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The Oxford Handbook of International Climate Change Law
 9780199684601, 019968460X

Table of contents :
The Oxford Handbook of International Climate Change Law
Table of Contents
List of Abbreviations
Notes on the Contributors
Part I Introduction
1. International Climate Change Law: Mapping the Field
2. Climate Change and International Law beyond the UNFCCC
3. Science and Climate Change Law—The Role of the IPCC in International Decision-making
4. Economics and International Climate Change Law
Part II Institutional
5. The United Nations Framework Convention on Climate Change—The Basis for the Climate Change Regime
6. Compliance under the Evolving Climate Change Regime
7. The Global Regime for Climate Finance: Political and Legal Challenges
Part III Climate Change—Principles and Emerging Norms Concepts in International Law
8. Precaution and Climate Change
9. Principles and Emerging Norms in International Law: Intra- and Inter-generational Equity
10. Common Concern of Humankind
11. Human Rights Principles and Climate Change
12. International Market Mechanisms
13. Legal Frameworks for Linking National Emissions Trading Systems
14. Carbon Leakage and the Migration of Private CO2 Emitters to other Jurisdictions
15. National Measures and WTO Consistency—Border Measures and other Instruments to Prevent Carbon Leakage and Level the Carbon Playing Field
16. The Design and Implementation of Greenhouse Gas Emissions Trading
17. International Law and the Renewable Energy Sector
18. Intellectual Property and Climate Change, with an Emphasis on Patents and Technology Transfer
Part V Climate Change Litigation
19. International Dispute Settlement
20. Institutions and Expertise: The Role of Science in Climate Change Lawmaking
21. Climate Change and Damages
22. Human Rights and Climate Change: Broadening the Right to Environment
Part VI Living With Climate Change and Climate Change Adaptation Measures
23. Climate Change-related Displacement of Persons
24. Climate, Oceans, and the Law of Special and General Adaptation
25. Forestry and Agriculture under the UNFCCC: A Jigsaw Waiting to be Assembled?
26. Climate Change and Disaster Law
Part VII Regional and Country-Specific Perspectives
27. United States Climate Change Law
28. Climate Change Policy and Law in China
29. Climate Change Law and Policy in the European Union
30. Climate Change Law and Policy in India
31. Russian Law on Climate Change
32. Brazilian Climate Change Law
33. The Least Developed Countries and Climate Change Law
34. Small Islands and the Big Issue: Climate Change and the Role of the Alliance of Small Island States

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The Oxford Handbook of


The Oxford Handbook of




1 Great Clarendon Street, Oxford, ox2 6dp, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © the several contributors 2016 The moral rights of the authors have been asserted First Edition published in 2016 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Crown copyright material is reproduced under Class Licence Number C01P0000148 with the permission of OPSI and the Queen’s Printer for Scotland Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2015945192 ISBN 978–0–19–968460–1 Printed and bound by CPI Group (UK) Ltd, Croydon, cr0 4yy Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

Cinnamon P. Carlarne For my lovely and inspiring daughter, Matilda, and all of the other creative and hopeful minds of her generation. Kevin R. Gray For my family, Claudia, Sebastien, and Maya, who continue to shed bright light on my path and to the planet, which I hope will benefit from the words of wisdom contained in this book. Richard G. Tarasofsky For my fabulous family—Meike, Jacob, and Yael—who I missed greatly during those long UNFCCC negotiations, and all the wonderfully dedicated and talented people I met along the way working to address one of the greatest challenges of our times.


Climate change is one of the greatest challenges of our times. It is a challenge at multiple levels. Energy production and use is the primary source of most of the greenhouse gases responsible for global warming. Yet energy production and use is the key driver of economic growth and social welfare. Measures to mitigate climate change raise issues of development needs, economic competitiveness of countries, historical and contemporary responsibility, equity, and fair burden-sharing as well as technological and technical capabilities. Climate change is also a security and existential challenge to many countries. It has adverse effects on economic production systems, ecosystem health, human health and welfare, and the enjoyment of human rights. Projected impacts of temperature rises above 2°C include mass migrations, displacement of populations, and the disappearance of states. The scale, implications, and global nature of the problem dictate robust international cooperation within a structured framework. International law provides a framework for structured cooperation amongst states on key global challenges. It embodies mutual reassurances and multifarious reciprocal obligations amongst cooperating states. The need for an effective international framework for cooperation was recognized quite early in the diplomatic discourse on responses to climate change. The United Nations General Assembly (UNGA), in its resolution 43/53 of 6 December 1988, the earliest resolution on the issue, recognized that climate change is ‘a common concern of mankind’ and ‘determined that necessary and timely action should be taken to deal with climate change within a global framework’. To this end, in its Resolution 45/212 of 21 December 1990, it decided to establish a single intergovernmental negotiating process under the auspices of the UNGA for the preparation by an Intergovernmental Negotiating Committee of ‘an effective framework convention on climate change, containing appropriate commitments, and any related instruments as might be agreed upon . . .’. The United Nations Framework Convention on Climate Change (UNFCCC) was adopted in New York on 9 May 1992 and entered into force on 21 March 1994. It is a framework-legal instrument setting out broad objectives, general principles, and basic obligations. As was presaged in UNGA Resolution 44/207, the intent was that ‘concrete commitments’ would be contained in ‘associated protocols’. Consequently, the normative content of the emergent international climate change regime was significantly augmented through the adoption of the Kyoto Protocol in 1997 which

foreword   vii established individual, internationally legally binding emission targets for industrialized countries supported by a robust reporting, review, and compliance regime. Annual meetings of the Conference of the Parties to the Convention and the Conference of the Parties (COPs and CMPs) serving as the meeting of the Parties to the Kyoto Protocol have resulted in an important body of ‘soft law’ rules, implementation guidance, and institutional arrangements established through COP and CMP decisions. Thus, the UNFCCC with its near-universal membership has become the central focus of global efforts to address climate change. However, the slowness of the process and the apparent dysfunctional nature of its decision-making procedures have at times led to the questioning of its appropriateness as a forum for global solutions. This was acutely demonstrated in the various post-mortems that followed the Copenhagen debacle. The disenchantment has seen calls for fragmentation of the international regime through ‘plurilateralism’. Nevertheless, the UN in general and the UNFCCC in particular remain, in the view of many, the most representative and legitimate locus for international responses to climate change. The international climate change regime is currently in flux and on the cusp of two competing visions. The current negotiations under the Durban Platform point to a general rethinking of a ‘top-down’ approach of the Kyoto Protocol model with internationally binding quantified commitments supported by a rigorous compliance assessment and enforcement. A more flexible ‘bottom-up’ approach is characterized by nationally determined mitigation contributions, a diversity of mitigation actions, and legal bindingness at the domestic level supported by an international measurement, reporting, and verification system seems to be gaining some currency. The core principles underpinning the regime—that is, the principles of equity and common but differentiated responsibilities and respective capabilities—have come under fresh scrutiny. There is concerted political drive by some countries that the regime should transition from the binary world of 1992 and that there is need to reconceptualize the principle of common but differentiated responsibilities and respective capabilities as a dynamic concept that evolves with changing global economic realities and specific socio-economic circumstances of states. There is also growing interest in the specific role and contribution of non-state actors and of sub-national authorities within the international climate change regime. As a discipline, international climate change law is still in its infancy. Legal doctrine has always played a significant role in the evolution and development of new areas of law. It plays this role by delineating the province of the new discipline, clarifying its theoretical and conceptual underpinnings, and analysing its substantive institutional and normative content. The Oxford Handbook of International Climate Change Law is an important addition to the growing doctrinal work in this field. It analyses the foundations of international climate change law, its basic principles and concepts, the overlaps and articulation with other areas of international law, the institutional and governance arrangements, and its substantive normative content.

viii   foreword The volume is enriched by an examination of existing legal regimes in regions and countries that play key roles in international climate change diplomacy either because of their position as major emitters of greenhouse gases, their historical responsibilities and current capabilities, or their susceptibility to disproportionate adverse impacts of climate change. The Oxford Handbook of International Climate Change Law should be a useful companion to students of international climate change law, legal practitioners, policy-makers, and negotiators. Dan Bondi Ogolla, Ph.D. Coordinator and Principal Legal Adviser, UNFCCC Secretariat

Table of Contents

List of Abbreviations Notes on the Contributors

xiii xxi

PART I  INTRODUCTION 1. International Climate Change Law: Mapping the Field


Cinnamon P. Carlarne, Kevin R. Gray, and Richard G. Tarasofsky

2. Climate Change and International Law beyond the UNFCCC


3. Science and Climate Change Law—The Role of the IPCC in International Decision-making


4. Economics and International Climate Change Law


Alan Boyle and Navraj Singh Ghaleigh

Navraj Singh Ghaleigh Navraj Singh Ghaleigh

PART II  INSTITUTIONAL 5. The United Nations Framework Convention on Climate Change—The Basis for the Climate Change Regime


David Freestone

6. Compliance under the Evolving Climate Change Regime


7. The Global Regime for Climate Finance: Political and Legal Challenges


Sebastian Oberthür

Alexander Thompson

x   table of contents



Jonathan B. Wiener

9. Principles and Emerging Norms in International Law: Intra- and Inter-generational Equity


10. Common Concern of Humankind


11. Human Rights Principles and Climate Change


Catherine Redgwell Friedrich Soltau John H. Knox



Shi-Ling Hsu

13. Legal Frameworks for Linking National Emissions Trading Systems


14. Carbon Leakage and the Migration of Private CO2 Emitters to other Jurisdictions


15. National Measures and WTO Consistency—Border Measures and other Instruments to Prevent Carbon Leakage and Level the Carbon Playing Field


16. The Design and Implementation of Greenhouse Gas Emissions Trading


Michael A. Mehling

Andrew Shoyer, Jung-Ui Sul, and Colette van der Ven

Francesco Sindico

Harro van Asselt

table of contents    xi

17. International Law and the Renewable Energy Sector


18. Intellectual Property and Climate Change, with an Emphasis on Patents and Technology Transfer


Martijn Wilder Am and Lauren Drake

Joshua D. Sarnoff

PART V  CLIMATE CHANGE LITIGATION 19. International Dispute Settlement


Roda Verheyen and Cathrin Zengerling

20. Institutions and Expertise: The Role of Science in Climate Change Lawmaking


21. Climate Change and Damages


22. Human Rights and Climate Change: Broadening the Right to Environment


Timothy Meyer

Christina Voigt

Philippe Cullet



Jane McAdam

24. Climate, Oceans, and the Law of Special and General Adaptation 543 Josh Eagle and U. Rashid Sumaila

25. Forestry and Agriculture under the UNFCCC: A Jigsaw Waiting to be Assembled?


26. Climate Change and Disaster Law


Charlotte Streck and Darragh Conway Daniel Farber

xii   table of contents



Michael B. Gerrard

28. Climate Change Policy and Law in China


29. Climate Change Law and Policy in the European Union


30. Climate Change Law and Policy in India


31. Russian Law on Climate Change


32. Brazilian Climate Change Law


33. The Least Developed Countries and Climate Change Law


34. Small Islands and the Big Issue: Climate Change and the Role of the Alliance of Small Island States




Alex L. Wang

Sanja Bogojević

Deepa Badrinarayana

Anna Korppoo, Max Gutbrod, and Sergey Sitnikov Karen Alvarenga de Oliveira Joyeeta Gupta

Espen Ronneberg

List of Abbreviations

AAU assigned amount units AB32 California’s Global Warming Solutions Act ADFD Abu Dhabi Fund for Development ADP Ad Hoc Working Group on the Durban Platform AF Adaptation Fund AfCHPR African Commission on Human and Peoples’ Rights AfCtHPR African Court on Human and Peoples’ Rights AFOLU agriculture, forestry, and other land uses AGF High Level Advisory Group on Climate Change Financing AGGG Advisory Group on Greenhouse Gases AILAC Independent Alliance of Latin America and the Caribbean ANA National Water Agency (of Brazil) AOSIS Alliance of Small Island States APEC Asia-Pacific Economic Cooperation APG associated petroleum gas AR4 Fourth Assessment Report AR5 Fifth Assessment Report ASCM Agreement on Subsidies and Countervailing Measures ASEAN Association of Southeast Asian Nations AUD arbitrary or unjustifiable discrimination AWG-DPEA Ad Hoc Working Group on the Durban Platform for Enhanced Action AWG-KP Ad Hoc Working Group on the Kyoto Protocol AWG-LCA Ad Hoc Working Group on Long-term Cooperative Action AWK-KP Ad Hoc Working Group, Kyoto Protocol BASIC Brazil, South Africa, India, and China BC Canadian province of British Columbia BEE Bureau of Energy Efficiency BiNGO business-friendly international NGO BM&FBOVESPA Brazilian Mercantile and Futures Exchange and São Paulo Stock Exchange merged BNDES National Bank for Economic and Social Development (Brazil) Boiler MACT Boiler Maximum Achievable Control Technology BRIC Brazil, Russia, India, and China BRL Brazilian Real BTA border tax adjustments BUND German branch of Friends of the Earth BVRio Rio de Janeiro state government-created programme called Bolsa Verde CAA Clean Air Act


Corporate Average Fuel Economy Caribbean Community Convention on Biological Diversity common but differentiated responsibilities common but differentiated responsibilities and respective capabilities Convention to Combat Desertification Climate Change Levy carbon capture and storage Chicago Climate Exchange Carbon Dioxide Information Analysis Center clean development mechanism Council of Economic Advisers Convention on the Elimination of All Forms of Discrimination Against Women CEQ Council on Environmental Quality CERCLA Comprehensive Environmental Response, Compensation, and Liability Act CERD International Convention on the Elimination of All Forms of Racial Discrimination CERs Certified Emission Reductions CFC chlorofluorocarbon Ci-Dev Carbon Initiative for Development CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora CLRTAP Convention on Long-Range Transboundary Air Pollution CMP Conference of the Meeting of the Parties CO2 carbon dioxide CO2e carbon dioxide equivalent CODEMA Municipal Environmental Agency COP Conference of the Parties CP commitment period CRC Carbon Reduction Commitment CRU Climatic Research Unit CTCN Climate Technology Centre and Network CTF Clean Technology Fund DG DG Directorate-General DG CLIMA Directorate-General for Climate Action DNA Designated National Authorities DSB Dispute Settlement Body DSU Dispute Settlement Understanding ECJ European Court of Justice ECT Energy Charter Treaty ECtHR European Court of Human Rights EDPRS Economic Development and Poverty Reduction Strategy EEDI Energy Efficiency Design Index EEZ exclusive economic zone EGC European General Court

list of abbreviations    xv EIA US Energy Information Administration EIS environmental impact statement EITI energy-intensive and trade-intensive ENGO environmental non-governmental organization EPA Environmental Protection Agency EPCA Energy Policy and Conservation Act ERT expert review teams ERU Emission Reduction Unit ESA Endangered Species Act ET International Emissions Trading EU ETS European Union Emissions Trading System EUA European Union emissions allowances EVI Economic Vulnerability Index FAO Food and Agriculture Organisation FAZ Fundação Amazonia Sustentável FCCC Framework Convention on Climate Change FDI foreign direct investment FIELD Foundation for International Environmental Law and Development FMRL Forest Management Reference Levels FNMC National Fund on Climate Change FY Financial Year G20 Group of Twenty G77 Group of 77 G8 Group of Eight GAL global administrative law GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade GCF Green Climate Fund GCSDSIDS Global Conference on the Sustainable Development of SIDS GDP Gross Domestic Product GEF Global Environment Facility GFDRR Global Facility for Disaster Reduction and Recovery Gg gigagrams GHG greenhouse gas GNP gross national product GtCO2e Gigatons of carbon dioxide equivalent GW gigawatts ha hectares HAI Human Assets Index HCFC hydrochlorofluorocarbon HFC hafnium carbide IAC InterAcademy Council IACHR Inter-American Commission on Human Rights IAR International Assessment and Review ICA International Consultation and Analysis ICAO International Civil Aviation Organization ICC Inuit Circumpolar Conference

xvi   list of abbreviations ICCPR International Covenant on Civil and Political Rights ICESCR International Covenant on Economic, Social and Cultural Rights ICJ International Court of Justice ICSID International Centre for Settlement of Investment Disputes IEA International Energy Agency IEF Forest State Institute (Brazil) IEP Integrated Energy Policy IFFG In Fairness to Future Generations IGO International Governmental Organizations ILC International Law Commission IMF International Monetary Fund IMO International Maritime Organization INC Intergovernmental Negotiating Committee INDC Intended Nationally Determined Contributions INR Indian Rupee IP Intellectual Property IPCC Intergovernmental Panel on Climate Change IPTU Urban Property Tax (Brazil) IRA International Reserve Allowances IRENA International Renewable Energy Agency IRU International Relief Union ITLOS International Tribunal for the Law of the Sea IUCN International Union for Conservation of Nature IUU illegal, unregulated, and unreported (fishing) JISC Joint Implementation Supervisory Committee JNNSM Jawaharlal Nehru National Solar Mission KP Kyoto Protocol LCFS Low Carbon Fuel Standard LDC Least Developed Country LDCF Least Developed Country Fund LEED Leadership in Energy and Environmental Design LLDC Landlocked Developing Countries LRD legitimate regulatory distinction LUCF land use change and forestry LULUCF land use, land use change, and forestry MAC Market Advisory Committee MACT Maximum Achievable Control Technology MARPOL International Convention for the Prevention of Pollution from Ships MDB multilateral development banks MDG Millennium Development Goals MEA multilateral environmental agreements MFN most favoured nation MoEF Ministry of Environment and Forests MOP Meeting of the Parties to the Kyoto Protocol MRV measure, report, and verify; also measurement, reporting, and verification

list of abbreviations    xvii MtCO2e million metric tonnes of carbon dioxide equivalent MW megawatts NAMA Nationally Appropriate Mitigation Actions NAP National Adaptation Plans NAPA National Adaptation Plans of Action NAPCC National Action Plan on Climate Change NCP National Contact Points NEPA National Environmental Policy Act NGO non-governmental organization NHTSA National Highway Traffic Safety Administration NOx nitrogen oxides NRC National Research Council NSPS New Source Performance Standard OAU Organization of African Unity ODA Official Development Assistance ODK Open Data Kit ODS ozone-depleting substances OECD Organisation for Economic Co-operation and Development OHCHR Office of the High Commissioner for Human Rights OPEC Organization of the Petroleum Exporting Countries oPt occupied Palestinian territory PCA Permanent Court of Arbitration PES payment for environmental services PICs Pacific Island Countries PIL private international law PM2.5 fine particulates PNMC National Policy on Climate Change PP Precautionary Principle PPA power purchase agreement ppm parts per million PPM process and production method PRSP Poverty Reduction Strategy Papers PSAG Private Sector Advisory Group PSD prevention of significant deterioration PV photovoltaic PX Paraxylene QELRC Quantified Emission Limitation and Reduction Commitments R&D research and development RDD&D research, development, demonstration and deployment RE renewable energy REC renewable energy certificate REDD reducing emissions from deforestation and forest degradation REDD+ REDD, which also includes conservation, sustainable management of forests, and enhancement of forest carbon stocks REEEP Renewable Energy and Energy Efficiency Partnership RFF Resources for the Future

xviii   list of abbreviations RGGI Regional Greenhouse Gas Initiative RIA regulatory impact assessment RMU Removal Units RUB Russian rubles SBI Subsidiary Body for Implementation SBSTA Subsidiary Body for Scientific and Technological Advice SC Security Council SCCF Special Climate Change Fund sCER secondary Certified Emissions Reductions SCM Subsidies and Countervailing Measures SDPC State Development and Planning Commission SE4ALL Sustainable Energy for All SEA strategic environmental assessment SEC Securities and Exchange Commission SEEMP Ship Energy Efficiency Management Plan SIDS Small Island Developing States SO2 Sulphur dioxide SPM Summary for Policymakers SPREP South Pacific Regional Environmental Programme SRFC Sub-Regional Fisheries Commission SRM Solar Radiation Management SSRN Social Science Research Network TBT Technical Barriers to Trade TEC Technology Executive Committee TEPCO TEPCO (the Tokyo Electric Power Co TFEU Treaty for the Functioning of the European Union TNC The Nature Conservancy (Brazil) TPES Total Primary Energy Supply tpy tons per year TRIMs Agreement on Trade-Related Investment Measures TRIP Trade-Related Aspects of Intellectual Property Rights TTE team of technical experts UNCED United Nations Conference on Environment and Development UNCLOS United Nations Convention on the Law of the Sea UNDESA United Nations Department for Economic and Social Affairs UNDP United Nations Development Programme UNEP United Nations Environment Programme UNESCO United Nations Educational, Scientific and Cultural Organization UNFCCC United Nations Framework Convention on Climate Change UNFSA United Nations Fish Stocks Agreement UNGA United Nations General Assembly UNHCR United Nations High Commissioner for Refugees UNHRC United Nations Human Rights Council UNHRC United Nations Human Rights Commission UNISDR United Nations International Strategy for Disaster Reduction

list of abbreviations    xix UNSC VAT WHO WMO WTO

United Nations Security Council value added tax World Health Organization World Meteorological Organization World Trade Organization

Notes on the Contributors

Karen Alvarenga de Oliveira Ph.D., is Team Leader, Writer, and Editor at Earth Negotiations Bulletin, International Institute for Sustainable Development. Deepa Badrinarayana is Associate Professor, Chapman University School of Law. Sanja Bogojević is Associate Professor in Environmental Law, Lund University. Alan Boyle is Professor of Public International Law, University of Edinburgh and barrister, Essex Court Chambers. Darragh Conway is a lawyer specializing in international environmental and climate change law at Climate Focus. Philippe Cullet is Professor of International and Environmental Law at SOAS. Lauren Drake is a lawyer at Baker & McKenzie, Sydney. Josh Eagle is Solomon Blatt Professor of Law at the University of South Carolina School of Law. Daniel Farber is Sho Sato Professor of Law, University of California, Berkeley. David Freestone is Visiting Scholar and Professorial Lecturer in Law at George Washington University, Washington, DC. Michael Gerrard is Andrew Sabin Professor of Professional Practice at Columbia Law School. Navraj Singh Ghaleigh is Lecturer in Public Law at the University of Edinburgh and a barrister. Joyeeta Gupta is Professor of Environment and Development in the Global South at the Group on Governance and Inclusive Development of the Amsterdam Institute for Social Science Research of the University of Amsterdam and at UNESCO-IHE Institute for Water Education, Delft. Max Gutbrod is a partner at CIS Limited. Shi-Ling Hsu is Larson Professor at Florida State University College of Law. John H. Knox is Henry C. Lauerman Professor of International Law at Wake Forest University School of Law.

xxii    notes on the contributors Anna Korppoo is Senior Research Fellow at Fridtjof Nansen Institute. Jane McAdam is Director at the Andrew & Renata Kaldor Centre for International Refugee Law, UNSW, Scientia Professor of Law and Australian Research Council Future Fellow, UNSW, and Non-resident Senior Fellow, Brookings, Washington, DC. Michael A. Mehling is Executive Director, Center for Energy and Environmental Policy Research, Massachusetts Institute of Technology, and Visiting Professor at the University of Strathclyde. He is also Editor-in-Chief of Carbon & Climate Law Review. Timothy Meyer is Professor of Law and Enterprise Scholar at Vanderbilt University Law School. Sebastian Oberthür is Academic Director at the Institute for European Studies. Catherine Redgwell is Chichele Professor of Public International Law and Fellow of All Soul’s College, University of Oxford. Espen Ronneberg is Climate Change Adviser at the Secretariat of the Pacific Regional Environment Programme, Apia, Samoa. Joshua D. Sarnoff is Professor of Law at DePaul University College of Law. Andrew Shoyer is a partner in the Washington, DC office of Sidley Austin LLP. Francesco Sindico is reader in International Environmental Law, University of Strathclyde Law School, Glasgow, Scotland, UK and Director of the Strathclyde Centre for Environmental Law and Governance. Sergey Sitnikov is a partner at Causa Privata Law Firm, and Visiting Professor at MGIMO University, Russia. Friedrich Soltau is Sustainable Development Officer, Division for Sustainable Development at the United Nations Department of Economic and Social Affairs. Charlotte Streck is Director at Climate Focus. Jung-ui Sul is an associate in the Brussels office of Sidley Austin LLP. Rashid Sumaila is Director and Professor at the Fisheries Economics Research Unit, Fisheries Centre, University of British Columbia. Alexander Thompson is Associate Professor of Political Science and a Faculty Affiliate of the Mershon Center for International Security Studies at The Ohio State University. Harro van Asselt is Research Fellow at the Stockholm Environment Institute and Visiting Research Associate, University of Oxford. Colette van der Ven is an associate in the Geneva office of Sidley Austin LLP.

notes on the contributors    xxiii Roda Verheyen is a partner at Rechtsanwälte Günther, Hamburg. Christina Voigt is Professor at the Department of Public and International Law, and coordinator for the environmental law sector at the Center of Excellence, PluriCourts, at the University of Oslo, Norway. Alex L. Wang is Assistant Professor of Law at UCLA School of Law. Jonathan Wiener is Perkins Professor of Law, and Professor of Environmental Policy and Public Policy, at Duke University and is University Fellow, at the Resources for the Future (RFF). Martijn Wilder AM is a partner at Baker & McKenzie, Sydney. Cathrin Zengerling is a lawyer at Rechtsanwälte Günther, Hamburg.

Part I


Chapter 1


Cinnamon P. Carlarne, Kevin R. Gray*, and Richard G. Tarasofsky*

1. The Emergence of International Climate Change Law


2. Evolution of the Field


3. The Legal Framework for Climate Change


4. Conclusion: The Future of International Climate Change Law


*  The views expressed in the book are those of the authors and in no way do they represent the views of the Government of Canada, the Canadian Department of Justice or the Global Affairs Canada.

4   part i. introduction

1.  The Emergence of International Climate Change Law The field of international climate change law emerged and evolved rapidly. In the span of a quarter of a century, the international community identified climate change as a global problem, negotiated a framework treaty and a protocol to define the parameters of a global response, and developed domestic laws and regulations to implement such a response through a network of complex legal and political agreements at every level of governance. In 1990, the United Nations General Assembly (UNGA) initiated the development of the field of international climate change law by passing Resolution 45/212 that launched formal negotiations for an international climate change treaty.1 Within two years, these negotiations culminated in the adoption of the United Nations Framework Convention on Climate Change (UNFCCC).2 The UNFCCC, as a framework instrument, sets the parameters for global discourse and provides an essential forum for dialogue and decision-making on climate change matters. It is and always has been the focal point for the development of the norms and principles of international climate change law. The UNFCCC is complemented by the hard-fought-for Kyoto Protocol. The Kyoto Protocol is a treaty that sets out legally binding emission reduction obligations for developed country Parties, provides for a series of market-based mitigation tools, and generally adds further contour to the legal framework established under the UNFCCC. Together, the UNFCCC and the Kyoto Protocol form the backbone of the international climate change regime. But, it is a backbone that is bending under the weight of ongoing patterns of climate change coupled with the pressure exerted on the system by State and non-State actors in the international community to respond to changing physical, scientific, political, and economic realities. Indeed, it is now evident that the Kyoto Protocol itself is no longer considered by the international community to be an appropriate basis for moving forward in the longer term, given that its second commitment period for emission reduction obligations,3 which is still not in force at the time of writing, will not be followed by a subsequent commitment period. The international climate change regime, thus, stands at a crossroads. There is an international law foundation in place but the structure has not yet produced   Protection of Global Climate for Present and Future Generations of Mankind, G.A. Res. 45/212, UN Doc. A/RES/45/212 (21 December 1990). 2   9 May 1992, 1771 UNTS 107, available at (hereinafter ‘UNFCCC’). 3   Report of the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol on its Eighth Session, held in Doha from 26 November to 8 December 2012, Doha Amendment to the Kyoto Protocol, Decision 1/CMP.8, UN Doc FCCC//KP/CMP/2012/13/Add.1 (28 February 2013). 1

1. international climate change law   5 the type of changes in state behaviour that are necessary to effectively address the contemporary challenges of climate change; it is a foundation in need of further development if not reconceptualization. Recognizing this need, the Parties to the UNFCCC are currently engaged in negotiations with the ultimate goal of creating ‘a protocol, another legal instrument or an agreed outcome with legal force’ for the period from 2020 onwards.4 The mandate for these negotiations derives from the Durban Platform for Enhanced Action (the Durban Platform), adopted in December 2011. The vague wording in the Durban Platform and the absence of any language about binding commitments both differ from the path set forth in the 1990 UNGA Resolution with its call for a framework convention that includes binding obligations, and reflects continuing resistance by a few developing country Parties to agree to legally binding commitments that would be ‘applicable to all’. The resistance poses a fundamental challenge that the international community must overcome in order to reach a consensus on how the international climate change regime and, in particular, the law that underscores the regime, can evolve. The ongoing negotiations also reveal how efforts to develop international climate change law challenge the traditional paradigm of international environmental law and, in particular, traditional reliance on treaties with enforceable obligations. The vigour of the existing international law regimes developed in the last century is being put to the test. The uncertainty about the future legal regime is juxtaposed with increasing certainty about human-induced climate change. In 2014, the lead scientific body on climate change—the Intergovernmental Panel on Climate Change (IPCC), which Ghaleigh in Chapter 3 calls ‘a remarkable success’ despite its weak mandate— released its Fifth Assessment Report (AR5).5 This Report, which is the most comprehensive assessment of climate change to date, warns of the increasing scope and intensity of the effects of climate change on human and non-human life. In critical part, the AR5 concludes that ‘[h]‌uman influence on the climate system is clear’6 and that: [w]‌arming of the climate system is unequivocal, and since the 1950s, many of the observed changes are unprecedented over decades to millennia. The atmosphere and ocean have warmed, the amounts of snow and ice have diminished, sea level has risen, and the 4  Report of the Conference of the Parties on its Seventeenth Session, held in Durban from 28 November to 11 December 2011, Establishment of an Ad Hoc Working Group on the Durban Platform for Enhanced Action, Decision 1/CP.17, Preamble, UN Doc FCCC/CP/2011/9/Add.1, (15 March 2012). 5   IPCC, Fifth Assessment Report (AR5), (accessed 8 July 2015). More than 830 authors representing up to eighty-five countries contributed to this Report. IPCC, Activities, (accessed 8 July 2015). 6   IPCC, (2014), Fifth Assessment Report (AR5): Climate Change 2014: Impacts, Adaptation and Vulnerability, Working Group I, Summary for Policy Makers 15, .

6   part i. introduction concentrations of greenhouse gases have increased.7 . . . Each of the last three decades has been successively warmer at the Earth’s surface than any preceding decade since 1850.8

The AR5 confirms that unless the international community modifies its collective behaviour—by reducing emissions of greenhouse gases substantially—we will witness further warming of the planet and continued changes in all components of the climate system. These changes will be significant.9 The AR5 deepens our understanding of what we already knew: climate change creates new threats to the planet, exacerbates existing dangers, and contributes to the perpetuation of existing social and economical inequalities at both the global and local levels. Scientific consensus creates the imperative to act. Yet, the political will of States has not risen to the challenge. Despite these failings, there is still near-unanimous political consensus on the need to act. Engagement in the UNFCCC process is nearly universal, with 195 Parties having ratified the treaty.10 This means that 195 States (as well as a regional economic organization), representing all United Nations (UN) Member States, concur that ‘human activities have been substantially increasing the atmospheric concentrations of greenhouse gases, that these increases enhance the natural greenhouse effect, and that this will result on average in an additional warming of the Earth’s surface and atmosphere and may adversely affect natural ecosystems and humankind’.11 They also share the goal to ‘stabiliz[e]‌ . . . greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system’.12 Within this context, The Oxford Handbook on International Climate Change Law offers insight into the evolving shape and structure of international climate change law. As editors, we have attempted to compile a book that delineates climate change law, re-enforcing how this area of international law deserves specific scholarly attention. International climate change law is a unique area of international law that demands comprehensive analysis and thinking. Although climate change law can be considered a subset of international environmental law, the range of cross-cutting themes and interdisciplinary considerations (e.g. energy, trade, forests, agriculture), coupled with its contemporary significance and the fluid context of international negotiations, highlights the need for a publication dedicated to this unique area of international law. This chapter explores the evolution of 8   Ibid, at 4.   Ibid, at 5.   Ibid, at 20 (According to the IPCC, ‘[g]‌lobal surface temperature change for the end of the twenty-first century is likely to exceed 1.5°C relative to 1850 to 1900 for all RCP scenarios except RCP2.6. It is likely to exceed 2°C for RCP6.0 and RCP8.5, and more likely than not to exceed 2°C for RCP4.5. Warming will continue beyond 2100 under all RCP scenarios except RCP2.6’). 10   UNFCCC, Status of Ratification of the Convention, (accessed 11 March 2014). There are now 195 State Parties that have ratified the UNFCCC, while there are 192 Parties that have ratified the Kyoto Protocol. 11 12  UNFCCC, supra note 2, Preamble.  UNFCCC, supra note 2, Article 2. 7


1. international climate change law   7 international climate change law as revealed through international negotiations, and examinations of the norms, systems, actors, and debates that shape and inform the field.

2.  Evolution of the Field Although international climate change law has its grounding in the UNFCCC and the Kyoto Protocol, the antecedents for the field stem from the basic tenets of inter­national environmental law. This includes the international laws of state ­responsibility,13 the international treaties governing transboundary air pollution,14 as well as the normative principles that underlie the foundations of international environmental law (e.g. common but differentiated responsibility, the ‘polluter pays’ principle, and the common heritage of humankind).15 The corpus of inter­national environmental law, including both customary international law and general principles, has set the foundation for climate change law. However, climate change law forged its own identity once the UNFCCC was concluded. As discussed in detail by David Freestone in Chapter 5, the UNFCCC is a framework convention signed in 1992. The UNFCCC provides for ‘stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system’.16 Further, it establishes the fundamental principles underlying the development of international climate change law, including common but differential responsibilities and respective capabilities,17 precaution,18 as well as Principle 2 of the Rio Declaration.19 Following the entry into force of the UNFCCC in 1994,20 the Parties began negotiations on a protocol that would delineate State roles and responsibilities. These negotiations culminated in 1997 with the conclusion of the Kyoto Protocol, which subjects developed country Parties to explicit targets and timetables in meeting   Trail Smelter Arbitral Tribunal Decision (United States v Canada), 11 March 1941, Ad Hoc International Arbitral Tribunal, 3 UN Rep. Intl. Arb. Awards 1911, 1938 (1941). 14  E.g. Convention on Long Term Transboundary Air Pollution (Geneva, 13 November 1979), UKTS 57 (1983), Cmd. 9034, TIAS No. 10521, 18 ILM 1442 (1979). 15   All of these principles are reflected, either explicitly or by implication, in the UNFCCC and the Kyoto Protocol. 16 17  UNFCCC, supra note 2, Article 2.  UNFCCC, supra note 2, Articles 3(1), 4(1). 18  UNFCCC, supra note 2, Article 3(3). 19   Rio Declaration on Environment and Development, (1992) 31 ILM 876. See UNFCCC, Preamble. 20   UNFCCC, supra note 2. Opened for signature 9 May 1992, and entered into force 21 March 1994. 13

8   part i. introduction their obligations to reduce global greenhouse gas emissions.21 Developing country Parties were not assigned any emission reduction targets. From an early point in international climate change negotiations, a handful of States have played a pivotal role in shaping the regime. In 1997, for example, the United States was one of the key architects of the Kyoto Protocol. It was also the largest net global greenhouse gas emitter at the time the Protocol was negotiated. Accordingly, climate negotiators knew that the United States’ response to the Protocol was critical. If the United States ratified the Protocol, then two primary results would follow: (1) the largest global polluter would agree to meaningful emission reductions, thus significantly limiting free-rider problems and offering the real possibility of net global emission reductions; and (2) the international climate change regime would receive an important boost of support. This would help legitimize the institution in the eyes of the global community and create added incentives for both developed and developing country States to engage in the process moving forward. Following the negotiation of the Kyoto Protocol, the newly minted Bush Administration signaled that the United States would not be ratifying the Protocol. There initially remained, however, some hope that, due to international pressure, the United States would eventually reverse course. As a result, while the European Union (EU) and other supporters of the Protocol made efforts to increase the number of ratifications so as to allow the Protocol to enter into force, both State and non-State actors pursued a diverse set of strategies designed to incentivize US reengagement in multilateral efforts to address climate change. These efforts vis-à-vis the United States came to naught. Nonetheless, enough States ratified the Kyoto Protocol, with Russia’s being the final necessary ratification that resulted in the agreement entering into force in 2005.22 From a legal point of view, the most significant legal development that enabled many States to ratify was the Marrakesh Accords agreed at the seventh Conference of the Parties (COP-7) in 2001, which set out detailed rules on implementing the Protocol. These included the rules on the flexible mechanisms as well as the compliance regime. During the interim period between adoption and ratification of the Protocol, the greenhouse gas footprint of the rapidly developing economies of developing country Parties grew exponentially. In particular, emissions in China drastically increased beginning in 2002. By 2006, China had surpassed the United States as the largest net emitter of greenhouse gas emissions.23 21   Kyoto Protocol to the United Nations Framework Convention on Climate Change, opened for signature 16 March 1998, 37 ILM 22 (entered into force 16 February 2005) (hereinafter ‘Kyoto Protocol’). 22  Ibid. 23   In 2007, the US Energy Information Administration (EIA) projected that ‘by 2030, carbon dioxide emissions from China and India combined are projected to account for 31 percent of total world emissions’. Energy Info. Admin., US Dept of Energy DOE/EIA-0484(2007), International Energy Outlook 74–86, .

1. international climate change law   9 After a decade of concerted efforts by the Parties to ensure that the Protocol was ratified and to push for collective action in its implementation, a roadmap for negotiating a post-2012 climate agreement was accepted at the 13th COP in Bali, Indonesia in 2007. The tone of the negotiations in Bali reflected a turn in global climate negotiations. The growing presence of civil society in these negotiations reflected mounting frustration with global climate change politics. Both members of civil society and some States began to redirect the conversation during the negotiations away from the failures of key developed country Parties to commit to obligations towards a more nuanced discussion about the relative roles and responsibilities of developed and developing country States. By 2007, the global community no longer seemed to hold onto hope that the United States would reengage meaningfully in global climate change negotiations. At the same time, China and other States with rapidly developing economies that have become some of the biggest producers of greenhouse gas emissions, remained adamantly opposed to committing to legally binding obligations to reduce greenhouse gas emissions. By 2007, the role of the rapidly developing country Parties in a negotiated solution to international climate change had become one of utmost importance. In the wake of unprecedented rates of emissions growth in these States, the global community had to adjust to a new reality: achieving meaningful emission reductions could not be accomplished without full engagement on the part of the rapidly developing country Parties. Between 2007 and 2009, progress was made in developing negotiating texts for the all-important 2009 UNFCCC COP and the Meeting of the Parties of the Kyoto Protocol (MOP) in Copenhagen. Following multiple years of stalled negotiations, the year 2009 brought the promise of progress. With Barack Obama assuming the Presidency of the United States on a platform that promised to prioritize its domestic efforts to address climate change, and with the new administration following up shortly thereafter with modifications to its US climate change law and policy, progress seemed possible. As the 2009 COP neared, the United States, China, India, and Brazil indicated they were willing to come to the negotiating table. The Copenhagen Climate Change Conference (COP-15/MOP-5) was an important turning point in the development of the climate change regime. Following multiple years of negotiations defined by frustrations directed towards the United States and the rapidly developing country Parties (particularly China and India), the Copenhagen Conference marked, for the first time since the 1997 meeting in Kyoto where the Protocol was adopted, a credible possibility that all major emitters would actively engage in climate change negotiations with a view to raising collective ambition. The Copenhagen meeting proved to be a tumultuous event wherein tempers and emotions ran high and efforts to negotiate a substantive way forward to respond to

10   part i. introduction climate change proved elusive. Unlike the meetings of the preceding years where the negotiations were largely left to lower-level diplomats and ministers, with a modest role for the handful of Heads of State in attendance, in Copenhagen, the hard work of the State negotiators was ultimately overshadowed by the presence of Heads of State from the United States, Europe, China, India, and elsewhere. In the end, the primary output of the Copenhagen Conference was a watereddown instrument with little gravitas: the Copenhagen Accord.24 Heads of State and negotiators representing the United States, China, India, Brazil, and South Africa, drafted the Copenhagen Accord during the course of a private meeting. The threepage Accord committed parties to continuing efforts to facilitate long-term cooperative action to combat climate change and to providing ‘[s]‌caled up, new and additional, predictable and adequate funding’.25 It also laid the groundwork for a new ‘Green Climate Fund’ (see Thompson, Chapter 7).26 However, this agreement was not formally adopted by the COP, having been objected to by a handful of small developing country Parties. The fact that international consensus could be thwarted by a small number of negotiating Parties, fundamentally questioned how international climate change issues can be effectively governed by the international community. Ultimately, the COP-15 failed to live up to the expectations of many that were kindled in the run-up to Copenhagen—that being the conclusion of an agreement including legally binding emission reduction obligations—but it gave the UNFCCC Parties a basis upon which to move forward. For example, the Copenhagen Accord called for deep cuts in emissions premised on the need to ‘[h]‌old the increase in global temperature below 2 degrees Celsius’,27 a benchmark that has underpinned subsequent negotiations. It also set up a process by which all Parties, pledged mitigation actions—marking the first time that developing country Parties made such commitments in the UNFCCC forum. Beyond mitigation, the Accord emphasized the urgent need for ‘[E]‌nhanced action and international cooperation on adaptation’,28 a theme that the COP has since prioritized. Similarly, as noted above, the Accord called for the creation of a ‘Green Climate Fund’ that would constitute the operating entity of the financial mechanism for the UNFCCC.29 Thompson provides a comprehensive account of 24  UN Framework Convention on Climate Change Conference of the Parties, Copenhagen, Denmark, 7–19 December 2009, Report of the Conference of the Parties on its Fifteenth Session, Decision 2/CP.15, UN Doc FCCC/CP/2009/11/Add.1 4 (30 March 2010), available at (hereinafter ‘Copenhagen Accord’). 25   Ibid, at 4. 26   Ibid, para 10. See also Rob Fowler, Analysis of the Copenhagen Accord: An Initial Assessment of the Copenhagen Outcomes, Teaching Climate/Energy Law & Policy, available at (accessed 8 July 2015). 27   Copenhagen Accord, supra note 24, at 5, para 2. 28   Copenhagen Accord, supra note 24, para 3. 29   Copenhagen Accord, supra note 24, para 10.

1. international climate change law   11 the Fund in Chapter 7. Developed country Parties agreed to mobilize (from public and private sources) US$100 billion per year starting from 2020. The COP has subsequently followed through in setting up the Green Climate Fund. Finally, the Accord called for the creation of a new mechanism for enhancing technology development and transfer. At the subsequent COP, held in Cancún in 2010 (COP-16/MOP-6), the Parties concluded a set of agreements, known as the Cancun Agreements.30 In these Agreements, the key components of the Copenhagen Accord were formalized and expanded on through decisions with respect to monitoring mitigation efforts, developing the principles of the new Green Climate Fund, creating a new mechanism to facilitate technology development and transfer, and establishing the Cancún adaptation framework to facilitate action on adaptation, including the creation of a new Adaptation Committee. In key part, the Cancun Agreements reaffirmed the need to achieve cuts in greenhouse gas emissions ‘deep enough to hold the increase in global average temperature below 2°C above preindustrial levels’.31 By the time COP-17 began on 28 November 2011 in Durban, South Africa, negotiators were more pragmatic in their efforts to achieve a consensus, bearing in mind the experiences leading up to the Copenhagen COP. This is not to say that many State and non-State actors did not continue to push for a comprehensive, legally binding framework that would contain further emission reduction commitments; they did. Parties such as the small island States, the EU, and those from the ‘umbrella group’ consisting of, inter alia, the United States, Canada, Australia, Russia, and Norway, continued to pursue a legally binding instrument.32 The primary outcome of COP-17 was the Durban Platform for Enhanced Action.33 In two pages, the Durban Platform for Enhanced Action created a roadmap for the   See generally, Report of the Conference of the Parties on its Sixteenth Session, held in Cancún from 29 November to 10 December 2010, The Cancun Agreements: Outcome of the Work of the Ad Hoc Working Group on Long-Term Cooperative Action under the Convention, Decision 1/CP.16, UN Doc FCCC/CP/2010/7/Add.1 (15 March 2011), available at . 31   Ibid, at para. 4. 32   See e.g. Press Release, Council of the European Union, Environment (10 October 2011), available at declaring that 30

[t]‌he E.U. remains of the view that a single legally binding instrument would be the best framework for the period after 2012, but the Council agreed in confirming the EU’s openness to a second commitment period [to the Kyoto Protocol], on the condition that it should be the last one before convergence between the Kyoto Protocol and Convention outcomes, and that in any case it should last no longer than 2020. 33  Framework Convention on Climate Change, Report of the Conference of the Parties on its Seventeenth Session, 28 November–11 December 2011, Establishment of an Ad Hoc Working Group on the Durban Platform for Enhanced Action, Decision 1/CP.17, Preamble, UN Doc FCCC/CP/2011/9/ Add.1 (15 March 2012).

12   part i. introduction next three years of negotiations with the end goal being the completion of a new global agreement by 2015, as described above. Beyond this, the Durban meeting resulted in other noteworthy developments. First, one of the most significant developments in Durban was the COP Decision on the Green Climate Fund, which set out the Fund’s broad design.34 This fulfilled a commitment made by developed country Parties in the Copenhagen Accord, which proved essential in securing developing country States’ support for the entire package of decisions adopted in Durban. Second, the Parties to the Kyoto Protocol, noting the ‘importance of ensuring continuity in mitigation action’,35 saved the Protocol from falling into desuetude by setting out a second emission reduction commitment period that began on 1 January 2013 that is scheduled to end on 31 December 2020.36 The salvaging of the Protocol is legally significant because the mechanisms under the climate change regime will continue (see Freestone, Chapter 5). For instance, the second commitment period has prolonged the use of the project-based Clean Development Mechanism.37 This reinforces support for the existing legal infrastructure and system already established in international climate change law, even amidst uncertainty over the longer-term future direction of the climate regime. The third significant development at COP-17 was the progress made on the issue of adaptation. In Durban, the COP adhered to the proposition set forth at COP-16 in Cancún that ‘[a]‌daptation must be addressed with the same priority as mitigation and requires appropriate institutional arrangements to enhance adaptation action and support’.38 In key part, the COP agreed on the composition of, and modalities

34   Report of the Conference of the Parties on its Seventeenth Session, 28 November–11 December 2011, Addendum, Launching the Green Climate Fund, Decision 3/CP.17, UN Doc FCCC/CP/2011/9/ Add.1 (15March 2012). 35   See Report of the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol on its Seventh Session, held in Durban from 28 November to 11 December 2011, Outcome of the work of the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol at its Sixteenth Session, Decision1/CMP.7, FCCC/KP/CMP/2011/10/Add.1 (15 March 2012), available at . 36  Ibid. 37   Ibid. Decision 2/CMP.7. See also UNFCCC, REDD Web Platform, ; Carbon Planet White Policy, The History of REDD Policy (2009), available at (accessed 28 September 2015). 38  Report of the Conference of the Parties on its Sixteenth Session, held in Cancún from 29 November to 10 December 2010, The Cancun Agreements: Outcome of the Work of the Ad Hoc Working Group on Long-Term Cooperative Action under the Convention, Decision 1/CP.16, UN Doc FCCC/CP/2010/7/Add.1 (15 March 2011), available at (accessed 25 September 2015).

1. international climate change law   13 and procedures for, the Adaptation Committee,39 and agreed upon a decision on National Adaptation Plans (NAPs).40 Following the basic framework and pursuing the call for action issued in Cancún, the COP formalized the structure for the Adaptation Committee with the objective of finalizing it before COP-18. Fourth, the COP continued to develop a system to measure, report, and verify (MRV) Parties’ greenhouse gas emissions and the actions taken to reduce them.41 This was done through the adoption of revised guidelines for developed country Parties’ annual greenhouse gas inventories. The guidelines provide a platform for ensuring that these inventories are ‘transparent, consistent, comparable, complete, and accurate’,42 although they leave questions concerning national reporting by developing country Parties unanswered. Nevertheless, the progress in measurement, reporting, and verification was evident in the Parties agreeing to a common set of guidelines to ensure regular and consistent reporting of emissions. In the years following COP 17, the Parties to the UNFCCC addressed individual issues, such as: adopting the amendments to the Kyoto Protocol in Doha that created the second commitment period, adopting a set of decisions on Reduced Emissions from Deforestation and Forest Degradation (REDD+), agreeing upon a new mechanism to address loss and damage caused by climate change,43 and developing the framework for post-2020 climate action based on a system of Intended Nationally Determined Contributions (INDCs).44 Further, the Parties made progress towards laying the groundwork for a new global agreement. Leading into COP-21 to take place at the end of 2015, the Parties to the UNFCCC continue to develop the terrain of international climate change law. At the time of this publication, the possibility of creating a legally binding agreement still remains on the table.  Report of the Conference of the Parties on its Seventeenth Session, held in Durban from 28 November to 11 December 2011, Outcome of the Work of the Ad Hoc Working Group on Long-Term Cooperative Action under the Convention, Decision 2/CP.17, UN Doc FCCC/CP/2011/9/Add.1 (15 March 2012). 40  Report of the Conference of the Parties on its Seventeenth Session, held in Durban from 28 November to 11 December 2011, National Adaptation Plans, Decision 5/CP.17, UN Doc FCCC/ CP/2011/9/Add.1 (10 December 2011; 15 March 2012). 41  Report of the Conference of the Parties on its Seventeenth Session, held in Durban from 28 November to 11 December 2011, Revision of the UNFCCC reporting guidelines on annual inventories for Parties included in Annex I to the Convention, Decision 15/CP.17, UN Doc FCCC/CP/2011/9/Add.2 (15 March 2012), available at . 42  Ibid. 43  See UNFCCC, Warsaw Mechanism for International Loss and Damage Associated with the Climate Change Impacts, (accessed 25 September 2015). 44  Report of the Conference of the Parties on its Twentieth Session, held in Lima from 1 to 14 December 2014, Lima Call for Climate Action, Draft Decision 1CP/.20, UN Doc FCCC/CP/2014/10/ Add.1 (1 February 2015). 39

14   part i. introduction

3.  The Legal Framework for Climate Change 3.1 Principles and Emerging Norms The UNFCCC firmly places ethical concerns at the centre of the international climate change regime. In characterizing the Earth’s climate system as being of common concern to humankind (Soltau, Chapter 10), promoting a precautionary approach to addressing climate change (Wiener, Chapter 8), and articulating concerns about future generations and intra- and inter-generational equity (Redgwell, Chapter 9), the UNFCCC establishes a normative framework that supports ethical grounds for decision-making. Yet the implementation of these underlying norms remains a constant point of consternation for States, because the drivers of implementation operate firmly in the realm of national interests and realpolitik. A particular point of normative controversy concerns the implementation of the principle of common but differentiated responsibilities (CBDR). The UNFCCC provides that Parties to the treaty ‘should protect the climate system . . . on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities’.45 This provision sets the parameters for one of the most salient ethics-based climate debates: what does common but differentiated responsibilities mean and how should it be realized? There are numerous examples of treaties that differentiate the responsibilities of States.46 The specific phrase ‘common but differentiated responsibilities’ was first formally used in 1992 in Principle 7 of the Rio Declaration on Environment and Development.47 That same year, the UNFCCC became the first multilateral environmental agreement to include the phrase.48 In the UNFCCC, the phrase is suggests that the international community shares a common responsibility  UNFCCC, supra note 2, Article 3(1).  See Christopher Stone, ‘Common but Differentiated Responsibilities in International Law’ (2004) 98 AJIL 276, 278. The 1972 Stockholm Declaration laid the foundations for CBDR in environmental law: 45


Without prejudice to such criteria as may be agreed upon by the international community, or to standards which will have to be determined nationally, it will be essential in all cases to consider the systems of values prevailing in each country and the extent of the applicability of standards which are valid for the most advanced countries but which may be inappropriate and of unwarranted social cost for the developing countries. ‘Report of the United Nations Conference on the Human Environment’ (Stockholm, Sweden, 5–16 June 1972) (16 June 1972) UN Doc A/CONF.48/14. 47   Rio Declaration, supra note 19, principle 7; UNFCCC, supra note 2, Article 3. 48  UNFCCC, supra note 2, Article 3.

1. international climate change law   15 for  protecting the global atmosphere, but that the responsibility for addressing global climate change should be differentiated among States (arguably) based on historical contribution to the problem as well as present capacity to respond.49 Inclusion of CBDR provisions in the UNFCCC divided the international community. Many developed country Parties, including the United States, resisted the inclusion of CBDR, fearing that it would create additional legal obligations. Developing country Parties were more inclined to support CBDR as it allocates more of the burden of combatting climate change to developed country Parties. Ultimately, the CBDR principle was included and emerged as the ‘overall principle guiding future development of the regime’,50 although it is important to note that the addition of the words ‘and respective capabilities’ mark an important departure from the usual CBDR formulation, particularly as it appears in Article 4(1) of the UNFCCC, which creates obligations for all parties. Debate surrounding the legal meaning and application of the CBDR principle is the most prominent question of principle preoccupying climate policies and negotiations. How it is understood and applied will affect how the collective burden of climate change obligations is met by each individual Party. A static interpretation of the CBDR principle—that places the burden of achieving emission reductions solely on developed country Parties (as defined in 1992 in Annex 1 of the UNFCCC), while excluding the Parties with rapidly developing economies (e.g. China, India, and Brazil) from any type of legally binding emissions reduction commitment—is now untenable as it no longer reflects current realities. Not only does this interpretation potentially place developed country Parties in a position of economic disadvantage, but it also undermines the importance of truly effective collective action, where all States work to address climate change. More dynamic notions of the meaning of CBDR are evident not only in the positions taken by certain EU member states and the United States, but also in the positions taken by many developing country States within the G77—and in particular, Least Developed Country (LDC) members (see Gupta, Chapter 33) and the Alliance of Small Island States (see Ronneberg, Chapter 34), who argue that any effective international climate regime must include the world’s biggest emitters. There is an increasing, yet not universal, consensus that notions of CBDR must evolve to more closely attribute responsibilities based not only on past responsibilities but also on present contributions and capacities. Adding to the challenge, the Parties to the UNFCCC, by including a list of developed countries directly in the treaty (Annex I), constrained the ability of the COP to adopt an evolving approach to understanding the concept of CBDR. In order formally to embrace a more dynamic approach to CBDR, the COP would need to adopt an amendment 49   Lavanya Rajamani, ‘The Principle of Common but Differentiated Responsibility and the Balance of Commitments under the Climate Regime’ (2000) 9 Rev Eur Community & Intl Envtl L 120, 121. 50   Ibid, at 124.

16   part i. introduction to the UNFCCC, which is a difficult process. For example, even Russia’s relatively benign amendment proposal in 2011 to create a regular review of Annexes I and II which would only envisage changes with the approval of any Party affected has still not been accepted.51 Efforts to achieve consensus on the normative foundations for a future agreement, in addition to the problems noted above, are further complicated by a variety of other perspectives such as the evolving notions of human rights and the impact of related judicial decisions (see Knox, Chapter 11 and Cullet, Chapter 22). At root, current efforts to address climate change require dramatic societal changes that touch upon sensitive public policy and economic questions, including those relating to energy, transportation, infrastructure, agriculture, food security, and forestry. A new global agreement for the twenty-first century must transcend the traditional mode of bargaining and search for reciprocity upon which most international law rests. What is at stake with climate change is a profound challenge to the way States legally bind themselves in order to voluntarily assume obligations that will, by definition, affect prosperity and development unevenly (at least in the nearmedium term), but improve the collective good. What is clear is that the current UN negotiating framework has so far proved unable to meet this challenge.

3.2 The Mitigation Regime: International and National Elements Mitigating climate change—through measures to reduce greenhouse gas emissions or to enhance carbon sinks—so as to avoid ‘dangerous anthropogenic interference with the climate system’, lies at the heart of the international climate regime.52 Article 4(1)(b) of the UNFCCC contains general commitments by all Parties to take mitigation measures, while the Kyoto Protocol contains quantified emission reduction targets only for developed country Parties, which to date are the only internationally legally binding specific mitigation commitments. The Protocol also contains an ambitious compliance mechanism for those targets, which Oberthür assesses and seeks to draw lessons from as the UNFCCC Parties negotiate the post-2020 regime (see Chapter 6). In response to the UNFCCC and the Kyoto Protocol, and affected by domestic concerns and interests, many UNFCCC Parties have developed a diverse and impressive set of emission reduction measures. Among others, these measures include efforts to set emission limits, establish energy intensity targets, create markets in greenhouse gas emissions, promote energy efficiency and conservation, and develop the 51   See Proposal from the Russian Federation to amend Article 4, paragraph 2(f), of the Convention, UN Doc FCCC/CP/2011/5 (26 July 2011), (accessed 25 September 2015). 52  UNFCCC, supra note 2, Article 2.

1. international climate change law   17 renewable energy sectors. For example, in Chapter 17, Wilder and Drake explore how the international community has attempted to cooperate in developing the renewable energy sector but note how further governance is needed at the international level. In choosing what mitigation measures to take, States generally seek to achieve positive environmental outcomes in the most economically efficient manner possible. As a result, some States—mainly developed country States—have complemented command and control style regulatory approaches with a move towards market mechanisms that provide incentives for economic actors to comply. As Hsu argues in Chapter 12, market mechanisms are policy instruments that seek to harness market forces to either reduce pollution or reduce compliance costs. Both are essential for successful environmental regulation. Indeed, market-based approaches appear regularly in the climate context. At the international level, the Kyoto Protocol created flexible mechanisms for Parties to meet its obligations,53 the most important of which are the market-based rules created under the Clean Development Mechanism. Although notable in its sophistication, its actual mitigation impact has been limited due to the low market prices for its ‘Certified Emission Reduction Units’. More successful have been some prominent domestic emissions trading systems such as the ones developed in the EU, some states in the United States and provinces of Canada, and even South Africa (See Shoyer, Sul, and van der Ven, Chapter 14). A common debate about mitigation policies and measures concerns their impact on domestic industry and whether additional measures should be taken to address any negative economic consequences. Furthermore, facing new and often costly compliance burdens, representatives of regulated industries often contend that their counterparts operating in jurisdictions with less stringent climate change commitments have a competitive advantage. Governments, naturally, are sensitive to these concerns when designing climate mitigation measures. In Chapter 14, Shoyer, Sul, and van der Ven examine how divisions between UNFCCC Parties willing to take on more aggressive climate change reduction commitments and those that are not have led to proposals designed to alleviate the economic burden for firms and businesses subject to stricter emission reduction requirements. Mehling, in Chapter 13, explores how linking between emissions trading systems can be effective in both achieving emissions reductions while addressing economic competitiveness concerns. However, as States develop a diverse and complex set of mitigation measures, along with measures to shield their domestic industry from economic disadvantages, 53   These mechanisms are known as (a) ‘Joint Implementation’, which is a project-based mechanism allowing developed country Parties to earn credits towards meeting their targets by investing in emission reduction projects in other developed countries, (b) ‘Clean Development Mechanism’, which is a project-based mechanism allowing developed country Parties to earn credits towards meeting their targets by investing in emission reduction projects in developing country Parties, and (c) ‘emissions trading’, which allows developed countries Parties to purchase emission reduction credits from other developed country Parties.

