The Kyoto Protocol - background 1992: UN Framework Convention on Climate Change - recognized there is a problem: CO2 emissions are warming the planet - stabilize CO2 at "at a level that would prevent dangerous anthropogenic (human induced) interference with the climate system.“ goals: 1) ensure that ecosystems can adapt to climate change 2) make sure that food production not threatened 3) allow sustainable economic development - requires precise and regularly updated inventories of greenhouse gas emissions from industrialized countries -"Parties to the Convention“ agree to develop national programs to slow climate change; meet at “Conference of Parties” (COP’s); where binding international treaties (i.e. Kyoto) can be made - establishes a "framework" document -- something to be amended or augmented over time

The Kyoto Protocol - background 1992: UN Framework Convention on Climate Change - places the heaviest burden for fighting climate change on industrialized nations Annex 1: industrialized economies and economies in transition Annex 2: the richest Annex 1 countries (aka the Organization for Economic Cooperation and Development (OECD)) - general target: collectively reduce emissions to 1990 levels by 2000 (but no mechanisms, enforcement proposed) - support developing countries’ climate change activities (granting body) - developing countries’ emissions will grow before they shrink - developing countries will have largest climate change impacts; work to mitigate

Dec 1-11, 1997: representatives from 160 countries agreed to enter into binding limits on emissions of greenhouse gases TARGETS: Total: reduce developed nation emissions to 5% below 1990 levels during “commitment period” (most countries need -18% reduction in BAU by 2008) 37 industrialized nations and the EU subject to binding emissions targets Greenhouse gases: CO2, CH4, N2O, HFCs, PFCs, and SF6 PENALTY : Non-compliant countries will have to reduce emissions by 1.3 units for every unit of emissions “overshoot” in subsequent commitment period. Ex: if your emissions target is 7Gtons per year by 2012, and you end up at 10Gtons/yr, in the next commitment period ( ) you will have to reduce by 4Gtons/yr (in addition to any new targets) to be compliant The Kyoto Protocol

The Doha Amendment passed on December 21, nd implementation: 1/1/13-12/31/20 *Russia, Canada, and Japan bow out of KP2 1990

Three primary mechanisms 1.Emissions trading - trade carbon units between Annex 1 countries (flow is from countries with carbon credits to countries with carbon overshoots) - example: Europe’s Emissions Trading System (ETS), National Allocation Plans 2.Joint Implementation - Annex 1 countries can invest in a emissions-reduction project in another Annex 1 country and receive emissions reduction units (ERU) 3.Clean Development Mechanism - Annex 1 countries receive ERUs for emissions reductions in developing countries - must certify reductions (they would not have happened without action by Annex 1) PROS: -For countries that are ultra-efficient, Kyoto would be cost prohibitive. Such countries can ‘buy their way out’ by buying carbon credits from other countries - Developing countries have incentive to reduce emissions by selling carbon credits

Kyoto comes into force when 55% of the global CO2 emissions are covered by Kyoto-ratifying countries Kyoto took effect on Feb 16, 2005 after ratification by Russia Brown = signed and ratified (dark brown = Annex 1 & 2) Blue = signed and unratified (dark blue = withdrew, add Russia and Japan)

Country Change in GHG Emissions ( ) EU Assigned Objective for 2012 Treaty Obligation Germany-17%-21%-8% Canada+27%N/A-6% Spain+49%+15%-8% United States +16%N/AN/A (would be -7%) France-0.8%0%-8% Greece+27%+25%-8% Ireland+23%+13%-8% Japan+6.5%N/A-6% United Kingdom -14%-12.5%-8% Portugal+41%+27%-8% EU %N/A-8%

Who are the Biggest Losers? Whose emissions have grown?

Source: International Energy Agency

Source: UNFCC So it’s not true that EU countries are not meeting their Kyoto obligations although help from Eastern Block countries help a lot….

Land use changes have contributed significant CO2 Source: UNFCC

Land-use and Land-use Change and Forestry (LULUCF) makes a huge difference in maps of relative CO 2 emissions wikipedia.org/LULUCF

Hugo Ahlenius, UNEP/GRID-Arendal

Enter REDD : Reducing Emissions from Deforestation and Forest Degradation Fact: 18% anthropogenic emissions comes from forest destruction Idea: Developed countries will pay for developing countries not to destroy rainforest REDDplus What do people mean by “perverse incentive” with REDD? Any equity issues to consider? What do people mean by “perverse incentive” with REDD? Any equity issues to consider?

EIA analysis of impact of Kyoto Protocol on US economy (Oct 1998): KEY POINTS: 1)US emissions projected to increase 34% above 1990 levels by )Potential for natural C sinks may reduce US commitment to -3% (vs. 7%) of 1990 levels 3)Carbon prices range from $67/tonne (+24% by 2010) scenario to $385 (-7%) scenario 4)Large uncertainties (social response, market response); also cost depends on when you begin to implement (starting later yields higher costs) So would it ‘cost’ us? Yes Do we know what the cost would be? Perhaps not so well…. What is the cost of climate change? Very difficult to say

1.Cap and trade is a market-based approach to reducing pollution. The govt sets an overall cap on emissions and creates allowances up to the level of the cap. 2.Sources must hold enough allowances to cover their emissions. - can lower emissions and sell or bank allowances - continue to emit higher than their allowance and purchase additional allowances 3.Market-driven: govt does not prescribe where emission reductions are made, but the govt must set the goal and monitor compliance The Basics of Cap and Trade US Cap and Trade Programs in Place (via EPA) 1.Acid Rain Program: covers SO2 emissions from power-generation facilities - reductions of 51% of 1990 levels by NOx Budget Trading Program: covers O 3 -season (summer) NOx - reductions of 60% of 2000 levels by 2007

EU Greenhouse Gas Emission Trading System (EU ETS) 1.Create allowances equivalent to the EU Kyoto assignments for each country 2.Distribute them to the nations, and then the nations distribute them to the large emitters 3.Each year, large emitters must return allowances equivalent to their emissions that year Phase 1 ( ): allowances given out freely; involves 40% EU CO2 EU emissions grow by 1.9% in two years Phase 2 ( ): CDM and JI included; 60% allowances auctioned EU emissions (only 3% required) Phase 3 (2012- ): aviation included; most allowances (>50%) must be auctioned; outside-EU emissions credits <50% - new cap means -21% of 2005 emissions by 2020

Carbon currently trading at €8.52 ($10.50) per tonne “Cheaper, not cleaner” --The Economist

Australia chose a carbon tax: $24/ton

How $43/ton carbon price translates into energy prices: