Developing a Post-Kyoto Policy Framework

Introduction

In the Kyoto Protocol, developed countries (Annex B Parties) commit to emissions reductions. These are considered important first steps towards the deep emission reductions that are needed to meet the ultimate objective of the Convention. Negotiations on a second commitment period (2013 and thereafter) are expected to be formally initiated in 2005; however, informally they can be considered ongoing. It is hoped that an agreement would be reached well before the start of the first commitment period in 2008. However, these negotiations present tremendous challenges for policy makers, and stalemate is imminent. This research project will help to identify these problems and recommend policies that can help overcome them.

Purpose

The project will assist policymakers in their negotiation efforts to establish a broader consensus among key actors on what is achievable and how to proceed in the negotiations. It goes beyond "issues& options" by providing concrete policy recommendations on the basis of a discussion of alternative scenarios for how a post-Kyoto regime can be developed. Quantitative model studies of the proposed scenarios, together with discussions among the authors, will provide the first in-depth study of the feasibility of policy scenarios for the second commitment period negotiations.

The project will benefit from intensive and cooperative discussions among key researchers from Europe, Japan, China and the USA, as well as input from a range of stakeholders from a number of workshops planned for 2003.

Outline of the Report

Executive Summary

1. Introduction
The current standing of the Kyoto Protocol and recent developments for the post-Kyoto process, in particular the political situation governing the negotiations, will be described briefly. Special attention will be paid to a review of options for moving forward, including an overview of the key actors and approaches in this process.

2. Crunch Issues
Narrow down the discussion and focus on crunch issues that have to be dealt with to facilitate negotiations. These will include inter alia the level and type of participation including rights and obligations, with a special focus on emission paths compatible with long-term reduction requirements, developing country participation; taxonomy of targets, and rules and guidelines for target setting; and supporting policy instruments.

3. Policy Scenarios
All scenarios will address the following common questions:

3.1 Marketing Incentives Scenario
This scenario aims to deepen and widen the binding Kyoto commitments by offering emissions trading market incentives. Key elements include: continued use of the architecture of the first commitment period, with absolute targets for participants, negotiated through 'horse-trading'. Assistance (technical and financial, Montreal Protocol type) is used to increase participation. An expanding GHG trading regime is characterised by an increasing number of parties with emission targets and low implementation costs as "generous" targets are set for new parties in order to increase participation.

3.2 Integrity Scenario
This scenario aims to deepen and widen Kyoto binding commitments by agreeing clear and transparent rules with maximum integrity of the regime. Key elements include: participation through binding targets is limited, with stricter absolute targets. There are clear rules for "graduation", or participation by developing countries at higher income; and a strong policy-and-measures regime for outsiders. Price levels in the GHG market are kept high to encourage climate-benign investments.

3.3 Orchestra Scenario
This scenario aims to deepen and widen Kyoto Protocol through multiple policy instruments, without putting the utmost emphasis on binding targets. Key elements include: a dual- or multiple-track approach is available for Parties in their choice of commitments; this could extend to possibility of having several protocols for the climate regime; there are both binding and non-binding targets; the target-setting process is guided by sector-wise analysis on GHG intensity. The carbon price falls between scenarios 1 and 2. The effectiveness of the regime is secured by multiple instruments, including: mandated submission of plan, policy and measures by Parties without binding targets; funding to developing countries; commitment by developed countries to promote technological innovations, substantive review of policy and measure by third Parties.

3.4 Sustainable Development Scenario
This scenario aims to address sustainable development concern of developing countries as much as possible while accommodating stakeholders from developed countries.

4. Quantitative Model Analysis of Scenarios
Quantitative models will used to analyse how the scenarios may look like in quantitative terms. With such efforts, we expect that the answers to the key common questions raised at section 3, i.e. "What is it? How to get there? and How effective is it?" are more concrete. A model will analyse the causal pathway how the climate regime may evolove along with the scenarios. A model will compare the distributional effects of the three policy scenarios. In particular, it will be discussed how the various scenarios will affect: emissions trends, the overall costs of reducing emissions, carbon prices and the costs and benefits for the various actors. An important aspect will be discuss the incentives created by target setting and emissions trading, and on this basis discuss the feasibility of various approaches for the negotiations.

5. Policy Implications/Discussions
The policy scenarios are discussed among the authors. Will the scenario meet the demands of the crunch issues identified in Chapter 2? How feasible are the scenarios? Agreements and disagreements are elaborated upon.