18   part i. introduction a key question can arise as to whether such measures are consistent with a Party’s international trade obligations. In Chapter 15, Sindico assesses this issue in the light of World Trade Organization (WTO) obligations. Although evidence of economic uncompetitiveness and even carbon leakage (where producers relocate to States with less stringent emission reduction requirements) is varied and anecdotal, States are taking heed of these concerns in designing measures while being cognizant of the risks of the measures’ WTO inconsistency. Meanwhile, Sarnoff (Chapter 18) examines how the patent system, as anchored in the WTO rules, may risk colliding with innovation and technology development policies of States as they ramp up their efforts to combat climate change. Since the Copenhagen Accord, which triggered non-binding pledges for mitigation action by both developed and developing countries, Parties have struggled with how to design an effective and appropriate international architecture that would capture and further leverage mitigation actions. Important steps included the adoption of guidelines for ‘measuring, reporting and verifying’ mitigation actions, with processes for ‘international assessment and review’ for developed country Parties and ‘international consultation and analysis’ for developing country Parties. But the central issue of what legal status future emission reduction targets should have has so far eluded consensus. At root is a central dilemma. On the one hand, an architecture that fixes hard mitigation targets along with strong consequences for non-compliance may have the advantage of enhancing predictability, but risks deterring States from being ambitious in their commitments. On the other hand, a more flexible architecture may allow States to take on higher mitigation commitments, but may lack the clout and credibility to ensure that the targets set are ultimately met.

3.3 The International Adaptation Regime Even as States develop increasingly complex mitigation measures, the absence of mitigation results coupled with incontrovertible evidence confirming the inevitability of some degree of climate change is prompting increased attention to adaptation planning. Leading to a further sense of urgency surrounding adaptation, the IPCC has cautioned that ‘[r]‌ecent climate changes and climate variations are beginning to have effects on many other natural and human systems’.54 As a result, we are witnessing increased efforts to develop adaptation strategies in both the developed and developing world.55 54   ‘Summary for Policymakers’, in Martin L. Parry et al. (eds), Impacts, Adaptation and Vulnerability, Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, 9 (Cambridge: Cambridge University Press, 2007). 55   See UNFCCC, Climate Change: Impacts, Vulnerabilities and Adaptation in Developing Countries (2007), available at (noting the particular vulnerabilities of developing countries to climate change).

1. international climate change law   19 Adaptation governance differs fundamentally from the traditional methods of assessing governing in the context of mitigation. International efforts to mitigate climate change to date have concentrated on collective action and therefore demanded centralized, consensus-based top-down decision-making. States recognize that adaptation efforts will require greater diversification and, often, decentralization of decision-making authority. Leading climate experts have noted that ‘[a]‌dapting to climate change involves cascading decisions across a landscape made up of agents from individuals, firms and civil society, to public bodies and governments at local, regional and national scales, and international agencies’.56 Financial aid and capacity building are traditional means employed under many multilateral environmental agreements to assist developing country States in implementing their commitments. But the imperative of adapting to climate change is profound and defies traditional paradigmatic approaches. This imperative is not limited to developing country Parties, but it is developing country Parties who are most vulnerable to the adverse impacts of climate change. While there is widespread recognition of the need to develop more comprehensive adaptation strategies, very little attention has been made to coordinate adaptation efforts, particularly at the global level. Policy-makers continue to grapple with approaches other than a top-down system of adaptation governance or, conversely, fragmentary and uncoordinated local efforts. Within this context, the UNFCCC, as the primary instrument of international climate change law along with its decision-making institutions, has a critical role to play. The progress the COP has made since COP-15 to develop a strategy for climate change adaptation efforts demonstrates that adaptation is at the top of the international climate change agenda. There is an underlying, if unstated, recognition by the COP that adaptation governance is better suited to global facilitation rather than centralized decision-making. The UNFCCC Parties are devoting efforts to create an institutional framework for national adaptation planning in developed countries (particularly in the leastdeveloped countries),57 and operationalize a financing mechanism for adaptation planning and adaptation efforts in developing countries.58 Given the nascent and still evolving nature of the debate over approaches to adaptation, however, the question of how the climate change regime develops instruments to address adaptation will be a subject of discussion for the foreseeable future. As the recent debates around loss   W. Neil Adger et. al., ‘Successful Adaptation to Climate Change Across Scales’, 15 Global Envtl. Change 77, 79 (2005). 57   As it exists, the UNFCCC adaptation framework focuses on the least-developed country Parties. UNFCCC adaptation efforts focus on facilitating country-driven approaches, complementing other ongoing adaptation planning efforts and avoiding being prescriptive or duplicative. 58   Report of the Conference of the Parties on its Seventeenth Session, 28 November–11 December 2011, Addendum, UNFCCC, Launching the Green Climate Fund, Decision 3/CP.17, UN Doc FCCC/ CP/2011/9/Add.1 (15 March 2012; 10 December 2011). 56

20   part i. introduction and damage reveal, reaching outcomes that place additional burdens on developed country Parties to provide financial assistance will be difficult to reach.

3.4 National and Supranational Actors As previously discussed, international climate change law is significantly influenced by a handful of States acting both in their individual capacity and in their capacity as members of negotiating blocs. As explored in Part VII of this book, these States include developed country Parties responsible for the brunt of historic emissions but whose emissions have largely evened off, such as the United States of America (see Gerrard, Chapter 27) and the EU (see Bogojević, Chapter 29)—and developing country States with rapidly developing economies whose net emissions have risen rapidly and continue to climb—China (see Wang, Chapter 28), India (see Badrinarayana, Chapter 30), and Brazil (see Alvarenga de Oliveira, Chapter 32). Both developed and developing country States will be indispensable to future efforts to develop the international climate change regime. Although politically important, the largest polluting States are not the only actors that play key roles in the negotiations and, more broadly, in global climate politics. From the G77 to the increasingly influential negotiating blocs, including the BASIC (i.e., Brazil, South Africa, India, and China), to the Alliance of Small Island States (see Ronneberg, Chapter 34), to the Least Developed Countries (see Gupta, Chapter 33), these States and groups of States have come to play increasingly important roles in shaping the narrative of climate politics generally, and the focus of global climate change negotiations more specifically. In particular, as the physical processes of climate change have advanced amidst slow and stalled negotiations, those States most affected by climate change, buoyed by support from civil society, have become increasingly prominent voices in calling for not only more effective mitigation strategies (see Ronneberg, Chapter 34 and Gupta, Chapter 33), but also improved mechanisms for adaptation and climate finance (see also Thompson, Chapter 7).

3.5 International Organizations The UNFCCC and its constituent bodies and processes are at the centre of international climate change law; yet a host of other international organizations are playing increasingly prominent roles in structuring mitigation and adaptation measures. The roles these institutions play vary. Institutions such as the Conference of the Parties to the Montreal Protocol on Substances that Deplete the Ozone Layer59   (1987) 1513 UNTS 323; 26 ILM 1529.


1. international climate change law   21 make decisions that can contribute towards emission reductions, while dispute settlement bodies at the World Trade Organization (see Sindico, Chapter 15) or the International Court of Justice (see Verheyen and Zengerling, Chapter 19) or human rights tribunals such as the European Court of Human Rights (see Cullet, Chapter 22) or the Inter-American Commission on Human Rights (see Knox, Chapter 11) may be able to clarify the meaning of international obligations with respect to climate change. The UN Security Council has also discussed climate change, but so far no outcomes have emerged, nor have there been resolutions identifying climate change as an international security threat. The continuing emphasis placed on adaptation has led to many specific adaptation programmes being funded and facilitated by International Governmental Organizations (IGOs). Among the most prominent IGOs engaged in adaptation is the United Nations Development Programme (UNDP). The UNDP, together with its partner agencies—the United Nations Environment Programme (UNEP), the Food and Agriculture Organization (FAO), the United Nations International Strategy for Disaster Reduction (UNISDR), the World Health Organization (WHO), and the World Bank, among others—facilitates ongoing adaptation efforts. These and other institutions play an increasingly important role in international efforts to respond to climate change and, thus, inform the practice of international climate change law. Finally, as noted by Verheyen and Zengerling in Chapter 19, international courts and tribunals have already had an important influence on international climate change law and will likely become increasingly important.

3.6 Non-State Actors Civil society has played a vital role in shaping climate change debates and strategies. The involvement of civil society groups in environmental policy dates back to the late 1960s, when the growing social movement around environmental protection helped mobilize support for the development of new environmental laws at the domestic and eventually the global level. Civil society continued to influence environmental decision-making, culminating in the outcomes at the 1992 United Nations Conference on Environment and Development in Rio de Janeiro (Earth Summit). The Rio/Earth Summit brought together political and civic leaders from all over the world. As a result of the energy and initiative civil society brought to the Rio/Earth Summit, the States adopted two prominent multilateral environmental agreements (the UNFCCC and the Convention on Biological Diversity), as well as a number of soft law instruments. Since the Rio Earth Summit, the climate change debate continues to be influenced by civil society. Civil society campaigns have helped to mobilize awareness

22   part i. introduction of climate change and related issues through various initiatives, including massive climate change litigation campaigns in the United States and at inter­national forums (Gerrard, Chapter 27, and Verheyen and Zengerling, Chapter 19), the global campaign (including litigation) to reinforce the linkages between ­climate change and human rights (see Knox, Chapter 11, and Cullet, Chapter 22), ­ongoing efforts to develop new frameworks for responding to displaced peoples (see McAdam, Chapter 23), compensating losses and damages caused by climate change (see Voigt, Chapter 21), and focused campaigns to stop new fossil fuel ­projects or divest financial resources away from fossil fuel development. These civil society initiatives have affected both public opinion and the concurrent development of national measures. Yet, in recent years, the influence of civil society on the outcomes of UNFCCC negotiations has been hard to discern, even though the UNFCCC is one of the most open and transparent international negotiating processes. The private sector in particular has an indispensable role to play in addressing climate change. The IPCC notes in the AR5 that ‘[i]‌n many countries, the private sector plays central roles in the processes that lead to emissions as well as to mitigation. Within appropriate enabling environments, the private sector, along with the public sector, can play an important role in financing mitigation’.60 The private sector is both a primary contributor to climate change and also a possible source of hope for mitigating climate change through mobilizing changes in consumer behaviour, and, perhaps most critically, by investing in the development of clean and renewable energy. The IPCC AR5 emphasizes the importance of private sector investment, stating that there needs to be huge shifts in investment in order to avoid the worst impacts of climate change, noting in particular that ‘[s]ubstantial reductions in emissions would require large changes in investment patterns’.61 The pace of investment cannot be slow. According to the AR5, investment in renewables and other low carbon sources ‘needs to at least treble by the middle of the century, while money flowing into fossil fuels has to diminish’.62 The massive shift towards decarbonization and the investments needed to generate that shift will require extraordinary levels of private sector involvement. How that shift materializes will be influenced by governmental policy and the ability of governments to create the right incentives.

60  IPCC, (2014), Fifth Assessment Report (AR5): Climate Change 2014: Mitigation of Climate Change, Working Group III, Summary for Policy Makers 15, at 5.1 p. 32, . 61   Ibid, at 5.1, p. 29. 62   The Report notes, in key part, that ‘[t]‌he reduction of subsidies for GHG [greenhouse gas]-related activities in various sectors can achieve emission reductions, depending on the social and economic context (high confidence)’. Ibid, at 31.

1. international climate change law   23

4.  Conclusion: The Future of International Climate Change Law International climate change law is a field that sits on the precipice of great advancement. The boundaries of international climate change law are being redrawn. Global climate change is a problem defying traditional geographic and geopolitical divisions. How the international community divides, coordinates, and enforces its responsibilities to address climate change will determine success. Responses will need to be thoroughly assessed to face climate change scenarios that transcend such divisions, and will involve governing bodies from the local to the inter­ national. For instance, issues of water supply and flood control will often involve watersheds that span national and internal boundaries. Similarly, climate change may in the future lead some actors to attempt to limit the effects of climate change using new technologies designed to remove carbon dioxide from the atmosphere and manage solar radiation—often collectively referred to as geoengineering—that will raise profound questions around responsibility and liability (see Eagle and Sumaila, Chapter 24). In these and other ways, climate change poses complex governance challenges. The urgency of climate change necessitates considering what types of governance options are available when the existing approaches are failing. It requires innovative responses to an environmental problem that is characterized by extreme heterogeneity, in terms of needs, capacities, and challenges across multiple levels of governance. The issues here are not ones where traditional modes of bargaining between States based on self-interest have, or will likely provide, sufficient answers. Arriving at effective legal solutions entails critical assessment of, and obvious self-reflection by, the UNFCCC process. The 2014 meeting of the COP in Lima, Peru (COP-20), and the resulting Lima Call for Climate Action,63 reflect the challenges and the changing perceptions of the gap between what can be achieved through the sometimes-clumsy processes of the UNFCCC, and what needs to be achieved in order to address climate change. The Lima Call for Climate Action challenges the rigidity of the dominant legal strategy that characterized the first two decades of negotiations in two important ways. First, the Lima Call for Climate Action abandons the premise that the Parties should agree to an overarching emission reduction objective that will be achieved through corresponding, emission reduction obligations for State Parties met within a specific timeframe. Instead, the Lima Call for Climate Action ‘invites 63  Report of the Conference of the Parties on its Twentieth Session, held in Lima from 1 to 14 December 2014, Lima Call for Climate Action, Draft Decision–1CP/.20, UN Doc CCC/CP/2014/10/ Add.1 (14 December 2014; 2 February 2015).

24   part i. introduction each Party to communicate to the UNFCCC Secretariat’ an ‘intended nationally determined contribution’64—contributions formulated through domestic policymaking processes. Second, the Lima Call for Climate Action erodes the long-standing divide between developed and developing country Parties with respect to their climate change mitigation obligations. That is, it calls on all States—not just developed countries—to communicate their ‘nationally determined contributions’. Negotiations in Lima and the subsequent Lima Call for Climate Action were spurred, in part, by the announcement by the United States and China before the COP in which they committed to bilateral cooperation on climate change and announced respective emission reduction targets.65 This announcement was seen as a breakthrough; it demonstrated that the two largest polluters were open to negotiations and that the lines between developed and developing country States were beginning to blur. This shift is critical, simultaneously reflecting the realities of what can and cannot be achieved through the channels of the UNFCCC. Reflecting these dual realities, at the end of COP-20, UNFCCC Executive Secretary, Christiana Figueres, noted: ‘The negotiations here reached a new level of realism and understanding about what needs to be done now, over the next 12 months and into the years and decades to come if climate change is to be truly and decisively addressed’.66 In the run-up to the next COP (COP-21) in Paris, there is widespread recognition of the challenges climate change poses to long-term physical, social, and economic stability. There is also widespread acceptance that our existing governance systems are inadequate for addressing these challenges. The results of the Lima COP begin to break down the walls between the developed and developing world that separate the approaches on mitigation efforts, although it does little to envision how the collective mitigation measures will be achieved. The Lima Call for Climate Action reiterates the seriousness of the issue and the need for enhanced action on mitigation, adaptation, financing, and more. It confirms the depth of the problem, embeds fairness concerns at the heart of global efforts and reminds us how much still needs to be achieved. In the end, however, the Lima Call for Climate Action creates only a skeletal road map for how to get where we need to go. Fundamentally, it reveals the extent to which climate change is an issue of such scale and complexity that it defies resolution through traditional governance approaches and, in particular, through the constraints of the UNFCCC process.   Ibid, para. 9.  US–China Joint Announcement on Climate Change (11 November 2014), (accessed 8 July 2015). 66  ‘Lima Call for Climate Action Puts World on Track to Paris 2015’, UNFCCC Press Release (14 December 2014), (accessed 8 July 2015). 64 65

1. international climate change law   25 Behind these efforts are a series of questions that inform the future of the field of international climate change law. Key among these questions are: how to determine the relative roles and responsibilities of different groups of State actors in addressing climate change in a world characterized by rapid change; how to balance the parallel need to continue to search for effective and efficient mitigation strategies with the growing need to develop comprehensive adaptation strategies; how best to mobilize civil society and the private sector in efforts to address climate change; and, how to maximize the effectiveness of law at every level of governance in ongoing efforts to mitigate and adapt to climate change. The aim of this handbook is to provide a comprehensive exposition of the field of international climate change law. The chapters in this book examine the unique nature of climate change, the complexities that complicate international efforts to address climate change, and the legal instruments, mechanisms, and processes that have resulted from those efforts.

Chapter 2


1. Introduction


2. The Evolving Regime


3. Institutional Problems: The Negotiating Framework


4. Human Rights Perspectives


5. Environmental Impact Assessment and Climate Change


6. Law of the Sea Perspectives


7. Trade Law Perspectives


8. ICJ Advisory Opinion


9. Conclusions


2. beyond the unfccc   27

1. Introduction Few global problems reveal the competing forces exercised on the international order as sharply as climate change. Whilst the science speaks with ever greater clarity about the causes and effects of anthropogenic climate change and its prospects for the climate system,1 the societal mechanisms for dealing with climate change continue to disappoint. Whether we consider the effectiveness of the Kyoto Protocol flexibility mechanisms, progress in the United Nations Framework Convention on Climate Change (UNFCCC) negotiations, or prospects for effective national action, the inability to respond adequately to the requirements of science poses challenges to our institutions and processes, including those of international law. Writ large, ‘the need [is] to capture shared and common interests, to manage unequal power, and to mediate cultural diversity and value conflict’.2 Given that Hurrell provides chapter and verse on the institutional shortcomings of past and present international society, what hope is there that it can resolve one of the greatest challenges to international cooperation the United Nations has ever faced?3 Climate change is par excellence a global problem—the ‘common concern’ of humanity, to use the language of the UNFCCC—potentially affecting all States, and for which global solutions are essential. That was the reason for negotiating the two principal multilateral environmental agreements (MEAs) on the subject—the UNFCCC and the Kyoto Protocol. It is the reason for trying to negotiate a further post-Kyoto global agreement. The process of elaborating these regimes has been characterized as one of ‘interactional dialogue’,4 but its essential feature is negotiation and bargaining leading to adoption of a text agreed by consensus. Negotiations on climate change have always been difficult, not only because of the complexity of the issues and the diversity of the interests at stake,5 but   Intergovernmental Panel on Climate Change, ‘Climate Change 2013: The Physical Science Basis. Working Group I Contribution to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change’ (Cambridge University Press 2013) (accessed 16 September 2015). 2   Andrew Hurrell, On Global Order: Power, Values, and the Constitution of International Society (Oxford University Press 2007) 2. 3  See inter alia Rosemary Gail Rayfuse and Shirley V Scott, International Law in the Era of Climate Change (Edward Elgar 2012); John S Dryzek, Richard B Norgaard, and David Schlosberg (eds), The Oxford Handbook of Climate Change and Society (Oxford University Press 2011). 4  Jutta Brunnée, ‘COPing with Consent: Law-Making Under Multilateral Environmental Agreements’ (2002) 15 Leiden Journal of International Law 1. See also Jutta Brunnée and Stephen J Toope, Legitimacy and Legality in International Law: An Interactional Account (Cambridge University Press 2010). 5   Irving M Mintzer and J Amber Leonard (eds), Negotiating Climate Change: The Inside Story of the Rio Convention (Cambridge University Press 1994); Urs Luterbacher and Detlef F Sprinz, International Relations and Global Climate Change (MIT Press 2001). 1

28   part i. introduction also owing to the centrality of the ‘public bad’ under discussion (carbon and its by-products) to global systems of production, distribution, and consumption.6 In a pluralist and multi-polar world, we cannot assume that global interdependence will be reflected in a willingness to cooperate on common solutions, nor has it been.7 Moreover, as Oran Young explains: ‘[T]‌he problem here is that the climate regime is not based on principles of fairness that are broadly acceptable to all the major players.’8 Developed States (‘Annex I States’ in the language of the Convention) want to keep the costs down and the timescales long. A small number have serious problems convincing electorates and legislatures, much less industry, that more needs to be done.9 Although, in this respect, the European Union (EU) has been more willing to make commitments on greenhouse gas (GHG) emission reductions than other developed economy Parties,10 European diplomacy has failed to move the United States or the major developing country States. The newly industrialized economies such as China, India, and Brazil want the Annex I States to show that they will live up to their commitments to shoulder most of the burden. However, the emissions data show that the Annex I States cannot constrain increases in global temperature on their own. Even if Annex I emissions fell to zero by 2030, projected non-Annex I State emissions would be sufficient to effect a 2°C rise.11 Many of the States most likely to be seriously affected by climate change are poorly resourced developing countries that rely heavily on developed and certain developing country States,12 the United Nations, and the World Bank to come up with the money and resources they need to adapt to the worst effects of climate change. They have little or no 6   Nicholas Stern, The Economics of Climate Change: The Stern Review (Cambridge University Press 2007) xiii–xix. 7   Hurrell (n 2) Chapter 1. 8   Oran Young, ‘Improving the Performance of the Climate Regime’ in John S Dryzek, Richard B Norgaard, and David Schlosberg (eds), The Oxford Handbook of Climate Change and Society (Oxford University Press 2011). See Steve Vanderheiden, Atmospheric Justice: A Political Theory of Climate Change (Oxford University Press 2008). 9   The United States is the most obvious example, but Japan has similar characteristics. See respectively, Navraj Singh Ghaleigh, ‘Anti-Americanism and the Environment’ in Brendon O’Connor (ed), Anti-Americanism: History, Causes, Themes, vol 1 (Greenwood World Publishing 2007) and Yves Tiberghien and Miranda A Schreurs, ‘Climate Leadership, Japanese Style: Embedded Symbolism and Post-2001 Kyoto Protocol Politics’ in Kathryn Harrison and Lisa McIntosh Sundstrom (eds), Global Commons, Domestic Decisions: The Comparative Politics of Climate Change (MIT Press 2010). 10   Legally binding steps include a unilateral emission reduction target of 20 per cent by 2020, a (heavily criticized) emissions trading scheme, and a plethora of complementary measures on energy efficiency, carbon capture and storage, biofuels, eco-labelling, etc. See Navraj Singh Ghaleigh, ‘Two Stories about E.U. Climate Change Law and Policy’ (2013) 14 Theoretical Inquiries in Law 43. 11   Mattia Romani, James Rydge, and Nicholas Stern, ‘Recklessly Slow or a Rapid Transition to a Low-Carbon Economy? Time to Decide’ (2012) Centre for Climate Change Economics and Policy, Grantham Research Institute on Climate Change and the Environment 12. 12   Consider the emerging role of China. See Paul Collier, The Plundered Planet: How to Reconcile Prosperity with Nature (1st edn 2nd Impression, Allen Lane 2010) 91–2, 122–5.

2. beyond the unfccc   29 leverage over the main players, while in some cases, the major players have a great deal of leverage over them.13 International agreement on further measures nevertheless remains essential for future progress. Whilst unilateral and national actions are less incoherent in the climate change area than in other areas of international law such as trade, uncoordinated national policies and measures will nonetheless struggle to achieve either the necessary level of ambition or legitimacy. In both trade and climate change, international regulation provides the indispensable basis for collective action based on agreed objectives and common standards.14 But it does not follow that the existing structure of global climate change regulation created by the UNFCCC and the Kyoto Protocol is the right one for the future or that it can succeed without support from other international regimes and institutions.15 The UNFCCC is a ‘framework convention’, that is, it does not itself regulate climate change but only creates a basis for negotiating multilateral solutions.16 The model’s most evident weakness, as demonstrated by the process to agree the Marrakesh Accords17 or the Copenhagen negotiations, is that it depends on the ability of the Parties to reach an agreement under an appropriate timescale. This cannot be taken for granted. Nor can the participation of all the important players be guaranteed, as both the continuing opposition of the United States to the Kyoto Protocol and the refusal of Japan, New Zealand, and the Russian Federation to take on obligations under the Protocol’s second commitment period show only too well. While the Kyoto Protocol requires reductions in GHG emissions for some Annex I Parties based on 1990 levels, even if the reductions had been met, the reductions fall well short of what will be needed to achieve a meaningful effect on atmospheric concentrations of GHGs.18 The Protocol represents at best only a first step in the development of a stronger regime—in the optimistic words of an EU official at the time of its coming into force: ‘the Kyoto Protocol . . . represents a promising start of a long-term process 13   Some small island states have considered trying to litigate climate change or asking the UNGA to request an advisory opinion but the political obstacles have proved insuperable. 14   For a contrary view though, see Richard B Stewart, Michael Oppenheimer, and Bryce Rudyk, ‘Building a More Effective Global Climate Regime through a Bottom-up Approach’ (2013) 14 Theoretical Inquiries in Law 273. 15   Rayfuse and Scott (n 3), Chapter 1; Alexander Proelss, ‘International Environmental Law and the Challenge of Climate Change’ in Thomas Giegerich and Alexander Proelss (eds.) 53 German Yearbook of International Law 65 (Duncker & Humblot 2010). 16   Nele Matz-Lück, ‘Framework Agreements’, in Rüdiger Wolfrum (ed.), Max Planck Encyclopedia of Public International Law (Oxford University Press 2008). 17   See the Marrakesh Ministerial Declaration, (2001) Decision 1/CP.7—originally conceived of as a two-year work programme, defining meaningful rules for the flexibility mechanisms, sinks, etc. extended over five COPs and four years of negotiations. 18   See section 2 below.

30   part i. introduction of change in the way the world produces and consumes goods and services’.19 Young, however, sees the picture more clearly, noting that the Kyoto Protocol addresses emission reductions at a marginal level, focusing on ‘modest reductions from current levels on the part of major emitters rather than setting overall emissions levels and confronting the question of how to allocate emissions permits on a global scale’.20 Just as importantly, the UNFCCC’s articulation of the principle of common but differentiated responsibility, replicated by Kyoto, has to date relieved developing country States of any obligation to constrain greenhouse gas emissions, however significant they may become.21 Whilst this may have been an understandable policy choice for State Parties in 1992,22 or even in 1997,23 by 201224 the absence of constraint on some of the largest net emitters requires stringent justification25 at the very least. The rapidly rising GHG emissions generated by China and India remain largely unregulated under the Kyoto Protocol or any other international legal instrument.26 At the same time, the globalization of industrial production and consumption has in large measure outsourced production from Annex I States (some covered by the Kyoto Protocol’s emission reduction targets) to non-Annex I states that have no such obligations. The World Trade Organization (WTO) trade regime has facilitated this trend. At the same time, a strict adherence to WTO rules that admonishes 19   Jos Delbeke, ‘The Emissions Trading Scheme (ETS): The Cornerstone of the EU’s Implementation of the Kyoto Protocol’ in Jos Delbeke (ed), EU Energy Law, Volume IV: EU Environmental Law: The EU Greenhouse Gas Emissions Trading Scheme: 4 (Claeys & Casteels 2006) 1. 20   Young (n 8) 628. 21  See Article 4(2)(a) UNFCCC and the Berlin Mandate, 1/CP.1 (1995). See generally Lavanya Rajamani, Differential Treatment in International Environmental Law (Oxford University Press 2006), especially Chapter 6. 22   At the conclusion of the UNFCCC, the combined emissions of China and India, respectively the second (2694MtCO2) and sixth (783MtCO2) largest emitters in the world, were less than those of the United States (4918MtCO2). See TA Boden, G Marland, and RJ Andres, ‘Global, Regional, and National Fossil-Fuel CO2 Emissions: Carbon Dioxide Information Analysis Center (CDIAC), Oak Ridge National Laboratory’, accessed via the Tyndall Centre’s Global Carbon Atlas, at (accessed 14 July 2015). 23   By the conclusion of the Kyoto Protocol, the combined emissions of China and India, then the second (3467MtCO2) and fifth (1043MtCO2) largest emitters in the world, were equivalent to those of the United States (5415MtCO2), ibid. 24  The combined current emissions of China and India, now the first (9621MtCO2) and third (2240MtCO2) largest emitters in the world, dwarf those of the United States (second at 5118MtCO2). 2012 figures provisional, ibid. 25   Obvious candidates would be to compare per capita emissions, or emissions per unit of Gross Domestic Product (GDP), or indeed eschew territorial emissions altogether and focus on consumption emissions. 26   Although outwith the scope of this chapter, it should be noted that the period 1981 to 2004 saw China lift more than 500m of its people out of poverty, an achievement of world-historical proportions. See The World Bank, ‘From Poor Areas to Poor People: China’s Evolving Poverty Reduction Agenda—an Assessment of Poverty and Inequality in China’ (The World Bank 2009) 48058. Indian performance in the same period is not comparable.

2. beyond the unfccc   31 discriminatory measures between WTO Parties, would also entail challenging the principle of common but differentiated responsibilities among State Parties, which is one of the cornerstones of the UNFCCC and the Kyoto Protocol. Thus a key issue in the climate change negotiations remains whether to preserve the architecture of historic responsibility agreed at Rio de Janeiro in 1992, or to rethink assumptions about who must take responsibility for reducing greenhouse gas emissions in the future. For the climate change regime to work effectively, it seems obvious that significant restructuring is essential.27 If climate change is to be tackled successfully, it is not just the United States but also the non-Annex I industrialized States—especially China, India, Iran, and Saudi Arabia—that have to be brought into the GHG emissions and carbon management control regime. If international trade obligations present obstacles to this, alterations to the WTO trade regime may also have to be part of the answer. Climate change policy cannot be implemented through the UNFCCC alone but requires coordination of policies and measures by a range of international institutions inside and outside the UN system. The difficulty of ensuring coherence among institutions with competing mandates should neither be underestimated28 nor overstated. For example, carbon capture and storage (CCS) entails using subseabed depositories and must be compatible with the Law of the Sea Convention29 and the London Dumping Convention.30 Establishing such depositories requires cooperation by the parties to these treaties, which has in large part been achieved with some expedition. Negotiations to allow the disposal of CO2 streams for sequestration within the London Protocol31 commenced in 2005 and concluded with the entry into force of the amended Annex I in February 2007,32 and amendments to the Convention for the Protection of the Marine Environment of the North-East Atlantic (OSPAR Convention) to facilitate CCS in the North East Atlantic were adopted in June 2007.33 Within the UNFCCC itself, the inclusion of CCS as clean development mechanism (CDM) project activities has been considered by various bodies   Young (n 8) 629, and see section 2 below.  See Martti Koskenniemi, ‘International Legislation Today: Limits and Possibilities’ (2002) 23 Wisconsin International Law Journal 64. 29   United Nations Law of the Sea Convention, (1992) 33 ILM 1309. 30   Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter (London Dumping Convention), (1972) 11 ILM 1294. 31   1996 Protocol to the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, 1972 (1997) 36 ILM 1. 32  IMO, Report of the Twenty-Eight Consultative Meeting and the First Meeting of the Contracting Parties, LC 28/15 (6 Dec 2006) Annex 6. Note however that while amendments to London Protocol Article 6 to allow transboundary CO2 export have been agreed (2009 LP4 (30 October)), they have yet to enter into force. 33  See generally Chiara Armeni, ‘Legal Developments for Carbon Capture and Storage under International and Regional Marine Legislation’ in Ian Havercroft, Richard Macrory, and Richard B Stewart (eds), Carbon Capture and Storage: Emerging Legal and Regulatory Issues (Hart Publishing 2011). 27


32   part i. introduction (e.g., the Conference of the Parties serving as the Meeting of the Parties (CMP), the Subsidiary Body for Scientific and Technological Advice (SBSTA), and the CDM Executive Board) since November 2005, leading to a CMP decision at Cancun in 2010 to include CCS as CDM project activities—a major breakthrough.34 In a similar fashion, controlling GHG emissions from shipping requires regulatory action by the International Maritime Organization (IMO) if it is to be globally effective. In 2011, the IMO adopted amendments to the International Convention for the Prevention of Pollution from Ships (MARPOL) Annex VI,35 making the Energy Efficiency Design Index (EEDI) and the Ship Energy Efficiency Management Plan (SEEMP) mandatory from 2013 subject to certain conditions.36 Moreover, GHG emissions also cause marine pollution and affect the marine environment, marine living resources, biodiversity, and ecosystems.37 Pollution standards adopted within the UNFCCC regime may also constitute ‘internationally agreed rules and standards’ for the purposes of Part XII of the 1982 United Nations Convention on the Law of the Sea (UNCLOS). There is thus a close relationship between what is negotiated within the climate change regime and what is applicable law within the UNCLOS regime. As these examples show, any attempt to understand the relationship between climate change and international law cannot be confined to the UNFCCC regime.

2.  The Evolving Regime The key feature of the Kyoto Protocol is its establishment of quantitative restrictions on emissions from advanced industrialized States of the six greenhouse gases listed in Annex A.38 Since the Kyoto Protocol’s modest targets are focused on GHG emissions rather than on consumption, and given disciplines imposed by the Protocol’s compliance mechanism,39 all parties to the Kyoto Protocol are likely to meet their targets, except Canada (which withdrew from the Protocol in December 2012), subject to the UNFCCC’s reporting and review process, ongoing at the time of w ­ riting. 34   Decision 7/CMP.6, ‘Carbon dioxide capture and storage in geological formations as clean development mechanism project activities’. Modalities and Procedures followed with Durban’s Decision 10/ CMP.7. 35   International Convention for the Prevention of Pollution from Ships, Annex VI—Regulations for the Prevention of Air Pollution from Ships (entered into force, 19 May 2005). 36  See James Harrison, ‘Recent Developments and Continuing Challenges in the Regulation of Greenhouse Gas Emissions from International Shipping’ in A Chircop, S Coffen-Smout, and M McConnell (eds), Ocean Yearbook, vol 27 (Martinus Nijhoff Publishers 2013). 37 38   See section 6 below.   Kyoto Protocol, Article 3(1) and Annexes A and B. 39   Kyoto Protocol, Article 18 and Decision 27/CMP.1, ‘Procedures and mechanisms relating to compliance under the Kyoto Protocol’.

2. beyond the unfccc   33 It is difficult to infer from this that Kyoto has caused any reductions in ‘business-asusual’ emissions. True though it is that EU GHG emissions fell by 17 per cent from 1990 to 2010, such reductions would have resulted in any case because of deindustrialization and energy efficiency.40 The achievement, such as it is, is somewhat unclear. The EU’s reductions are more than offset by increased GHG emissions in those developing countries from which the EU now imports manufactured goods (most of all China), but its aggregate consumption emissions have remained constant, diverging from its downwards territorial emissions trajectory. Thus, the EU’s consumption has not lessened over time, merely its production.41 Naturally, the numbers take on a different character when viewed on a per capita basis. Chinese emissions are less than one-half of the United States,42 and even EU and Japanese per capita emissions are closer to those in China than the United States.43 Whilst this might suggest that the United States is one of the least efficient users of energy on the planet, it actually ranks only fourteenth on a per capita basis, with significant emitters such as Qatar, Kuwait, UAE, and Saudi Arabia leading the way.44 In terms of climate impacts, the Kyoto Protocol has been ineffective in reducing the rate of increase in atmospheric GHGs, or global mean temperature.45 The IPCC concludes that evidence of warming of the climate system is unequivocal, with the atmosphere and oceans warming, snow and ice mass depletion, sea level rises, and greenhouse gas concentrations increasing.46 But for the capacity of the oceans to absorb the bulk of global warming, however, these atmospheric figures would be significantly greater. Ocean warming dominates the increase in energy stored in the climate system, accounting for more than 90 per cent of the energy accumulated between 1971 and 2010, with it being virtually certain that the upper ocean (0−700 m) has warmed.47 Other oceanic changes, such as to salinity, provide indirect evidence that evaporation and precipitation rates over the oceans have changed.48 It is in the cryosphere, however, that some of the most visually apparent changes to the climatic system have occurred. The Technical Summary of the IPCC’s Fifth Assessment Report states with high confidence that over the last two decades, the Greenland and Antarctic ice sheets have been losing mass, glaciers have continued 40   EEA Technical Report No 2/2011, European Union greenhouse gas inventory 1990–2009 and inventory report 2011: Submission to the UNFCCC Secretariat (Copenhagen, EEA, 2011). 41   The EU’s 1990 consumption emissions were 4947MtCO2, 4814MtCO2 in 2012—a reduction of 2.5 per cent. Compare 1990 territorial emissions of 4255MtCO2, 3543MtCO2 in 2012—a reduction of 17 per cent. Boden, Marland and Andres (n 22). 42  7.0tCO2/person versus 16.0tCO2/person in 2012. Ibid. 43   Japanese per capita emissions in 2012 were 9.9tCO2/person and 7.1tCO2/person in the EU28. Ibid. 44   Respectively 44.0, 30, 19, and 18tCO2/person in 2012. Ibid. 45   See generally, Intergovernmental Panel on Climate Change, ‘Climate Change 2013: The Physical Science Basis. Working Group I Contribution to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change’ (n 1). Hereafter ‘IPCC 2013’. 46 47 48   Ibid, 2.   Ibid, 3.2, Box 3.1.   Ibid, 2.5, 3.3, 3.5.

34   part i. introduction to shrink almost worldwide, and Arctic sea ice and Northern Hemisphere spring snow cover have continued to decrease.49 The decline of Arctic sea ice is not something that has escaped the attention of international lawyers,50 or of oil and gas multinationals as new trade routes and exploration opportunities arise. As regards sea levels, these have risen in the past 150 years faster than in the previous two millennia, as a consequence both of glacier loss and ocean thermal expansion from warming.51 Finally, as regards atmospheric greenhouse gas concentrations, these stand at levels unprecedented in the past 800,000 years, according to ice core samples. In the case of CO2, concentrations have risen by 4 per cent in the industrial period (from fossil fuel combustion and land use changes). Again, the buffering role of the oceans has been significant with 30 per cent of the emitted anthropogenic CO2 being absorbed by the oceans, with acidification consequences.52 With all this in mind, limiting the increase in average global temperatures to 1.5°C is highly unlikely to be achievable and even holding the increase to 2°C seems unattainable.53 Given these conclusions, the Kyoto Protocol alone will clearly not meet the ‘ultimate objective’ of stabilizing GHG concentrations ‘at a level that would prevent dangerous anthropogenic interference with the climate system’.54 Much more is needed, and would be even if the United States were a party and everyone complied fully with their existing Kyoto emissions reduction requirements. Even with United States participation, the developed State parties cannot by themselves do all that would be necessary to contain the global temperature rise to 2°C. As Romani et al. note: ‘Total emissions from developing countries could be as high as 37–38 billion tonnes of carbon dioxide equivalent (CO2e) in 2030 (around 70 per cent of global CO2e emissions), and total global emissions for a 2°C path can only be around 32–33 billion tonnes in that year.’55 The developing economies—and above all China—will have to carry some of the burden. From this perspective, common but differentiated responsibility, as articulated in the UNFCCC and the Kyoto Protocol, is not a viable basis for saving the climate. A more nuanced approach to differentiation is embodied in the Durban Platform for Enhanced Action (Durban Platform/ADP) and its passage to a binding, comprehensive agreement at the Paris COP in 2015, to have effect from 2020. In this   Ibid, 4.2–4.7.   Tore Henriksen, ‘The Future of Navigation in Ice-Covered Areas: A View from the Arctic’ in Richard Caddell and DR Thomas (eds), Shipping, Law and the Marine Environment in the 21st Century: Emerging Challenges for the Law of the Sea—Legal Implications and Liabilities (Lawtext Publishing Ltd 2013). 51 52   IPCC 2013, 3.7, 5.6, 13.3.   Ibid, 2.2, 3.8, 5.2, 6.2, 6.3. 53  IPCC, Climate Change 2007: Synthesis Report (Bangkok, IPCC, 2007); UNEP, The Emissions Gap Report: Are the Copenhagen Accord pledges sufficient to limit global warming to 2°C or 1.5°C? A preliminary assessment (Nairobi: UNEP 2010). 54  UNFCCC, Article 2. Michael Oppenheimer and Annie Petsonk, ‘Article 2 of the UNFCCC: Historical Origins, Recent Interpretations’ (2005) 73 Climatic Change 195, 2. 55   (n 11). 49 50

2. beyond the unfccc   35 current phase of UNFCCC negotiations we see the prospects for a more nuanced vision of differentiation among state responsibilities. Whilst it does not amount to a repudiation of the principle of common but differentiated responsibility, the future terms of engagement between developed and developing economies will be significantly changed. Tasked to ‘develop a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all parties’,56 by 2015 the Ad Hoc Working Group on the Durban Platform (ADP) seeks to close the gap between the Parties’ voluntary ambitions (as set out in the Copenhagen Accord) and that identified by the IPCC’s Fifth Assessment Report. The Copenhagen Accord itself significantly challenged the pre-existing, crude distinction between developed (Annex I) and developing (non-Annex I) States. In key part, the Copenhagen Accord provided for developed States to assume non-binding, bottom-up commitments to make additional reductions in GHG emissions,57 while also providing the opportunity for developing State parties, for the first time, to make a commitment to reduce their own emissions. These commitments are considerably less certain than those made under the Kyoto Protocol, and are purely voluntary, but represent the first time that emission constraints have been extended to developing countries.58 Rajamani argues that this is a shift in the understanding of differentiation, with ‘symmetry rather than differentiation . . . intended to be the central organizing principle of the future climate regime’.59 That may be debatable—a departure from the status quo is not the same as equivalence or symmetry. At the time of writing, the two streams of the ADP were close to their 2015 deadline. The prospects of a comprehensive, legally binding, agreement at the Paris Conference of the Parties to the UNFCCC (COP) seem as distant as ever. Familiar cleavages persist, viz the concerns of India and China about the use of the word ‘commitments’, a term later softened to ‘contributions’. Moreover, ‘intended nationally determined contributions’ raise the prospect of highly asymmetric (and therefore contentious) emission reductions. Although the Durban Platform provides that mitigation efforts be undertaken by ‘all Parties’, the Dracula-like fear of legally   The tortuous formulation arose from India’s opposition to the original wording, ‘a legal framework’.   Among the more important but heavily conditional GHG emission reduction ‘commitments’ are the following: Australia: 5 per cent unconditionally or 25 per cent by 2020 if further agreement; Belarus: 5–10 per cent if access to technology etc; Canada: 17 per cent aligned with the United States if legislation enacted; EU: 20 per cent unconditionally or 30 per cent conditionally; Japan: 25 per cent if comprehensive agreement; Russia: no specific target—range of reductions ‘will depend on’ various conditions; Ukraine: 20 per cent, if agreement among Annex I parties; United States: ‘In the range of ’ 17 per cent against a base year of 2005, subject to legislation (which has not been passed). 58   Commitments include: China: 40–50 per cent per unit of GDP by 2020, and an increase in forests and non-fossil fuels; Brazil: 36–38 per cent by 2020 through reduced deforestation, new farming practices, energy efficiency, and alternative fuels; India: 20–25 per cent voluntary reduction by 2020 (base year 2005); South Africa: 34 per cent reduction by 2020 and 42 per cent by 2025, depending on financial support/technology transfer etc. and the conclusion of a binding agreement. 59   Lavanya Rajamani, ‘The Durban Platform for Enhanced Action and the Future of the Climate Regime’ (2012) 61 International & Comparative Law Quarterly 501, 502. 56 57

36   part i. introduction binding commitments shared by many developing States suggests a preference for voluntary ‘actions’. The last-minute compromise text at the Warsaw COP used the language of ‘determined contributions, without prejudice to the legal nature of those contributions’, suggesting a certain attachment to strong differentiation. From the position of non-believers (say, Americans unwilling to commit without parallel Chinese commitments, or recent victims of climate catastrophes60), this all too easily appears to be more of the same—piecemeal and self-interested, with a comprehensive solution remaining as distant as ever. The ‘patient progress’ promised by the framework method has, to date failed to match the urgency of the challenge. At the time of writing, it remains to be seen whether the Paris COP can act with greater alacrity.

3.  Institutional Problems: The Negotiating Framework Participation in the UNFCCC regulatory process is open to all members of the United Nations.61 In theory, any State can stay outside the regime: there is no compulsion to become a party. In practice, participation is nearly universal. At the time of writing, there were 195 Parties to the UNFCCC62 and 192 Parties to the Kyoto Protocol. The United States and Canada are the only significant non-parties to the Kyoto Protocol, with the latter having withdrawn in December 2012. Diversity of political interests among the participants is a prominent feature of the UNFCCC/Kyoto Protocol process. The United States and Canada are the only significant non-parties to the Kyoto Protocol, with the latter having withdrawn in December 2012. Diversity of political preferences among the participants is a prominent feature of the UNFCCC/ Kyoto process. This is not a regime that can be understood in terms of a simple split into developed (Annex I) and developing States (non-Annex I).63 While the 60   After Typhoon Haiyan devastated the Philippines during the Warsaw COP, their chief negotiator condemned the negotiations as a ‘farce [and] an annual carbon-intensive gathering of useless frequent fliers’. 61   UNFCCC, Article 20. 62   This includes the EU and two non-UN members (Niue and Cook Islands). The Holy See participates as an observer. 63   The various negotiating groups are outlined in Lavanya Rajamani, ‘The Making and Unmaking of the Copenhagen Accord’ (2010) 59 International & Comparative Law Quarterly 824. New and additional negotiating groups hone in and out of view, however, including the BRICs (Brazil, Russia, India, and China), the Like-Minded Developing Countries (Bolivia, China, Ecuador, Egypt, India, Malaysia, Nicaragua, Pakistan, Philippines, Saudi Arabia, Thailand, and Venezuela), and AILAC (Independent Alliance of Latin America and the Caribbean), each of which overlaps with existing groups.

2. beyond the unfccc   37 major developed States are nearly all members of the Organisation for Economic Co-operation and Development (OECD), they disagree over climate policy. Similarly, many developing State parties have little in common. Notable examples are the small islands states, which may disappear with sea level rise and the Gulf oil producers who have an existential interest in producing more fossil fuels. Brazil, Russia, India, and China (BRIC) are now major GHG emitters themselves. In contrast to when UNFCCC negotiations first began, the BRIC countries now represent at least as big a threat to small island or low-lying states as any OECD member, and are increasingly coordinating their positions distinct from the framework of the G77.64 The UNFCCC negotiating model involves near universal participation by States with very diverse views. Its other key feature is a consensus-based negotiating process, rather than majority voting on the text. Even though Article 7.2(k) of the UNFCCC provides that the COP ‘agree upon and adopt, by consensus, rules of procedure’, and draft rules of procedure were drawn up for adoption by COP 1, the absence of agreement on voting arrangements65 prevented COP 1 from reaching consensus. Parties have subsequently agreed to apply the draft rules of procedure, with the exception of Rule 42, meaning that negotiating by consensus has become the default position. The benefit of this model is that it allows complex, comprehensive, and inclusive agreements to be negotiated despite widely differing interests, relying on the ‘politics of interdependence’ that characterizes regulation of world trade, the oceans, or the global environment. Like the UNCLOS III Conference, the consensus negotiating procedure used in the UNFCCC process generates a greater need to engage in diplomacy, to listen, and to bargain than would be the case when decisions are taken by majority vote.66 Every group of States has to be accommodated in this process—none can be ignored. Powerful States or groups of States cannot simply dictate what should be in an agreement without risking ultimate breakdown. This explains the influence of the Alliance of Small Island States (AOSIS) during the original UNFCCC negotiations,67 but also the need to keep the United States on board during the current negotiations. This model was used successfully at Rio and Kyoto to negotiate the UNFCCC and its Protocol, but it is does not always work, and it has not worked smoothly in the current phase of negotiations on climate change.

  Karl Hallding et al., ‘Rising Powers: The Evolving Role of BASIC Countries’ (2013) 13 Climate Policy 608. 65   FCCC/CP/1996/2, ‘Draft Rules of Procedure of the Conference of the Parties and its Subsidiary Bodies’, Rule 42. 66   See Jens Evensen, ‘Working Methods and Procedures in the 3rd UNCLOS’ (1986-IV) 199 Recueil des cours 425, 455; Alan Boyle and Christine Chinkin, The Making of International Law (Oxford University Press 2007), Chapter 3. For a more critical view, see Robbie Sabel, Procedure at International Conferences: A Study of the Rules of Procedure at the UN and at Inter-Governmental Conferences (2nd edn, Cambridge University Press 2006) 335. 67   See Mintzer and Leonard, Negotiating Climate Change (n 5) (Cambridge University Press 1994). 64

38   part i. introduction The delicate balance at the heart of consensus has been highlighted in recent COPs. The gavelling through of the Cancun Agreements, in the face of Bolivian opposition, in 2010 has become part of the lore of the climate regime. COP President Patricia Espinosa became a folk hero in some quarters by ignoring the concerns of a Party perceived to be obstructive to the consensus-based decision-making process. In 2012, COP President Abdullah bin Hamad Al-Attiyah repeated the trick to force through the Doha Amendment to the Kyoto Protocol,68 despite Russian objections. On this occasion, however, the Russians (with Ukraine and Belarus) insisted that ‘procedural and legal issues relating to decision-making’ be put in the Subsidiary Body for Implementation (SBI) agenda for the Bonn intersessionals of 2013,69 so as to get agreement that no future decisions could be adopted over a party’s objection. The Russian blocking tactics meant that the SBI was unable even to adopt its agenda and so its work on crucial issues such as Nationally Appropriate Mitigation Actions (NAMAs), the Kyoto Protocol review, adaptation finance, and more was left undone. Whatever its tactical merits, the strategic costs of gavelling through are not inconsiderable to a regime that already suffers from a legitimacy deficit. The failure of the Copenhagen negotiations in 2009, however, shows that consensus requires compromises that may be unobtainable, or may result in a text that is weaker or more ambiguous than many States are prepared to accept. Negotiations can only proceed at the pace of the slowest learner. But if the compromises necessary to engineer consensus cannot be reached, then nothing will be agreed, and some way must be found to overcome that outcome. For that reason the option of adopting a text by majority vote is normally retained as a fallback if all else fails. Much will then depend on how many States are in the minority and how important their participation may be. The Copenhagen Accord shows how the process can fall apart when consensus is not achievable.70 Whether to join in a consensus is thus a potentially delicate decision. A State that refuses to do so may find itself ignored, as Bolivia was eventually ignored at Cancun (albeit at a cost to procedural values), or it may simply be part of a tiny minority if it forces matters to a vote, a position in which the United States regularly finds itself. But if the participation of a State is essential to the deal under discussion then other States may have no option but to keep negotiating if stalemate is to be avoided. Are there alternatives to a global consensus deal? Possibly, but they all have serious drawbacks. The easiest alternative is a coalition of the willing within the OECD—in effect an agreement among the Kyoto Protocol Annex I parties. The obvious problem is that the OECD does not include the BRICs, or major Gulf emitters. A G20 agreement is possibly a better model because it includes some of these 69   Decision 1/CMP.8  FCCC/SBI/2013/1/Add.1   Rajamani, ‘The Making and Unmaking of the Copenhagen Accord’ (n 59); Jorge E. Viñuales, ‘Du bon usage du droit international: les négociations climatiques en perspective’ (2010/11) 26 AFDI 437. 68 70

2. beyond the unfccc   39 States. Nevertheless, even that would remain useful only in tandem with UNFCCC negotiations, which alone can provide the necessary ambition and legitimacy. But the G20 could supply the necessary political input for a broader settlement if it could agree on one. Does the United Nations have the potential to influence the UNFCCC negotiating process effectively? If consensus cannot be achieved through the UNFCCC process, it seems unlikely that the United Nations General Assembly (UNGA) would be any more successful—it would face exactly the same political obstacles. Only the UN Security Council (UNSC) has the necessary status and legal authority to change the mould and legislate for climate change without the consensus agreement of other States. Measures to promote environmental protection may in some circumstances be necessary for the maintenance of international peace and security, thus giving the UNSC power to take mandatory action under Chapter VII of the United Nation Charter. However, ‘the language of the Charter, not to speak of the clear record of the original meaning, does not easily lend itself to such an interpretation’.71 That said, it is increasingly recognized that climate-related events can have consequences beyond the capacity of the affected societies or global systems to manage, and that these may have global security implications.72 Seen in this light, the UNSC is no longer viewed as an inappropriate forum for climate change negotiations. Moreover, although the UNSC is not formally a law-making body, since the terrorist attacks on the World Trade Center (9/11), it has started to use its mandatory powers to adopt a small number of binding resolutions on anti-terrorism measures laying down general rules for all States.73 There are some obvious advantages to UNSC law-making in contrast to the more formal processes of negotiation through the UNGA or a treaty conference. First, all UN Member States are bound to comply with Chapter VII resolutions—there is no room for opt-outs or reservations. Second, such resolutions prevail over other international agreements and they do not have to conform to existing general international law.74 UNSC law-making could thus enhance the coherence of international law if used appropriately. To that extent the UNSC could become an instrument of 71   Paul Szasz, in Edith Brown Weiss (ed) Environmental Change and International Law (Tokyo 1992), p. 359. 72   John D Steinbruner, Paul C Stern, and Jo L Husbands, Climate and Social Stress: Implications for Security Analysis (The National Academies Press 2013). See also the series of climate change-related reports by the US Director of National Intelligence, available at (accessed 14 July 2015). 73   Two striking and unprecedented examples are SC Resolutions 1373 (2001) and 1540 (2005), both Chapter VII Resolutions passed in the aftermath of the 11 September 2001 attacks in New York and Washington and the later atrocities. 74   Lockerbie Case (Provisional Measures) 1992 ICJ Reports 114, para 42. ‘The Charter does not provide that decisions . . . in order to be enforceable must be in conformity with the law which exists at the time they are adopted’, Hans Kelsen, The Law of the United Nations (New York, United Nations University Press 1950), pp 294–5. See UN Charter, Article 103, and commentary in Bruno Simma, The Charter of the United Nations (2nd edn, Oxford University Press 2002).

40   part i. introduction law reform, overcoming the problem of the ‘persistent objector’ in customary law and the ‘free-rider’ in multilateral treaties. Nevertheless, to give the UNSC an enhanced role as an international legislator in areas such as climate change would be a tenable option only if the process can be legitimized and made generally acceptable to states.75 The problems are obvious if we consider current UNSC membership from the perspective of major GHG emitters: the United States, China, and Russia are already on the UNSC, but India and Brazil are not permanent members. The EU is fully represented only if Britain, France, and one other non-permanent EU Member State on the UNSC can present a coordinated European position. Most of the other GHG emitters and oil-producing states are only represented in the UNGA: a UNSC law-making process would have to involve UNGA participation to be inclusive. Law-making by fifteen States for the rest of the world is not attractive or likely to work without broader support. In any event, it would be no use unless the United States, Russia, China, and Europe could agree on what to do, since they all have a veto over the UNSC. But if they can agree then it is probably unnecessary to resort to the UNSC in the first place, subject to considerations of legitimacy and ambition. Thus, in the end, there seems little practical alternative to the present UN negotiating framework, however slow it may be. The Durban Platform thus offers at least the illusion of progress while holding open the possibility of a comprehensive agreement. Can the process now be influenced or moved along in some other way? Various possible options have been suggested, and in the second half of this chapter we examine some of them.

4.  Human Rights Perspectives This section will focus on climate change from a human rights perspective.76 As a ‘common concern’ of humanity,77 climate change is an issue in respect of which all states have legitimate concerns. The UN Human Rights Council is therefore correct   David Caron, ‘The Legitimacy of the Security Council’, 87 AJIL (1993) 552 and Paul Szasz, ‘The Security Council Starts Legislating’, 96 AJIL (2002) 901, but contrast T Sato, in Jean-Marc Coicaud and Veijo Heiskanen, The Legitimacy of International Organisations (Tokyo 2001), 327–9. 76   See Alan Boyle, ‘Human Rights and the Environment: Where Next?’ (2012) 23 EJIL 613 on which this section is based. See also Stephen Humphreys, ‘Climate change and international human rights law’, in Rayfuse and Scott (n 3), Chapter 2; Dan Bodansky, ‘Climate Change and Human Rights: Unpacking the Issues’ (2010) 38 Georgia J Int & Comp L 511; John H Knox, ‘Climate Change and Human Rights Law’ (2009) 50 Virginia JIL 2. 77   See UNGA Resolution 43/53 on Global Climate Change (1988); 1992 Convention on Climate Change, Preamble. 75

2. beyond the unfccc   41 to take an interest in the matter.78 Nevertheless, two observations in the 2009 Office of the High Commissioner for Human Rights (OHCHR) report are worth highlighting. First, ‘[w]‌hile climate change has obvious implications for the enjoyment of human rights, it is less obvious whether, and to what extent, such effects can be qualified as human rights violations in a strict legal sense’.79 Second, ‘human rights litigation is not well-suited to promote precautionary measures based on risk assessments, unless such risks pose an imminent threat to the human rights of specific individuals. Yet, by drawing attention to the broader human rights implications of climate change risks, the human rights perspective, in line with the precautionary principle, emphasizes the need to avoid unnecessary delay in taking action to contain the threat of global warming’.80 On the view set out here, a human rights perspective on climate change essentially serves to reinforce political pressure coming from the more vulnerable developing states. Its utility is rhetorical rather than juridical. It is easy to see that governments have a responsibility to protect their own citizens from pollution that affects the right to life, private life, or property.81 However, in the climate change context, where the impacts are global, the key question is whether GHG-emitting States also have a legal responsibility to protect people in other States from the harmful impacts of those emissions on the global climate system. Human rights treaties generally require a State party to secure the rele­ vant rights and freedoms for everyone within its own territory or subject to its jurisdiction.82 For this reason, the question of whether these treaties can have extraterritorial application is a difficult one. There are some precedents in favour of this ­ 83 interpretation, but mainly where a State exercises control over territory or persons. The obvious problem in applying human rights law to climate change is that the States principally responsible for GHG emissions do not have jurisdiction or control over territory or inhabitants beyond their own borders, however seriously affected they may be. Moreover, the multiplicity of causes and States contributing to the problem makes it difficult to show any direct connection to the victims. The inhabitants of sinking   UNHRC Resolution 10/4 (2009) on Human Rights and Climate Change. 80   OHCHR 2009 Report, para 70.   Ibid, para 91. 81   The Social and Economic Rights Action Center and the Center for Economic and Social Rights v Nigeria, ACHPR, Communication 155/96 (2002), paras 52–3; Lopez Ostra v Spain (1994) 20 EHRR 277; Guerra v Italy (1998) 26 EHRR 357; Fadeyeva v Russia [2005] ECHR 376; Öneryildiz v Turkey [2004] ECHR 657; Taskin v Turkey [2004] ECHR, paras 113–19; Tatar v Romania [2009] ECHR, para 88. 82   1950 European Convention on Human Rights, Article 1; 1966 UN Covenant on Civil and Political Rights, Article 2. 83   See e.g. Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, Advisory Opinion, ICJ Reports 2004, para 109; Al-Skeini v United Kingdom [2011] ECtHR, para136; Ecuador v Colombia (Admissibility) [2010] IACHR Report No.112/10, paras 89–100; Cyprus v Turkey [2001] ECHR No.25781/94; Loizidou v Turkey (Preliminary Objections) [1995] ECHR Sers. A/310, para 87; Loizidou v Turkey (Merits) [1996-VI] ECHR, para 52. Contrast Bankovic v Belgium [2001] ECHR No. 52207/99. 78


42   part i. introduction islands in the South Seas may justifiably complain of human rights violations, but who is responsible? Those States like the United Kingdom, the United States, and Germany, whose historic emissions have unforeseeably caused the problem? China and India, whose current emissions have foreseeably made matters worse? The United States or Canada, which have failed to agree on, or to take adequate measures to limit further emissions or to stabilize global temperatures at 1990 levels? Or, the governments of the Association of Small Island States, which may have conceded far too much when ratifying the Kyoto Protocol or in subsequent climate negotiations? As easy as it is to see that governments have a responsibility to protect their own citizens’ rights, it is much harder to frame such a problem in terms of jurisdiction or control over persons or territory as required by the human rights case law. It is also harder to contend that any of the major GHG emitters have failed to strike the right balance between their own state’s economic development and the right to life or private life in other states when they have either complied with, or are exempt from greenhouse gas emissions reduction targets established by the Kyoto Protocol and agreed by the international community as a whole.84 Inadequately controlled transboundary pollution is clearly a breach of general international law,85 and may also be a breach of human rights law.86 However, given the terms of the Kyoto Protocol and subsequent commitments, it is far from clear that inadequately controlled climate change violates any treaty obligations or general international law.87 In those circumstances, the argument that it nevertheless violates existing human rights law is far harder to make. At this point, one may ask whether further negotiations through the UNFCCC process are the only realistic answer, however unsatisfactory that might be. If it wants to take climate change seriously then the UN Human Rights Council (UNHRC) must find a better way of giving human rights concerns greater weight within the UNFCCC negotiating process. Arguably that can best be achieved by using the International Covenant on Economic, Social and Cultural Rights and the notion of a right to a decent environment to pressure governments into cooperating in order to mitigate the global impact of climate change on human rights.88 Climate change is a global problem. It cannot easily be addressed by the simple process of giving human rights transboundary effect. It affects too many States and too much of humanity. Its causes, and those responsible, are too numerous and too widely spread to respond usefully to individual human rights claims. The   Greenhouse gas emission reduction targets under Kyoto apply only to Annex I developed state parties, not to developing countries, including China, India, and Brazil. Compare 1997 Kyoto Protocol, Articles 2–9, which apply to Annex I parties, and Article 10, which applies to all parties. 85 86   Pulp Mills case, 2010 ICJ Reports, paras 101, 187.   Boyle (n 76). 87 88   Supra, section 2.   Knox (n 76); Boyle (n 76). 84

2. beyond the unfccc   43 response of human rights law—if it is to have one—needs to be in global terms, treating the global environment and climate as the common concern of humanity. In that context, focusing on the issue within the corpus and institutional structures of economic, social, and cultural rights makes sense. The policies of individual states on energy use, reduction of greenhouse gas emissions, land use, and deforestation could then be scrutinized and balanced against the evidence of their global impact on human rights. This is not a panacea for deadlock in the UNFCCC negotiations, but it would give the rights of humanity as a whole a voice that at present is scarcely heard. Whether the UNHRC wishes to travel down this road is another question, for politicians to answer rather than lawyers, but that is where the UNHRC must go if it wishes to do more than posture on climate change.

