trade program for greenhouse gases. For example, the U.S. Environmental Protection Agency already works with China’s Ministry of Environmental Protection to build the institutions and infrastructure for sulphur dioxide cap-and-trade programs.[2] And the Asian Development Bank currently assists its member countries in establishing and enforcing value-added taxes. The CPC could discuss whether multilateral technical support, either directly through member agencies or through regional development banks, could assist developing countries with similar measures for greenhouse gas emissions trading and carbon excise taxes.

The CPC could also consider ways to enlist existing institutions for analytical support related to carbon pricing. For example, the International Monetary Fund recently issued a report on fiscal policy approaches to mitigate climate change that can help policymakers in its member countries think through the potential for a carbon tax.[3] Likewise, the OECD has prepared an illuminating cross-country comparison of energy and carbon pricing approaches.[4] The CPC could consider ways to expand or target efforts by these institutions to facilitate cooperation on climate change.

It may be possible—and it is desirable—to embed the CPC within the Major Economies Forum, the G-20, or other existing forums as much as feasible. The defining characteristic of the CPC, distinguishing it from existing clean energy and climate consultations, would be that the finance and trade ministries (not the environment and energy ministries) would take the lead. These are the ministries charged with international economic relationships, tax administration, and general macroeconomic stewardship. Of course, to the extent that environment or energy ministries oversee domestic carbon tax or cap-and-trade systems, they would play a role. However, the focus of the discussions would be on the technical, administrative, and economic cooperation aspects of carbon pricing policies, with minimal attention to whether any particular country’s approach would achieve any particular emissions target or other goal. To that end, the typical level of engagement within the CPC may best lie below that of the ministerial level, and it should include those with technical expertise.

One advantage of this approach is that it would separate the work of the CPC, i.e. the pragmatic details of carbon pricing, from divisive issues such as who bears what responsibility for collective mitigation goals, who should compensate whom for what, and whose approach is more ambitious or moral. These debates, however important, have contributed little to global emissions mitigation. Subsequent or parallel efforts can review the adequacy of the price signals and seek to increase and/or harmonize them; the CPC should center on relatively low-profile but critically important administrative and technical policy exchanges by interested countries. An underlying premise is that most major emitters have a mutual interest in effective policy machinery to price carbon.

One useful outcome of the CPC dialogue could be to shape negotiations under the UNFCCC so that countries can supplement their emissions targets with commitments in the form of carbon pricing, allowing compliance by either achieving their emissions targets or by demonstrating significant effort through imposing agreed price signals.[5] Price-based commitments would reduce the risk of inadvertent stringency or laxity, help achieve and document compliance, and allow Parties to compare their efforts transparently.

III. Why a CPC is in the interests of the United States

Consultations around mutual efforts to price carbon are clearly in the interests of countries that have already adopted or are seriously considering adopting such policies. However, even though the U.S. does not currently price carbon at the Federal level, it would also benefit from carbon pricing consultations.

First, an increasing number of US trading partners are adopting carbon pricing, and it is in the US interest to follow these developments closely. Carbon taxes have been adopted in Sweden, Australia, Finland, Ireland, Norway, and South Africa, and the EU has a major CO₂ emissions trading system. As mentioned above, India has a small tax on coal, and China is experimenting with cap-and-trade measures at the local and regional level for possible expansion nationwide. Canada also has several sub-national carbon pricing systems.

To be sure, the magnitude of the price signals and the scope of emissions to which they apply vary significantly across and within countries. But gradually more global fossil fuel consumption is falling under some sort of carbon pricing policy. The United States should welcome a venue in which it can learn from other countries’ efforts, discuss potential economic spillovers and effects on international commerce, and foster discussions that could prevent international incidents such as the dispute over the EU aviation tax.

Second, the United States has considerable tax administration and cap-and-trade expertise that could highlight potentially successful approaches. Although this experience is not climate-related, the United States deploys an efficient and highly compliant excise tax system, and it could assist developing country efforts to build their own capacity to tax carbon. For example, the United States missed an opportunity to applaud and support India’s recent adoption of a small tax on coal. The United States could offer to share its experience in administering its similar coal excise tax, which it collects under the Black Lung Benefits Act of 1977. The United States also has long experience with cap-and-trade systems for criteria air pollutants, much of which is transferable to greenhouse gas emissions trading.

