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Kyoto2 in a nutshell
See also the longer Kyoto2 in a nutshell - version used in the leaflet distributed at the UNFCCC convention in Poznan in December 2008.
- Kyoto2 is a global system to auction transferable Permits to pollute the atmosphere with industrial greenhouse gases up to a series of annual caps defined at levels that would prevent dangerous interference with the Earth's climate system.
- Greenhouse gas emissions would be regulated 'upstream', that is, as near as possible to the point of production, and in the case of emissions from fossil fuels, as close as practical to the point of production of the fuels themselves.
- This system would create market incentives for the wide scale and systematic reduction of greenhouse gas emissions and the development of alternatives, to be supported in turn by regulations and standards aimed at overcoming specific market failures.
- The funds raised at auction would be invested to tackle both the causes and the consequences of climate change, with an emphasis on addressing the needs of the poor and the those most adversely impacted, including to:
- help adaptation to such climate change as is already inevitable,
- accelerate progress towards a clean, energy-efficient, low-carbon global economy,
- reform land use so as to conserve biological carbon within soils, peatlands, forests and other ecosystems, and reduce emissions from land of other greenhouse gases,
- research low cost and environmentally benign geo-engineering options that could in extremis prevent a 'runaway greenhouse effect' from taking hold.
Kyoto2's purpose is to deliver the Objective of the Climate Convention, the most important outcome of the 1992 Earth Summit in Rio de Janeiro:
"stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system ... within a time frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner".
But what is the level of greenhouse gases at which we should aim to stabilise in order to "prevent dangerous anthropogenic interference with the climate system"? The latest scientific findings [see Chapter 1] indicate that existing net greenhouse gas levels (including the negative contribution of reflective aerosols), calculated by the Intergovernmental Panel on Climate Change (IPCC) at 375 parts per million CO2 equivalent (ppm CO2 eq) in 2005, are already giving rise to positive feedback warming trends - and must therefore be considered dangerous. On a multi-century time scale only a rapid shift to climate neutrality will do the job.
Accordingly Kyoto2 proposes a set of mechanisms that aim to:
- progressively limit greenhouse gas emissions year by year in order to achieve global climate neutrality by mid-century, and long term greenhouse gas stablisation at no more than 350 ppm CO2 eq.
- move decisively towards an equitable low-carbon economy, in which: energy is generated increasingly from renewable and other clean sources; energy is used more efficiently; and 'energy poor' countries and people enjoy improved access to energy. [Principle 4]
- support the advances in prosperity and quality of life that are so desperately sought across the world, and especially by the world's poorest people. [Principles 2, 4 and 5]
- mobilise the funds with which to pay for human adaptation to such climate change that we are already committed to by virtue of lags in the climate system, and a 'best case' trajectory of future greenhouse gas emissions, with particular regard to the needs of the poorest countries and the poorest people who are likely to be the principal victims of climate change, including climate-related health and emergency relief costs. [Principles 2 and 3]
- give all countries endowed with carbon-rich ecosystems such as forests, swamps and peatlands financial incentives to conserve them: to keep the carbon they contain locked up; to enhance their ability to take up more atmospheric carbon; to preserve the biodiversity they embody; and to meet human needs. [Principle 3]
- reduce the emissions from agriculture through reforms in agricultural practice, to enhance the role of farmed soils as sinks and long term reservoirs of carbon, and to maintain and improve agricultural productivity in the face of climate change.
- give developed countries and their economies a leading role in providing the necessary finance, technology and know-how in order to bring all the above to fruition, in cooperation with developing countries who also have their own important parts to play. [Principle 1]
2. Main mechanism
The main mechanism is a market mechanism - since markets are generally the best means of allocating finite resources without unnecessary waste, while keeping as many people as happy as possible. Kyoto2 has this is common with the Kyoto Protocol and the EUETS. However due to poor design and implementation, the last two mechanisms have so far proved to be ineffective, wasteful and loaded with perverse incentives.
Reforms are under way which will in time bring about improvements in these systems, however a more effective approach is to design a new and better mechanism from scratch - learning from both the failures and the successes of the past, and drawing from climate science, economic theory, and principles of equity that apply across nations, peoples and generations. In particular it is essential to recognise the atmosphere as a global commons to be managed for the general benefit of humanity. Accordingly Kyoto2 proposes to:
- define a global cap, or a series of global caps, for greenhouse gas emissions, leading towards stablilisation at 350 ppm CO2eq in the atmosphere, and to allocate a proportion of that cap (based on current figures, 68 percent) to greenhouse gases from fossil fuels and other industrial sources.
- regulate industrial greenhouse gas emissions 'upstream' at or close to production by requiring that the companies responsible surrender Permits based on the greenhouse gas pollution implicit in their production, expressed in tonnes of CO2 equivalent (tCO2eq). In the case of fossil fuels this would be at the points where flows are concentrated and easily measured such as the oil refinery, coal washing station, gas pipeline or gas tanker. Other industrial greenhouse gases to be similarly controlled include:
- CO2 from calcinating lime in cement factories
- the mix of greenhouse gases emitted by aircraft which multiply the climate forcing of the CO2 alone (by 36 times in the first year, down to 3.7 times over 20 years and 1.7 times over a century)
- 'potent industrial greenhouse gases' (PIGGs) such as the F-gases from chemical factories and other industrial processes
- nitrous oxide (N2O) of industrial origin, and based on volume of nitrate fertiliser production, since a proportion of the nitrate (3-5 percent) is converted into nitrous oxide by soil and water bacteria.
- sell the permits by way of a global 'uniform price sealed bid' auction, subject to both reserve price and a 'safety valve' or ceiling price, with the proceeds accruing to a Climate Change Fund.
