Author Archives: Climate Strategies/Climate Policy

Beyond Facilitative Accountability in the Paris Agreement: Three Additional “Accountability Pathways”

By Sylvia Karlsson-Vinkhuyzen

During the UN Climate Conference of the Parties (COP 23) in Bonn, the fourth workshop of the Facilitative Sharing of Views (FSV) was held as part of the 47th meeting of the Subsidiary Body for Implementation (SBI). Here, five developing countries (non-Annex I), after submitting reports for technical review, presented their reports on the development of domestic MRV systems and the mitigation policies they have adopted. This was followed by an opportunity for the other states to ask questions.

This peer-to-peer exchange, and its equivalent for Annex I countries in the form of the Multilateral Assessment process, is to provide learning for what the development of the ‘facilitative’ accountability framework for individual countries under the Paris Agreement may look like (see Article 13, paragraph 3). In the same way, the Facilitative Dialogue in 2018 is a kind of practice run for future global stocktaking, aimed at prodding countries to adjust their Nationally Determined Contributions (NDCs) upwards, in order to keep the overall Paris Agreement goals in sight.

In a recently published paper in Climate Policy,  we argue that additional accountability processes, formal and informal, and primarily at domestic levels, have stronger potential to entice compliance from states. We also systematically explore four pathways of accountability.

The first is the global pathway of peer-to-peer accountability among states within the regime itself. The effectiveness of this pathway – with the facilitative tools it will employ – depends considerably on whether compliance with the Paris Agreement (beyond the procedural legal obligations) becomes the norm. Countries want neither to lose face nor to be left behind, and they will work harder to do their best if others they respect do the same. Only a limited number of countries will ignore being internationally named and shamed, and others will still want to show moral leadership.

The second pathway goes through national institutions and, for EU member states, also via European institutions, such as the parliament, inspection agencies and other legal bodies. They can play a key role in formulating the national contributions to reduce CO2 emissions and to develop effective policies and legislation.

The third pathway is enacted through the public such as individuals, civil society organisations and scientists. At the COPs, on international forums and over social media, many civil society organisations assess countries on their efforts and alert them to their responsibilities. The power of this type of ‘accountholding’ from these non-state actors depends on how well they can perform their own research, set up campaigns and win the support of policymakers. It is also essential that traditional media report on these activities and that governments give citizens plenty of scope to manoeuvre and rebel.

Finally, executive governments might hold themselves to account, for example through their own internal systems of monitoring and evaluation of policy effectiveness and efficiency. The functioning of this pathway will largely depend on the kind of administrative traditions and cultures existing in each state, and what provisions for this they include in their implementing climate laws and policies.

These four pathways invariably interact in various ways and form an intricate web of ‘watchdogs’, arenas and mechanisms through which accountability for state obligations under the Paris Agreement can be enacted (both legal and moral). We see plenty of potential for comparative research of these pathways and the web they weave, which can provide the foundation for identifying ways to improve both their effectiveness and legitimacy.

About the Author

 

Sylvia Karlsson-Vinkhuyzen is Assistant professor in the Public Administration and Policy Group at Wageningen University and Member of Climate Strategies.

 

Note: this blog draws partly on a blog posted on the Wageningen University website. The original post was part of the University’s efforts to share research with the public via advertisements accompanied by a blog. Further information at: http://www.wur.nl/en/In-the-spotlight/show-in-the-spotlight/More-roads-lead-to-compliance-with-the-Paris-Climate-Agreement.htm

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Realising Fossil Fuel Subsidy Reform through Trade Agreements

By Cleo Verkuiji, Harro van Asselt and Peter Wooders.


STORY HIGHLIGHTS
  • When the WTO’s eleventh Ministerial Conference meets in December 2017, Members can make a significant contribution to the 2030 Agenda by calling for new rules to curb fossil fuel subsidies.
  • Fossil fuel subsidy reform could significantly reduce global greenhouse gas emissions and free billions in public funds that could be reallocated to other development priorities.
  • WTO Members have several options to address fossil fuel subsidies, including: providing technical assistance and capacity building; improving transparency; making reform pledges; adopting a political declaration; and including fossil fuel subsidies in the WTO’s list of prohibited subsidies.

