Amidst Conflicting Reports, China’s Emissions Message Sets Positive Tone

Originally posted at Weathervane, RFF’s climate policy blog.

Given the history of global climate negotiations, it is no surprise that a lack of trust remains between developing and developed nations in ongoing discussions for a new international agreement. In the context of the U.S. domestic policy debate, this distrust has—rightly or wrongly—been concentrated on China, and has led to calls for strong measurement, reporting, and verification (MRV) provisions in U.S. climate legislation and international agreements. It even led lawmakers to include a provision in the House bill that would require the EPA to report on emissions in China and India (Title V, Sec. 3).

It doesn’t help matters when major media outlets publish conflicting reports so close together (The Financial Times here and China Daily here) about a crucial component to U.S. domestic and international agreements: China’s emissions peaking date. Given the pace of China’s growth this number is arguably much more important than the U.S mid-term target for protecting the global climate, and it is certainly just as important for reaching a new agreement in Copenhagen. It’s also a critical step on the path toward setting a long-term collective global goal.

So climate change and China watchers had a collective heart attack when they read the Financial Times article in which high-level Chinese official Su Wei said China’s emissions would not peak until 2050. This is the equivalent of Deputy Special Envoy on Climate Change Jonathan Pershing stating that the United States will reduce emissions 0 percent instead of 17 percent by 2020. It would basically kill any chance of a global deal.

Thankfully, China Daily followed-up shortly highlighting a recent report by influential Chinese climate policy scholars arguing that the country could and should reach its emissions peak in 2030. Everyone breathed a sigh of relief. The United States and other developed nations will and should ask for more, but this number is likely to be within the range that they could accept as part of a global agreement. Although it was not an official government position, it’s the next best thing in China. The think tanks that published this report are close government advisers. The fact that they were quoted and featured on one of the nation’s leading English-language news websites indicates that this is a message the government wants the world to receive. China is moving ahead on clean energy with or without you, and is willing to put strong climate goals on the table if others are. An even more recent article indicates that China’s top legislative body will consider a draft resolution on climate change next week lends further credibility to this position.

This is not the first and will certainly not be the last time conflicting reports come out of China on climate or other issues. Since it is in both of their best interests, one would expect that both the media and the Chinese government will continue to improve their MRV procedures inside and outside of a climate agreement. However, it’s important to take the time to sort through the facts and recognize that, in the end, the preponderance of evidence continues to show that China will both do what it takes to be seen as a responsible global citizen on climate change, and will give everything it has to win the race on developing clean energy industries of the future.

Gentlemen, start your wind turbines.

Confidential Memo Intercepted by Common Tragedies

CT has just intercepted this confidential memo….

From: The Patriot Freedom America Puppies Alaska Coalition (PFAPAC)

To: Grassroots Conservative activists

First, I want to thank you for your efforts so far in derailing the President’s drive to push through a government takeover of Medicare and Medicaid. I want to offer a few notes for upcoming town hall meetings on the so-called “cap-and-tax” legislation that is coming before the Senate this fall.

1) Death panels. We have been getting a lot of questions about this, and yes, the American Clean Energy, Security and Death Panel Act of 2009 does include death panels (section 1289, page 1567 of the bill). It reads, “Sometimes the tree of socialism needs to be watered with the blood of polluters”. These death panels are concentrated in Midwestern states where population reductions can achieve the greatest impact on U.S. greenhouse gas emissions reductions. They will be made up entirely of people from California, Massachusetts, and New York, because, according to the bill “they know what’s good for you”. Again according to the bill, if population in coal-using states gets too low, immigrants from China and Kenya will be allowed to replace them in a deal brokered by President Obama. Say ni hao to your new neighbors!

2) Jobs. This is one point we don’t need to worry about, because a little-known provision in the bill calls for Soviet-style “re-education” employment for those who lose their jobs or are not in compliance. These re-education camps would teach people the virtues green living, including not bathing or showering, not eating tasty animals, and generally not having any fun. “Students” will be paid handsomely in granola and tree bark, and when finished will return home to a job in a Chinese-owned wind factory. Although this is perhaps not ideal, our arguments about the bill sending jobs overseas will be more difficult with this new provision.