Finally, one key impediment to carbon pricing in the United States is the concern that if the United States prices carbon and other major emitters don’t, then U.S. climate efforts will harm its economy to little environmental benefit. An international venue to discuss carbon pricing policies among major emitters could fruitfully evolve into a place to address such concerns and coordinate, if not fully harmonize, carbon price signals.

IV. Next Steps

As a way forward, we recommend that at their next meeting this spring in Washington, MEF members discuss their preliminary views around the potential for carbon pricing consultations and options for CPC agenda items for future MEF meetings. Australia, given its experience in carbon pricing design, could also propose a CPC agenda item for the G-20 meetings that it will host in Brisbane next year. Discussions within the MEF and G20 could explore whether members believe a CPC agenda item would be productive within the UNFCCC process.

[1] The 17 major economies participating in the MEF are: Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, South Africa, the United Kingdom, and the United States.

[2] For more, see EPA’s Clean Air Markets website: http://www.epa.gov/airmarkt/international/china/index.html

[3] Fiscal Policy to Mitigate Climate Change: A Guide for Policymakers, edited by Ian W.H. Parry, Ruud de Mooij, and Michael Keen, International Monetary Fund, 2012.

[4] Taxing Energy Use: A Graphical Analysis, OECD Publication, January 28, 2013.

[5] McKibbin, Morris, and Wilcoxen (2012) outline just such an approach. http://www.brookings.edu/research/papers/2012/07/carbon-tax-mckibbin-morris-wilcoxen.

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Governance, Rule of Law and Natural Resources in Indonesia and Lessons for Burma’s Transformation

Thu, 07 Feb 2013 10:00:00 -0500

Event Information

February 7, 2013
10:00 AM - 11:30 AM EST

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

An authoritarian state merely a decade ago, Indonesia is now an open, pluralist democracy characterized by consistently high levels of economic growth, a growing middle class and booming foreign investment. Not only is Indonesia geostrategically important in the development of U.S. policy toward Asia, it is also a model for the coexistence of Islam and democracy and a key player in efforts to tackle global deforestation, biodiversity loss and climate change.

On February 7, Brookings hosted a discussion on Indonesia’s natural resources management in the context of the country’s political, economic and rule of law reform efforts, as well as its battle against terrorist groups. The panel also drew lessons for Burma’s political and economic transformation and its management of natural resources.

Brookings Senior Fellow Vanda Felbab-Brown provided insights from her recent fieldwork in Indonesia on illicit economies and organized crime; School of Advanced International Studies Associate Director William M. Wise analyzed the rise of terrorist activity in Indonesia; and Brookings Nonresident Senior Fellow Lex Rieffel discussed how Burma can learn from Indonesia’s economic reforms and management of foreign aid and foreign investment. Senior Fellow Richard Bush, director of the Center for Northeast Asian Policy Studies, provided introductory remarks and moderated the discussion.

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Governance, Rule of Law and Natural Resources in Indonesia and Lessons for Burma’s Transformation

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The “Doha Climate Gateway”: Limited Progress Toward a Global Agreement

Nathan Hultman and Claire Langley — Mon, 10 Dec 2012 14:57:00 -0500

The high-level round of this year’s climate talks have just ended in Doha, Qatar. These U.N.-based international negotiations have become increasingly complex, with different sets of countries involved in multiple agreements (see previous post Doha Climate Conference: Key Issues Up for Negotiation), and multiple negotiating tracks open at any given time. Accordingly, it is important to situate the outcomes in a broader perspective of: (a) setting and monitoring progress toward ambitious climate, development and economic growth goals for the international community; (b) enhancing the ability of existing institutions to make progress toward achievable outcomes; and (c) generating new approaches to reaching the goals we have set.

Seen in this context, the results of the recent Doha round are mixed. On the one hand, useful but minor progress was made in some of the more mundane operational parts of the regime – addressing part (b) above. Negotiators were able to wrap up a few outstanding negotiating tracks, agreeing on the details of a new commitment period for the Kyoto Protocol, and gathering new if somewhat miserly pledges of support for the new Green Climate Fund. On the other hand, there was not substantial progress on (a) or (c): negotiators failed to set a more ambitious series of international goals, nor did they move meaningfully toward a new international agreement which must be negotiated by 2015.