With 2017 rapidly drawing to a close, several international summits this year can still significantly advance sustainable development. Hopeful observers will naturally look closely at any progress made at the 23rd UN Climate Conference in Bonn in November, as well as the upcoming UN Environment Assembly in Nairobi in December.

Yet another key summit is likely to receive much less attention in the climate change and sustainable development communities: the World Trade Organization’s (WTO) eleventh Ministerial Conference (MC 11). When meeting in Buenos Aires this December, WTO Members can leave a real mark on the goals of the 2030 Agenda for Sustainable Development and the Paris Agreement by calling for new WTO rules to curb government support to fossil fuels.

Fossil Fuel Subsidies, Sustainable Development and Trade

The benefits of fossil fuel subsidy reform are undeniable. It is a vital piece of the climate change puzzle, estimated to cut greenhouse gas emissions by some 11% by 2020 if implemented in 20 countries. But it can also positively impact other SDGs. Removing the billions of dollars put into fossil fuel consumption and production each year can relieve the burden on the public purse, allowing for the re-channeling of funds to other development priorities, such as health, education and public infrastructure. Moreover, removal of fossil fuel subsidies can help level the playing field, given that subsidies are known to affect the rate and timing of development of new fields or mines.

But while international forums such as the G 20, Asia Pacific Economic Cooperation (APEC), the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF) have begun to take up fossil fuel subsidies, their lack of consideration at the WTO thus far has been conspicuous. Though cases related to more than 10 renewable energy support measures have been filed under the WTO dispute settlement mechanism over the past decade, not one fossil fuel subsidy has been challenged.

With momentum building for the international trade community to engage with this critical sustainable development issue, MC 11 offers a clear opportunity to change course.

Why the WTO?

Skeptics may interject: “Why should the WTO get involved when fossil fuel subsidies are already addressed elsewhere?” While other international organizations have put fossil fuels subsidies on their agendas, the persistence of such subsidies worldwide shows that more still needs to be done. The WTO would not be the only organization addressing the issue, and would need to act in concert with others.

In fact, owing to its wide membership, history of promoting subsidy reform in other sectors, and well-established dispute settlement system, the WTO is one of the most suitable international forums for doing so. The Organization was explicitly established to ensure that economic progress is achieved in accordance with sustainable development. Moreover, the 2030 Agenda recognizes trade as an enabler for achieving the SDGs. SDG 12 (Responsible consumption and production) specifically addresses fossil fuel subsidies.

Precedent for such engagement already exists, as the WTO continues to consider the topic of environmentally harmful subsidies in the fisheries sector – with hopes that rules in this area will be agreed upon at MC 11.

What Can be Done?

In a recent policy brief, we show that WTO Members can address this gap in several ways.

One approach would be for WTO Members to extend the list of prohibited subsidies of the Organization’s Agreement on Subsidies and Countervailing Measures (ASCM) to include certain types of fossil fuel subsidies, for instance those with particularly adverse climate change or trade impacts. A “softer” approach that might be more feasible in the short-term would see Members voluntarily pledge to reduce their fossil fuel subsidies, extending existing commitments and processes under the G20 and APEC. Progress could be tracked through regular reporting and review.

However, not all options need to come in the form of new rules or commitments. Members could begin by offering technical guidance and capacity-building support on how to reform fossil fuel subsidies. Given existing shortfalls in the Organization’s subsidy notification system, governments could also agree to take steps to improve the transparency of fossil fuel subsidies. This option underlines a key role for any international organization in addressing fossil fuel subsidies: sharing information on the extent to which these subsidies are used.

Concerns can be raised about the impacts of subsidy reform on energy prices and energy access for the poor. Although it should be noted that in many cases fossil fuel subsidies benefit the richer parts of society, it would be important for rules and guidance to factor in such development concerns, for example by including an exemption for subsidies that are proven to target the poor.

“The time is ripe for progressive countries to take the first small steps to help achieve a “win-win-win” situation for sustainable development, climate change and trade at the eleventh WTO Ministerial Conference in December 2017.”

Agreeing on the most suitable option – or combination of options – to pursue will take time. But at MC 11, a first important step would be for Members to signal their willingness to take up fossil fuel subsidy reform in the WTO’s work. This could be done, for instance, through a political declaration reaffirming the commitments made in the SDGs and the Paris Agreement, or recognizing the general need for new rules in this area.

Importantly, this effort need not be taken up by all WTO Members simultaneously. A coalition of the willing could decide to lead the way. The time is ripe for progressive countries to take the first small steps to help achieve a “win-win-win” situation for sustainable development, climate change and trade at MC 11.

This blog was originally posted on the IISD SDG Knowledge Hub blog.

About the Authors

 

Cleo Verkuijl is Research Fellow of Climate Change Policy at the Stockholm Environment Institute (SEI).

 

 

Harro van Asselt is Senior Research Fellow at the Stockholm Environment Institute (SEI).

 

 

Peter Wooders is Group Director of Energy at the International Institute for Sustainable Development (IISD).

What if Negative Emissions Fail at Scale?

By Alice Larkin (University of Manchester, Tyndall Centre for Climate Change Research)

It is recognised in the climate science community that literature and research informing the Intergovernmental Panel on Climate Change (IPCC) and relevant policymakers is heavily weighted towards Integrated Assessment Modelling (IAM) work. This prioritises emission-cutting solutions that can be more easily characterised and quantified over those that are challenging to evaluate precisely, such as how society may respond to a major policy shift.

Yet putting options into the ‘too difficult to quantify’ box, is a huge mistake, as my co-authors and I argue in a recent paper published in Climate Policy. Coupled with our desire to precisely quantify, and communicate, numbers, it is important to recognise that there appears to be an optimistic bias that assumes future technologies will solve present-day social and environmental problems.

Perhaps in most wealthy people’s minds, this would be the ideal – no need to disrupt ‘normalised’ lifestyles that include frequent flying, high levels of material consumption, an ability to have what we want, when we want. It is then easy to see why Negative Emissions Technologies (NETs) fit neatly into the climate mitigation discourse. They could lead to net negative emissions in future, avoiding a need to invest political capital in more unpalatable areas such as lifestyle change, and reducing consumption.

But what if NETs fail at scale – what then? Our article argues that they are being so heavily relied upon to inform policymakers, that we are losing sight of alternatives. Furthermore, delaying meaningful debate on the demand-side of the equation is at odds with what the climate science is telling us. There is a finite carbon budget for avoiding 2°C, so the sooner emissions are cut, new habits and behaviours established, and infrastructures to support low-carbon lifestyles put in place, the lower the risk of devastating climate change impacts.

It is not uncommon for humans to be optimistic about what technology can deliver and by when. Carbon capture and storage – even without biomass– is a good example. And with most modelling work being done by those of us in privileged positions in terms of wealth, it is unsurprising that lifestyle change is low down our priority list.

My problem with this optimistic techno-centric approach is that we (wealthy people in high emitting countries calling the shots on climate change) are not only choosing climate change futures on behalf of ourselves, but we are making choices on behalf of others. Whilst we may well be able to adapt to early climate impacts by making marginal adjustments to our everyday living, by installing more air conditioning, moving away from low-lying coastlines, paying insurance companies to repair our homes after floods etc., that isn’t a luxury that most people in the world will have.

Furthermore, with globalised social media, those who will be most impacted by climate change are able to observe us continue as is, while they struggle to adapt, fund and cope with changes in their climates. Global social media lifts the lid on inequalities we are not prepared to address, as this paper highlights.

If big emitting countries, and the big emitters within those countries, are prepared to put in place stringent polices aiming to significantly reduce absolute fossil fuel consumption, even for a few years while establishing low-carbon infrastructure, there would be a much better chance of achieving the 2°C goal. While many industrialising nations will be trying to transition their own energy systems away from fossil fuels, and may well put more industrialised countries to shame in terms of the pace of change, they will still need space for economic growth, and therefore a near-term rise in emissions, to improve standards of well-being.

A meaningful, deep and an equally large body of work focusing on how to build systemic change around energy demand and material consumption is urgently needed. As long as IAMs dominate climate literature, a more balanced perspective of opportunities on the demand side will be overlooked, and time is running out.

