Tag Archives: Climate Strategies

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).

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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.

 

Global Climate Policy Conference (GCPC) 2014: Summary and Reflections

By Heleen de Coninck, with contributions from Climate Strategies and CDKN teams

What can researchers contribute to the current efforts to break the logjam at the international climate change negotiations? Over 80 participants representing various groups of stakeholders gathered at ODI in London on the 7th and 8th of May 2014, to take part in the first Global Climate Policy Conference (GCPC). The organisers – Climate Strategies and CDKN – wanted to provide a space for discussing new ideas provided by researchers in a variety of climate fields, that could push climate negotiations forward and contribute to breaking the deadlock. Issues and perspectives seem to come and go in the negotiations in what can seem to external stakeholders like confusion and isolation.

The conference agenda was based on solid contributions from researchers taking some of these issues and subjecting them to rigorous analysis. Does “green growth” really offer a new narrative for achieving climate progress? Are the notions of equity behind the original UNFCCC treaty changing? Are aspirations for effective levels of public and private financing at all realistic? Does the idea of “clubs” of countries cooperating on adaptation, mitigation or both, hold promise or will it undermine the chances of a global solution? These and other questions were tested by presenters and an invited audience, mainly pf experts in their field, with enough time to hold the issues and positions up to the light and debate them fully.

In the opening session chaired by Mattia Romani of GGGI, the conference started with changes in economic thinking bearing on sustainability. Carlo Jaeger and Michael Grubb presented their ideas on sustainable development and green growth and whether this was a “new focus or an optical illusion”. Carlo Jaeger emphasized that the green growth idea could be helpful but that the narratives behind it need development. One such story was told by Michael Grubb, whose book “Planetary Economics”, based on over 20 years of policymaking and academic experience, observed that for transformative change, it is not helpful to argue over whether standards and regulation, markets and pricing or strategic investment (in infrastructure, knowledge or innovation) would deliver the best result. As contexts differ, we need experimentation and implementation in all of these policy pillars. Focusing on only one will lead to disappointing results, as all have shortcomings. For a global agreement, the lessons learned in the Planetary Economics approach contain useful lessons, for instance for NAMAs, the Technology Mechanism and carbon markets. Respondent Radhika Perrot, from South Africa confirmed that all three pillars were recognized as important, but not consistently observed, in her country’s strategy for green growth.

In a session chaired by Ambuj Sagar of IIT, on how mitigation and adaptation packages could secure finance, Jose Garibaldi explained how current initiatives between like-minded countries in Latin America and the Caribbean were succeeding in “cross-subsidisation” of local mitigation policies through adaptation mainstreaming and country to country cooperation. Adaptation, over time, was a bigger cost for most countries than mitigation, and the case for support in adaptation was improved if action on mitigation could be demonstrated. Progress could be made if language was changed to emphasise differentiated but ambitions action by all, a “small is beautiful” approach, the availability of support, and the benefits of crossing the boundaries of the traditional negotiating groups.

A conclusion from these two sessions was that cooperation in clubs, or coalitions of the willing, could be a useful complement to UN-based systems. Examples like the Quisqueya case that Jose Garibaldi introduced could be formed by clubs of countries where cost of climate change exceeded their mitigation costs. Michael Grubb argued that coalitions of countries that depend on fossil fuel imports could work for agreeing on mitigation. In the consensus-based UNFCCC negotiations, countries who do not share such interests could block such deals. Tom Brewer argued that such clubs could be helpful by forming coalitions that further efforts, but also highlighted risks of exclusion and regulatory capture. The idea of clubs (covered more extensively in the last session) could be also risky, as boundaries in the negotiations are often deep-rooted in history, emotions and tactics – argued Michael Cutajar, who went on to chair the next session on CBDR.

Common but differentiated responsibilities and respective capabilities (CBDR/RC) is a term that almost defines the UN Convention on Climate Change, but could use a rethink, argued both Xiaohua Zhang from the perspective of China, and Christoph Schwarte from an international legal perspective. Xiaohua Zhang argued that the term remains highly relevant, but more differentiation than Annex I/ non-Annex I is now needed. He introduced a grouping of developing countries with high capabilities to implement low-carbon growth strategies: “Capable DCs”. Christoph Schwarte ran through the recommendations of the recently-completed work of the International Law Association. He argued that in the spirit of the Convention, the distinction between developed and developing countries should to some degree be maintained but that more differentiation is needed, and mentioned a “spectrum of States’ commitments” and making a framework more flexible in order to manage the remaining atmospheric space as a common natural resource. The implication of this latter suggestion would need to be further investigated.

