The United Nations Framework Convention on Climate Change: new challenges for environmental economics and international law

by Michael Bothe Dr. jur., Professor of Law at the Johann Wolfgang Goethe University, Frankfurt/Main

The international climate change regime is one of the most ambitious undertakings of international governance, highly complex in many respects. My presentation tries to elucidate some key features. The starting point and raison d’être of this regime is a natural phenomenon, namely the greenhouse effect. So-called greenhouse gases in the earth’s atmosphere account for the effect that the heat emitted from the sun is retained in the earth’s atmosphere. Without this greenhouse effect, there would be no life on earth. The regulatory problem addressed by the climate change regime results from the forecast that a further accumulation of greenhouse gases in the atmosphere will increase the greenhouse effect in a way which is prejudicial. Business as usual forecasts predict a rise in the average global temperature of two degrees by 2025 and four degrees by 2100. This, it is predicted, would negatively affect the biological balance of the earth. While the greenhouse gas effect as such is an uncontroversial fact of nature, the scope of overall global warming remains uncertain, the distribution of this effect over the earth is still more so, and still more so are the consequences of that effect. The melting of the polar icecaps and the ensuing rise in the sea level are only the most commonly cited effects of climate change. Disastrous weather effects, heavy tropical storms, torrentious rainfalls or droughts are another perspective. When the first warnings from the scientific community were uttered in the 1970’s, the scope of the problem was very controversial. Since then, a tremendous amount of research has been done, providing a clearer picture, but uncertainties remain. The political reaction to scientific warnings started in the 1980’s. In 1985, the United Nation Environment Programme (UNEP) and the World Meteorological Organisation (WMO) organised a common conference in Villach. In 1988, the Toronto Conference on the Changing Atmosphere was organised by the Canadian Government. In that year, UNEP and WMO created the Intergovernmental Panel on Climate Change (IPCC) as a scientific, yet official body. The General Assembly of the United Nations addressed the question in Resolutions 43/53, 44/207 and 45/212, the latter Resolution establishing an Intergovernmental Negotiating Committee (INC). In 1990, IPCC rendered its first assessment report. As a result of the efforts of the negotiating committee, the United Nations Framework Convention on Climate Change (UNFCC) could be opened for signature at the Rio Conference in 1992. It must be stressed that this action was based on the pre-cautionary principle, recognized at the same time by the Rio Declaration. The convention is indeed a pre-cautionary measure, based on the rule (which constitutes the core of the precautionary principle) that scientific uncertainty should not bar remedial action. This definition of the principle is a negative one. Turned positive as a basis for measures to be taken, the precautionary principle is not a hard and fast rule. It is not possible to so to say automatically derive from the principle an indication of specific measures. Thus, the application of the pre-cautionary principle requires political determinations. It is therefore influenced by political interests. In order to understand the compromise finally reached in the UNFCC of 1992 and later in the Kyoto Protocol, it is necessary to understand the interest at stake, be they real or “only” perceived by relevant actors. There are, first, the environmental interests pursued by the UNFCCC regime, i.e. the interest to limit the man-made increase of the greenhouse effect and its ensuing negative consequences. The problem of the greenhouse effect is a long-term one. Those really affected are not yet, or are just, born. It is a concern for future generation. But by whom and how strongly could those interests be represented? Much of the pressure to take into account those environmental interests came from civil society. UNCED 1992 was the first big international conference, which opened itself systematically to the input from organisations of civil society. But treaties are finally concluded by governments. The essential question is which impact this pressure from civil society has on the actual behaviour of governments. In this respect, the ‘green power’ was stronger in Europe than elsewhere in the world. Thus, one can acknowledge green preferences of European politicians, expressed by the European Economic Community (as it still then was) and its member states. Other developed countries (the United States, Japan, Canada, Australia and New Zealand – to be known in the negotiating for a as “umbrella group”) took a different view. They preferred to leave the solution of the problem to market forces. Their position towards the climate change regime was between lukewarm and hostile. Probably the strongest emphasis on environmental interests was put forward by those states which are most probably affected by a C-level rise, the so-called Alliance of Small Island States (AOSIS). The obvious environmental interests of these developing states limited the unity of the G-77 and China Group which otherwise is an important fact in international negotiations. There