After Copenhagen, let's focus on governance

I end a series of posts on the Copenhagen climate conference with this one to reiterate why governance has to be at the heart of future climate negotiations. For nearly two decades climate negotiators have been trying to get deals on reducing greenhouse gas emissions but they have largely failed to develop the institutions that would make such deals credible. Any future climate deal will have a combination of emissions reductions or controls, financing, monitoring, and development and transfer of cleaner technologies. While all this is on the agenda for climate meetings, there is a real gap between substantive discussions on emissions and those on other aspects of climate governance. If we have to get beyond the Copenhagen impasse, negotiators, political leaders and ordinary citizens have to recognise the realities of unequal power in world politics. And we have to find win-win strategies for collaboration on technology development, organise more efficient but also more representative coalitions to manage negotiations, and build capacity for better information collection, analysis and exchange.

You can read more in my op-ed for the Financial Express, Climate for a win-win dialogue, here.

Copenhagen offers lessons for climate governance

In an op-ed for the Financial Express today, I argue that the chaos on the streets of Copenhagen and the frustration with the negotiations inside the Bella Center show a mirror to the world of international diplomacy and global governance. For international regimes in general, Copenhagen offers lessons for agenda-setting and participation, negotiations and rule-making, and implementation, monitoring and enforcement of commitments. Read the article here.

Why climate finance negotiations do not move forward

During my week in Copenhagen I was asked to contribute to Opinio Juris, a forum of reputed international law and international relations scholars. I argue that negotiations are stuck because we are unable to break out of the moulds that have defined our positions for nearly two decades. The massive trust deficit that plagues the negotiations can only be broken if we take a more honest approach towards debunking seemingly dichotomous and exclusive positions: a choice of public over private finance; a trap of us versus them stemming out of a fear of competition; and a stalemate over what comes first, commitments or conditionality. Continue reading the article, Red herrings in debates over climate finance, here.

Four questions for Copenhagen

The success or failure of Copenhagen will depend not only on the substance of the deal but on the spirit and message of the talks as well. The legitimacy of any climate agreement will depend on answers to four questions:

1. Where will the deal get struck and who will participate?

2. How will commitments be implemented?

3. Who will pay for the sharing of burdens?

4. How will firms and private citizens respond to the signals that come out of the climate negotiations?

My article on the GEG blog, Making Copenhagen count, engages with these questions to highlight the prevailing and potential tensions in climate change discussions. A longer list of my current research on climate change governance (on technology transfer, financing, trade and climate links, monitoring and enforcement) is available here.

G8, G17 or G192?

Last week I wrote a column about the G8 summit in L'Aquila, Italy and the climate change discussions that were held there under the Major Economies Forum umbrella (comprising 17 economies). I argued that for the climate negotiations to succeed, much greater levels of trust is needed between developed and developing countries. And in order to build such trust, I suggested that joint activities are needed more than ever - activities to develop and diffuse technologies, to collect and share satellite-based emissions information, or cooperation to reform multilateral financial institutions.

I received a range of comments, some of which focused on the need for sticks and carrots, some of linkages between climate and other regimes, others on domestic politics, and finally on the issue of trust. Let me elaborate a bit on these points.

Carrots and sticks are of course necessary. The main carrot is financing but the U.S. has yet to put something on the table, something that Obama acknowledged in L'Aquila. So, China and

India are playing a wait-and-see game. Another carrot is through access to markets, particularly in environmental goods and services (already a $500bn market). But we're not going to get a deal on that without a comprehensive conclusion of trade talks under the Doha Round.

Meanwhile, the sticks could also be employed through linkage with other regimes, particularly trade sanctions. But that would raise the threat of protectionism, in the least, and make the trade regime ungovernable, at worst. More on this in a future post.

Therefore, in addition to the carrots and sticks approach, there is a need to shift domestic politics in developing countries, a point I have been trying to push via the technology and renewable energy investments route. I am just sceptical (given India's WTO experience) whether the interests in favour of curbing emissions will line up that easily. In the WTO case, the interests that benefited from participation in the trade regime realised it post hoc, not during the Uruguay Round negotiations. Similarly, there will be interests in the new energy sectors that would benefit from a higher carbon price, stronger regulation on emissions, cap & trade, etc. But I do not yet see a strong enough lobby to shift the official position. It has not moved beyond the

North-South posturing.

