date: Wed, 29 Nov 2000 11:13:20 -0500 from: "Tom Jacob" subject: REFLECTIONS ON THE HAGUE... to: climatepolicy@ic.ac.uk, michael.grubb@ic.ac.uk, m.hession@ic.ac.uk, t.jackson@surrey.ac.uk, hadi@cmu.edu, sujatag@teri.res.in, a-michaelowa@hwwa.de, Emilio@ppe.ufrj.br, yamagata@nies.go.jp, Jorgen.Wettestad@fni.no, schellnhuber@pik-potsdam.de, gouvello@centre-cired.fr, EHaites@attcanada.ca, shs@leland.stanford.edu, jw18@soas.ac.uk, jonathan.pershing@iea.org, RKinley@unfccc.int, Sylvie.Faucheux@c3ed.uvsq.fr, m.hulme@uea.ac.uk, nkete@wri.org, Z.X.Zhang@Rechten.RUG.NL, pretel@chmi.cz, zkundze@man.poznan.pl, noble@rbs.anu.edu.au, jae@pnl.gov, ogunlade@energetic.uct.ac.za, Eberhard.Jochem@isi.fhg.de, hoesung@unitel.co.kr, naki@iiasa.ac.at, kchomitz@worldbank.org, enikitina@glas.apc.org, dlashof@nrdc.org, nishioka@iges.or.jp, pachuri@teri.res.in, tom.downing@eci.ox.ac.uk, mmunasinghe@eureka.lk, munasinghe@worldbank.org "CLIMATE POLICY" EDITORIAL BOARD CONTACTS: I am taking the liberty of putting you on a large, predominantly industry, distribution list I have been accumulating, with which I share various climate change documents. Please advise if you want off. Otherwise, FYI (reactions welcome)... ---------------------- Forwarded by Tom Jacob/AE/DuPont on 11/29/2000 11:08 --------------------------- Tom Jacob 11/29/2000 10:04 To: cc: Subject: REFLECTIONS ON THE HAGUE... GLOBAL INDUSTRY CLIMATE CONTACTS: FYI, following is an impressionistic summary of developments at The Hague, which I forwarded today to my internal DuPont climate change network. I offer it as food for thought and reflection, and invite feedback... CLIMATE CONTACTS: The negotiations in The Hague failed to deliver even the limited decisions and guidance which many of us expected, let alone the final "package" for which some had hoped. The failure of Saturday's last-minute gambit by the US put a particularly disappointing punctuation on the whole affair. While some points were reportedly negotiated to consensus during the ministerial dialogues last week, the fact is that nothing was formally approved and it remains very uncertain just where the process will pick up when it resumes (presumably in conjunction with the already scheduled round of negotiations the last two weeks of May in Bonn). The result of all this is an ever-larger question mark hanging over the Kyoto Protocol, its aggressive (and fast-approaching) targets/timetables and its innovative approaches to tapping the power of the market place. The two weeks were not without significant developments, though. The Hague was a melange of ceremonial formality, tedious negotiation, high-stakes back-room dealing, protests, and a seemingly endless stream of open side-events and closed outside meetings. On the surface, the affair was distinctly lacking in coherence. Beneath that surface, though, there were threads emerging that, woven together, begin to fashion a most intriguing tapestry. Following are a few of the observations that may have important implications as the process moves tentatively forward from last week's session: · Tightening The Scientific Noose · Beyond Environment · Reactionary Protests · Ever-Widening Embrace Of Mechanisms · The "Sinks" Thing · Markets Finding A Way · Keeping The U.S. Honest Comments and disagreement more than welcome... TIGHTENING THE SCIENTIFIC NOOSE: Amid the pomp and circumstance of the opening of the negotiation, the voice most keenly attended to was that of one of the least-pretentious people on the planet, Bob Watson, Chair of the Intergovernmental Panel on Climate Change -- the global scientific effort supporting the work of the Framework Convention on Climate Change. While the IPCC's Third Assessment Report (TAR) has not yet been completed (scheduled for release next year), Watson previewed some of its likely themes by noting that: "The weight of scientific evidence suggests that the observed changes in the Earth's climate are, at least in part, due to human activity." He also concluded that: "If actions are not taken to reduce the projected increase in greenhouse gas emissions, the Earthe climate is projected to change at a rate unprecedented in the last 10,000 years with adverse consequences for society, undermining the very foundation of sustainable development." It is significant that, while there is still uncertainty in the science and still sniping from the margins, the voices challenging the fundamental premises of the Framework Convention and its Kyoto Protocol (particularly in the US) have diminished in both their number and their pitch in the past several years. More and more, even those that continue to challenge the Protocol as a strategy, acknowledge concern regarding climate change as warranting attention. Similarly, even the countries that seemed most at odds with the sense of the negotiation on many points (Saudi Arabia and some OPEC allies) have not challenged the fundamental legitimacy of the concerns driving the effort. BEYOND ENVIRONMENT: While the Framework Convention is certainly an environmentally motivated agreement, it is equally an economic agreement. The harsh reality of climate change is that effectively responding to it will ultimately require a fundamental restructuring of foundations of the global economy. At DuPont, we have long voiced this view of climate change as a serious, complex issue with major risks associated with both the environmental and economic realities. Countries are