The conference in Doha was the 18th Conference of Parties to the United Nations Framework Convention on Climate Change (COP-18), and it ended in high drama on Saturday evening – a full 24 hours after the official closing of the conference, meant for Friday the 7th of December. What was widely thought to be a low-key, largely procedural meeting with a few key issues on the table for completion, instead dragged on for two weeks before erupting in disagreements and distrust in the final three days. Given the degree to which many Parties insisted on linking progress across tracks, it is not surprising that the completion of simultaneous negotiating issues and tracks has been difficult. Many vulnerable countries have been wary of the slow pace of progress and are clinging to small past victories that have held the U.N. process together for so long. Underlying the climate negotiations is always a fundamental tension between developed and developing countries, and compromise has never been easy to achieve. But with each new scientific report on worsening future climate change predictions and impacts, the stakes are getting higher and higher (see a previous post, The Final Stretch of the Doha Climate Talks).

Given the largely technical nature of the discussions, negotiations at Doha had not been expected to be particularly onerous. When the talks began over two weeks ago, the agenda appeared manageable, with the closure of the two main legacy tracks – the Ad Hoc Working Group on Long-term Cooperative Action (LCA) and the Ad Hoc Working Group on the Kyoto Protocol (KP) – and the establishment of a work program for a new global agreement (the Ad Hoc Working Group on the Durban Platform for Enhanced Action – ADP) appearing likely. Nevertheless, the final three days saw the reemergence of entrenched positions on cross cutting issues.

The outcome from COP-18 is being called, somewhat aspirationally, the “Doha Climate Gateway,” though in truth maybe it is somewhat equivalent to erecting only the frame of the front door to a house, handing the hammer to the next guy and wishing him luck. The gateway includes a package of agreements on five main areas: the LCA, KP and ADP tracks, as well as cross cutting issues of long-term finance and a new issue on “loss and damage”. Countries have achieved a minimum reasonable outcome at Doha:

The LCA track has been closed, with outstanding issues brought under areas where negotiations are ongoing.
The Kyoto Protocol has a second commitment period, albeit with a vague recommendation to ramp up mitigation pledges under a mid-term review.
The Durban Platform was essentially punted to the next round of negotiations: delegates agreed to start negotiating a work plan next year on a new global agreement. With only one interim negotiating session scheduled for 2013, the three years available to negotiate an agreement that would cover all countries and take effect in 2020 will likely be just as fraught as Doha has been.
Finance emerged as the biggest issue in the negotiations, viewed as a symbol for trust and engagement by developing country Parties and the degree of commitment by developed country Parties. The promise from Copenhagen of delivering scaled up funding of up to $100 billion by 2020 was not supported by pledges of mid-term finance; instead there is only an agreement to discuss a work program for long term finance over the next year. Several EU member states did announce new funding for next year apart from their old commitments (The EU, U.K., Denmark, Sweden and Germany announced new funding amounting to around $6 billion for 2014), but this was not enough to bridge the trust gap between the Parties.
In a somewhat unexpected (though maybe unsurprising) development, the idea of compensation for future climate change impacts in developing countries came up in the final week under calls for an international mechanism on “loss and damage.” A highly emotive issue linked to the lack of capital in the Adaptation Fund (see Timmons Roberts’s post, Climate Finance and Global Development Post-2012: Clearing the Fog) and the low level of ambition on developed country mitigation targets, this was a major stumbling block between Parties in the final days and hours. These discussions resulted in agreement on a work program next year and resolution at the subsequent Conference of Parties (COP-19), although it is unlikely developing countries (particularly the U.S.) would accept liability for future events, or agree to deliver finance in the form of compensation.

The Doha Climate Gateway at least left the door open for negotiations to begin in earnest on a post-2020 agreement that would cover all countries, with essentially all details still unresolved. The controversies of the past two weeks on finance and damage underscore that the fundamental tensions in international climate discussions are not fading quietly and the road to 2015 will not be easy. Under pressure, Parties revert back to entrenched positions on responsibility, ambition and obligation. It is centrally important at this stage of the discussions—before the endgame pressures are on—to realize that re-fighting these old battles within the international negotiations will not result in an outcome that will help the climate, and by extension all of us around the globe that depend on it. All key emitters, present and future, must soon take steps to reduce their emissions trajectory — the EU, U.S., China, India, Brazil and others. These steps must be rooted foremost in their own domestic policies, but those policies can be influenced by collective goal-setting and, yes, even international negotiation. The path to success, however, is to focus on constructive next steps for all to take, not to bludgeon those emitters and seek to assign liabilities. In that light, the coming year provides an opportunity for all Parties to walk through that flimsy gateway and discuss what real, concrete and measureable domestic actions they are willing to undertake as part of this genuinely collective effort.

