Explaining the Variation in Commitment to the Kyoto Protocol in Annex I and Non-Annex I Countries Nicholas Schneider 1 & Glenn Fox 2 September 28, MSc Guelph, now Fraser Institute 2.Professor, Food, Agriculture and Resource Economics, Guelph

Background United Nations Framework Convention on Climate Change (1992) –“…stabilization of [GHG] concentrations [to] prevent dangerous anthropogenic interference with the climate system.” Groups countries into –Annex I: Developed and some EIT countries –Non-Annex I: Everyone else Only Annex I countries have GHG reduction responsibilities –Singapore both affluent and emissions intensive, but not Annex I

Reduction targets Kyoto Protocol (1997) set out reduction targets relative to 1990 –Canada agreed to a 6% reduction –Iceland agreed to “reduction” target of a 10% increase

Targets reported by the UNFCCC

However… The “reduction” targets for non-1990 base year countries (such as Slovenia – 1986) The “reduction” targets EU BSA countries –Agreed to common 8% reduction target in 1997, reallocated in 1999 –In the end, only about half of Annex I countries agreed to reduce emissions relative to 1990

Actual targets relative to 1990

Status of ratification RatifiedNot Currently Ratified Austria Belarus (no target) Belgium Bulgaria Canada Czech Republic Denmark Estonia Finland France Germany Greece Hungary Iceland Ireland Italy Japan Latvia Kazakhstan (no target) Liechtenstein Lithuania Luxembourg Monaco Netherlands New Zealand Norway Poland Portugal Romania Russian Federation Slovak Republic Slovenia Spain Sweden Switzerland Ukraine United Kingdom Non-Annex I Countries Australia Croatia Turkey United States

Emissions reductions Canada is about 30% above 1990 levels Portugal, Spain and Turkey are more than 30% above Most former Communist Bloc countries are more than 30% below

Change in GHG emissions,

Background - Summary There is a wide variation in actual targets, emissions, and progress towards meeting targets Why? That’s a good question, which the federal government is asking. Especially if Canada is to continue into further rounds of Kyoto-like agreements

Current Policy Statements “[A]ny future approaches to new targets for developed countries should reflect a country’s specific national circumstances – considerations such as the nature of the economy and energy sources” Hon. Rona Ambrose (2006) “The future international climate change arrangement needs to reflect differences in economic and social conditions among economies and be consistent with our common but differentiated responsibilities and respective capabilities.” (APEC, 2007)

Research Problem How have various economic and political factors specific to each country thus far influenced commitment to the Kyoto Protocol?

Measure of commitment? Existing measures use ratification as proxy for commitment –Doesn’t allow for any variation in commitment among those that ratified –Doesn’t account for “symbolic” ratification Ratification doesn’t fulfill the main objective of the Kyoto Protocol –“[T]o pursue a stabilization of GHG concentrations in the atmosphere…”

Better measures of commitment Two different measures of Kyoto commitment –The chosen greenhouse gas reduction target –The actual change in GHG emissions, More commitment if: –A stricter reduction target is chosen –GHG emissions (1990 to 2004) shows a larger reduction (or smaller increase)

Existing literature tends to use only a few explanatory factors Instead, we test most, and adopt a Public Choice perspective 5 categories of explanatory factors, identified from previous literature –Interest group pressure –Geophysical characteristics –Economic growth –Economic structure –Previous climate change policy decisions What affects commitment?

Interest group pressure Level of commitment Size of Environmental NGO (ENGO) lobby Higher Size of Coal energy lobbyHigher or lower? Size of Academic lobbyHigher

Geophysical characteristics Level of commitment Risk of coastal floodingHigher Average temperature (approximated by latitude) – REMOVED Higher

Economic growth Level of commitment Population growthLower GDP per caput growthLower GHG intensity growth (GHG/GDP) Lower Why these three factors?

How to reduce emissions? Situation in Canada ( ) - 14% emissions intensity + 28% income per caput + 15% population = Overall increase in GHG emissions 1. GHG = GHG/GDP * GDP/Pop * Pop = Emissions Intensity (e) * GDP per caput (y) * Population (p) 2. %∆E = %∆e + %∆y + %∆p

Decomposition in Annex I countries

Economic structure Level of commitment Economic FreedomHigher or lower? AffluenceHigher Transportation intensityLower Size of primary resource sectorLower Share of global CO 2 emissionsLower

Previous climate change policy decisions Level of commitment Reduction target (higher is less strict) Lower Kyoto Protocol ratificationHigher

Empirical framework Reduction targets estimated using OLS Change in GHG emissions indirectly measured as system of 3 equations GHG = GHG/GDP * GDP/Pop * Pop

Explaining the target: significant results (OLS) A lower (-) target is stricter (higher commitment) GHG intensity growth (+) GDP per caput growth (+) Population growth not significant –2 of 3 economic growth variables are +, significant Transportation dependency (+)

Emissions change in Annex I Change in population and GDP/caput explained by: education, life expectancy, economic freedom, gross capital formation, and inflation A few variables significant to explaining the change in GHG intensity, but one variable explains most of the variation: A higher (less strict) reduction target was associated with a larger increase in GHG emissions ( )

Only 2 variable significant to explaining the change in GHG intensity (proxied by CO2/GDP) A higher transportation dependency is associated with a larger increase in GHG[CO2] emissions intensity Annex I countries are associated with lower increases in emissions intensity Emissions change in Annex I and non-Annex I

Summary of results CategoryF-Statistic TargetGHG EmissionsCO 2 Emissions Interest Group Pressure Geophysical Significant Economic Growth Significant Economic Structure Significant Previous Climate Change Policy Decisions Significant Joint significance tests of categories

Conclusions Results suggest that Kyoto targets and emissions best explained by expectations of future economic growth (or lack thereof) –Those countries that could more easily agree to strict targets did so. –Those who could more easily chose stricter targets, more easily reduced emissions –This may suggest that compliance with the Kyoto Protocol is a by-product of changes in national emissions, rather than the goal. Interest group lobbying has been mentioned frequently in policy discussions –Lobbying is likely occurring, but these results suggest not dominant influence

Future research First commitment period ( ) hasn’t even started. Some countries may have significantly different level of emissions by Some approximations could be improved –ENGO pressure proxied by number of ENGOs/caput –Actual membership or donation per caput would be better Are other international environmental agreements more symbolic than substantive?

Thank you. Any questions?