5.  Environmental Impact Assessment and Climate Change Should the potential greenhouse gas emissions of large industrial or energy projects be the subject of an Environmental Impact Assessment (EIA) if they are likely to contribute to climate change and cause damage in other States? In principle there seems no reason why not. Some States include climate change impacts in their EIA process where appropriate.89 EIA in international law is normally required for planned ‘activities’ or ‘projects’ that are likely to cause significant transboundary harm to other states.90 However, the 1991 Convention on EIA in a Transboundary Context (1991 EIA Convention) defines transboundary impact as ‘any impact, not exclusively of a global nature, within an area under the jurisdiction of a party’.91 Does this exclude GHG emissions which make a significant contribution to climate change from triggering the obligation to do an EIA? Possibly, but in addition to their impact on global temperatures, GHG emissions are especially 89   E.g. Canada, on which see N Craik, The International Law of EIA (Cambridge University Press 2008), pp 212–16. 90  1991 Convention on EIA in a Transboundary Context, Article 2(3); 1987 UNEP Goals and Principles of Environmental Impact Assessment, Principle 1; ILC, 2001 Articles on Transboundary Harm, Articles 1, 2(a), 7; Pulp Mills on the River Uruguay case (2010) ICJ Reports, paras 204–5. 91   Convention on Environmental Impact Assessment in a Transboundary Context (Espoo Convention), Article 1(viii), (1991) 30 I.L.M. 800. The Protocol on Strategic Environmental Assessment to the Convention on Environmental Impact Assessment in a Transboundary Context, (21 May 2003) Doc. ECE/MP.EIA/2003/2., contains no comparable limitation: see Article 10.

44   part i. introduction likely to cause transboundary harm in States that are low-lying and vulnerable to sea level rise, acidification of the oceans, and loss of marine productivity. Here the impact is arguably not ‘exclusively of a global nature’ but specific to those particular States.92 In this regard, Article 206 of the UNCLOS requires Parties to assess the potential for ‘significant and harmful changes to the marine environment’ of activities under their jurisdiction or control. Article 206 has been construed broadly to include ‘activities with an impact on the environment in an area beyond the limits of national jurisdiction’.93 Whatever the 1991 EIA Convention may say, there seems no reason to read the 1982 UNCLOS as excluding GHGemitting activities from the obligation to carry out an EIA for potential impacts on the marine environment.94 EIAs of this kind embrace the licensing or approval of industrial, energy, and transport undertakings, inter alia,95 but would not cover plans or policies of a more general kind—whether to use coal or oil for power generation, for example. However, Article 4(1)(f) of the UNFCCC adopts a broader perspective, requiring Parties to take climate change into account when formulating ‘social, economic and environmental policies and actions’. It envisages, inter alia, impact assessments ‘determined nationally’. In effect, this is a reference to ‘strategic environmental assessment’ (SEA). SEA applicable to policies and plans has been developed in some of the more advanced jurisdictions, including the EU and the United States.96 The United States has, for example, subjected free trade agreements to an EIA.97 Article 2(7) of the 1991 EIA Convention provides for parties to ‘endeavour’ to apply EIAs to ‘policies, plans and programmes’, but more importantly a 2003 Protocol on Strategic Environmental Assessment (SEA Protocol)98   In 2010 Micronesia made representations to the Czech Republic concerning an EIA for a lignite power station: see Rayfuse and Scott (n 3), 336–7. 93   See Advisory Opinion on Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area, 2011 ITLOS Seabed Disputes Chamber, paras 145–50. 94   For a review of other precedents see CBD, ‘Background on the Development of Voluntary Guidelines for the Consideration of Biodiversity in Environmental Impact Assessments and Strategic Environmental Assessments in Marine and Coastal Areas’, UNEP/CBD/SBSTTA/16/ INF/16, 11 April 2012. 95   See the activities listed in the 1991 Convention on EIA, Annex 1. 96   Directive 2001/42/EC, OJ L197/30, on which see S Marsden, ‘The Espoo Convention and SEA in the EU’ (2011) 20 RECIEL 267. In R (ex parte Greenpeace Ltd) v Secretary of State for Trade and Industry [2007] EWHC 311 the UK’s plans for nuclear power were successfully challenged. See generally B  Sadler and R Verheem, Strategic Environmental Assessment: Status, Challenges and Future Directions (Netherlands Ministry of Housing and Environment, 1996); R Therivel and MR Partidario, The Practice of Strategic Environmental Assessment (Earthscan 1996); R Therivel, E Wilson et al, Strategic Environmental Assessment (Earthscan 1992). 97   US Executive Order 13141 (1999) 39 ILM (2000) 766. Canada also conducted an EIA of the North American Free Trade Agreement. 98   Protocol on Strategic Environmental Assessment to the Convention on Environmental Impact Assessment in a Transboundary Context, (21 May 2003) Doc. ECE/MP.EIA/2003/2. 92

2. beyond the unfccc   45 has significantly broadened the obligations of States Parties in this respect.99 Unlike the 1991 EIA Convention, the SEA Protocol is not limited to transboundary effects, and it also requires parties to promote SEAs in international organizations and ‘decision-making processes’ (presumably treaty conferences).100 It applies in full only to ‘plans and programmes’, but ‘policies and legislation’ are covered to a more limited extent.101 Article 4 requires an SEA for plans and programmes relating inter alia to energy, forestry, and industry, so its potential relevance to climate change is obvious. An EIA/SEA is fundamental to any regulatory system that seeks to identify environmental risk, integrate environmental concerns into development projects, and promote sustainable development.102 It may facilitate transboundary cooperation and has the potential to place some restraints on policies that could exacerbate climate change. Both the 1991 EIA Convention and the Arhus Convention103 recognize that transboundary applicants have a right to participate in the EIA process,104 and this possibility could open the door to representations by international non-governmental organizations (NGOs) or even foreign governments.105 The SEA Protocol’s strong provision for public participation also represents a considerable expansion of environmental democracy in many states and international organizations if fully implemented.106 Whether as a matter of law or policy, it is hard to see why states likely to be affected by climate change should not be heard when decisions on energy-related projects or programmes are subject to an EIA or SEA. Of course an EIA or SEA does not determine whether a project should proceed or how it should be regulated. Those decisions are for the relevant public authority, balancing the information provided by the EIA or SEA against whatever other considerations are considered decisive, including economic development. Seen from this angle, it is clear that a ‘satisfactory’ EIA or SEA need not show that there will be no risk of global or transboundary harm. It will be sufficient if it provides the necessary information about the project’s likely impact and follows the proper process.   See Jan De Mulder, ‘The Protocol on SEA: A Matter of Good Governance’ (2011) 20 RECIEL 232.   Articles 3(5) and 4. 101   Article 13. See UNECE, Resource Manual to Support Application of the Protocol on SEA (Geneva, 2012). 102   See for example SEA Protocol, Article 1, although note De Mulder (n 99), at 237: ‘the objective of the SEA Protocol is not clearly situated within a policy framework aimed at sustainable development.’ 103   Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters (Aarhus Convention) 2161 UNTS 447; 38 ILM 517 (1999). 104  1991 Convention on EIA, Article 2(6); 1998 Arhus Convention, Articles 2(5) and 3(6); SEA Protocol Article 8. 105   E.g. the representations made by Micronesia to the Czech Republic (n 92). 106   See Article 8. See Jonas Ebbesson, ‘A Modest Contribution to Environmental Democracy and Justice in Transboundary Contexts’ (2011) 20 RECIEL 248. 99


46   part i. introduction

6.  Law of the Sea Perspectives This section addresses climate change from a Law of the Sea perspective.107 For low-lying and small island States, sea level rise and changes in the marine ecosystem are the most immediate threats posed by climate change. The UNCLOS provides a fairly comprehensive regime for the protection and preservation of the marine environment and the prevention, reduction, and control of marine pollution damage to other States. Its provisions are increasingly relevant to climate change insofar as GHG emissions cause marine pollution and harmful changes to the marine environment. In particular, Article 192 provides that ‘[S]‌tates have the obligation to protect and preserve the marine environment’. Later treaties, such as the Convention on Biological Diversity,108 suggest that, consistently with the objects and purposes of UNCLOS, Part XII can readily be interpreted to cover protection of marine ecosystems and marine biodiversity in general.109 Atmospheric deposition of CO2 into the marine environment arguably falls within the terms of Article 192 and the subsequent provisions of Part XII. Article 194 requires states to take measures necessary to prevent marine pollution ‘from any source’. While anthropogenic GHG emissions are not specifically listed, it is entirely plausible to read Article 194(3) as covering atmospheric depositions of CO2 resulting in marine pollution. A significant proportion of marine pollution already comes from airborne depositions, and it has never been suggested that this is excluded from UNCLOS. These CO2 emissions have caused marine pollution. Article 1(1)(4) of UNCLOS defines ‘pollution of the marine environment’ to include the introduction of substances or energy resulting in harm to the marine environment. CO2 emissions appear to have resulted in the deposition of excess anthropogenic carbon into the oceans, altering their chemistry, and making them more acidic.110 They also appear to have added ‘energy’ to the oceans, either directly by causing ocean temperatures to rise, or indirectly by melting ice caps and glaciers, resulting in sea level rise. Evidence evaluated in reports from various UN specialized agencies has shown that 107   This section is based on an article previously published in 27 IJMCL (2012), 831. For an overview of other issues not covered here see ‘Climate change and the law of the sea’, in Rayfuse and Scott (n 3), Chapter 6. 108 109   1760 UNTS 79; 31 ILM 818 (1992)   See 1982 UNCLOS, preamble and Article 194(5). 110   The surface ocean is thought to absorb around one quarter of the carbon dioxide emitted to the atmosphere. See CBD, Scientific Synthesis of the Impacts of Ocean Acidification on Marine Biodiversity (CBD Technical Series no. 46), p 9; IOC/UNESCO, Building Stewardship for the Ocean: The Contribution of UNESCO to Responsible Ocean Governance, Our Changing Oceans: Conclusions of the First International Symposium on the Effects of Climate Change on the World’s Oceans (Gijon 2008), ICES Journal of Marine Science Advance Access (4 June 2009), 1, and generally, M Allsopp et al, State of the World’s Oceans (Springer 2009), Chapter 5.

2. beyond the unfccc   47 these depositions have caused or are likely to cause the kind of harmful effects listed in Article 1(1)(4).111 Article 194(2) of UNCLOS is directed at protecting other States from marine pollution damage. It is particularly pertinent to climate change insofar as States are required to take measures to control and regulate polluting ‘activities’ within their jurisdiction. Examples of such activities would include industrial installations that generate CO2, power generators that use oil or coal, oil extraction industries, coal-mining, or possibly deforestation. This does not mean that corporate polluters would be responsible under UNCLOS, or that the contribution of each plant would have to be quantified. UNCLOS does not address private parties directly. But it does make State parties responsible under Article 194 for regulating and controlling the risk of marine pollution damage to other States resulting from the activities of the private sector. Fundamentally this is an obligation of due diligence—States must take the measures necessary to prevent or minimize harmful pollution, including environmental impact assessment, regulation, and use of best available technology, application of the precautionary principle, and enforcement.112 On that basis, States have an obligation to control and reduce CO2 emissions from any source likely to pollute the marine environment and cause harm to other States. The most obvious way of showing a failure to take the measures required by Articles 192 and 194 is to argue that the Kyoto Protocol sets a standard for giving effect to these provisions—that, in other words, UNCLOS developed State Parties must comply with their emission reduction targets under the Kyoto Protocol. This argument thus presents a very clear pathway through which compliance with the Kyoto Protocol’s GHG emission reduction standards could be litigated in UNCLOS proceedings. Of course it would have to be shown that the Parties to the Kyoto Protocol have not complied with their emission reduction commitments and that any alleged failure to comply with UNCLOS has been the subject of an exchange of views between the parties indicating the scope of the dispute.113 It is, however, quite likely that all of the Annex I State Parties will have met their emission reduction targets for the first Kyoto Protocol commitment period, ending in 2012; only Canada would have been in non-compliance had it remained a Party. 111  CBD, Scientific Synthesis, ibid; FAO, Fisheries Report No. 870: Report of the FAO Expert Workshop on Climate Change Implications for Fisheries and Aquaculture (Rome, FAO 2008); IPCC, Climate Change 2007: Synthesis Report (Geneva, IPCC 2008). 112   ILC, 2001 Articles on Prevention of Transboundary Harm, Article 3 and commentary, ILC Report (2001) GAOR A/56/10, 391–5, paras (7)–(17); Pulp Mills on the River Uruguay, 2010 ICJ Reports, paras 197 and 223; Advisory Opinion on Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area, 2011 ITLOS Seabed Disputes Chamber, paras 115–20. 113   1982 UNCLOS, Article 283; Barbados v Trinidad & Tobago (2006), XXVII RIAA 149, para 198. See also Case Concerning Application of the International Convention on the Elimination of All Forms of Racial Discrimination (Georgia v Russian Federation), Preliminary Objections, 2011 ICJ Reports, paras 157–9; Questions relating to the Obligation to Prosecute or Extradite (Belgium v Senegal), 2012 ICJ Reports, paras 54–8.

48   part i. introduction Developing State Parties to the Kyoto Protocol have no obligation to reduce GHG emissions, even if, like India and China, they are large GHG emitters. They will still be in compliance with the Kyoto Protocol even though their GHG emissions have greatly increased since 1997. They would also not be in breach of UNCLOS Articles 192 and 194 if the Kyoto Protocol defines the content of those articles. Nor would the United States, which is not a party to the Kyoto Protocol or UNCLOS. Moreover, developed state Parties to the Kyoto Protocol have different emission reductions targets, and in some cases they are permitted to increase emissions above historic levels. Taking the Kyoto Protocol as a standard of diligence for non-parties simply begs the question: what standard, and for whom? Could we argue that compliance with the Kyoto Protocol is not enough to satisfy the requirements of UNCLOS Part XII? UNCLOS, it might be said, is more demanding, especially if interpreted by reference to the precautionary principle and the duty of due diligence referred to earlier. This is an attractive argument precisely because it would set a common higher standard for GHG emission reductions for all developed States and would address the obvious inadequacy of the Kyoto Protocol emission reduction commitments. Marine pollution will worsen even if every Party fully complies with the Kyoto Protocol, since GHG emissions overall will still continue to rise—they will simply do so less quickly. If the evidence of serious or irreversible harm to the marine environment is good enough, then surely we could say that stronger precautionary measures must not be postponed? Attractive though this may be as an argument, the counter-arguments are ­considerably easier to make. Can it plausibly be claimed that UNCLOS regulates climate change impacts on the oceans in splendid isolation from the Kyoto Protocol? Other marine pollution agreements are directly relevant to the interpretation and application of Part XII obligations, including the 1973/78 MARPOL Convention and the London Dumping Convention. Why should the Kyoto Protocol be different? The argument that compliance with agreed standards of pollution control (such as the Kyoto Protocol) is not enough to satisfy the more general duty of due diligence has been tried unsuccessfully in the Mox Plant and Pulp Mills cases. Both developed and developing State parties would undoubtedly point to Article 193 of UNCLOS, which refers to their ‘sovereign right to exploit their natural resources pursuant to their environmental policies and in accordance with their duty to protect and ­preserve the marine environment’. This could be interpreted as a reference to the right to sustainable development, in accordance with the case law of the ICJ.114 Taking these decisions into account, and the two previous points, it seems very likely that any tribunal would view reduction of GHG emissions as an exercise in balancing ­continued economic development against environmental protection, and that it 114   Gabčíkovo-Nagymaros Dam Case (1997) ICJ Reports 7, para 140; Iron Rhine Railway Arbitration (2005) PCA, paras 58–9; Pulp Mills Case (Provisional Measures) (Argentina v Uruguay) (2006) ICJ Reports, para 80; Pulp Mills Case (Merits) (2010) ICJ Reports, para 177.

2. beyond the unfccc   49 would be reluctant to require more of States than they have agreed to under the Kyoto Protocol, or under Article 2 of the UNFCCC, which refers to enabling ‘economic development to proceed in a sustainable manner’. The relationship between UNCLOS and climate change is not clear-cut, despite its obvious importance. Part XV provides for compulsory settlement of UNCLOS disputes by a variety of international courts and tribunals, and this may give weaker States with limited influence in UNFCCC negotiations the opportunity to exert greater pressure on GHG emitters through litigation. Nevertheless, it is doubtful whether viewing climate change through the law of the marine environment greatly alters the overall picture. At best, it provides a vehicle for compulsory dispute settlement notably lacking in the UNFCCC regime. Realistically, while UNCLOS may import any newly agreed standards for the control of GHGs, it is not a substitute for further agreement.

7.  Trade Law Perspectives The preamble to the 1994 Marrakesh Agreement establishing the WTO acknowledges115 that expansion of trade must allow for ‘the optimal use of the World’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development’. To that extent, protecting the world from climate change is a legitimate concern of those charged with developing and applying WTO law. Reflecting the objectives of the WTO, a commitment to an ‘open international economic system’ is expressed in Article 3 of the UNFCCC. Yet it is the lack of GHG emissions controls on developing States under the UNFCCC or the Kyoto Protocol, that has in effect enabled developed States to export GHG emissions to China, India, Brazil, and other developing Sates. By doing so they have neatly evaded the emissions constraints placed on Annex I-developed States by the Kyoto Protocol. Those constraints focus on emissions of GHGs within the country concerned; they ignore emissions generated by goods produced elsewhere that are then imported.116 As we 115   For a more comprehensive treatment see Navraj Singh Ghaleigh and David Rossati, ‘The Spectre of Carbon Border-Adjustment Measures’ (2011) 2 Climate law 63 and Markus Gehring, Marie-Claire Cordonnier-Segger, and Jarod Hepburn, ‘Climate Change and International Trade and Investment Law’ in Rosemary Gail Rayfuse and Shirley V Scott (eds), International Law in the Era of Climate Change (Edward Elgar 2012). 116   Contrast the Montreal Protocol on Substances that Deplete the Ozone Layer (1987) 1522 UNTS 3; 26 ILM 1550, which regulates both production and consumption of ozone-depleting substances for all

50   part i. introduction saw earlier, the EU’s net consumption of GHGs has remained unchanged whilst its territorial production has plummeted, because of imports from China and other developing countries. In that sense free trade and the globalization of production and transport have exacerbated the difficulty of regulating GHG emissions. It is an obvious question whether a post-Kyoto accord can sustain the status quo—leaving trading patterns unchanged will certainly make climate change harder to solve. At the very least, it may be necessary to factor imports from non-Annex I countries into Annex I GHG reduction commitments, but it also raises larger questions about whether WTO rules on free trade can survive if we want to get serious about oil and coal consumption or deforestation.117 Article XX of the General Agreement on Tariffs and Trade (GATT) allows for exceptions from GATT obligations, including measures ‘necessary to protect human, animal or plant life or health’, or ‘relating to conservation of exhaustible natural resources’.118 It seems clear that climate change is or will become a risk to human health, as evidenced by 2009 OHCHR Report on the relationship between climate change and human rights.119 Equally obvious, climate change is a threat to exhaustible natural resources.120 The term potentially covers, inter alia, forests, biodiversity, terrestrial and marine living resources, and the quality of air and water.121 Unilateral trade restrictions are likely to be regarded as arbitrary or discriminatory for the purposes of Article XX if, inter alia, the State concerned has not first sought a cooperative solution through negotiation.122 What is less clear is whether unilateral measures are permitted where both sides have negotiated in good faith but have simply been unable to reach agreement, for example because they differ in their view of what tackling climate change requires. It is one thing to say that States must negotiate in good faith, but what constitutes a failure to do so? There are legitimate differences of opinion on what measures should be taken to address

of its parties. This effectively prevented the outsourcing of production. The Kyoto Protocol negotiators could not reach agreement on a similar approach.  See Scott Barrett, Climate Change and International Trade: Lessons on their Linkage from International Environmental Agreements (Geneva, CTEI 2010); UNEP/WTO, Trade and Climate Change (Geneva, UNEP/WTO 2009). 118   General Agreement on Tariffs and Trade, Article XX(b) & (g). 119   UN HRC, Report of the Office of the United Nations High Commissioner for Human Rights on the relationship between climate change and human rights, GAOR A/HRC/10/61, 15 January 2009, citing IPCC, Climate Change 2007: Synthesis Report (Geneva, IPPC 2008), 48. 120   Supra, nn 110 and 111. 121  In Standards for Reformulated Gasoline, WT/DS2/AB/R (1996), the WTO Appellate Body found that clean air is ‘an exhaustible natural resource’. 122   US—Import Prohibition of Certain Shrimp and Shrimp Products, WTO Appellate body (1998) WT/DS58/AB/R, paras 168–72. See Lorand Bartels, ‘The WTO Legality of the Application of the EU’s Emission Trading System to Aviation’ (2012) 23 EJIL 429. 117

2. beyond the unfccc   51 climate change, how soon they should begin to operate, and whether they should be in a form binding on all States or only on developed States. The idea that Europe or any other party could resort to unilateral trade sanctions under GATT Article XX if climate negotiations fail is tenable only if it can be shown that the other party has failed to cooperate.123 Whatever the problems evident in the current negotiations, it would be difficult to argue that any particular UNFCCC Party has failed to negotiate in good faith. Any attempt to take unilateral trade measures in response to a mere breakdown in bona fide negotiations is thus likely to be characterized as arbitrary and unjustifiable discrimination contrary to the chapeau of Article XX of the GATT. Even if the conditions for resorting to unilateral trade sanctions are found to exist, however, the real problem with using them to pressurize reluctant States into reducing GHG emissions is that this would represent a desperate last resort. Sanctions might work against an oil-exporting state like Saudi Arabia, but could Europe really use them against China or the United States? The only likely outcome would be a trade war. Legally, it might be possible in certain circumstances. Politically, it seems only likely to worsen relations.

8.  ICJ Advisory Opinion Bearing in mind how little progress has been made in building on—or even sustaining—the Kyoto Protocol, it is not surprising that some developing State Parties have thought about alternative approaches. The possibility of seeking an advisory opinion from the International Court of Justice is one of them. That begs the question what general international law has to say about climate change apart from the UNFCCC regime. Do States have an obligation in international law to apply Rio Principle 2124 and the obligation of due diligence to the emission of greenhouse gases? The general obligation of States to take measures to

  US—Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5, WTO Appellate Body (2001) WT/DS58/AB/RW, p 37. 124   Principle 2 provides: 123

States have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to exploit their own resources pursuant to their own environmental and developmental policies, and the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction. U.N. Conference on Environment and Development, June 3-14, 1992, Rio Declaration on Environment and Development, Principle 2, U.N. Doc. A/CONF.151/26/Rev.1 (Vol. 1) (June 14, 1992).

52   part i. introduction prevent, reduce, and control transboundary pollution and pollution of the marine environment was elaborated in the 2010 Pulp Mills case and in the International Tribunal for the Law of the Sea (ITLOS) Advisory Opinion on Seabed Activities of 2011. If this obligation can apply to nuclear fallout,125 there seems no reason not to apply it to GHG emissions. Both cause pollution of other states and of the global environment. But as we saw when considering the UNCLOS, it is more than likely that, whatever general obligation States may have to deal with climate change, will be fulfilled by complying with the Kyoto Protocol and any other measures agreed in that context. The Kyoto Protocol is, in effect, the agreed standard of due diligence for the Parties. For all the reasons already set out in the section on law of the sea, it seems unlikely that an international court will hold that more must be done than has so far been agreed. A study undertaken by an ILA Committee has not challenged that conclusion.126 At best, an international court may be persuaded to exhort the parties to negotiate in good faith, and to cooperate, as the ICJ did in the Gabčíkovo-Nagymaros case.127 It cannot compel the parties to agree, or to agree to measures that are stronger or more effective. This is not to argue that the UNFCCC regime is a selfcontained regime. On the contrary, the problem is precisely the inter-­relationship between the general obligation of due diligence and the treaty regime. It is characteristic of most environmental treaties that they build upon the due diligence obligation and require parties to take internationally agreed measures or apply international rules and standards.128 Once those measures, rules, or standards are agreed it is very difficult to sustain the argument that the due diligence obligation has some separate and, if necessary, stronger character. Due diligence inevitably represents a compromise between what is possible and what is economically acceptable—a compromise fatally reflected in the UNFCCC and the Kyoto Protocol. Reformulating that problem in terms of the precautionary principle or approach does not change things. The UNFCCC already acknow­ledges the applicability of the precautionary approach,129 but that has not resulted in States going any faster or any further. They can legitimately say that what has been agreed represents their adoption of a precautionary approach. Is any international court likely to disagree?

125  IAEA/GC(SPL.1)Res./1 (1989); Phoebe Okowa, State Responsibility for Transboundary Air Pollution in International Law (Oxford University Press 2000) Chapter 4. In the dispute over nuclear testing in the Pacific, France accepted ‘its duty to ensure that every condition was met and every precaution taken to prevent injury to the population and the fauna and flora of the world’ (note to New Zealand of 19 February 1973). 126   ILA, Legal Principles Relating to Climate Change, 2nd Report, Sofia Conference (2012). 127   1997 ICJ Reports 7. 128   See for e­ xample 1982 UNCLOS, Articles 194, 207–12; 1994 Convention on Nuclear Safety. 129   UNFCCC, Article 3(3).

2. beyond the unfccc   53

9. Conclusions At best, international regulation based on the UNFCCC and the Kyoto Protocol provides a foundation for coordinated action by governments and the private sector, but it can only be effective to the extent that politicians allow it to be. The fundamental challenge is to secure a stronger commitment from all Parties to take the necessary measures, and therein lies the core of the problem. A global solution requires near-global consensus, and that consensus has only come slowly and reluctantly on the part of some key States. There is some movement by developing industrialized states, and that is both necessary and welcome, but the developed states are still unable to agree on a common vision of the way forward. The current consensus is based on a lowest common denominator approach because, as we have seen, there is no viable alternative to consensus negotiations, but this consensus represents only what is politically feasible, not what is scientifically necessary or technologically possible. It remains to be seen whether that limited consensus generates measures sufficient to restrain global temperature rises to 2°C. Future progress will depend on a number of pivots – that is the United States and China agreeing to limit emissions, on Europe not hiding behind the distinction between territorial and consumption emissions. The challenge at this point is essentially political rather than legal. For all of the reasons set out earlier there seems only limited scope for using human rights law, WTO law, or the Law of the Sea as weapons to pressure governments to act on climate change. Nor is an ICJ advisory opinion likely to add anything new. Litigation is not the answer. In this context there really is no useful alternative to negotiation, except at the margins. But those negotiations do not have to take place only in the UNFCCC process. Rather, the important lesson is that climate change should be on the negotiating agenda of all international institutions whose mandate is affected by it. It is a human rights issue. It is a trade issue. It is an issue for the IMO and convention secretariats responsible for protecting the marine environment, and so on. These institutions and their various intergovernmental and civil society processes can and should be mobilized to pressure the key States into taking more effective action to deliver on the promises they made at Cancun and Durban. In particular, the UN Covenant on Economic, Social and Cultural Rights has obvious relevance to climate change. More needs to be heard from that perspective. The same can be said about the UN Convention on Biological Diversity. Koskenniemi has drawn attention to the potential for fragmentation in international law and policy arising from the competing mandates of international institutions.130 But when an issue such as   Koskenniemi (n 28) at 61.


54   part i. introduction climate change has over-arching implications for a range of different mandates, it seems wiser to emphasize instead the potential for coordination and more effective action when the international system as a whole is more comprehensively engaged. Put another way, climate change is too serious a problem to leave to the UNFCCC alone.

Chapter 3


1. The Pre-History of the IPCC


2. Establishment, Principles, and Status


3. The Structure of the IPCC


4. Reform of the IPCC


5. Public International Law and Scientific Evidence


6. The Lens of Global Administrative Law


7. Conclusion


* Sincere thanks to David Rossati for his research assistance. Errors and opinions are the author’s alone.

56   part i. introduction Warming of the climate system is unequivocal, and since the 1950s, many of the observed changes are unprecedented over decades to millennia . . . Continued emissions of greenhouse gases will cause further warming and changes in all components of the climate system.1

The scientific basis for climate change has now been widely accepted, and this blunt warning from the Intergovernmental Panel on Climate Change (IPCC)’s Fifth Assessment Report (AR5) affirms successive reports issuing from it and other bodies. In a loose causalistic sense, each of the key stages of the climate regime to date has been driven by the demands of science as articulated by IPCC Assessment Reports. Rio (1992) and the United Nations (UN) Intergovernmental Negotiating Committee (1990) were preceded by the First Assessment Report, Kyoto (1997) by the Second, Copenhagen (2009) by the Fourth, and the long run-up to Paris (2015) by the Fifth, with each ‘presenting the problem in steadily starker terms’.2 Indeed, the thud of IPCC reports periodically hitting desks has been accompanied by the steady drumbeat of scientific warnings from authoritative scientific bodies such as the American Association for the Advancement of Science, the US Global Change Research Program, the Royal Society, Netherlands Environmental Assessment Agency, and many others. There is strikingly little divergence in the messages of these variously constituted bodies, and the IPCC as the global clearing house of climate research leads the way.

1.  The Pre-History of the IPCC The early climate regime can be divided into five periods, characterized by the emergence of the scientific consensus (1960s to 1980s), agenda-setting (late 1980s), prenegotiation (1988–90), formal intergovernmental negotiation (to May 1992), and implementation and Kyoto negotiation (to 1997).3 In the first of these, scientific advances driven in part by computational advances, helped to crystallize the 1   ‘IPCC, 2013: Summary for Policymakers’ in Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)). (Cambridge University Press, United Kingdom and New York) 4. 2   Anthony Brenton, ‘“Great Powers” in Climate Politics’ (2013) 13 Climate Policy 541, 544; Soltau F, Fairness in International Climate Change Law and Policy (Cambridge University Press 2011) pp.25–7. 3   Daniel Bodansky, ‘The History of the Global Climate Regime’ in Urs Luterbacher and Detlef F Sprinz (eds), International Relations and Global Climate Change (MIT Press 2001) pp.23–40. See also

3.  science and climate change law    57 scientific consensus around key features of anthropogenic climate change. These understandings moved into political and public realms by a number of interconnected mechanisms, including leading scientists4 acting as ‘knowledge brokers’ to international organizations (especially the UN Environmental Programme (UNEP) and the World Meteorological Organization (WMO)) and national governments. The agenda-setting period itself came towards the end of the two-decade-long era of making global environmental agreements. International agreements on the seas, fresh water resources, and the ozone layer not only created a context in which international legality was seen as capable of responding to long-term, non-local, environmental challenges, but firmly embedded the notion that humankind was making decisive and deleterious impacts on a planetary scale.5 In each of these contexts, ‘science represents an important decision premise for decision-makers in international environmental regimes’.6 Moreover, in these initial stages, the primary actors were not nation states but scientific communities, non-governmental organizations (NGOs) and international organizations.7 A rider to this is the pivotal role played by the United States. Uniquely, the United States had undertaken governmentsponsored research into climate change since the mid-1960s.8 This accumulation of expertise was not only a function of broader scientific excellence but also due to the United State’s heightened stakes in the issue as the world’s largest emitter, the strength of the fossil fuel lobby in its domestic politics, being the largest donor to the UN system, and the fact that the various government agencies and research establishments in the United States viewed the climate change problem differently.9 It was in the prenegotiation phase that national governments moved towards the centre stage, albeit sharing the space with WMO and UNEP, and latterly their progeny, the IPCC. Whilst these debates were principally the preserve of western governments, cleavages emerged between ‘north’ and ‘south’ (what would become the UN Framework Convention on Climate Change (UNFCCC)’s ‘Annex I’ and ‘non-Annex I’ parties), the latter seeing the UN General Assembly (UNGA) as the proper focal point for negotiations of a future climate treaty, rather than the more technical IPCC, in which developing countries felt less able to participate.10 This feeds into debates about the autonomy of science and political involvement in international decision-making, and the proper places and times of each. While Shardul Agrawala, ‘Context and Early Origins of the Intergovernmental Panel on Climate Change’ (1998) 39 Climatic Change 605.   Bodansky highlights the role of Bert Bolin, future IPCC chair. Bodansky (n 3) 26.   Mostafa Kamal Tolba and Iwona Rummel-Bulska, Global Environmental Diplomacy: Negotiating Environmental Agreements for the World, 1973–1992 (MIT Press 2008). 6   Steinar Andresen and Jon Birger Skjærseth, ‘Science and Technology: From Agenda Setting to Implementation’ in Daniel Bodansky, Jutta Brunnée and Ellen Hey (eds), The Oxford Handbook of International Environmental Law (Oxford University Press 2008) p.200. 7   Bodansky (n 3).    8  Agrawala (n 3) 606, 608–9. 9  Ibid 609.   10  Bodansky (n 3). 4 5

58   part i. introduction developed countries may regard the insulation of scientific knowledge from political processes as desirable or even essential, developing countries tend to harbour unease with the notion, not least since that science was done elsewhere,11 raising a powerful legitimacy challenge for the climate regime, and its institutional design.12

2.  Establishment, Principles, and Status As all students of climate change know, the IPCC came into being following joint decisions in 1987 of the WMO and UNEP to ‘establish an ad hoc intergovernmental mechanism to carry out internationally co-ordinated scientific assessments of the magnitude, timing, and potential impact of climate change’.13 Less well-known is that it was preceded by the Advisory Group on Greenhouse Gases (AGGG), a small taskforce established inter alia by the WMO and UNEP in 1986. In its 1987 meetings it proposed a series of policy actions, viewed as aggressive by the United States.14 Indeed, Agrawala suggests that US concern with the AGGG provoked it to seek, via the WMO, the establishment of an intergovernmental mechanism to conduct scientific climate change assessments.15 The precise form of intergovernmental cooperation was ‘primarily a back-room effort of design, negotiation and compromise [and] the hub of activity was in the US,’ in which national representation was raised above that of international organizations, and the scope of the mechanism should comprise the science of climate change, its impacts and response strategies.16 The following year, the WMO/UNEP proposals, much influenced by the United States, were endorsed by a resolution of the UN General Assembly albeit with the term ‘ad hoc’ removed and reference to ‘realistic response strategies’ added.17 Moreover, in line with US concerns for the scope of the mechanism, the Resolution determined its mandate to ‘initiate action leading to . . . comprehensive review and recommendations [on] the science of climate and climatic change . . . social and economic impact of climate change [and] response strategies’.18 These three limbs map closely onto the IPCC’s Working Groups.   Andresen and Skjærseth (n 6).  For a full consideration, see Shardul Agrawala, ‘Structural and Process History of the Intergovernmental Panel on Climate Change’ (1998) 39 Climatic Change 621, 628–32. See also Friedrich Soltau, Fairness in International Climate Change Law and Policy (Reissue, Cambridge University Press 2011) pp. 36–7. 13   WMO Thirty-Ninth Session of the Executive Council General Summary 3.4, 1–5 June 1987; UNEP Governing Council Decision 14/20, 17 June 1987. Emphasis in original. 14 15 16   Agrawala (n 3) 610.   Ibid 611, 614.   Ibid 615. 17   UNGA Res 43/53 (6 December 1988) UN Doc A/RES/43/53 ¶5.    18  Ibid ¶10. 11


3.  science and climate change law    59 As far as the operation of the IPCC is concerned, the Principles Governing IPCC Work is the key document.19 (The Principles are regularly reviewed and amended,20 most recently at the Thirty-Seventh Session in 2013.) The role of the IPCC is to ‘assess on a comprehensive, objective, open and transparent basis the scientific, technical and socio-economic information relevant to understanding the scientific basis of risk of human-induced climate change’.21 Notably absent are references to the IPCC undertaking primary research—assessment being its stock-in-trade, to be undertaken by ‘experts from WMO and UN Member countries’.22 As to the IPCC’s status in international law, whilst it is independent of its two parent entities, UNEP and WMO, it is not an international organization.23 Although competing definitions abound,24 neither the decisions establishing the IPCC,25 nor its constitutive instrument (Principles Governing the IPCC Work), satisfy two necessary elements: that the institution is established under an international agreement covered under international law, and that it holds international legal personality. Rather, those instruments point to the conclusion that the IPCC is an international institution, belonging to that loosely defined category of ‘soft organizations’,26 created by a ‘co-operative arrangement’ between two UN Agencies.27 Soft organizations have the peculiarity of being entities that, despite engaging with and being managed by states, nonetheless act outside the realm of international law. As a consequence, the regulatory activities of the IPCC and its organs28 do not directly participate into the complex enterprise of international lawmaking, in the sense that the resolutions and decisions of the IPCC do not affect member states via either binding norms or ‘soft’ obligations. How then does the IPCC engage with the UNFCCC? Do its assessments feed into a formal process or a black hole? The Convention itself gives only limited guidance, its sole reference to the IPCC being that the Secretariat ‘will cooperate 19   Approved at the Fourteenth Session (Vienna, 1–3 October 1998) on 1 October 1998. Available at , (accessed 3 November 2014). 20  Ibid ¶16.   21 Ibid ¶2.   22  Ibid ¶9. 23  See generally Reparation for Injuries Suffered in the Service of the United Nations, Advisory Opinion, (1949) ICJ Reports 174, 179–80; and International Law Commission, ‘Draft articles on the responsibility of international organizations’, Report on the work of its sixty-third session (UN GAOR 66th Sess. Supp. No 10, 2011), Article 2(a). 24   Henry G Schermers and NM Blokker, International Institutional Law: Unity within Diversity (4th (revised) edn, Brill 2004), ¶34ff; CF Amerasinghe, Principles of the Institutional Law of International Organizations (2nd edn, Cambridge University Press 2005) p.10; and Philippe Sands and Pierre Klein, Bowett’s Law of International Institutions (Sweet & Maxwell 2009) pp.10–15. 25   Ibid nn. 11, 12. 26   Jan Klabbers, ‘Institutional Ambivalence by Design: Soft Organizations in International Law’ (2001) 70 Nordic Journal of International Law 403. 27  Philippe Sands and Jacqueline Peel, Principles of International Environmental Law (3rd edn, Cambridge University Press 2012) pp.70, 76. 28   The Plenary, Bureau, and recently established, Executive Council.

60   part i. introduction closely with the Intergovernmental Panel on Climate Change to ensure that the Panel can respond to the need for objective scientific and technical advice. Other relevant scientific bodies could also be consulted’.29 The specification of cooperation with the Secretariat is a very narrow form of engagement, making no mention of relations with the Convention’s subsidiary bodies, much less the Conference of the Parties. Each is accordingly, as a formal matter at least, entirely at liberty to depart from the conclusions of the IPCC, consistent with the desire for national government primacy articulated above. Furthermore, despite oblique references in the Preamble to the WMO/UNEP,30 to ‘intergovernmental programmes’,31 and for the Conference of the Parties (COP) to ‘seek and utilize . . . information provided by competent international organizations and intergovernmental and non-governmental bodies’,32 the hesitancy of the Convention to embed formal structures between itself and the relatively unknown quantity of the IPCC is unsurprising. Its First Assessment Report was after all published only in 1990.33 In short order, however, the IPCC became primus inter pares amongst the various international organizations, NGOs, and international government organizations in UNFCCC’s orbit. Both input and output legitimacy account for the institutional leadership of the IPCC. In respect of the latter, the publication of an updating Supplement in 199234 and a Special Report35 for the first COP, ensured that by 1995 the IPCC’s credentials were established and its Reports became the means by which the UNFCCC process gauged the science of climate change. Decisions from the Berlin COP made repeated and specific reference to the IPCC, its reports, and their role in ascertaining the ‘best available scientific information’,36 contributing to methodological issues,37 as named consultees to the Subsidiary Body for Scientific and Technological Advice (SBSTA) and the Subsidiary Body for Implementation (SBI),38 and prioritizing the consideration of the (then) forthcoming Second Assessment Report prior to the next COP.39 No less importantly, the IPCC was swift in undertaking a significant number of institutional reforms. These included the decision to produce   UNFCCC, Article 21.   ‘Conscious of the valuable analytical work being conducted by many States on climate change and of the important contributions of the World Meteorological Organization, the United Nations Environment Programme and other organs, organizations and bodies of the United Nations system, as well as other international and intergovernmental bodies, to the exchange of results of scientific research and the coordination of research.’ 31 32   Article 5(a) and (b).   Article 7(2)(l). 33   JT Houghton, GJ Jenkins, and JJ Ephraums (eds), Climate Change: The IPCC Scientific Assessment (Cambridge University Press 1990). 34  Intergovernmental Panel on Climate Change, IPCC First Assessment Report Overview and Policymaker Summaries and 1992 IPCC Supplement (Cambridge University Press 1992). 35  JT Houghton et al (eds), Climate Change 1994: Radiative Forcing of Climate Change and An Evaluation of the IPCC IS92 Emission Scenarios (Cambridge University Press 1994). 36 37   COP Dec. 1/CP.1, ¶3, in FCCC/CP/1995/7/Add.1.   COP Dec. 4/CP.1, ¶1, in ibid. 38 39   COP Dec. 6/CP.1, ¶6, in ibid.      Ibid Annex II, ¶1. 29


3.  science and climate change law    61 a summary for policymakers (1989), the establishment of a Special Committee for Participation of Developing Countries (1989–90), starting a dialogic with UNFCCC officials (1993–to date) and producing ‘rapid response’ papers for UNFCCC bodies (1996–to date).40 Thus, while the formal position remained unchanged and the COP was under no binding obligation to follow IPCC recommendations, UNFCCC decision-making processes de facto regarded the IPCC as singular in its expertise, independence, and legitimacy.41 That 1997’s Kyoto Protocol assigns specific prominence to the IPCC42 is testament to the same, and subsequent COP Decisions repeatedly affirmed the UNFCCC’s appreciation of IPCC outputs, not least by urging Parties to contribute to its funding, and need for continued cooperation.43 At the bureaucratic level, co-working between the UNFCCC Secretariat and the IPCC has been common, in the organization of workshops and methodological standard setting,44 development of the adaptation agenda in the wake of the Third Assessment report,45 identifying priority areas,46 and much else. Even Annex I parties are advised to be guided by the IPCC’s guidance, in addition to UNFCCC’s own reporting guidelines, on reporting for the purposes of greenhouse gas inventories.47 A further reason for the elevation of the IPCC above other scientific inter- and non-governmental organizations may be a pragmatic recognition of the need for coordination.48 There is a potentially wide array of international bodies which have been established to undertake tasks similar to those attributed to the IPCC, or regional bodies doing such work, or multiple bodies each addressing an aspect of the IPCC’s remit. In the absence of coordination the risk arises of duplication, omission, and conflict. As such, the IPCC’s position in the UNFCCC process and beyond can be seen as an act of de facto prioritization which, owing to the exceptionally broad base and preeminence of its membership, has been able to avoid generating disgruntlement from other potential competitors. Certainly, as between the WMO and UNEP, the IPCC operates as a common organ to reduce coordination costs.49

  Agrawala (n 12) 638.   LA Kimball, ‘Treaty Implementation: Scientific and Technical Advice Enters a New Stage’ (1996) 28 Studies in Transnational Legal Policy 177, 196–7. 42   Articles 3(4), 5(2)(3), and 10(d). 43   Especially COP Dec. 19/CP.5 (Cooperation with the IPCC). See also 25/CP.7 (Third Assessment Report), 1/CP.11 (Dialogue on long-term cooperative action) and 9/CP.11 (Research needs of the Convention). 44   I.e. FCCC/SBSTA/2001/INF.4. (accessed 14 July 2015). 45   COP Dec. 1/CP.8 (Delhi Ministerial Declaration on Climate Change and Sustainable Development). 46   I.e. FCCC/SBSTA/2002/Misc.15 . 47   COP Dec. 13/CP.9 (Good practice guidance for national greenhouse gas inventories). 48   Henry G Schermers and NM Blokker, International Institutional Law: Unity within Diversity (4 Revised, Brill 2004)¶1702–1741. 49   Ibid ¶1716. 40 41

62   part i. introduction

3.  The Structure of the IPCC The distinction between research science and policy science is well established: ‘[W]‌hereas research science places greatest value on published papers, certified by peers as true, original, and significant, science conducted for policy is rarely innovative.’50 Moreover, ‘regulatory science’ frequently seeks to answer a specific question asked by a non-scientific agency, can be predominantly synthetic, and is often predictive.51 Viewed in this light, that the IPCC is a scientific body providing an authoritative view of climate change knowledge and its impacts without actually conducting any original research of its own is consistent with the notion of regulatory science produced for policymakers. The IPCC’s teams of authors, nominated by its 195 member countries, summarize and evaluate the peer-reviewed literature on climate change science to inform decisions and policy debates. The process is vast—authors and peer reviewers number in the thousands and include preeminent scientists who work collaboratively in thematic groups to produce their assessment, through extensive processes of draft, comment, and review. All authors sign a conflict of interest statement affirming their non-partisan character (such as membership of NGOs, or other forms of activism, political affiliation, or bias arising from funding concerns), a key mechanism by which scientific objectivity is sought.52 As a matter of practice, it very much appears that the carefully honed processes and procedures of the IPCC, combined with the scientific professionalism of those involved, are effective in insulating its work from plausible allegations of bias or other shortcomings. Moreover, notwithstanding the fact that nomination of authors is in the gift of national governments and that its reports require the endorsement of the same, evidence of political interference is absent. Although some have questioned this,53 several IPCC lead authors with decadal experience of serious science have stressed that very absence.54 The core of the IPCC’s work is its Assessment Reports, produced at the end of five-year (approximate) cycles of collation, drafting, and peer review, and divided into three working groups, dealing respectively with the ‘Physical Science Basis of Climate Change’, ‘Climate Change Impact, Adaptation and Vulnerability’, and ‘Mitigation of Climate Change’. The volumes are substantial, technical reports, 50   Sheila Jasanoff, The Fifth Branch: Science Advisers As Policymakers (Harvard University Press 1990) p. 188. 51   Ibid 187–8. 52   See (accessed 7 August 2014). 53   Soltau (n 12) 38. 54  House of Commons, Energy and Climate Change Committee, ‘Intergovernmental Panel on Climate Change Fifth Assessment Report: Review of Working Group I Contribution’ (House of Commons 2014) First Report of Session 2014–15, HC 587, citing Professors Myles Allen and Sir Brian Hoskins, at 11.

3.  science and climate change law    63 running to thousands of pages. The Synthesis Report distils the findings of the working group contributions55 into a more manageable form, and a Summary for Policymakers (considered further below). Furthermore, the IPCC regularly assesses the science of specific issue areas. Recent reports have addressed renewable energy,56 disaster management,57 and climate engineering.58 These reports are influential in their own right but are also folded into the Assessment Reports.

4.  Reform of the IPCC The Assessment Reports of the IPCC are now questioned principally by the mischievous and mendacious. It was ever thus. Agrawala notes the alacrity with which the US fossil fuel industry lobby, so well trained in Washington DC, decided to discredit the messenger whose message so alarmed it.59 One unintended consequence of these attacks was to formalize the IPCC’s peer review process such that they became ‘more comprehensive, by many orders of magnitude, than that in an average journal’.60 The authoritativeness of the Second Assessment Report, so critical a driver for the Ad Hoc Group on the Berlin Mandate (and as such, the Kyoto Protocol) was questioned by some UNFCCC parties61 and industry lobbies.62 More recently, after the production of the Fourth Assessment Report, the IPCC’s review processes have come under scrutiny in the form of the ‘climategate’ episode. This lamentable tale originated at the Climatic Research Unit (CRU) at the University of East Anglia—a globally prominent climatology research centre. Two of CRU’s data sets related to global temperature developments and were used in IPCC reports. Hacked emails from scientists working on these data sets were 55   AR5 also integrates the two Special Reports produced during the cycle (on Renewable Energy, and Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation). 56   ‘IPCC, 2011: IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation’, Prepared by Working Group III of the Intergovernmental Panel on Climate Change (O. Edenhofer, R. Pichs-Madruga, Y. Sokona, K. Seyboth, P. Matschoss, S. Kadner, T. Zwickel, P. Eickemeier, G. Hansen, S. Schlömer, C. von Stechow (eds)) (Cambridge University Press 2011). 57  ‘IPCC, 2011: IPCC Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation (SREX)’, Prepared by Working Group I and II of the Intergovernmental Panel on Climate Change (Field, C.B., V. Barros, T.F. Stocker, D. Qin, D.J. Dokken, K.L. Ebi, M.D. Mastrandrea, K.J. Mach, G.-K. Plattner, S.K. Allen, M. Tignor, and P.M. Midgley (eds)) (Cambridge University Press 2012). 58   Ottmar Edenhofer and IPCC Working Group III Technical Support Unit, ‘IPCC Expert Report on Geoengineering, Lima Meeting Report’ (IPCC 2012). 59   Agrawala (n 12) 625.    60  Ibid 624. 61   Bodansky (n 3).    62  Agrawala (n 12) 626.

64   part i. introduction published online. References to phrases such as ‘tricks’ and ‘hiding the decline’ were represented by online climate deniers as evidence of systematic attempts to manipulate the data and exaggerate the extent of climatic change. A detailed inquiry into the affair was conducted by the UK House of Commons Science and Technology Select Committee,63 taking evidence from a large number of individuals and bodies, from both sides of the controversy. The Committee dismissed the core allegations of manipulation as inferences incorrectly drawn from colloquial terms used in informal and private emails. To the secondary allegation that prominent researchers at CRU were reluctant to share raw data and methodologies with others, this was judged to be acceptable: ‘It is not standard practice in climate science to publish the raw data and computer code in academic papers’. However, noted the inquiry, ‘climate scientists should take steps to make available all the data that support their work (including raw data) and full methodological workings (including the computer codes). Had both been available, many of the problems at the University of East Anglia could have been avoided’.64 Following these and other procedural criticisms, which often have the character of ‘higher-level rhetorical strategy’,65 a review was undertaken by the InterAcademy Council (IAC) in 2010, at the request of the UN Secretary-General, and the IPCC Chair, focusing on the IPCC’s processes and procedures.66 The report, led by a college of twelve non-climate scientists (i.e. not involved in the IPCC’s own processes), made some fairly sweeping recommendations in terms of the governance of the IPCC as well as a number of not-so-thinly-veiled criticisms of various IPCC actors and processes (Working Group (WG) II in particular). The conclusion that ‘significant improvement [to IPCC processes and procedures] are both possible and necessary for the fifth assessment and beyond’67 was both stinging and well received. Key recommendations included improved updating procedures to correct errors post-publication, more consistent language to express uncertainty across Working Groups (although the latter was already under consideration by the IPCC),68 and the creation of an ‘Executive Team’ to meet regularly between IPCC meetings and better coordinate the activities of the 194 member governments.69 Collectively, these measures should ensure that the Assessment Report process is strengthened, that 63   Science and Technology Committee, The Disclosure of Climate Data from the Climatic Research Unit at the University of East Anglia (2009–10, HC 387). 64   Ibid 3. 65   Andrew Dessler and Edward A Parson, The Science and Politics of Global Climate Change: A Guide to the Debate (2nd edn, Cambridge University Press 2010). 66   InterAcademy Council, ‘Climate Change Assessments: Review of the Process and Procedures of the IPCC’ (InterAcademy Council 2010) . 67   Ibid 26. 68   Independently of and prior to the InterAcademy recommendations, the IPCC held a workshop with the aim of synchronizing the uncertainty guidance between the working groups in the summer of 2010, which produced a guidance paper. 69   InterAcademy Council (n 67).

3.  science and climate change law    65 the risk of errors is minimized and rectified more quickly should they occur. One member of the IAC review panel has, however, criticized the IPCC’s failure to incorporate the recommendation that the Executive Team include a number of independent non-climate scientists, a measure that would ‘improve transparency, openness and good governance’.70 The paucity of non-climate scientists in the Assessment Report process at the review stage has also been noted, leading to the suggestion that ‘experts from outside the climate field [could] bring the rigour and expertise of other scientific disciplines to bear’.71 It may be the case that such additional layers of scrutiny are redundant (the assessment process being less important than the underlying science) or could bring an already cumbersome process to a grinding halt, but given the intense scrutiny that the institution, processes, and outputs of the IPCC are under, present conditions cannot be assumed to be either beyond reproach or set in stone. The potentially least robust aspect of the Assessment Report process is also its most high-profile output—the ‘Summary for Policymakers’ (SPM). Given the complexity and length of the underlying technical reports, the SPM is the only part of the Assessment Reports that most readers (already a small constituency) will ever read. They are necessarily highly condensed—by way of example, the Working Group I contribution to Assessment Report 5 was reduced from 1,536 pages of Full Technical Report to 33 pages of SPM—and here the controversy enters. The former are subject to an open process of review in which expert reviewers comment on particular chapters to which the authors must respond in turn. Each review comment is logged and overseeing Review Editors ensure that comments have been properly taken account of and addressed. This is all in addition to the fact that the Reports themselves draw from a published literature that has already been subjected to rigorous scientific peer review. SPM, however, are drafted in a very different manner. The abovementioned SPM for WG1 AR5 took place between the report authors and IPCC member government representatives over four days in September 2013, with no published record of the closed door meeting. The collaborative nature of SPM production is not in itself a weakness—if science is to be communicated effectively beyond the academy and into the policy community and beyond, it is prudent to include representatives of such bodies to participate in the drafting. The proviso is of course that scientific integrity is not compromised by political negotiation and prominent participants have affirmed that that is the case,72 in particular because of the ‘traceability’ requirement that ensures propositions in the SPM have an anchor in the Full Technical Report.73 Moreover, observer organizations are permitted to sit in on the process and have likewise affirmed the absence of political tinkering.74   House of Commons, Energy and Climate Change Committee (n 54).   Ibid, per Dr Ruth Dixon at 10. 72   Ibid, per Professor Sir Peter Williams at 17. 73 74   Ibid, per Professor Sir Brian Hoskins at 18.   Ibid, per World Wildlife Fund at 17. 70 71

66   part i. introduction It is of course possible to alter the main report so that it coheres with the SPM without doing damage to the substance of the science. However, doing so will always raise eyebrows, the appropriate response to which is to demonstrate through full disclosure that indeed the integrity of the science is unaffected. Ensuring such confidence in the process is possible only with comprehensive and timely transparency mechanisms. Moreover, to pick up on the notions of scientific autonomy and involvement raised above, ‘autonomy is good for the production of science, while involvement is essential for the transformation of science into policy’.75

5.  Public International Law and Scientific Evidence It is important to distinguish the IPCC from those scientific or technical bodies which are the creations of given multilateral environmental agreements (MEAs) and dedicated to them so as to be fully integrated into their lawmaking and implementation processes.76 In the UNFCCC, these would include the Subsidiary Body for Scientific and Technological Advice and Subsidiary Body for Implementation,77 the Subsidiary Body on Scientific, Technical and Technological Advice under the Convention on Biological Diversity,78 the Openended Working Group of the Basel Convention,79 and the Scientific Council of the Convention on the Conservation of Migratory Species of Wild Animals.80 The membership of these bodies is open to all parties, and as such is to be contrasted with those expert bodies with limited membership such as the three Advisory Committees under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).81 As an independent advisory body, sharing similarities with Group of Experts on the Scientific Aspects of Marine Environmental Protection,82 it is arguable that the IPCC’s arm-length relationship with the UNFCCC contributes to its prominence and accumulated esteem, and may account for its model being replicated to some extent in the Millennium Ecosystem Assessment.83 Moreover, the fact that IPCC participants are unpaid   Andresen and Skjærseth (n 6).   See generally, Steinar Andresen et al. (eds), Science and Politics in International Environmental Regimes: Between Integrity and Involvement (Manchester University Press 2000). 77 78   UNFCCC Articles 9, 10.   CBD Article 25. 79 80   COP Dec. VI/36/CP.6 (institutional arrangements).   Article VIII. 81   CITES for COP 11 amendments to committee structure.    82  Sands and Peel (n 27). 83   See (accessed 4 November 2014). 75


3.  science and climate change law    67 and cannot extract rents from a ‘hardened bureaucracy . . . reduces incentives for maintaining the status quo’.84 The way in which the IPCC relates scientific knowledge into international decision-making, including the annual Conference of the Parties of the UNFCCC, shares something with the general approach for the treatment of expert evidence by international courts and tribunals. However, as international environmental law has increased in prominence in the firmament of Public International Law, it has brought its own challenges, one of which being that MEAs typically rely on scientific and technical knowledge in a manner that is distinct from other international agreements.85 One means by which international law addresses this challenge is by way of the ICJ’s familiar ratio that ‘evidence obtained [by independent persons] experienced in assessing large amounts of factual information, some of it of a technical nature, merits special attention’.86 Although not specific to scientific knowledge, this emphasis on independence, specialized knowledge, and the evaluation of data shares much with the scientific method.87 Indeed, as the work load of international tribunals has in recent years been increasingly occupied by ‘environmental’ disputes, the necessity of engaging with, reviewing, and assessing scientific data has become pressing.88 Cases such as Pulp Mills,89 the Whaling in the Antarctic case,90 and the Aerial Spraying case91 have all raised evidential questions about the handling of scientific materials. In these cases, the tribunals paid close attention to independent scientific assessments; respectively, Environmental Impact Assessment reports commissioned by the International Finance Corporation, reports of the International Whaling Commission’s Scientific Committee and reports by the UN Special Rapporteurs investigating the Ecuador–Colombia border area.92

  Agrawala (n 12) 638.   Sheila Jasanoff, ‘Contingent Knowledge: Implications for Implementation and Compliance’ in Edith Brown Weiss and Harold Karan Jacobson (eds), Engaging Countries: Strengthening Compliance with International Environmental Accords (MIT Press 2000) 63. 86   Case Concerning Armed Activities on the Territory of the Congo (Democratic Republic of Congo v Uganda) (2005) ICJ Reports 168, ¶61. 87   ‘ “[S]‌cientific method, n.” . . . is now commonly represented as ideally comprising some or all of (a) systematic observation, measurement, and experimentation, (b) induction and the formulation of hypotheses, (c) the making of deductions from the hypotheses, (d) the experimental testing of the deductions, and (if necessary) (e) the modification of the hypotheses.’ OED Online. Oxford University Press, September 2014. Web. 1 October 2014. 88   See generally, Alan Boyle and James Harrison, ‘Judicial Settlement of International Environmental Disputes: Current Problems’ (2013) 4 Journal of International Dispute Settlement 245. 89   Case Concerning Pulp Mills on the River Uruguay (2010) ICJ Reports 14. 90   Case Concerning Whaling in the Antarctic (Australia v Japan: New Zealand intervening) (2014) ICJ Reports XX. 91   Case Concerning Aerial Herbicide Spraying (Ecuador v Colombia): application filed on 31 March 2008; removed from the ICJ’s list on 13 September 2013 at the request of Ecuador. 92   See Boyle and Harrison (n 88). 84 85

68   part i. introduction Accordingly, international law’s means and processes, and indeed willingness, to engage with scientific materials are reasonably well developed, at least as far as dispute settlement is concerned. Drawing on general rules of evidence, a set of judicial practices are emerging in parallel with the expansion of the environmental caseload of the international tribunals.