- credit Permits when greenhouse gases are verifiably destroyed or sequestered into secure long term storage, as with 'carbon capture and storage' (CCS).
- apply the Climate Change Fund to tackling both the causes and the consequences of climate change, that is a combination of mitigation and adaptation, as set out below.
3. Non-market solutions
No matter how well the main market mechanism works, there is a complementary role for direct regulation to constrain greenhouse gas emissions, and additional, targetted taxes, levies and subsidies. These non-market methods will be most successful where they are designed to overcome specific market failures, and where the costs of the measures (no matter who has to pay them) reflect, to a reasonable approximation, a consistent long term carbon price.
One great exemplar of this approach is the Montreal Protocol, whose regulatory role in phasing out 'ozone eater' chemicals is supported by financial assistance for technology transfer to developing countries through a 'Multilateral Fund'. This approach could well be extended to the full range of 'powerful industrial greenhouse gases (PIGGs).
Energy labelling accompanied by demanding and progressive efficiency standards for cars, appliances, lighting, other energy-demanding goods and housing has also been highly effective. This approach, already widely used within the EU, should be extended to other countries, and extended to encompass new product types, such as computers and home entertainment systems.
As for diffuse land-based emissions from deforestation, agriculture and soils, these are excluded from the market mechanism mainly due to the difficulty of measuring and monitoring them. Instead Kyoto2 proposes to finance global programs to reduce emissions from these land-based sources, as detailed below.
Kyoto2 also adopts Jim Hansen's call for an end to coal burning power plants which do not operate carbon capture and storage (CCS). This should be implemented soon in both developed countries (at generator's expense) and in developing countries (with financial support from the Climate Change Fund). Other reforms are also needed in the power sector to encourage the development of combined heat and power (CHP) and to decentralise generation into smaller units closer to the demand for power and heat.
It is also important to bring an end to perverse subsidies to fossil fuel production, which have been estimated to amount to $235-$300 billion per year, and whose continuation would directly counter the operation of Kyoto2's main market-based mechanism described above.
4. Allocating resources
The auction of Permits could credibly raise a sum of about €1 trillion per year for the Climate Change Fund [Chapter 6]. These funds would be allocated to:
- finance human adaptation to the climate change to which we are already committed by way of lags in the climate system and unavoidable future greenhouse gas emissions;
- pay countries who maintain their forests and other natural ecosystems in good condition (especially ecosystems which contain substantial embodied carbon in themselves or in underlying soils) and restore these ecosystems where lost or degraded, all subject to a requirement to respect the rights of traditional land / forest owners, users and dwellers;
- research techniques for low-emissions agriculture for and agricultural systems that will be resilient in the face of climate change impacts, and so develop best practice guidelines to be promoted worldwide to farmers, herders and ranchers by way of agricultural extension support;
- finance research and development into renewable and other clean energy production, and the efficient use of energy;
- provide supplementary finance to divert new energy infrastructure investments into renewable and other clean energy development, to retrofit 'carbon capture and storage' (CCS) where appropriate, and to accelerate the phase-out of inefficient and polluting generation capacity and its replacement with renewable and other clean technologies;
- support the development of appropriate standards in all countries for energy efficiency in industry, building, housing, transport, white goods, home entertainment, computer and other sectors, and in the case of poor countries to pay all or part of the supplementary costs so imposed;
- investigate the potential of geo-engineering projects to reduce the global temperature and so prevent a 'runaway greenhouse effect' from taking hold, with particular focus on cost-effectiveness, careful evaluation of potential hazards, and reversibility;
- extend access to family planning services where such access is presently limited or denied;
- finance emergency humanitarian relief related to extreme weather events;
- finance programmes to address the health risks associated with climate change.
Box: Climate Convention - Objective and Principles
The ultimate objective of this Convention and any related legal instruments that the Conference of the Parties may adopt is to achieve, in accordance with the relevant provisions of the Convention, stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. Such a level should be achieved within a time frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner.
In their actions to achieve the objective of the Convention and to implement its provisions, the Parties shall be guided, inter alia, by the following:
- The Parties should protect the climate system for the benefit of present and future generations of humankind, on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities. Accordingly, the developed country Parties should take the lead in combating climate change and the adverse effects thereof.
- The specific needs and special circumstances of developing country Parties, especially those that are particularly vulnerable to the adverse effects of climate change, and of those Parties, especially developing country Parties, that would have to bear a disproportionate or abnormal burden under the Convention, should be given full consideration.
- The Parties should take precautionary measures to anticipate, prevent or minimize the causes of climate change and mitigate its adverse effects. Where there are threats of serious or irreversible damage, lack of full scientific certainty should not be used as a reason for postponing such measures, taking into account that policies and measures to deal with climate change should be cost-effective so as to ensure global benefits at the lowest possible cost. To achieve this, such policies and measures should take into account different socio-economic contexts, be comprehensive, cover all relevant sources, sinks and reservoirs of greenhouse gases and adaptation, and comprise all economic sectors. Efforts to address climate change may be carried out cooperatively by interested Parties.
- The Parties have a right to, and should, promote sustainable development. Policies and measures to protect the climate system against human-induced change should be appropriate for the specific conditions of each Party and should be integrated with national development programmes, taking into account that economic development is essential for adopting measures to address climate change.
- The Parties should cooperate to promote a supportive and open international economic system that would lead to sustainable economic growth and development in all Parties, particularly developing country Parties, thus enabling them better to address the problems of climate change. Measures taken to combat climate change, including unilateral ones, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.
Read on ...
- Kyoto2 - the book. To be published by Zed Books in summer 2008.
- Existing approaches to regulating greenhouse gases.
- The Kyoto2 proposals.
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