Air travel is an example that brings this clearly into view. As academics, we are not prepared to look at the evidence that air travel is one of the most difficult sectors to decarbonise, with constraints on demand needed here more than anywhere (see also my paper All Adrift: Aviation, shipping and climate change policy, also published in Climate Policy). Yet I doubt the number of flights attributable to climate change research activity is declining. The reality of taking a carbon budget perspective, is that one flight taken by me this year, removes a chunk of the budget available for someone in a developing country to heat or cool their home. We are all part of the system – my behaviour here changes the climate impacts others experience elsewhere.

I have a background in climate science, and climate modelling, and I’m certainly not against modelling contributions, but it is essential that we are not blinded by precise quantification to the extent that we overlook the full possibility space. This is particularly important when basing decisions on models that combine the laws of physics with the ‘understandings’ (and certainly not laws) of economics. Not everything can be quantified in a way that is appropriate and useful for policymakers. Other ways of looking at the world are essential and need to contribute to the debate. If we don’t start to make a concerted effort to do that soon, we may well have missed our chance to demonstrate real intelligence in tackling climate change.

About the Author

 

Alice Larkin is Head of the School of Mechanical, Aerospace and Civil Engineering and a Professor of Climate Science and Energy Policy in the Tyndall Centre for Climate Change Research, University of Manchester.

 

Fairness in the Eyes of Parties to the Paris Agreement. What Explains Divergences?

By Håkon Sælen (CICERO) and Vegard Tørstad (EUI, Florence) 

The question of how to differentiate efforts fairly has always been central and controversial in UN climate negotiations. The UN Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol, and the Paris Agreement include different formulations and compromises relating to the distribution of efforts between parties.

In a new study published in Climate Policy, we show how disagreement over fairness principles prevailed in the discussions leading up to the Paris Agreement, and suggest an explanation for why the parties have been unable to reach consensus on the question of fairness.

Broadly, three different understandings of how mitigation burdens should be distributed fairly have been frequently invoked in debates in the climate negotiations:

  1. The principle of Responsibility demands that climate change should be solved by those who have caused it. In other words: the polluters must pay.
  2. The Capability principle emphasises that all those who have the capacity to mitigate climate change have an imperative to do so.
  3. The Rights (needs) principle suggests that an actor is either entitled by right to emit a given amount of greenhouse gases, or that it needs to be exempted from undertaking provisions.

There has been considerable disagreement among parties in the negotiations on how to interpret and weight these principles in discussions of burden sharing. In our research, we were interested in two questions:

  1. Which parties support each of the three fairness principles?
  2. What explains variation in fairness conceptions across countries?

To answer the first question, we used content analysis to count the frequency with which the principles appear in parties’ negotiation documents over a three-year period in the negotiations leading up to Paris. We found that fairness conceptions among key actors in the negotiations are polarised. On one extreme of the fairness spectrum are Australia, Canada, the United States, and Russia, who all refer to Capability in more than 75% of their fairness references. On the other are Brazil, China, India, Saudi Arabia, and certain Latin American countries, who devote the majority of their references to Responsibility.

This polarization of fairness conceptions is bad news for the climate negotiations, because agreements that are based on a common notion of fairness are largely thought to be more effective and durable than those that are not. It is analytically interesting, therefore, to understand what explains these large differences in parties’ fairness conceptions.

The literature often suggests that fairness conceptions in negotiations are determined by parties’ self-interest. However, our regression analysis of more than 160 parties in the climate negotiations showed that several factors often regarded as important to parties’ interests – such as historical emissions and capacity to pay – are not the primary determinants of fairness conceptions in these negotiations. Instead, whether a country is listed in ‘Annex I’ of the UN Framework Convention on Climate Change–—that is, whether it is classified as a ‘developed’ country—is the single strongest predictor.

While the dominance of this variable may seem somewhat surprising, it is nevertheless compatible with an interest-based perspective. The binary Annex-division between ‘developed’ and ‘developing’ countries was the basis for differentiating obligations under the UNFCCC and the Kyoto Protocol. Only ‘developed’ were assigned individual obligations to reduce emissions under the Kyoto Protocol. Therefore, countries classified as ‘developing’–—such as China and India–—benefit from the Annex scheme’s continuation, while ‘developed’ countries–—such as Australia, Russia and the United States–—from its removal.