Authors

Nathan Hultman
Claire Langley

Image Source: © Mohamad Dabbouss / Reuters

The Final Stretch of the Doha Climate Talks

Nathan Hultman and Claire Langley — Wed, 05 Dec 2012 15:49:00 -0500

Delegates to the 18th Annual United Nations Conference of Parties (COP) on climate change have so far spent over a week in Doha, Qatar but have made only slow and small progress. This inching result contrasts disconcertingly with recent reports indicating, on the one hand, that our earlier estimates of the severity of climate change may have been overly sanguine (as outlined by the World Bank in its Turn Down the Heat report); and, on the other, that global greenhouse gas emissions have continued increasing—seemingly inexorably (shown in analysis by the Global Carbon Project).

Negotiations have focused on a number of distinct tracks (see Doha Climate Conference: Key Issues Up for Negotiation), though none of them have been resolved over the first week. As ministers arrive toward the end of the session, pressure may build for conclusion on a few items. Three items, in particular, have attracted attention:

The Green Climate Fund (GCF) was established in earlier agreements but the initial seed funding from the GCF has been obligated. As such, there is considerable interest to replenish funds in the GCF, particularly from both developing countries most likely to benefit from this structure and from environmental NGOs. Donor countries have expressed their support for the GCF but have held their cards close for the first week: While funding is not explicitly linked to progress on other topics, it is always part of the bargaining process. It is likely that the ministerial segment of the COP will see some announcements of funding levels, but whether they amount to much may remain indeterminate if there is not sufficient reporting on those commitments. Our colleague Timmons Roberts examines these issues in more detail in Climate Finance and Global Development Post-2012: Clearing the Fog at Doha.

The obligations under a second commitment period of the Kyoto Protocol are also unclear. These discussions are highly visible but occur parallel to other negotiations. The U.S. remains outside of the Kyoto Protocol, and will continue to do so, while the large emerging economies have no emissions reductions obligations under it. As such, the Kyoto Protocol covers less than 20 percent of global emissions. Delegates decided to extend the Kyoto Protocol by instating a second commitment period at last year’s meeting in Durban, but have not yet settled the terms of the extension. (For example, should it be a five- or eight-year period? Should unused emissions allowances from the first period carry over into the second period?). A main argument for extending the Protocol is to allow the continuation of its mechanisms, such as the Clean Development Mechanism (CDM). The CDM allows emission-reducing projects in developing countries to tap into additional financing and has been a moderately successful element of the Kyoto Protocol.

Discussions on a new global climate agreement have begun in Doha, but, given the three-year negotiating timetable, much of the activity so far has taken the form of opening gambits. The Durban outcome last year set the deadline of 2015 to conclude negotiations on an agreement that would take effect by 2020. Failure to reach agreement on this timetable would mean that countries would still operate under the Copenhagen/Cancún agreements (see Figure 1), but questions do remain about whether the international community can do more than the simple pledging process that these agreements established.

Other areas currently under discussion are the overall “level of ambition” of mitigation targets, future financing contributions, and more technical negotiations on GCF governance, technology instruments and approaches to allow for the linking of national carbon market mechanisms.

Given the almost comically languid pace of negotiations at the COP, major breakthroughs seem unlikely. However, there are four key areas where a minimum amount of progress can still occur:

Parties should agree on the parameters for the second commitment period of the Kyoto Protocol. While extending the Kyoto Protocol has a limited long-term value, it is an important issue of trust and legacy of cross-Party cooperation for many developing countries. As such, deadlock on this topic has stalled progress on the other elements on the agenda. The first commitment period therefore should be brought to a close and the second commitment period could include an ambition clause, for instance, a midterm review to ensure future pledges are adequately in line with the latest scientific projections.

Parties should also close the discussions on the Long-term Cooperative Action (LCA) track, which is another holdover from earlier negotiations and is diverting attention from the 2015 agreement. It is essential that any outstanding key foundational elements from the Bali Action Plan (i.e., mitigation, finance, adaptation, technology transfer and capacity building) be taken up by another body in the UNFCCC if they cannot be fully addressed before the closure of this track.