were countervailing economic interests: The cost of investment to be made in order to cope with the greenhouse effect, which means high costs threatening certain industries, in particular old, low-efficiency industries in the industrialised countries. It appears that this cost has been of particular concern for the United States. The industrial development interests of developing countries, however, pointed into a similar direction. The fear of the developing countries was that these costs might force them to renounce to, or at least restrict, industrialisation, a fear which has characterised the stance of developing countries towards environmental policy in general from the early 70s. The economic interests of fossil fuel producers (OPEC), at least as they currently perceive them, are also adverse to any attempt to limit fuel consumption through climate protection measures. These politically very divers countries were united in a strange way, an alliance sometimes called the axis of global warming. Combined with the countervailing economic interests, there is also a countervailing social interest: the interest in maintaining a lifestyle based on high-energy consumption. This is a politically powerful interest in a great number of industrialised countries. Finally, there is a countervailing political interest, often formulated as a sovereignty interest. It is the perceived threat to state freedom of action which might be the result of the climate change regime. In this perspective, this more general sovereignty aspect joins unilateralist tendencies in the United States’ foreign policy. As to the developing countries, the stance based on their perceived economic interest was buttressed by considerations of distributional justice. They argued that the whole problem was due to the emission blown into the atmosphere from the industrialised countries during the last two centuries. The historic contribution of the developing was next to nil, and their current contribution to the problem was still very low. It was, thus, unjust to require the developing countries to make an economic sacrifice in order to solve this problem. The distribution problem becomes very clear, indeed, if one looks at the current figures of per capita CO2 emissions, measured in tons of carbon per year. The world average is 1.1, in China it is 0.7, in India 0.3. The average of the OECD, i.e. the industrialised countries is 3.0, the figure for Japan is 2.4, that for the USA is 5.4! The UNFCCC is able to accommodate these conflicting interests in a specific way. It is a compromise solution in many respects. The first aspect of this compromise is the time element: The convention adopts a stepwise approach, which by 1992 had become a standard element in the creation of international environmental regimes. It is a framework convention, which contains only general commitments, thus, leaving obligations which really hurt to a later phase. On the other hand, the convention recognizes indeed the existence of the problem, a fact that cannot be underestimated in the face of remaining uncertainties. The first phrase of the pre-amble reads: “Acknowledging that change in the earth’s climate and its adverse effects are a common concern of human kind”. The approach is based on the pre-cautionary principle (Art. 3 no. 3) in accordance with the principle of intergenerational equity of Art. 3 no. 1. Nevertheless, the convention recognizes on the other hand, the necessity of development, which should, however, be sustainable (Art. 3 no. 4). All this corresponds to the principles adopted at the same time in the Rio Declaration. As to the specific problem to be solved, the convention adopts what can be called the double track approach: mitigation through stabilisation of emissions on the one hand (primary goal) and adaptation to the change, on the other (secondary goal). The former is formulated in Art. 2, the latter is reflected in a number of different provisions, e.g. assistance to adaptation by most vulnerable countries (Art. 3 no. 2, Art. 4 para. 1(e)). The essential compromise between developed and developing countries lies in a system of differentiated obligations of developed countries on the one hand, and developing countries on the other. On the level of principles, this is formulated in the principle of common but differentiated responsibilities, which accepts the argument of distributional justice put forward by the developing countries. To quote the pre-amble: “Noting that the large share of historical and current global emissions of greenhouse gases has originated in the developed countries, that per capita emissions in developing countries are still relatively low and that the share of global emissions originating in the developing countries grow to meet their social and development needs, … acknowledging that the global nature of climate change calls for the widest possible cooperation by all countries and their participation in an effective and appropriate international response, in accordance with their common but differentiated responsibilities and respective capabilities and their social and economic conditions.” The most important practical difference between developing and developed countries relates to their stabilisation duties (for all countries Art. 4 para. 1 (d), for developed countries Art. 4 para. 2 (a)). The developing countries do not have stabilisation duties. This is called the “North first” approach. But also for