3) Global government. Along with the death panels, this will be one of our primary talking points to arouse fear in the American people about the ACESDPA. The bill calls for a long-term goal of an 80% reduction in greenhouse gas emissions and gross domestic product by 2050 from the United States, while China, India, and other major developing countries will be allowed to increase both their emissions and GDP by 80%. These mandates will be enforced by United Nations peacekeepers who will have the authority to come into your living room and turn off your TV after the 8th hour of the Glenn Beck marathon. Thousands of them will also be stationed in communities all across America to generally scowl and wag their fingers at people when they drive by in SUVs.

Please target your attacks on climate legislation at these provisions, which we believe are an unacceptable intrusion that goes against all that is good about this country. Although we can’t openly condone violence, we encourage everybody attending town hall meetings to exercise their 2nd amendment rights in case your well-being is endangered by radical liberal activists. Please keep dialogue rational by limiting your rants to 30 seconds or less, which is the average attention span of an American watching a youtube clip.

Thank you, and good luck,

Your friends at PFAPAC

Climate Bill Success Can Equal Treaty Success, Even With Border Measures

Originally posted at Weathervane, RFF’s climate policy blog.

President Obama and leaders of the U.S. Chamber of Commerce have spoken out against incorporating border adjustment measures in U.S. climate policy. Though there is great uncertainty about the economic and diplomatic value of leveling fees against nations who may not price carbon, 10 conservative Senate Democrats recently told the president such measures will be integral to their support of climate legislation.  The challenge now is walking the fine line between the objective of these senators—not just maintaining, but strengthening the House measures—and respecting the concerns of the administration and Chamber about potential trade wars and international ill-will threatening the success of global climate cooperation.  It will be a delicate balance, but one that can be achieved with a few key modifications. 

The House bill (H.R. 2454) takes a three-fold approach to ensuring the global environmental integrity of U.S. climate policy by preventing emissions leakage. It  exempts vulnerable industries from the first two years of the cap-and-trade program, provides output-based rebates until 2035, and introduces a border adjustment system in 2020 only if a multilateral agreement that meets certain conditions is not in place by 2018 and Congress and the president concur that border adjustments are necessary (with Congress given final authority). 

The border adjustments are also intended to create leverage, by encouraging major-exporting and emitting developing nations to join an international agreement.  Although the adjustments’ primary targets—China and India—have spoken out against this goal, South Korea actually cited it as one reason for being the first non-Annex I Kyoto country to announce a national target.  Some have taken an optimistic view of the relationship between these measures and international agreements, while others are more skeptical. 

While the House bill represents a compromise on border measures that most people could live with despite not being truly satisfied, the Senate is likely to push for making the measures stronger.  In light of this political reality, the following changes could be introduced to both strengthen the measures and ensure they still reinforce, and are reinforced by, international agreements:

Provide incentives for a real negotiation.  Large, developing countries are much more likely to accept the “sticks” (border measures) of U.S. climate legislation if they come with real “carrots” (financing and mitigation commitments) attached.  Funding for adaptation and technology transfer in the House bill is well below what most estimates say is truly needed to solve the global climate problem.  Although it is clearly concerned about upsetting domestic support, increasing recognition of the necessity for a global solution in Congress indicates the administration may be able to push further on these incentives, if they are properly structured and conditioned.

Improve the likelihood of World Trade Organization consistency.  Border adjustments are likely to survive challenge in the WTO if they only enter into force after serious multilateral negotiations have failed, are targeted as clearly as possible at an environmental objective, and/or are backed by an agreement among several nations.  Therefore, providing greater incentives for a real negotiation to take place—as discussed above—would likely improve the prospects in this area.  Ensuring there are no references to specific countries or competitiveness concerns are also essential in the Senate bill.  Finally, support from the nations of the European Union and other developed nations to adopt similar measures would also be helpful when standing before the WTO.  These modifications should be in the interest of both those who want to see the measures implemented and those looking to avoid a trade war.

