The Kyoto Protocol - background

1992: UN Framework Convention on Climate Change http://unfccc.int/

- recognized there is a problem: CO2 emissions are warming the planet

- stabilize CO2 at "at a level that would prevent dangerous anthropogenic (human induced) interference with the climate system.“

goals: 1) ensure that ecosystems can adapt to climate change2) make sure that food production not threatened3) allow sustainable economic development

- requires precise and regularly updated inventories of greenhouse gas emissions from industrialized countries

-"Parties to the Convention“ agree to develop national programs to slow climate change; meet at “Conference of Parties” (COP’s); where binding international treaties (i.e. Kyoto) can be made

- establishes a "framework" document -- something to be amended or augmented over time

The Kyoto Protocol - background

1992: UN Framework Convention on Climate Change http://unfccc.int/

- places the heaviest burden for fighting climate change on industrialized nationsAnnex 1: industrialized economies and economies in transitionAnnex 2: the richest Annex 1 countries(aka the Organization for Economic Cooperation and Development (OECD))

- general target: collectively reduce emissions to 1990 levels by 2000(but no mechanisms, enforcement proposed)

- support developing countries’ climate change activities (granting body)

- developing countries’ emissions will grow before they shrink

- developing countries will have largest climate change impacts; work to mitigate

Dec 1-11, 1997: representatives from 160 countries agreed to enter intobinding limits on emissions of greenhouse gases

TARGETS:Total: reduce developed nation emissions to 5% below 1990 levels during

“commitment period” 2008-2012(most countries need -18% reduction in BAU by 2008)

37 industrialized nations and the EU subject to binding emissions targets

Greenhouse gases: CO2, CH4, N2O, HFCs, PFCs, and SF6

PENALTY:Non-compliant countries will have to reduce emissions by 1.3 units for every unit of emissions “overshoot” in subsequent commitment period.

Ex: if your emissions target is 7Gtons per year by 2012, and you endup at 10Gtons/yr, in the next commitment period (2013-2020) you will have to reduce by 4Gtons/yr (in addition to any new targets) to be compliant

The Kyoto Protocol

The Doha Amendment passed on December 21, 2012

2nd implementation: 1/1/13-12/31/20

*Russia,Canada,and Japanbow outof KP2

1990

Three primary mechanisms

1. Emissions trading- trade carbon units between Annex 1 countries (flow is from countries with carbon credits to countries with carbon overshoots)- example: Europe’s Emissions Trading System (ETS), National Allocation Plans

2. Joint Implementation- Annex 1 countries can invest in a emissions-reduction project in another Annex 1 country and receive emissions reduction units (ERU)

3. Clean Development Mechanism- Annex 1 countries receive ERUs for emissions reductions in developing countries- must certify reductions (they would not have happened without action by Annex 1)

PROS:- For countries that are ultra-efficient, Kyoto would be cost prohibitive. Such countries

can ‘buy their way out’ by buying carbon credits from other countries- Developing countries have incentive to reduce emissions by selling carbon credits

Kyoto comes into force when 55% of the global CO2 emissions are covered byKyoto-ratifying countries

Kyoto took effect on Feb 16, 2005 after ratification by Russia

Brown = signed and ratified (dark brown = Annex 1 & 2)Blue = signed and unratified (dark blue = withdrew, add Russia and Japan)

CountryChange in GHG

Emissions (1990-2004)

EU Assigned Objectivefor 2012

Treaty Obligation 2008-2012

Germany -17% -21% -8%

Canada +27% N/A -6%

Spain +49% +15% -8%

United States

+16% N/A N/A (would be -7%)

France -0.8% 0% -8%

Greece +27% +25% -8%

Ireland +23% +13% -8%

Japan +6.5% N/A -6%

United Kingdom

-14% -12.5% -8%

Portugal +41% +27% -8%

EU-15 -0.8% N/A -8%

Who are theBiggest Losers?

Whose emissionshave grown?

Source: International Energy Agency

Source: UNFCC

So it’s not true that EU countries are not meeting their Kyoto obligationsalthough help from Eastern Block countries help a lot….

Land use changes have contributed significant CO2

Source: UNFCC

Land-use and Land-useChange and Forestry(LULUCF) makes a hugedifference in maps ofrelative CO2 emissions

wikipedia.org/LULUCF

Hugo Ahlenius, UNEP/GRID-Arendal

Enter REDD: Reducing Emissions from Deforestation and Forest Degradation

Fact: 18% anthropogenic emissions comes from forest destruction

Idea: Developed countries will pay for developing countries not to destroy rainforest

REDDplusWhat do people mean by“perverse incentive” with

REDD?Any equity issues to consider?

What do people mean by“perverse incentive” with

REDD?Any equity issues to consider?

EIA analysis of impact of Kyoto Protocol on US economy (Oct 1998):

http://www.eia.doe.gov/oiaf/kyoto/execsum.html

KEY POINTS:1) US emissions projected to increase 34% above 1990 levels by 20102) Potential for natural C sinks may reduce US commitment to -3% (vs. 7%) of 1990 levels3) Carbon prices range from $67/tonne (+24% by 2010) scenario to $385 (-7%) scenario4) Large uncertainties (social response, market response); also cost depends on when

you begin to implement (starting later yields higher costs)

So would it ‘cost’ us? YesDo we know what the cost would be? Perhaps not so well….What is the cost of climate change? Very difficult to say

1. Cap and trade is a market-based approach to reducing pollution. The govt sets an overall cap on emissions and creates allowances up to the level of the cap.

2. Sources must hold enough allowances to cover their emissions.- can lower emissions and sell or bank allowances- continue to emit higher than their allowance and purchase additional allowances

3. Market-driven: govt does not prescribe where emission reductions are made,but the govt must set the goal and monitor compliance

The Basics of Cap and Trade

US Cap and Trade Programs in Place (via EPA)

1. Acid Rain Program: covers SO2 emissions from power-generation facilities- reductions of 51% of 1990 levels by 2008

2. NOx Budget Trading Program: covers O3-season (summer) NOx- reductions of 60% of 2000 levels by 2007

EU Greenhouse Gas Emission Trading System (EU ETS)

1. Create allowances equivalent to the EU Kyoto assignmentsfor each country

2. Distribute them to the nations, and then the nationsdistribute them to the large emitters

3. Each year, large emitters must return allowances equivalentto their emissions that year

Phase 1 (2005-2007): allowances given out freely; involves 40% EU CO2EU emissions grow by 1.9% in two years

Phase 2 (2008-2012): CDM and JI included; 60% allowances auctionedEU emissions (only 3% required)

Phase 3 (2012- ): aviation included; most allowances (>50%) must be auctioned; outside-EU emissions credits <50%- new cap means -21% of 2005 emissions by 2020

Carbon currently trading at €8.52 ($10.50) per tonne

“Cheaper, not cleaner”--The Economist

Australia chose a carbon tax:$24/ton

How $43/ton carbon price translates into energy prices:

http://www.eia.doe.gov/oiaf/1605/coefficients.html