developed countries, these stabilisation duties are rather soft. In this respect, the convention really adopts a wait-and-see-approach. What is important, however, is a provision for a review of the adequacy of this approach. As to implementation and enforcement, the convention calls for the establishment of inventories and reporting; both obligations also being differentiated between developing and developed countries. A last element of the compromise achieved between developing and developed countries relates to finance. For all practical purposes, the developed countries should bear the actual compliance costs of the developing countries (Art. 4 para. 3, 11). It is probably the soft overall approach which accounts for the smooth ratification process. The weak obligations do not really hurt. Within less than two years after the adoption of its text, the UNFCC entered into force 21 March 1994 after the deposit of the 50th ratification instrument. The ensuing development of the regime is characterised by the attempt to achieve stricter stabilisation obligations. In 1995, the second IPCC-Assessment Report brought more certainty as to the man-made components of the greenhouse effect and furnished worse predictions for the business-as-usual approach. But it could not remove all uncertainties, in particular those relating to negative social and economic impact of climate change on specific areas, nor those relating to the actual cost of remedies. The first conference of the parties (COP) took place in Berlin in March/April 1995. In conformity with Art. 2 (4) (d), already mentioned, it undertook a review of the existing obligations and held them to be inadequate. A new negotiating group was created with the mandate to elaborate an additional protocol containing concrete stabilisation obligations, the so-called Berlin Mandate. That mandate was fulfilled at the Kyoto Conference in 1997 (COP 3). The Kyoto Protocol, too, constitutes a compromise, but this time more between various groups of developed countries than between developing and developed countries. The developing countries defended their position as it emerged from the Rio Conference: No strict stabilisation obligations for developing countries, not even for threshold countries whose contribution to the greenhouse effect is not negligible. That tough stance of the developing countries furnished an additional reason, even an appearance of justification, for the United States’ rejection of the Kyoto Protocol. The United States considers the absence of important developing countries, such as India and Brazil, and in particular of China as unjust and therefore a major flaw of the Kyoto Protocol regime. The general regulatory approach of the Protocol constitutes a compromise in many respects. The basic obligation of the developed countries is a quantified emission limitation and reduction commitment (QELRC) formulated as an aggregate target, i.e. a stabilisation or reduction of the overall greenhouse gas emissions of a particular state, taken as a whole. This method of fixing an absolute target was not uncontroversial from the point of view of the countervailing economic interests. Some would have preferred, and still prefer, a relative target, such as one linked to economic growth factors. On the other hand, the formulation of an aggregate obligation leaves a complete freedom, at least as a matter of principle, as to how a state reaches this overall target. Thus, there is a type of obligation which is not very intrusive, which does not infringe upon claims of state sovereignty. It, thus, accommodates sovereignty interests. Like UNFCCC itself, the Kyoto Protocol constitutes a compromise in relation to time. It does not attempt to achieve at once the entire reduction required to solve the problem of the excess greenhouse effect. It only provides for a more modest reduction to be achieved during a first “commitment period”, 2008-2012. The full solution of the problem is left to future commitment periods. It is in a number of important details that further problems involved in this approach appear and where compromises between different developed countries had to be made. As a matter of fact, the concrete shape of the obligations was a matter of horse-trading. The first problem is the determination of the QELRC for each particular country. Concessions had to be made in various respects, leading to a result where certain countries which were reluctant, but necessary in order to achieve a meaningful participation with the Protocol, were given concessionary QELRCs. This is in particular the case for Russia and Australia. The second serious problem involved in the calculation of the targets is carbon sinks. Recognising sequestration of greenhouse gases by sinks favours countries having a large potential of afforestation, as growing forests are the most important sink on land. The next compromise element is flexibilisation. Mainly the United States, but not only, insisted on the insertion of flexibilisation mechanisms. The basic rational behind the flexibilisation mechanisms is a process of compensation between a non-reduction in one place and an increased reduction in another. The four flexibilisation mechanisms provided by the Protocol are: a specific bubble approach, Joint Implementation, Clean Development Mechanism and emissions trading. The major argument for flexibilisation is economic efficiency. Flexibilisation mechanisms allow reductions to