6.  The Lens of Global Administrative Law Much of the foregoing is very deliberately written in a descriptive, style. It would be fair to question aspects of its relevance to law. To bring this discussion into legal focus, the lens of global administrative law (GAL) may be helpful.93 This is not to suggest that the IPCC itself is an administrative body which is bound by such norms but rather that GAL principles can serve as useful benchmarks against which to judge the performance of the IPCC. GAL trains its attentions on the plethora of regulatory bodies operating internationally and transnationally beyond the state, which are often conceived as increasingly dense systems of global governance. Whilst these do not fit easily into traditional public international law (being principally concerned with inter-state relations), GAL asks whether such systems conduct their business through administration, and if yes, whether familiar techniques of administrative law can control public power of this sort, channel it to make global governance more effective, check abuses to make it more acceptable and where there are mistakes or abuses, catch them. At this very general level, GAL seems an apt approach but does this bear scrutiny? A preliminary issue to be decided in all GAL discussions is the ‘publicness’ of the body under scrutiny.94 Does it exercise power beyond the state which affects individuals, and corporations, as well as states, and as such raise the risk of injustice? In the case of the IPCC, this test is satisfied. Of the taxonomy of administrative types, the IPCC exhibits constitutive characteristics of administration both by formal international organizations (it is after all an ‘intergovernmental’ entity)95 and transnational networks of government officials (that is, nominees of

  See the locus classicus of this approach, Benedict Kingsbury, Nico Krisch, and Richard B Stewart, ‘The Emergence of Global Administrative Law’ (2005) 68 Law and Contemporary Problems 15. 94   Benedict Kingsbury, ‘The Concept of “Law” in Global Administrative Law’ (2009) 20 European Journal of International Law 23. 95   For the status of the IPCC in international institutional law, see nn 23–8 above and attendant text. 93

3.  science and climate change law    69 member countries).96 Similarly in functional terms, the IPCC’s outputs are explicitly intended to ‘provide the world with a clear scientific view on the current state of knowledge in climate change and its potential environmental and socio-economic impacts’.97 The absence of binding legal form is typical, rather than an exclusionary characteristic, of GAL entities.98 With the threshold issue settled, it will be apparent that many of the critiques of the IPCC, whether by the IAC or others which address the standards which should apply to public bodies conducting scientific research, cohere very closely to standard administrative law techniques. Familiar notions of accountability, participation, review mechanisms, transparency, and reason-giving figure prominently, notwithstanding that none of the IAC review members were lawyers. Whether or not this suggests that they reasoned in ‘legal ways’, or that legal normativity is universal in character, there is clearly scope for asking how more can be made of administrative law techniques. Consider accountability. At the institutional level, the detailed IAC review can be seen as a straightforward instance of supervisory accountability as between the IAC and IPCC in that in the face of controversy surrounding the Fourth Assessment Report (AR4), the latter was required to give an account of their exercise of power, to defend it, and to trigger a process of review. Moreover, the IPCC is ­accountable to governments, its founders and funders, both individually (consider the Bush Administration’s request that the US National Academy of Sciences review the 2001 Third Assessment Report) and collectively, through processes such as the drafting of SPMs, and indeed the requirement that reports are endorsed by member countries. Similarly the concept of participation as an administrative value is reflected in existing IPCC practices (all 195 member countries are entitled to nominate experts, participate in review processes and plenaries, etc.), and criticisms of them. As regards the latter, recommendations that greater use of non-climate scientists be made has not been accepted by the IPCC. Moreover, is there a case for increasing the range of interest groups, stakeholders, and others who have a normative view? This may not be apt at the stage of drafting and reviewing Full Technical Reports, but at the intergovernmental stage where SPMs are being agreed, there is a case for a more corporatist model, such as that used in the International Labour Organization where trade unions and employers’ representatives can participate. In the case of the IPCC, there may be a case for greater involvement of those NGOs/environmental non-governmental organizations (ENGOs)/business-friendly international NGOs (BiNGOs), etc. that are well known to participate in the COPs. The risks though are obvious—of politicization, duplication of the COP, creating insuperable problems of institutional design, the risk of paralysis, and so on. The first of these is 96  Kingsbury, Krisch, and Stewart (n 93). Alternative ‘types’—administration by hybrid intergovernmental–private arrangements—and combinations are also plausible. 97   (accessed 7 August 2014). 98   Kingsbury, Krisch, and Stewart (n 93).

70   part i. introduction perhaps the greatest and requires us to recall that ‘a scientific assessment body, not a purely scientific one [the IPCC] sits between the worlds of science and policy, and must manage the resultant tensions’.99 Overly ambitious corporatist designs would play havoc with the delicate balance that has been so carefully crafted. Finally, both reason-giving and transparency do a similar job in the IPCC. The risk of asymmetric information enhancing some voices at the cost of others is not a problem unknown to the IPCC and is substantially undercut by procedures such as published notice-and-comment. The requirement to give reasons for decisions, as is the case at the review stage may well slow the drafting process but in the absence of other forms of legitimation (i.e. electoral), reason-giving can be an effective substitute, demonstrating that reasons were taken into account, taking the form of persuasion, and providing a reason for buy-in. But where decisions are not justified, this form of legitimation is absent and may leave the IPCC vulnerable. Indeed, the closed drafting procedure of the SPM of the WGI AR5 was recently lambasted on exactly these terms by a prominent climate-sceptic member of the UK House of Commons Energy and Climate Change Committee: ‘Representatives from a hundred governments were involved in a secret four-day long meeting . . . [the SPM] is clearly a negotiated political statement . . . the IPCC is fundamentally a political body that from its inception has been subject to undue influence from governments and “activists”’.100 Each of these allegations can be readily swatted away, but the IPCC could forestall them if its processes were less obscure at various critical stages. Given the precipice upon which its authority balances, such measures may be prudent.

7. Conclusion The IPCC’s central task is unenviable. Striking the right balance between scientific precision and clear communication is profoundly demanding. It must communicate the risks of climate change and its myriad indirect impacts in a way that is effective, accurate, and policy-relevant. When the underlying science is as complex and wide ranging as that pertaining to the climate, this is arguably the global community’s most ambitious exercise in knowledge exchange. Writ both large and small, the IPCC has been a remarkable success. In the macro sense it has organized climate science in such a way that the urgency of the UNFCCC’s task has been brought home to senior decision-makers in national   Dessler and Parson (n 65).   House of Commons, Energy and Climate Change Committee (n 54).

99 100

3.  science and climate change law    71 governments. In the absence of the IPCC, it is unlikely that the issue would ever have reached the international political agenda.101 Institutionally, the IPCC is no less impressive. Despite being born with a weak mandate and in a highly politicized context, it has managed to overcome these potentially fatal shortcomings. What might have been insurmountable barriers to establishing its expertise and influence have instead been overcome by remarkably nimble institutional reforms that have placed the IPCC at the very crux of global climate decision-making. In Agrawala’s apt phrase from 1998, ‘the IPCC has not demanded hegemonic status but instead may have commanded it’.102

  Andresen and Skjærseth (n 6).


  Agrawala (n 12) 640.


Chapter 4


1. Introduction: Economics and International Lawyers


2. The Economics of Climate Change


3. Immanent Critiques


4. Conclusion


*  This chapter draws on, with gratitude, co-teaching and conversation with my colleague, Drew Scott. The usual disclaimers apply.

4.  economics and int’l climate change law    73

1.  Introduction: Economics and International Lawyers The editors’ suggested title for this chapter—Economics and International Climate Change Law—generates a number of connected thoughts, not least the recognition that a, perhaps the, central work of climate change debates was written not by a physical scientist, much less a lawyer, but an economist. It is unlikely that any research commissioned by Her Majesty’s Treasury has ever had the global influence of the Stern Review.1 Although much of the ‘international climate regime’ predates it, Stern’s analyses provide an influential if not uncontroversial diagnosis, prognosis, and course of treatment. Related is the recognition that market mechanisms have been the dominant regulatory approach in climate action.2 After the Kyoto Protocol,3 market-based approaches to environmental problems are not merely a possibility of social scientific rumination but the keystone of global climate policy. From ‘New Market Mechanisms’ under the UNFCCC to the EU’s Emissions Trading Scheme and new trading schemes being established in California and across China, marketbased approaches are the default tool for climate policymakers. Markets for pollution led then to the realm of microeconomic theory and what is routinely described as both the most cited law review article and the least wellunderstood one—‘The Problem of Social Cost’ (PSC).4 The link between that paper and the central feature of the global climate regime (mutatis mutandis its regional, national, and subnational spillovers)—markets for pollution—is direct. One of the goals of this chapter is to map the basics of Coase’s approach, its implications for climate law, and the claims made on its behalf. Although elementary, this task is often poorly done by environmental lawyers.5 Moreover, when our decade-long 1   Nicholas Stern, The Economics of Climate Change: The Stern Review (Cambridge University Press 2007). ‘In Gordon Brown’s Britain there is always a review . . . Passing a child drowning in a duck pond, he would leap into action and set up a committee to look at the matter of aquatic safety for the under-fives’. Simon Hoggart, ‘Parliamentary Sketch’, The Guardian (24 July 2007). 2   Although emissions trading schemes are only one of the economic instruments in the climate action tool kit—consider carbon taxes, feed in tariffs, regulation, capital subsidies—they are the most prominent and form the focus of this chapter. See generally, Cameron Hepburn, ‘Carbon Taxes, Emissions Trading, and Hybrid Schemes’ in Dieter Helm and Cameron Hepburn (eds), The Economics and Politics of Climate Change (Oxford University Press 2011). 3   Kyoto Protocol to the United Nations Framework Convention on Climate Change, 11 December 1997, 2303 UNTS 162. 4   R. H. Coase, ‘The Problem of Social Cost’ (1960) 3 Journal of Law and Economics 1–44. For a contextual commentary, see Harold Demsetz, ‘Ronald Coase’ in Peter Newman (ed), The New Palgrave Dictionary of Economics and the Law, vol 2 (Palgrave Macmillan 1998). 5   Elizabeth Fisher and others, ‘Maturity and Methodology: Starting a Debate about Environmental Law Scholarship’ (2009) 21 Journal of Environmental Law 213, 237; Navraj Singh Ghaleigh, ‘Two Stories About E.U. Climate Change Law and Policy’ (2013) 14 Theoretical Inquiries in Law 43.

74   part i. introduction experiences of carbon markets are assessed on Coase’s own terms, their shortcomings are rudely exposed. The present discussion operates within ‘mainstream economics’. It deploys its assumptions of individuals as rational, fully informed, utility maximizers, the homo economicus.6 No challenge is made to these assumptions or the methodology of mainstream economics. They are accepted provisionally and subjected to immanent critiques, tested against own standards. Indeed, many of the prescriptions that mainstream economics advocates in the climate arena—that so many climate lawyers find so objectionable7—are sunderable by its very own terms.8 In this way, mainstream economics can sharpen our critique of the climate regime, principally by exploring transaction costs but also by considering path dependency and ‘what counts’, and scrutinizing the claim that trading schemes drive innovation. The conclusion will briefly sketch further critiques. These considerations apart, and as a preliminary matter, at the back of the collective mind of international (environmental) lawyers there may be an awareness that whilst the economic analysis of law has proved so influential in other fields of law, it has scarcely made an impression in their own. The economic analysis of law forces important questions about the effects of legal rules, their formulation and reform: ‘Do these legal rules achieve the objectives at which they aim, and would alternative rules do any better?’9 For the international climate regime, which has to date so comprehensively failed to achieve its objective10 and is in clear need of alternative rules, these are not obviously bad questions. Given the singular contribution of economic thought in developing understandings of anthropogenic climate change and shaping responses to it, such a mode of analysis seems apt. As MacKenzie notes, the role of economics has not been to analyse an already-existing market, but to help bring a new market into existence. While meteorologists and other natural scientists have been the experts on   Richard A Posner, The Problems of Jurisprudence (Harvard University Press 1990) 353.   For a roughly representative sample, all of which trade on loose understandings, or the straightforward misrepresentation, of basic economic ideas see Sanja Bogojević, ‘Ending the Honeymoon: Deconstructing Emissions Trading Discourses’ (2009) 21 Journal of Environmental Law 443; Chris Hilson, Regulating Pollution: A UK and EC Perspective (Hart Publishing 2000); Gerd Winter, ‘The Climate Is No Commodity: Taking Stock of the Emissions Trading System’ (2010) 22 Journal of Environmental Law 1—further discussed at 2.3 infra. 8   This proceeds on the basis that the new institutional or transaction cost economics, propounded first by Coase and Williamson, falls within mainstream economics, requiring only modifications to its model, rather than the rejection of its tenets. 9   Brian Bix, Jurisprudence: Theory and Context (6th edn, Carolina Academic Press 2012) 206. 10   United Nations Framework Convention on Climate Change stated, ‘The ultimate objective of this Convention . . . is to achieve . . . stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.’ See generally, Michael Oppenheimer and Annie Petsonk, ‘Article 2 of the UNFCCC: Historical Origins, Recent Interpretations’ (2005) 73 Climatic Change 195. 6 7

4.  economics and int’l climate change law    75 the extent to which human activities are increasing the ‘greenhouse’ warming of the planet, economists have played a leading role in discussing what should be done in response.11

The broad indifference of public international law to the economic analysis of law is a curiosity. As Malloy notes, ‘for better or for worse, and without regard to one’s politics, the borrowing of market concepts has transformed legal reasoning and captured an authoritative position in the legal imagination’.12 This is, writ small, merely an instance of the remarkable imperial ambitions of economics in recent decades13 Writ smaller still, someone forgot to tell the international lawyers. In contradistinction to practically every other field of scholarly legal enquiry, international law is almost entirely untainted by the economic analysis of law.14 To the extent that there are counter-examples, they are overwhelmingly North American. This may not be surprising given that singular influence of the economic analysis of law in US legal teaching, scholarship, and practice and this may feed the latent antagonism between international lawyers on either side of the Atlantic.15 Yet the scholarly indifference is at odds with the tools of much international law, international environmental law in particular,16 and international climate change law above all. Noting the absence of serious engagement by environmental lawyers with economic thought is not novel, but it remains substantially unaddressed.17 This chapter seeks to sketch some preliminary avenues of engagement. Whilst elements will be familiar to climate lawyers, it will argue that the accurate treatment of mainstream economics enriches lawyers’ understandings of key features of the climate regime. It also better directs and sharpens the criticisms of those who are wary of the economic method.

11   Donald MacKenzie, Material Markets: How Economic Agents Are Constructed (Oxford University Press 2008). 12  Robin Paul Malloy, Law in a Market Context: An Introduction to Market Concepts in Legal Reasoning (Cambridge University Press 2004) 3. 13   Edward P Lazear, ‘Economic Imperialism’ (2000) 115 The Quarterly Journal of Economics 99. The phenomenon, and hostility to it, is far from recent, however—see infra Swift (n 101) and Weber (n 102). 14   Though see Joel P Trachtman’s, The Economic Structure of International Law (Harvard University Press 2008), in part a rejoinder to an earlier, less sophisticated foray into the genre—Jack L Goldsmith and Eric A Posner, The Limits of International Law (Oxford University Press, USA 2006). 15   Guglielmo Verdirame, ‘“The Divided West”: International Lawyers in Europe and America’ (2007) 18 European Journal of International Law 553. For a specific instance in the context of international environmental law, see Alan Boyle’s Book Review—The Art and Craft of International Environmental Law by Dan Bodansky (2011) 2 Climate Law 291–4. 16   For the non-novelty of using economic incentives to achieve environmental goals, see Gro Harlem Brundtland and World Commission on Environment and Development, Our Common Future (Oxford University Press 1987) 162, 167. 17   Supra (n 5).

76   part i. introduction

2.  The Economics of Climate Change 2.1 Economic Elements The ‘science’ of economics is the study of the allocation of scarce resources between competing ends.18 It comprises a number of foundational insights, two of which are rehearsed below. The first is that the free exchange of goods tends to move resources to their highest valued use, in which case the allocation of resources is said to be ‘Paretoefficient’.19 Indeed a situation in which all resources across the world are so allocated constitutes, for the economist, the optimal allocation of resources—that is an allocation that cannot be improved upon, being an outcome that if disturbed (e.g. by government intervention) will impose losses on some for which the gains to others provides no compensation.20 However, underpinning this insight are a number of assumptions or requirements that may be difficult to meet: • that a price can be determined for all goods (and services) to ensure they can be traded—which requires that all products are capable of being assigned property rights; • that the price of goods and services reflects the true social costs as well as private costs incurred in the production of the good or services; • price comprises all relevant information needed by the consumer to make a Pareto-improving transaction; and • that markets are competitive. If any of these assumptions are violated then the operation of market forces will not result in a Pareto equilibrium being achieved, and the actual outcome achieved by markets could be improved upon by appropriate government 18   ‘Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses’. Lionel Robbins, An Essay on the Nature & Significance of Economic Science (2nd edn, revised and extended, 1949), Ch. 1.3. 19   Whilst efficiency is obviously not the only value, ‘it is valuable for the policy-maker to have information as to the economically appropriate approach even where another value is to prevail . . . the efficiency characteristics of legal principles [are] valuable even if the principal objective of the legal principle in question is something other than wealth-maximisation’. AI Ogus, Costs and Cautionary Tales: Economic Insights for the Law (Hart Publishing 2006) 26, 14. For a magisterial dismantling of the use of efficiency in law and economics, see Duncan Kennedy, ‘Cost–Benefit Analysis of Entitlement Problems: A Critique’ (1981) 33 Stanford Law Review 387. 20   For critiques, see Amartya Sen, ‘The Impossibility of a Paretian Liberal’ (1970) 78 Journal of Political Economy 152; Guido Calabresi, ‘The Pointlessness of Pareto: Carrying Coase Further’ (1991) 100 Yale Law Journal 1211. For a rare deployment of paretianism in International Environmental Law, see Jonathan Baert Wiener, ‘On the Political Economy of Global Environmental Regulation’ (1998) 87 Georgetown Law Journal 749.

4.  economics and int’l climate change law    77 intervention. That should deliver a Paretian improvement, albeit unlikely to yield Pareto optimality. The second, and closely related, foundational insight is that economic agents respond to incentives. Economic agents are rational utility maximizers, meaning that they will undertake those actions which raise their level of utility. Smith’s ‘invisible hand’ insight argued that by so doing, economic agents would collectively deliver the optimal allocation of society’s resources—albeit he used slightly different language!21 The economics of climate change—and environmental economics more generally—draws on both insights. From these building blocks, a number of concepts of more direct application to climate change appear: temporality, property, and public goods.

A. Temporality One way to look at this is to recall that economics is the study of the allocation of scarce resources between competing ends, and then to recognize that the environment itself has become a scarce resource which requires to be allocated between competing ends. The difficulty, however, is that unlike most goods and services, the challenge facing environmental (or climate change) economists is not the allocation of the environment between competing uses at any point in time, but rather the allocation of ‘the environment’ over different time periods. That is, what type of environment do we wish to bestow upon future—as yet unborn—generations and what decisions do we need to take now in order to achieve this outcome? But determining the time preference for society in its consumption of the environment is not the sole—or even the principal—problem. After all, we all save for the future despite the fact we have no fixed idea of what we will spend our savings on when the future arrives. All we know is that if we are to save for the future, then we expect a reward for doing so—that is, an interest rate payment that exceeds the rate of inflation in order that our future real savings value exceeds the aggregate amount we have actually saved. Why? Because we value future consumption less than we value present consumption. We need to be rewarded for postponing our consumption— that is, we need to be rewarded for saving. The same holds for the environment. If we are to ‘save’ the environment for future generations then we need to be rewarded for doing so. We will not do so out of altruistic reasons, even where a sizeable number of individuals may be altruistic about saving the environment. So we have to be incentivized if we are to ‘save the planet’ for future consumption.   The notion that the self-interested actions of individuals may have the unintended consequence of benefitting society is often attributed to Smith but certainly predates him, at least to Bernard Mandeville, The Fable of the Bees: Or Private Vices, Public Benefits (FB Kaye (ed), Facsimile edition, Liberty Fund Inc 1988). See also Mikko Tolonen, Mandeville and Hume: Anatomists of Civil Society (Voltaire Foundation 2013). 21

78   part i. introduction But who are ‘we’ in this context? Who is to save the planet? Whose planet is it? This raises an additional problematic feature of climate change economics (and environmental economics generally) which is that nobody can claim to own the climate in the sense of enjoying a property right upon the planet which she/he can invoke if others undertake activities that damage her/his planet. How then are we to go about persuading rational economic agents to desist from harming a planet given that there is nobody who is able to legally require the delinquents to stop damaging ‘their property’? After all, underpinning the savings and investment decisions that are made daily by rational economic agents is the certain knowledge that they enjoy legal ownership of the savings or investment medium which they purchase, and which provides the vehicle for their ‘consumption in the future’. Certainly there will be risks associated with any financial (or other) instrument by which we purchase future consumption. But these risks will be factored into the decision-making of the economic agent—for instance in terms of the rate of return they require in order to hold any particular investment instrument. Economists approach this issue by reference to the notion of discount rates.22 These can be thought of as the inverse of compound interest rates. Whereas compounding measures the future value of a present-day investment, discounting measures how much a future benefit is worth today. A low or zero discount rate will value future generations at the same rate as the present one (even though they may be wealthier than us). A high discount rate reduces or ‘discounts’ the welfare of future generations. The flipside of discount rates is the question of altruism and reward. Expenditure to ensure a given future environment is expenditure that cannot be used for present consumption. Since preserving the environment is costly, those making the expenditure require more than the warm glow of giving. Even if large numbers of individuals are so motivated, the lukewarm successes of the Kyoto Protocol suggest that few states are similarly disposed. Discount rates stand at the heart of the debates surrounding the Stern Review. Stern’s core argument for strong and early action to mitigate climate change is premised on a low discount rate (of 1.4 per cent p.a.).23 In other words, a trilliondollar cost of addressing climate change within the coming century is worth $247bn today. Others, however, such as Nordhaus, prefer a higher discount rate of six per cent, and as such, downgrade the present value of a future environment (to $2.5bn).24 This then has profound implications, both general (‘how much, how fast, how costly?’) and specific (‘what is carbon price is necessary to make the necessary investments in society?’). In respect of the former, higher discount rates suggest   Partha Dasgupta, ‘Commentary: The Stern Review’s Economics of Climate Change’ (2007) 199 National Institute Economic Review 4. 23   Stern (n 1) 50–54. 24   William Nordhaus, ‘A Review of the Stern Review on the Economics of Climate Change’ (2007) XLV Journal of Economic Literature 686. 22

4.  economics and int’l climate change law    79 that climate action can be deferred; for the latter, the inability of the climate regime to reward adequately those making significant postponements in their present consumption on the promise of future benefits (or dis-benefits avoided) to others, is a key challenge.

B. Property A particularity of the environment is that nobody can claim ownership over it in the form of a legal entitlement. Creating a market for the atmosphere or climate quickly faces the challenge of ‘property’. Markets exist for the purchase and sale of property but is there property in the climate? Ownership is a key aspect of property consisting of possession, use, and disposition. It is not straightforward to argue that any of us ‘possess’ the climate or a subset thereof. Moreover, we are unable to exclude others from it on the basis that we own it—likewise usage and disposition. The latter approach poses similar challenges. There is thus a need for law to create property rights, to deliver us from the climatic ‘state of nature’, in which government is absent and claim rights are unenforceable.25 As Coase demonstrated in 1959, the non-existence of binding property rights proves to be an insuperable impediment to the operation of a market in the product concerned, and therefore to the efficient allocation of resources.26 In his view, and the central proposition of ‘The Problem of Social Cost’, the initial distribution of legal entitlements does not matter from an efficiency perspective so long as these entitlements can be freely exchanged. Therefore in the absence of legally binding property rights over the environment, we are unable to ensure that ‘the environment’ is efficiently traded at the present time, or over the future. Of course one of the key goals of emission trading schemes is precisely to change this situation and to assign property rights with regard to consumption of the environment in a specifically defined and limited manner.

C. Public Goods In terms of economic analysis, the economics of climate change constitutes an example of a ‘public good’.27 A public good is defined as a good that is non-rivaled and non-excludable, meaning respectively that the consumption of the good by one individual does not reduce availability of the good for consumption by others, and that no one can be effectively excluded from using the good. If we consider the ­prevention of climate change as an economic product, delivering that product to 25   See generally, Gregory S Alexander and Eduardo Peñalver, An Introduction to Property Theory (Cambridge University Press 2012). 26   RH Coase, ‘The Federal Communications Commission’ (1959) 2 Journal of Law and Economics 1, 1. 27   For a classic account see Garrett Hardin, ‘The Tragedy of the Commons’ (1968) 162 Science 1243; see also Scott Barrett, Environment and Statecraft: The Strategy of Environmental Treaty-Making (Oxford University Press 2005).

80   part i. introduction one individual makes it equally available to all other individuals without impacting on the quantity or quality of the product available to the first individual. Similarly, if we deliver the prevention-of-climate-change product, there is no mechanism whereby the person purchasing that product can exclude everyone else from consuming that product. Accordingly, and this is the essence of the public good problem, nobody will express a demand or willingness to pay for this product, because as long as someone else expresses a demand, they will be able to consume it freely. Clearly we are unlikely to see a market for such products—public goods—emerging. Or, public goods represent an instance of market failure. By conceptualizing the prevention of climate change as an economic product, we can readily see why the market will fail to supply this product spontaneously. Economists working in the area of climate change policy therefore face a large number of problems that need to be resolved if this product—the prevention of climate change—is to be supplied. We have identified a number of linked features of the product that demonstrate this—allocation of climate change over time; how to derive a value (or price) of postponing consumption of the environment; how to create a functioning market for the prevention-of-climate-change product that will ensure the efficient allocation of the resource of ‘the environment’ over time.

2.2 How to Act on Climate Change? A. Externalities and the Problem of Social Cost 28 . . . human-induced climate change is at its most basic level an externality. Those who produce greenhouse-gas emissions are bringing about climate change, thereby imposing costs on the world and on future generations, but they do not face directly, neither via markets nor in other ways, the full consequences of the costs of their actions.29

An externality may be the uncompensated noise, dust, or odour, etc. suffered by residents adjacent to a dirty industrial operator (a ‘negative externality’) or the pleasure one receives from viewing the herbaceous border of one’s neighbour (a ‘positive externality’). In both cases, the social cost or benefit is greater than the private one. Consider the case of a coal-fired steel mill that emits great volumes of soot which then fall on a neighbouring laundry. Such negative externalities impose a cost on society (the laundry and its customers) that is not borne by the mill operator who views this cost as external to—hence ‘externalities’—its own profit calculations,   This section draws on Ghaleigh (n 5).   Stern (n 1) 27. See also Coase, ‘The Problem of Social Cost’ (n 4) 3 and Michael J Trebilcock, The Limits of Freedom of Contract (1st edn, Harvard University Press 1994), Ch. 3. 28


4.  economics and int’l climate change law    81 resulting in too much steel being produced and too few clothes being laundered. But how to redress this imbalance, this problem of social costs? At this point in law and economic discussions, the famous interventions of Ronald Coase enter,30 challenging prior orthodoxy of the Cambridge economist, Arthur Pigou.31 The latter advances ‘a clear prescription: markets for private goods, government for public goods, taxes for externalities. Coase challenged this tradition by arguing that externalities can be cured in the market, provided that transaction costs do not obstruct private bargains’.32 When faced with a negative externality, Pigouvianism engaged the state and require direct governmental intervention in the form of the imposition of a tax on each unit of pollution equal to the marginal social damages at the efficient level of pollution. In its absence, argued Pigou, the social cost of a market activity would not be covered by the private cost of the activity—an inefficient outcome that would likely lead to overproduction, as operators are incentivized to produce beyond the optimum level. By burdening the activity in question, the market would be brought back into balance. The appeal of ‘internalizing externalities’ in this fashion is considerable, responding to a lawyerly instinct that wrongdoers should desist from and make reparations for their actions either through liability rules (by means of tort law, or in Public International Law, state responsibility, or the ‘polluter pays’ principle) or penalties (i.e., taxes or fines). Further it seems unarguable that the polluting steel mill should compensate those who ‘innocently’ bear costs arising from its activities or that a tort liability rule requires those causing damage to the property of others to compensate them for their losses. This would correspond to our intuitions regarding causation and responsibility.33 Coase’s response to Pigou’s internalization strategy, cast in the form of a series of simplified industrial scenarios based on the English common law, has at its very heart the matter of transaction costs. Assuming zero transaction costs—‘a very unrealistic assumption’34—Coase provocatively posits that the right to pollute or to prevent pollution (what he called ‘the distribution of legal rights’) would not matter because the higher valuing party could always purchase the right from the lower valuing user, if the latter was initially allocated that right (say, by tort law).35 If the legal regime in place allows the burning of highly polluting coal and does not grant the laundry a right to clean air, the laundry owner is incentivized 30   Principally Coase, ‘The Problem of Social Cost’ (n 4) but also of direct relevance is Coase, ‘The Federal Communications Commission’ (n 26). 31   AC Pigou, The Economics of Welfare (Macmillan 1920). 32   Robert D Cooter, ‘Law from Order: Economic Development and the Jurisprudence of Social Norms’ in Mancur Olson and Satu Kähköhnen (eds), A Not-So-Dismal Science (Oxford University Press 2000). Emphasis added. 33   See though, Neil Duxbury, Patterns of American Jurisprudence (new edn, Clarendon Press 1997) 961: ‘the guiding impulse behind law and economics is counter-intuitiveness’. 34   Coase (n 4) at 15.    35  See generally Demsetz (n 4) 268.

82   part i. introduction to pay the steel mill to reduce its output (or take other steps) to reduce soot output. That source of potential revenue thus becomes an implicit cost to the steel mill if it declines to reduce production, and in this way the private costs, explicit and implicit, are equal to the social cost of steelmaking. Thus ‘if transaction cost is zero, no special government action is needed. Negotiations between the interacting parties will result in an efficient mix of outputs’.36 Pigou’s solution of the ‘internalization of externalities’ merely imposes a cost on the parties that cannot ‘ensure optimal outcomes (even in principle) within the constraints imposed by transaction costs’.37 Rather than requiring the intervention of the state to determine legal entitlements, Coase argued that individuals will come to an agreement with an efficient result in the absence of transaction costs. This is sometimes known as the independence property, as the final allocation of property rights will, in the stipulated circumstances, be independent from the initial allocation. Provided that property rights are properly defined, participating firms will exploit all the potential gains from trades.38 To the obvious retort that transaction costs are rarely if ever zero, Coase anticipates the challenge: In order to carry out a market transaction it is necessary to discover who it is that one wishes to deal with, to inform people that one wishes to deal and on what terms, to conduct negotiations leading up to a bargain, to draw up a contract, to undertake the inspection needed to make sure that the terms of the contract are being observed, and so on. These operations are extremely costly, sufficiently costly at any rate to prevent many transactions that would be carried out in a world in which the pricing system worked without cost.39

If, then, transaction costs are so ubiqutous, and can be ‘extremely costly’, what are the implications for the role of private ordering itself? There are, according to Deakin, three possible interpretations.40 First, that law should aim to achieve a ‘no transaction cost’ market so as to ensure effective allocation of resources. In the alternative, if the allocation of legal entitlements are only relevant when transaction costs are low, law should seek to ‘lubricate’ free exchange or allocate initial entitlements so as to minimize the need for transactions. Finally, law should not be concerned with the efficiency implications of assignment of legal entitlements but bringing competitive markets into existence. Accordingly, the main point of ‘The Problem of Social Cost’ is to highlight the prevalence of transaction costs and as such guide institutional choice.41 In a similar vein, Bix notes that more current

  Coase (n 4) at 269.   Matthew H Kramer, ‘A Coda to Coase’, In the Realm of Legal and Moral Philosophy: Critical Encounters (St Martin’s Press 1999) 101. 38  Simon Deakin, ‘Law and Economics’ in Philip A Thomas (ed), Legal Frontiers (Dartmouth Publishing Co Ltd 1996). 39   Coase, ‘The Problem of Social Cost’ (n 4), 15. 40   Deakin (n 38).    41  Ibid, 78–9. 36 37

4.  economics and int’l climate change law    83 interpretations of Coase conclude ‘that in the real world, where there are pervasive transaction costs, the initial distribution of legal rights does matter . . . many of the important later works of law and economics focused their study of (alternative) legal rules on a consideration of the effect that they have had or would have on transaction costs’.42 It should be clear then that to characterize the Coasean world as one in which transaction costs are unimportant suggests at the very least an unfamiliarity with his work. As he has pointed out: [in ‘The Problem of Social Cost’] I examined what would happen in a world in which transaction costs were assumed to be zero. My aim in so doing was not to describe what life would be like in such a world but . . . to make clear the fundamental role which transaction costs do, and should, play in the fashioning of the economic system.43

B. From ‘The Problem of Social Cost’ to Emissions Trading Tietenberg summarizes the pre-Coasean position as a series of standoffs between economists (favouring Pigouvian taxes) and policymakers (who doubted that the bureaucracy could design efficient taxes owing to the information burden).44 By thinking about the issue as one of property rights,45 and arguing for such rights to be explicit and transferable, market actors can allocate the use of this property in a cost-effective way, that is, one that achieves the overall emissions objective at the lowest cost. Moreover, so the argument goes, by putting a price on carbon, emissions trading schemes generate interrelated incentives, namely to discourage the use of carbon-intensive activities and encourage (or ‘drive’, in the vernacular) investment into the low-carbon economy. As actors are faced with bearing the full social cost of their actions, they will switch from high-carbon goods and services to low-carbon alternatives.46 The application of this basic Coasean logic to the problem of pollution is now relatively straightforward and commonly associated with the proposals of TD Crocker and JH Dales.47 They elaborated schemes in which environmental resources such   Brian Bix, ‘Coase Theorem’, A Dictionary of Legal Theory (Oxford University Press 2004) 33.   RH Coase, The Firm, the Market and the Law (new edn. University of Chicago Press 1990) 13. 44   TH Tietenberg, Emissions Trading: Principles and Practice (2nd edn, RFF Press 2006) 2. 45   See also Coase, ‘The Problem of Social Cost’ (n 4), 44: 42 43

If factors of production are thought of as rights, it becomes easier to understand that the right to do something which has a harmful effect [ . . . ] is also a factor of production . . . The cost of exercising a right (of using a factor of production) is always the loss that is suffered elsewhere in consequence of the exercise of that right.   Stern (n 1) Ch. 15.   Respectively, TD Crocker, ‘The Structuring of Atmospheric Pollution Control Systems’ in Harold Wolozin (ed), Economics of Air Pollution (WW Norton & Co 1966). and JH Dales, ‘Land, Water, and Ownership’ (1968) 1 Canadian Journal of Economics 791; JH Dales, Pollution Property and Prices: An Essay in Policy-Making and Economics (University of Toronto Press 1970) 92–4. 46 47

84   part i. introduction as air and water are recognized as tradable property in the form of transferable discharge permits, a regulator determines the total quantity of allowed emissions (the ‘cap’), distributes rights in line with the cap, and a well-functioning market allows for permit holders (individual sources of emissions) to trade their permits until a cost-effective allocation has been reached. The great virtue of such a scheme, according to Dales, is that ‘no person, or agency, has to set the price—it is set by the competition among buyers and sellers of rights’.48 As is well known, emissions trading experimentation originated in the United States of the 1970s and 1980s.49 MacKenzie highlights the ability of activist liberal economists, environmental non-governmental organization (ENGOs), and polit­ icians to make ‘possible coalitions of “left-wing” environmentalism and “right-wing” pro-market sentiment’.50 The perceived success of SO2 trading eased the transition of market logic from sulfur to carbon externalities, having ‘moved emissions trading firmly into the political mainstream in the USA’.51 The Clinton Administration arrived at the Kyoto Conference of the Parties (COP) armed with this experience and detailed economic modelling, which suggested that emissions trading at the international level could significantly reduce the costs of emissions reduction, not least to the United States. Facing down European desires for mandatory measures and non-Annex I country concerns over carbon colonialism, the US negotiators’ professionalism and clout combined with their ideological conviction to deliver the ‘flexibility mechanisms’ with which the Kyoto Protocol is associated.52 Just prior to the COP, they realized that the Brazilian proposal for a Clean Development Fund with fines for non-complying Annex I parties53 could, ‘by turning the payment from a fine into a contribution towards meeting one’s obligations’, operate as a ‘route to international emissions trading’.54 What followed—the US Senate’s Byrd–Hagel resolution, George W Bush’s rejection of Kyoto, and the EU’s desperate embrace of it—is familiar history.55

  Tietenberg (n 44) 2. See also Tietenberg (n 44) 4: ‘[T]‌ransferability, at least in principle, allows the market to handle the task of ensuring that the assignment of control responsibility ultimately ends up being placed on those who can accomplish the previously stipulated reductions at the lowest cost’ (Tietenberg, 2006). 49   Robert Stavins, ‘Experience with Market-Based Environmental Policy Instruments’ in Karl-Göran Mäler and Jeffrey R Vincent (eds), Handbook of Environmental Economics (Elsevier 2003); A Denny Ellerman, Markets for Clean Air: The U.S. Acid Rain Program (Cambridge University Press 2005). 50   MacKenzie (n 11) 176. 51   Ibid, 148–9. Note however that the serendipitous deregulation of rail-freight considerably reduced the cost of clean coal, facilitating low-cost emission reductions independently of the trading scheme. 52   Ibid. Prominent in the US delegation was William Nordhaus, see supra (n 24). 53   Michael Grubb and Duncan Brack, The Kyoto Protocol: A Guide and Assessment (Earthscan Ltd 1999) 101ff. 54   MacKenzie (n 11) 150. 55   Navraj Singh Ghaleigh, ‘Anti-Americanism and the Environment’ in Brendon O’Connor (ed), Anti-Americanism: History, Causes, Themes, vol 1 (Greenwood World Publishing 2007). 48

4.  economics and int’l climate change law    85

2.3 Why Engage with Coase? The Scholarly Imperative The case for environmental lawyers to take mainstream economics seriously has recently been argued in an important manifesto for the discipline. Fisher et al. stress the importance of engaging with: Novel legal concepts [which] are potentially relevant for understanding environmental governance regimes . . . particularly [those which] mobilise different aspects of law, economics and social ordering. Thus, for example, to understand adequately emissions trading schemes, there is a need to understand property law, regulatory theory, Coase’s theory and other economic ideas about the market.56

To what extent has this call been taken up? The above passage references an article57 that attempts to do just that, which although often unobjectionable in its account of Coasean basics,58 does contain missteps. It is claimed that ‘the acceptable limit of air pollution in this model is seen to be defined not by the regulator but by the market’.59 However, as the literature and practice make clear, the level or limit of pollution is a quintessentially political/technocratic matter in emissions trading schemes: how firms respond to that constraint is a matter for the marketplace (rather than the state). In a similar fashion the attribution to Coase of internalizing externalities60 is precisely what he does not argue.61 In a trading or negotiating scenario, many externality-creating firms will internalize nothing whilst other firms will abate. Finally, to assert that ‘whether the role of the state in emissions trading is laissez-faire or profoundly interventionist, are irrelevant as long as the emissions trading scheme constructed produces cost-effective results’62 is to ignore the key role of transaction costs and the state’s role in intervening when they obstruct voluntary exchanges.63 Another approach to Coase, which is not always clear, comes from the editor of the Journal of Environmental Law from 2007 to 2012, as such, a particularly important interlocutor.64 Hilson claims that ‘the Coase theorem suggests that a Pigouvian tax is not necessary to achieve the economists’ ideal of efficiency—all that is required is a bargained solution between polluter and polluted’.65 This misstates a central impulse of ‘The Problem of Social Cost’—that whilst frictionless bargaining may result in optimal outcomes from an efficiency perspective, it is deeply improbable given the ubiquity of transaction costs. Hilson goes on to claim in the attendant footnote that ‘it has long been pointed out that the theorem falls down where large numbers are involved and where bargaining cannot therefore

  Fisher and others (n 5) 237.   Sanja Bogojević, ‘Ending the Honeymoon: Deconstructing Emissions Trading Discourses’ (2009) 21 Journal of Environmental Law443. 58 59 60 61   Ibid 446–7, 452.   Ibid 454.   Ibid 459.   Supra Kramer (n 37). 62  Ibid.   63  Coase, ‘The Problem of Social Cost’ (n 4), 18. 64   Hilson (n 7).    65  Ibid 7. 56 57

86   part i. introduction take place without considerable transaction costs’.66 Again, this is not quite the case. In Coase’s own words cited above,67 transaction costs will have the whip hand in determining which bargains are struck and which are not. If they are present in the circumstances of simplistic scenarios of launderers and elementary arithmetic, they will certainly be present in the real world. Finally, Hilson claims that ‘Coase . . . is a true free marketeer, who believes that an efficient solution can be found without the need for government intervention of any kind’.68 Again, there is no direct reference for this statement, it ignores the implications of Coase’s treatment of transaction costs, and downplays Coase’s own recognition that governmental regulation may ‘lead to an improvement in economic efficiency. This would seem particularly likely when . . . a large number of people are involved and in which therefore the costs of handling the problem through the market or the firm may be high’.69 Given the clarity of Coase’s original article—unlike so much of contemporary economics, it is written in simple prose and requires only finger-and-toe numeracy— and its subsequent restatements, it is unfortunate that its basic message has been so poorly understood, so often, by environmental lawyers.70

3.  Immanent Critiques No challenge is made in this discussion to the assumptions or the methodology of mainstream economics—whether pertaining to rationality, information, or other characteristics of economic actors (though see Section 3.3 infra). Rather, they are provisionally accepted, not because they are invulnerable but because of the conviction that immanent critiques are more persuasive than external ones. By testing the postulates of mainstream economics by its own standards, we can locate its shortcomings, as developed according to its own logic. If the claims of mainstream economics in the climate arena, that climate lawyers find so objectionable, are vulnerable on their own terms, why do so few lawyers take this approach? Indeed, it may be worth restating emissions trading’s central claim, that a carbon price will reveal to economic actors the social cost of their activities, incentivizing the transformation to a low-carbon future. This argument depends on a sufficiently high carbon price. Generally reckoned to be in the region 67   Ibid 7.   Supra n 39. [Coase, ‘The Problem of Social Cost’ (n 4), 15.]   Coase, ‘The Problem of Social Cost’ (n 4), 18. 70   See also Kramer (n 37), citing numerous misreadings of the argument. 66 69



4.  economics and int’l climate change law    87 of €50/t in the near term, and rising over time,71 neither the CDM, JI, nor European Union Emissions Trading Scheme carbon markets have come close to such levels for a sustained period. Rather they bump along at one or even two72 orders of magnitude lower. But inveighing against emissions trading schemes on this basis relies substantially on non-legal arguments, relating to the level of caps (too high), the impact of the global financial crisis (draining demand from the system), and the travails of Kyoto’s second commitment period (unratified). How can internal, legal, arguments be made to count against the logic of emissions trading?

3.1 Transaction Costs ‘The Problem of Social Cost’ demands an attentiveness to transaction costs, in particular, their potential to impede optimal exchanges and the implications for law’s role in underpinning and regulating economic activity.73 Transaction costs are ubiquitous in market economies and arise from the transfer of property rights when parties must find one another, communicate, or exchange information.74 In the literature, there are three major sources of transaction costs: search and information costs, bargaining and decision-making costs, and monitoring and enforcement costs.75 The first of these is the cost of determining whether a particular good is available on the market, at the right quality and at the best price. This is ordinarily where brokers, lawyers included, step in to provide pertinent information to market participants, thereby reducing their transaction costs, albeit for a fee. Similarly bargaining costs, those required to come to an acceptable agreement with counterparties. Finally, there is a cost attached to ensuring that all parties hold to the terms of contracts. These may be borne by firms or governmental authorities, but in any event remain costs which may impede optimal exchanges. A further category of costs would be ‘policy-related’ transaction costs—those incurred by government in designing, monitoring, and amending policy. According to Crals and Vereeck, political transaction costs, those of ‘running and adjusting a political system’, form a distinct and critical category of costs.76 In the content   House of Commons, Energy and Climate Change Committee, ‘Report on the EU Emissions Trading System’ HC 1476, published on 26 January 2012 at 63, Professor Michael Grubb and Professor Samuel Fankhauser. 72   At the time of writing, the market price for an EUA and secondary Certified Emission Reductions (sCERs) were respectively, €4.67 and €0.51. (accessed 25 October 2013). 73   Deakin (n 38) 73. Coase first highlighted the importance of transaction costs in ‘The Nature of the Firm’ (1937) 4 Economica 386. 74   Robert N Stavins, ‘Transaction Costs and Tradeable Permits’ (1995) 29 Journal of Environmental Economics and Management 133, 134. 75   CJ Dahlman, ‘The Problem of Externality’ (1979) 22 Journal of Law and Economics 141. 76   Evy Crals and Lode Vereeck, ‘Taxes, Tradable Rights and Transaction Costs’ (2005) 20 European Journal of Law and Economics 199. 71

88   part i. introduction of emissions trading, will such costs violate the independence property and result in outcomes which are in fact dependent on initial allocation? Will they serve to reduce trading levels and increase abatement costs? In a well-known article,77 Streck and Lin raise doubts as to whether the governance of the Clean Development Mechanism is sufficiently robust to regulate an international market mechanism. They focus their criticisms on the CDM Executive Board (EB)’s unpredictable decision-making, the fact that EB members often have conflicting interests which impair or appear to impair their decision-making and that adversely affected private participants in the CDM have very constrained due process rights. The absence of procedural fairness, in particular the ability to appeal against EB determinations undermines the transparency and accountability of CDM decision-making processes. Each of these failings can be seen as transaction costs which make for improperly defined property rights, a prerequisite for effective trading. Although some of the authors’ proposals for reform—the professionalization of the EB and panels, better and more consistent funding, the elimination of political interference, and the introduction of administrative law-like processes— have been subsequently implemented, most have not. Transaction costs of this sort, those that arise from legal uncertainty and contestation, are sometimes overlooked but operate as barriers to the construction and operation of what might otherwise be an effective market. Seen most prominently in the case of the European Union Emissions Trading Scheme, which accounts for the largest part of the global carbon market, these cases have thrown keys aspects of the scheme into doubt. Examples abound: the EU’s putative extension of its Scheme to international aviation,78 challenges to the methods of national allocation of allowance and the scope of the scheme,79 and those in response to fraudulent activity in the EU Emissions Trading System (ETS) spot market which have temporarily shut down the Scheme and called into question the legal nature of EU emissions allowances (EUAs) themselves.80 Other legal challenges take the form not of court cases but the legislative difficulty of ensuring that the scheme creates sufficient scarcity to actually generate a meaningful carbon price. What MacKenzie calls ‘the politics of allocation’ has been a running sore for European legislators, desperate on the one hand to revive their flagship carbon policy, constrained on the other by corporate and national interests   Charlotte Streck and Jolene Lin, ‘Making Markets Work: A Review of CDM Performance and the Need for Reform’ (2008) 19 European Journal of International Law 409. 78   Case C-366/10, Air Transport Association of America, American Airlines, Inc, Continental Airlines, Inc, United Airlines, Inc v The Secretary of State for Energy and Climate Change [2010] OJ C260/9. 79   Navraj Singh Ghaleigh, ‘Six Honest Serving-men: Climate Change Litigation as Legal Mobilization and the Utility of Typologies’ (2010) 1 Climate Law 31. 80   Armstrong DLW GmbH v Winnington Network Ltd [2012] EWHC 10 (Ch). See more generally, Katherine Nield and Ricardo Pereira, ‘Fraud on the European Union Emissions Trading Scheme: Effects, Vulnerabilities and Regulatory Reform’ (2011) 20 European Energy and Environmental Law Review 255. 77

4.  economics and int’l climate change law    89 which resist a system-wide cap that would actually serve to push up the carbon price to a meaningful level.81 As noted above, a key tenet of PSC is that when property rights are well defined and enforceable at a low enough cost, freely bargaining parties will arrive at a mutually advantageous outcome, that is, an efficient one. However, and as Coase and subsequent commentators have been very much aware, that outcome would not necessarily be achieved in the face of significant impediments to private bargaining: ‘If, for any number of reasons, the transaction costs of private bargaining swamp available gains to trade then private bargaining will not maximise social welfare’.82

3.2 What Counts in the Climate Regime—Path Dependency A separate sort of economic argument relating to the climate regime draws on the notion of path dependency and ask, ‘what counts?’ As we know, the climate regime seeks to count, and then ratchet down, emissions measured on a territor­ ial production basis,83 that is, quantities of greenhouse gases emitted by parties.84 Subsequent debates have then sought to settle the matter of how and whose territorial emissions should be reduced in order to meet the requirements now very clearly laid down in the science,85 leading to debates over the principle of common but differentiated responsibilities (CBDR), per capita emissions, emissions per unit of GDP, and other permutations (IPCC, 2013). The demerits of this approach, upon which the entire treaty and scientific structure of the UNFCCC sits, are exposed when we consider how states have managed to reduce their emissions. In the twenty years from 1991, the United Kingdom reduced its territorial emissions86 by twenty-two per cent, as against the eight per cent target enshrined 81   MacKenzie (n 11). In January 2014, the European Parliament’s Climate Change Committee finally approved a proposal for ‘backloading’, or holding back from the market, 900m carbon permits between 2014 and 2016, so as to prop up the carbon price. Agreement on structural reforms—see European Commission, ‘The State of the European Carbon Market in 2012’ (European Commission 2012) COM(2012) 652 Final—is still pending. 82   Richard RW Brooks, Nathaniel O Keohane, and Douglas A Kysar (eds), Economics of Environmental Law (Edward Elgar Publishing 2009) xii. 83   2006 IPCC Guidelines for National Greenhouse Gas Inventories Volume 1, General Guidance and Reporting, 1.4: ‘National inventories include greenhouse gas emissions and removals taking place within national territory and offshore areas over which the country has jurisdiction’. 84   See UNFCCC, Articles 1(4) and (9), 4(1) and 4(2). 85   ‘Climate Change 2013: The Physical Science Basis’, Working Group I Contribution to the IPCC 5th Assessment Report—Changes to the Underlying Scientific/Technical Assessment. 86  584MtCO2 in 1991 and 457MtCO2 in 2011; UK emissions peaked in 1973 at 660 MtCO2. See TA Boden, G Marland, and RJ Andres, ‘Global, Regional, and National Fossil-Fuel CO2 Emissions: Carbon Dioxide Information Analysis Center (CDIAC), Oak Ridge National Laboratory’, accessed via the Tyndall Centre’s ‘Global Carbon Atlas’, (accessed 14 July 2015). In

90   part i. introduction in Annex B of the Kyoto Protocol. How has this been achieved? The answer is twofold and well-known.87 During the 1980s and 1990s the United Kingdom pursued a ‘dash-for-gas’, a long-term shift in its primary energy production from coal-based to natural gas-based, with predictable emission consequences. Yet more significantly, the United Kingdom continued its long-term trajectory as a net importer rather than exporter of manufactured goods. By offshoring its production, principally to emerging economies, the United Kingdom simultaneously appears carbon-virtuous (goods previously manufactured domestically now disappear from its greenhouse gas (GHG) inventory) whilst countries that it imports from suffer from a degradation of their GHG balance sheet. Clearly, the United Kingdom is far from unique in this respect.88 If the UNFCCC accounting method instead captured consumption, not territorial production, the position would be altered. The party that produces a good would find the associated carbon credited to its own national inventory. Although a full argument in favour of such an approach cannot be made here, it is submitted that this is a considerably more equitable approach than the present arrangements. Not only does it attribute emissions on a more just basis, it would drive down on the fundamental problem of affluent societies’—which have such ruinous climate consequences—over-consumption. The task of measuring and attributing consumption is not a simple one, but neither is that of territorial production. Sophisticated schemes for consumption-based GHG accounting—multi-regional input-out methods—have been advanced89 and debated.90 They divide the world into broad categories of CO2 consumers and producers, with the former being developed countries (including EU-27, especially EU-15, and OECD countries in which CO2 emissions from production are lower than CO2 emissions embodied in goods) and the latter being developing countries in which CO2 emissions embodied in exports are higher than CO2 emissions the same period, US emissions rose from 4823MtCO2 to 5313MtCO2 (a ten per cent increase); Chinese emissions increased from 2582MtCO2 to 9087MtCO2 (a 352 per cent increase). 87  Dieter Helm, ‘Climate-change Policy: Why Has so Little Been Achieved?’ (2008) 24 Oxford Review of Economic Policy 211 and Dieter Helm, The Carbon Crunch: How We’re Getting Climate Change Wrong—and How to Fix It (Yale University Press 2012). 88   From 1991 to 2011, UK consumption emissions fell from 650MtCO2 to 630MtCO2 (a three per cent reduction). In the same period, US consumption emissions increased from 4715MtCO2 to 5724MtCO2 (a twenty-one per cent increase); Chinese emissions increased from 2350MtCO2 to 7478MtCO2 (a 318 per cent increase). See Boden et al (n 86). 89  Glen P Peters and Edgar G Hertwich, ‘Post-Kyoto Greenhouse Gas Inventories: Production Versus Consumption’ (2008) 86 Climatic Change 51. 90   House of Commons, Energy and Climate Change Committee, ‘Consumption-based Emissions Reporting’, HC 1646, published on 27 March 2012: ‘[T]‌he fall in the United Kingdom’s territorial emissions was not entirely or even mostly a consequence of the Government’s climate policy. Rather, it was mainly a result of the switch from coal to gas-fired electricity generation that began in the early 1990s, and the shift in manufacturing industries away from the United Kingdom in response to the pressures of globalised markets’ ¶22.

4.  economics and int’l climate change law    91 embodied in imports). Moreover, the gap between CO2 embodied in consumption and CO2 emissions taking place within the territory is accelerating.91 Why then has the territorial-based approach persisted? Why has the more equitable consumption-based approach not superseded it, which would amongst other things address the persistent problem of carbon leakage? The answer is to be found in the notion of path dependency, the idea that prior decisions constrain (or expand) the subsequent range of possible or feasible choices.92 For present purposes, initial conditions, even of technical matters (such as the method of accounting for carbon emissions taken in 1992), can wield considerable determination effects for the future of the regime, even blocking future, more productive or equitable methods. The very term path dependence chimes with the idea that choosing the road ‘less travelled by . . . has made all the difference’.93 It could be that taking the right hand fork at a junction takes a traveller to the same destination (say, arriving at a low-carbon economy) as the left. But it might also be the case that it does not, that the prior decision (turning right) closes off the option of reaching a low-carbon economy. That ‘closing off ’ may be total or practical—a low-carbon economy may now be impossible because the path has collapsed in the intervening period or merely impracticable, because the effort of retracing one’s steps is too burdensome. But why and how is path dependence significant? As we know from heads-or-tails, the history of a series of coin tosses does not influence the probabilities on the next toss, but if we restructure the example, its role becomes clearer. Consider Pólya’s Urn, an exercise in probability theory based on George Pólya’s exploration of contagion:94 Here’s how it works: Start with an urn containing two balls, one red and one black. Draw out one ball. Return that ball to the urn, together with another ball of the same colour. Continue the process until the urn fills up. Then tip out the balls and count how many there are of each colour. Obviously, the outcome of this process depends crucially on what colour call you draw first. If out of the two-ball urn you draw the red ball, and you rerun that ball and another red one to the urn, your chances of randomly drawing a red ball in the second round are two-to-one . . . and so on, until the urn is almost completely full of red balls.95

91   Ibid ¶15 and B Boitier, ‘CO2 emissions production-based accounting vs consumption: Insights from the WIOD databases’. WIOD Final Conference—Causes and Consequences of Globalization, Groningen, 24–26 April 2012. 92   See generally Stephen E Margolis and SJ Liebowitz, ‘Path Dependence’ in Peter Newman (ed), The New Palgrave Dictionary of Economics and the Law (Palgrave Macmillan 1998); Oona A Hathaway, ‘Path Dependence in the Law: The Course and Pattern of Legal Change in a Common Law System’ (2001) 86 Iowa Law Review 601. 93   ‘The Road Not Taken’, Robert Frost, Mountain Interval (Henry Holt 1916). 94   RP Boas, ‘George Pólya 1887–1985’, National Academy of Sciences of the United States of Amercia: Bibliographical Memoirs, vol 59 (National Academy of Sciences 1990). 95   R.E. Goodin, Innovating Democracy: Democratic Theory and Practice After the Deliberative Turn (Oxford University Press 2008)112–13.

92   part i. introduction Simply put, the serendipitous act of drawing out a ball of a particular colour in round one skews draws in subsequent rounds meaning that the eventual outcome is substantially determined by what happens at the early stages. In the case of territorial emissions accounting, the decision taken at the climate regime’s formative period owes much to technical rather than principled reasons. Methods of analysing lifecycle analysis, and the technologies of remote sensing (the key elements of consumption-based accounting), were too underdeveloped in the early 1990s to be sufficiently robust. That is now considerably less true but that initial decision, of an apparently technical and discrete nature, serves to wield considerable determination effects such that the departure from territorial emissions is regarded as fanciful, owing to the embedded nature of the accounting method.96 Conceptual entropy of this sort might be characterized as ‘second degree path dependence’, that which occurs when ‘the inferiority of a chosen path is unknowable at the time a choice is made, but we later recognize that some alternative path would have yielded greater wealth . . . dependence on past conditions leads to outcomes that are regrettable and costly to change’.97

3.3 Rationality and Information In his laconic account of the development of carbon markets, MacKenzie notes that economic actors in the EU ETS, which accounts for the largest part of the global carbon market, consistently act in ways which are not conventionally rational. For example, companies issued with free allowances which were not needed for compliance purposes declined to sell when a significant profit was realisable, or to abate when this costs less than the allowance price. Rather than treating the ETS as a profit opportunity (as economic theory anticipates), most industry actors instead viewed it merely as a compliance matter.98 How are we to account for such conduct within an economic frame? Behavioural law and economics provides something of an answer, modifying as it does conventional economic assumptions about rationality in the light of what we know about actual decision-making. Drawing on the work of figures such as Herbert A Simon and Daniel Kahneman99 (respectively, 1978 and 2002 Nobel Prize for Economics), the   House of Commons, Energy and Climate Change Committee, ‘Consumption-based Emissions Reporting’, HC 1646, ¶80–3. 97   Margolis and Liebowitz (n 92), ‘Path Dependence’, 18. See also Guido Calabresi, ‘Transaction Costs, Resource Allocation and Liability Rules: A Comment’ (1968) 11 Journal of Law and Economics 67. 98   MacKenzie (n 11). 99   See generally, Herbert Alexander Simon, Models of Bounded Rationality: Empirically Grounded Economic Reason (MIT Press 1982) and Amos Tversky and Daniel Kahneman, ‘Rational Choice and the Framing of Decisions’ (1986) 59 The Journal of Business S251. 96

4.  economics and int’l climate change law    93 behavioural approach recognizes the fragility of neoclassical economics’ assumption of rationality. At its heart is ‘bounded rationality’, the notion that individual or organizational analysis is characterized by ‘act[ing] on limited information, after truncated reflection, and in ways that may not be entirely consistent with earlier decisions’.100

4. Conclusion The imperial ambitions of economics have long attracted hostility. The empire of reason’s foundational task of commensurability was attacked by Swift over three centuries ago101 and the confidence of economics to see the world with new accuracy through its lens caused Weber to remark in his inaugural lecture that ‘When a way of looking at things breaks new ground so confidently, it is in danger of falling prey to certain illusions and of overestimating the significance of its own point of view’.102 In the environmental context this has led to suspicion of commodification and suggestion that ‘[t]‌o presume that markets and market signals can best determine all allocative decisions is to presume that everything can in principle be treated as a commodity’.103 Rather than reject all economic argument, however, this chapter has sought to work within its own logic, limited though that is. The immanent approach of course recognizes that there are other sets of values but, following a critical approach, if they are to prevail, they must first demonstrate the shortcomings of the incumbent reality. That reality is undoubtedly a culture of the market,104 in which markets govern states. There are resemblances between the primacy of market-based mechanisms in the climate regime and Foucault’s remark that ‘ordo liberals say we should . . . adopt the free market as the organizing and

100   Brian Bix, ‘Bounded Rationality’, A Dictionary of Legal Theory (Oxford University Press 2004) pp. 26–7. ‘Under the broader usage, the term [emphasizes] the habits and tendencies of thought that lead us systematically to overestimate or underestimate certain kinds of risks.’ 101   Jonathan Swift, ‘A Digression on Madness’, A Tale of a Tub (London 1704): ‘For what man in the natural state or course of thinking, did ever conceive it in his power to reduce notions of all mankind exactly to the same length, and breadth, and height as his own?’ 102   Peter Lassman and Ronald Speirs, Weber: Political Writings (Cambridge University Press 1994). 103   David Harvey, A Brief History of Neoliberalism (Oxford University Press 2009) 165. 104   ‘[T]‌o regard the Community as a technological instrument is, in the first place, to under-estimate the profound choice and cultural impact which the single market involves—a politics of efficiency, a culture of market.’ Joseph HH Weiler, ‘Fin-de-Siècle Europe’ in Renaud Dehousse (ed), Europe after Maastricht: An Ever Closer Union? (Beck 1994) 215.

94   part i. introduction regulating principle of the state . . . In other words: a state under the supervision of the market rather than a market supervised by the state?’105 The truth of Foucault’s observation can be seen in the apparently unending proliferation of market mechanisms in the climate realm. Whether at international or national or sub-national level, emissions trading schemes are springing up with ever-greater frequency. The likelihood is that these schemes will be no more successful than those in the EU or under the Kyoto Protocol. Nonetheless, whether lawyers like it or not, an understanding of economics is necessary for a full, critical, understanding of the climate regime.

105  Michel Foucault, The Birth of Biopolitics: Lectures at the Collège de France, 1978–79 (Michel Senellart (ed), Palgrave Macmillan 2008) 116.

Part II


Chapter 5


1. Origins of the UNFCCC


2. Text of the 1992 UNFCCC


3. 1997 Kyoto Protocol


4. The Kyoto Mechanisms


5. The Rise of Carbon Trading


6. The Road from Kyoto: Implementation of the Protocol


7. The Special Climate Change Fund and the Least Developed Countries Fund


8. Kyoto Protocol Adaptation Fund


9. The Post-Kyoto Regime


10. The Bali Action Plan


98   part ii. institutional 11. Copenhagen Accord


12. Cancun Adaptation Framework


13. The Durban Platform


14. Doha and Second Commitment Period for the Kyoto Protocol


15. The Way Forward


1.  Origins of the UNFCCC United Nations (UN) Secretary-General Ban Ki-moon has called climate change the defining issue of our era.1 It is significant, however, that it is only in the last 25 years that the full enormity of human impact on the climate system has become clearer, and that it is only in the last five years that scientists have suggested that the earth is leaving the stable conditions of the Holocene and entering the unpredictable age of the Anthropocene—an era dominated by the impacts of one species— homo sapiens.2 Although the greenhouse effect was first identified by the Swedish scientist, Svante Arrhenius, in the nineteenth century,3 it was in the 1970s that scientists concerned about the depletion of the ozone layer as a result of human chemical emissions noticed wider impacts in the atmosphere from emissions of greenhouse gases. The initial concerns were taken seriously, with the first scientific World Climate Conference convened in 1979 by the World Meteorological Organization (WMO) to assess the state of knowledge of climate and to consider the effects of climate variability and change on human society.4 This led in 1988 to the endorsement by the UN General Assembly (UNGA) of the initiative of the United Nations Environment Programme (UNEP) and WMO to establish the Intergovernmental 1   7 June 2007, (accessed 15 July 2015). 2   The term was coined in 2000, but in 2008 a proposal was presented to the Stratigraphy Commission of the Geological Society of London to make the Anthropocene a formal unit of geological epoch divisions. There is now an Anthropocene Working Group of the International Commission on Stratigraphy looking at whether the Anthropocene should be formally accepted into the Geological Time Scale. (accessed 15 July 2015). 3  Svante Arrhenius, 1896, Ueber den Einfluss des Atmosphärischen Kohlensäurengehalts auf die Temperatur der Erdoberfläche, in the Proceedings of the Royal Swedish Academy of Science, Stockholm 1896, volume 22, I N. 1, pages 1–101. 4   (accessed 15 July 2015).

5.  unfccc—basis for climate change regime    99 Panel on Climate Change (IPCC).5 The IPCC produced its first Science Assessment Report in 1990. Although in retrospect rather tentative, it did suggest important changes were taking place in the earth’s atmosphere. It attributed these to increased emissions of greenhouse gases (GHGs), the most likely reasons for which were industrial emissions and deforestation. It cautiously predicted these changes were likely to result in increased severity of storms and other extreme weather events, negative impacts on ecosystems and on biodiversity, and sea level rise. It was not until the Third Assessment Report in 2001 that the IPCC felt it could state definitely that these changes were happening and not until the Fourth Assessment Report in 2007 that they could state that they were caused by human activity.6 Nevertheless there was sufficient momentum for the UNGA to agree to incorporate the idea of an international climate convention into the preparations for the forthcoming UN Conference on Environment and Development (UNCED),7 and in December 1990 to decide to establish a process for ‘the preparation by an Intergovernmental Negotiating Committee (INC) of an effective framework convention on climate change, containing appropriate commitments’8 and to recommend that the first session of the INC be held in Washington, DC.9 After just under two years’ work by the INC, the final text was agreed in New York on 9 May 1992. It was then sent to the UNCED Conference in Rio de Janeiro in June 1992 for signature, where together with the Rio Declaration, Agenda 21, and the Convention on Biological Diversity (CBD), it was one of the key outcomes of the Earth Summit. Joined by the Convention to Combat Desertification (CCD) in 1995, the three conventions, UN Framework Convention on Climate Change (UNFCCC), CBD, and CCD, are typically known as the Rio Conventions. The

5   UNGA Resolution 43/53 on protection of global climate for present and future generations of mankind (UN Doc A/43/905 (6 Dec. 1988), reproduced in Robin Churchill and David Freestone, International Law and Global Climate Change, 1991, 240–2. 6   For full texts of all IPCC reports see (accessed 15 July 2015). The AR5 is still being completed, but the 2014 Science WG1 Report says: ‘Human influence has been detected in warming of the atmosphere and the ocean, in changes in the global water cycle, in reductions in snow and ice, in global mean sea level rise, and in changes in some climate extremes . . . This evidence for human influence has grown since the AR4). It is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century.’ (accessed 15 July 2015). 7   UNGA Res 44/206 (UN Doc. A/44/25) of 22 Dec. 1989 on possible adverse effects of sea level rise on islands and coastal areas, particularly low-lying coastal areas; UNGA Res 44/207 (UN Doc. A/44/25) of 22 Dec. 1989 on protection of global climate for present and future generations of mankind. Both reproduced in Robin Churchill and David Freestone, International Law and Global Climate Change, 1991, 243–4 and 245–8 respectively. 8   UNGA Resolution 45/212 on protection of global climate for present and future generations of mankind (UN Doc A/45/851 (21 Dec. 1990)); reproduced in Robin Churchill and David Freestone, International Law and Global Climate Change, 1991, 249–52, at 250. 9   Ibid, para 11.

100   part ii. institutional UNFCCC entered into force on 21 March 1994. Today, it has near-universal membership, with 195 parties.

2.  Text of the 1992 UNFCCC With the benefit of hindsight, and the experience of more than 20 years of difficult climate negotiations behind us, the UNFCCC—even though it is a framework—does look like a remarkably progressive instrument. Like the 1985 Vienna Convention for the Protection of the Ozone Layer, it is essentially based on a precautionary approach. In 1992 the science was considerably less certain than it has become today, yet the Convention urges action to preserve human safety where risks are high even in the face of scientific uncertainty. Its over­ arching aim, however, is not to reverse the greenhouse effect but rather, as it provides in Article 2 for ‘stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system’. The significance of ‘dangerous anthropogenic interference’ became more relevant later, when in 2007 in the Fourth Assessment Report (AR4) the IPCC warned that a rise of concentrations of carbon dioxide in the atmosphere of more than 450 parts per million (ppm) and consequential temperature rises of more than 2°C since pre-industrial times would be likely to cause ‘dangerous climate change’.10 The Convention itself, however, sets no time frame for action, requiring simply that stabilization at ‘such a level should be achieved within a time frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner’.11 Significantly, the phrase ‘to adapt naturally’ in Article 2 is one of the few references to adaptation in the UNFCCC text. The main concern of the Convention is clearly mitigation; adaptation has been widely seen as the ‘poor relation’.12 In fact only Article 4 refers to adaptation in any detail. Nevertheless, it has been suggested that the numerous references to the ‘effects’ and ‘adverse effects’ of 10   See the Forth Assessment Report (AR4), ‘The long-term perspective’, at (accessed 15 July 2015). 11   Article 2. 12  David Freestone, ‘The International Legal Framework for Adaptation’ Chapter 17 in Michael Gerard and Katrina F. Kuh (eds), Law of Adaptation to Climate Change: US and International Aspects, American Bar Association Press, 2012, pp 601–19, 601.

5.  unfccc—basis for climate change regime    101 climate change do demonstrate an implicit agenda to address such effects, through adaptation.13 In addition to precaution, the Convention is also based on other important principles such as sustainable development14 and inter-generational equity,15 as well as innovative ones like the principle of ‘common but differentiated responsibility’.16 The message is clear from the preamble that ‘the largest share of historical and current global emissions of greenhouse gases has originated in developed countries’, so further to the principle of common but differentiated responsibility, the developed country Parties should, says Article 3(1), ‘take the lead in combating climate change and the adverse effects thereof ’.17 Precaution is adumbrated in detail in Article 3(3), where the reported influence of the US is to be seen in the requirement that when precautionary action is taken it should ‘be cost-effective so as to ensure global benefits at the lowest possible cost’.18 The Convention establishes a number of institutions to further its work: a Conference of the Parties (COP) that ‘shall, within its mandate, make the decisions necessary to promote the effective implementation of the Convention’,19 a Permanent Secretariat,20 and two subsidiary bodies: the Subsidiary Body for Scientific and Technological Advice (SBSTA)21 and the Subsidiary Body for Implementation (SBI).22 These institutions are characteristic of the ‘new model’ of multilateral environmental agreements.23 The other key innovation of the Rio Conventions, which again followed the model of the Montreal Protocol that in 1990 had set up the Montreal Protocol Multilateral Fund,24 is the establishment of financing mechanisms to assist developing countries in meeting their obligations. This is taken so far by the   Philippe Sands, Principles of International Environmental Law, 261 (2nd edn, 2003).   Article 3(4). 15   Article 3(1): ‘The Parties should protect the climate system for the benefit of present and future generations of humankind, on the basis of equity.’ 16 17   Article 3(1).  Ibid. 18   Article 3(3) in full reads: ‘The Parties should take precautionary measures to anticipate, prevent or minimize the causes of climate change and mitigate its adverse effects. Where there are threats of serious or irreversible damage, lack of full scientific certainty should not be used as a reason for postponing such measures, taking into account that policies and measures to deal with climate change should be cost-effective so as to ensure global benefits at the lowest possible cost. To achieve this, such policies and measures should take into account different socio-economic contexts, be comprehensive, cover all relevant sources, sinks and reservoirs of greenhouse gases and adaptation, and comprise all economic sectors. Efforts to address climate change may be carried out cooperatively by interested Parties.’ 19 20 21 22   Article 7.   Article 8.   Article 9.   Article 10. 23   The so-called ‘Rio model’ treaties have fairly sophisticated institutional frameworks including permanent secretariats, regular conferences of parties and subsidiary bodies, and often financial mechanisms. Churchill and Ulfstein posit them as important new actors in international law: R.R. Churchill and G. Ulfstein, ‘Autonomous institutional arrangements in multilateral environmental agreements: a little-noticed phenomenon in international law’ (2000) 94 American Journal of International Law 623–59. 24   (accessed 15 July 2015). 13


102   part ii. institutional UNFCCC that Article 4(7) contains what I have previously called a ‘blanket conditionality’,25 insofar as it provides that the ‘extent to which developing country Parties will effectively implement their commitments under the Convention will depend on the effective implementation by developed country Parties of their commitments under the Convention related to financial resources and transfer of technology’.26 The idea that developing countries do not need to fulfill their obligations unless financial and technical assistance is provided is radical indeed. The World Bank had gone some considerable way to facilitate the development of a financing mechanism for this process. In early 1991, in advance of the 1992 UN Conference on Environment and Development, the French and German governments led an initiative proposing that the Bank establish a trust fund to address global environment concerns in developing countries. The objective was in part designed to acquire ‘experience which could provide a useful input into the deliberations of [UNCED]’.27 The direct result was the Global Environment Facility, financed by a Trust Fund with donor contributions of some US$1.2 billion. The Fund was established in 1991 for a three-year pilot period with the World Bank as Trustee and with UNEP and the UN Development Programme (UNDP) acting with the Bank as Implementing Agencies. Although welcoming the idea of a global fund of this kind, developing countries (the G77) were unhappy with the fact that decisions on allocations from the fund (like all its other trust funds) were to be made by the World Bank Board of Executive Directors.28 Hence at the UNCED Rio Summit itself, a great deal of attention was focused on the governance of the Global Environment Facility (GEF). Agenda 21—the key Rio policy outcome document—recommended that it be ‘restructured’29 and this same approach is specifically included in the UNFCCC text. Article 11 of the UNFCCC provides for a Financial Mechanism for the Convention. However, Article 11(2) requires that the ‘financial mechanism shall have an equitable and balanced representation of all Parties within a transparent system of governance’. Article 21 does entrust the operation of the   See David Freestone, ‘The Establishment, Role and Evolution of the Global Environment Facility: Operationalising Common but Differentiated Responsibility?’ Liber Amicorum for Thomas A. Mensah: Law of the Sea, Protection of the Marine Environment and Settlement of Disputes in T.M. Ndlaye and R. Wolfrum (eds), 2007, 1077–1107, 1084; reproduced in David Freestone, The World Bank and Sustainable Development: Legal Essays, 2012, 113–42, 120. 26 27  Ibid.   Ibid at 1079 and 115 respectively. 28   Unlike the UN ‘one country, one vote’ system, the World Bank Board decisions are taken using a weighted voting system, based on the shareholdings of the Bank’s member countries; it is therefore heavily influenced by wealthy countries. 29   Chapter 33.16(a)(iii) ‘ . . . to ensure a governance that is transparent and democratic in nature, including in terms of decision making and operations, by guaranteeing a balanced and equitable representation of the interests of developing countries, as well as giving due weight to the funding efforts of donor countries.’ 25

5.  unfccc—basis for climate change regime    103 financial mechanism to the GEF ‘on an interim basis’ until it has been ‘appropriately restructured and its membership made universal to enable it to fulfil the requirements of Article 11’.30 The result was a painful three-year restructuring process which resulted in the finalization of the text of the 1994 ‘Instrument for the Establishment of the Restructured Global Environment Facility’, with a new replenishment of US$1 billion for the forthcoming four years.31 This Restructured GEF would have a Secretariat, led by a Chief Executive Officer (CEO), which although housed in the World Bank would be ‘functionally separate’ from the Bank, and a representative Council, to meet twice a year as its main decision-making process, overseen by an Assembly of all the parties to the Instrument.32 The novel principle of Common but Differentiated Responsibility (CBDR) is also central to the organization of the Convention itself. Differentiation is explicit in the listing in Annex I of all the developed states and states with economies in transition (i.e. the members of the former Soviet Union) and in Annex II of all the developed states which would be expected to make good on undertakings to provide financial support. Developing countries are termed non-Annex I. Differentiation is reflected also in the key commitments of a number of the requirements of the Convention including Article 4, where there is a key distinction between the commitments of Article 4(1), which apply to all parties, and those of Article 4(2), which only apply to ‘developed country Parties and other parties listed in Annex I’. Looking in more detail at the text, the chapeau of Article 4(1) does contain the word ‘shall’—a generally accepted word of obligation—however, most of the ‘commitments’ listed in Article 4 are hortatory. Nevertheless, all Parties do have the obligation to develop, update, and publish ‘national inventories of anthropogenic emissions by sources and removal by sinks of all greenhouse gases not controlled by the Montreal Protocol’,33 as well as to formulate, implement, publish, and regularly update ‘national and where appropriate regional programs containing measures to mitigate climate change . . . as well as measures to facilitate adequate adaptation to climate change’.34 In addition the Parties at the ­sessions of the Conference of the Parties will review national communications with the aim of returning GHG emissions individually or jointly to their 1990 levels.35 These differentiated obligations are also reflected in Article 12 on ‘Com­ muni­cation of Information related to Implementation’, which requires Annex I   Article 21(3).   Text, updated with subsequent amendments is reproduced in David Freestone, Legal Essays, 2012 (n 25), 191–228 and at (accessed 15 July 2015). 32   For full details see Freestone (n 25).    33  Article 4(1)(a). 34  Article 4(1)(b).   35  Article 4(2)(b). 30 31

104   part ii. institutional Parties to make their first national communication within six months of the coming into force of the Convention for them.36 In contrast, non-Annex I Parties have three years, and ‘least developed countries’ may do this ‘at their discretion’.37 Finally, the UNFCCC does make provision for dispute settlement in Article 14, but it is not very sophisticated, nor is it compulsory. Parties may, on becoming a party, opt for settlement of disputes through the International Court of Justice or Arbitration in accordance with procedures to be agreed by the COP ‘as soon as practicable’ in an annex on arbitration.38 The COP is also mandated to agree an annex on conciliation.39 Neither annex has been agreed to date.

3.  1997 Kyoto Protocol As noted above, the Convention came into force on 21 March 1994. Pursuant to Article 7(4) the first session of the Conference of the Parties was held one year later in March/April of 1995 in Berlin. At that meeting, chaired by Angela Merkel, the items mandated by the Convention for that first session were reviewed, in particular the adequacy of the requirements of Article 4 UNFCCC to return anthropogenic GHG emissions to 1990 levels. The Conference decided to begin a process to allow it to strengthen the commitment in Article 4 for Annex I countries through the adoption of a protocol or other legal instrument. This process was named the Berlin   Article 12(1) requires that all National Communications shall include:


(a) A national inventory of anthropogenic emissions by sources and removals by sinks of all greenhouse gases not controlled by the Montreal Protocol, to the extent its capacities permit, using comparable methodologies to be promoted and agreed upon by the Conference of the Parties; (b) A general description of steps taken or envisaged by the Party to implement the Convention; and (c) Any other information that the Party considers relevant to the achievement of the objective of the Convention and suitable for inclusion in its communication, including, if feasible, material relevant for calculations of global emission trends. Article 12(2) requires that Annex I Parties must in addition incorporate: (a) A detailed description of the policies and measures that it has adopted to implement its commitment under Article 4, paragraphs 2(a) and 2(b); and (b) A specific estimate of the effects that the policies and measures referred to in subparagraph (a) immediately above will have on anthropogenic emissions by its sources and removals by its sinks of greenhouse gases during the period referred to in Article 4, paragraph 2(a).   Article 12(5). The COP determines the frequency of subsequent communications. 39   Article 14(2).   Article 14(7).



5.  unfccc—basis for climate change regime    105 Mandate,40 and the open-ended ad hoc group of parties established to conduct this was termed the Ad Hoc Group on the Berlin Mandate (AGBM); it was told to complete its work as early as possible in 1997 with a view to adopting the results at COP 3.41 The COP designated Ambassador Raúl Estrada-Oyuela of Argentina as Chair of the AGBM. COP 3 in December 1997 in Kyoto, Japan was a difficult meeting. Despite the relative clarity of the mandate—to return emissions of Annex I countries to 1990 levels—a number of other issues had to be agreed for a functioning Protocol: relative shares of reductions, the dates of the commitment periods, compliance procedures, the inclusion of emissions trading for which the US pressed very hard, and the role of non-Annex I countries. The final text of the Kyoto Protocol was gaveled down by Estrada, after some 48 hours of continuous negotiation, in the early hours of 11 December, the day after the planned end of the Conference. The results, however, were significant. Annex I Parties agreed, under Article 3, individually or jointly, to reduce their GHG emissions by an average of 5.2 percent below 1990 levels, for the five-year commitment period 2008–2012,42 the exact commitment levels for each Annex I Party being listed in Annex B to the Protocol. It is important to stress that these reductions of GHGs were never intended by themselves to attain the objective of stabilization of GHG emissions at the level to achieve the objective of Article 2 of the UNFCCC—it was, by analogy with the Montreal Protocol, rather seen as the first step in the development of a process by which obligations could be ratcheted up in the way that the parties to the Montreal Protocol had progressively reduced emissions of ozone depleting substances over the years. The Kyoto Protocol also introduced, for the first time in an international treaty regime, trading mechanisms to help parties achieve these emissions reductions objectives. Initially called flexibility mechanisms or flex-mechs, the more politically correct term for them is the Kyoto Mechanisms.43 There are three, plus the provision for burden-sharing among the members of a regional economic integration organization (UNFCCC-speak for the European Union). Such burden-sharing is permissible under Article 4 of the Protocol provided that the members enter into an agreement to fulfill their emission reduction obligations jointly, notify the secretariat of this agreement at time of joining the Protocol,44 and appreciate that if the members as a whole do not meet their joint target then the residual state obligations remain.45  FCCC/CP/1995/7/Add.1.1/CP 1 The Berlin Mandate: Review of the adequacy of Article 4, paragraph 2(a) and (b), of the Convention, including proposals related to a protocol and decisions on follow-up. 41   Ibid, section III, para 6. 42   The precise reduction obligations of each party are set out in Annex B. 43   G77 members criticized the use of the concept of ‘flexibility’ in describing the CDM—which has sustainable development objectives. 44 45   Article 4(2).   Article 4(6). 40

106   part ii. institutional The three market mechanisms envisaged by the Protocol are Joint Implementation under Article 6, the Clean Development Mechanism under Article 12, and emissions trading—actually more accurately, Assigned Amount trading—under Article 17. The first two are project-based; the last is a true trading arrangement. The next section deals with each in turn.46

4.  The Kyoto Mechanisms Article 6: Joint Implementation The UNFCCC envisaged Annex I Parties taking action individually or jointly,47 and at COP 1 a pilot program called Activities Implemented Jointly (AIJ) was set up, where countries collaborated voluntarily to reduce GHG emissions without expectations of future credit.48 Article 6 is largely derived from this program.49 The basic concept of Joint Implementation (JI) is that an Annex I country, whose emissions may be under its cap, hosts a project financed in whole or part by one or more Annex I countries which reduces emissions of GHGs in the host country. In return the host country agrees that the GHG emission reductions generated by that project will be transferred as Emission Reduction Units (ERUs) to the financing country or countries. This arrangement between two or more Annex I countries, all of whom have emission reduction obligations under Kyoto, is a classic ‘cap and trade’ arrangement. Reductions of GHGs in one country are financed by another which can then claim the credit against its cap. It is worth noting that with a cap and trade system, where both parties to a trade have reduction commitments, the system is, to an extent, self-policing, for both the host and the financing country need clarity of how many ERUs have moved from one to another. It is for this reason that Article 6 envisages that this can be done by the country itself or by other entities, but only under the authority and responsibility of the country, and that the 46   For more detail see Chapter 7. See also David Freestone and Charlotte Streck (eds), Legal Aspects of Carbon Trading: Kyoto, Copenhagen and Beyond (Oxford University Press 2009), passim. 47   Article 4(2)(b) talks of the aims of ‘returning [GHG emissions] individually, or jointly, to their 1990 levels’. 48   See David Freestone, ‘World Bank Initiatives towards AIJ and its potential Role in the Global Carbon Investment Business’, Proceedings of the International Workshop on Joint Implementation and Activities Implemented Jointly, International Energy Agency, 1997. 49  Although most AIJ projects—like those implemented by the World Bank (above)—were in non-Annex I countries.

5.  unfccc—basis for climate change regime    107 administrative apparatus for JI is much lighter than for the Clean Development Mechanism (CDM).50

Article 12: Clean Development Mechanism This has been called the Kyoto Surprise.51 Never part of the draft negotiating texts developed by the Berlin Mandate group, it derived from a Brazilian proposal for a clean development fund, financed from penalties paid by Annex I countries for noncompliance with emission reduction targets that would in turn finance low-carbon ‘clean’ development projects in developing countries.52 During the Kyoto negotiations themselves, it morphed into a ‘baseline and credit’ trading mechanism. The principle is relatively simple. Annex I countries with Kyoto emission reduction (ER) commitments finance projects in developing countries (non-Annex I countries, which have no Kyoto ER commitments) that promote sustainable development and also reduce GHG emissions. The Annex I countries can then claim credit against their own Kyoto targets for the emissions reductions that an independent party can certify would not have taken place in the host country without their financing. Hence these projects generate what are called Certified Emission Reductions (CERs). Unlike cap and trade, which is largely self-policing, a baseline and credit system depends entirely on the integrity of the baseline and the verification and certification procedures. Hence much of the detail of the CDM depends on ensuring this integrity. Article 12(4) makes the functioning of the CDM subject to the authority and guidance of the COP serving as the Meeting of the Parties to the Protocol, but sets up a CDM Executive Board (EB) to supervise it. Participation in the CDM must be voluntary and the emission reductions that CDM projects generate must be ‘real, measurable and long-term benefits’ and ‘additional to any that would occur in the absence of the certified project activity’.53 Importantly, like JI, participation in the CDM is open to public and private entities.54 The Protocol also envisages that CERs obtained during the period from   Although for Track 2 projects for those that do not meet initial JI eligibility criteria there is a JI Supervisory Committee (JISC), see further Chapter 7 and Anthony Hobley and Carly Roberts, ‘Joint Implementation Transactions: An Overview’, in David Freestone and Charlotte Streck (eds), Legal Aspects of Carbon Trading: Kyoto, Copenhagen and Beyond, 2009, 194–212. 51   Jacob Werksman attributes the term to Estrada himself; see ‘The Clean Development Mechanism: Unwrapping the “Kyoto Surprise”’ (1998) 7 Review of European Community & International Environmental Law, 147–58, 147. 52  FCCC/TP/2000/2 (25 November 2000). Joanna Depledge, Tracing the Origins of the Kyoto Protocol: An Article by Article Textual History, para 349. 53   Article 12(5)(b) and (c) respectively. 54   Article 12(9), on the history of these provisions and the role of Prototype Carbon Fund participant governments see David Freestone, ‘The World Bank’s Prototype Carbon Fund: Mobilising New Resources for Sustainable Development’ in Sabine Schemmer-Schulte and Ko-Yung Tung (eds), Liber 50

108   part ii. institutional 2000 up to the beginning of the first commitment period could be used for compliance during that period—the so-called ‘early start’ provision.55 Hence, after the conclusion of the Marrakech Accords in 2001, the CDM EB started work almost immediately. According to Article 12(8), the administrative expenses of the EB are to be covered by ‘a share of the proceeds from certified project activities’, which shall also be used to ‘assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation’. So was born the idea of the Adaptation Fund.56

Article 17 Emissions Trading The US had pressed hard for emission trading to be included within the Kyoto regime. Indeed it had submitted legal text in support, but after a deal of controversy in the negotiations, in the end the Kyoto text is remarkably bland—providing simply that ‘The parties included in Annex B may participate in emission trading for the purposes of fulfilling their commitments’ so long as it is ‘supplemental to domestic actions’.57 However, the COP ‘shall define the relevant principles, modalities, rules and guidelines, in particular for verification, reporting and accountability for emissions trading’.58 These ‘principles, modalities, rules and guidelines’ had to wait until the Marrakech COP 7 in 2001 to be settled.

5.  The Rise of Carbon Trading As mentioned above, it was the United States which had pressed hard for the inclusion of market mechanisms in the Kyoto Protocol, and the EU which, interestingly in retrospect, had initially opposed them. Within ten years of the finalization of the Protocol, however, the carbon market was already a huge undertaking, with the EU Emissions Trading Scheme (ETS) rapidly becoming the world’s largest carbon trading mechanism. Amicorum for Ibrahim S.I. Shihata, Kluwer Law International, The Hague, 2001, 265–341, 286–7; reproduced in David Freestone, The World Bank and Sustainable Development: Legal Essays, 2012, 73–96, 86–7.   Article 12(10).   Although its final form was not agreed until COP 16 in Cancún, see below Section 12 at p. 118. 57   A term not defined in the UNFCCC. 58   Article 17 puts the role of the COP first, a change made by chair Estrada himself, reversing the text of the final drafts. Depledge (n 52), para 394. 55


5.  unfccc—basis for climate change regime    109 The World Bank played a key facilitating role in the early market, mobilizing in 2000 the first carbon fund (called the Prototype) with contributions from the public and private sector of some US$180 million, which it invested in a range of projects under the CDM and JI.59 The CDM began its prompt start in 2001 and in 2005 the European Union mobilized the first phase of its Emissions Trading Scheme.60 By 2007 the value of the global carbon market had grown to be worth more than US$63 billion, with the CDM accounting for some US$13 billion. By 2009, as the global financial crisis began to make itself felt, trading in the EU ETS alone was still worth US$118.5 billion and the global market reached US$143.7 billion.61 However, the sort of project-based investments that generate CERs and ERUs require long lead times and as the end of the first Kyoto Protocol commitment period in 2012 began to loom, the level of investment in primary CDM projects began to decline. Fuelled by, amongst other things, uncertainty as to how, or indeed if, these trading mechanisms would continue after 2012, by 2013 the trading price of CO2 had fallen from an all-time high of some $30 per tonne to less than $1.

6.  The Road from Kyoto: Implementation of the Protocol Despite its considerable achievements, UNFCCC COP 3 had deferred a large number of administrative issues, such as emissions trading modalities and rules, for agreement at forthcoming COP meetings. This was a difficult and protracted process. The following year at COP 4, the UNFCCC Parties agreed to a ‘Buenos Aires Plan of Action’, which inter alia agreed that the deadline for reaching decisions on all three market mechanisms would be COP 6 in 2000.62 However, the controversial and protracted negotiations stretched beyond COP 6 in The Hague, and necessitated an extra COP 6bis (or COP 6.5) in Bonn in July 2001. Agreement was finally reached later that year in December at COP 7 in Marrakech, where the package of 262 pages and 39 decisions became known as the Marrakech Accords.63 59   See David Freestone, ‘The World Bank’s Prototype Carbon Fund: Mobilising New Resources for Sustainable Development’ (n 54). 60   Markus Pohlmann, ‘The European Union Emissions Trading Scheme’ in David Freestone and Charlotte Streck, Legal Aspects of Carbon Trading: Kyoto, Copenhagen and Beyond, (Oxford University Press 2009) 337–65. 61  See State and Trends of the Carbon Market 2012, The World Bank, Washington DC, 2012 (An Annual Review). 62   Decision 7/CP 4. 63   FCCC Decisions 15–19/CP 7. Reproduced in David Freestone and Charlotte Streck, Legal Aspects of Implementing the Kyoto Protocol: making Kyoto work, 2005, 567–622.

110   part ii. institutional Indeed the much-needed stimulus to finalize the Accords may have been external, for in the meantime the Kyoto Protocol was under a different threat. The US, under President Clinton, had signed the Protocol in November 1998, but after the Republican victory in the election a year later, the incoming Bush Administration announced that it would withdraw from the Protocol. Not only did this mean the loss of support from what was then the world’s largest GHG emitter, but it also cast doubt as to the ongoing viability of the Protocol, which required ratification by 55 Parties to the Convention including ratification by Annex I Parties ‘which accounted in total for at least 55 percent of the total carbon dioxide emissions for 1990 of the Parties included in Annex I’.64 The result of the US decision was therefore that virtually all the other Annex I Parties—including the Russian Federation—would have to ratify the Protocol in order to bring it into force. After a lot of behind the scenes diplomacy, this seemingly insuperable hurdle was overcome on 18 November 2004, when the Russian Federation ratified the Protocol, which then came into force on 16 February 2005. In addition to the massive agreement on the Accords, COP 7 also agreed to the establishment of three new funds to finance a range of activities, programs, and measures relating to climate change in developing countries including, for the first time, recognition of the need to provide finance for adaptation. By Decision 7/CP 7 it decided to establish a Special Climate Change Fund and a Least Developed Countries Fund that it invited the GEF, as financial mechanism of the Convention to operate. By Decision 10/CP 7 it also established a Kyoto Protocol-specific Adaptation Fund to manage the ‘share of the proceeds’ of CDM projects as envisaged in principle by Article 12(8), and to be open to receive other donations from Annex I countries. There appears to be some overlap in the mandates of these funds, but the general activities that might be financed were set out in the relevant decisions.

7.  The Special Climate Change Fund and the Least Developed Countries Fund The main practical issues with these Funds did not relate to their mandates but to their governance. COP 7 asked the Trustee and the Secretariat to propose arrangements for their establishment and operation, envisaging that the World Bank would act as Trustee but that they would each be managed separately from the GEF Trust Fund. Mobilization of resources for these funds would also not be through the   Kyoto Protocol, Article 25(1).


5.  unfccc—basis for climate change regime    111 four-yearly GEF replenishment process but through a separate process managed by the GEF Secretariat.65 The GEF Council now meets as the Least Developed Country Fund (LDCF)/ Special Climate Change Fund (SCCF) Councils with slightly different voting rules.66 Currently, 51 least developed countries (LDCs) have accessed $12.20 million in support of the preparation of their National Adaptation Programmes of Action (NAPA) through the LDCF67 and 66 countries have accessed a total of $242.26 million for 58 projects under the SCCF.68

8.  Kyoto Protocol Adaptation Fund The remit of the Adaptation Fund is a little more obvious that the two previous funds, namely to finance concrete adaptation projects and programs,69 as well as activities identified in paragraph 8 of Decision 5/CP 7. These include starting to implement adaptation activities promptly where sufficient information is available to warrant such activities, inter alia, in the areas of water resources management, land management, agriculture, health, infrastructure development, and fragile ecosystems, including mountainous ecosystems and integrated coastal zone management. Other items are more of a shopping list of possible adaptation actions.70   It was also agreed that the operational policies and procedures and governance structure of the GEF would apply to these voluntary funds. 66   Formal voting is by consensus but in the event of the vote the normal GEF rule will be amended to require both 60 per cent majority of GEF Participants represented at the LDCF/SCCF Council and 60 per cent majority of the total contribution to such fund. See further David Freestone, ‘The International Climate Change Legal and Institutional Framework: An Overview’ in David Freestone and Charlotte Streck (eds), Legal Aspects of Carbon Trading: Kyoto, Copenhagen and Beyond, 2009, 27–28. 67   (accessed 15 July 2015). 68   (accessed 15 July 2015). 69   Paragraph 1 of Decision 10/CP 7. 70   Ibid: (b) improving the monitoring of diseases and vectors affected by climate change, and related forecasting and early-warning systems, and in this context improving disease control and prevention; (c) supporting capacity building, including institutional capacity, for preventive measures, planning, preparedness and management of disasters relating to climate change, including contingency planning, in particular, for droughts and floods in areas prone to extreme weather events; (d) strengthening existing and, where needed, establishing national and regional centres and information networks for rapid response to extreme weather events, utilizing information technology as much as possible. For a wider discussion, see David Freestone, ‘The International Legal Framework for Adaptation’ in Michael Gerard and Katrina F. Kuh (eds) Law of Adaptation to Climate Change: US and International Aspects, 2012, 601–19. 65

112   part ii. institutional

9.  The Post-Kyoto Regime The Kyoto Protocol set the first commitment period to run from 2008 to 2012. The Protocol itself envisaged a procedure for establishing commitments for subsequent periods and required that the Parties shall ‘initiate the consideration of such commitments at least seven years before the end of the commitment period’.71 To meet this requirement meant in practice that the negotiations would need to start in 2005—the year that the Protocol eventually came into force. So at the first Conference of the Meeting of the Parties (or CMP as it is termed) in Montreal in December 2005 (at COP 6/CMP 1), the clock was already ticking, but an orderly approach to the negotiations was not agreed until 2007 at Bali (COP 13/CMP 3).

10.  The Bali Action Plan The Bali Action Plan sought to set up a comprehensive process to ‘enable the full, effective and sustained implementation of the Convention through long-term cooperative action, now, up to and beyond 2012’.72 The Plan included developing a ‘shared vision for long-term cooperative action, including a long-term global goal for emission reductions’.73 To achieve this, it established two Ad Hoc Working Groups: the first (AWG-KP) would look at the Kyoto Protocol and its future after 2012—including the provisions for subsequent commitments.74 The second (AWG-LCA) reflected the view that longer-term action needed to include developing countries, possibly with commitments.75 Both were to report by COP 15/CMP 5, planned for Copenhagen in December 2009.

  Article 3(9).  Bali Action Plan, Decision 1/CP 13, available at (accessed 21 September 2015). 73   See (accessed 15 July 2015). 74   Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP). 75  Ad Hoc Working Group on Long-Term Cooperative Action (AWG-LCA). The Action Plan included five elements: shared vision, mitigation, adaptation, technology and financing. The AWG-LCA subsequently split the work streams into components under those five parts. 71


5.  unfccc—basis for climate change regime    113

11.  Copenhagen Accord The December 2009 Copenhagen Climate Change Conference is generally regarded as a disaster;76 one that moreover had a chilling effect on the whole UNFCCC process. For a variety of reasons, most of which can be laid at the feet of the host government including poor preparations, inadequate facilities, and inexperienced chairing, the meeting was unable to make any substantive progress on its core agenda—the development of a global treaty. As tensions rose at the end of the meeting with the arrival of heads of state, including US President Obama, it was clear that there was nothing prepared for them to agree. In a hastily organized process the heads of state themselves—including the largest unregulated emitters of greenhouse gases—the US, China, and India—drafted a political statement— the Copenhagen Accord. The Accord does have important political significance. It explicitly recognizes climate change as ‘one of the greatest challenges of our time’ and the scientific view that global increases in temperature should be kept below 2°C to ‘prevent dangerous anthropogenic interference with the climate system’. It accepts that deep cuts in global emissions are necessary but that on the basis of equity the time frame for peaking emissions by developing countries will be longer than for developed countries. It recognizes the need for urgent action on adaptation and agrees that developed countries need to ‘provide adequate predictable and sustainable financial resources, technology and capacity building to support implementation of adaptation action in developing countries’. In a ‘bottom-up’ approach, Annex I countries listed unilateral non-binding mitigation targets in the Appendix I, and in an important ‘first’, non-Annex I countries also agreed to implement voluntary mitigation actions in Appendix II. The US itself was only able to list a reduction ‘in the range of 17%’ from 2005 levels by 2020,77 but some of the other proposals are very significant. Norway’s commitment to a 30–40 percent reduction from 1990 levels by 2020,78 and the really important undertakings by Brazil amounting to between 36.1 and 38.9 percent by 2020, including major avoided deforestation reductions.79 76  David Freestone, ‘From Copenhagen to Cancun: Train Wreck or Paradigm Shift?’ (2010) 12 Environmental Law Review, 87–93. 77   (accessed 14 September 2015). 78   (accessed 14 September 2015). 79   (accessed 14 September 2015).

114   part ii. institutional The Accord also recognized more generally the crucial role of reducing emissions from deforestation and forest degradation—the REDD agenda. It recognized the need for ‘scaled up, new and additional predictable and adequate funding’ for enhanced implementation of the UNFCCC—US$30 billion a year for 2010–2012 and sets a goal of US$100 billion a year by 2020 to address the needs of developing countries. It proposed a High Level Panel be established to study potential alternative sources of revenue80 and that a Copenhagen Green Climate Fund be established as ‘an operating entity of the financial mechanism’,81 as well as a Technology Mechanism.82 The downside, however, is that although 114 countries are listed in its chapeau as agreeing to it, the Accord is not a legal instrument and was not a part of the UNFCCC COP process.83 The final COP Plenary Meeting which had not been involved in any way with the process of negotiation refused to adopt the Accord as a UNFCCC decision—simply ‘noting’ it at the closing ceremony. It therefore exists outside the framework of the UNFCCC and has no formal legal status.

12.  Cancun Adaptation Framework After such a high-profile debacle in Copenhagen, the Mexican hosts of COP 16 in Cancún were anxious to see the UNFCCC process back on track. Controversy in the final days of the Copenhagen Meeting had prevented a few important but largely non-contentious issues being settled, notably agreement on the REDD agenda,84 but also on adaptation. The key achievement of COP 16 was probably the Cancun Adaptation Framework85 and the establishment of the Adaptation Committee to oversee this work.86 It was also decided that a transitional committee be established to draw up details of a Green Climate Fund (stripped of its negative ‘Copenhagen’ sobriquet) to be considered at

80   UN Secretary-General’s High-Level Advisory Group on Climate Change Financing, set up in response to the Accord, reported in November 2010 that US$100 billion per annum was ‘challenging but feasible’, see (accessed 14 September 2015). 81   The existing financial mechanism for the UNFCCC is of course the GEF. 82   The Mechanism mandate was agreed in Cancún (Decision 1/CP 16) and the decision to implement by 2012 was made in Durban (2/CP 17). The Technology Executive Committee reported in Doha (13/CP 18). The Climate Technology Centre and Network (CTCN) to be run by UNEP was agreed in Warsaw (25/CP 19). 83   (accessed 15 July 2015). 84   Reduction of Emissions through Deforestation and Forest Degradation. 85   (accessed 14 September 2015). 86   See further Freestone, op.cit (n 12).

5.  unfccc—basis for climate change regime    115 COP 17/CMP 7 in December 2011 in Durban.87 The Cancún Package was approved by ‘consensus’, notwithstanding the active opposition of Bolivia, a procedural innovation which has sent further ripples through the UNFCCC decision-making system.

13.  The Durban Platform By COP 17/CMP 7 in Durban in December 2011, it was clear that the two ad hoc working groups that had been talking for nearly five years about amendments to the Kyoto Protocol (AWG-KP) and longer-term cooperative action (AWG-LCA) were coming to the end of their useful life. Proposals were on the table for a new commitment period for the Kyoto Protocol and there was general recognition of the need to work now on a text which would include obligations for all countries—not simply those listed in Annex I. In what is regarded as a significant turning point in the negotiations, governments recognized the need to work now on a blueprint for a fresh universal, legal agreement to deal with climate change beyond 2020. This became the so-called Durban platform for negotiations and with the agreement of all parties, a new Ad Hoc Working Group with a much more sweeping agenda was set up. The Ad Hoc Working Group on the Durban Platform for Enhanced Action was set up ‘to develop a protocol, another legal instrument or an agreed outcome with legal force under the UNFCCC applicable to all Parties’.88 The target date for the completion of the negotiation of this new instrument is COP 21/CMP 11 in 2015, which we now know will be in Paris, with a commitment period to start by 2020.

14.  Doha and Second Commitment Period for the Kyoto Protocol As discussed above, the first commitment period of the Kyoto Protocol was agreed to run from 2008 to 2012. Hence, at the Doha COP 18/CMP 8 in December 2012, there was some urgency to finalize the negotiation of the details of the second   The Cancun Agreements: Outcome of the work of the Ad Hoc Working Group on Long-Term Cooperative Action under the Convention. Decision 1/CP 16, available at (accessed 14 September 2015). 88   Emphasis added. 87

116   part ii. institutional commitment period (CP 2) that would run from 2013 to 2020. On 8 December 2012, by decision 1/CMP 8,89 the Kyoto Parties adopted an amendment to the Kyoto Protocol. Annex I Parties committed themselves to reduce GHG emissions by at least 18 percent below 1990 levels in the eight-year period from 2013 to 2020.90 Existing provisions relating to the market mechanisms under Articles 6, 12, and 17 remain unchanged in CP 2, except that international emissions trading and joint implementation would also provide the Adaptation Fund with a 2 percent share of proceeds. The Doha Amendment requires 144 instruments of acceptance to enter into force.91 The composition of Parties in the second commitment period is different from the first. Canada had already withdrawn from the Protocol in 2011 and Japan, Russia, and New Zealand had signaled that they would not take part in the second period, leaving the 27 EU countries and Australia as the main players.92 To hasten its impact, Parties were encouraged to apply the amendment provisionally pending its entry into force.93 Parties also agreed to review their emission reduction commitments by the end of 2014, with a view to ‘increasing their respective levels of ambition’. There is also strong political will to see the Doha Amendment enter into force before COP 21/CMP 11 in Paris at the end of 2015. At a technical level, the Doha Amendment continues the accounting and carbon trading regimes of the first commitment period (CP 1): the Clean Development Mechanism, Joint Implementation, and International Emissions Trading (IET) will continue. Access to these mechanisms remains uninterrupted for all Annex I countries with targets for CP 2. However, the transparency and the accountability regime of carbon trading was increased by the agreed adoption of a common tabular format for the biennial reports of parties on measurement, reporting, and verification (MRV).94 If Kyoto Parties with ER commitments had surplus assigned amount units (AAUs) at the end of 2012, these can be carried over without limit, but with some restrictions, to CP 2.95   In accordance with Articles 20 and 21 of the Kyoto Protocol.   A number of parties, including the EU and Norway, accepted the Quantified Emission Limitation and Reduction Commitments (QELRCs) set out in the amended Annex B to the Protocol, on the basis that they may be made more rigorous in the light of a global treaty. 91   I.e. at least three-quarters of the Parties to the Protocol. 92   Other Annex I Second Commitment Period states include Belarus, Croatia, Iceland, Kazakhstan, Liechtenstein, Monaco, Norway, Switzerland, and Ukraine. 93   Paragraph 5, Decision 1/CMP 8. Parties so intending may notify the Depositary. 94   A key element was added to the measurement, reporting, and verification (MRV) framework for developed countries with the adoption of the tables for the biennial reports known as common tabular format, thereby strengthening transparency and the accountability regime. 95  Surplus assigned amount units can be carried over without limit from the first to the second commitment period of the Kyoto Protocol by Parties included in Annex I that have a target for the second commitment period, but with restrictions on the use of these carried-over AAUs for the second commitment period and quantitative limits on how many of these units may be acquired from other Parties. This is not entirely free from interpretative 89


5.  unfccc—basis for climate change regime    117

15.  The Way Forward At COP 19/CMP 9 in Warsaw in December 2013 it was formally agreed that within two years at COP 21 in Paris in December 2015, the new legal agreement which will include obligations for all UNFCCC parties, not simply Annex I countries, will be finalized and, hopefully, approved. The aspiration is that it then receives sufficient ratifications to enter into force by 2020. The future of the UNFCCC system now depends on the work and the recommendations coming from the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP). That working group has agreed on two ‘workstreams’ for approaching its task. Both face very substantial hurdles. The first ‘workstream’ focuses on the steps necessary to negotiate a global climate change agreement that will be adopted by 2015 and enter into force from 2020. A series of extra meetings, mainly additional negotiating sessions, were arranged— including a high-level Summit in New York in September 2014 hosted by the UN Secretary-General that was attended by more than one hundred Heads of State and Government, including President Obama of the United States, and leaders from the private sector and civil society. The original timetable envisaged an initial draft text by December 2014 to be considered at COP 20/CMP 10 in Lima, with a formal draft text ready by May 2015. Despite the very positive atmosphere of the Lima meeting, it was not able to agree a draft; however, a negotiating text was released after the Geneva Session of the ADP in February 2015—a development widely regarded as very promising, even though all the text was still in square brackets.96 An innovative part of this new process is that governments agreed to begin or to intensify their own national work to identify what contributions towards the agreement they each can make at a domestic level. These so-called Intended Nationally Determined Contributions (INDCs) provide a ‘bottom-up’ approach to the negotiations and are an important new element in the process.97 These plans were requested to be ready by the first quarter of 2015 and in any event well before December 2015. Developed countries were urged to support developing countries in this important domestic planning process. The Lima COP 20/MCP 10 in December 2014 had agreed that these INDCs be communicated by each Party difficulty; however, see Anja Kollmuss, ‘Doha Decisions On The Kyoto Surplus Explained’, Carbon Market Watch Policy Brief, March 2013 at (accessed 15 July 2015). 96  FCCC/ADP/2015/1. Available at (accessed 14 September 2015). 97   See the INDCs at (accessed 14 September 2015).

118   part ii. institutional to the UNFCCC secretariat through the INDC Submission Portal, in a clear and transparent manner.98 At the same time, in the second workstream, the ADP was also charged with agreeing how to further accelerate global ambition to address climate change before the proposed agreement might come into force in 2020. In particular, it would seek to close the ‘ambition gap’—that is, the gap between what countries have already agreed to in terms of mitigation actions and the actions that will be necessary to keep the atmospheric temperature rise to below 2°C, as recommended by the IPCC. The sorts of measures that have been put on the table to date include technical innovative opportunities with high potential to curb greenhouse gas emissions, implementation of environmentally sound polices and technologies, and the voluntary cancellation of CERs earned under the CDM once they have been paid for. The sorts of suggestions that have been mooted include addressing specifically the causes of black carbon, and concentrating on measures to reduce high-impact GHGs such as HFCs99 and methane.100 This is an ambitious agenda, reminiscent of the momentum leading up to Copenhagen, but with the benefit of hindsight the preparations are not purely topdown but designed also to assist developing countries to develop national strategies to fit within a global compact. The huge economies of China, India, and Brazil, with burgeoning GHG emissions, are a particular concern—but so also is the United States which has seemed incapable of making realistic commitments for national action because of the political strangle-hold of its Senate.101 While there are signs of appreciation of the need to implement GHG reduction strategies in China and Brazil,102 the United States has been a continual obstacle in the UNFCCC negotiations. It seems, however, that the Obama Administration may have found a way forward. The US administration has already used the national Clean Air Act103 to declare CO2 a pollutant and to initiate executive action by the Environmental Protection Agency (EPA) to reduce emissions from power stations.104 Its INDC released in February 2015 indicated that the ‘United States intends to achieve an economy-wide 99   1/CP 20, paras 9 and 13.   See n 105 below.   The World Bank is developing a $100m facility to purchase cheap methane emissions in bulk; (accessed 15 July 2015). 101   The US Constitution requires international treaties receive the advice and consent of two-thirds of the Senate for ratification. 102   See the proposed voluntary reduction targets flagged under the Copenhagen Accord. 103   The Act dates originally from 1963, well before climate change was mooted. P.L. 88-207 see (accessed 15 July 2015). 104  See generally David A. Wirth, ‘The International and Domestic Law of Climate Change: A Binding International Agreement without the Senate or Congress?’(2015) 39 Harvard Environmental Law Review 515–66. 98


5.  unfccc—basis for climate change regime    119 target of reducing its greenhouse gas emissions by 26–28 per cent below its 2005 level in 2025 and to make best efforts to reduce its emissions by 28%’. In addition, in the run-up to the UN Secretary-General’s Summit in September of 2014, the United States announced that it had reached a voluntary agreement with some of the largest US companies to phase out their use of HFCs. It claims by 2015 this would be equivalent to 700 million tonnes of CO2 which would be itself the equivalent of 1.5 percent of 2010 global GHG emissions.105 Meanwhile, the Green Climate Fund has been established, based in Incheon, South Korea.106 Its Board has already met a number of times and its first capitalization in late 2014 resulted in pledges of more than US$10 billion.107 The New Climate Report by the Global Commission on the Economy and Climate suggests that the investments needed for effective climate mitigation and adaptation will actually be a major stimulus to economic growth.108 It argues that: countries at all levels of income now have the opportunity to build lasting economic growth at the same time as reducing the immense risks of climate change. This is made possible by structural and technological changes unfolding in the global economy and opportunities for greater economic efficiency. The capital for the necessary investments is available, and the potential for innovation is vast. What is needed is strong political leadership and credible, consistent policies. The next 15 years will be critical, as the global economy undergoes a deep structural transformation.109

So looking forward the situation for COP 21 in Paris is much more positive than it was for Copenhagen. The ground is better prepared. Developing countries have been engaged by the process of developing realistic national GHG reduction strategies. Although the important demands for equity in a future global treaty remain,110 a number of key negotiating objectives of the G77 have been met, such as the establishment of the Adaptation Framework and the Warsaw International Mechanism for Loss or Damage.111 There are some positive signs of movement by the big economies. If politics is the art of the possible, the new global agreement may be possible—but only time will tell. 105   HFCs are 10,000 times more powerful than CO2 as a GHG, hence it is also equivalent to taking 15 million cars off the road by 2020. See (accessed 15 July 2015). 106   See . 107  See (accessed 14 September 2015). 108   Better Growth Better Climate: the New Climate Economy Synthesis Report, 2014. (accessed 15 July 2015). 109   Ibid, 8. 110   For a useful examination, see Christina Voigt, ‘Equity in the 2015 Climate Agreement’ in David Freestone and Alexander Zahar (eds), The State of Climate Law 2014 (Special issue 2014) 4 Climate Law 50–69. 111   By Decision 2/CP 19. See further Maxine Burkett, ‘Loss and Damage’, ibid, 119–30.

Chapter 6


1. Introduction and Background


2. Lessons from the Kyoto Protocol Compliance System


3. Developments under the Convention: International Assessment and Review and International Consultation and Analysis


4. Conclusion: Possible Trajectories for the Future


6.  compliance under a post-2020 regime    121

1.  Introduction and Background Specific mechanisms for facilitating and promoting compliance have become a common feature of modern multilateral environmental agreements (MEAs). Since the early 1990s when such procedures were first introduced under the Convention on Long-Range Transboundary Air Pollution of the United Nations (UN) Economic Commission for Europe and the Montreal Protocol to the Vienna Convention for the Protection of the Ozone Layer, they have spread to more than a dozen global and regional MEAs (United Nations Environment Programme (UNEP), 2007; Treves et al., 2009; Bulmer, 2012). Accordingly, a specific compliance mechanism has also been established under the Kyoto Protocol (see infra). In the 2000s, possibly due to their success, the diffusion of compliance mechanisms to new MEAs has slowed down due to disagreement over their application to both developing and developed countries. Thus, parties to the 2001 Stockholm Convention on Persistent Organic Pollutants and the 1998 Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade have failed to reach agreement on compliance mechanisms for several years (Bulmer, 2012: 58). In 2013, a compliance mechanism was agreed to form part of the Minamata Convention on Mercury in its Article 15. This contribution assesses the ways in which compliance has been addressed under the United Nations Framework Convention on Climate Change (UNFCCC) and its Kyoto Protocol (KP) in order to identify likely options/scenarios for a future new international climate agreement. It starts from the assumption that there is merit in assessing and promoting compliance with international commitments on climate change beyond the measuring, reporting, and verification (MRV) of relevant data. In particular, compliance mechanisms stabilize cooperation and enhance effective implementation by helping to build and maintain trust, address capacity problems, clarify rule ambiguities, and protect against free-riding. The politics of compliance mechanisms involves balancing two considerations. On the one side, any compliance mechanism implies some level of multilateral supervision of national implementation and thus limits national choices (‘sovereignty costs’; Abbott and Snidal, 2000: 436–40). As such, there may be a tradeoff between (the stringency of) any compliance mechanism and the willingness of countries to participate in an international agreement and especially to commit to ambitious action that will be monitored. On the other side, as mentioned above, compliance mechanisms can build trust and confidence and ensure effective implementation of commitments, while non-compliance, if not properly addressed, may undermine the agreement as a whole (Abbott and Snidal, 2000: 424–34). Given the high economic stakes involved in climate policy, a lack of assurances that others will be held accountable may thus also reduce the willingness of countries to commit to and implement ambitious action.