Trust is not a fluffy term. In international relations, it is the basis for any agreement, no matter how we line up the incentives. The question is how we build trust. I see joint technology development (with public-funded R&D and of course private investments, like GE's investments in China on cleaner coal tech) as one of the ways forward, so that the win-win benefits become more obvious to the actors. Otherwise, the competitiveness concerns of individual economies could overwhelm the public good benefits of responding to climate change.

Ultimately, the G8 or the 'G17' cannot substitute for the G192, namely the full membership of the United Nations for a comprehensive deal on climate change. Smaller negotiating groups might deliver a bargained outcome (although they failed to do so in L'Aquila). But such an outcome will neither enjoy trust nor legitimacy in the wider international community, unless an inclusive process engages with the wide range of governance issues plaguing the climate regime, from negotiations to implementation to monitoring and enforcement.

Growth, energy and climate change - no easy reconciliation

In her speech to Parliament last week, President Patil declared that one of the top priorities for her government would be ‘energy security and environment protection’. The intention is commendable. India and other developing countries face a triple challenge of increasing income growth, building energy infrastructure and confronting climate change. Reconciling these challenges would depend on financing, regulatory and institutional reforms, and international cooperation. Continue reading my article, published today in The Financial Express, here.

China's cleaner coal surge

It was only yesterday that I was giving a lecture on the need for 'cleaner coal' investments in China's power infrastructure, to raise efficiency and reduce emissions. Today the New York Times reports that China has overtaken the United States in its quest for building more efficient coal power plants.

Although the average efficiency of the U.S. plants (40%) still exceeds China's (29-30%). The best plants can reach up to 44-45% efficiency, cutting emissions by a third. More interestingly, by scaling up the investments, China is managing to generate cost efficiencies as well: an ultra-supercritical plant now costs a third less in China than a low efficiency plant in the United States.

Of course, there are many other ways to improve efficiency as well. As the International Energy Agency reported on China recently, rational mining, modern management practices, matching fuel quality to users' specifications, and reducing losses during transport can deliver efficiency gains along the supply chain.

A point of contrast with India is that China's higher efficiency plants are coming on stream towards the tail end of a decade-long building boom. As the economy slows, the pace of new (more efficient) plants will also reduce. India is about to embark on a similar journey of huge investments in the power sector (its coal power capacity is about 87GW, which has to rise to 440 GW by 2032). India has a chance to upgrade to higher technology plants from now itself, rather than locking itself in poorer infrastructure for another three to four decades.

For both China and India to deploy cleaner coal technologies, we would need an international agreement that encourages investments in such technologies, and facilitates them with public-private partnerships and credible technology transfer arrangements.

Powering a change - cleaner coal technologies for India

Is it possible for India to make a significant contribution towards mitigating climate change without undermining its growth and poverty-reduction imperatives?

Indian policymakers view calls for reducing India’s greenhouse gas emissions as both illegitimate and a threat. They are illegitimate because rich countries are primarily responsible for the historic stock of emissions. The calls are a threat because curbing emissions could undermine growth, necessary to lift millions out of poverty.

But the fact remains that despite historically low per capita emissions, India will increasingly become a major source of emissions. Developing countries (led by China and India) will account for three quarters of the projected increase in emissions up to 2050. Unless developing countries’ emissions are also stabilized by 2020-25, any meaningful action by rich countries would be negated.

The transfer of cleaner coal technologies to India holds one of the keys to reconciling these competing concerns.

Continue reading my latest article, on the transfer of cleaner coal power technologies to India, which has been published in Indian business newspaper, Mint.

Climate cleavages

This week the G-20 leaders met in London to discuss the global financial crisis, which is set to dominate the international agenda for some time. A parallel debate has been under way here in Bonn on another financial question, which affects an even greater systemic crisis: the funding required to tackle global climate change.

Click here for my op-ed on the state of climate finance negotiations, published in The Indian Express today.

