Five Years of Kyoto

On February 16th, the Kyoto Protocol will reach the fifth anniversary of its entry into force, the date at which it received enough ratifications to become legally active. While technically not a “birthday”—the Protocol was negotiated in December 1997—this milestone provides an opportunity to reflect on the wider meaning and significance of this instrument into which perhaps too many expectations were invested.

By most assessments, the Kyoto Protocol has been a failure. Emissions have risen substantially over the past five years even in parties to the Protocol and in many EU countries expressing great commitment to reducing their own emissions. Four of the world’s top five emitters (the U.S., China, India and Russia) are not included in the treaty, have not ratified it, or are not subject to substantial limitations. Finally, the Kyoto Protocol attempted to establish a system of monetized assets (emissions quotas) and distribute them across countries without any ability to enforce the rules.  

And these problems merely form the basis for a much bigger and potentially wide-reaching question about global environmental governance, particularly in light of the disappointing outcome from the recent Copenhagen negotiations for its successor. Kyoto was built on a philosophy of broad international engagement on topics requiring coordinated collective action—a movement arguably nascent in the 1972 Stockholm Conference and maturing at the 1992 Rio Conference, and with some limited success in  the 1987 Montreal Protocol on ozone-depleting substances. From this wider perspective, the enthusiasm for addressing global environmental problems through international agreements— for which climate change seemed the natural pinnacle—is now shaken. Shall we construe the joint failures of Kyoto and Copenhagen as the death knell for international climate policy?

Simply put, no. It is true that the approach taken with the Kyoto Protocol was, in the end, not successful. However, the failure of one approach to regulation addressing one element of the problem, while worth evaluating and improving, does not invalidate the search for a better approach. There is similarly no doubt that elements of addressing  climate challenge will remain multilateral. One of the key problems created by Kyoto—and its associated vociferous debate—was the conflation of country emissions reduction obligations with the larger context of climate policy. The best way to illustrate this is by analogy: international climate policy is not equivalent to domestic emissions regulation; rather, international climate policy is like international economic policy. It is complex, cutting across multiple dimensions of regulation; it is international and based on mutual benefit, not coercion; and it is an element of improving human well-being across geography and time. It requires groups of different governments, ministries, experts and regulators to meet and coordinate national policies. Yet, continuing the analogy, if those same agents fail to reach agreement on, for example, the Doha round of trade talks, we rarely hear the retort that international economic coordination is impossible, or more narrowly that free trade is just too difficult to negotiate.

Similarly, international climate policy is not a simple matter of making all countries agree to reduce emissions by some percent by some date; rather it is a broad set of linked regulatory initiatives, spanning multiple agencies and levels of government, that seek to harmonize decisionmaking according to a set of consistent guiding principles over long time scales. Regardless of Kyoto or Copenhagen, the tasks remain gargantuan: to keep global temperature rise under roughly 2–3ºC, global emissions must drop to by about 70% from current levels by the year 2050; and, simultaneously, individual communities around the world must gird for possible changes in extreme temperatures, rainfall patterns, floods, droughts, diseases and pests.

International climate policy therefore must address not just aggregate emissions from individual countries, but also international technology policy, innovation, development, public health, natural hazards mitigation and adaptation to expected climate changes. Any future suite of agreements would need to address three interlinked components of climate policy:

  • Reducing greenhouse gas emissions, including setting long-term and medium-term global goals, and setting up a mechanism to allow for individual country reporting and collective trust-building;
  • Increasing resilience to climate change, probably via multiple funding streams and institutional arrangements to incorporate adaptation into development; and
  • Stimulating innovation and investment in new technologies and likely going beyond existing international cooperative mechanisms.

Each of these components can be done more or less well, and none of them can be as effectively implemented if individual countries act in an isolated or atomistic way. Kyoto is one particularly ambitious approach to multilateral governance, but it is just one among many possibilities. The question raised by Kyoto is not about the goals, but about the best process by which these components can be most efficiently addressed.