now increasingly acting as if they understand that fact, and economic considerations seem to be rising in prominence accordingly. Certainly at this session, a hugely important theme was a consistent and very loud voice of the Group of 77 & China on a range of economics-driven concerns that came to be known as the "developing country issues." These included funding for technology transfer, for adaptation to climate change effects, for adaptation to the economic effects of climate change action (compensation for fossil-fuel resource economies); and for meeting specific needs of least-developed economies. While often couched in terms of sustainable development, the core concerns tend to be driven by perceptions of the traditional north/south economic gulf and need to bridge that gulf, and the prescriptions always seemed to boil down to more and more money from the north for use by the south. Similarly, even within the developed world, economic drivers are proving hugely important in policies countries take. Certainly the messages from Capitol Hill driving US policy on both flexible mechanisms/supplementarity and developing country participation have been motivated as much by concern over the economic impact of various options as by the (growing) concern over climate change. Within industry circles in the US, the perceptions of economic risk have always been very high, though they have in past couple of years begun to be more broadly matched by growing perceptions that the environmental risk may, indeed, be equally high. Interestingly, there is now a convergence, here, as European industry has begun to become more concerned about economic impacts of climate action. Long more willing than many of their US counterparts to acknowledge the legitimacy of environmental climate concerns, they had been relatively less focused upon economic risks attendant the Kyoto targets/timetable, until growing concerns about Europe's ability to meet its targets began to erode some of the government assurances that had moderated industry's concerns. REACTIONARY PROTESTS: It is perhaps not coincidental that as economic concerns have begun to rise, both in the increasingly serious consideration to market mechanisms and the emerging dialogue about economic impacts of climate action, we have begun to see an increase in traditional, confrontational environmental protests. Even in Kyoto, demonstrations were small and relatively non-confrontational reminders of the environmental concerns. In The Hague, we saw for the first time organized disruption of the conduct of negotiation and publicly staged confrontations. While organized and deeply committed environmental activism has long been an important part of the UNFCCC process through major groups such as NRDC, EDF/ED, WWF and Greenpeace, they have operated within the structure as constructive participants in the policy-setting process, along with industry. At The Hague, this "inside" role was supplemented by hundreds of young, relatively naïve demonstrators brought in specifically to energize the environmental presence and confront the process. Even some within the ranks of the more established participants -- while disavowing the takeover of the negotiating room -- saw fit to publicly offer Minister Pronk and the UNFCCC Secretariate a veiled threat of "Seattle" if the process failed to deliver. In the context of this resurgence of "environmental fundamentalism" it is also interesting to contrast the dynamics of the final give-and-take between the US and the EU in The Hague. The US has always approached major treaty negotiations such as this from a policy process that brings each of the potentially involved agencies (ministries) together to jointly frame priorities and strategy, with the process in the field managed by the State Department (foreign service) and the White House -- not, typically, by any particular agency "minister" (Carol Browner, head of US EPA, for example, has not represented the US in these sessions). In contrast, EU policy and representation in "environmental" forums such as The Hague is vested more narrowly in the Council of Environment Ministers -- opting to give priority to providing each country an opportunity to participate through their environment minister, but in the processes constraining the range of perspectives such that all the key players are answerable to the similar constituencies. Obviously, there are limits to the implications one can draw from this, but it may be significant that it was one of those Ministers for whom the portfolio is most broadly drawn (Deputy Prime Minister John Prescott) that was central in shaping the initial deal with the US, while those implicated by public accounts in turning down the deal (Voyner, and Trittin in particular) are among those with closest ties to their more activist constituencies. EVER-WIDENING EMBRACE OF MECHANISMS: While some in the environmental community continue to react against the emerging attention to economic concerns, the innovative "Kyoto mechanisms" which would attempt to tap market economic forces to encourage economic activity responsive to the environmental concerns have continued to grow broader support. Even within developing countries for whom the notion of market mechanisms was most foreign at the time of Kyoto, there is growing recognition of the potential benefits -- particularly the potential economic and sustainable development benefits of the