Bonn climate meetings 3 - Trust, but verify - and comply

A more technical but hugely important issue in climate negotiations is measurement, reporting and verification (MRV). Monitoring what states are doing and whether their actions meet their commitments is a fundamental basis for international cooperation. There can be no credible global agreement unless there is trust that countries will comply - and that trust is contingent on monitoring mechanisms that can notify non-compliance and identify deliberate cheating. In the climate regime, MRV is meant to serve that purpose.

I have been listening to negotiators and experts outline their positions on the issue. Meanwhile, the Pew Center on Global Climate Change organised a side-event today to launch a new report by Dan Bodansky (international law professor at the Georgia School of Law and a former negotiator) and Clare Breidenich (a former State Department official who has also worked at the UNFCCC Secretariat). The paper explains in great detail the existing provisions -and challenges - for MRV for different parts of the climate regime: greenhouse gas inventories, trading of emission permits, mitigation actions by individual countries, and financial and technology commitments.

Since I know something about monitoring and review processes (a.k.a. my doctoral thesis!), I think there are four big questions that have to be answered.

First, what needs monitoring? Developing countries argue that MRV primarily applies to `quantified emission reduction commitments´ of developed countries. Developed countries it is important to measure the actions of developing countries as a condition for financial transfer to them. In other words, even if developing countries do not take on specific commitments to reduce emissions, their `nationally appropriate mitigation actions´(NAMAs) should be reported. In turn, developing countries point out that their NAMAs are contingent on support from rich countries. And so the debate goes on. There were a lot of references to chickens and eggs in the discussions.

Second, how do we overcome the capacity constraints in building monitoring systems? Reporting on their emissions accurately and regularly would impose a huge cost on developing countries. Until now the funding made available to poor countries to build monitoring capacity at home has been woefully inadequate. If data is collected from other sources, by international organisations or by NGOs, then serious issues of sovereignty arise.

Third, how would assessment and verification happen at the international level? Once the data on emissions, policies and actions, and financial and technological flows have been reported, it has to be independently verified. Currently, the climate regime checks whether developed countries follow international guidelines when preparing their reports - the actual data is not verified. For other actions, the procedures are even weaker. And developing countries' data is not verified at all. Going forward, these procedures would have to be strengthened to increase all-round confidence in the system.

Fourth, how would MRV help in promoting compliance? Verification is a technical process; reviews are inherently political. This is the elephant in the room, which is being sadly ignored. In other regimes, say WTO and the IMF, monitoring procedures have suffered precisely because developing countries have felt that they do not have adequate influence in promoting compliance by rich countries. What is the point of extensive and expensive procedures for generating information if enforcement is still affected by the power asymmetries between member states? In the climate regime, too, compliance and enforcement have been weak. If developing countries secure guarantees for financial and technological transfers, they would want effective compliance review as well.

The climate regime certainly needs robust monitoring. But it will fail in its objectives if there is no clear endgame. Trust yes, verify yes, but also comply.

Bonn climate meetings 2 - Climate financing and four-letter words

I spent much of today attending plenary sessions and 'side-events' on financing and technology transfer. It is easy to get lost in the rhetoric that envelopes the debates. I have seen this happen so many times in trade negotiations, and am witnessing the same in climate talks. But the essential issue is this:

1. The climate change problem is real to which there could be two responses: either countries can try to mitigate the problem by reducing greenhouse gas emissions (the world needs at least a 50% cut in emissions by 2050 to restrict average temperature increases to 2 degrees Celsius); or countries can adapt to an already changing climate, which means changing agricultural practices, building flood defences, preparing for sharp changes in water availability, etc. In practice, both mitigation and adaptation are necessary and sometimes the activities cannot be easily distinguished.

2. In order to do so, all countries need money and access to new technologies. Developing countries argue that since they played no part in creating this problem, they should receive funding from developed countries. The UN Framework Convention on Climate Change recognises this obligation of developed countries, in principle.

The consensus ends there and the debates begin.