122   part ii. institutional This chapter proceeds in three broad steps. First, it briefly reviews the experience with the KP compliance mechanism by presenting its main features and functions and providing an overall assessment of its functioning. Second, the still-evolving relevant mechanisms under the Convention of ‘international consultation and ana­ lysis’ (ICA) applicable to developing countries and ‘international assessment and review’ (IAR) applicable to developed countries are introduced and assessed briefly. Finally, the last section identifies three principal options for elaborating compliance procedures under a future climate agreement.

2.  Lessons from the Kyoto Protocol Compliance System 2.1 Main Features and Functions of the Kyoto Protocol Compliance System The core of the KP compliance system is the ‘procedures and mechanisms relating to compliance under the Kyoto Protocol’ adopted in accordance with Article 18 of the Protocol at the first Conference of the Parties serving as the Meeting of the Parties (CMP) to the KP in 2005 in Decision 27/CMP.1 (‘Procedures and Mechanisms’). These Procedures and Mechanisms were subsequently further elaborated in rules of procedure of the KP Compliance Committee (Lefeber and Oberthür, 2012; Lefeber, 2009a). On the one side, these Procedures and Mechanisms possess features that are similar to those of compliance mechanisms of other MEAs referred to above (Bulmer, 2012). First of all, they establish a compliance committee with a limited number of twenty members and twenty alternate members acting in their individual capacities. They also determine how cases can be triggered, the procedure for addressing these cases and the applicable ‘consequences’ (for detailed analyses, see Oberthür and Lefeber, 2010; Lefeber and Oberthür, 2012; Holtwisch, 2006; see there also for the following). On the other side, the KP compliance system possesses some rather particular features that distinguish it from compliance mechanisms of other MEAs. Most notably, the Procedures and Mechanisms not only aim to promote and facilitate but also to enforce compliance. Accordingly, the KP Compliance Committee is divided into two sub-committees, the facilitative branch and the enforcement branch, contrasting other MEAs’ compliance mechanisms that are usually served by one unitary committee. Whereas such other compliance mechanisms usually

6.  compliance under a post-2020 regime    123 tend towards the rather soft ‘management’ end of the spectrum ranging from facilitation to enforcement (for the protagonists of the ‘management’ and ‘enforcement schools’ regarding compliance, see Chayes and Chayes, 1995 and Downs et al., 1996), the KP Procedures and Mechanisms include a strong enforcement component (Brunnée, 2003). The enforcement branch of the KP Compliance Committee hence also has relatively strong consequences at its disposal, which it has to apply quasi-automatically in the case of a finding of non-compliance (i.e. with little discretion to tailor the consequences to the case at hand). These consequences in particular include the suspension from the participation in the KP international carbon-market mechanisms (Joint Implementation under Article 6, the Clean Development Mechanism under Article 12, and international emissions trading under Article 17) and, in the case of non-compliance with the emission reduction targets, the deduction of 1.3 times the excess emissions from the amount of emissions allocated for the next commitment period (for more detail, see Oberthür and Lefeber, 2010: 148–52). Some other features of the KP compliance system are consequential of its particular enforcement component. To start with, especially the procedures of the enforcement branch follow relatively strict and well-defined timelines and procedural steps, including a hearing, a preliminary finding, and a final decision. Furthermore, the party concerned enjoys broad due-process rights/safeguards, including the right to make two written submissions, to request a hearing and to be represented during the proceedings (except for the elaboration and the adoption of the decisions). Overall, the KP can be considered to possess the most ‘judicial’ compliance mechanism among MEAs, as is further evidenced by its far-reaching independence from political interference, including by the CMP. Thus, decisions taken by the branches—usually by consensus but, as a last resort, by majority—are final and cannot usually be overturned by the CMP. The triggering provisions of compliance mechanisms deserve particular attention because they determine the mechanisms’ capacity to address cases of potential non-compliance. Since states have been found to be reluctant to point fingers at each other (‘there’s honour among thieves’), it is important that other actors than governments can trigger proceedings (Keohane et al., 2000). One particular alternative channel has been employed under the KP Procedures and Mechanisms: socalled expert review teams (ERTs), tasked to review national reports under the KP (annual inventory submissions and less frequent periodic national communications), are mandated to indicate any ‘question of implementation’ in their review reports, which triggers the proceedings of the Compliance Committee. Confirming the experience in other compliance mechanisms and similar proceedings, no cases have been triggered so far by parties. Rather, all the questions of implementation concerning the eight countries that the committee (i.e. its enforcement branch) has addressed in substance since 2008 have been raised in ERT reports (as of mid-2014) (Manguiat and Bondi Ogolla, 2013).

124   part ii. institutional This points to an important link between the Procedures and Mechanisms as such and the KP reporting and review system, nowadays frequently known as measuring, reporting, and verifying (MRV). The MRV system of the KP heavily builds on and expands the one under the UNFCCC itself, which also employs ERTs. It is itself a rather special feature of the governance architecture of the UNFCCC and its Kyoto Protocol not found in other MEAs. ERTs assess the information submitted by developed country parties in-depth through desk reviews or even during in-country visits. As ERTs identify problems and address them in cooperation with the developed country party reviewed during the review process, they in fact perform an important facilitative function especially as regards the fulfillment of methodological and reporting obligations, significantly limiting the need for additional facilitation by the KP Compliance Committee (facilitative branch) in this respect (Herold, 2012: 137; Oberthür and Lefeber, 2010: esp. 152–5). This may be one of the reasons why the facilitative branch has had no specific cases to address so far and has thus had little substantive work overall (see below). The Kyoto Compliance Committee’s two branches fulfill different functions, as defined in sections IV and V of the Procedures and Mechanisms. The enforcement branch is responsible for addressing cases of potential non-compliance by developed countries with (a) their emission limitation or reduction commitments under Article 3.1 of the Protocol (their emission targets); (b) the key methodological and reporting requirements under Articles 5.1/5.2 and 7.1/7.4; and (c) the eligibility requirements for participation in the carbon-market mechanisms Joint Implementation, the Clean Development Mechanism, and international emissions trading. In case of a finding of non-compliance, it has to apply pre-defined ‘consequences’, as mentioned above. The enforcement branch is also mandated to decide on the application of adjustments to inventories (for example, where emission estimates are found to be lacking or incorrect) and corrections to the database for the accounting of assigned amounts (for example, where transfers of emission units are found to be recorded inappropriately). Such a decision is warranted in situations where a related disagreement between an ERT and a party could not be resolved during the review of national greenhouse gas (GHG) emission inventories. The power to decide on adjustments of emission inventories (and consequently to resolve related disagreements) is crucial for ensuring correct and comparable data (Herold, 2012: 140–1). The facilitative branch is essentially responsible for addressing any question of implementation that does not fall under the authority of the enforcement branch. This specifically includes an early-warning function regarding (a) emission targets prior to the end of the relevant commitment period and (b) methodological and reporting requirements prior to the first commitment period. With respect to any question of implementation addressed by it, the facilitative branch, rather than determining non-compliance, is to provide advice and facilitation and promote compliance by applying a mix of consequences that can be characterized as ‘soft’.

6.  compliance under a post-2020 regime    125 As of mid-2014, the facilitative branch has not received any question of implementation and has thus had little substantive work. A submission by South Africa as Chair of the Group of 77 and China in May 2006 relating to the alleged failure of fifteen developed countries to submit reports demonstrating progress in achieving their commitments under the KP in accordance with Article 3.2 did not proceed to the merits. The branch did not proceed with this question because members could not agree on whether the submission had been properly filed by a party (see Doelle, 2012: 102–5; Lefeber and Oberthür, 2012: 82–3). Other attempts to make use of the facilitative branch’s capabilities have had little result. A request for clarification of the action the Committee could take in relation to its facilitative function, made in 2009, has remained unanswered by the CMP. Furthermore, in 2010, the facilitative branch decided to take proactive action with respect to parties that had not submitted their national communication on time. The branch wrote to Monaco and offered its services in order to facilitate the completion of the delayed fifth national communication. Without having made use of the offered services, Monaco eventually submitted its national communication in March 2011. In 2012, the branch agreed on ‘indicative working arrangements’ to execute its early-warning function. Canada declined the facilitative branch’s offer to provide its services. The consideration of the situation of other parties has not resulted in concrete action by the branch. Overall the facilitative branch has thus, despite the aforementioned attempts, made a very limited contribution to the functioning of the Kyoto Protocol.

2.2 A Brief Assessment In assessing the functioning of the KP compliance system, it is useful to distinguish compliance with methodological and reporting requirements and the resolution of disagreements over adjustments, on the one side, from compliance with the substantive mitigation targets (emission limitations and reductions), on the other. While experience exists with the former, the assessment of the latter is more speculative since it is largely based on the design of the related procedures.

A. Methodological and Reporting Requirements and Disagreements over Adjustments The enforcement branch of the KP Compliance Committee has made a significant contribution to compliance with the methodological and reporting requirements as well as to the resolution of disagreements over adjustments of inventory estimates. As of mid-2014, the enforcement branch had addressed ‘questions of implementation’ concerning eight countries. All of these cases were related to the methodological and reporting requirements and led to findings of non-compliance and the accompanying application of the foreseen consequences. As of mid-2013, all these

126   part ii. institutional cases of non-compliance had been successfully resolved and the parties concerned had returned to compliance. The enforcement branch had also addressed and successfully resolved disagreements over adjustments with respect to one country in 2012 (Slovakia). There is also evidence supporting the conclusion that the sheer existence of the compliance mechanism has acted as an incentive for parties to avoid compliance problems regarding methodological and reporting requirements, to try to resolve related issues during the ERT process and to accept adjustments calculated by the ERTs (see Lefeber and Oberthür, 2012: 94, 98–9). Overall, in these cases the committee’s enforcement branch has proved its ability to effectively address and resolve compliance issues within the framework of the applicable rules. It has delivered authoritative, quasi-judicial findings and has generally lived up to a high standard (Doelle, 2012; see also Manguiat and Bondi Ogolla, 2013). Further potential may exist for facilitating compliance with methodological and reporting requirements by addressing implementation problems early on. While the ERT process itself fulfills an important facilitative function (see above), in several cases this has not resulted in the sustained efforts required to address and resolve problems beyond the review process—as is evident from the cases brought to the enforcement branch as well as from the long list of problems indicated in other review reports (available at ). A facilitative early warning might hold potential for preventing compliance problems regarding methodological and reporting requirements from escalating all the way towards non-compliance (see also Lefeber and Oberthür, 2012; Doelle, 2012).

B. Mitigation Targets A similar potential for further enhanced facilitation may also exist regarding compliance with emission limitation and reduction commitments, that is mitigation targets. Since self-submission by a party or submissions by a party with respect to another party can be expected to remain a rare exemption, cases of potential noncompliance will primarily reach the compliance system through ERT reports. As a result, questions of implementation regarding the mitigation commitments will only reach the KP Compliance Committee after the final compliance assessment, that is in 2015/2016 at the earliest. By then, any non-compliance could not be effectively addressed/remedied anymore through measures addressing GHG emissions because the commitment period itself would long have come to a close in 2012. Although the applicability of ex-post consequences can be assumed to have a deterring effect on countries (with the question of consequences playing a role in public and political debates), it is this inability to address potential non-compliance with mitigation targets timely, built into the KP Procedures and Mechanisms, that has contributed to criticism of the KP compliance system. The case of Canada is illustrative in this respect (e.g. Murtha, 2009). As early as 2007, the Canadian government had publicly declared that it did not plan to (try to) meet its emission target, calling it ‘unrealistic’ and ‘unachievable’ (see also Lefeber, 2009b: 10–11). Despite

6.  compliance under a post-2020 regime    127 emission figures subsequently underlining and reinforcing Canada’s potential noncompliance (which could, however, in theory have been offset even after the end of the commitment period by international emission credits), the KP Compliance Committee was unable to address the issue in a proactive manner. In any event, Canada eventually withdrew from the KP in December 2011, which became effective in December 2012, just prior to the end of the commitment period. Different triggering provisions (e.g. mandating ERTs to indicate potential non-compliance to the KP Compliance Committee) would have the potential to enhance the facilitative functions of the KP compliance system as regards mitigation targets. While this would itself not allow enforcement of mitigation commitments, it would enable the Compliance Committee to clearly display potential problems and apply soft consequences (e.g. issuing recommendations). A further question concerns the effectiveness of the consequences or sanctions available in the case of (potential) non-compliance with the mitigation targets. These consequences include a declaration of non-compliance, the request for the elaboration and submission of a compliance action plan, the suspension of the party’s eligibility to sell emission units, and the deduction of 1.3 times the excess emissions from the amount of emissions allocated for the next commitment period (see above). These consequences are not negligible and are exceptionally strong when compared to compliance mechanisms of other MEAs (with some even calling them ‘penalties’; e.g. Brunnée, 2003: 274). Arguably, they exploit the potential for incentives and disincentives provided by the KP itself, even though their effectiveness remains in doubt (Oberthür and Lefeber, 2010: 148–52). More importantly, the facilitative consequences that would be available in the case of early warning of potential non-compliance are rather soft, focusing mainly on advice and facilitation (but could in general be strengthened, e.g. by allowing the issuance of warnings).

C. Overall Considerations Based on the experience with the operation of the KP Compliance Committee, one may also question the rationale for separating facilitation and enforcement. Both are frequently closely related and it is unclear why one branch may not be able to discharge both facilitative and enforcement functions (that could even be separated within one branch if parties so wished). What lessons exactly should be drawn for the future climate regime will also depend on the overall design of this future regime, which is as yet uncertain. For example, if a stringent MRV system were part of the regime, the important function fulfilled by the KP compliance system in addressing the most serious cases of noncompliance with methodological and reporting requirements may be important to consider. Also, deciding on the most appropriate data to use (where the party and the ERT disagree) could be an important function. In any event, however, there is a strong rationale for any future compliance system to be able to address any lack of action early on, that is before non-compliance has become manifest.

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3.  Developments under the Convention: International Assessment and Review and International Consultation and Analysis Compliance has not been addressed very prominently under the UNFCCC itself, probably due to the lack of precise binding obligations. Article 13 of the Convention tasked the first Conference of the Parties (COP-1) ‘to consider the establishment of a multilateral consultative process . . . for the resolution of questions regarding the implementation of the Convention’. The ensuing negotiations on the multilateral consultative process produced a draft text on related procedures that foresaw the establishment of a related committee. However, this draft text was never adopted in particular due to lack of agreement on the representation of parties on the committee (Yamin and Depledge, 2004: 384–5). While the MCP has formally remained on the table, parties have not attempted to activate it. Instead, the Cancun Agreements of 2010 initiated two new relevant developments: they launched a process for the International Assessment and Review (IAR) related to the emission reduction targets of developed countries and a process for International Consultation and Analysis (ICA) to increase the transparency of developing countries’ mitigation actions and their effects (Decision 1/CP.16). The IAR and the ICA were subsequently to some extent further developed at COP-17 in 2011 (Decision 2/CP.17) and COP-19 in 2013 (Decision 20/CP.19 on the ICA). They attempt to collectively appraise information on the implementation of mitigation pledges while implementation is still ongoing—with a clear separation between developing and developed countries. In the following, the IAR and ICA are briefly introduced and an overall ex-ante assessment is provided (which, due to the early stage of their development, is based on their design rather than any experience with their operation).

3.1 International Assessment and Review The IAR process is composed of two components, namely (1) ‘a technical review of information’ and (2) ‘a multilateral assessment of the implementation of quantified economy-wide emission reduction targets’ of developed countries (Decision 2/CP.17, para. 23). It addresses the ‘biennial reports’ of developed countries (while the review of annual national GHG inventories is to continue on an annual basis). In addition to the mitigation targets, the assessment also ‘aims at assessing the implementation of methodological and reporting requirements’ (Decision 2/CP.17, Annex II, para. 2). The technical review builds on the expert review system established under the UNFCCC (and also used under the KP; see above). Essentially,

6.  compliance under a post-2020 regime    129 ERTs are to review the information submitted in the biennial reports and to prepare related review reports. The multilateral assessment, however, is a new element. It is to take place during a session of the Subsidiary Body for Implementation (SBI) on the basis of the biennial report and related supplementary information as well as the ERT’s review report. Prior to the actual assessment, other parties can electronically submit questions and the party in question ‘should endeavor to respond to those questions’ (Decision 2/CP.17, Annex II, para. 10(b)). All parties can subsequently participate in the actual assessment during the SBI session and pose questions to the party under review. The major output of the process is a record of relevant documents and proceedings prepared by the secretariat, which forms the basis of SBI conclusions to be forwarded ‘to relevant bodies under the Convention as appropriate’ (Decision 2/CP.17, Annex II, para. 12). Importantly, the agreed guidelines do not foresee any findings, recommendations or other consequences for the party under review. The first IAR cycle started in 2014 when the first biennial reports became due, and the multilateral assessment phase started in late 2014, after the finalization of the ERT reports. A revision of the existing IAR arrangements is foreseen no later than 2016 and ‘should take into account any future agreement on a compliance regime for mitigation targets under the Convention’ (Decision 2/CP.17, para. 31).

3.2 International Consultation and Analysis Like the IAR, the ICA consists of two steps, namely (1) a ‘technical analysis’ of biennial update reports of developing countries and, on this basis, (2) a ‘facilitative sharing of views’ (Decision 2/CP.17, Annex IV, para. 1). The ICA addresses the ‘biennial update reports’ of developing countries, including national greenhouse gas inventories and other relevant information (regarding, inter alia, the mitigation actions, their implementation and relevant methodologies and assumptions), that were agreed as part of the 2010 Cancun Agreements in order to increase the transparency of developing countries’ mitigation actions. While developing countries generally have to submit these reports every other year (starting in late 2014), Least Developed Countries (LDCs) and Small Island Developing States (SIDS) may submit them at their discretion (Decision 2/CP.17, para. 41). While a parallelism between IAR and ICA seems obvious, political discussions under the COP have led to a clear separation, with the ICA remaining the softer of the two. A ‘team of technical experts’ (TTE) is to conduct the technical analysis. The composition and terms of reference of TTEs are similar to those of ERTs in charge of reviewing developed countries’ reports, with some significant differences. Thus, the agreed guidelines aim to ensure that a majority of the TTE members are from developing countries and that each TTE is geographically balanced. Also, experts serving

130   part ii. institutional on a TTE are supposed to have followed a specific training program organized by the Consultative Group of Experts on National Communications from Parties not included in Annex I to the Convention. At least one member of this Consultative Group should also, to the extent possible, form part of each TTE. The process is meant to be ‘non-intrusive, non-punitive and respectful of national sovereignty’, and does not include discussion about the appropriateness of domestic policies and measures. It may identify capacity-building needs for reporting. The TTEs are expected to provide a ‘summary report’ to be ‘noted’ by the SBI in its conclusions (Decision 2/CP.17, Annex IV, paras. 4-5; Decision 20/CP.19). The facilitative exchange of views is to be conducted by the SBI at workshops to be convened ‘at regular intervals’ on the basis of the biennial update reports and the technical summary reports. Other parties can submit written questions in advance and at the workshop. Sessions for each party (or group of up to five parties, as requested by the parties involved) are to last one to three hours. The outcome will be a ‘record of the facilitative sharing of views’. As in the case of the IAR, no findings or concrete results directed at the party in question or at others (e.g. institutions providing financial assistance) are foreseen. A first round of the facilitative sharing of views can be expected for 2015/2016. A revision of the existing ICA arrangements is foreseen no later than 2017 (Decision 2/CP.17, para 58(c); see also Annex IV).

3.3 Overall Assessment As neither the IAR nor the ICA had yet started operating at the time of writing—let alone completed a full cycle—any assessment can only be based on its core design features. The following assessment focuses on the multilateral phases, that is ‘multilateral assessment’ under the IAR and the ‘facilitative exchange of views’ under the ICA (rather than the preceding review/technical assessment phases), because these appear closest to an actual compliance mechanism. In this respect, a certain potential and several accompanying limitations can be identified. On the positive side, the multilateral phases of both the IAR and the ICA kick in before the actual target date(s) of the mitigation pledges under the Cancun Agreements, generally 2020. This is an important difference and additional potential when comparing these mechanisms to the KP Compliance Committee (see above), since both the IAR and the ICA in principle provide the opportunity to discuss and address shortcomings (as well as highlight possible success stories) relatively early on. The timing of this public scrutiny may still be too late to lead to concrete and timely correcting action by the parties reviewed towards their 2020 targets. Since it frequently takes several years from the initiation to the adoption and effective implementation of additional measures, measures initiated in 2017/2018 may unfold their main effects only after 2020. However, the prospect of public scrutiny

6.  compliance under a post-2020 regime    131 of their own implementation efforts (lacking under the KP) could act as a significant incentive for effective implementation and pressure for additional action may still arise much earlier than in the case of the KP. Assuming a regular reporting and review cycle of about two years (‘biennial’), feedback and peer pressure could already kick in earlier as regards future target dates, if the system is kept (e.g. early in the 2020s for 2030 targets). On the other side, this additional potential contrasts with—and may be canceled out by—five significant shortcomings and limitations. First, since only other parties can ask questions and raise issues during the multilateral phases, not all relevant implementation difficulties and deficits may—judging from past experience and since ‘there’s honour among thieves’—be raised. In this respect, it may be important to take into account that also the ability of ERTs and TTEs to raise issues in their respective reports are (judging from past experience as well as their mandates) very much limited. Second, it is also uncertain whether and how a problem-oriented factual debate can be ensured and politicization be avoided or at least reduced in the current setup of the assessment/consultation. Parties are the main participants within a largely political organ of the UNFCCC, the SBI, forming part of a much bigger political process. There are no safeguards built into the process that would ensure that the debate is targeted at an independent assessment following agreed criteria (e.g. through the mandates of the IAR and ICA and/or those undertaking the assessment acting in their personal capacity and thus not under political instruction). A politicization of the discussion provides particularly broad grounds for parties concerned to fend off criticism as politically motivated (rather than substantially founded). In addition, a fruitful substantive debate would require individual parties to assess very carefully the situation of a great number of other parties as reflected in the respective review reports. Third, the (institutional) capacity of the SBI or a workshop convened under it to address implementation issues in a structured, focused, and productive way can be considered sharply limited and most probably insufficient. This may be further aggravated by the lack of guidance to the processes as to the focus of the discussions. Assuming that the ‘multilateral assessment’ under the IAR and the ‘facilitative exchange of views’ under the ICA (including a presentation of the party; consideration of the review and summary reports, respectively, and discussion of issues identified) would take only about one hour per party on average (or group of parties), this would lead to a time requirement of 40–50 hours for developed countries and about 100–150 hours for developing countries (depending on the submission of reports by LDCs and SIDS). An overall total of about 200 hours translates into more than thirty days of meetings per cycle. In comparison, the SBI itself has so far convened for about 15–20 days per year. While even this seems already like an overstretch for the SBI, it is more than likely that one or several hours per party will be insufficient to address any issues

132   part ii. institutional in any detail. Any useful exploration and discussion of mitigation actions and commitments (including their effects) will involve a number of aspects, including methodologies and assumptions. The KP experience suggests the importance of such methodologies and assumptions as well as that understanding them involves intricate technical issues, which are essential for being able to assess the implementation of mitigation commitments/actions. The practice of the World Trade Organization’s (WTO) Trade Policy Review Mechanism—that has been referred to as a useful point of reference (e.g. Ellis et al., 2011; Cecys, 2010)—may provide an indication of the time required: the WTO Trade Policy Review Body takes two days of meetings per country (or group of smaller countries) to explore their situations (see ). This leads directly to the fourth limitation, namely the lack of any follow-up for cases where serious problems exist. It is the standard in compliance mechanisms of MEAs, including the one under the KP, that countries for which serious compliance issues have been identified remain on the agenda of the body responsible until the issues have been resolved. Other relevant international processes, including under the WTO and the International Monetary Fund, vary with respect to such followup (e.g. Ellis et al., 2011; Cecys, 2010)—which can be seen as an important ingredient of their effectiveness as well. No such follow-up is foreseen under the IAR and the ICA. Hence, parties will be ‘off the hook’ after their slot in the multilateral assessment/facilitative exchange of views until the next biennial (update) reports will be reviewed and assessed/analyzed. Finally, both the IAR and the ICA lag as regards actual measures. The prospect of being subject to scrutiny by peers may create some pressure and incentive for action, but the questioning ends after an hour or so without any concrete consequence. Even without thinking about ‘enforcement’ as enshrined in the KP compliance mechanism, the IAR and ICA fail to activate the potential of the compliance mechanisms of other MEAs that employ facilitative consequences such as findings (of non-compliance), expressions of concern, issuing of warnings, advice, recommendations, linking with financial institutions, etc. (e.g., Bulmer, 2012: 71–2). Applied by an international body/authority, such measures can fulfill important facilitative functions by empowering actors at the domestic scene to push for remedial action and activating international support. In this context, the example of relevant other international processes confirms the added value of consequences in general. Thus, policy change in response to the WTO Trade Policy Review Mechanism has been found to benefit from subsequent follow-up and decisions under the WTO dispute settlement procedure (Chaisse and Chakraborty, 2007). The ‘record’ resulting from the IAR and the ICA may at best provide ammunition in related bilateral and multilateral debates. It is difficult to imagine that it and the reference to other countries having asked questions can fulfill this function. Overall, the multilateral phases under the IAR and the ICA thus remain seriously lacking in supporting an effective implementation of both methodological/

6.  compliance under a post-2020 regime    133 reporting requirements and mitigation commitments/actions. They do open up an interesting potential to address implementation issues per party relatively early on, comprehensively, and on a regular and systematic basis. However, their design raises serious concerns and questions regarding the ability to contribute to effective implementation because of the lack of institutional capacity, the exclusive entitlement of parties to trigger and participate in the debate, the political nature of the debate, the lack of follow-up of problems identified, and the absence of authoritative outcomes of the process incentivizing action by individual parties.

4.  Conclusion: Possible Trajectories for the Future Thinking about the future of compliance procedures in the international cooperation on climate change may easily be speculative. How parties will address compliance in the future is a political decision that is difficult to anticipate, even if past discussions may give an indication of what is feasible politically. In any event, the experience with the existing arrangements under the KP and the UNFCCC do provide a useful reference point for addressing compliance in the future and their assessment holds important lessons for thinking about suitable design arrangements that exploit the potential of any compliance mechanism to the fullest extent possible. Before identifying three generally possible trajectories (see also in more detail Oberthür, 2014), several key design features derived from this past experience towards an effective compliance regime deserve highlighting: (a) The capacity of actors beyond governments in identifying implementation problems (i.e. triggering proceedings) and contributing to/participating in the compliance assessment should be drawn upon. (b) In order to ensure sufficient institutional capacity and authority, the compliance mechanism should rely on a dedicated body (or two bodies) with limited membership of individuals serving in their personal capacity mandated to undertake the compliance assessment independently and impartially. (c) In addition to any ad hoc triggering of compliance proceedings, the body should be mandated to regularly undertake assessments of the implementation of the agreement by each party so that issues are identified and addressed not only ex post but also early on. (d) Where implementation problems have been identified, the body should be mandated to keep these under review until they have been resolved.

134   part ii. institutional (e) The body should be mandated to take measures addressing and promoting the effective implementation in individual countries (e.g. to empower domestic actors to take further action and/or to activate international support). The current state of international discussions would suggest that any such measures would need to be facilitative. (f) Depending on the overall design of the future regime and given the central importance of data, the powers of the body should include deciding on the accuracy of reported emission data. One option to realize these design elements would consist of transferring a reformed/ adjusted KP compliance mechanism to any future climate protection arrangement. However, the political appetite for pursuing this option at present seems low. To be sure, the KP compliance mechanism has proven its capacity to address compliance issues effectively on an ex post basis (Lefeber and Oberthür, 2012; Manguiat and Bondi Ogolla, 2013). However, several important developed countries do not support the concept of enforcement enshrined in this mechanism. At the same time, many developing countries (including emerging economies) currently consider subjecting themselves to such a mechanism as an unacceptable loss of sovereignty. Under these circumstances, the prospects of building on the existing Kyoto compliance mechanism, even if reformed, seem poor. The major reform issue arising from the above list of design features would concern the ability of the mechanism to address implementation problems regularly early on. However, enforcement may be too enshrined in the KP compliance mechanism for a world in which facilitation may be the most that could be acceptable. As a second option, it may be possible to more fully exploit and enhance the potential of the evolving facilitative IAR and ICA system. It follows from the analysis above that this might be achieved by addressing the limitations and significantly strengthening the multilateral phases of the IAR and the ICA. Both currently forego a major part of their potential to effectively support and promote implementation. Simply incorporating them into a future climate agreement would thus leave a large part of the potential of compliance mechanisms untapped. At a minimum, there would need to be a clear mandate for the COP to work to improve them in the future. The above list of design features could then be employed as guidance for strengthening the IAR and ICA system so as to more effectively support implementation. Third, the governing body of the future international climate agreement may elaborate its own compliance mechanism. Given the political realities, it should be fair to assume that such a new compliance mechanism would have to focus on facilitation. In accordance with the assessment above, this new mechanism should incorporate the lessons learned from both the KP compliance system and the evolving IAR and ICA system. In essence, a new mechanism should thus reflect much the same points addressed above. Again, the above list of design features could provide useful

6.  compliance under a post-2020 regime    135 guidance. One way of elaborating such a facilitative compliance mechanism may be to start from the existing draft of the MCP under Article 13 of the Convention referred to above and to adapt it to the needs of the new future agreement (on this option, see Oberthür, 2014: 38–9 and 46–7). Overall, we may expect that a compliance mechanism—whatever its eventual form, name, and trajectory—may well have to be elaborated after the future climate agreement is adopted. For one, the issue has come to be among the most politicized areas in international climate governance as it touches upon issues of national sovereignty and is interwoven with the broader issue of equity and differentiation. Furthermore, and partially as a result, there is an important rationale for elaborating a compliance mechanism only after clarity exists to a significant degree on the cornerstones of the overall regime as this allows tailoring of the mechanism appropriately (Bulmer, 2012: 58–9). If the design of a compliance mechanism for a future climate agreement takes into account the lessons of the past, the available experience suggests that such a mechanism can make a significant contribution to bolstering and advancing international climate governance. Given the urgency of the climate change challenge, it may be wasteful not to make use of this potential.

References Abbott, K.W. and Snidal, D. (2000). ‘Hard and Soft Law in International Governance’, International Organization 54: 3, 421–56. Brunnée, J. (2003). ‘The Kyoto Protocol: Testing Ground for Compliance Theories?’, ZaöRV 63: 2, 255–80. Bulmer, J. (2012). ‘Compliance Regimes in Multilateral Environmental Agreements’, in J. Brunnée, M. Doelle, and L. Rajamani (eds), Promoting Compliance in an Evolving Climate Regime, Cambridge University Press, 55–73. Cecys, K. (2010). MRV: A Survey of Reporting and Review in Multilateral Regimes, Post2012 Policy Brief, December 2010, Arlington, VA: Pew Center on Global Climate Change. Chaisse, J. and Chakraborty, D. (2007). ‘Implementing WTO Rules through Negotiations and Sanction: The Role of Trade Policy Review Mechanism and Dispute Settlement System’, Pennsylvania Journal of International Economic Law 28: 1, 153–85. Chayes, A. and Chayes, A.H. (1995). The New Sovereignty: Compliance with International Regulatory Agreements, Harvard University Press. Doelle, M. (2012). ‘Experience with the Facilitative and Enforcement Branches of the Kyoto Compliance System’, in J. Brunnée, M. Doelle, and L. Rajamani (eds), Promoting Compliance in an Evolving Climate Regime, Cambridge University Press, 102–21. Downs, G.W., Rocke, D.M., and Barsoom, P.N. (1996). ‘Is the Good News about Compliance Good News about Cooperation?’, International Organization 50: 3, 379–406. Ellis, J., Briner, G., Dagnet, Y., and Campbell, N. (2011). Design Options for International Assessment and Review (IAR) and International Consultation and Analysis (ICA), Paris: OECD/IEA.

136   part ii. institutional Herold, A. (2012). ‘Experiences with Articles 5, 7, and 8 Defining the Monitoring, Reporting and Verification System under the Kyoto Protocol’, in J. Brunnée, M. Doelle, and L. Rajamani (eds), Promoting Compliance in an Evolving Climate Regime, Cambridge University Press, 122–46. Holtwisch, Ch. (2006). Das Nichteinhaltungsverfahren des Kyoto-Protokolls, Entstehung— Gestalt—Wirkung, Berlin: Duncker und Humblot. Keohane, R.O., Moravcsik, A., and Slaughter, A.-M. (2000). ‘Legalized Dispute Resolution: Interstate and Transnational’, International Organization 54: 3, 457–88. Lefeber, R. (2009a). ‘The Practice of the Compliance Committee under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (2006–2007)’, in T. Treves, L. Pineschi, A. Tanzi, C. Pitea, C. Ragni, and F. Romanin Jacur (eds), Non-Compliance Procedures and Mechanisms and the Effectiveness of International Environmental Agreements, The Hague: T.M.C. Asser Press, 303–17. Lefeber, R. (2009b). An Inconvenient Responsibility, Utrecht: Eleven. Lefeber, R. and Oberthür, S. (2012). ‘Key Features of the Kyoto Protocol’s Compliance System’, in J. Brunnée, M. Doelle, and L. Rajamani (eds), Promoting Compliance in an Evolving Climate Regime, Cambridge University Press, 77–101. Manguiat, M.S. and Bondi Ogolla, D. (2013). ‘The Compliance Committee of the Kyoto Protocol: Towards a Robust Assessment of Compliance with Targets for the First Commitment Period’, in J. Gerardu, M. Koparova, K. Markowitz, E. Stull, and D. Zaelke (eds), Compliance Strategies to Deliver Climate Benefits, Washington, DC: Institute for Governance & Sustainable Development, 36–9. Murtha, P.J. (2009) ‘Effective International Compliance Is Needed to Avoid “Dangerous Anthropogenic Interference” with the Climate System’, INECE Special Report on Climate Compliance 8 (December 2009) 8–9. Oberthür, S. (2014). ‘Options for a Compliance Mechanism in a 2015 Climate Agreement’, Climate Law 4: 1–2, 30–49. Oberthür, S. and Lefeber, R. (2010). ‘Holding Countries to Account: The Kyoto Protocol’s Compliance System Revisited after Four Years of Experience’, Climate Law 1: 1, 133–58. Treves, T., Pineschi, L., Tanzi, A., Pitea, C., Ragni, C., and Romanin Jacur, F. (eds) (2009). Non-Compliance Procedures and Mechanisms and the Effectiveness of International Environmental Agreements, The Hague: T.M.C. Asser Press. United Nations Environment Programme (UNEP) (2007). Compliance Mechanisms under Selected Multilateral Environmental Agreements, Nairobi: UNEP. Yamin, F. and Depledge, J. (2004). The International Climate Change Regime: A Guide to Rules, Institutions and Procedures, Cambridge University Press.

Chapter 7


Alexander Thompson

1. Introduction


2. The Evolution of Agreements for Climate Finance


3. The Landscape of Institutions for Climate Finance


4. Improving the Governance of Climate Finance


5. Mobilizing Climate Finance: Political and Legal Challenges


6. Conclusion: Obstacle and Opportunity


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1. Introduction From the earliest days of the global climate change regime, the question of how to finance efforts to address the problem has featured prominently in policy debates and international negotiations. Much of the emphasis has been on promoting the transfer of resources—in the form of aid, loans, and investments—from wealthier countries to the developing world for the purpose of reducing emissions of greenhouse gases (mitigation) and enhancing resilience to the impacts of climate instability (adaptation). These transfers are an important manifestation of the principle of ‘common but differentiated responsibilities’, which places a greater burden on industrialized countries to address climate change and other global environmental problems. Participation by developing countries in the climate regime is critical. As a group, they have surpassed developed countries as the largest emitters of greenhouse gases and will account for a growing proportion of emissions over time, due mostly to a handful of large emerging economies and their growing need for energy. Any successful effort to mitigate will therefore depend on actions in the developing world. Indeed, even if rich countries were to completely eliminate their emissions in the near future, strong action by developing countries would be needed to prevent dangerously high levels of greenhouse gas concentrations in the atmosphere.1 At the same time, the most severe impacts of climate change will be felt in lower-income countries, especially those that are least developed. These populations are heavily dependent on agriculture and other vulnerable sectors, and their weaker infrastructure and high rates of poverty make them less capable of adapting.2 Thus while discussions of climate policy and international legal agreements have traditionally focused on the efforts and responsibilities of industrialized countries, the front lines in the battle against climate change are shifting to the developing world by necessity. Put simply, the climate problem cannot be addressed effectively without robust participation by high- and low-income countries alike. As a political reality, however, developing countries are reluctant to pay a high price or undermine their economic growth in order to combat climate change; they expect any actions they take to be heavily subsidized or compensated. For many, this is a question of fairness: The industrialized countries are historically responsible for 1   Mattia Romani, James Rydge, and Nicholas Stern, ‘Recklessly Slow or a Rapid Transition to a Low-Carbon Economy: Time to Decide,’ Centre for Climate Change Economics and Policy, Policy Paper (December 2012), 4. On the necessity of reducing emissions in developing countries, see also Eric A. Posner and David Weisbach, Climate Change Justice (Princeton, NJ: Princeton University Press, 2010); and WBGU, Solving the Climate Dilemma: The Budget Approach (Berlin: German Advisory Council on Global Change, 2009). 2  Nicholas Stern, The Economics of Climate Change: The Stern Review (New York: Cambridge University Press, 2007), Chapters 3–4; Intergovernmental Panel on Climate Change, Climate Change 2007: Impacts, Adaptation and Vulnerability (New York: Cambridge University Press, 2007).

7.  the regime for climate finance    139 a large majority of greenhouse gas emissions and have much higher emissions per capita on average, and yet it is less developed nations that will be harmed most by climate change.3 It is in this context that North–South finance has emerged as such a critical issue. Any grand bargain on climate change will hinge on agreement over specific obligations and mechanisms to promote resource flows from more to less developed countries. This chapter explores the interplay between politics and international law in the realm of climate finance, with an emphasis on its North–South dimensions.4 The chapter begins with an overview of international climate agreements and their provisions on the transfer of resources from the developed to the developing world. I then address two critical issues in the governance and future of the climate finance regime. First, the wide variety of institutions and mechanisms involved expands the scope for attracting and supplying resources but they remain fragmented and require greater coordination to be effective. Second, the mobilization of North–South finance is insufficient relative to mitigation and adaptation needs, a challenge that requires greater political will but also a stronger legal regime. I conclude by arguing that, despite significant obstacles, progress on climate finance has the potential to bridge the clash of interests that so often divides the developed and developing worlds in climate politics.

2.  The Evolution of Agreements for Climate Finance International rules related to climate finance have proliferated over the years, providing guidance to states and establishing a variety of mechanisms to channel resources from developed to developing countries. An early emphasis on mitigation has been complemented by more urgent calls to supply resources for adaptation. Although the provisions in international agreements related to climate finance generally lack   On issues of equity and justice in climate change, see Stephen M. Gardiner, ‘Ethics and Global Climate Change’ (2004) 114 Ethics 555; J. Timmons Roberts and Bradley C. Parks, A Climate of Injustice (Cambridge, Mass.: MIT Press, 2007); and Steve Vanderheiden, Atmospheric Justice: A Political Theory of Climate Change (New York: Oxford University Press, 2009). 4  I do not address in detail other important dimensions of climate finance, including domestic financing and carbon markets, which are covered thoroughly in the literature and elsewhere in this volume. For an overview, see J. Meckling and C. Hepburn, ‘Economic Instruments for Climate Change,’ in R. Falkner, ed., The Handbook of Global Climate and Environment Policy (Malden, Mass.: Wiley-Blackwell, 2013) 468; and Chapters 12 and 16 in this volume by Shi-Ling Hsu and Harro van Asselt, respectively. 3

140   part ii. institutional precision and legal force, they have succeeded in establishing an important set of principles and institutions to guide the regime’s evolution. This section provides an overview of the relevant agreements as a background for understanding current challenges, both political and legal.

2.1 Foundational Treaties: The Framework Convention and Kyoto Protocol An important product of the 1992 UN Conference on Environment and Development, held in Rio de Janeiro, was the Framework Convention on Climate Change (FCCC),5 the first global treaty to focus on the emerging threat of global warming. The Preamble calls on all governments to address the problem but only ‘in accordance with their common but differentiated responsibilities and respective capabilities and their social and economic conditions’. In other words, the burden should fall primarily on the most economically developed countries. The treaty goes further by recognizing the ‘specific needs and special circumstances’ of developing countries when it comes to the impacts of climate change and the costs of mitigation (Article 2.3). Building on these principles, under Article 4.3 the FCCC requires its developed country parties to supply various types of assistance. They ‘shall provide new and additional financial resources’ to meet the ‘agreed full costs’ for developing countries to formulate and implement climate-related policies. Article 4.4 further requires developed countries to ‘assist the developing country Parties that are particularly vulnerable’ in meeting the costs of adapting to the adverse effects of climate change. To facilitate these transfers, the FCCC calls for the creation of a ‘mechanism for the provision of financial resources on a grant or concessional basis’ (Article 11.1) and designates the Global Environmental Facility (GEF) as the interim operating entity of the financial mechanism (Article 21.3). The Conference of the Parties (COP) to the FCCC subsequently agreed to extend the GEF’s role indefinitely, subject to periodic review.6 The GEF’s appeal came partly from its unusual structure. Lacking its own operational capacity, it relied on three ‘implementing agencies’, the World Bank, the UN Development Programme (UNDP), and the UN Environment Programme (UNEP), to develop and implement projects. Each was supposed to engage in project activities according to its comparative advantages, thereby promoting efficiency and satisfying the needs of a variety of stakeholders.7 The FCCC   United Nations Framework Convention on Climate Change (FCCC) (Rio, 29 May 1992, 1771 UNTS 107). 6   Decision 3/CP.4, contained in FCCC/CP/1998/16/Add.1, 25 January 1999. 7   The GEF subsequently added seven new project agencies (the Food and Agricultural Organization, the International Fund for Agricultural Development, the UN Industrial Development Organization, the Asian Development Bank, the African Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank) and is in the process of expanding the set even further, to include non-governmental organizations and national agencies. 5

7.  the regime for climate finance    141 also allows developed countries to supply financing outside of its own mechanism, including through bilateral channels (Article 11.5). Some of the FCCC’s financing provisions were clarified and strengthened at the first COP, in 1995.8 Delegates agreed that the choice of projects should be ‘country driven’ and in conformity with the ‘national development priorities’ of each recipient, and that funds allocated to least developed countries would be in the form of grants rather than loans. The COP also entrusted the GEF with meeting the ‘agreed full costs’ of initial adaptation efforts, including studies on the impacts of climate change, identification of adaptation policy options, and relevant capacity building. However, no decision was made on how actual adaptation measures and projects might be financed, reflecting a lack of attention and urgency regarding adaptation in international negotiations at the time.9 Overall, while North–South financing is a major theme of the FCCC, the language is quite general. There is no timeframe and the obligations lack the precision needed to tie industrialized countries to specific amounts of financing, making any sort of accountability difficult. Moreover, stipulations such as ‘agreed costs’ and ‘new and additional’ were left undefined, to be determined by the parties themselves pending future negotiations. Nevertheless, the FCCC established the basic principles and institutional architecture to guide international climate finance and spurred a significant increase in climate-related aid.10 The 1997 Kyoto Protocol reaffirms the need for adequate and predictable financing from developed countries.11 With it, North–South transfers were also tied for the first time to binding commitments, though only indirectly. The centerpiece of the Protocol is a set of emissions reduction targets imposed on thirty-eight industrialized and transition economies (countries listed in Annex I of the FCCC). One path to reaching these targets is the Clean Development Mechanism (CDM), outlined in Article 12, which allows certified emission reduction (CER) credits generated from projects in non-Annex I countries to be applied toward Kyoto targets. The CDM was appealing to developed countries because it made it possible for them to reduce emissions—and achieve their targets—with greater flexibility and at a lower cost   See Decision 11/CP.1, contained in FCCC/CP/1995/7/Add.1, 6 June 1995, 34–38.  On the relative neglect of adaptation in international agreements during this period and in general, see Richard J.T. Klein, ‘Adaptation to Climate Variability and Change: What is Optimal and Appropriate?’ in Climate Change in the Mediterranean: Socio-Economic Perspectives of Impacts, Vulnerability and Adaptation, edited by C. Giupponi and M. Schechter (Cheltenham, UK: Edward Elgar, 2003), 32–50; and David Ciplet, J. Timmons Roberts, and Mizan Khan, ‘The Politics of International Climate Adaptation Funding: Injustice and Divisions in the Greenhouse’ (2013) 13 Global Environmental Politics 49. 10   On trends in climate-related development assistance during the 1990s, see World Bank, Beyond Bonn: World Bank Group Progress on Renewable Energy and Energy Efficiency in Fiscal 2005–2009 (Washington: World Bank Group, 2009), xi; and Axel Michaelowa and Katharina Michaelowa, ‘Climate or Development: Is ODA Diverted from Its Original Purpose?’ (2007) 84 Climatic Change 5. 11  Kyoto Protocol to the United Nations Framework Convention on Climate Change (Kyoto Protocol) (Kyoto, 11 December 1997, 2303 UNTS 148). See, especially, Article 11. 8


142   part ii. institutional (since mitigation generally is more cost-effective in the developing world). It was appealing to developing countries because it allowed them to attract investments and technology; indeed, it grew out of a series of proposals by Brazil and the Group of 77 to create a ‘clean development fund’.12 In addition to these CDM-related investments aimed at mitigation, the Kyoto Protocol envisioned an additional stream of resources devoted to adaptation. According to Article 12.8, a share of the proceeds from CDM projects should be used ‘to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation’. This launched a negotiation process that would eventually produce the Adaptation Fund (AF). A series of decisions at COP 6 (2000) and COP 7 (2001) formally established the AF and specified that a 2 percent share of the proceeds from CER sales (and any additional, voluntary contributions from Annex I parties) should be used to finance its activities. Even then, it was several years before the AF would become operational, mainly because the Protocol did not enter into force until 2005. Overall, COPs 6 and 7 were quite innovative in the area of adaptation financing and produced a number of important decisions to operationalize the provisions of the FCCC and Protocol.13 In addition to fleshing out the AF, which applied only to Kyoto parties, they established two new funds under the FCCC to be managed by the GEF: the Special Climate Change Fund (SCCF), to be used for technology transfer and infrastructure projects related to adaptation and for economic diversification, and the Least Developed Countries Fund (LDCF), designed to assist the poorest countries in developing and implementing a National Adaptation Programme of Action. These two meetings thus signaled a shift from earlier climate negotiations, with their heavy emphasis on mitigation concerns. They also resulted in agreements that were quite concrete in terms of producing institutional results, in the form of new funding mechanisms, rather than merely calling on developed countries to supply more resources.

2.2 Toward Implementation: Copenhagen, Durban and Beyond A new phase of climate negotiations was launched with the 2007 Bali Action Plan, in which finance issues feature prominently. To support action on both mitigation and adaptation, it calls for ‘Improved access to adequate, predictable and sustainable 12   J. DePledge, Tracing the Origins of the Kyoto Protocol: An Article-by-Article Textual History, Technical Paper, FCCC/TP/2000/2, 25 November 2000, 75–6. 13   See Report of the Conference of the Parties on Its Seventh Session, Held at Marrakesh From 29 October to 10 November 2001, Part Two: Action Taken by the Conference of the Parties. FCCC/ CP/2001/13/Add.1, 21 January 2002. For an overview of the decisions reached at COP 6 and 7 with respect to adaptation financing, see Saleemul Huq, ‘The Bonn-Marrakech Agreements on Funding’ (2002) 2 Climate Policy 243.

7.  the regime for climate finance    143 financial resources and financial and technical support, and the provision of new and additional resources, including official and concessional funding for developing country Parties’.14 The discussions launched at Bali culminated at COP 15 in Copenhagen, a milestone in the history of North–South finance. Although the 2009 Copenhagen Accord received most attention for what it did not achieve, significant new commitments to reduce emissions, developed countries agreed to supply ‘new and additional resources’ totaling $30 billion for the period 2010–2012, balanced between mitigation and adaptation.15 They also pledged to mobilize long-term financing of $100 billion a year by 2020 from a variety of sources, both public and private and through both bilateral and multilateral channels. On the institutional front, the parties agreed that a ‘significant portion of such funding’ should flow through a newly envisioned Copenhagen Green Climate Fund. The Copenhagen Accord was ambitious in its aspirations but was not legally binding and left many details to be worked out (the document was only three pages long).16 The two subsequent COPs, in Cancun in 2010 and Durban in 2011, were quite productive in this regard. Building on progress at Cancun, the Durban COP adopted the governing instrument for the re-labeled Green Climate Fund (GCF), designating it as an operating entity of the financial mechanism of the FCCC (alongside the GEF) and calling on its Board to balance the allocation of resources between mitigation and adaptation. They also reaffirmed the Copenhagen goal of mobilizing $100 billion a year by 2020, with financial inputs from developed country governments but also from ‘a variety of other sources, public and private’.17 The GCF began receiving funds in 2014 and faces the twin challenges of attracting sufficient capital and defining its relationship to other channels of North–South finance (issues addressed at more length below). Cancun and Durban were also notable for producing new momentum in the area of forestry. The Cancun Agreements call for ‘adequate and predictable support to developing country Parties’ to slow and reverse deforestation.18 At COP 19 in Warsaw (2013), delegates agreed on a more specific framework whereby the developed world would supply ‘results-based’ financing contingent on verification of emissions reductions and safeguards for biodiversity and the rights of indigenous peoples.19 Given that deforestation accounts for 15 to 20 percent of global carbon emissions, preservation is a key path to mitigation that also has the benefit of   Decision 1/CP.13, contained in FCCC/CP/2007/6/Add.1, 14 March 2008.   The Copenhagen Accord is Decision 2/CP.15, contained in FCCC/CP/2009/11/Add.1, 30 March 2010. 16   In the end, the COP could not agree to adopt the Copenhagen Accord because a handful of developing countries blocked it. They merely agreed to ‘take note’ of it. On the legal status of COP decisions more generally, see Jutta Brunnée, ‘COPing with Consent: Law-Making under Multilateral Environmental Agreements’ (2002) 15 Leiden Journal of International Law 1. 17  Decision 3/CP.17, contained in FCCC/CP/2011/9/Add.1, 15 March 2012 (hereinafter ‘GCF Governing Instrument’). 18   Decision 1/CP.16, contained in FCCC/CP/2010/7/Add.1. 19  The various decisions that comprise the Warsaw Framework for REDD-plus are available at (accessed 16 July 2015). 14 15

144   part ii. institutional promoting resilience to climate impacts. Through a combination of aid and offset credits, the UN estimates that financial flows to the developing world to promote Reducing Emissions from Deforestation and Forest Degradation (known as REDD) could reach $30 billion a year once the mechanisms are in place,20 and a broad set of constituencies across the North and South emphasize the benefits of increasing financial flows, both private and public, in the area of forests.21 This will be a key component of any comprehensive climate treaty that attracts global participation. Climate finance is central to current international negotiations and a key challenge for the Ad Hoc Working Group on the Durban Platform, established to produce a new, comprehensive climate treaty to go into effect by 2020. Much of the discussion concerns the implementation of the funding pledges made in Copenhagen and embraced in Durban, which will require a combination of more precise rules governing climate finance and more effective institutions to mobilize and manage financial flows. The GCF will feature prominently in this regard, though its precise role will take years to define.

3.  The Landscape of Institutions for Climate Finance Only one organization, the GEF, was originally designated in the FCCC to operate its financial mechanism. The GEF has since been joined by the GCF and they compete with several additional multilateral organizations and funds involved in channeling North–South finance. The result is a complicated tapestry of governance institutions. The expansion of climate funds and new governing bodies owes partly to the limitations of the GEF. Dating back to the Rio conference in 1992, the choice of the GEF to manage climate financing was controversial because it was tied institutionally to the World Bank and was viewed by the developing world as excessively controlled by donor countries.22 This suspicion was partly offset by an agreement at Rio to restructure the GEF toward more democratic governance, a process completed in 1994,23 and by the GEF’s reliance   (accessed 16 July 2015).   Arild Angelsen, Maria Brockhaus, William D. Sunderlin, and Louis V. Verchot, eds., Analysing REDD+: Challenges and Choices (Bogor, Indonesia: Center for International Forestry Research, 2012). 22  Joyeeta Gupta ‘The Global Environmental Facility in its North–South Context’ (1995) 4 Environmental Politics 19. 23   Nicholas Van Praag, ‘The Global Environmental Facility: Instrument Established’ (1994) 33 I.L.M. 1273. 20 21

7.  the regime for climate finance    145 on the World Bank, UNDP, and UNEP to develop projects in collaboration with host governments. The bottom-up nature of the process and the involvement of two UN agencies were appealing to the developing world, as was the GEF’s reliance on grant aid. Nevertheless, by the late 1990s there was growing discontent among developing countries with the state of climate finance and they began pushing for alternatives that served their priorities and offered them more control. From their perspective, too much funding was going toward mitigation. Developed countries preferred to invest in mitigation and its global benefit of reduced greenhouse gas emissions, rather than the more localized benefits of adaptation projects. The GEF emphasized mitigation because it is explicitly mandated to fund environmental projects with ‘global environmental benefits’.24 Although the establishment in 2001 of the SCCF and LDCF helped address adaptation, these funds are based on voluntary contributions and their resources are modest. The CDM succeeded in generating a substantial amount of investment in the developing world,25 but it had limitations as well. It focused exclusively on mitigation and emphasized private financing over public aid, and in practice the high transaction costs and strict requirements produced a relatively narrow range of projects that benefitted mostly high-capacity countries like China, India, and Brazil.26 As a reaction to this status quo, the Adaptation Fund satisfied developing country preferences by emphasizing adaptation and by offering a more reliable stream of funding based on the monetization of CDM credits. Recipients can receive AF funding through a multilateral organization like the World Bank or UNDP but can also receive it directly through an accredited ‘national implementing agency’. In contrast to the GEF model, which required that recipients work through a multilateral organization, the option of direct access satisfied developing country demands for more control and ‘country ownership’ of projects.27 Ultimately, however, the AF’s link to the Kyoto Protocol and CDM raises questions about its future. The Protocol is set to expire in 2020 and some important developed countries do not have emissions targets under it or are not parties   The GEF has since expanded its purview and recognized that local projects related to sustainable development are often linked to the production of global benefits. GEF Evaluation Office, The Role of Local Benefits in Global Environmental Programs, Evaluation Report No. 30, June 2006. 25   More than 7800 projects have been registered in the CDM, spurring over $300 billion in investments. Clean Development, Executive Board Annual Report (New York: United Nations, 2013), p. 13. 26   Axel Michaelowa and Frank Jotzo, ‘Transaction Costs, Institutional Rigidities and the Size of the Clean Development Mechanism’ (2005) 33 Energy Policy 511; Andrew Keeler and Alexander Thompson, ‘Mitigation through Resource Transfers to Developing Countries: Expanding Greenhouse Gas Offsets’ In Climate Change Policy Beyond Kyoto, edited by Robert N. Stavins and Joseph E. Aldy (New York: Cambridge University Press, 2010), 439–68. 27   Partly in response to this competition from the AF, in 2011 the GEF began a process to accredit national agencies to implement projects. GEF, Broadening the GEF Partnership under paragraph 28 of the GEF Instrument, GEF/C.40/09, 26 April 2011. 24

146   part ii. institutional (including the United States, Russia, Canada, and Japan). In the absence of ambitious targets among many of the world’s largest emitters, demand for carbon credits has plummeted in recent years, reducing the value of CERs and producing a dramatic decline in the number of new CDM projects.28 Current demand comes mainly from the EU’s Emissions Trading System (ETS) and may grow as more regional and national cap-and-trade schemes are established. For now, however, the CDM is not a predictable source of investment and adaptation funds (through the AF) for most developing countries. The Green Climate Fund embodies many of the design features favored by developing countries, at least on paper: It is established under the FCCC, their preferred venue; it has a new, independent secretariat based in Songdo, South Korea; it is mandated to balance its funding between mitigation and adaptation; and it is required to base its activities on a ‘country-driven approach’, including the option of direct access to funding.29 On the other hand, the GCF Board—comprising twenty-four members, divided equally between developed and developing countries—is unusually powerful, an arrangement favored by donor countries. Although the GCF, as an operating entity of the FCCC’s financial mechanism, is ‘accountable to’ and ‘under the guidance’ of the COP, the Board is designed with considerable independence. For example, while the AF Board operates ‘under the authority and guidance’ of the COP30 and the GEF Council is instructed that it ‘shall act in conformity’ with COP decisions,31 the GCF Board is required only to consider guidance from the COP and is granted ‘full responsibility for funding decisions’.32 The GCF’s independence from the COP has fueled complaints among developing countries that it will not be sufficiently responsive to their interests. While the COP intends for the GCF to become the ‘main’ global fund for climate finance, many questions about its procedures and business model were left to the Board to decide in a series of meetings between 2012 and 2014. The Board established criteria for the accreditation of agencies, national and international, to receive funds and implement projects, and also established an initial ‘results management framework’ to assess the effectiveness of its projects, including a set of goals and indicators for both mitigation and adaptation.33 The Board’s investment and allocation strategy reiterates the need to balance funding geographically and between mitigation and adaptation, with at least 50 percent of adaptation funding going toward 28   ‘Carbon Markets: Complete Disaster in the Making’, The Economist, September 15, 2012; CDM Executive Board, Annual Report 2013 (Bonn, Germany: UNFCCC, 2013), p. 7. 29   GCF Governing Instrument. 30   Decision 1/CMP.3, contained in FCCC/KP/CMP/2007/9/Add.1, Article 4. 31   Instrument for the Establishment of the Restructured Global Environment Facility, paragraph 5. Available at (accessed 16 July 2015). 32   GCF Instrument, Articles 5 and 6. 33  Green Climate Fund, ‘Initial Results Management Framework of the Fund’, GCF/B.07/04, 7 May 2014.