6. Conclusions and Policy Recommendations
Conclusions are drawn and recommendations are made for the political process needed to reach an agreement on the second commitment period.

Communication With Stakeholders

The project will target key actors in the Kyoto regime. These will include governments worldwide, with active participation by various stakeholders in a number of workshops planned for 2003. An active networking strategy will be pursued, utilising the range of contacts of all the project participants.

There will be presentations and discussions at the workshops in Europe, Japan and China. Important feedback to the process is expected from the presentation and debate planned for the Subsidiary Body meeting in Bonn in June. The activities of the first year will culminate in the presentation of the report at COP9 in Milan in December. There is also the possibility to publish individual papers under the same theme.

Workshops planned for 2003:

The Project seeks to be a core activity of the International Human Dimension Program/ Institutional Dimension of Global Environmental Change (IHDP/IDGEC), and will most likely be authorized as such. Inputs and guidance from the Scientific Steering Committee (SSC) will also benefit this project.

Project Participants

Kristian Tangen is Research Fellow at the Fridtjof Nansen Institute (FNI), Norway. He is widely recognised as a leading international expert in the field of climate change policy, and has in-depth knowledge of the international negotiation process, domestic policies, and the distributional effects of implementation of climate change related policies. His current research focuses in particular on the use of the flexibility mechanisms in climate change policies. He has published several articles and books on climate policies in Russia and China, and is an active participant in several networks on international climate change policy research.

Taishi Sugiyama is Senior Researcher at the Central Research Institute of Electric Power Industry (CRIEPI), Japan. He is author and co-author of many books, academic papers, and journalistic articles. He has been a member of the Panel to Recommend Draft Simplified Modality and Procedures of Small Scale CDM that made recommendations to the Executive Board of Clean Development Mechanism of the UN Framework Convention on Climate Change in 2002. He also serves as a member of Scientific Steering Committee (SSC) of International Human Dimension Program/ Institutional Dimension of Global Environmental Change (IHDP/IDGEC) His latest publication in English includes The Russian Green Investment Scheme (Climate Strategies Network, 2002) co-authored with Kristain Tangen et.al.

Dr. Axel Michaelowa is Head of the Programme "International Climate Policy" at the Hamburg Institute of International Economics (HWWA), Germany. He has been analysing climate policy issues since 1994 and focuses on the design of the Kyoto Mechanisms. The relevance of interest groups on different levels of climate policy, especially in the EU context, is another field of interest. He is widely recognised as a leading international expert in the field of climate policy, and has published widely and extensively on several aspects of the climate policy agenda. Hamburg Institute has been an accredited observer of the UNFCCC negotiations since COP 1 and has many links to the different stakeholder groups. Michaelowa has advised among others the World Bank, UNDP, UNEP, the German government and the UNFCCC secretariat on climate change policy issues, particularly the baseline issue. Currently, he is strongly involved in the German capacity building programme for CDM host countries, focusing on India, Indonesia and Tunisia. Linking academic research, policy proposals and consulting of companies is a declared aim of Michaelowa´s programme. He is chair of the Project Committee of the Climate Strategies Network.

Prof. Jiahua Pan is Senior Fellow and Executive Director of the Research Centre for Sustainable Development at the Chinese Academy of Social Sciences (CASS), China. He has published extensively on the economics of sustainable development and on climate change policies. Prof. Pan was one of the co-editors and a lead author of the IPCC Third Assessment Report. His presentation at the Sino-Norwegian Workshop on Equity, Development and Climate Change Mitigation in April 2002 outlined the rationale behind emissions demand in China for the fulfilment of human development potentials. In November 2002 CASS organized a Symposium on the Kyoto Protocol and Beyond, with broad international participation. His latest paper on emissions demand for fulfilment of human development potentials was published in the journal Social Sciences in China (the highest academic journal in China in the areas of social sciences and humanities) and an English version was made available at COP8 in New Delhi November 2002.

Henrik Hasselknippe is Research Fellow at the Fridtjof Nansen Institute (FNI), Norway. He has been working in the field of energy and environment since 1997 and on international climate change policy since 1999. He has advised among others the Confederation of Norwegian Business and Industry (NHO) and the Netherlands government on these matters. His latest publication on the emerging international systems for greenhouse gas emissions trading and transfer will be published in Climate Policy in Spring 2003. Hasselknippe will be the coordinator of the project.