1. The first issue is the amount of funding required for techology research, development, deployment and diffusion (or RD3 in the jargon). Estimates vary wildly. For mitigation, the spending is anywhere between $70 billion and $165 billion a year; and additional funding of $262 billion to $670 billion is needed. Adaptation spending is about $1 billion a year when some estimates suggest $86 billion are needed. Thanks to such a wide range, one NGO representative told me that developing countries are hesitating to put any specific estimate in their proposals. Fair enough, but then how do you get a concrete commitment and, more importantly, by what standard would you measure compliance? Compliance has been one of the biggest problems with the climate regime so far, and there has been little progress so far to overcome it on the question of climate financing.

2. Where will the money come from? There is a major debate about private versus public financing. Developed countries argue that since much of the technology spending comes from private sources, that would also be the source of funding for developing countries. Developing countries are calling the bluff. They argue that private investment can flow into developing countries only when profits are expected, not when the higher capital, operational and intellectual property costs make a project commercially unviable. Hence, public funding has to cover the difference in costs. As the Indian delegate put it, "If the initial upfront capital investment and lifetime expenses [of a clean technology project] are positive, then developed countries must recompense developing ones. I'd love to see which are the commercial institutions that will invest in projects that have no return!"

3. Under what conditions will the funding be given? There is a fear that, even if commitments for funding mitigation and adaptation activities were secured, developing countries would be treated as aid recipients, subject to conditionalities imposed by rich donors. Developed countries are, of course, interested in ensuring that the money is spent in a verifiable manner. But poor countries argue that the process cannot be top-down, there has to be a sense of "ownership", as the Filipino delegate noted.

In the end, the debate boils down to the purpose of climate funding. Developing countries, like Uganda, insist that "funding climate change is a commitment, not a donation." For them it is a right, both from a legal point of view and from an ethical one. But the modalities of financial and technology transfer will not be resolved easily. The Indian delegate ended his intervention by asking for grants, not loans: "A 'grant' is a four-letter word in some dictionaries, so I will introduce a new phraseology: we want interest-free, non-repayable transfer of money." The current climate negotiations are meant to conclude in December this year. There will be many more four-letter words whispered under diplomatic breaths before then.

Bonn climate meetings 1 - U.S. setting expectations on climate change?

U.S. climate envoy, Todd Stern, is trying to set expectations on the prospects for climate negotiations. Speaking in Bonn at the climate meetings, he said, 'I don't think anybody should be thinking that the U.S. can ride in on a white horse and make it all work.'

As I have written before, President Obama has already taken steps to move away from the Bush era's almost complete lack of engagement with the climate issue. There is palpable enthusiasm among climate activists about potential U.S. leadership to drive through a global agreement in Copenhagen at the end of this year. Meanwhile, developing countries have announced measures of their own.

But here in Bonn, the first of three major sets of meetings before Copenhagen, the United States is making it clear that ambitious targets for emission reductions will not be politically or economically feasible. 'It is in no one's interest to repeat the experience of Kyoto by delivering an agreement that won't gain sufficient support at home,' says Stern. As always, the United States wants China and other major developing countries to share the burden of cutting greenhouse gas emissions.

Sure, the global economic crisis complicates matters (see my previous blog): climate-friendly investments are not as profitable, and the domestic political economy of distributing the costs of shifting to lower carbon trajectories is complicated further by rising unemployment.

Yet, for all the reality checks, there is still nothing concrete on offer for developing countries. They want specific commitments on financing, technology transfer and adaptation measures. The trouble is that the discussions and the rhetoric focus on targets for emission reductions and the remaining issues are treated more like 'side payments' to induce cooperation by developing countries. Unless the demands of poor countries are elevated to the same status, there is little hope for progress.

Economic crisis complicates climate crisis in more ways than one

California is a leader in the United States when it comes to environmental regulation. But the economic crisis threatens to undermine its climate-friendly plans. The New York Times gives the example of CalPortland, a cement company in Colton, which is struggling to find the resources to retrofit its plant to reduce CO2 emissions. Whereas lawmakers had estimated it would cost $200 million to upgrade all eleven cement plants in the state, now it looks like that much would be needed just for the Colton plant. And with the economic crisis, cement prices have fallen to levels that force a revision of the cost-benefit calculus for climate-related investments.