In this light, it is notable that the Paris Agreement omits any reference to Annex I of the UNFCCC, using instead less clearly defined terms such as ‘developed’ and ‘developing’ or ‘other’ countries. The lack of strict differentiation in the Paris Agreement suggests, firstly, that the Agreement is more favourable than previous agreements towards ‘developed’ countries, such as the United States, and less so towards rising economies such as China and India, which were previously classified as ‘developing’. It is therefore paradoxical that the United States is the only country that has decided to pull out, citing the unfairness of the Agreement as a reason.

Secondly, the lack of reference to the Annex is significant because it affects the fundamental tension over effort-sharing in the negotiations. By removing the Annexes, the dominant variable in explaining past divergences in fairness conceptions has been rendered less relevant. This development may improve parties’ chances for reaching compromise and agreement. However, ongoing negotiations on implementation of the Agreement have already encountered ‘roadblocks’ that partially derive from how the Agreement resolved the issue of differentiation between ‘developed’ and ‘developing’ countries. It therefore appears that negotiators will have to continue to deal with this issue, even though it may take on a new dynamic now that the Annex I division has less force. In doing so, our paper suggests that looking for pragmatic solutions tailored to each substantive agenda point will be more fruitful than discussions at the level of fairness principles aiming for one overarching solution.

The question of fairness in effort-sharing will continue to be relevant also in the future cycle established by the agreement. Parties are obliged to submit nationally determined contributions (NDCs) every five years and are requested to justify their own contribution as ‘fair and ambitious’ – a process sometimes termed ‘self-differentiation’. What is more, a ‘global stocktake’ will assess collective progress every five years, ‘in light of equity’, and shall inform future NDCs. To achieve meaningful self-differentiation, the stocktake (as well as informal assessments by civil society) might be linked to parties’ own fairness conceptions as presented in their negotiation documents, such as NDCs and submissions. For this purpose, stakeholders may find overviews of fairness conceptions – like presented in our new paper – of use.

About the Authors

 

Håkon Sælen is a Senior Researcher at the Center for International Climate Research (CICERO).

 

 

Vegard Tørstad is a PhD Researcher at the Department of Political and Social Sciences, European University Institute (EUI)

Living in a Material World: A Win-Win for Improving Energy Efficiency?

By Kate Scott, Katy Roelich, Anne Owen and John Barrett (University of Leeds, UK)

Understanding the role of materials in the supply chain can give us a truer picture of global emissions, as well as increased efficiency and reduced costs.

The EU’s ‘Hidden’ Carbon Footprint

An 80-95% reduction in greenhouse gas emissions produced within the EU by 2050 from 1990 may sound impressive, but it is not the whole story, as we discuss in a new paper published in Climate Policy: http://www.tandfonline.com/doi/full/10.1080/14693062.2017.1333949.

There is more than one way to calculate national carbon footprints and the way emissions are currently counted casts EU countries in a favourable light. Climate targets focus on greenhouse gases produced within the EU, not those required to support the consumption of its residents. While emissions produced within the EU’s territory – by its factories, power plants, buildings, cars and so on – are declining, emissions driven by EU consumption are rising.

Greenouse gases become embodied in products as energy is used, transforming raw materials into buildings, clothes, phones or cars. Some of these materials and products will be mined and manufactured abroad, and the EU imports more than it exports. As a result, the EU ‘consumes’ about 40% more emissions than it produces. 

In our research, we looked across the whole EU supply chain (including overseas territory) to see where greenhouse gases are expended in the materials, transportation, construction, use, disposal and replacement of everything from buildings and cars to furniture and packaging. We calculated how many of these emissions are included/excluded from existing EU climate policies and whether policies could be extended to capture additional emissions as materials are transformed into products. Cutting carbon along product supply chains can also reduce production costs, so addressing the full supply chain emissions could realise cost savings too.