Parties should agree to a timetable to start work on the new 2015 agreement, with a concrete work plan in place to ensure negotiations are ready to begin in earnest with the next major meeting in Bonn in June.

Donor countries should provide commitment for midterm financing to bridge the gap between 2013 and 2020. The U.K. has already offered new support beyond its 2010-2012 "Fast Start Finance" contributions, and other EU member states are expected to make similar announcements as the conference progresses (e.g., Germany and Sweden). Developing countries have signaled finance as a crosscutting issue in Doha and have highlighted compensation for loss and damage as a key demand, standing at odds with developed countries. Pledges to bridge the financing gap may help to temper these demands and build trust toward negotiating a new agreement.

While the Doha negotiations lumber along, one might hope that two new pieces of information might cause countries to reflect on the inadequacy of this pace. First, a number of studies in the past few months have indicated that our estimates of the climate impacts from our emissions may have been overly conservative. In other words, the climate may be more sensitive to changes in the atmosphere than we have been assuming for our policy planning. As just one example, recent rates of sea level rise have been accelerating at the upper end of the previous estimates, and the World Bank study mentioned above indicates a wide suite of impacts can be expected from warming even slightly above our (ambitious) 2°C warming target.

Secondly, the global emissions rate (tons per year) continues to increase rapidly. While some countries have been able to temper growth with fuel switching or increased deployment of renewables and efficiency, those reductions have been swamped by rapid rises in the past two years from China and other emerging economies. China, which only in 2007 drew even with the U.S. in terms of largest annual emissions, has now left the U.S. far behind, increasing its emissions by roughly 10 percent in 2010 and another 10 percent in 2011—giving China an annual emissions rate of roughly 10 billion tons of carbon per year, versus roughly 6 billion tons for the U.S. This is a remarkable rate of increase in just the past half-decade. Those increases, already for the largest single emitter globally, now mean that China’s per capita emissions are close to the EU-27 average, and the clip shows no sign of moderating. Other emerging economies are also growing quickly, particularly India, which is also rapidly deploying coal-fired electricity generation.

Taken together, these observations should underscore the fact that we most likely have less time to take significant steps—both internationally and domestically— than previously believed. Basically the climate is more sensitive to emissions than we thought, and we are increasing our emissions at a faster rate than we expected. Domestic policy to encourage the best from dynamic markets will be essential in this task, and internationally the negotiators in Doha should recognize that the principle of "common but differentiated responsibilities" is of a substantially different character now, in 2012, than it was when the Convention was first negotiated in 1992. At this stage, the international negotiations should seek to stem losses first by streamlining the process for future meetings and then by setting a focus on achievable near-term actions combined with long-term ambition that matches the magnitude of the challenge.

Authors

Nathan Hultman
Claire Langley

Climate Finance and Global Development Post-2012: Clearing the Fog at Doha

Timmons Roberts — Tue, 04 Dec 2012 17:52:00 -0500

For 15 years, climate policy wonks have been talking about “the post-2012 World,” describing the years after the end of the Kyoto Protocol’s “first commitment period,” which ran from 2005 to 2012. Now just three weeks away, the post-2012 world is actually much fuzzier than ever before. Just as we near the shore, a fog is descending.

In terms of reducing emissions, the Kyoto Protocol’s binding limits on greenhouse gas emissions was always applied to a small group of developed nations, excluding the United States, and several other major emitting nations. Kyoto’s “second commitment period” captures even fewer emissions than the first, with a smaller number of nations taking on binding targets, and debate continuing here in Doha over whether the second commitment period might be five or eight years long. The real solution of course is a global agreement, but negotiations to this effect are taking place under another track (the Ad Hoc Working Group on the Durban Platform for Enhanced Action, or ADP) with a potential agreement kicked down the road to 2015, for implementation by 2020. So expect three more years of fog on mitigation targets.

However there is no reason why climate finance should be a contributor to the haze. As developing nations become increasingly aware of the need to avoid dirty energy pathways and face the risks of a changing and uncertain climate, they need clarity on what support is available from abroad, and whether they can count on it. To address these huge challenges, planning needs to be long term. Otherwise, climate finance will fall into the trap of much of foreign aid, where agencies get approval very late and have to “push money out the door,” creating haphazard initiatives that lack coherence and long-term impact.

