G8 agreement may drive climate policy

The G8 Summit on June 7 reached a compromise agreement on climate change.

German Chancellor Angela Merkel continued U.K. Prime Minister Tony Blair’s initiative to discuss international climate policy within the G8 framework — including five major developing-country emitters. Although the United States had indicated that it preferred discussions to take place outside the G8 and U.N. processes, G8 leaders agreed to continue discussions within the U.N. to define a “significant, long-term goal” for tackling global emissions. Media coverage of the ensuing “breakthrough” on international climate policy largely was optimistic about what seemed to many a surprising advance:

G8 climate discussions expanded to include five invited “outreach countries” — large emitters outside the G8 — Brazil, China, India, Mexico, and South Africa, which also agreed to implement domestic policies to address climate change within an international framework. Previously, non-participation by the United States, China, and India was seen as a major flaw in the Kyoto Protocol. News of this agreement thus was presented as a significant shift in international politics, and perhaps even demonstrated “back-pedaling” by U.S. President George Bush. Yet many of the policies were reiterations of past positions, and the G8 consensus contains very few specifics.

Climate change and the G8.

While many countries are discussing domestic approaches to reducing emissions that lead to climate change, on the international stage only two significant international approaches currently exist:

•European Union Emissions Trading System (ETS). The EU ETS has been a moderately successful program that established a functioning EU-wide market for carbon emissions reductions. Although there are opportunities to use reductions made outside the EU, this remains an approach that necessarily regulates only EU countries.

•U.N. Framework Convention on Climate Change (UNFCCC). The UNFCCC subsumes the more recent Kyoto Protocol, which expires in 2012. This has created several growing international markets for greenhouse gas emissions, most notably the Clean Development Mechanism, which allows projects to be financed in developing countries. While open to all countries, the Kyoto Protocol has not imposed commitments on five major emitters: the United States, China, Australia, India and Brazil. The overall contribution of this instrument to reductions in global emissions is likely to be small relative to the near-60 percent cut expected to be necessary for long-term climate stabilization.

The approaching expiry of the Protocol, combined with increasing scientific understanding and political pressure for action on climate change, has prompted major emitters to reflect upon their individual and collective approaches to reducing emissions. However, the means for reaching such a post-Kyoto consensus is far from clear:

Different blocs and important individual countries have begun vying not only on details of commitments — for example, whether to focus on technologies or reduction targets — but also are advocating different venues and approaches for negotiations.

Since meaningful global action requires participation by all or most of the world’s biggest emitters, bringing into the regime the United States, China, India and Brazil long has been seen as the major challenge for post-Kyoto climate policy.

New climate policies.

Three key states outlined new climate policies immediately before the meeting:   

Five days before the G8 was to convene, Bush made a policy statement outlining what many media outlets reported as a new climate policy:

Many elements of the plan were not new, but this clearly was a high-profile restatement and elaboration of previously articulated principles.

It was also a clear signal — to both domestic and international audiences — that the United States was looking to re-engage in international discussions on this issue.

The plan Bush outlined stated that:

•the United States wants to be part of a post-Kyoto international agreement to address climate change;

•the focus should be on the 15 top emitters, which together account for over 80 percent of global emissions;

•these countries should convene separately from the U.N. and G8 processes — Bush offered to host a meeting;

•the focus of talks should be on setting a “long-term global goal for reducing greenhouse gases”;

•in achieving that goal, countries would be given flexibility in the “medium term” to adjust their pathway to reflect their “own mix of energy sources and future energy needs”; and

•any agreement should be concluded by the end of 2008 — the end of Bush’s presidency.

Importantly, Bush did not propose what the goal should be, nor what form it should take (for example, it could be a goal for absolute emissions reduction, reduction in emissions intensity; or penetration rates of certain technologies). However, he noted that it should be easy to observe, measure and compare across countries. Also clear from Bush’s speech was an absolute focus on technology as the means to achieve reductions — inducements for behavioral change clearly were unwelcome. In this vein, Bush highlighted some of his administration’s commitments to expand research and development funding for energy technology and called on other countries to do the same. He also linked the issue to trade by arguing for reduced tariff barriers for transfer of technology — often a key demand of developing countries.

New commitments.

While the headlines and press releases of the G8 summit sound a note of optimism, little progress was made on setting concrete policies or targets. Nevertheless, several provisions contain the kernel of possibility for future policy:

G8 agreed to “seriously consider” the 50 percent by 2050 reduction goal. This wording does not create any fixed obligation.
Indeed even if the “goal” were accepted, Bush’s top environmental adviser was careful to clarify that any targets agreed during this process would constitute only “aspirational goals” for cutting emissions. Therefore, though this specific target might serve as a mental anchor for discussions over the next 18 months, the G8 meeting itself made no tangible progress on
this question.

•“Substantial cuts” in emissions. Previously, the United States was unwilling to discuss actual cuts, preferring instead to talk about other metrics of emissions, such as emissions intensity. However, “substantial” is not defined. The outcome depends on subsequent negotiations and the extent to which historically reluctant countries are willing to set aggressive targets.

•Further negotiations under the U.N. process. After initially pushing strongly for climate negotiations held outside the G8 and U.N. frameworks, the United States agreed to talks under the pre-existing U.N. framework. This is a small but significant endorsement of the UNFCCC process, which would have become increasingly marginalized if it were no longer seen as the primary venue for negotiations on climate mitigation. Nonetheless, the United States is likely to continue with its proposal to convene a parallel working group of the top 15 emitting countries.

Most of the provisions in the G8 statement, as well as new policies by the United States, China and Australia, were not new, and the resulting agreement is more of a statement of consensus on approach than actions. In particular, the United States has proposed similar strategies on climate but not shown much haste in executing these plans. Nevertheless, the impression of the G8 summit is that reluctant countries are intent on engaging in finding an international approach to climate change, which does achieve actual reductions in emissions.

Many factors probably have contributed to the more engaged U.S. stance:

•Bush recently often has spoken of the importance of climate change, and it is possible that increasing scientific consensus on the topic to some extent has informed this position.

•Repeated entreaties from Blair and, more recently, Merkel and even possibly Australian Prime Minister John Howard may also have had an effect.

However, as in Australia, domestic politics is playing an increasing role in the U.S. approach:

•Bush is increasingly unpopular at home and his Republican Party clearly is vulnerable in elections at the end of 2008.

•Climate change is an issue that the Democrats have dominated historically, not least because of former Vice President Al GoreAlbert (Al) Arnold GoreTwo Norwegian lawmakers nominate Trump for Nobel Peace Prize There’s no need to panic about the rising sea level When it comes to Iran, America is still running the show MORE.

•The Republicans and their constituents have noted, possibly with concern, that major regional segments of the U.S. economy have decided to move forward with their own emissions-trading programs, bypassing federal control.

•Many businesses and segments of the voting public are searching for a moderate, engaged approach on what seems a scientifically legitimate issue.

In short, the Republican leadership may have realized that non-action on this issue is no longer a viable strategy. It is also possible that they wish to establish a long-lived framework for future policy and simultaneously claim credit for progress before the next election.

Oxford Analytica is an international consulting firm providing strategic analysis on world events for business and government leaders. See www.oxan.com .