Levi: Modest Results From Bali’s Heated Climate Conference

Michael A. Levi, CFR fellow for science and technology, says the Bali conference on climate made some headway on deforestation and funding to help poor nations adapt to the effects of climate change. But Levi says it is probably too soon to attempt agreement on binding emissions targets, especially with the Bush administration—a chief opponent of binding caps—entering its final year. Regarding India and China, Levi says binding caps are not feasible but improving efficiency in both countries could start them on the road to emissions controls.

Delegates from around the world have been in Bali working on a road map for action after the Kyoto Protocol expires. Canada, Japan, Russia, and Australia joined the United States in opposing mention of emissions cuts of 25 percent to 40 percent below 1990 levels by 2020. The U.S. isn’t a surprise, but what’s going on with the others?

Every country has its own challenges involved in meeting reductions targets. Canada is well away from its Kyoto targets and it’s not going to meet them. The United States is well away from what its targets would have been. Russia doesn’t necessarily want substantial progress on emissions reductions. It has a thriving economy right now based on fossil fuel exports, and Japan has the best energy productivity of any country essentially in the world, which makes it relatively difficult for it to squeeze out more. So each country comes with different reasons for being hesitant about quick, deep cuts.

There’s also, I’m sure, concern about separating the targets too much from the methods and deciding on goals before looking at strategies, rather than exploring the two parts in tandem. For some countries, the opposition is for the specifics but not necessarily for the principles of some sort of targets or caps. For other countries, like the United States with the current administration, the opposition is to the existence of caps in and of themselves, regardless of what the numbers are.

There’s also been talk from countries like Canada about making binding emissions cuts for both developed and developing nations. What effect will it have on the process?

If we force ourselves into a model where all countries need to adopt binding emissions caps, we’re going to end up with a lowest common denominator outcome. Countries will adopt binding caps that are meaningless. There’s confusion at some level between capping emissions and having binding emissions caps. I suspect that there are a lot of countries that would be willing to take much more ambitious goals on if they weren’t formally binding. And in particular when it comes to developing countries like China, focus on the type of instrument rather than on the level of ambition can be dangerous.

Many countries are having trouble, as you said, meeting their Kyoto targets, which on average is about 5 percent below 1990 levels by 2012. What realistically can industrialized countries accomplish in the next two decades as far as emission cuts?

Countries may have misestimated where they were going as far as emissions were concerned and as a result misestimated what they would have to do to bring them down. So Europe, for example, has a cap on emissions from certain large emitters, which gives them a certainty in reductions. But other parts of the economy aren’t covered by the European emissions trading system. So one can set off in a path [toward] reductions and those reductions can be feasible but you may not reach them if you don’t have the right policy instruments in place.

In Europe, there isn’t necessarily a scramble to adjust policy instruments to meet those goals because they probably will meet them by purchasing emissions credits from developing countries. Japan is likely to do the same. But just because a country has not been able to meet goals does not mean that it’s somehow physically impossible or economically ruinous to do that.

So what about developing nations? Is it feasible to have them reduce their emissions?

It’s not going to be feasible to have China and India reduce their emissions. Their economies are growing very quickly. It is feasible to have these countries reduce the amount of emissions required to produce a unit of [gross domestic product], which we call emissions intensity. And China in particular already has ambitious targets for reducing emissions intensity. There are a lot of inefficiencies in its economy and in its various approaches that could be squeezed out; the challenge there is actually putting these goals into practice. The Chinese central government is not as powerful in a lot of these areas as many imagine, in power production in particular. Governance is largely at the local level. So they may be very ambitious goals, whether in building efficiency or in fuel efficiency for vehicles or in pollution controls on power plants. But if the state can’t get companies to meet those goals, they don’t matter all that much.

Now, you can ask the question: “Would the state be willing to impose those goals if they’d known that they would have to actually be met?” That’s a question that is hard to answer before we actually try to get there. But bottom line: There is a lot of room for improvement in countries like China or India that they would find economically beneficial. There are things that will ultimately need to be done to reduce emissions that cost money. But there are a lot of things, a lot of first steps that pay back over relatively short time and are positive economically, so long as the players in the game have the right information and know what steps are worth taking.

There’s been a lot of haggling on this issue of transferring clean technologies to developing nations. As I understand it, it was provided for in the Kyoto Protocol but hasn’t really happened yet. Countries like China have said “we would like policy mechanisms from developed nations such as tax breaks” to encourage companies to make such transfers. Why are industrialized countries having such trouble with this?

There has been some technology transfer. We saw recently a deal between France and China, a transfer of nuclear power technology. So things are happening. It’s hard to see, though, particularly in the current political climate, the U.S. providing companies tax credits for selling technology to China but not subsidizing the same sort of technology sales to American companies that in the future will likely have binding commitments to reduce emissions.

There’s another dimension here. There’s a difference between what countries may be willing to do unilaterally and what they’re willing to commit to as part of an international process. I would give incredibly small chance of a country committing to subsidize these sorts of things with any quantitative commitments as part of something that’s binding, [something] that they can’t alter depending on the relationship with particular countries, depending on how the world evolves, depending on how cheap, for example, these technologies become. But they may be more willing to make particular steps through unilateral measures.  They give them flexibility and already there are environmental considerations incorporated into various U.S. export promotion bodies. There could be reforms within these various entities that could shift their approach so that they’re more effective in promoting transfer technology in a way that it benefits American business.

What’s been accomplished so far on initiatives of deforestation and on an adaptation fund for developing nations?

These are the two big areas where we’ve seen some progress during the Bali meetings. Deforestation contributes an enormous fraction of the world’s greenhouse-gas emissions. Under the Kyoto Protocol there are provisions to provide compensation to reforestation even though those have not been used extensively. There are no provisions to provide compensation for avoiding deforestation. In a large fraction of cases deforestation has economic benefit. It provides pasture land or crop land or it provides revenue through timber sales. So, there does need to be some sort of mechanism if there going to be incentives for key countries like Brazil and Indonesia to avoid deforestation on very large scales.

There has been progress announced in Bali with the World Bank setting up a fund that would direct money to avoid deforestation. It can plug into any mechanism that was created in the future. It’s relatively small, but in the long term there will need to be considerably more money. In the short term, there are a lot of difficulties to work out. It’s hard to quantify the emissions from deforestation. It’s hard to deal with other issues. For example, if you pay a country not to deforest in the following five years and they cut down all the trees anyhow, what have you paid for? Nothing. So, starting slow, getting things right, with a relatively small fund may be a very useful way forward to go.

On adaptation, regardless of what we do to lessen the potential effects of climate change, there are going to be consequences of what we have already done and what we will do in terms of emissions over the following decades. And these are going to hit poor countries harder than developed countries. Though there will be effects throughout—the leading climate legislation in Congress now has adaptation funds for domestic application in the U.S. There is progress again [in Bali] on building up a capacity to deliver a fund for adaptation. There’s the Global Environmental Facility that will channel some of these funds. Various countries have made contributions [to the fund]. Ultimately though for adaptation funding to be effective, it will probably have to be mainstreamed into the rest of official development assistance. There really is a danger of very important, very immediate needs other than climate adaptation in the developing world to be pushed aside.