7.  the regime for climate finance    147 ‘particularly vulnerable countries’.34 A key premise of the business model is that the GCF should aim to catalyze as much co-financing as possible, from both public and private sources, in order to promote large-scale, transformational change. The investment framework thus emphasizes the need to ‘maximize engagement with the private sector’35 so that relatively small amounts of public funding can be used to leverage greater sums of private investment, including through a dedicated Private Sector Facility that will seed climate-friendly activities by defraying investor costs and risk.36 The emerging business model and institutional framework of the GCF draw reasonable lessons from existing multilateral funds for development and the environment. Donor governments and investors will find appealing its emphasis on ensuring financial and environmental integrity (through accreditation and monitoring and evaluation procedures) and its relatively open approach to the sources and instruments of financing. Only by embracing a wide range of finance options can the GCF hope to achieve its goal of promoting a fundamental shift toward lowemission, climate resilient development. However, many developing countries are unhappy with the independence of the GCF from the COP and the prominent role played by the private sector in its business model.37 Thus a key challenge for the GCF will be to maintain credibility and legitimacy in the eyes of governments and stakeholders in the South. This requires an approach that is sensitive to development priorities and that accords sufficient country ownership to recipients, concerns emphasized repeatedly by developing country delegates during negotiations.38 In principle, these concerns can be reconciled: strengthening the role and capacity of recipients also builds trust among donors interested in accountability.39 Ultimately, the credibility of the GCF will depend on its ability to mobilize the financing necessary to play a transformative role and on the willingness of donor governments to follow through on their public pledges—now totaling more than $10 billion—to fund the GCF. The UN hosts two additional multilateral funds outside the FCCC umbrella. UN-REDD allows donors to pool resources to address deforestation and forest   Green Climate Fund, ‘Investment Framework’, GCF/B.07/06, 9 May 2014, p. 4.  Ibid. 36  Green Climate Fund, ‘Business Model Framework: Private Sector Facility’, GCF/B.04/07, 12 June 2013. 37   ‘UNFCCC’s Finance Committee Tussles over Green Climate Fund Arrangements’, TWN Info Service on Climate Change, 10 June 2013. (accessed 14 September 2015). 38   Climate & Development Knowledge Network, ‘The Green Climate Fund—Ready for Take Off ’, 27 June 2014. (accessed 16 July 2015). 39  Louise Brown, Clifford Polycarp, and Margaret Spearman, ‘Within Reach: Strengthening Country Ownership and Accountability’, WRI Working Paper. Washington, DC: World Resources Institute, 2013. 34 35

148   part ii. institutional degradation in the developing world. Implemented through UNDP, UNEP, and the Food and Agricultural Organization, it emphasizes capacity building for governments to engage a wide range of relevant stakeholders to develop and implement REDD strategies. The Millennium Development Goals (MDG) Achievement Fund contributes to climate adaptation (and mitigation, to a much lesser extent) as part of its broader focus on sustainable development. Through its Environment and Climate Change window, in particular, the MDG Achievement Fund has partnered with more than a dozen UN agencies to help governments build climate resilience into their development strategies and improve their access to climate-related finance. Parallel to these efforts under the UN, in 2008 the World Bank established its own Climate Investment Funds. The Bank funds are substantial and have supported projects—mostly through concessional loans—worth over $4 billion. The Clean Technology Fund (CTF) provides developing countries with financing to promote the scaling-up and deployment of low-carbon technology in sectors such as power generation, transportation, industry, and agriculture. The Special Climate Change Fund operates through three programs: The Forest Investment Program, which supports activities that reduce emissions and promote sustainable forestry management; the Pilot Program for Climate Resilience, which promotes the integration of climate adaptation measures into a country’s broader development strategy; and the Scaling-Up Renewable Energy Program, which aims to scale up and demonstrate the viability of renewable energy in low income countries. Because the Bank funds have less transparent governance and tend to serve the interests of donors and relatively high-income recipients, and because their larger-scale projects typically combine climate-specific support with more general development financing, their relationship to the FCCC regime is controversial.40 Nevertheless, the Bank is and will remain an important conduit for North–South climate finance. The various multilateral climate funding mechanisms are listed in Table 7.1. A full accounting of the architecture for climate finance would be much more complex, including regional development banks, direct assistance by donor countries, international funds established by individual governments, and the mainstreaming of climate components into traditional development projects. Thus the finance regime, like the broader climate change regime of which it is a part, has evolved in a rather fragmented manner, with several overlapping treaties, organizations, and mechanisms—at global, regional, and national levels—supplying relevant resources and governance functions.41 40   Smita Nakhooda, ‘The Clean Technology Fund: Insights for Development and Climate Finance’, WRI Working Paper. Washington, DC: World Resources Institute, 2010; Addie Haughey, ‘The World Bank Clean Technology Fund: Friend or Foe to the UNFCCC?’ (2009) 9 Sustainable Dev. L. & Pol’y 57. 41   On the complexity of the climate regime generally, see Cinnamon Piñon Carlarne, ‘Good Climate Governance: Only a Fragmented System of International Law Away?’ (2008) 30 Law & Policy 450; and Robert O. Keohane and David G. Victor, ‘The Regime Complex for Climate Change’ (2009) 9 Perspectives on Politics 7.

7.  the regime for climate finance    149 Table 7.1  Multilateral Funds for Climate Finance

Year Operational

Main Focus

Deposits ($)

Approved Projects ($)

GEF Trust Funda



775 million

777 million




929 million

963 million




349 million

278 million

Green Climate Fund



109 million


Adaptation Fund



592 million

226 million

Clean Development Mechanism



10 billion in revenueb 315 billion in investmentsc




235 million

241 million

MDG Achievement Fund–Environment and Climate Change Windowd



90 million

90 million

Clean Technology Fund



5.1 billion

4.2 billion

Scaling-Up Renewable Energy Program



520 million

165 million

Pilot Program for Climate Resilience



1.1 billion

841 million

Forest Investment Program



517 million

292 million

Framework Convention

Kyoto Protocol

United Nations

World Bank

Sources: ; UNFCCC, Benefits of the Clean Development Mechanism 2012 (New York, United Nations, 2012), pp. 50, 54; Clean Development Mechanism, Executive Board Annual Report (New York: United Nations, 2013), p. 13. a  These figures refer to the GEF’s Fifth Replenishment Period, or GEF 5 (2010–2014). GEF 6 (2014-18) has about $1 billion in deposits and $90 million in approved projects as of August 2015. b  These are the approximate revenues to host countries from CER sales through 2012. c  This represents the total capital investments leveraged by the CDM through 2013. Approximately $40 billion of this total represents foreign investments in non-Annex I countries. d  Most but not all of these resources went toward climate change. The Achievement Fund is no longer funding new projects.

150   part ii. institutional

4.  Improving the Governance of Climate Finance As the need for financing becomes more urgent, there remains a gap—driven by political obstacles in donor countries, capacity constraints in developing countries, and North–South divisions over the design of financing mechanisms—between the actions called for in international agreements and their effective implementation, which is fragmented across a range of institutions. More effective governance of climate finance will require improvements to individual institutions—to make them more efficient but also more legitimate to a wide range of stakeholders. A particular problem is the pervasive disagreements between donor countries and the developing world over issues of institutional design and priorities for climate finance. Effective institutions must be perceived as legitimate by, and serve the interests of, both groups, even if they define institutional goals somewhat differently.42 The presence of multiple institutions for channeling climate finance has virtues in this regard, insofar as it helps alleviate concerns that any given institution is biased or narrow in its activities. The most profound needs for improvement are at the systemic level. The existing ‘spaghetti bowl’ of funding mechanisms complicates the smooth governance of climate finance when efforts are not harmonized and when there is no clear division of labor among the various institutions involved. Ironically, perhaps, while dissatisfaction from developing countries has often motivated the creation of new institutions to manage climate-related aid, one lesson from other issue-areas is that small and lower-capacity countries are often disadvantaged when international issues are characterized by institutional complexity and overlap.43 In particular, excessive fragmentation makes it difficult to track financing and to hold developed countries accountable for meeting their finance obligations. It also imposes a burden on lowincome countries with less capacity to seek aid and implement projects.44   Athena Ballesteros, Smita Nakhooda, Jacob Werksman, and Kaija Hurlburt, Power, Responsibility, and Accountability: Re-Thinking Institutions for Climate Finance (Washington: World Resources Institute, 2010). International organizations often face the problem that different constituents define success with different goals and metrics in mind. See Tamar Gutner and Alexander Thompson, ‘The Politics of IO Performance: A Framework’ (2010) 5 Review of International Organizations 227. 43   For an argument in the area of international trade, see Luis Abugattas Majluf, Swimming in the Spaghetti Bowl: Challenges for Developing Countries under the ‘New Regionalism’ (Geneva: UN Conference on Trade and Development, 2004). For a general argument that institutional complexity and overlap benefits powerful countries, see Daniel W. Drezner, ‘The Power and Peril of International Regime Complexity’ (2009) 7 Perspectives on Politics 65. 44   See GEF, Progress Toward Impact: Fourth Overall Performance Study of the GEF (Washington, DC: GEF Evaluation Office, 2010), 37 (concluding that ‘multiple and fragmented aid channels impose an additional strain on already weak implementation capacities in low-income countries’). 42

7.  the regime for climate finance    151 To improve the collective effectiveness of climate finance institutions, there is an urgent need to rationalize and harmonize their functions and relationships. As one analysis of existing climate funds concludes, ‘delivery is fragmented’ and their ‘respective roles are not clearly defined’.45 Even within the relatively wellorchestrated GEF system, what began as a fairly clear division of labor among three implementing agencies (World Bank, UNDP, and UNEP) has begun to fray. We see competition among the current agencies and erosion of the principle that they should be matched to projects according to their comparative advantages.46 This undermines the efficiency of the GEF ‘partnership’ and casts doubt on whether scarce funding is being channeled appropriately. These problems are even worse outside the framework of the GEF. A key challenge in climate finance is to find ways to pull together multiple sources of financing and to strategically match them to climate-related actions that are currently under-funded.47 A clearer division of labor and a better working relationship among the various funds is necessary to achieve this. In addition to clarifying the respective roles of the various funds, there is a need for greater coordination when it comes to setting standards and sharing information. As it stands, there are no agreed definitions for what exactly distinguishes climate financing from other types of assistance, what counts as ‘new and additional’ financing, or how ‘mobilized’ climate finance can be demonstrated. Clear standards are especially challenging for adaptation, which is closely linked to traditional sustainable development programs.48 It is therefore impossible to quantify the share of aid and investments that contributes to climate change and that meet developed countries’ commitments under international agreements.49 Greater harmonization of procedures for receiving funds and tracking projects would also help by reducing transaction costs and making it easier for developing countries to navigate the  OECD, Development Perspectives for a Post-2012 Climate Financing Architecture (Paris: OECD, 2010), 6–7. 46  GEF, Progress Toward Impact, 188; Erin R. Graham and Alexander Thompson, ‘Efficient Orchestration? The Global Environment Facility in the Governance of Climate Adaptation’, in Kenneth Abbott, Philipp Genschel, Duncan Snidal, and Bernhard Zangl, eds., International Organizations as Orchestrators (New York: Cambridge University Press, 2015). 47   Joy Aeree Kim, Jane Ellis, and Sara Moarif, ‘Matching Mitigation Action with Support: Key Issues for Channeling International Public Finance’, OECD and IEA, December 2009. COM/EVN/EPOC/ IEA/SLT(2009)8. 48  J.B. Smith et al., ‘Development and Climate Change Adaptation Funding: Coordination and Integration’, 11 Climate Policy 987 (noting that it is difficult to distinguish climate adaptation funding from sustainable development funding, and arguing that better coordination of the two funding streams could result in more effective support for both goals). 49   Two important efforts to define and measure climate-specific finance are Christa Clapp, Jane Ellis, Julia Benn, and Jan Corfee-Morlot, ‘Tracking Climate Finance: What and How?’ OECD and IEA, 4 May 2012, COM/ENV/EPOC/IEA/SLT(2012)1; and Angela Falconer and Martin Stadelmann, ‘What Is Climate Finance? Definitions to Improve Tracking and Scale Up Climate Finance’, Climate Policy Initiative Brief, July 2014. 45

152   part ii. institutional system.50 Only with greater and more specific standardization can financing efforts be compared and their results monitored across countries and across funding mechanisms. In the context of institutional fragmentation, information-sharing is also critical. There is considerable reporting and information gathering under the FCCC but this does not include systematic or standardized information on climate finance. Several other international organizations track aid and other financial flows related to climate change, including the Organisation for Economic Co-operation and Development (OECD), the World Bank, various regional development banks, and the UN Conference on Trade and Development. Better coordination of reporting and monitoring systems across these institutions would improve the information environment substantially and provide more comprehensive coverage of all North–South transfers and how they are being used.51 This would enhance scrutiny of donor country efforts and promote a fairer distribution of resources, and could also facilitate the sharing of best practices among donors and recipients, information that is currently insufficient in the climate regime.52 Improved standards and information-sharing would also strengthen the regime by promoting the integration of regional and national policies. In the area of carbon markets, for example, linkage across systems at various levels, both public and private, would expand the global market and the potential for investments in the developing world. It would certainly benefit the CDM and the EU ETS to be linked to as many regional and national trading schemes as possible in order to maintain demand for carbon.53 More generally, to the extent that national and regional schemes can be linked, this will tend to reduce differences in abatement costs and the potential for ‘leakage’, when emission reductions in one jurisdiction are counter-balanced by increases in jurisdictions that have less regulation or a lower price for carbon.54 50   The need for harmonization in these areas has been stressed in recent climate conferences by delegates from the developing world. At the Bonn conference in June of 2014, for example, they stressed the need for ‘greater harmonization and rationalization of approval criteria’ across climate finance channels and ‘common definitions and guidelines for effectiveness’. IISD, Earth Negotiations Bulletin, Vol. 12, No. 598 (2014), p. 24. 51   Jan Corfee-Morlot, Bruno Guay, and Kate M. Larsen, ‘Financing Climate Change Mitigation: Towards a Framework for Measurement, Reporting and Verification’, OECD and IEA, October 2009. COM/ENV/EPOC/IEA/SLT(2009)6. 52  Alexander Thompson, ‘Management under Anarchy: The International Politics of Climate Change’ (2006) 78 Climatic Change 7, 20–4; Joseph Aldy, ‘Designing a Bretton Woods Institution to Address Climate Change,’ HKS Faculty Research Working Paper Series RWP12-017 (May 2012). 53   Steven Bernstein, Michele Betsill, Matthew Hoffman, and Matthew Paterson, ‘A Tale of Two Copenhagens: Carbon Markets and Climate Governance’ (2010) 39 Millennium 161; Judson Jaffe and Robert N. Stavins, ‘Linkage of Tradable Permit Systems in International Climate Policy Architecture’, Discussion Paper 08–07, Harvard Project on International Climate Agreements (September 2008). 54   Gilbert E. Metcalf and David Weisbach, ‘Linking Policies When Tastes Differ: Global Climate Policy in a Heterogeneous World’ (2012) 6 Review of Environmental Economics and Policy 110.

7.  the regime for climate finance    153 Given the heterogeneity of interests, capacity, and political circumstances across regions and countries, the climate finance regime will continue to be quite decentralized and multi-faceted. The GCF has the potential to increase the system’s coherence by providing a more centralized conduit and promoting, through its Board and secretariat, harmonized standards. Indeed, reflecting the COP’s recognition of the need for greater coordination, Articles 33 and 34 of the GCF Governing Instrument address the issue of ‘complementarity and coherence’: 33. The Fund shall operate in the context of appropriate arrangements between itself and other existing funds under the Convention, and between itself and other funds, entities, and channels of climate change financing outside the Fund. 34. The Board will develop methods to enhance complementarity between the activities of the Fund and the activities of other relevant bilateral, regional and global funding mechanisms and institutions, to better mobilize the full range of financial and technical capacities. The Fund will promote coherence in programming at the national level through appropriate mechanisms. The Fund will also initiate discussions on coherence in climate finance delivery with other relevant multilateral entities.

A reasonable starting point is to clarify the relationship between the GCF and the GEF, as the two operating entities of the FCCC’s financial mechanism. Where they are successful and widely accepted, the GCF should build as much as possible on existing policies and standards established by the GEF, which have been widely adopted among the implementing agencies that work with it. Although the GCF will play a useful role in streamlining North–South finance, it is only one component of the regime and cannot accomplish the goal alone. An important task for the COP, and for forums such as the Group of 20, the OECD, development banks, and UN agencies, is to cooperate among themselves to rationalize the landscape of finance institutions by clarifying the division of labor, setting common standards, and establishing mechanisms for information sharing.

5.  Mobilizing Climate Finance: Political and Legal Challenges Since the Copenhagen Accord, developed countries have committed themselves to mobilizing $100 billion in financing per year by 2020, a goal that is enshrined in the GCF Governing Instrument. Perhaps the most comprehensive attempt to calculate flows of climate finance concludes that about $165 billion was invested in developing countries in 2013 to support mitigation and adaptation activities, mostly from domestic sources. About $34 billion of the total originated in developed countries,

154   part ii. institutional giving us a rough estimate of North–South flows.55 However, much of this total is not ‘new and additional’ and, absent a precise definition of what ‘counts’ as climate finance under the FCCC, it is not a clear indicator of progress toward the goal of $100 billion. In any case, the actual resources required to address mitigation and adaptation needs in the developing world are likely much higher than current levels. According to the International Energy Agency, between now and 2050 developing countries will need about $531 billion per year of investments in green energy technology to limit global temperature increases to two degrees Celsius above pre-industrial levels (the threshold recommended by the Intergovernmental Panel on Climate Change to avoid the worst impacts).56 As for adaptation, funding is unpredictable and inadequate by all accounts, even as the estimated costs of adaptation and developing country demand for adaptation projects have grown rapidly.57 From the funds established under the FCCC, for example, mitigation receives about ten times the financing of adaptation.58 Overall, according to an analysis by the Climate Policy Initiative, ‘climate finance investments have plateaued at levels well below what is needed’.59

5.1 Sources of Climate Finance The High Level Advisory Group on Climate Change Financing (AGF), established by the UN Secretary General in 2010, determined that it should be possible to g­ enerate the resources necessary to reach the Copenhagen goal provided that a variety of options are considered. As the AGF Report concludes, ‘Funding will need to come from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance, the scaling up of existing sources and increased private flows’.60 Governments in the North have shown some willingness to supply new aid to address climate change and there are sources of domestic ­revenue could be tapped by them, such as carbon taxes, the auctioning of carbon allowances, and the diversion of budget resources away from fossil fuel 55   Barbara Buchner et al., ‘The Global Landscape of Climate Finance 2014, Climate Policy Initiative Report’ (November 2014), p. iv. 56  IEA, Energy Technology Perspectives 2012: Pathways to a Clean Energy System (Paris: International Energy Agency, 2012). 57  GEF, ‘Revising Programming Strategy on Adaptation to Climate Change for the Least Developed Country Fund (LDCF) and the Special Climate Change Fund’, GEF/LDCF.SCCF.9/4/ Rev. 1 (19 October 2010). 58  OECD, Development Perspectives, 11. 59   Buchner et al., ‘The Global Landscape of Climate Finance 2013, Climate Policy Initiative Report’ (October 2013), 34. 60   Report of the Secretary-General’s High-Level Advisory Group on Climate Change Financing (New York: United Nations, 2011), 5 (hereinafter AGF Report).

7.  the regime for climate finance    155 subsidies. In the end, however, public sector funding to the developing world is likely to be limited and uneven, subject to the vicissitudes of economic circumstances and domestic politics. The expectation, therefore, is that substantial private financing will be needed, in the form of foreign direct investment, private sector loans, and carbon market activity. This is especially true for mitigation, where private funding already dominates. For example, about 90 percent of international investments in clean energy come from the private sector rather than public funds.61 Overall, the share of private sector contributions to climate finance in developing countries is estimated at 57 percent and is growing.62 In contrast, the GEF Trust Fund, replenished with official development assistance (ODA) from donor governments, has actually decreased in real terms since its first replenishment period, even as the demand for financing has increased. Recent analyses conclude the most fruitful approaches will combine instruments and institutions in creative ways.63 For example, the main value of public sector financing—through bilateral ODA, GEF funds, or multilateral development banks (MDBs)—may be to leverage additional private sector investment, especially if public money is used to guarantee or limit the risk of new investments.64 Public and private money complement each other in this way. UN agencies and MDBs can also work together to identify areas where climate action strengthens broader development strategies. The former can work with developing country governments to identify needs and build capacity for effective implementation, while the latter focus on their specialty: generating financial resources.65 Although a prominent role for MDBs is controversial in some developing countries, they are very attractive participants from the perspective of mobilizing resources and combining instruments. Every dollar paid into the World Banks’ CTF, for example, leverages an additional eight dollars of support from a combination of private and public sources.66 Similarly, GEF projects that are channeled through regional development banks (such as the Inter-American Development Bank and the Asian Development Bank) benefit from total co-financing packages that are many times the size of the original grant, an attractive feature for both donors and recipients.67   Green Climate Fund, ‘Business Model Framework: Private Sector Facility’, GCF/B.04/07, 12 June 2013, 2 (citing data from Bloomberg New Energy Finance). 62   Barbara Buchner et al., ‘The Landscape of Climate Finance 2012, Climate Policy Initiative Report’ (December 2012), p. 58. 63  This is a major theme of the AGF Report and of World Bank, Mobilizing Climate Finance: A Paper Prepared at the Request of G20 Finance Minister, 6 October 2011 (available at: (accessed 16 July 2015)). 64   Corfee-Morlot, Guay, and Larsen, ‘Financing Climate Change Mitigation’, 34. 65   AGF Report, 11. 66   Climate Investment Funds, 2011 Annual Report: CIF From the Ground Up: Investing in Our Green Future (Washington: World Bank, 2011), 14. 67   In contrast, projects channeled through the UNDP or UNEP generate financing packages that are only two or three times the original grant. Bok-Keun Yu and Sebastian Miller, Climate Change Funds 61

156   part ii. institutional These realities have shaped GCF policies in important ways. Embracing the Governing Instrument’s call for a variety of financial inputs, both public and private, the Board has emphasized the need to rely on a range of sources and instruments for climate finance and the importance of combining them to increase the scale of interventions. Indeed, the GCF’s performance measurement framework for mitigation includes an indicator for ‘volume of public and private funds catalyzed by the Fund’.68 The focus on large-scale projects and private sector financing has virtues but also presents challenges. First, the path to scaled-up funding in the area of adaptation is less clear. There are fewer opportunities for private investment in adaptation and the needs of the most vulnerable countries are not likely to be met with public financing alone. The GCF Board will need to consider how scarce public money can be targeted and leveraged to have the greatest impact and to explore ways to promote private sector adaptation activities, perhaps by making a ‘business case’ for investing in adaptation.69 Second, the problem of inadequate financing is exacerbated by the uneven distribution of funds, with most aid and private investments going to a relatively small number of middle-income countries. Of particular concern are least developed countries, which have trouble attracting private investment and prefer to rely on scarcer grant aid rather than loans. The Board is currently debating how to meet its mandate to ensure geographical balance and meet the needs of particularly vulnerable countries.70

5.2 Legalization of Finance Commitments Given the importance of public funds as a source of aid and as a catalyst for private sector participation, the successful mobilization of climate finance depends on political conditions in wealthier countries. However, it also depends on the state of the international legal regime itself. As it stands, developed countries face no specific legal obligations for which they can be held accountable. The language in the relevant treaties—phrases such as ‘new and additional’ and ‘adequate and predictable’—is general in nature and the only concrete target, Copenhagen’s promise of $100 billion per year to be mobilized from a variety of sources, is collective in nature. This state of affairs makes it more difficult for advocates to and Implications for LAC Countries and the IDB (Washington: Inter-American Development Bank, 2011), 22. 68   Green Climate Fund, ‘Initial Results Management Framework of the Fund’, GCF/B.07/04, 7 May 2014, p. 13. 69   This is a recommendation of the Private Sector Advisory Group. See Green Climate Fund, ‘Report of the Private Sector Advisory Group (PSAG) to the Board of the Green Climate Fund’, GCF/B.07/10, 19 May 2014, p. 7. 70   Governing Instrument, Article 52.

7.  the regime for climate finance    157 rally support behind particular policies and to hold governments accountable in the case of inaction. The future of climate finance may therefore hinge on the ability of negotiators to further legalize the regime, so that it is based on commitments that are more precise and combined with more robust monitoring.71 More precise rules are needed to clarify how certain sources of financing should count (e.g., the role of private investments and loans) and how financing should be distributed across functions (e.g., defined shares for adaptation or forestry) and across recipients (e.g., a minimum share for least developed countries). Developing countries have called for the establishment of specific targets and timetables for tracking progress toward climate finance goals, including the capitalization of the GCF, and the African Group goes even further, advocating for specific obligations that would apply to each developed country.72 A more politically viable alternative might be to agree on a formula or set of criteria to establish each country’s ‘fair share’ of financing, as a nonbinding metric against which its pledges and efforts could be compared.73 Well-defined commitments are most useful when they are combined with better monitoring. While industrialized countries are required to report on their financing activities through their FCCC-mandated national communications, the information has been too inconsistent to allow for evaluation and comparison across countries.74 The Copenhagen Accord (paragraph 4) calls for financing by developed countries to be ‘measured, reported and verified’, and the COP took some measures to implement this at the 2012 Doha meeting. They produced a ‘common tabular format’ for developed countries to report on their actions related to both emissions and financing, with different categories for different types and channels of funding.75 This should help promote higher quality monitoring of financing efforts, though, as noted above, many definitional issues must be resolved before real measurement can take place. In return for strengthening the finance obligations of developed countries, the recipients of climate assistance should be prepared to accept greater scrutiny of how these funds are spent, especially when public money is involved. As a condition for supplying aid, donor countries increasingly seek ‘mutual accountability and transparency’ to track aid effectiveness.76 The EU, which represents the greatest source 71   On the concept of ‘legalization’, see Judith L. Goldstein et al., Legalization and World Politics (Cambridge, Mass.: MIT Press, 2001). 72   Third World Network, ‘ADP: Call for $15 Billion Capitalization of Green Climate Fund’, TWN Bonn News Update No. 14, 12 June 2014, pp. 2–6. 73   For a discussion of alternatives to calculate ‘fair shares’, see Clarisse Kehler Siebert, ‘Footing the Bill: What is Sweden’s “Fair Share” of Global Climate Finance?’ (Stockholm: Stockholm Environment Institute, 2013). 74   Clare Breidenich and Daniel Bodansky, ‘Measurement, Reporting and Verification in a Post-2012 Climate Agreement’ (2009) Pew Center on Global Change Report, 15. 75   Decision 19/CP.18, contained in FCCC/CP/2012/8/Add.3, 28 February 2013. 76   This phrase is from OECD, Paris Declaration on Aid Effectiveness (2005), 46.

158   part ii. institutional of North–South financing, has made its pledges contingent on greater transparency in how resources are used,77 and the GEF increasingly emphasizes monitoring and evaluation of project implementation as a way to track effectiveness and as a criterion for allocating future funds.78 The GCF is continuing this trend with its Results Management Framework. By accepting enhanced scrutiny of their own climate projects and programs, something they have consistently resisted in international negotiations, developing countries can increase the confidence of donors. Mobilizing climate finance therefore requires some sacrifice and compromise on the part of developing countries as well. The broader context is considerable—and often acrimonious—debate over the legal form of future climate agreements, an issue that has pre-occupied negotiators during the last several COPs. The Durban Platform text glosses over this problem with some creative ambiguity. While most governments preferred language that called for the process to produce a legally binding outcome, in the end the negotiators decided to launch ‘a process to develop a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties’.79 While a protocol presumably would be a legally binding expansion of the FCCC (as in the Kyoto Protocol), the terms ‘legal instrument’ and ‘agreed outcome with legal force’ could be interpreted to include a variety of possibilities.80 In general, governments have been reluctant to tie their hands with climate agreements that are too rigid, given the political sensitivity of climate policy and the uncertainty surrounding the costs and benefits of different policy approaches.81 This has been most visible in debates over emissions reduction targets but similar dynamics are emerging in the context of climate finance obligations. To date, they have been rather ‘soft’, inviting disagreement between North and South over precise requirements and their legal status.82 In the process of improving this state of affairs, the narrow and politically sensitive question of whether obligations are legally binding need not prevent progress on developing more specific standards, more precise commitments and more robust monitoring, which together can produce the   (accessed 16 July 2015).   Miriam Chaum et al., ‘Improving the Effectiveness of Climate Finance: Key Lessons’, Climate Policy Initiative (November 2011). The GEF’s System for Transparent Allocation of Resources bases part of its allocation formula on how successfully recipients are able to implement GEF projects and programs. 79   Paragraph 2 of Decision 1/CP.17, contained in FCCC/CP/2011/9/Add.1, 15 March 2012. 80   For a discussion of the legal debates leading to, and implications of, the Durban Platform language, see Lavanya Rajamani, ‘The Durban Platform for Enhanced Action and the Future of the Climate Regime’ (2012) 61 ICLQ 501, 506–7. 81  Alexander Thompson, ‘Uncertainty and Flexibility in the Global Climate Regime’ (2010) 16 European Journal of International Relations 269. 82  The interaction between hard and soft law can lead to confusion and disagreement among states, undermining the advantages of each and exacerbating distributive conflict. On this dynamic, see Gregory C. Shaffer and Mark A. Pollack, ‘Hard Law vs. Soft Law: Alternatives, Complements and Antagonists in International Governance’ (2010) 94 Minnesota Law Review 706. 77


7.  the regime for climate finance    159 practical effect of enhancing accountability and increasing the amount and effectiveness of climate finance.

6.  Conclusion: Obstacle and Opportunity From the earliest days of the climate change regime, negotiators recognized the importance of North–South finance as a key element of ‘common but differentiated responsibilities and respective capabilities’, which places a greater burden on industrialized countries to address the problem. Developing countries bear less historical responsibility for climate change and face the greatest threats, yet many of them lack the resources or capacity to respond meaningfully to the problem on their own. A robust regime for climate finance is now more critical than ever. Developing country emissions account for a majority of the total and are increasing rapidly. At the same time, the impacts of climate instability are already being felt and pose a growing risk to food security and human development, especially in least developed countries.83 Providing resources to the global South is both necessary and just. Beginning with the UN Framework Convention on Climate Change in 1992, successive international climate agreements have included obligations for developed countries to supply resources to their less developed counterparts. The implementation of these obligations, however, remains fragmented and incomplete. Several multilateral funds co-exist alongside bilateral flows and a variety of market-based mechanisms at the national, regional, and global levels. While this diversity has virtues, the regime as a whole requires more coherent governance, including a clearer division of labor and greater coordination among its institutions. In their effort to mobilize sufficient resources, political and civil society leaders face political obstacles in donor countries but also confront weaknesses in the legal fabric of the finance regime. More precise obligations and higher-quality monitoring—of both developed and developing country activities—can incentivize action by promoting accountability, while also improving the effectiveness of existing institutions and programs. Negotiations over climate finance are recurrently obstructed by disputes between North and South over the extent of financing commitments, what sources should count toward these commitments, and what mechanisms and institutions should   This is a major them of UNDP, Africa Human Development Report 2012: Towards a Food Secure Future (New York: UN Development Program, 2012). 83

160   part ii. institutional be used to channel them. In this respect, the climate finance issue reflects many of the political obstacles that have plagued climate cooperation more generally. However, the situation is complicated today by the rapid growth of certain developing countries, which has called into the question the North–South basis for differentiation that has guided the climate regime since the Framework Convention. In recent climate negotiations, some developed countries (including the United States and UK) and even some developing countries (including Mexico, South Korea, and Brazil) have argued that non-Annex I parties like China, India, and Brazil should contribute to international climate finance. In response, China warned against ‘blurring the lines’ between developed and developing countries and India opposed the effort as an ‘unfair’ attempt to renegotiate previous agreements on finance.84 However, just as the sharp distinction between developed and developing countries has been softened when it comes to emissions reductions (reflected in the concept of ‘intended nationally determined contributions’ that applies to both groups), the same blurring of lines appears inevitable when it comes to finance commitments. Political and legal progress on North–South finance is key to forging an effective regime for climate change. Most developing countries are only willing or able to undertake significant action on mitigation and adaptation if they receive adequate financing from the industrialized North. At the same time, industrialized countries increasingly link their acceptance of binding emission reduction commitments to meaningful participation by the developing world. Thus if the two sides can agree on a mutually acceptable set of rules and institutions for climate finance, this could facilitate the grand bargain needed to produce a robust and truly global climate change regime.

 IISD, Earth Negotiations Bulletin, Vol. 12, No. 598 (2014), p. 24.


Part III


Chapter 8


1. Introduction


2. Precautionary Principles


3. Precaution and Climate Change


4. Beyond Precaution: Politics, Provisionality, and Post-Cautionary Policies


*  I am grateful to Cinnamon Carlarne for her invitation and graciousness, and to Christa Owens for helpful research assistance.

164    part iii.  principles, emerging norms, and concepts

1. Introduction ‘Precaution’ is surely a central topic of climate change law and policy. The flagship international climate treaty, the 1992 United Nations Framework Convention on Climate Change (FCCC), expressly called for ‘precautionary measures’ in Article 3. Because climate change poses uncertain but serious and even catastrophic risks, and because greenhouse gas emissions have latent and longlasting effects (over decades or centuries), precautionary action is widely urged as essential to preventing future climate change—rather than waiting to act after the damage is done and it is too late to address the cause. The ‘Precautionary Principle’ is sharply controversial, but if there is any sensible form of precaution to apply to any problem, then climate change seems an especially apt and urgent case. So far, though, precautionary measures on climate change have been elusive. For another global atmospheric problem, stratospheric ozone depletion, the 1987 Montreal Protocol (and related national policies) took early action and have achieved substantial success (WMO 2014). Has there been comparable early action to prevent climate change? Not so much. What accounts for this, and what can be done? This chapter examines the role of precaution as applied to climate change. Section 2 identifies the key features of precaution, reviewing differing formal versions of ‘The Precautionary Principle’ and attempting to distill the core elements of a ‘precautionary posture’ for policy-making. Section 3 assesses the normative pros and cons of applying precaution to the problem of climate change. Then it compares that normative case to the positive record of the application of precaution to climate change in actual practice—a record of only partial precaution in action. Section 4 explores options beyond exhortations to precaution against climate change. First, it addresses the problem that espousing precaution is not enough to motivate policy action. It considers what could be done to make precautionary policy more successful in the future—such as reducing its costs and countervailing risks, enhancing the incentives for participation in global cooperation, and using the ‘provisional’ character of precaution as a call for continuous learning and policy updating. Second, it addresses the possibility that, with growing global emissions and rising greenhouse gas concentrations (now passing 400 parts per million (ppm)), climate change may already have passed beyond the time for precaution. It therefore explores ‘post-cautionary’ policy options that remain to address climate change—such as adaptation, liability for loss and damage, and geoengineering.

8. precaution and climate change   165

2.  Precautionary Principles It is common to refer to the ‘Precautionary Principle’ (PP) as a formal doctrine. But there is no one authoritative statement of the PP. Instead there are several different Precautionary Principles (for reviews, see Bodansky 2004; Wiener 2007). To understand the meaning of the PP and its role in climate change law, it is useful to review several versions of the PP, and then attempt to distill from them the core elements of what might be called a precautionary posture for climate change policy-making. Versions of the PP have now been adopted in more than fifty international agreements (Trouwborst 2002: 63). Early versions of the PP emerged by the early 1970s, notably the German Vorsorgeprinzip, and related concepts in Swiss and Swedish law. In the United States, the federal Court of Appeals held in Ethyl Corp. v EPA, 541 F.2d 1 (D.C. Cir. 1976) that the US Clean Air Act is a ‘precautionary’ law, authorizing US EPA to take regulatory decisions to prevent anticipated but uncertain future harms. Some versions of the PP appear not just to authorize regulation despite uncertainty, but to require regulation or even to forbid risky activities. According to the 1998 Wingspread Statement on the PP (drafted by non-governmental organizations): ‘When an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause and effect relationships are not fully established.’ Going even further, the UN World Charter on Nature (UNGA Resolution 37/7 (1982)) declared that ‘where potential adverse effects are not fully understood, the activities should not proceed’—but as risks are never ‘fully understood,’ this would amount to forbidding those activities. The Intergovernmental Panel on Climate Change (IPCC) (2014b) has recently commented that ‘[t]‌he PP allows policymakers to ban products or substances in situations where there is the possibility of their causing harm and/or where extensive scientific knowledge on their risks is lacking. These actions can be relaxed only if further scientific findings emerge that provide sound evidence that no harm will result’. But because providing evidence that ‘no harm will result’ is effectively impossible (everything poses some risk, particularly energy systems whether fossil or renewable), this formulation is tantamount to a prohibition. By the late 1980s, the PP began to gain adherence in global atmospheric and climate change law. The Montreal Protocol on Substances that Deplete the Stratospheric Ozone Layer (1987) (by now universally adopted) spoke of ‘precautionary measures’ in its Preamble, stating that it was ‘[d]‌etermined to protect the ozone layer by taking precautionary measures to control equitably total global emissions of substances that deplete it, with the ultimate objective of their elimination on the basis of developments in scientific knowledge, taking into account technical and

166    part iii.  principles, emerging norms, and concepts economic considerations and bearing in mind the developmental needs of developing countries,’ and also ‘[n]oting the precautionary measures for controlling emissions of certain chlorofluorocarbons that have already been taken at national and regional levels’. As climate change became the subject of international negotiations, the Bergen Declaration (1990) provided: In order to achieve sustainable development, policies must be based on the precautionary principle. Environmental measures must anticipate, prevent and attack the causes of environmental degradation. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing measures to prevent environmental degradation.

A widely cited formulation is the version in the 1992 Rio Declaration, paragraph 15, which provides: In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.

The Rio Declaration was adopted by country governments at the 1992 Earth Summit (UN Conference on Environment and Development). Compared to the earlier Bergen Declaration, the Rio Declaration maintained the core message that where there are ‘threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing . . . measures to prevent’ harm, while also introducing several modifications, including the term ‘approach’ in place of ‘principle,’ the qualifier ‘by States according to their capabilities’, and the qualifier ‘cost-effective’. Similarly, the FCCC, signed and ratified by virtually all countries, provides in its Article 3(3): The Parties should take precautionary measures to anticipate, prevent or minimize the causes of climate change and mitigate its adverse effects. Where there are threats of serious or irreversible damage, lack of full scientific certainty should not be used as a reason for postponing such measures, taking into account that policies and measures to deal with climate change should be cost-effective so as to ensure global benefits at the lowest possible cost. To achieve this, such policies and measures should take into account different socio-economic contexts, be comprehensive, cover all relevant sources, sinks and reservoirs of greenhouse gases and adaptation, and comprise all economic sectors. Efforts to address climate change may be carried out cooperatively by interested Parties.1 1   Disclosure: while serving in the US Government in 1989–93, I helped negotiate the 1992 FCCC, including Article 3(3) on precaution. I also contributed to the IPCC First Assessment Report (1990) in Working Group (WG) III on Response Strategies. I joined the faculty at Duke in 1994. I was also a co-author of the IPCC Fifth Assessment Report (AR5) (2014), WG III, c­ hapter 13 on ‘International Cooperation: Agreements and Institutions,’ which critically assessed the climate treaties and their performance.

8. precaution and climate change   167 Also in 1992, the European Union adopted the Maastricht Treaty, which provided in Article 130r (now Lisbon TFEU (2009), Article 191) that EU policy on the environment ‘shall be based on the precautionary principle’—though without defining what that meant. Eight years later, the European Commission (2000) issued its explanation of the PP in an important statement, providing that precaution must be based on risk assessment, must consider costs and benefits, ‘must not aim at zero risk,’ and must be ‘provisional’ to be revised over time as understanding improves. Several national and local governments have also formally adopted versions of the PP. In 1999, Canada incorporated the precautionary principle in its revised Canadian Environmental Protection Act. In 2005, France adopted the PP as part of its Constitution (including the qualification that precautionary measures must be ‘provisoires et proportionnées’—provisional and proportionate). The City of San Francisco’s version of the PP emphasizes thorough evaluation of alternative policy options, which of course is general advice on good decision-making, rather than distinctive of precaution. Some observers imbue the PP with a role in fostering public participation or stakeholder input in the regulatory process, but the texts of the PP (such as those quoted above) do not seem to address this issue (and there can also be public participation in non-precautionary regulatory processes, such as public comment on policies adopted after a problem has arisen, as well as public protests and government hearings held after a disaster). This brief review illustrates the advance of the PP across the terrain of national and international law, and also the variation among its proliferating versions (for more details, see Bodansky 2004; Wiener 2007). The result is that there is no one formulation of the PP. Each of these versions was negotiated by a different set of parties for a different time and topic. Several of the official versions quoted above refer not to a ‘Precautionary Principle’ but rather to the desirability of taking ‘precautionary measures’ subject to several qualifications. Sandin (1999) found 19 versions, with significant differences regarding threat, uncertainty, action, and command. VanderZwaag (1999) identified 14 formulations. Stone (2001) found no coherent statement, and only ‘disarray’. Wiener and Rogers (2002) and Wiener (2007) grouped the many versions into three basic approaches: (i) authorization to take policy measures despite uncertain risk, (ii) obligation to take policy measures to address uncertain risk, and (iii) shifting the burden of proof (of safety or of acceptable risk) to the proponent of the activity. Bodansky (2004) found that versions of the PP differ on multiple dimensions, including the permission to act versus duty to act, the trigger of application, and what action should be taken; he concluded that the PP has ‘not moved . . . towards consensus’ and ‘the only point of overlap is a truism’. In addition to the sources cited above, further details on the PP’s many versions are offered in Wiener (2007) and Wiener et al. (2011). Among these numerous differing versions of the PP, there is still much left unspecified. These versions of the PP typically do not say what level of risk triggers its invocation (beyond vague terms like ‘serious’), nor which risks deserve priority

168    part iii.  principles, emerging norms, and concepts for precautionary measures among the vast array of the multiple serious and uncertain risks a society may face. They do not say how early or how anticipatorily measures must be taken. They sometimes say that action need not wait for ‘proof ’, but as there is never conclusive proof of risks—the essence of risk is that there is always uncertainty about the future—any version calling for action before proof is actually addressing all decision-making about risks in the face of uncertainty, which is to say all decision-making about risks. And they often do not say which measure(s) should be taken to anticipate or prevent the risk. Words like ‘prevent or minimize’ lean toward more stringent measures, and some of the burden-shifting versions go further toward prohibiting risky activities. Some versions of the PP, notably Rio 15 and FCCC 3(3), qualify the choice of measures by calling for ‘cost-effective’ measures (achieving climate protection benefits at least cost); the European Commission version calls for assessing costs and benefits, and the French version calls for proportionality. But many other versions of the PP do not speak to cost, proportion, reasonableness, optimization, or other criteria for choosing which measures to take. In some cases, these gaps in official formulations of the PP may be intentional. Specifying risk priorities, or regulatory stringency, or cost–benefit balancing, would oblige the drafter to confront the difficult tradeoffs in policy-making and might dilute enthusiasts’ support for precaution. Two advocates of the PP have remarked: Paradoxically, we conclude that the application of precaution will remain politically potent so long as it continues to be tantalizingly ill-defined and imperfectly translatable into codes of conduct, while capturing the emotions of misgiving and guilt . . . [I]‌t is neither a welldefined nor a stable concept. Rather, it is has become the repository for a jumble of adventurous beliefs that challenge the status quo of political power, ideology, and environmental rights (Jordan and O’Riordan 1999: 15).

In order to evaluate the application of precaution to climate change policy, it may be useful to try to characterize precaution as a general posture for policy-making, rather than as a legal principle, and to distill its main features from the several versions noted above (especially from the 1992 FCCC Article 3(3), which speaks most directly to climate change, as well as from the European Commission (2000) and the French charter (2005), cited above). The core elements of such a precautionary posture appear to include: (i) a threat of serious or irreversible or catastrophic risk or damage; (ii) a stance on knowledge, providing that scientific uncertainty about such risks does not preclude policy measures; (iii) a stance on timing, favoring earlier measures to anticipate and prevent the risk; (iv) a stance on stringency, favoring greater protection (on a spectrum from preventive measures to burden-shifting that prohibits risky activities at least until they are shown to be safe or acceptable); and (v) a qualifying stance on the impacts of the precautionary measures themselves, calling for assessment of their cost-effectiveness or costs and benefits, their coverage of multiple countries and gases and sectors, and their provisional character and hence their need for reassessment and improvement over time as knowledge

8. precaution and climate change   169 is gained. In short: such a precautionary posture favors earlier measures to prevent important risks, despite uncertainty, rather than waiting, while also recognizing that such early actions should be well designed to avoid their own drawbacks, and are provisional and should be updated over time in light of learning. Framing the general precautionary posture in this way enables precaution to be translated into a spectrum or continuous variable (rather than a binary classification of precautionaryor-not), which measures the degree of precaution (e.g. in terms of (iii) timing and (iv) stringency), so that different policies can be scored and compared for their relative precaution (Hammitt et al. 2005; Wiener et al. 2011). And rather than rigidly dictating precaution irrespective of other considerations, this posture leans in favor of precaution, while taking at least some account of costs, complexities, and continued learning over time.

3.  Precaution and Climate Change 3.1 Pros and Cons The Precautionary Principle remains controversial. One appraisal summed up the debate: ‘The precautionary principle may well be the most innovative, pervasive, and significant new concept in environmental policy over the past quarter century. It may also be the most reckless, arbitrary, and ill-advised’ (Marchant and Mossman 2004: 1). Some of this debate is about the specific language in strong versions of the PP. More generally, seeing precaution as a posture, or as a spectrum of the degree of precaution, illustrates its pros and cons as applied to climate change. Precautionary measures (early and anticipatory) can be essential to address risks of latent impacts—impacts that do not occur until long after their causes. In these cases, waiting for proof of the causal relationship or the magnitude of harms can mean waiting until it is too late to address the cause. Greenhouse gases (GHGs) accumulate in the atmosphere and affect the climate with time lags of months to years to decades or more. It has long been understood that in the case of GHGs and climate change, ‘a wait-and-see policy may mean waiting until it is too late’ (National Research Council 1979: viii). The latent impacts of GHGs on climate may last a long time and be very hard to reverse. Once emitted, GHGs have long-term latent impacts on the order of 1,000 years (Solomon et al. 2009). Further, the possibility of catastrophic climate risks favors precaution (Posner 2004; Weitzman 2009; Nordhaus 2011). Consider the possibility of a ‘tipping

170    part iii.  principles, emerging norms, and concepts point’, where the damages from rising GHG concentrations suddenly turn sharply disastrous (e.g. due to rapid melting of land-based ice sheets in Greenland and Antarctica, or positive feedbacks such as release of frozen methane which then accelerates warming). If we are uncertain about just where the tipping point lies, we may need to take added precautions to avoid getting too close to it. A recent report by White House economists summarized the literature on this issue: ‘the prospect of a potential tipping point with unknown location enhances the precautionary motive for climate policy. . . . [T]‌he uncertainty about the tipping point generally leads to a policy that is more stringent today than it would be absent uncertainty. To the extent that delayed implementation means higher long-run CO2 concentrations, then the risks of hitting a tipping point increase with delay’ (CEA 2014: 24–5).2 Thus, whereas some argue that uncertainty about the cause or magnitude of climate change warrants waiting longer to study the problem before adopting policies, here uncertainty about a catastrophic threshold warrants greater precaution (IPCC 2001, section TS—noting, however, that ‘the question of timing and extent of mitigation and/or adaptation policies remains unquantified by the precautionary principle’). On the other hand, precaution may pose problems. First, precautionary measures may be costly. Critics of precaution worry that anticipatory measures to restrict new technologies may inhibit innovation. Debates over precaution versus innovation often involve new technologies with nascent risks, such as genetic modification or nanotechnology. But in the case of climate policy, precaution would largely be applied to restrict old technologies, such as fossil fuels and deforestation. Still, strong versions of the PP could be very costly: applying the PP version under which risky activities may not proceed until their proponents demonstrate that they are ‘safe’ or pose ‘no risk of harm’ would seem to prohibit not just all burning of coal or oil, but all energy sources of any kind, including natural gas, nuclear, hydro, wind, and solar, because there is no energy system that does not pose some risk of some kind of environmental harm. More moderate versions of the PP would consider cost, such as the FCCC 3(3) qualification to be ‘cost-effective’, the European Commission’s attention to assessing costs and benefits, and perhaps the French use of ‘proportionate’. Second, precautionary measures do not affect just one risk at a time. We live in a multi-risk world (Wiener 2002). Precautionary measures must select which risks to make top priority, and must confront their potential to affect multiple risks at the same time. Precautionary measures to prevent one risk may induce ‘side-effects’   Cf. the IPCC’s 2014 report, observing in Chapter 13 that ‘the principle of precaution emphasizes anticipation and prevention of future risks, even in the absence of full scientific certainty about the impacts of climate change . . . [a]‌key ongoing debate concerns whether or not this principle implies the need for stringent climate change policies as an insurance against potentially catastrophic outcomes, even if they may have very low probability’ (IPCC 2014d, section, p. 10) (citations omitted). 2

8. precaution and climate change   171 or ‘risk–risk tradeoffs,’ including increases in other countervailing risks (ancillary harms), and decreases in other accompanying risks (ancillary co-benefits) (Graham and Wiener 1995; Wiener 2002; Revesz and Livermore 2008). Yet many versions, or applications in practice, of the PP in regulatory policy tend to focus on only one salient risk at a time (Graham and Wiener 1995; Heyvaert 2011). Sound policymaking has to assess the full portfolio of policy impacts, including these ancillary impacts (both harms and benefits), rather than focusing narrowly on just a single target risk. Indeed, if precautionary measures themselves increase some risks, then very stringent versions of the PP (forbidding risky activities) would ironically block the PP itself (Wiener 2002; Wiener 2007). Sunstein (2005) argues that in a world of risks on all sides, the PP points nowhere. Graham and Wiener (1995) and Wiener (2002) argue that the solution is to take a broader, more holistic approach that confronts the multi-risk reality, assesses the full portfolio of multiple impacts, and seeks ‘risk-superior moves’ that reduce multiple risks in concert. Examples of such risk–risk complexities are rife in climate change policy. Consider shifting energy sources from coal to natural gas, which would reduce CO2 emissions but could increase methane (CH4) emissions, potentially with even larger climate impacts. Or shifting from fossil fuels to some types of biofuels, which could again reduce CO2 emissions from vehicles, but could also increase emissions of N2O (a more potent GHG) if nitrogen fertilizers are heavily used to grow corn ethanol; and demand for land to grow crops for biofuels might also increase deforestation (thus reducing a key sink for CO2), as well as raise food prices. Or, shifting from fossil fuels to nuclear energy would reduce climate risks but could add risks from nuclear waste, reactor accidents, and weapons proliferation. Or shifting from fossil fuels to wind and solar energy might pose risks to migratory birds. One further example: the highly successful precautionary measures to phase out chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs) to protect the stratospheric ozone layer, under the Montreal Protocol and national laws, have also had the unintended consequence of potentially adding to climate change risk by increasing the use of non-ozone-depleting substitutes that are potent GHGs, such as HFCs (WMO 2014; this tradeoff was foreseen in Graham and Wiener 1995: 198–202). In all of these examples, the PP typically offers little guidance, but a full portfolio multi-risk approach counsels confronting and weighing the tradeoff to reduce overall risk, and seeking new risk-superior options that reduce multiple risks in concert (Graham and Wiener 1995; Wiener 2002). At the same time, there may be important co-benefits in climate policy. For example, reducing methane and black carbon may both reduce climate change risks and protect public health from the heavy toll of conventional air pollution (Shindell et al. 2012; Shindell 2015). These opportunities for ancillary benefits further illustrate the key point that every climate or energy policy choice affects multiple risks, and we must confront the full portfolio of impacts while searching for multi-risksuperior moves.

172    part iii.  principles, emerging norms, and concepts Advocates of precaution often invoke commonsense adages such as ‘better safe than sorry’. Yet because in reality we face multiple interconnected risks, simple adages are insufficient. Of course one prefers ‘safe’ to ‘sorry’—almost by definition. The real questions are ‘better safe against this, or against that?’, and ‘how safe—what are the pros and cons of seeking this much safety or in this way?’ In a world of multiple risks, which risks should we address more than others, and which actions will reduce overall risk rather than create new risks? ‘Better safe than sorry’ is an old adage, but ‘the cure may be worse than the disease’ has at least as old a pedigree. Precaution need not be opposed to full portfolio analysis of multiple policy impacts. First, in formal law, although some versions of the PP appear insensitive to costs and risk–risk tradeoffs, other versions expressly combine them. As noted above, both FCCC Article 3(3) and the European Commission (2000) included cost-effectiveness or cost–benefit in precaution. In fact, the EU’s 1992 Maastricht Treaty adopted not only the PP, but also cost–benefit analysis, in the very same Article 130r (now Lisbon TFEU Article 191). And the FCCC called for regulatory impact assessment (RIA) addressing both cost–benefit and risk–risk analyses, in its Article 4(1)(f) which required parties to ‘employ appropriate methods, for example impact assessments, formulated and determined nationally, with a view to minimizing adverse effects on the economy, on public health and on the quality of the environment, of projects or measures undertaken by them to mitigate or adapt to climate change’. Second, the general idea of precaution as a posture for policy-making is not at odds with cost–benefit analysis or risk–risk tradeoff analysis. As noted above, quantitative economic analyses of optimal climate change policy that incorporate tipping points and uncertainty can favor greater precaution. There is a growing literature showing how precaution and cost–benefit or decision analysis can be combined to favor optimal or robust policies that account for uncertainty, catastrophe, option value, and related precautionary factors (Graham 2001; DeKay et al. 2002; Stewart 2002; Wiener 2002; Gollier and Treich 2003; Lempert and Collins 2007; Weitzman 2009; Nordhaus 2011; Driesen 2013).

3.2 Positive Politics in Practice Given the case in favor of precautionary measures to address the latent, uncertain and potentially catastrophic risks of climate change, what have governments actually done? To combat stratospheric ozone depletion, national laws and the Montreal Protocol took early action and succeeded in phasing out CFCs and related substances (WMO 2014). To combat climate change: not so much. In the case of stratospheric ozone depletion, the uncertainty of the risk, and the earliness and stringency of the policy measures taken, were greater than for climate change. (For a comparison of the relative precaution on these two issues, see

8. precaution and climate change   173 Hammitt 2011). Chlorofluorocarbons (CFCs) were invented in the 1920s; the theory that they could break apart and deplete stratospheric ozone was published fifty years later by Molina and Rowland (1974). Just four years after the publication of that theory, before observational evidence of such depletion occurring had been collected, the United States banned CFCs in aerosol spray cans in 1978—about a decade before Europe took comparable measures. After discovery of the Antarctic ozone hole in 1985–86, countries agreed to the Montreal Protocol in 1987, which eventually phased out CFCs and HCFCs, and the ozone level has begun to recover (WMO 2014). By contrast, the risks of climate change were less uncertain, and yet policy measures were adopted later and less stringently. The burning of fossil fuels began in the 1800s, and the theory of greenhouse warming was well known by 1896 (when Svante Arrhenius began his famous article ‘A great deal has been written on the influence of the absorption of the atmosphere upon the climate’ (Arrhenius 1896: 237)). By the 1980s, observational evidence of rising CO2 concentrations was being collected, and computer models were forecasting damages to come. Policy measures to limit GHG emissions came mainly after the 1992 FCCC and its 1997 Kyoto Protocol (KP), including the European Union climate package and emissions trading system (EU ETS) since 2001, and several US regional programs (chiefly the Regional Greenhouse Gas Initiative (RGGI), and California’s AB32). Major US federal policies were adopted after a key US Supreme Court decision in 2007 (Massachusetts v EPA), including EPA’s GHG Reporting Rule in 2008, its vehicle emissions rule in 2010, and its ‘Clean Power Plan’ final rule for electric power sources in 2015. Thus, both the United States and EU were faster to act to phase out CFCs despite less evidentiary basis on stratospheric ozone depletion, and slower to act to limit GHG emissions despite greater evidence on climate change. And while the United States was more precautionary than Europe on CFCs and stratospheric ozone, Europe was more precautionary than the United States on GHGs and climate change (Hammitt 2011).3 Several hypotheses may explain why both American and European policy on CFCs has been more precautionary than on GHGs (see Sunstein 2007; Wiener and Richman 2010). Both problems pose short-term costs and long-term global benefits, discouraging action by politicians focused on short-term local re-election. But the two problems also differ in other ways. The perceived threat from CFCs may have been higher, especially after the discovery of the ozone hole, whereas climate change may have been seen as more gradual and lacking a focusing crisis event (so far, notwithstanding heatwaves in Europe and hurricanes Katrina and   It is not the case, though, that Europe has become generally more precautionary than the United States across the board—despite conventional wisdom to this effect, the reality is more complex. The United States and EU are both highly precautionary, but sometimes diverge on specific risks, with each more precautionary than the other in selected cases. See Sand (2000) on variation in precaution among member states within Europe, and Wiener et al. (2011) and Wiener et al. (2013) on variation in precaution across numerous risks in both the United States and EU. 3

174    part iii.  principles, emerging norms, and concepts Sandy in the United States). The perceived cost of abatement for CFCs was much lower (than for GHGs); CFCs were a far smaller share of the economy and substitutes were more readily available than for GHG-emitting activities. Fewer countries were major sources of CFCs (than of GHGs), facilitating international cooperation. Moreover, when climate did arrive on the policy agenda in the 1990s, the EU initially resisted US proposals for cost-effective flexibility mechanisms such as emissions trading (which the United States was then enacting for acid rain domestically, and was advocating for GHGs internationally) (Wiener 2001), and the EU also resisted inclusion of any quantitative targets for China and other major developing country emitters, both of which raised the perceived cost to the United States (Stewart and Wiener 2003). The EU later changed course and adopted its ETS after 2001. But by then the United States was withdrawing from Kyoto because of the rise of China (marked by the United States Senate’s Byrd–Hagel Resolution in 1997; President Clinton then declined to submit the Kyoto Protocol to the Senate for ratification; and President Bush-43 withdrew the United States from the Kyoto Protocol in 2001). Later, Canada and Australia also withdrew from Kyoto, and Russia, Japan, and New Zealand withdrew from the second commitment period (2013–2020). (For further analyses of the political economy of CFCs and GHGs in the United States and EU, see Sunstein 2007; Wiener and Richman 2010; and Hammitt 2011.) A tension between precaution and distributional equity persists in climate policy. Major developing countries such as China, India, Brazil, and Indonesia were not bound by quantitative commitments in the Kyoto Protocol. In 1990, China emitted only about half as much GHGs each year as the United States. But by 2006, China had rapidly surpassed the United States, and by 2014, China emitted almost twice as much GHGs each year as the United States. Moreover, cumulative global greenhouse gas emissions since 1850 from the developing countries have matched, and will soon exceed, the cumulative emissions of industrialized countries over that period. (On these emissions trends, see IPCC 2014d: section, at 60–1.) At the same time, climate initiatives have proliferated beyond the FCCC and KP, growing into a multifaceted and fragmented ‘regime complex’ (Keohane and Victor 2011; IPCC 2014d: 13.2, 13.13). ‘A major challenge is assessing whether highly decentralized policy action is consistent with and can lead to global mitigation efforts that are effective, equitable, and efficient.’ (IPCC 2014a: TS 4.4, p. 92.) The fragmentation of legal regimes addressing stratospheric ozone, climate change, long-range transboundary air pollution, and other atmospheric issues, poses problems of omissions, disregard, and risk–risk tradeoffs, but efforts to integrate these issues into a more coherent approach—or even to study such a coherent approach under the auspices of the International Law Commission—face persistent obstacles (Sand and Wiener 2015). So far, the most successful precaution on climate change has not been the FCCC or other climate treaties, nor national climate policies in the EU or United States, but, it turns out, has been a co-benefit of the Montreal Protocol to protect the stratospheric ozone layer. The Montreal Protocol’s phase out of CFCs and HCFCs—which

8. precaution and climate change   175 happen to be potent GHGs as well as ozone-depleting gases—has (so far) delivered five times more GHG abatement than the Kyoto Protocol (see WMO 2014—which notes, however, that the increasing use of HFCs as a substitute poses a countervailing climate risk). The Conference of the Parties (COP 21) meeting Paris in December 2015 aims to mobilize greater action by all countries to reduce GHG emissions, but faces challenges in motivating sufficient collective action and in linking national policies for cost-effective abatement and financing.