Thus, climate policy does not need to be addressed through a single international agreement in the style of Kyoto, negotiated as an omnibus approach with 192 countries participating. As such, we can identify smaller victories from Kyoto and try to build from those. One of these is  the Clean Development Mechanism (CDM). Despite some flaws, it stands out as an example of what might be a positive future approach to international climate governance. The CDM is a structure through which low-carbon projects in developing countries can, under a regulated process, accrue greenhouse gas credits that can then be sold to international buyers. It is similar in spirit to the broader “cap-and-trade” systems like the one under discussion in the U.S., in that they both create tradable emissions reductions that can help price carbon and simultaneously ferret out the lowest-cost abatement opportunities. However, rather than set broad quotas across sectors like in a cap-and-trade, the CDM is a so-called “project-based” system that generates credits only after individual projects are approved by the regulatory body. While many developed countries and regional groups have cap-and-trade systems, the CDM remains the only existing regulatory mechanism that allows for pricing greenhouse gases in developing countries. The Kyoto Protocol set up the CDM regulatory architecture but demand derives from the EU’s cap-and-trade system, which is easier to enforce legally.

As a result of this synergy, the CDM has, contrary to expectations, expanded rapidly, spurring over 4,900 projects in over 70 countries. The projects currently registered, awaiting validation, and requesting registration are expected to generate over 6 billion tons of CO2 equivalent reductions by 2020. Moreover, the CDM has clearly stimulated a proliferation of emissions-related expertise in the emerging economies, thereby laying the groundwork for possible expanded use of domestically driven emissions policies in those countries. As one illustration of this point, my academic research involves understanding the effect of the CDM on investment decisions in these countries by interviewing firm managers and carbon market regulators; one interviewee claimed that recently the hottest job in India for high-powered young people was to become a carbon consultant. While such assertions are difficult to verify empirically, if Kyoto has indeed motivated even some of India’s brightest to focus on implementing low-carbon technologies, it could lead to great dividends in future years.

The CDM certainly has its share of problems—excessive bureaucracy, initial problems with quality control, and occasionally inconsistent goals. But at a time when people are frustrated with the potential of international approaches to climate problems, it provides an example of what can be done and underscores some bases for future cooperation:

  1. Use the large international forums to set goals for international action. The Kyoto Protocol is one product of the 1992 UN Framework Convention on Climate Change, which establishes a governance structure within which the full set of countries can discuss how climate change concerns them. Such a basic mechanism will be essential as the global community wrestles with large societal questions about defining how much climate risk is reasonable and how to share the burden equitably.
  2. Use international approaches to harmonize rules and negotiate collective action, not to set up complex regulatory procedures requiring a strong compliance mechanism. The CDM worked well because it set the boundaries for what counted as an acceptable project and established a governance structure to handle the application process. Demand and enforcement came from an entity better suited to such – specifically, the EU.
  3. Use multilateral forums to align incentives to encourage widespread innovation. People were surprised when massive numbers of low-carbon projects began to be generated in developing countries, but they shouldn’t have been. The big emerging economies—Brazil, China and India—as well as a number of smaller developing countries, contain unique entrepreneurial cultures and unique energy-climate challenges. If necessity is the mother of invention, these countries have both the needs and the capacity to invent. As such, allowing them to tap into global carbon finance has proven to be a winning combination and one that could very well contribute more to global green innovation than the more conventionally minded developed countries.

I was in the plenary hall in Kyoto during the 3:00 a.m. session when the Protocol was, with considerable difficulty, concluded. To reach agreement, the chair summarily cut one of the provisions that was key to the U.S. delegation’s ability to sell the treaty to their skeptical domestic audience, which possibly condemned it to a future of unrealized potential. Although the Protocol was at the time widely seen as a natural evolution of international environmental governance, it did not demonstrably change the upward trajectory of global emissions. Nevertheless, Kyoto leaves two legacies of experience from which we can learn: first, it impelled the EU to implement the first cross-national and binding emissions trading system; and second, it created the surprisingly successful expansion of carbon finance and engineering expertise for low-carbon innovation in developing countries. If this legacy is improved and diversified in future international efforts, those Kyoto delegates will have cause to be pleased.