Make negotiating objectives flexible.  From a global cooperation perspective, the worst thing Congress could do is to provide negotiating instructions that would be impossible to achieve, thereby ensuring a repeat of Kyoto.  This means making them general enough—as the House bill does—that U.S. negotiators have flexibility about how, under what body, and with what conditions they will negotiate an international agreement on trade and climate, as long as it meets certain minimum requirements.  Since the primary thing 100 Senators can agree upon is that they do not like the House bill, it is likely that some will want to make these objectives stronger.  Instead of inserting additional specifics or calling for an explicit deal on border measures in Copenhagen, a more effective approach could be greater conditioning for U.S. financing and technology transfer on participation in an international agreement. 

Adopt a “do no harm” approach on border measures in Copenhagen.  From the perspective of U.S. domestic climate policy and global cooperation, the best possible outcome from Copenhagen on border measures is likely that nations do not condemn or even move to prevent them.  In the unlikely event that a trade and climate agreement is struck within the UNFCCC or the UN, the issue is contentious enough that it will not come until the final stages of negotiations a few years off.  The U.S.’ primary objectives for Copenhagen are likely to be gaining agreement on a long-term global goal, a broad framework for international financing, and potentially a recognition that all major emitters need to take legally binding actions if not now by a date certain.  Throwing border measures into the mix will seriously threaten those already tenuous objectives.

Overall, by strengthening the House bill with more robust incentives, targeted framing, effective negotiating objectives, and realistic expectations the “hammer” of border measures desired by conservative Democrats can be compatible with the prospects for a new global agreement in Copenhagen.

Innovative public policy from the Mountain West: Example 2

As an urban cyclist in the District of Columbia, my goals when I’m on my bike are quite simple: stay away from things that can kill you (namely cars) and maintain momentum as much as possible. They are both great ideas in theory, but not so easy to follow in practice, especially when navigating the plethora of stop lights and signs that populate our fair city. That’s why I’m a huge proponent of the Idaho Stop Law. The law, named after the clever state that instituted it in 1982, says that cyclists may treat stop signs as yield signs (they must stop for those w/ the right of way, but can proceed w/o stopping if the coast is clear) and may treat stop lights as stop signs (they must stop, but can proceed when the coast is clear, even if the light is still red). If that doesn’t make total sense, this handy-dandy video made in support of similar legislation in Oregon (which subsequently failed) will help illuminate the situation:

Like I said, i think it’s absolutely brilliant, and it’s what a lot of city cyclists do anyway. But wait, you might be asking, wouldn’t such a law result in more accidents because it would put cyclists in dangerous situations where they could be hit by oncoming traffic? Apparently not. According to the Athlete’s Lawyer (via Greater Greater Washington) reports that the year after the law’s inception, bicycle injuries dropped 14.5%. Isn’t it exciting when public policies make our lives better?

There are a lot of reasons the law makes sense (treats bikes different from cars, allows bikes to maintain momentum and reach top speeds easier, creates separation between bikes and cars going the same direction, etc), but the best reason is because it lets cyclists determine their actions based on their own assessments of their safety. Cyclists are certainly more aware of what they need to do to be safe than drivers and pedestrians, and they are in a position to determine how much time they have to cross an interaction, react to oncoming cars, etc. I don’t know why the law hasn’t been adopted in biking hubs all over the country. Sigh, if only everywhere else were as progressive as Idaho…

Senators and Climate, a Mixed Bag

I was at the senate finance committee’s hearing on allowance distribution under climate change legislation earlier this week.  It was really interesting to see how engaged the senators were considering how much of their attention health care is taking.

There was one moment, however, which was not so proud.  Check out the video here (go to the 80^th minute) of Senator Kerry talking about a carbon tax.

To put it succinctly, Senator Kerry was …misguided.  As Mr. Viard responded, a carbon tax and a cap and trade program can do the exact same thing.  While a carbon tax is a political non starter these days, no one really debates that it could accomplish a similar goal.