Clean Development Mechanism (including ideas of "unilateral" and south/south CDM projects that promise far greater control for developing nations in exploiting their potential value). While there is been pressure to constrain the use of these mechanisms so they cannot be exploited by developed nations, the broad understanding and engagement among developing countries has been one of the most remarkable evolutionary changes resulting from the past several years of climate discussions. Even among the developed nations there has been a transformation, with the EU now supporting the mechanisms conceptually, despite its ongoing preference for mandatory policies & measures (in the US analogue: command & control). There has even been some discussion suggesting that recent studies show the EU may end up being as much or more dependant upon such mechanisms as the US in meeting its targets (obviously, this would clearly be the case if the EU acknowledged its own "bubble" to be a form of emissions trading). The schism emerging within the environmental community between those pushing a return to confrontation politics and those seeking new approaches to securing environmental progress is nowhere more evident than in the groups responses to market mechanisms. Organizations such as Environmental Defense and WRI have recognized the capability of broadening the base of environmental action and delivering more environmental benefit for each dollar invested by harnessing the market place; and they have sought to actively shape the way in which the mechanisms operate to ensure their environmental integrity. Other groups have remained skeptical -- particularly of open-ended access to emissions trading or consideration of sinks. Ironically, even within industry, there had been division on mechanisms, particularly in the US. Some interests have viewed them less as a tool to find least-cost opportunities for action that would otherwise still be required, than as a tool to induce action where it would otherwise not be required. The latter sentiment seems increasingly to be moderating, however, and the market mechanisms now seem to have evolved to quite broad support among industry, THE "SINKS" THING: The one exception in the broadening consensus seems to be sinks. Certainly it was no surprise that this was a major point of disagreement. The tradeoffs that led to the Kyoto Protocol clearly included the notion of sequestration as a legitimate consideration in determining a country's contribution to greenhouse gas loadings. What was not clear at the time was what would, in fact, end up being encompassed by this category. The scientific work done since Kyoto, especially by the IPCC, has answered a number of questions, but pointed to a number of others that are not amenable to scientific answers. The potential reach of sequestration has broadened conceptually beyond the simplistic notions of rainforest protection that dominated pre-Kyoto discussion. With this broadening has come both accounting and political questions. MARKETS FINDING A WAY: One of the major themes of The Hague was the continued evolution of private sector initiative in advancing both the policy and reality of market mechanisms. Some of the best-attended of COP6 side events were those which brought together industry panels to discuss actions and opportunities to get out in front and make these emerging markets work. Traders are trading; buyers & sellers are buying & selling; and companies/accountants are looking systematically at how to standardize documentation to facilitate those market activities. It is all happening in spite of the lack of concrete action defining a global framework. It is the private sector gearing up to seize the moment as government regulators find themselves both challenged by the magnitude of their emission reduction task and tantalized by the possibility of harnessing global markets to advance to that end. KEEPING THE U.S. HONEST: Perhaps above all, this negotiation was conducted with all eyes on the US. The US has been a target in climate change from the outset, with its disproportionate consumption of energy resources and unparalleled economic prosperity. There is a lingering (but withering) perception that the US is fundamentally resisting any serious action on climate change. This had been accentuated by the Byrd-Hagel Resolution passed the US Senate in the buildup to Kyoto, and by concerted and very visible effort by a core group within US industry (the Global Climate Coalition) to deny legitimacy to the climate change issue. However, through leadership companies in groups such as the Pew Center on Global Climate Change and the International Climate Change Partnership, the message has gradually sunk-in on the global stage that more and more US companies are, in fact, coming to recognize the seriousness of climate change and are trying to play a more constructive role in responding to it. This and the shear hard work and leadership of the US negotiating team have gradually begun to erode this "just say no!" image of the US; but the economic imbalances continue to dominate the perspectives of many regarding these negotiations and will continue to keep the US (and US industry) in the target zone. - - - - - - - - - - Thomas R. Jacob DuPont -- Manager, International & Industry Affairs Internet Address: tom.jacob@usa.dupont.com Wilmington: 302-774-6873 fax: 773-2010 Washington: 202-728-3610 fax: 728-3649