Climate Policies Neglect Supply Chain Opportunities

The EU’s Emissions Trading Scheme (EU ETS) is not doing enough to incentivise low carbon innovations in energy intensive industries and even if it was effective, the industries it addresses only produce 45% of the EU’s emissions. Alongside renewable energy targets, the EU’s climate package relies on energy efficiency measures to deliver its climate targets. Energy efficiency standards have made progress in reducing the energy consumed when using electronic goods, heating buildings and driving cars (i.e. in use). Yet this does not address all the energy needed to produce the EU’s homes, cars, phones, roads, food etc.

Taking a closer look at buildings and cars purchased by EU residents: the EU’s Building Performance Directive tackles the energy efficiency of buildings in use. However, an equivalent amount of the carbon used to heat buildings (i.e. in use) is used in their construction. Whilst 30% of the supply chain emissions are produced in sectors covered by the EU ETS (mainly power and material processing sectors), and are arguably addressed by existing climate policies, 30% sit outside EU climate policy altogether.

 

For cars, we can see that nearly three quarters of the supply chain carbon is emitted when driving (i.e. in-use) and subject to energy efficiency standards. All in all, however, 20% is left outside the scope of EU climate policy.

Extending European Energy Efficiency Standards to Include Material Use

This same analysis we have applied to cars and buildings can equally be applied to appliances, electronics, furniture, clothes, packaging etc. Their supply chains emit the equivalent of 40% of EU production emissions, with two thirds completely outside the scope of existing policies. Therefore there is significant potential for EU product policies to address climate change in this area.

Energy efficiency regulations and standards could be extended to include embodied emissions. For example, the Ecodesign Directive, the EU’s tool to improve the energy efficiency of electronics and appliances,  does have a mechanism to address some aspects of embodied emissions, including promoting easy to repair designs which would reduce emissions embodied in material use. However, this was introduced when embodied emissions data was sparse and of poor quality. Without mandatory material efficiency standards this has not been utilised.

By addressing material efficiency alongside energy efficiency our research indicates that these measures can enhance the policy package for climate mitigation. There is however work to be done on designing the right policies to exploit these opportunities and this needs to be underpinned by a mainstreaming of knowledge of embodied emissions flows into policy, as well as research. In the ideal scenario we can provide a truer picture of the EU’s carbon footprint while simultaneously uncovering ways to substantially reduce it and save costs in the process.

About the Authors

 

Kate Scott is a Research Fellow at the Centre for Industrial Energy, Materials and Products (CIE-MAP), at the University of Leeds.

 

 

Katy Roelich is a University Academic Fellow in the School of Earth and Environment and School of Civil Engineering, at the University of Leeds.

 

 

Anne Owen is a Research Fellow at the Centre for Industrial Energy, Materials and Products (CIE-MAP), at the University of Leeds.

 

 

John Barrett is Professor and Director of the Centre for Industrial Energy, Materials and Products (CIE-MAP), at the University of Leeds.

Non-State Actors are Here to Stay, but Delivery Mechanisms Need Improvement

By Fatemeh Bakhtiari

The surge in transnational governance schemes led by non-state actors can be traced back to the incipient globalisation that followed the liberalisation of trade markets in the mid-1970s. These schemes provide public goods, thus complementing – and sometimes replacing – traditional, state actor-led governance schemes. A diverse set of reasons move non-state actors to engage in these schemes: philanthropy, influence policy, avoid regulation, first-mover benefits, and public relations are among the main such reasons. The Climate Alliance, a coalition of sub-national governments founded in 1990, is possibly the doyen of non-state actor-led transnational governance schemes focused on climate change.

The UNFCCC, the main state actor-led governance scheme in the area of climate change, recognises the potential role that non-state actors may play with regard to achieving the goals of the Convention. Most recently, it does so through the Paris Agreement, which “resolves to strengthen” the existing technical examination process on mitigation, including by improving access to, and participation in, this process by developing country non-Party experts (paragraph 110), and “welcomes the efforts of non-Party stakeholders to scale up their climate actions” (paragraph 118). For all practical purposes, today non-sate actor actions are seen as a valid, and indeed much needed, addition to state actor-led climate change mitigation efforts. Put bluntly, non-state actor actions have risen sharply in the political agenda partly because state actor-led action falls seriously below the levels that would be required to achieve the goals of the Convention.