Much to his credit, later on in the hearing Senator Kerry asked a number of questions which were very perceptive and showed a deep understanding of the issue.

He also brought up one of the underlying issues that is driving the climate debate, the EPA endangerment finding.  Most politicians won’t come out and say it as forcefully as he did (minute 111), so it was impressive to hear.  Lets just hope that everyone gets on board so we don’t end up in command and control land.

Innovative public policy from the Mountain West: Example 1

It’s rare that the state of Utah comes up with an innovative public policy, let alone gets recognized for it. Come to think of it, it’s rare that Utah gets any shoutout not related to the dominant culture or the occasional piece on the peculiar culinary delights found in the state.That’s why last week was a particularly exciting week for the Beehive State, as both Brad Plumer and Matt Yglesias called out Utah for its clever policies. Both authors highlight a Scientific American article looking at the state’s new 4 10-hr day work week (work M-Th, take Friday off) and the effects it’s had since its inception last year:

For those workplaces, there’s no longer a need to turn on the lights, elevators or computers on Fridays—nor do janitors need to clean vacant buildings. Electric bills have dropped even further during the summer, thanks to less air-conditioning: Friday’s midday hours have been replaced by cooler mornings and evenings on Monday through Thursday. As of May, the state had saved $1.8 million.

Perhaps as important, workers seem all too ready to replace “TGIF” with “TGIT”. “People just love it,” says Lori Wadsworth, a professor of public management at Brigham Young University in Provo. She helped survey those on the new Working 4 Utah schedule this May and found 82 percent would prefer to stick with it.

The environment seems to like it, too. “If employees are on the road 20 percent less, and office buildings are only powered four days a week,” Langmaid says, “the energy savings and congestion savings would be enormous.” Plus, the hour shift for the Monday through Thursday workers means fewer commuters during the traditional rush hours, speeding travel for all. It also means less time spent idling in traffic and therefore less spewing of greenhouse gases and other pollutants. The 9-to-5 crowd also gets the benefit of extended hours at the DMV and other state agencies that adopt the four-day schedule.

An interim report released by the Utah state government in February projected a drop of at least 6,000 metric tons of carbon dioxide emissions annually from Friday building shutdowns. If reductions in greenhouse gases from commuting are included, the state would check the generation of at least 12,000 metric tons of CO2—the equivalent of taking about 2,300 cars off the road for one year.

Aside from the environmental benefits, the state workers seem to like the new arrangement:

“Utah employees actually show decreased health complaints, less stress and fewer sick days,” Wadsworth says, noting previous research finding that fatigue is typically triggered by workdays over 12 hours. Early results from another multicity survey indicate that just 20 percent of respondents said they felt they ate more fast food and only 30 percent said they worked out less. In fact, 30 percent said they exercised more. Anecdotal evidence from Utah also points to an unexpected benefit: increased volunteerism.

Hopefully, Utah’s experience will spur more discussions about non-traditional 9 to 5 work schedules. People’s ability to connect to their workplace and tele-conference regularly are making the traditional work week less and less relevant. I’m a big advocate of flexible schedules and think that more organizations would be wise to consider allowing their employees to set their own work schedules and patterns. In the meantime, though, cheers to Utah for reducing its environmental impact. This will surely make up for its new governor not believing in global warming.

P.S. Full disclosure: I am a native-born Utahn. The answer to your next question is no.

Ecosystem service stacking: Can money grow on trees (and more)?

This post originally appeared on Weathervane, RFF’s climate policy blog.

Future commodity traders may look back on June 26, 2009 as the day that the Congress officially backed ecosystem service markets as the prominent vehicle of environmental conservation in the 21^st Century. It was then that the sweeping American Clean Energy and Security Act of 2009 (H.R. 2454)—legislation in which carbon offset markets play a huge role—passed the House 219-212. Estimates from the EPA suggest by 2030, the U.S. offset market could be worth $4 billion. Forest offsets will likely constitute a large portion of the total market but agricultural lands will also have some significance.