be made were it is economically speaking most efficient. Thus, the basic idea is to achieve the overall reduction target at lower cost. That purpose is no doubt laudable, even necessary, given the considerable cost involved in the implementation of the regime. On the other hand, this approach involves certain problems. In particular, the Clean Development Mechanism opens up the possibility that developed countries fulfil their reduction obligations by paying for reductions achieved in other countries which do not have quantified reduction obligations of their own without so to say making a significant effort at home. For many, this approach seems to be unreasonable, even unethical. This motivated attempts to put a cap on flexibilisation, meaning that the use of flexibilisation mechanisms can only supplementary to a serious stabilisation effort made by each developed country. Similar considerations apply to sinks, in particular in combination with Joint Implementation. This allows a country having relatively high emissions to reduce its burden by financing afforestation in another country. The calculation of individual stabilisation targets for states as a result of aggregate emissions and the use of sinks and in combination flexibilisation mechanisms put difficult questions of calculation, monitoring compliance and last but not least sanctions, which makes the system very complex also from a purely technical point of view. When the basic elements of the compromise were adopted in Kyoto, it was not possible to deal with all these technical details. Thus, in a way, Kyoto was still characterised by a wait-and-see approach. The real meaning of Kyoto could only become clear when these relevant details were settled. Thus, there developed a widespread reluctance to ratify the Kyoto Protocol until these details became clear. COP 6 which took place at The Hague in 2000 brought a final show-down on these matters. It was not possible to solve the outstanding issues during that conference. COP 6 had to be adjourned and resumed in Bonn in 2001. It was at this conference that the difficulties were settled as a matter of principle, while the finalisation took place at COP 7 in Marrakech in 2001. The result are the so-called Marrakech Accords, a huge volume of instruments most of which will have to formally adopted by the first conference of the parties to the UNFCC serving as a meeting of the parties of the Kyoto Protocol (COP/MOP). The Clinton administration in the United States had taken steps in the direction of a ratification of the Protocol by the United States, but was not successful against an hostile Senate. In 2000, the Bush administration announced its intention not to ratify. The other countries decided to go ahead nevertheless although the United States is by far the biggest emitter of greenhouse gases. But the U.S. decision fundamentally changed the negotiating environment. The negotiations now practically took place between the rest of the industrialised countries. Vis-à-vis the EU which pushed for a strong Protocol, the relative bargaining power of some hesitant countries grew. The position of Russia became particularly strong as the entry into force of the Protocol now depends on the ratification by Russia. Entry into force requires ratification by a number of countries which, taken together, account for at least 55% of the world’s emissions. Russia accounts for 17%. After the non-ratification by the United States, it is not possible to reach the necessary 55% without Russia. The Russian decision is still open. As the consequence of the process of progressive concretisation of the UNFCC and Kyoto Protocol regime, a most ambitious and complex system emerges. Four categories of problems can be distinguished: 1. The calculation of QELRCs: The stabilisation obligation is calculated in a unit which makes the different greenhouse gas emissions comparable. To arrive at a national emission figure, sequestration of greenhouse gases in sinks has to be deducted. The method of calculating this sequestration is the next problem as there is no practical means to actually measure it. 2. Flexibilisation: Flexibilisation means that reductions achieved in one place may be credited to a QELRC of another, or vice versa, that an emission taking place in one place is debited to the account of another state. This means, first of all, that the transactions in question have to be documented, registered and monitored. The calculation problems already mentioned are complicated by that fact. 3. Implementation: As the QELRC is expressed in an aggregate quantity of emissions originating in one state, the state has a complete freedom as to the choice of the means how to achieve the required stabilisation of those aggregate emissions. These measures are different in relation to different greenhouse gases. In relation to CO2, the basic principle is reducing the combustion of fossil fuels, which can be achieved in a number of ways, such as more energy efficient combustion engines, energy saving through various measures, such as modification of the construction and situation of buildings, and the reduction of combustion processes by a change in consumption habits, such as reducing the speed of cars or the use of air-conditioning systems. To achieve these results, very different regulatory approaches are possible, such as command and control approaches in relation to certain points of a chain of causation leading to the use