Yet, as argued in a new paper published in Climate Policy, little is known about the efficiency and effectiveness of non-state actor action in the area of climate change. Critical questions, for which only partial answers exist at best, include:

  • What level of emission reductions can be attributed to non-state actor actions?
  • To what extent do emission reductions attributed to non-state actor actions overlap with emission reductions attributed to state actor actions?
  • At what cost do non-state actor actions reduce emissions of greenhouse gases?
  • Do non-state actor actions attract more private-sector funds, compared to state actor actions?
  • Do non-state actor actions spur, or stifle, state actor actions?

Against this background, it seems legitimate to question whether the political rationale for promoting non-state actor actions is warranted. Specifically, and in light of the scant objective evidence that is currently available, two issues deserve consideration. Firstly, the appropriateness of institutionalising non-state actor actions, without any associated transparency requirements. Secondly, the opportunity cost associated with public (and private) sector funding of non-state actor actions.

Transparency requirements

Beyond the rhetoric of “strengthening” the technical examination process through non-state actor participation, and “welcoming” increased efforts on the part of non-state actors, the UNFCCC will have to introduce basic accountability requirements on these actors. These requirements are essential, if non-sate actor actions are to be embedded in the international climate change regime in a structured manner, and they are to make a sizeable contribution to it. In practice, this means that basic monitoring and reporting requirements would have to be agreed to, and met. For most non-state actor actions, such requirements would undermine their main raisons d’être – namely the lack of oversight, and the non-committal nature of their objectives. Therefore, from this point of view, increased institutionalisation of non-state actor actions is likely to be challenging.

Opportunity costs

While it is clear that public funds contribute to financing non-state actor actions, the overall amounts of public funds invested, and the share that these amounts represent, vis-à-vis the total ‘budget’ of non-state actor actions, are not known. In the likely event that these public sector funds are not additional – in the sense that they ‘displace’ funding that would have otherwise been invested in other, related activities – it is legitimate to question whether these public funds are better used through non-state actor actions, as opposed to state actor actions. The question is not whether public funds should be directed to non-state actor actions, but rather how efficient and effective non-state actor actions are, compared to ‘equivalent’ state actor-led actions. The relevance of this question increases with both the political and (public sector) budgetary stakes associated with the institutionalisation of non-state actor actions.

 

Fatemeh Bakhtiari is a researcher at the UNEP DTU Partnership, Department of Management Engineering, Technical University of Denmark in Copenhagen, Denmark.

Five Ways to Address Fossil Fuel Subsidies through the WTO and International Trade Agreements

By Peter Wooders (IISD) and Cleo Verkuijl (SEI)

Can the international trade system be a catalyst for reforming fossil fuel subsidies (FFS) to help relieve the burden on the public purse, reduce local and global air pollution, improve energy security and tackle climate change?

Oil-drilling platform in the Brent Field, North Sea. Photo credit: UN Photo/Exxon Photo via Flickr (CC BY-NC-ND 2.0)

This was the theme of a recent workshop set at the World Trade Organization (WTO) in Geneva and organised by Climate Strategies, the Stockholm Environment Institute and the International Institute for Sustainable Development. The event forms part of a broader conversation on how the international trading system can be made compatible with the UN Sustainable Development Goals (SDGs) and the goals of the Paris Agreement on climate change.


Fossil Fuel Subsidy Reform in Context

  • Annual expenditure on fossil fuel subsidies has been estimated at US$320 billion for consumers in developing and emerging countries in 2015, and at US$100 billion for fossil fuel production worldwide.
  • Fossil fuel subsidy reform can free up significant funds towards meeting the SDGs.
  • Encouraging examples from India and Indonesia show that today’s low oil prices form an opportunity to redirect public spending on oil, coal and gas towards development priorities such as education, health, infrastructure and access to clean and reliable energy.
  • Reform is also vital piece of the climate change puzzle, with the potential to cut greenhouse gas emissions by more than 10% by 2020.
  • By complementing and strengthening ongoing reform efforts, the international trading system can be a key enabler of the 2030 Agenda.
  • Reform should adequately address the needs and concerns of developing countries, including those related to energy access.