Along with the end of the first commitment period of the Kyoto Protocol, December 31, 2012 is also the end of the “Fast Start Finance” period, three years over which $30 billion was promised to build experience and institutions to deliver funding to vulnerable poorer countries to begin to develop green energy and adapt to climate risks. This funding pledge was made at Copenhagen, as part of the effort to keep negotiations going in spite of deep distrust and acrimony.

Over these past three years, something approaching the $30 billion has been delivered by the wealthy OECD nations, but the details of what actually arrived are not clear. Final reports are still coming in, but lacking is definitive evidence that promises for “new and additional” funding was provided (see my recent briefing with IIED, and another related briefing from Oxfam ).

Copenhagen agreed to provide funding that would “scale up” to levels “approaching $100 billion a year” by 2020. However no mid-term targets were ever specified for that scaling up. Basic math shows that to get from about $10 billion a year to $100 billion a year over eight years would require roughly an additional $11 billion each year to be “mobilized”. That would suggest we need $21 billion in 2013, $32 billion in 2014, and $43 billion in 2015, for a total of $86 billion. Recognizing financial hard times, the G77+China (the largest negotiating bloc in the UNFCCC, comprised of developing and emerging economies) has proposed a lower amount of $60 billion total over the next three years, of which a majority should come from public resources and be allocated to adaptation actions.

Climate finance discussions are headed to a shore blanketed with fog. As the U.N. climate negotiations move into their final days in Doha, there is still no certain finance stream that would start when “Fast Start Finance” ends on January 1, 2013 -- just days away. Developed nations are resisting a concrete pledge, with countries like the U.S. only saying that the funding won’t go over a “fiscal cliff” in January, but without further specifics.

The Doha negotiations are dizzyingly complex, with seven separate negotiating tracks, and a lack of clarity on the resolution of two key tracks that were created in Bali in 2007 to try to bring the United States and other key nations onboard (the AWG-KP and AWG-LCA). But just three areas require attention to be resolved for finance to become “adequate, predictable, and reliable,” as is needed for developing countries to plan a greener and safer future. These are the funding stream for the now 10-year-old Adaptation Fund, the functioning and filling of the Green Climate Fund, and a clearer picture on long-term finance and the role of the standing committee. The importance of these three areas at Doha and what is needed going forward is as follows:

The Green Climate Fund (GCF) was created with much fanfare in Durban last year, but has taken forever just to get its board appointed and its rules laid out. As we move into the final days in Doha, the GCF is still only partially operationalized and has only $3 million in start-up funding committed. The GCF needs to be fully functioning by this time next year, and needs major pledges and a reliable finance stream to avoid it becoming another empty “placebo fund.”

The Adaptation Fund was meant to be supported by a levy on Clean Development Mechanism (CDM) projects, but demand for CDM credits has collapsed with the end of the first commitment period of the Kyoto Protocol with no certain second commitment period beyond 2012. This is happening just as the fund is hitting its stride: direct access is now approved for 14 countries, and 25 adaptation projects have been approved, with $160 million allocated. Meanwhile incomes are a slim fraction of what was projected when CDM credits had real value.

So now for the Adaptation Fund it’s back to the “bad old days” when funds and recipients await pledges and voluntary contributions from generous developed countries (like Spain and Sweden), while others are holding back or only giving through bilateral channels. My analysis with IIED of the “Fast Start Finance” reports of 10 nations/groups showed that only 2 percent of that funding was given through U.N. channels like the Adaptation Fund and the also-underfunded Least Developed Countries Fund.

The new Standing Committee awaits its marching orders, which will include the substantial task of assessing the needs for funding among developing countries and should include recommending how those needs are actually going to be filled. In order to generate stable and adequate funding for integrating climate and development, a potential funding source has to include “Innovative Sources” of Long-term Finance. These should include finally taxing international shipping and airline flights (which somehow still have massive loopholes) and possibly an international transaction tax. While politically difficult, these are perhaps the only places where adequate and predictable financing rests outside national treasuries, who are hoarding funds since the financial crisis.

One final element is needed to truly lift the fog of finance going forward: transparency. Whether it is in the Standing Committee or elsewhere such as in the Subsidiary Body for Scientific and Technological Advice (SBSTA) track, there has to be developed rigorous standards for defining what counts as climate finance, and where each climate project claimed by contributors is reported in a standardized format. This “Measurement, Reporting and Verification” (MRV) was required of poor nations on their mitigation pledges, and should be required of developed countries on their finance pledges. As it stands now, there may be no formal reports on climate funding until 2014. This is no way to build trust, and certainly no way to foster stable long-term development planning. It’s time to lift the fog in Doha.