I think the bigger lesson is that the economic crisis presents policymakers with a "double distributive" burden: the distribution of costs and benefits resulting from a process of decarbonising our economies, complicated further by the loss of jobs and economic opportunities during a severe recession. It's one thing to claim that 'green' jobs can be created; quite another when the pressure of job losses in other sectors builds up. Any economic restructuring would involve distributive questions; this time it's just doubly challenging.

Which brings me to my final point: what happens when developing countries try to reduce their emissions? One feasible pathway for countries like China and India is to increase the efficiency of their coal-fired power plants, using already available improved technologies (more on those details in a few days). While improved efficiency would have economy-wide benefits, it is hard to find good estimates of how the incremental costs of upgrading plants would affect individual sectors of the economy (power generation, cement, iron and steel, etc.). Without such estimates, it would be harder still to measure the distribution of costs and benefits across sectors. And, more importantly, it would undermine developing countries' efforts to secure guaranteed financing from rich countries for technological upgrades.

First signs from Obama on climate change

The Obama administration has signaled intent on climate-related issues within its first week. The New York Times reported this morning that the new President favours allowing states to set their own automobile emission and fuel efficiency standards, which are sometimes higher than federal standards. California and thirteen other states in the United States wish to regulate tailpipe emissions, but their request had been rejected by President Bush. Obama's memorandum to the Environmental Protection Agency to review Bush's order opens up the possibility that more states will take the lead. Obama has also ordered the Department of Transportation to issue new nationwide fuel efficiency standards, raising them from the current 27 miles per gallon to 35 miles per gallon by 2020.

Another idea is that of a 'smart grid', which would use information technology to manage the flow of power through the electricity grid. The objective is to reduce the irregularities associated with renewable energy sources like wind and solar, thereby actually increasing the potential for their use and also cutting transmission losses. Further, 'smart meters' would monitor energy consumption and are expected to reduce household use by 10-15%. The project has the support of Obama's new energy secretary, Nobel laureate Steven Chu.

But Obama is also insisting on action by India and China. While saying that 'America is ready to lead' he also warned that 'we will ensure that nations like China and India are doing their part.'

India has its own complaints, particularly the unwillingness of rich countries to commit more money to help developing countries adapt to the adverse impacts of climate change. As India's negotiator, Prodipto Ghosh, put it, 'Obama's announcement of US$15 billion a year - for ten years - is significant but is probably far from enough.'

Here lies the real tension. For rich countries, climate change action means the reduction of emissions globally. For poor countries, the responsibility of causing global warming lies with rich countries who should also bear the burden of financial transfers, technology transfers and accelerated action on adapation. As I've written before, these tensions raise many governance questions. Despite Obama's initial signals, 2009 is not going to be an easy road for climate negotiations.

Developing countries taking the lead on climate change?

Who said developing countries can't take the lead? Of late, several developing countries have proposed to take unilateral action to deal with climate change. Poor countries have long claimed (rightly) that they did not create the problem of global warming, and so argue (wrongly) that they should have nothing to do with solving the problem. That's a cop out answer, which ignores that global warming affects everyone. The attitude, it seems, is changing.

On Monday this week, Brazil promised to reduce deforestation by 70% by 2017. We read a lot about polluting industries in China and energy-intensive lifestyles in the United States (the world's two biggest polluters). But did you know that one-fifth of annual greenhouse gas (GHG) pollution in the world is due to the destruction of rain forests, and Brazil accounts for 40% of this? Since trees absorb carbon dioxide, felling them releases excess CO2 into the atmosphere, which results in global warming. Brazil's commitment signals a major step forward.

Meanwhile, yesterday Mexico announced that it would reduce emissions by half by 2050 (compared to 2002). South Korea plans to announce a similar target next year. South Africa wants to ensure that its emissions flatten out between 2020 and 2025, and starting reducing after that period. China plans to use more than a third of its $586 billion economic stimulus for energy and ecology-friendly investments. India, too, announced a national action plan on climate change last June, though it has not set itself any targets for cutting emissions.

Climate change is one of the most complex global challenges. No single country's efforts will be sufficient to deal with it. Which is why every single country's initiatives, especially coming from poor countries, is welcome.