While the ultimate fate of the bill remains uncertain, H.R. 2454 indicates that ecosystem service markets have a critical role in both the fight to slow climate change and the future of ecosystem conservation. In fact, reduced emissions from deforestation and degradation (REDD) and other forestry issues will likely be integral to an eventual agreement at the COP negotiations in Copenhagen this December.

Ecosystem Service Markets

While carbon markets are currently dominating discussions, they are certainly not the only type of ecosystem service market being utilized for environmental benefits. Other examples include water quality or nutrient trading, conservation easements, and habitat banking for endangered species. Section 404 of the Clean Water Act led to the establishment of wetland mitigation banks, which proved to be a successful conservation device. By 2005, 450 wetland banks had been established, with 59 selling out of credits completely.

Current ecosystem service markets have just scratched the surface. Robert Costanza and others estimated the global annual value of ecosystem services was $33 trillion. The voluntary carbon market in 2008 was estimated to be worth about $705 million. The forest carbon offset markets in H.R. 2454 provide an opportunity to expand and refine ecosystem service markets aggressively and incorporate them into the larger economic system domestically and worldwide.

Stacking

Widespread acceptance of carbon-related ecosystem services may present a vehicle for the expanded usage of other types of ecosystem services. Combining the value of these different services is called bundling or stacking, and it allows landowners and indigenous communities expanded opportunities to be compensated for maintaining and enhancing ecosystem functions. It is important to note that services will be stacked or bundled in a single ecosystem, but must be well-defined enough to separate into autonomous markets. The markets themselves will not necessarily be stacked.

One can imagine eventually linking carbon offsets with water quality credits or habitat credits. With a network of robust, functional ecosystem service markets a landowner could manage an entire portfolio on his/her land, balancing forest offsets with increased stream buffers that generate water quality market credits, understory clearing to generate endangered species habitat credits, and other types of natural capital. Such opportunities are a prospective avenue for alleviating poverty among rural or indigenous populations.

Oversight

Stacked but separate ecosystem service markets could possibly create incentives (though not guarantees) for landowners to take a more holistic management approach, looking at the functionality of entire natural systems rather than one specific usage. A fully integrated and functional ecosystem marketplace is currently far from becoming a reality, however. There are a number of issues that must be addressed to ensure the markets are robust and effective. Major concerns include:

• Valuation: One advantage carbon has over other ecosystem services is that there are straightforward mechanisms for valuing tons of CO2. Determining accurate values for endangered species habitat credits or water filtration on a chunk of land will require better research and better valuation techniques than are currently available. Significant investments in scientific assessments and monitoring are needed before these markets can be established effectively.
• Additionality: One of the major questions carbon markets must answer is how they can establish additionality, or proof that sequestration activities would not have occurred in the absence of the offset project investment. If other ecosystem markets link up with the carbon market on a piece of land, the landowners will likely need to show that actions that can earn other types of credits would not have occurred without additional investment.
• Double-counting: If landowners hope to obtain multiple revenue streams, then they must manage for multiple ecosystem services. Selling water quality credits from land that is only being managed for carbon will not generate the correct incentives for landowners and will undercut the effectiveness of the water quality market. Added value of different services must be well-established enough to avoid multiple payments go to one specific type of action.
• Capacity-building: International forest carbon offsets will be a sizable chunk of the total offset market, the vast majority of which will come from developing countries that currently lack the capacity to effectively establish, monitor, and certify offset projects. To ensure the veracity and efficacy of the market, massive capacity-building efforts are needed in places like the Congo Basin, Indonesia, and Central America. Other ecosystem service markets will also need similar building efforts, though they may be able to piggyback on the efforts to establish carbon-related infrastructure.
• Permanence: What is the value of an ecosystem service credit if the ecosystem is damaged or destroyed soon after investment? This question will need a solid answer for markets to work properly. While permanence is currently a big concern in carbon markets, it will correspondingly affect other ecosystem markets. In order for these markets to grow and thrive, solid governance structures will be needed to establish appropriate risk premiums and other tools that can mitigate the problems related to permanence.