of combustion processes, economic incentives or disincentives such as an energy tax or social incentives such as premiums on good environmental behaviour. The appropriate choice of a mix of implementation measures is the major challenge of a national (or, as the case may be, EU/EC) policy to achieve compliance with the QELRC. In the light of the costs involved, a cost efficient choice of instruments is vital. The problem is further complicated by the fact that these national measures of implementation may also be subject to other international legal regimes. An example is, for instance, land-use measures to develop sinks which may be in contradiction to an international legal regime such as the biodiversity convention which may require that nature is left in the existing state and not be modified through measures of afforestation. 4. Compliance control: Information concerning national compliance, i.e. relating to the aggregate figure of emissions as calculated in conformity with the rules just described, has to be collected by a body established under the Convention and/or the Protocol. Like many other environmental regimes, the Protocol relies on national reporting. For this purpose, the Kyoto Protocol develops the relevant provisions of the Convention. There are a number of procedural obligations of the developed countries parties to ensure compliance with the Protocol. They include the development of inventories of all greenhouse gas emissions in the base year 1990 and the following years (article 3 (4), 10 (a) KP), the establishment by 2007 of a national system for estimating greenhouse gas emissions from sources and their removal by sinks (article 5 KP) and reporting on compliance with quantitative emission reduction obligations (art. 7 KP). These obligations have to be concretised by COP/MOP decisions. They are reinforced by the verification procedure set forth in articles 3, 4, and 7 KP – a task to be undertaken by the technical body established by the Convention, namely the review teams of the Subsidiary Body for Scientific and Technical Advice (SBSTA). All that is a very complex challenge. The reporting is complex and ambitious, and so is the scrutiny of those reports. Following the modern trend towards non-conflictual compliance regimes, the compliance provisions of the Protocol have been supplemented, through a text adopted at COP 7 in Marrakech, by a compliance mechanism which contains important procedural safeguards, including an appeals procedure, as required by art. 18 KP. 5. Sanctions: Reactions of the system in cases of non-compliance are essential. As in other environmental regimes, the system of carrots and sticks is applied. The sticks, so far, are rather weak. In case of non-compliance, a party may no longer be eligible to participate in the flexible mechanisms. Emissions exceeding the assigned amount, multiplied by a factor 1.3, will be debited to the next reduction period. These issues, solved in a way which is more or less satisfactory, account for the highly ambitious, complex and innovative character of the climate change regime. Thus, the success or failure of the climate change regime will be a crucial crossroad for the international legal system. This is, so to say, the philosophical question put by the greenhouse effect. But this question cannot be separated from the environmental and economic question which affects the fate of future generations. Thus, we have to ask what are the political and economic perspectives of climate change in the future. As already pointed out, assuming the entry into force of the KP, the long-term solution of the greenhouse effect problem is left to the coming commitment periods, i.e. to future negotiations. In these negotiations, the problem of free riders will again be laid on the table. All countries which have no reduction commitment, unless they seriously undertake independent abatement efforts relating to greenhouse gases, are free riders as they benefit from the abatement efforts of the others. So far, these free riders are the United States and the major newly industrialised countries, particularly those in Asia, China and India being the major players. To give only some basic figures: In 1998, Asia except Japan accounted for 24,1% of the world’s emissions. Asia contributes 12,7% to the Asian emissions. The role of China is so crucial because it has the highest growth rates and economic growth tend to lead to higher energy consumption and, thus, to higher CO2 emissions. The importance of the emissions from the countries which have so far been the free riders of the system make it improbable that the countries making a serious and costly abatement effort accept these free rides any longer. But neither the newly industrialised countries in Asia, nor the United States will be ready to accept absolute emissions limitations without a comparable contribution by the other state(s). Thus, bringing aboard all relevant states is the most crucial issue of future. The platform for doing this might not be UNFCCC alone, other fora might also come into play, but UNFCCC is bound to remain the main platform. In this game, the Kyoto Protocol is by no means sacrosanct, the approach it provides for may be modified. Be that as it may, a serious new effort, made by a broader range of countries, is necessary in order to deal with global warming effectively – a crucial issue of the quality of life of future generations, in all parts of the world.