Authors

Timmons Roberts

Economics of Carbon Taxes

Barry Rabe — Wed, 14 Nov 2012 14:16:00 -0500

The idea of enacting a carbon tax to address climate change and fiscal woes may be as plausible as relying on new leadership to steer the Chicago Cubs to their first world championship in over a century.

But now that another baseball season has come and gone with no changes on the North Side of Chicago, national fiscal season emerges with yet another return to the question of imposing some form of tax on some forms of fossil fuel. In this case, could such a tax be part of a fiscal cliff deal?

The carbon tax idea has been around for a long time, backed by an extensive and ideologically diverse set of economists. This includes prominent economic advisors going back to every presidential administration since that of Richard Nixon, though their public embrace of the idea tends to increase markedly after departure from public office. Even diverse think tanks are getting back into the act, reflected in yesterday’s “economics of carbon taxes” summit at the American Enterprise Institute.

Indeed, that illustrates the main rap against carbon taxes: Good economics, awful politics, public policy non-starter. Why take a risk on the best available policy option when the political costs are likely to be severe? And why not revert to third- or fourth-best policy options that obscure the costs and thereby curry greater favor? The avalanche of state and local climate initiatives over the past decade largely reflect this pattern, with carbon tax aficionados most likely to note much earlier experience from the Nordic countries as their models.

But that is not the entire story. Indeed, perhaps the most prominent example of a carbon tax in the past decade involves one Canadian province. Like the United States, Canada produces a very high rate of per capita greenhouse gas emissions. Like the United States, it has struggled mightily to formulate any federal policy on climate change. But Canada is a very decentralized federal system and some provinces have operated outside the conventional policy box, just like some states under American federalism.

Enter British Columbia. If this province seceded from Canada and joined the United States, it would clearly be a blue coastal state, somewhat akin to neighboring Oregon and Washington. But this is hardly a case in which environmental advocates seized power and imposed their will. Key design elements and features follow:

Center-right Political Push. The push for a tax that would steadily ramp up to $30 per ton of carbon dioxide over a four-year period came from the Liberal Party, the center-right governing party. It faced stiff opposition from the left-center New Democratic Party, which endorsed virtually every climate policy option except a tax. This was approved in 2008, the Liberal Party won subsequent re-election, and continues to hold power despite a change in its premier. The tax reached its peak of $30 in January 2012, roughly equivalent to 27 cents per gallon on gasoline and also applied to other fossil fuels. (See Shi-Ling Hsu’s The Case for a Carbon Tax for a fuller discussion)

Targeted Revenue Use. Most of the focus on carbon taxes has emerged from the economics community, looking at competing designs and likely economic consequences. Far less attention has been paid to how revenue might be allocated—and whether or not that makes a political difference. British Columbia systematically linked cost-imposition (the tax) with public benefits. This began with a small rebate check to all citizens but followed with a revenue-neutral approach that involved a commensurate reduction in other provincial taxes. There is ample precedent in the United States for linking new energy taxes to demonstrable benefits, ranging from Dwight Eisenhower’s use of gasoline excise revenues to Sarah Palin’s allocation of funds from her oil windfall profits tax overhaul in Alaska.

Rapid Implementation. Imposition of the first wave of the tax was almost immediate, building on established tax platforms and necessitating virtually no staff expansion. Indeed, the overseeing minister faced a 15 percent salary penalty if key implementation requirements were missed. This is greatly at odds with many other climate policies, such as California which is about to enter its seventh year of deliberation on how to implement its cap-and-trade program and how to use any revenues generated via auction.

Measurable Impacts. The best analysis to date suggests that the tax has had a demonstrable impact on reducing fossil fuel use and emissions. In turn, the province has experienced higher GDP growth than the average rate among provinces during this period, confirming the Nordic experience that a unilateral energy tax can coincide with economic growth.

No other province or state has rushed in to replicate the British Columbia model and it may remain a single-case fluke in North America. But if carbon taxes ever shift from the agenda of former public officials to current ones (including newly-elected ones facing a fiscal cliff), it offers numerous lessons on political feasibility. These might prove particularly useful for newly-elected officials eager to avoid a fiscal cliff. Even the Chicago Cubs need to get ready for next year, just in case.