Stacked ecosystem services could prove to be a powerful conservation tool, but are not a silver bullet for protecting natural systems. They are designed to create incentives for people to manage land carefully. If carbon, water quality, endangered species, and other services simply morph into commodities to be traded back and forth without any robustness checks or on-the-ground coordination, then the transformative power of stacked ecosystem services will be lost. Moreover, regional issues will play a key role in determining which markets work and how. Carbon is a global good that can be traded across countries and continents; water quality and species habitat are very region-specific and will require smaller-scale markets that may or may not be trans-national.

Despite these challenges, ecosystem service markets are an innovative and potentially useful approach to conserving and restoring damaged and sensitive parts of the biosphere. The emphasis on forest carbon in H.R. 2454 may provide an opportunity to refine and expand these markets to the benefit of both ecosystems and the people who depend on them.

Mad Max: Beyond Carbondome

Things are moving slowly on the climate legislation front these days. While there were a couple Senate hearings this week and maybe a couple more scheduled for next week, climate has taken a back seat to health care and likely won’t be a major talking point until mid-September. Though eventual passage of the bill looks a wee bit shaky right now, that’s not stopping other nations from being bullish on the prospects on of a U.S. carbon offset market.

Tim Flannery, one of my favorite science writers (his book the Weather Makers partially inspired me to start working on climate issues), and 2007′s Australian of the Year, recently told the Australian government that it should set up a single trading desk that can sell carbon offsets into the U.S. market. According to Mr. Flannery, Australia could buy up 10% of the 1 billion tons of international offsets available in H.R. 2454, generating a substantial amount of revenue for the land down under:

‘‘The Government could then buy a certain amount of permits from farmers for carbon soil storage … at, say, $15 a tonne and sell them on to the US at $20 through the desk,’’ Mr Flannery said. ‘‘If we could get 10 per cent of the US market at, say, $20 that would be about $2 billion a year coming into Australia and [would] help Australian farmers expand carbon storage projects.’’

Now, you could seriously debate whether or not the benefits Flannery claims are available for Australia. Assuming he’s speaking in Australian dollars, he’s predicting that Australia will be able to corner 10% of the international offset market by selling ag and forestry credits at $17US (current exchange rates have $1US = $1.19AUD).

Consider that EPA is predicting allowances will come into the market at $13 at the low end (though they certainly could come in higher). Also consider that the huge amount of offsets in H.R. 2454 were put in their as a cost containment mechanism, meaning they will assuredly be less expensive than allowances. Lastly, while they may not be available right away, forest offsets from developing countries are going to take up a massive chunk of the international offset market and they are likely going to be much cheaper than $17. Paying for a plot of rainforest in Bolivia is probably going to be much cheaper and better PR than paying a farmer in the Murray-Darling basin to rotate his crops differently.

Aside from the economic reality, Flannery offers a compelling institutional vision for the future of the carbon market. Presuming some vaguely similar version of H.R. 2454 passes the Senate, the international carbon market is going to blow up. That rapid growth will require a lot of quality control throughout the product chain. Establishing government agencies that are wholly responsible for managing the entry and sale of offsets in the market could help provide a level of security. Of course, it could be subject to corruption in less-stable countries (like the Democratic Republic of Congo, for example). Additionally, such an institution would limit the amount of over-the-counter (OTC) sales, which is where the offset buyer makes the purchase directly from the seller. OTC transactions dominate the voluntary market currently, and limiting them will have major implications for the functionality of the international carbon market.

The suggestion of a single carbon desk is not unlike one recently made by RFF scholars Ray Kopp, Nigel Purvis, and our own Andrew Stevenson. In the paper, they argue for the formation of an International Forest Conservation Corporation, which would be primarily responsible for working with countries to prepare them to enter the carbon market and monitoring the volatility of the market. With such an entity in place, it could encourage other nations to follow Australia’s lead and establish their own carbon-specific trading agencies.

It will be interesting to see if Flannery’s proposal gains any traction with Kevin Rudd‘s government. In the meantime, I sincerely hope that carbon trading with Australians is more civilized than oil trading with Australians:

(A little forced maybe, but I gotta take my Mad Max references where I can get them.)