Voluntary Mechanisms

There are several topics from my week's absence that I could comment on, including the pending difficulties of Calpine and the prospects for a change in OPEC quotas at today's meeting, but the item with the longest-term implications may be the inconclusive climate change talks that wrapped up on Saturday in Montreal. Although they agreed to begin discussions on what should follow the Kyoto Treaty after it expires in 2012, the major blocs remain divided on whether the response to climate change should be based on voluntary or mandatory targets. It is hard to divorce these competing approaches from underlying views on the urgency of action.

The UN Framework Convention on Climate Change and the specific Kyoto Treaty that grew out of it require periodic global meetings on the issues, of which the Montreal meeting was only the latest. One of Montreal's most visible goals was to lay the groundwork for an agreement subsequent to the 2008-2012 "measurement period" of the current Kyoto Treaty--the so-called "son of Kyoto." Now, it might seem premature to ring alarm bells about a process that wouldn't even take effect for another 7 years. However, given the difficulties in the Kyoto negotiations, which ultimately missed including the US or large developing countries such as China and India, it is imperative that any successor treaty have all the parties on board, or risk total irrelevance in the real world. That means finding a way to bridge the gap between voluntary emissions reductions--which the US favors--and the mandatory reductions agreed to by the Kyoto signatories such as the EU, Russia and Canada.

The other impetus for early agreement on a successor to Kyoto stems from a growing recognition that the Kyoto Treaty itself falls far short of the dramatic reductions that would be required if climate change were proceeding along anything like a worst-case path. Nor is it clear that the reductions agreed to by the countries that signed on to Kyoto will actually be achieved. "Son of Kyoto" must make broader and deeper cuts for the long-term, or we should forget about the UN climate process and focus on adapting to a warmer world, with unpredictable local consequences.

This sounds bleak, but there've been lots of positive indications recently, including the G-8 Gleneagles agreement and a similar Asia-Pacific approach, focusing on areas of agreement, rather than differences. Technology is the key to this approach, based on a recognition that the greenhouse gas emissions reductions necessary to stabilize the atmospheric concentration of these gases cannot be achieved with current vehicle and power plant technology and global economic growth.

Former-President Clinton may have said it best in Montreal, when he indicated that while firm targets were essential to the creation of a viable carbon-trading market, those standing outside firm targets could still focus on the things--e.g. technologies--that would have to be done to achieve reductions. "Disagreements (over specifics) shouldn't be a reason to do nothing." The ultimate shape of any consensus on this issue will probably be influenced by a combination of real-world experience putting Kyoto into action during 2008-12, and on the visible environmental indicators of actual climate change.