Authors

Barry Rabe

Invest But Reform: Smarter Finance for Cleaner Energy: Open Up Master Limited Partnerships and Real Estate Investment Trusts to Renewable Energy Investment

Felix Mormann and Dan Reicher — Tue, 13 Nov 2012 00:00:00 -0500

Master Limited Partnerships (MLPs) and Real Estate Investment Trusts (REITs)—both well-established investment structures—should be opened up to renewable energy investment. MLPs and, more recently, REITs have a proven track record for promoting oil, gas, and other traditional energy sources. When extended to renewable energy projects these tools will help promote growth, move renewables closer to subsidy independence, and vastly broaden the base of investors in America’s energy economy.

Allowing renewable energy investment through MLPs and REITs would have a wide range of positive effects:

MLPs and REITs would give renewable energy projects access to greater pools of capital. As a result, renewable energy would no longer pay scarcity prices for project capital because capital markets would be able to better align risk with return, based on a project’s actual, long-term revenue
With current financing charges driving up the cost of a project’s electricity by as much as 50 percent, MLPs and REITs would go a long way in cutting the overall cost of renewable power
Granting renewable energy the same access to low-cost capital that conventional energy has enjoyed for decades would help level the playing field. Unlike other leveling approaches, including a pending Senate bill to eliminate MLPs and other conventional energy subsidies altogether, allowing MLPs and REITs for renewables would encourage rather than stifle sustainable growth in America’s energy economy and other sectors
From an international perspective, extending MLPs and REITs to renewables would promote American competitiveness in the global clean energy race. Over time, technological innovation brings down the equipment cost of renewable power projects across the globe. However, financial innovation through the extension of MLPs and REITs to renewables would benefit renewable energy deployment in the United States immediately, thereby strengthening America’s clean energy industry at a critical moment
MLPs and REITs would also open an attractive secondary market for renewable energy investment by allowing the entry of new investors beyond a project’s initial phase of tax benefits and enhancing liquidity in the renewable power marketplace
And just as REITs were originally designed to encourage small-scale individual investment in commercial real estate, so would MLPs and REITs enable individual investors to profit from a renewable energy project's returns. With publicly traded shares, MLPs and REITs could allow millions of Americans to invest in the nation's energy future.

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Authors

Felix Mormann
Dan Reicher

Strengthen Federalism: Enact Legislation Supporting Residential Property Assessed Clean Energy Financing

Devashree Saha — Tue, 13 Nov 2012 00:00:00 -0500

Congress should enact legislation that supports residential property assessed clean energy (PACE) programs in the nation’s states and metropolitan areas. Such legislation should require the Federal Housing Finance Agency (FHFA) to allow Fannie Mae and Freddie Mac to purchase residential mortgages with PACE assessments while at the same time providing responsible underwriting standards and a set of benchmarks for residential PACE assessments in order to minimize financial risks to mortgage holders.

Along these lines, congressional support of residential PACE programs would:

Send a strong signal that the U.S. remains fiercely committed to investing in smart, innovative financing structures that can catalyze the energy retrofit market

Enable states and local governments—many of which suspended their residential PACE programs in the wake of the FHFA ruling—to design and implement such programs in their communities

Save money for homeowners by reducing energy costs

Create new jobs and career opportunities in both the energy efficiency and renewable energy industries

Reduce greenhouse gas emissions and so produce significant climate benefits

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Authors

Devashree Saha

On Proposition 37 and Genetically Modified Foods

William Y. Brown — Sun, 23 Sep 2012 10:30:00 -0400

Editor's Note: In a letter to the editor of The New York Times, William Y. Brown responds to Mark Bittman's September 15, 2012 op-ed on California's Proposition 37, which would require labeling on foods containing genetically modified organisms (G.M.O.'s) and prohibit the marketing of them as "natural."

We need genetically modified organisms. They keep insects and weeds from corn and soybeans. New crops can resist droughts, floods and heat coming with climate change and provide vitamins and nutrients. Nothing erodes life and peace more than poverty, and hunger is its expression. DNA is being sequenced, synthesized and understood with increasing rate and decreasing cost. We need to tap that.

G.M.O. regulation is deficient in the United States. Some products aren’t covered, and the system is incomprehensible. We need a new federal law. But labeling is just toying with what government should do rather than fixing it. It might feel good not to buy a product labeled a G.M.O., but we can do better.

Authors

William Y. Brown

Publication: The New York Times