In Sonja Klinsky’s presentation at the session on equity and fairness, chaired by Daniel Klein of UNFCCC, socio-psychological viewpoints of what people perceive as fair played a crucial role. She argued that there was not a single concept of equity, and often what is fair cannot be easily expressed in words or argued. Sometimes, something just is not fair. The ultimate injustice done to people or groups occurs in situations of war. Still, some communities succeed in overcoming the aftermath of war; peace and reconciliation processes can provide useful lessons. To agree on a way forward after injustice, perpetrators need limited liability; a limit to the claim that can be put on them. Victims need a new deal, or a structural change that convinces them that things will get better. This was summarized as ‘backward-looking justice and forward-looking peace’. It was also noted that compensation payments can undermine such an approach, and that it is important for all participants to have a sense that there is procedural justice. A conclusion could be that future narratives about a climate-resilient future that are credibly implemented (forward-looking peace) could be accompanied by gradually phasing out the rhetoric of historical responsibility (backward-looking justice).

Ari Huhtala of CDKN chaired the session on private climate finance, where Christa Clapp spoke about growing investor interest in green bonds, renewable energy in China and divestment campaigns. While more investment from the private sector should be encouraged, governments, researchers and UNFCCC have lots to do to create an enabling environment and to reach a scale that could make a difference. Problems along the way include adequate definitions or certification of “green” , to avoid the re-badging of BAU, achieving sufficient liquidity in the green bond market, persuading Governments to engage in de-risking (there were examples from developing countries, but the financial crisis has made all governments nervous about putting their balance sheet at risk), and persuading more investors that “green” is not just a synonym for “poor returns”. Different views were expressed about the importance of disclosure of risks and green activity by companies.

The last session, chaired by Heleen de Coninck, focused on clubs. Carlos Rossi presented a proposal by Peru for COP20 in Lima. The key was technology integration approaches, with a new focus on regional technology centres, producing technology that can be widely shared in a global pool. Globalization of technology, regionalization of application and diffusion, respect for capabilities and trade implications all played a role in the Peruvian proposals. Tom Brewer highlighted an area where such integration of technology could be furthered by developing the “club” approach: reducing methane leakages from LNG transport and processing, where emissions are increasing as a consequence of booming LNG trade globally. Such an agreement could develop general rules for methane leakage, certify exporters, importers and shippers, and verify whether agreed leakage rates are not exceeded. However, the incentives on clubs to achieve real reductions, and the possibility of undermining the international approach to a global problem, needed to be watched carefully.

Simon Maxwell of CDKN brought the conference issues together. Climate policy would not make progress unless it was grounded in research, linked to theory, multidisciplinary to reflect the “wicked” nature of the problem, alive to the changing structure of the world economy, and connected to the intellectual trends that moved today’s politicians, the public, and other stakeholders. The conference could not find all the answers, but asking the right questions was a major advance; it should never be forgotten that even policy research had to follow the basic rules of research: generate testable propositions and, for each of them, do the work necessary to assemble the evidence and refine the hypothesis.

Looking back over the event, other participants raised issues about effective and acceptable developing country participation and agenda-setting, capturing and accelerating the signs of positive momentum in the areas of finance, clean technology and donor initiatives, how technology can be developed for all and not just for the elites, and how to educate the public, generate a social movement and allow and help individuals across the world to look beyond their personal self-interest.

What happens next

The conference proceedings are being made available on video, accessible from the CDKN and Climate Strategies websites. A summary will be presented in a UNFCCC side-event in the Bonn Negotiations in June, featuring some of the papers presented to the conference. The full presentations will be assembled in a peer-reviewed publication which will appear later in the year. And Climate Strategies will be picking the most suitable issues and ideas from among those presented to turn into substantive research projects.

The general reaction to the conference so far has been very favourable; if this continues a further conference in the run-up to the UNFCCC Paris negotiations in 2015 will be considered, perhaps in a form that allows a multidisciplinary “laboratory approach” to some of the most intractable issues.

Climate Strategies and CDKN wish to thank all presenters, chairs, respondents and participants for a though-provoking event, and express their hope that such questions, and many others, may get addressed at the Global Climate Policy Conference 2015 – which – we hope – will become an annual event. Please let us know your interest in participation by emailing: info@climatestrategies.org

Presentations as well as the video from GCPC 2014 are already available on Climate Strategies website.

Conference contributions by the speakers along with the summary of the discussions will be published in late August / early September 2014 in a professionally edited volume. Please check Climate Strategies and CDKN websites for announcement (www.climatestrategies.org and www.cdkn.org)