Participants found there is significant scope for the WTO and international trade agreements to complement and strengthen reform efforts already being supported under a range of international forums, including the 2030 Agenda for Sustainable Development, the G20 and APEC (the Asia-Pacific Economic Cooperation).

Fossil Fuel Subsidies and the WTO: “A Missed Opportunity”

Owing to its wide membership, its central role in disciplining trade-distorting subsidies across economic sectors, and its well-established dispute settlement system, the WTO is well-equipped to take the FFS reform agenda forward.

To date, however, the Organization’s involvement on FFS has been limited. In notable contrast with the various disputes against renewable energy subsidies that have been launched at the WTO over the past decade, no FFS have been disputed thus far. In part this is because many WTO Members do not fully notify their FFS, whether because of a lack of data and understanding of energy subsidies and their trade effects, current shortfalls in the Agreement on Subsidies and Countervailing Measures’ (ASCM) notification questionnaire or a lack of mechanisms to enforce notification. In the absence of case law and targeted research, there is also a lack of legal clarity on the extent to which different types of FFS can be disciplined by the ASCM to begin with.

And yet addressing this topic falls squarely within the Organization’s mandate. FFS can have a range of distorting impacts on trade and investment, including by affecting the rate and timing of development of new fields or mines.

Moreover, the WTO was established with a view to ensuring economic progress is achieved in accordance with the objective of sustainable development, and the SDGs explicitly identify trade as a critically important means of implementation. As such, trade should be viewed as an enabler for achieving the SDGs and targets, including the objective of reducing FFS set out under SDG 12.

Although parallels should not be overstated, it is also worth noting the WTO’s continued engagement on reducing environmentally harmful fisheries subsidies as part of the Doha Round. Observing the discrepancy in how the two subsidies were treated in the WTO, the former Director-General Pascal Lamy characterised the absence of FFS from the WTO’s agenda as a “missed opportunity”.

What Can Be Done?

During the Geneva workshop, participants identified multiple avenues to address FFS within the international trading system. While not purporting to be exhaustive, the table below identifies five key categories of action available to WTO Members: 1) Promote capacity building and technical cooperation; 2) Enhance transparency; 3) Adopt subsidy reform pledges and ensure credible follow-up through reporting and review; 4) Clarify the interpretation of existing rules; and 5) Make changes to existing rules. Several concrete pathways to help realise these goals are also identified.

Table 1: Five Ways to Address Fossil Fuel Subsidies at the WTO

It is important to note that these pathways are not mutually exclusive, and many are likely to be particularly effective if adopted together. A pledge, report and review system, for instance, would benefit from parallel efforts to improve transparency.

All approaches would necessarily be led by WTO Members. They range from those that are purely voluntary to those that are binding, and embedded in the WTO’s dispute settlement mechanism. This provides scope for gradual enhancements of ambition.

In a similar vein, many approaches can either be taken forward plurilaterally (by a coalition of the willing) or multilaterally (involving all WTO Members). As illustrated by references to fossil fuel subsidy reduction in the EU-Singapore Free-Trade Agreement (which is awaiting formal approval), bilateral and regional trade agreements may form an effective platform to pioneer cooperative approaches on fossil fuel subsidy reform.

The workshop also made clear that any successful effort to address FFS through the international trade system will need to adequately address the special circumstances of developing countries. That might involve special and differential treatment provisions, including potential exemptions and carve-outs for development, energy access and other reasons.

With the WTO’s 11th biennial Ministerial Conference coming up in Buenos Aires in December this year, creative thinking, constructive debate, and further research on the various options on the table is needed to help ensure the promise of Paris and the SDGs is fulfilled.

 

This blog is part of a larger Climate Strategies project: ‘Making the International Trade System work for Climate Change‘. More information can be found of the project webpage.

This blog is also available on both the SEI and IISD websites.

 

About the Authors

 

Peter Wooders is Group Director of Energy at the International Institute for Sustainable Development (IISD).

 

 

 

Cleo Verkuijl is Research Fellow of Climate Change Policy at the Stockholm Environment Institute (SEI).