4.  Beyond Precaution: Politics, Provisionality, and Post-Cautionary Policies If some sensible precautionary measures would be warranted to address the latent, uncertain and potentially catastrophic risks of climate change, but governments have not done enough, what can still be done? This section offers three kinds of answers: politics, provisionality, and post-cautionary policies. First, the politics: as should by now be evident even to earnest advocates of strong versions of the Precautionary Principle, simply espousing the PP is not enough to move actual policy-making (and extreme versions of the PP could be too strong, only hindering political acceptance). Political governments tend not to follow aspirational principles when the costs are high and short term and local, while the benefits are uncertain and long term and distant (i.e. to people in the future and elsewhere, who do not vote for the government policy-makers being asked to adopt precaution) (Sunstein 2007; Wiener and Richman 2010). The flip-side of this reality is the inequity that the impacts of climate change may be hardest on people in countries and future generations who were not the major sources of GHGs. Still, motivating action by political leaders of major GHG emitters requires more than exhortations to precaution as a principle. Climate and precaution present a cognitive puzzle. Precaution is predicated on acting in the face of uncertainty—so it confronts uncertain benefits, which may be less persuasive to politicians (even if uncertainty and tipping points favor precaution in economic models, as noted above). ‘[T]‌he precautionary principle as applied to climate change . . . inadvertently played into the hands of critics of swift and aggressive action on climate change, feeding the industry-funded view that the science of climate change was too uncertain to justify such action’ (Heinzerling 2008: 458). The PP may be intended to solve cognitive biases that neglect future risks (Dana 2009), but the PP itself may succumb to heuristics that distort its application to focus on recent events that grab public attention (Sunstein 2005). Unlike

176    part iii.  principles, emerging norms, and concepts many other risks in debates over the PP, climate change does not seem to exhibit the heuristics and biases that spur public outcry and demand for greater precaution than experts would recommend; rather, climate change exhibits experts (including sober economists) recommending greater precaution than the public, or at least than politicians in some places, seem willing to adopt. In this sense, fully optimal precautionary policies need to account not only for their risks, costs, and benefits once adopted (as discussed above), but also for their ability to get adopted. Put another way, if a problem warrants precaution—early anticipatory measures—then its timing of adoption matters, and delay in adoption is costly. Drawing on positive political economy, psychology, and policy instrument design, researchers can and should assess the probability and timing of adoption in evaluations of optimal climate change policy design (Wiener 1999a; Wiener 1999b; Gilligan and Vandenbergh 2014). This is especially true at the international level, where adoption depends on consent rather than majority rule or fiat (Wiener 1999a).4 Precaution in climate policy may therefore be more successful in actual politics if it is designed to attract adoption and implementation. Key strategies include: increasing its climate benefits; increasing its co-benefits in public health or other areas; decreasing its costs, through more cost-effective policy design; decreasing its ancillary harms (countervailing risks) through risk-superior policy design; and better informing the public and political leaders about all of these improvements in net benefits. Opposition to precautionary climate policies appears to derive in part from implicit fears of the cost of mitigation measures (Campbell and Kay 2014). It is also important to appeal to citizens’ public and prospective aspirations, and to their core values as well as their scientific literacy (Kahan et al. 2012).5 Thus, to achieve sensible precaution, one must solve the governance challenge: overcoming the obstacles to collective action by designing climate law to attract the participation of key actors (e.g. the United States, the EU, China, India, Brazil, Japan, Canada, Australia, Korea, Russia, Indonesia, South Africa, and others). Designing climate policy to be cost-effective, to promote co-benefits, and to avoid adverse side-effects, can both improve outcomes and help attract participation, which explains why the climate treaty already calls for these features as part of or alongside precaution in FCCC 3(3) and 4(1)(f), as noted above.6   Gilligan and Vandenbergh (2014) argue that ‘comprehensive’ policies may take too long to be adopted, while ‘incremental’ policies are faster. But comprehensive policies may offer lower abatement costs and deliver more benefits (e.g. avoiding leakage due to the partial coverage of incremental policies), thus fostering faster and wider adoption. See Stewart and Wiener (2003). 5   Exhortations to a moral obligation to prevent climate change, see e.g. Heinzerling (2008), may be counterproductive if the relevant public (such as in the United States, Europe, China, India, or elsewhere) views such exhortations as in conflict with their deeply held views, such as on the right to develop or the right to be free of government overreaching or foreign eco-imperialism; in many cases, economic incentives in policy design may be more effective than such exhortations, see Wiener (2008b). 6   Still, governments evidently find these issues so contentious that they could not agree on the text of the Summary for Policymakers (SPM) section summarizing the IPCC chapter on ‘International Cooperation’ (IPCC 2014d), so they deleted most of that SPM section (Stavins 2014). 4

8. precaution and climate change   177 Second, as to provisionality: Some versions of the PP provide that precautionary measures are ‘provisional,’ adopted under uncertainty and to be revised in light of new information and learning (e.g. European Commission 2000). The rounds of negotiations on the FCCC, KP, and subsequent commitments also exhibit a rough sequence of learning and updating. The choice is not between acting now, versus waiting to learn; the choice is between acting and learning versus waiting and learning. That is, there can be learning while acting—so long as the actions are monitored to evaluate their impacts, and they avoid ‘lock-in’ so that they can be revised over time (McCray et al. 2010; IPCC 2014b: section 2.8 at 56).7 Provisionality offers a bridge from precaution to adaptive learning and policy revision. In a section immediately following its discussion of precaution, the IPCC offers: ‘adaptive management represents structured processes for improving decision-making and policy over time, by incorporating lessons learned’ IPCC 2014b: section 2.5.6 at 31–2). The IPCC distinguishes ‘passive adaptive management’ which ‘involves carefully designing monitoring systems, at the relevant spatial scales, so as to be able to track the performance of policy interventions and improve them over time in response to what has been learned’, from ‘active adaptive management’ which ‘design[s]‌the interventions themselves as controlled experiments, so as to generate new knowledge’ (id.). In the former, observations can track the diffusion of varying policy approaches and compare results. In the latter, experiments can be conducted in the ‘lab’, that is with volunteers in a university research setting (Ludwig et al. 2011), or in the ‘field’, that is with real policies applied by accountable governments (Greenstone 2009; McCray et al. 2010; van Gestel and van Dijck 2011). In both passive and active adaptive regulation, welldesigned monitoring and performance evaluation are essential (Wiener 2015). Indeed, because precaution is predicated on uncertainty, that premise implies that there are opportunities for learning, by testing different policy approaches— subject to the costs of errors and of revising those policies over time (Greenstone 2009; Listokin 2008). For climate change, there are many different policy designs that could serve as precautionary measures to limit emissions, with different costs   Lazarus (2009: 1157–8) worries that interest groups will seek to unravel and relax climate policies because these policies impose short-term costs and redistributive impacts for long-term benefits, so he advocates that climate policies be ‘simultaneously . . . flexible in certain respects and steadfast in others. Flexibility is necessary to allow for the modification of legal requirements over time in light of new information. Steadfastness or “stickiness” is important to maintain the stability of a law’s requirements over time.’ He proposes entrenching ‘precommitment strategies that deliberately make it hard (but never impossible) to change the law in response to some kinds of concerns [i.e., relaxing emissions limits]. At the same time, the legislation should also include contrasting precommitment strategies that deliberately make it easier to change the law in response to other longer-term concerns that are in harmony with the law’s central purpose, which is to achieve and maintain greenhouse gas emissions reductions over time.’ Yet initial policies—not only in their stringency, but in their instrument choice—may be more ‘sticky’ than intended, as implementation efforts and vested interests grow up around them (as the history of environmental law often shows). They may be worth revising over time as we learn more about effectiveness, costs, and ancillary side-effects. 7

178    part iii.  principles, emerging norms, and concepts and ancillary impacts in different settings, so there could be value in careful experiment designs. Governments conduct such variation and policy experiments all the time—but they often do so haphazardly or unintentionally, and they neglect to structure the experiment carefully to compare treatment options, monitor performance, and evaluate outcomes. Successful provisionality and adaptive management require careful data monitoring and analysis, in order to evaluate policy performance over time, both compared to alternative policy designs and compared to the counterfactual scenario of what would have occurred without the policy (McCray et al. 2010; Wiener 2015). In addition to precaution informing climate change policy, climate change policy can also inform precaution. The complexities of climate change offer lessons for improving the broader regime of risk regulation (of all types of risks), favoring greater comprehensiveness in scope (to address systems more holistically and thereby avoid risk–risk tradeoffs), and greater adaptability over time (through learning and updating) (Wiener 2008a; Heyvaert 2011; Sand and Wiener 2015). Third, as to post-cautionary policies: The difficulty in adopting sensible precautions against future climate change may have shifted the timing for climate policy. If some observers are correct, we may now be (part way) past the time for precaution. We may have moved from ex ante regulation toward ex post remedies, or at least to somewhere in the middle along this spectrum. Some climate modelers have forecast that, given accumulating GHG concentrations now passing 400 parts per million (ppm), it is already (or almost, and with varying levels of confidence) too late to limit future temperature increases to the political long-term goal of 2°C. (Even if that is true, further temperature increases might still be prevented.) Some observers infer that the window of opportunity for precaution to prevent ‘dangerous anthropogenic interference with the climate system’ has closed (e.g. Harvey 2007; Shaw 2009). Heinzerling (2008: 452) argues: We should cease discussing responses to climate change in terms of the ‘precautionary principle’ and should begin to think instead in terms of a ‘post-cautionary’ approach. For a long time, climate change has been the exemplar for application of the precautionary principle. This principle has taken many forms over the years, but in its simplest and perhaps most common formulation, it stands for the idea that we should not wait for scientific certainty before acting on a threat. The underlying principle is that we are better off being safe than being sorry. At this moment in history, discussing climate change in terms of the precautionary principle is a serious mistake. . . . [w]‌e probably blew past our precautionary opportunity sometime in the 1980s. We are now, and have been for some time, in a post-cautionary world.

This point of view is not necessarily saying that nothing can be done now, just that we are no longer taking precautions early in anticipation of the risk. Nor is it to say that countries violated their international agreements on GHG emissions. The IPCC reports that Annex I countries, as a group, actually met their aggregate targets in both the FCCC (reducing their aggregate emissions below 1990 levels by

8. precaution and climate change   179 2000—partly due to the economic downturn in former Soviet countries), and in the Kyoto Protocol (reducing their aggregate emissions more than 5.2 percent below 1990 levels by 2012) (IPCC 2014d: section, at 59–60). But these emissions reductions by Annex I countries under the FCCC and KP, plus their additional pledges of new policy measures, are apparently not sufficient to achieve the long-term goal of limiting temperature rise to 2°C, largely because rapid increases in emissions from non-Annex I countries (i.e. major developing countries) are driving overall growth in global emissions and thus in global GHG concentrations (IPCC 2014d: Executive Summary, at 6–7; IPCC 2014d: section, at 60). A forecast of plausible pledges to be made at the 21st Conference of the Parties (COP 21) in Paris in 2015 shows that they could significantly bend down future emissions, but that the likely agreement will still not produce global emissions within the window of paths to 2050 that are consistent with frequently proposed climate goals (such as 2°C) (Jacoby and Chen 2014). New studies suggest that major melting of Antarctic ice may already be underway (Joughin et al. 2014; Rignot et al. 2014). If so, policy will shift toward an array of in-progress or ex post or ‘post-cautionary’ policies. In several areas, this is already occurring. For example, there has been an important shift in attention in the international climate negotiations from mitigation (prevention, emissions abatement) to adaptation. For many years, adaptation was downplayed or treated as taboo by climate activists, lest it invite moral hazard—a sense that precaution was not so urgently needed because adaptation would be available as a backup or insurance strategy. That seems to be changing, and adaptation is now widely discussed and sometimes mobilized. Adaptation assistance is sought by vulnerable countries, for whom it offers defenses against ongoing weather extremes and sea level rise (due to climate change or other causes). Bangladesh, for example, has developed improved strategies to cope with periodic flooding displacing millions of people. It remains unclear if adaptation can succeed for small island states, whose entire territory may be submerged. After hurricanes Katrina and Sandy, the United States (or some key cities) have tried to adopt adaptation plans, though reform of the national flood insurance system has been halting. Heinzerling (2008: 459) advocates adaptation, arguing that the moral hazard problem is now moot because climate change is occurring. Hartzell-Nichols (2014) suggests that adaptation can still be considered precautionary, in the sense that it reduces expected damages. Another type of post-cautionary policy is ‘loss and damage’, a form of ex post civil liability. Advocates seek not funding for prospective adaptation projects, but compensation for retrospective losses. The issue of loss and damage was raised at the Durban COP in 2011 and debated at the Warsaw COP in 2013. So far, there is no functioning legal mechanism for litigation over transboundary liability for climate harms, though a variety of international and national law tort claims have been attempted—not yet successfully, though conceivably that could change.

180    part iii.  principles, emerging norms, and concepts Plaintiffs face major challenges, including in establishing the jurisdiction of a tribunal over the case and the defendant(s), avoiding preemption by regulatory law (as in Connecticut v AEP, US S.Ct. 2011), proving causation, assessing damages, and enforcing any judgment (IPCC 2014c: section 3.3.6, at 16–17). Thus loss and damage remains a political negotiation, in which major emitting countries are not offering compensation (Myers and Kulish 2013). As major developing countries’ share of cumulative emissions rises to exceed the cumulative share of industrialized countries, the set of possible defendants may be expanding, but the political opposition to compensation is likely to remain high. If precautionary emissions limits and adaptation do not limit climate damages, a different post-cautionary strategy may be geoengineering. Countries may attempt to manage the Earth’s temperature directly through Solar Radiation Management (SRM)—methods of changing the Earth’s albedo, screening out some of the sun’s incoming energy—such as by adding sulfate aerosol particles to the upper atmosphere. SRM could be deployed very quickly, and some methods are extremely inexpensive (Barrett 2008), so if a climate emergency seems imminent, SRM might be the last resort to cool the planet (Moreno-Cruz and Keith 2013). In a match of odd bedfellows, SRM appeals both to those who see climate change as so imminent and catastrophic that it is too late for emissions limits, and to those who see climate change as not so serious, hence emissions limits are too costly, and SRM is attractive for its very low cost. SRM poses its own serious countervailing risks, such as cooling the planet too much, or adversely affecting stratospheric ozone, or causing adverse regional impacts, or changing the color of the sky, or unexpectedly failing and allowing a rapid temperature rebound (see IPCC 2014c: section 3.3.7 at 17–18). Some experts advocate greater research now to learn and clarify those impacts (thus enabling well-designed SRM if needed, and avoiding hasty resort to poorly designed or dangerous SRM) (see NRC 2015); others fear that research will encourage premature deployment. The very low cost of SRM and its ancillary impacts raise the opportunity—and concern—that it might be deployed by a single country or even a wealthy individual. The governance challenge of SRM is thus, in part, to restrain ‘rogue’ unwise deployment. The IPCC comments: ‘Whereas emissions abatement poses challenges of engaging multilateral action to cooperate, SRM may pose challenges of coordinating research and restraining unilateral deployment of measures with potentially adverse side-effects’ (IPCC 2014d: Executive Summary at 7). If precaution is understood not as a formal binary classification, but as a general posture—a continuum of degrees of precaution in terms of earliness and stringency—then the lack of early precautionary measures to combat climate change does not mean that precaution is irrevocably unavailable. There may still be opportunities to take mid-course precautionary measures that reduce future damages. And, in the meantime, we may have learned better ways to design climate policies, to yield more benefits at lower costs. Still, we can learn more while we undertake provisional (adaptive regulation) climate policies now and study their performance

8. precaution and climate change   181 over time. And the prospect of post-cautionary geoengineering (SRM) poses an appropriate coda for precaution and climate change: if we have not been sufficiently precautionary against emissions, then we may need to be precautionary regarding the measures that could be taken to remedy those emissions.

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184    part iii.  principles, emerging norms, and concepts Sunstein, Cass R. (2005). The Laws of Fear: Beyond the Precautionary Principle, Cambridge: Cambridge University Press. Sunstein, Cass R. (2007). ‘Of Montreal and Kyoto: A Tale of Two Protocols,’ Harvard Environmental Law Review 31: 1–66. Trouwborst, Arie (2002). Evolution and Status of the Precautionary Principle in International Law, The Hague: Kluwer Law International. VanderZwaag, David (1999). ‘The Precautionary Principle in Environmental Law and Policy: Elusive Rhetoric and First Embraces,’ Journal of Environmental Law & Practice 8: 355–75. van Gestel, Rob and Gijs van Dijck (2011). ‘Better Regulation through Experimental Legislation,’ European Public Law 17: 539–53. Weitzman, Martin L. (2009). ‘On modeling and interpreting the economics of catastrophic climate change,’ The Review of Economics and Statistics 91: 1–19. Wiener, Jonathan B. (1999a). ‘Global Environmental Regulation: Instrument Choice in Legal Context,’ Yale Law Journal 108: 677–800. Wiener, Jonathan B. (1999b). ‘On the Political Economy of Global Environmental Regulation,’ Georgetown Law Journal 87: 749–95. Wiener, Jonathan B. (2001). ‘Something Borrowed for Something Blue: Legal Transplants and the Evolution of Global Environmental Law,’ Ecology Law Quarterly 27: 1295–371. Wiener, Jonathan B. (2002). ‘Precaution in a Multi-Risk World,’ in Dennis Paustenbach (ed.), Human and Ecological Risk Assessment: Theory and Practice, New York: John Wiley and Sons, 1509–31. Wiener, Jonathan B. (2007). ‘Precaution,’ in Daniel Bodansky, Jutta Brunnée, and Ellen Hey (eds.), Oxford Handbook of International Environmental Law, Oxford: Oxford University Press, 597–612. Wiener, Jonathan B. (2008a). ‘Radiative Forcing: Climate Policy to Break the Logjam in Environmental Law,’ NYU Environmental Law Journal, 17: 210–55. Wiener, Jonathan B. (2008b). ‘Climate Change Policy, and Policy Change in China,’ UCLA Law Review 55: 1805–26. Wiener, Jonathan B. (2015). ‘Towards an effective system of monitoring, reporting and verification,’ in Scott Barrett, Carlo Carraro, and Jaime de Melo (eds.), Towards a Workable and Effective Climate Regime, FERDI: 183–300. Wiener, Jonathan B. and Barak D. Richman (2010). ‘Mechanism Choice,’ in Daniel A. Farber and Anne Joseph O’Connell (eds.), Research Handbook on Public Choice and Public Law, Edward Elgar, 363–96. Wiener, Jonathan B. and Michael D. Rogers (2002). ‘Comparing Precaution in the United States and Europe,’ Journal of Risk Research 5: 317–49. Wiener, Jonathan B., Michael D. Rogers, James K. Hammitt, and Peter H. Sand (eds.) (2011). The Reality of Precaution: Comparing Risk Regulation in the United States and Europe, Washington DC and London: RFF Press/Earthscan/Routledge. Wiener, Jonathan B., Brendon Swedlow, Michael D. Rogers, James K. Hammitt and Peter H. Sand (2013). ‘Better Ways to Study Regulatory Elephants,’ European Journal of Risk Regulation 2/2013: 311–19. WMO (World Meteorological Organization) (2014). Assessment for Decision-Makers: Scientific Assessment of Ozone Depletion: 2014, World Meteorological Organization, Global Ozone Research and Monitoring Project—Report No. 56, Geneva, Switzerland, preprint 10 September 2014, available at (accessed 16 July 2015).

Chapter 9


Catherine Redgwell*

1. Introduction


2. The Principles of Inter- and Intra-generational Equity


3. Legal Status of the Principles of Intra-and Inter-generational Equity


4. Conclusion: The Future of an ‘Equitable’ Climate Regime


*  I am grateful for comments from the editors and from Professor Lavanya Rajamani, though any errors and omissions remain my own.

186    part iii.  principles, emerging norms, and concepts

1. Introduction The United Nations Framework Convention on Climate Change (FCCC)1 is rare in its acknowledgement of future generations in the body of the treaty text when, more typically, such recognition is confined to non-binding preambular provisions which may inform and guide the interpretation of the treaty text.2 It is also an oft-quoted example of a treaty-based articulation of intra-generational equity, one expression of which is the principle of common but differentiated responsibilities and respective capabilities (CBDRRC). As discussed in Chapter 1, CBDR is one of the core principles of the climate regime,3 to which the FCCC adds the concept of ‘respective capabilities’ as a complement to differentiated responsibility for historical/ current contributions to climate change.4 It ‘constitutes a means of translating the concept of intra-generational equity to the inter-State level, and the South–North context in particular, with a view to attaining sustainable development’.5 Despite some allision of the concepts of intra-generational equity and CBDR,6 the former is a broader concept addressing disparities between States and taking various forms such as financial assistance, capacity-building, and the principle of CBDR.7 1   1771 UNTS 107. The general principles contained in the FCCC apply to its 1997 Kyoto Protocol, 37 ILM (1998) 22. 2   See further R. Gardiner, Treaty Interpretation (Oxford University Press, 2nd edn, 2015), at p. 205; and section 3 below. 3   ‘Regime’ is used here to refer to the FCCC and Kyoto Protocol and associated instruments and decisions. 4   P. Cullet, ‘Principle 7: Common but Differentiated Responsibilities’ in J.E. Viñuales (ed) The Rio Declaration on Environment and Development: A Commentary (Oxford University Press, 2015), at p. 238. See further L Rajamani, ‘The principle of common but differentiated responsibility and the balance of commitments under the climate regime’ (2000) 9 RECIEL 120–131; , and, more generally, L. Rajamani, Differential Treatment in International Environmental Law (Oxford University Press, 2006) and C.D. Stone, ‘Common but differentiated responsibilities in international law’ (2004) 98 AJIL 276–301. 5   E. Hey, ‘Common but Differentiated Responsibilities’ in R. Wolfrum (ed) Max Planck Encyclopedia of Public International Law (February 2011). 6  E.g. P.-M. Dupuy and J.E. Viñuales, International Environmental Law (Cambridge University Press, 2015), at p.71. Yamin and Depledge, on the other hand, refer to CBDR as ‘a mixture of different concepts, including “common concern” and acting for the benefit of present and future generations on the basis of equity’: F. Yamin and J. Depledge, The International Climate Regime: A Guide to Rules, Institutions and Procedures (Cambridge University Press, 2004), at p. 69; while Rajamani identifies intra-generational equity, ‘which would entail prioritizing the development needs of the developing countries, providing adequate environmental space for their development, and helping them secure the necessary resources, technology, and access to markets’, as one of the three ‘inter-related notions’ on which CBDR is based: Differential Treatment, n 4, at p. 252. 7   P. Birnie, A. Boyle, and C. Redgwell, International Law and the Environment (Oxford University Press, 3rd edn, 2009) (‘BBR’), at p. 122. In turn, financial assistance or transfer of technology may be viewed as implementation of the principle of CBDRRC: see Article 12 (CBDR) in the IUCN’s International Covenant on Environment and Development, Environmental Law & Policy Paper No. 31 Rev. 3 (4th edn, 2010), at p. 55.

9. intra- and inter-generational equity   187 While differentiation with respect to central obligations such as that found in the climate regime (e.g. Article 3 of the Kyoto Protocol) is rare, facilitation of financial and technical assistance are amongst the most frequent differential treatment provisions found in environmental treaties.8 Though touched on here, these various forms of intra-generational equity are explored further in other contributions in this volume. These principles are reflected in Article 3(1) FCCC, which states that: The Parties should protect the climate system for the benefit of present and future generations of humankind, on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities.9

The intra- and inter-generational linkage found in the first clause of Article 3(1) is also present in United Nations General Assembly Resolutions on climate change,10 which recognize that climate change is ‘the common concern of humankind’11 and that the global climate must be protected for present and future generations of humankind.12 Whatever doubts may exist over the legal status of inter-generational equity (see section 3 below), ‘the essential point of the theory, that [hu]mankind has a responsibility for the future, and that this is an inherent component of sustainable development, is incontrovertible, however expressed. The question then becomes one of implementation’.13 The climate regime is an example of such implementation in an international regime which already accommodates the interests of future generations in a balancing of interests.14 It is thus particularly apt to consider the climate change regime in the context of these two principles, and what contribution it has made to their recognition and development through   Cullet, n 4, at p. 239. See further C. Redgwell, ‘Facilitation of Compliance’ in J. Brunnee, M. Doelle, and L. Rajamani (eds) Promoting Compliance in an Evolving Climate Regime (Cambridge University Press, 2012), 177–93; L.B. de Chazournes, ‘Technical and Financial Assistance’ in D. Bodansky, J. Brunnee, and E. Hey (eds), The Oxford Handbook of International Environmental Law (Oxford University Press, 2006) 947–73, at p. 963; and Ch. 7 infra. 9   For detailed drafting commentary, see D. Bodansky, ‘The United Nations Framework Convention on Climate Change: A Commentary’ (1993) 18 Yale Journal of International Law 451, at pp. 501–5; and generally Yamin and Depledge, n 6, ch. 4 section 2 ‘Principles’. As noted above, the FCCC principles apply to the Kyoto Protocol (preamble, paragraph 4). Citing the hortatory language of Article 3, BBR conclude that the principles contained within it are ‘not without legal effect’ in so far as they may be relied upon in the interpretation and implementation of the FCCC (and the Kyoto Protocol) and in conditioning the expectations of the Parties in the fulfilment of their obligations: n 7, at p. 359. For analysis of the principle of CBDR, reaching a similar conclusion, see Rajamani, n 4, at pp. 158–62. 10   See e.g. ‘Protection of the global climate for present and future generations of mankind’, UNGA Res. 43/53 of 6 December 1988. 11   UNGA Res. 43/53 of 6 December 1988. 12 13   See e.g. UNGA Res. 44/207 of 22 December 1989.   BBR, n 7, at p. 121. 14   Ibid. Also cited as examples are the London Dumping Convention and the International Whaling Convention. The phasing out of dumping at sea, particularly of radioactive waste, and the adoption of further controls over whaling, respectively, ‘demonstrate a real concern for future generations’: ibid, at p. 120. 8

188    part iii.  principles, emerging norms, and concepts implementation.15 While there is a clear linkage between them, there is no clear consensus as to the nature of that linkage, that is, whether intra-generational equity is a component part of inter-generational equity, both are linked under the broad umbrella concept of equity; or each is a separate principle.16 The International Law Association’s recent Draft Articles on Legal Principles Relating to Climate Change view them as complementary, but also ‘limit each other’ with potential tension between them as limits are placed on present utilization of resources.17 ‘Separate but related’ is the approach taken to these principles below in considering their scope, legal status, and role in the climate regime.

2.  The Principles of Interand Intra-generational Equity The principle of inter-generational equity (IE)18 defines the rights and obligations of present and future generations with respect to the use and enjoyment of natural and cultural resources, inherited by the present generation and to be passed on to future generations in no worse condition than received.19 This applies both to the diversity of the resources, and to the general quality of the environment that is passed on.20 The principle is often linked with notions of fairness, and of distributive justice.21 15   For early analysis on the eve of the conclusion of the FCCC, see C. Redgwell, ‘Inter-generational Equity and Global Warming’ in R. Churchill and D. Freestone (eds), International Law and Global Climate Change (Graham & Trotman/Martinus Nijhoff Publishers, 1991), pp. 41–56. 16   See E.B. Weiss, ‘Inter-generational Equity’, Max Planck Encyclopedia of Public International Law (February 2013), para 11 (who considers that there may be general agreement on the basic elements of inter-generational equity, but not upon intra-generational equity). Shelton addresses them as two principles: ‘Equity’ in D. Bodansky, J. Brunnee, and E. Hey (eds), The Oxford Handbook of International Environmental Law (Oxford University Press, 2006) 639–62, at p. 642, as do BBR, n 8, at pp. 119–23. See also Rajamani, Differential Treatment (n 4), at p. 86. 17   ILA Draft Articles with Commentary (adopted in Washington, 2014), Article 4, para 3 available at SSRN (accessed 4 August 2015). 18   See, generally, E. Brown Weiss, In Fairness to Future Generations: International Law, Common Patrimony, and Inter-generational Equity (Transnational Publishers, 1989); C. Redgwell, Inter-generational Trusts and Environmental Protection (Manchester University Press, 1999); E. Agius et al., Future generations and international law (Earthscan Publications, 1998); ‘Agora: What Obligations Does Our Generation Owe to the Next?’ with contributions by Weiss, A. D’Amato, and L. Gundling, in (1990) 84 AJIL 190–212; G. Supanich, ‘The Legal Basis of Intergenerational Responsibility: An Alternative View— The Sense of Intergenerational Identity’, (1992) 3 Yearbook of International Environmental Law 94. 19   Given current climate change predictions, this seems unlikely for the present generation. 20   Weiss, n 16 and n 18. 21   See further discussion by T. Ahmed and D. French, ‘Situating Climate Change in (International) Law: A Triptych of Competing Narratives’ in French et al. (eds), Criminological Consequences of

9. intra- and inter-generational equity   189 It ‘articulates a principle of fairness among generations in the use and conservation of the environment and its natural resources’.22 Distributive justice is also one of the two key elements of CBDR as ‘a manifestation of equity’.23 Inter- and intra-generational equity have been identified by many authors—and by the Intergovernmental Panel on Climate Change (IPCC)—as an integral ele­ ment in the broader principle of sustainable development,24 which can be ‘seen as encompassing an international understanding of intra-generational (as well as intergenerational) equity in its effort to strike a fair balance between the often conflicting goals of economic development and environmental protection’.25 The centrality of inter-and intra-generational equity is evident in the Brundtland Commission’s definition of sustainable development as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’.26 Sands identifies categories of principles inherent in the concept of sustainable development (including equity and consideration of the needs of future generations) and those drawn from other areas of international law providing assistance in achieving it (including CBDR).27 A strong sustainability approach is arguably the more consistent with inter-generational equity given the emphasis upon maintaining certain ‘critical natural stock—such as the climate system and biodiversity—[that] cannot be replaced by human-made capital and must be maintained’.28 This is a task transcending the climate regime alone. As the recent report by IPCC Working Group 3 (WGIII) addressing ‘Sustainable Development and Equity’ concludes, ‘designing a successful climate policy may require going beyond a narrow focus on mitigation and adaptation, beyond the analysis of a few co-benefits of climate policy, and may Climate Change (2013), at pp. 37–41, and J. Brunnee, ‘Climate change, global environmental justice and international environmental law’ in J. Ebbesson and P. Okowa, Environmental Law and Justice in Context (Cambridge University Press, 2009), 316–32. 22   Weiss, n 16; Shelton, n 16, at p. 642 (‘two principles that have been developed that seek to infuse a greater degree of fairness among individuals and states, both present and future’); G.F. Maggio, ‘Inter/ intragenerational Equity: Current Applications under International Law for Promoting the Sustainable Development of Natural Resources’, (1997) 4 Buffalo Envt’l L. J. 161, at p. 163. 23   Cullet, n 4, at p. 231. 24   E.g P. Sands, ‘International Law in the Field of Sustainable Development’ (1994) LXV British Yearbook of International Law 303. E. Brown Weiss, ‘In Fairness to Future Generations and Sustainable Development’ (1992) 8 Am U Intl L Rev 19; Redgwell, n 18, at p. 42. IPCC WG III states the ‘Equity between generations underlies the very notion of [sustainable development]’: IPCC WG III contribution to the AR5, ‘Climate Change 2014: Mitigation of Climate Change’ Chapter 4 ‘Sustainable Development’, section 4.2.2, p. 14. See also Article 3(4) FCCC, which lays out the general right and duty (expressed in hortatory terms) to promote sustainable development. 25   Shelton, n 16, at p. 642. 26  WCED, Our Common Future (Oxford University Press, 1987), at p. 43; however, BBR, n 7, at p. 120 note that this definition ‘begs elaboration’. 27   Sands, n 24. 28   IPCC WG III, n 17, section, relying on Neumayer’s distinction: E. Neumayer, Weak versus Strong Sustainability: Exploring the Limits of Two Opposing Paradigms (Edward Elgar Publishers, 2010). This resonates strongly with Weiss’s ‘conservation of options’ element of IE considered below.

190    part iii.  principles, emerging norms, and concepts instead require “mainstreaming” climate issues into the design of comprehensive [sustainable development] strategies, including at local and regional levels’.29

2.1 Developing IE Doctrine In contrast with intra-generational equity, IE has been extensively addressed in legal doctrine and pioneered within it by Edith Brown Weiss since her seminal 1989 work In Fairness to Future Generations.30 In her more recent analyses she articulates the three elements of the principle of IE as: (i) ‘non-discriminatory access to the Earth and its resources’; (ii) ‘comparable options (reflected in the diversity of resources’); and (iii) ‘comparable quality in the environment’.31 This 2013 articulation of the principles demonstrates a subtle shift from her articulation in In Fairness to Future Generations which used ‘conservation’ in place of ‘comparable’. This recent phrasing seems more accurately to convey the sense of an equitable balancing of the needs of present and future generations.32 From these three basic principles are derived five ‘duties of use’: (i) the duty to conserve resources; (ii) the duty to ensure equitable use; (iii) the duty to avoid adverse impacts; (iv) the duty to prevent disasters, minimize damage, and provide emergency assistance; and (v) the duty to compensate for environmental harm.33 Climate change evidences all three types of inter-generational problem which may arise in the use of planetary resources: (i) reduced or barred access to the use and benefit of resources passed on from previous generations; (ii) depletion of resources for future generations; and (iii) degradation in the quality of resources available for future generations.34 Implementation of these principles in the climate change context requires measures to prevent rapid changes in climate and to prevent or mitigate damage, and measures to assist countries in adapting to climate   IPCC ibid, section   Weiss, n 18. In contrast, intra-generational equity is only lightly explored in the doctrine with greater attention paid, as noted above, to supporting concepts such as CBDR. 31   Weiss, n 16, para 7. 32   Dupuy and Viñuales categorize principles of international environmental law according to their function as ‘prevention’ or as ‘balance’, with CBDR and inter-generational equity discussed under the latter: n 6, ch. 3. 33   Weiss, n 18, pp. 51–60; for analysis see Redgwell, n 18, ch. 4. The commentary to the IUCN’S Draft Covenant is more specific, drawing on Part I of the World Charter for Nature (UNGA Res. 37/7, 37 UNGAOR Suppl. (No. 51) at 17, UN Doc. A/37/51 (1982)) to flesh out the meaning of inter-generational equity to include, inter alia, ‘maintaining populations of all life forms at least at levels sufficient for their survival’ and ‘applying conservation principles to all areas on Earth, with special protection for unique and representative areas and endangered species’: IUCN, International Covenant on Environment and Development, Environmental Law & Policy Paper No. 31 Rev. 3 (4th edn, 2010), at p. 44. 34   Redgwell, n 18, at p. 54 and, generally, Weiss, ‘Conservation and Equity Between Generations’ in T. Buergenthal (ed), Contemporary Issues in International Law: Essays in Honour of Louis B. Sohn (Engel, 1984), pp. 245–89. 29


9. intra- and inter-generational equity   191 change.35 These last, strongly intra-generational in flavour, developing States have sought to elevate to the same level of considerability as mitigation in the climate change negotiations, until recently with limited success.36 However, the ‘intended nationally determined contributions’ which Parties were invited at the nineteenth Conference of the Parties (COP19) in Warsaw in 2013 to submit before Paris 2015 are a form of ‘self-differentiation’, which is not conditioned by a priority for mitigation over adaptation.37 In the subsequent Lima Call for Climate Action at COP20, Parties are invited to ‘consider communicating their undertakings in adaptation planning or consider including an adaptation component in their INDCs [Intended Nationally Determined Contributions]’.38 There are also strong links between the principle of IE and public trust doctrine. Particularly in Weiss’s early work, notions from US domestic law of public trust were drawn upon39 and this has recently enjoyed a limited renaissance in academic writing stimulated in part by domestic atmospheric trust litigation.40 Thus, for example, in Angela Bonser-Lain et al. v Texas Commission on Environ­mental Quality41 the District Court of Travis County held that ‘the public trust doctrine includes all natural resources of the State including the air and atmosphere’ and in proceedings before the High Court in Kampala plaintiffs have invoked the Ugandan Constitution to argue that the State has a fiduciary duty to protect Ugandan atmospheric resources for the benefit of present and future generations.42  E. Brown Weiss, ‘Climate Change, Inter-generational Equity and International Law: An Introduction’ (1989) 15 Climatic Change 327–35, at p. 330. 36  Rajamani, n 4; see also D. French and L. Rajamani, ‘Climate Change and International Environmental Law: Musings on a Journey to Somewhere’ (2013) 25 Journal of Environmental Law 437. 37   See further L. Rajamani, ‘The Warsaw Climate Negotiations: Emerging Understandings and Battle Lines on the Road to the 2015 Agreement’ (2014) 63 ICLQ 721. See further analysis of adaptation below, chs. 23–26. 38   Decision 1/CP.20, ‘Lima Call for Climate Action’, para 12, available at (accessed 4 August 2015). 39   E. Brown Weiss, ‘The Planetary Trust: Conservation and Inter-generational Equity’ (1984) 11 Ecology Law Quarterly 495. The public trust doctrine was resurrected in modern US environmental law by J.L. Sax, ‘The Public Trust Doctrine in Natural Resources Law: Effective Judicial Intervention’ (1970) 68 Michigan Law Review 471. For recent reflections on the contribution of the doctrine, see ibid, ‘The Public Trust Doctrine: 30 Years Later’ (2012) 45 University of California Davis Law Review 665–1176. 40   See, for example, M.C. Wood, ‘Atmospheric Trust Litigation’ in W.D.G. Burns and H.M. Osofsky (eds), Adjudicating Climate Change: State, National and International Approaches (Cambridge University Press, 2009), 99–128 and id, ‘Atmospheric Trust Litigation Around the World’ in K. Coghill et al. (eds), Fiduciary Duty and the Atmospheric Trust (Ashgate Publishing, 2012), 99–164. 41   Case No. D-1-GN-11-002194 (2 August 2012), available at (accessed 4 August 2015). 42   Nisi Mbabazi et al. v Attorney-General (20 September 2012), invoking inter alia Article 237 of the 1995 Constitution of Uganda, available at ; see also Wood in Coghill n 40; and P.H. Sand, ‘The Practice of Shared Responsibility for Transboundary Air Pollution’ in P.A. Nollkaemper and I. Plakokefalos (eds), The Practice of Shared Responsibility in International Law (Cambridge University Press, forthcoming 2016), available as SHARES Research Paper 69 (2015) at (accessed 4 August 2015). 35

192    part iii.  principles, emerging norms, and concepts However, suggestions that the public trust doctrine could be utilized to protect the global atmosphere43 have gained limited traction. In the domestic cases there is a direct link between the air and atmosphere of the particular State and its domestic constitutional provisions, with the explicit invocation of ‘atmospheric resources’ language. While it may be possible to argue that national atmosphere constitutes a resource based on statutory or constitutional provision or even, recalling for example the World Trade Organization (WTO) Appellate Body’s recognition of clean air as an ‘exhaustible natural resource’,44 in treaty texts, such scant recognition has been limited to ‘national’ atmosphere and to legal characterization as a ‘resource’. Thus far, attempts to apply international trusteeship doctrine to the global atmosphere exist purely on the theoretical level.45 The doctrine46 is fundamentally grounded in notions of public trusteeship over resources within the State with the concept of public trust providing an accountability mechanism for the present gene­ration to hold the State, as trustee, to account for ‘the diligent management and conservation of common environmental assets’.47 Though a number of examples may be cited, they are neither so widespread nor consistent in recognition of a public trust doctrine to constitute a basis for emergence as a general principle of international law.48 At best, such examples of national recognition of trusteeship over natural resources ‘are empirical evidence of a growing amount of transnational/ trans-cultural convergence of environmental rules’.49 43   N. Myers, The Sinking Ark (Pergamon Press, 1979); P. Barnes, Who Owns the Sky: Our Common Assets and the Future of Capitalism (Island Press, 2006) and P. Barnes et al., ‘Creating an Earth Atmospheric Trust’ (2008) 319:5864 Science 724; P. Taylor, An Ecological Approach to International Law: Responding to the Challenges of Climate Change (Routledge, 1998) at 283. For recent discussion of an ‘internationalized’ concept of public trusteeship to ‘atmospheric resources’ see Sand, ibid. 44   Standards for Reformulated and Conventional Gasoline, WTO Appellate Body (1996) WT/DS2/ AB/R; 35 ILM (1996) 274. 45   Particularly prolific in this regard is Wood, n 40 and id., ‘Advancing the Sovereign Trust of Government to Safeguard the Environment for Present and Future Generations (Part II): Instilling a Fiduciary Obligation in Governance’ (2009) 39 Environmental Law 91–139; see also Sand n 42. 46  Or doctrines since interpretation of the concept varies from state to state within the United States, and from State to State internationally where the concept of public trust has been adopted: within the United States, see R. Kundis Craid, ‘A Comparative Guide to the Western States’ Public Trust Doctrine: Public Values, Private Rights, and the Evolution Toward an Ecological Public Trust’ (2010) 37 Ecology Law Quarterly 53–197; and M. Blumm et al. (eds), The Public Trust Doctrine in Forty-Five States, Lewis & Clark Law School Legal Studies Paper, 18 March 2014, available at SSRN: (accessed 4 August 2015). For constitutional provisions in Uganda and South Africa, and statutory provisions and decrees in the Philippines and Eritrea, and judicial pronouncements in India, see: P.H. Sand, ‘The Rise of Public Trusteeship in International Environmental Law’, Global Trust Working Paper Series 03/2013, available at (accessed 4 August 2015). 47   Sand, ibid. See also critique by Lowe at n 67 below. 48   Contra, M.C. Blumm and R.D. Guthrie, ‘Internationalizing the Public Trust Doctrine: Natural Law and Constitutional and Statutory Approaches to Fulfilling the Saxon Vision’ (2012) 45 University of California Davis Law Review 741, at 750. 49   Sand, n 46, at 8. He speaks later of a ‘vertical transplant’ metamorphosis of the concept, from the national to the international level (id, at p. 22), drawing on J. Wiener’s ‘Something Borrowed for

9. intra- and inter-generational equity   193

2.2 Intra- and Inter-generational Equity and the Climate Regime Notions of environmental trusteeship at the international level, expressed in terms of IE, do not rest exclusively on recognition of public trust doctrine as a general principle of international law. They also build on the use of equity50 ‘as a basis upon which to provide standards for allocating and sharing resources and for distributing the burdens of caring for the resources and the environment in which they are found’.51 The climate regime is imbued with equitable considerations, flowing inter alia from the recognition in Article 3(1) FCCC, noted above, of the obligation to protect the climate system for the benefit of present and future generations ‘on the basis of equity’.52 Here is recognition, albeit couched in hortatory language, of the need to act for the benefit of present and future generations. Article 3 may be viewed as supporting the legitimate expectation of future generations of equitable access to planetary resources, and the concomitant obligation of the present generation as trustee of these resources to ensure that future options are not unduly constrained. Moreover, intra-generational equity is clearly recognized in the incorporation of CBDR and in the reference to ‘respective capabilities’, not to mention the explicit acknowledgement that it is for developed States to shoulder the greater burden in restoring the global patrimony.53 Article 3(1) thus clearly incorporates notions of both intra- and inter-generational equity, and the principle of CBDRRC as an expression of intra-generational concerns. However, there is a chapeau to Article 3, included at the insistence of the United States,54 which states that ‘[i]‌n their actions to achieve the objectives of the Convention and to implement its provisions, the Parties shall be guided, inter alia, by [a number of enunciated principles]’. This wording limits the scope, legal Something Blue: Legal Transplants and the Evolution of Global Environmental law’ (2001) 27 Ecology Law Quarterly 1295, at 1305.   See Shelton, n 16. Brunnee notes that when equity is used in conjunction with justice, it is correctly limited to matters of distributive justice, the broader notion of justice also embracing corrective justice and procedural justice: n 21, at p. 319. 51   Weiss, n 16. Accordingly, she asserts that ‘[t]‌his use of equity provides a foundation for the principle of inter-generational equity’. 52  This was recently reiterated in Article 4 of the 2014 Draft Articles of the International Law Association’s Committee on the Legal Principles Relating to Climate Change, above n 17, which declares that ‘States shall protect the climate system on the basis of equity of which the principle of common but differentiated responsibilities and respective capabilities . . . is a major expression’. 53   See generally Rajamani (Differential Treatment), n 4. On shifting patterns of differentiation under the climate regime see Cullet, n 4, at p. 232; L. Rajamani, ‘Differentiation in a 2015 Climate Agreement’, Centre for Climate and Energy Solutions Briefing Paper, available at (accessed 4 August 2015); and, more generally, L. Rajamani, ‘The Changing Fortunes of Differential Treatment in the Evolution of International Environmental Law’ (2012) 88(3) International Affairs 605. 54   Bodansky, n 9, at p. 502. 50

194    part iii.  principles, emerging norms, and concepts implications and precedential value of Article 3: Parties (vs States as a whole)55 are only to be ‘guided’ (rather than ‘bound’) by principles which by this wording (‘inter alia’) is necessarily wider than Article 3 (e.g. also the preamble, and even principles outside the FCCC).56 While the clear intention of this wording is to confine the legal consequences of the principles articulated in Article 3 to the Framework Convention on Climate Change,57 it is doubtful whether the content of Article 3 may be ‘ring-fenced’ in this manner.58 Beyond the treaty text, equity is frequently invoked by Parties59 to the FCCC and it is found in several key COP decisions, including in the 1995 Berlin Mandate60 launching the process for the conclusion of the Kyoto Protocol and in the 2009 Copenhagen Accord.61 The latter, for example, refers to agreement on long-term cooperative action to combat climate change by those associating with the Accord as being ‘on the basis of equity’. Yet equity is rarely defined and the mechanics of its application seldom articulated.62 For example, the Cancun Agreements63 refer to ‘equitable access to sustainable development’ without articulating how that access is equitably to be achieved. Moreover, there is recent evidence of the erosion of differential treatment in relation to the application of central obligations under the 55   Yamin and Depledge, n 6, at p. 67, note that ‘reference to ‘Parties’, rather than ‘states’ is intended to limit the application of the principles to the Convention context, thus avoiding any implications that the principles are of broader relevance to the field of international environmental law generally’. See also S. Schiele, Evolution of International Environmental Law Regimes: The Case of Climate Change (Cambridge University Press, 2014), at p. 224. 56   Bodansky, n 9, at p. 502; Yamin and Depledge, n 6, at pp. 66–7. Writing with the benefit of some lapse of time, the latter note that state practice has a role in determining the nature, legal implications and status of the principles: ibid, at p. 67. 57   Sands, n 24, at p. 337. He notes that there is a footnote to the Convention specifically indicating that the titles to Articles are included solely to assist the reader. Thus the fact that Article 3 is titled ‘Principles’ has no determinative legal effect: ibid, at n 140. 58   A similarly worded chapeau precedes the acknowledgement in Article 5(c) of the 1992 Convention on the Protection and Use of Transboundary Watercourse and Lakes that ‘[w]‌ater resources shall be managed so that the needs of the present generation are met without compromising the ability of future generations to meet their own needs’. In contrast, no chapeau guards the duty recognized in Article 4 of the World Heritage Convention to transmit world heritage to future generations: see further n 75 below. 59   And by non-Parties: as Shelton’s opening paragraph to her chapter on ‘Equity’ relates, perceptions of fairness and equity implicitly underscored the US Senate’s rejection of the Kyoto Protocol on the basis that the United States would not join any agreement on climate change which required industrialized countries to reduce their GHG emissions without similar obligations imposed on developing countries parties: n 16, at p. 640. 60  Decision 1/CP.1, ‘The Berlin Mandate: Review of Adequacy of Articles 4, Paragraph 2, Sub-Paragraph (a) and (b), of the Convention, including Proposals Related to a Protocol and Decisions on Follow-Up’, in FCCC/CP/1995/7/Add.1 (6 June 1995). 61   Decision 2/CP.15, ‘Copenhagen Accord’, in FCCC/CP/2009/11/Add.1 (30 March 2010). 62   Commentary to ILA Draft Article 4, para 1 (n 17). 63   Decision 1/CP.16, ‘The Cancun Agreements: Outcome of the work of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention’, in FCCC/CP/2010/Add.1 (15 March 2011), para 6.

9. intra- and inter-generational equity   195 climate regime. For example, the 2011 Durban Platform on Enhanced Action on a future climate regime ‘applicable to all’ omits reference to equity and CBDRRC in marked contrast with these earlier COP decisions launching negotiations of future agreements.64 To stem this erosion in the negotiations for a 2015 agreement, the Africa Group, for example, is advocating an ‘Equity Reference Framework’ in order ‘to assess the adequacy and fairness of mitigation targets and actions that States select and commit to’.65 This contextualization is also evident under the Clean Development Mechanism (CDM) where equitable geographic distribution, particularly to Least Developed Countries (LDCs), has been sought, but proved difficult to achieve.66 While in specific contexts, equity is operationalized such as this example of seeking more equitably geographic distribution in the CDM, equity may be seen largely to act as an overarching general or guiding principle in the climate regime.

3.  Legal Status of the Principles of Intra- and Inter-generational Equity There is no general international law instrument which defines the core elements of IE. Indeed, the legal status and contours of the principles of intra- and intergenerational equity are controversial.67 Internationally, the interests of future generations have been recognized in non-binding ‘soft law’ declarations (e.g. the 1972 Stockholm Declaration on the Human Environment;68 1992 Rio Declaration on Environment and Development;69 the 1997 United Nations Educational, Scientific 65   Rajamani (2012), n 53, at p. 618.   Commentary to ILA Draft Article 4, para 4 (n 17).   There is a linkage here with the Millennium Development Goals: see further T.A. Eni-Ibukun, International Environmental Law and Distributive Justice: The Equitable Distribution of CDM Projects under the Kyoto Protocol (Routledge, 2014). 67   A.V. Lowe, ‘Sustainable Development and Unsustainable Arguments’ in A. Boyle and D. Freestone (eds) International Law and Sustainable Development: Past Achievements and Future Challenges (Oxford University Press, 1999) 19, at pp. 27–9; Redgwell, n 18; BBR, n 7. Some others assert inter-generational equity as ‘a binding principle of international law with broad application’: W.C.G. Burns, ‘Solar Radiation Management and Its Implications for Inter-generational Equity’ in W.C.G. Burns and A.L. Strauss (eds) Climate Change Geoengineering: Philosophical Perspectives, Legal Issues and Governance Frameworks (Cambridge University Press, 2013), 200–20, at p. 207; Maggio, n 22, at p. 161. 68   Principle 2, Declaration of the UN Conference on the Human Environment, Stockholm, 5–16 June 1972; for commentary see L.B. Sohn, `The Stockholm Declaration on the Human Environment’, (1973) 14 Harvard International Law Journal 423. 69   Principle 3 (‘the right to development must be fulfilled so as to equitably meet the development and environmental needs of present and future generations’), UN Doc. A/CONF.151/26/Rev.1, 28 September 1992. For in-depth analysis, see C. Molinari, ‘Principle 3: From a Right to Development to 64


196    part iii.  principles, emerging norms, and concepts and Cultural Organization (UNESCO) Declaration on the Responsibilities of the Present Generation Towards Future Generations;70 and the Rio+20 Final Report71),72 in the preamble to a number of environmental treaties (e.g. the 1946 International Convention on the Regulation of Whaling73 and the 1992 Biodiversity Convention74) and, in a few instances, in the text of the treaty itself (e.g. the FCCC already cited above and the 1972 World Heritage Convention75). However, no rights of future generations which are recognized as justiciable in international law arise under these treaty texts,76 nor is there evidence that it has passed into customary international law through the practice of States.77 While States have yet to accept the principle as a binding international obligation, there is some evidence of the application of the principle, in terms of recognition of interests of future Inter-generational Equity’ in J.E. Viñuales (ed) The Rio Declaration on Environment and Development: A Commentary (Oxford University Press, 2015), 139. 70   Resolution 44 adopted by the General Conference at its 29th session, 12 November 1997, available at (with the preamble citing inter alia the FCCC as an example of an instrument which already ‘refers to’ such a responsibility). For critique of the language employed, see R. O’Keefe, ‘World Cultural Heritage: Obligations to the International Community as a Whole?’ (2004) 53 ICLQ 189, at p. 205. Indeed, as its preamble suggests the obligation (upon States) is a moral one, ‘to formulate behavioural guidelines for the present generations within a broad, future-oriented perspective’. 71   ‘The future we want’ A/66/L.56, in Report of the United Nations Conference on Sustainable Development, Rio de Janeiro, 20–22 June 2012, A/CONF.216/16, where the rights of future generations and the co-related obligations of the present are significantly developed, with ten different references (at points 1, 13, 39, 50, 86, 108, 158, and 191 (which draws on the wording of FCCC Article 3(1)), 197 and 230): see A. Boyle and B. Boer, Human Rights and the Environment: A Background Paper (2013), at p. 65 (‘Climate Change and Future Generations’), available at (accessed 4 August 2015). 72   See also the 1988 Goa Guidelines on Inter-generational Equity adopted by Advisory Committee to the UNU Project on International Law, Common Patrimony and Inter-generational Equity, 15 February 1988, and the IUCN’s International Covenant on Environment and Development, n 33. With respect to the latter, the original 1995 formulation read: ‘Article 5 Inter-generational equity: The freedom of action of each generation in regard to the environment is qualified by the needs of future generations’. The 2010 formulation now reads ‘Equity and Justice: Equity and justice shall guide all decisions affecting the environment and shall oblige each generation to qualify its environmental conduct by anticipating the needs of future generations.’ CBDRRC is addressed in Article 12. 73   161 UNTS 72. 74   31 ILM (1992) 818. Other examples are contained e.g. in an appendix in E. Agius and S. Busuttil, Future Generations and International Law (Earthscan, 1998). 75   UKTS 2 (1985) Cmnd 9424. See, generally, C. Redgwell, ‘Protecting Natural Heritage and its Transmission to Future Generations’ in A.A. Yusuf (ed), Standard-setting in UNESCO Vol I: Normative Action in Education, Science and Culture Essays in Commemoration of the Sixtieth Anniversary of UNESCO (UNESCO publishing/Martinus Nijhoff, 2007) 267–88. 76   BBR, n 7, at p. 121. In contrast, rights-based arguments may gain some traction in domestic law, and is cited as one of the rights claimants might seek to rely on in climate change litigation: J. Brunnee, S. Goldberg, R. Lord QC, and L. Rajamani, ‘Overview of legal issues relevant to climate change’ in R. Lord, S. Goldberg, L. Rajamani, and J. Brunnee (eds) Climate Change Liability: Transnational Law and Practice (Cambridge University Press, 2012) 23–49, at p. 28. 77   Contra, Burns n 67.

9. intra- and inter-generational equity   197 generations in domestic environmental law and policy.78 However, in concrete terms its influence on domestic law remains slight:79 though the Philippines case of In re Minors Oposa80 is often used as an illustration of standing of the present generation to sue for the recognition of the environmental rights of future generations, their victory was Pyrrhic81 and has not been followed by other judicial recognition in comparable cases.82 At the international level there has been some limited judicial recognition of the principle of inter-generational equity by international tribunals.83 The Behring Fur Seals Arbitration is usually cited as the first occasion where the concept of future generations was pleaded before an international tribunal.84 In the Case concerning the Gabčíkovo-Nagymaros Project (Hungary v Slovakia),85 78   See, for example, Article 6 of the New South Wales’ Protection of the Environment Administration Act 1991, which links certain principles and programmes to the achievement of ecologically sustainable development including in paragraph (b): ‘inter-generational equity—namely, that the present generation should ensure that the health, diversity and productivity of the environment are maintained or enhanced for the benefit of future generations’; and J.V. DeMarco, ‘Law for Future Generations: The Theory of Inter-generational Equity in Canadian Environmental Law’ (2004) 15 Journal of Environmental Law and Practice 1–46 (stressing in particular the impact in areas of statutory interpretation, as well as noting the overlap with the related concept of sustainable development). See also the invocation of inter-generational equity by the Indian Supreme Court in State of Himachal Pradesh v Ganesh Wood Products (1995) 6 SCC 363 (conserving natural resources for future generations) and Indian Council for Enviro-legal Action v Union of India (1996) 5 SCC 281 (pollution by chemical plant waste water). For discussion of a number of judicial decisions invoking inter-generational equity see Molinari, n 69, at p. 139. 79   For example, while noting that ‘there is increasing interest in the principle in policy and legal terms in various jurisdictions’, Fisher et al. conclude that ‘it has no identifiable role in EU or UK law to date’: E Fisher, B Lange, and E Scotford, Environmental Law Text, Cases and Materials (Oxford University Press, 2013), at p. 411. Intra-generational equity is addressed only in passing as a concept relevant to the ethical dimension of combating transfrontier air pollution: ibid, at p. 606. 80   Minors Oposa v Secretary of the Department of Environment and Natural Resources, Supreme Court of the Philippines, 30 July 1993, reproduced in 33 ILM (1994), at p. 173. 81   See D.B. Gatmaytan, ‘The Illusion of Inter-generational Equity: Oposa v Factoran as Pyrrhic Victory’ (2003) Georgetown International Environmental Law Review 457. Lowe is also critical of an interpretation of the case as acknowledging the rights of future generations, and sees it rather as an instance of the duty of some members of the present generation being enforced at the instance of other members of that generation: n 67, at p. 27. 82   See e.g. Farooque v Government of Bangladesh (1997) 49 DLR (AD) 1. And, as DeMarco points out, it is far from clear that in invoking inter-generational equity the domestic courts are applying it as a rule of international law: J.V. DeMarco, ‘Case Note: Imperial Oil Ltd v Quebec (Minister of Environment)’ (2004) 13 RECIEL 108. See also J.V. DeMarco and M.L. Campbell, ‘The Supreme Court of Canada’s Progressive Use of International Environmental Law and Policy in Interpreting Domestic Legislation’ (2004) 13 RECIEL 320 and, more generally, M. Anderson and P. Galizzi (eds.), International Environmental Law in National Courts (BIICL, 2002). 83   Examples may also be drawn from the human rights context, including the Inter-American Court of Human Rights judgment in Mayagna (Sumo) Awas Tingni Community v Nicaragua, Judgment of 31 August 2001, Inter-Am. Ct. H.R., (Ser. C) No. 79 (2001), where a joint Separate Opinion by Judges Cançado Trindade, Pacheco-Gómez, and Abreu-Burelli noted their obligations to ‘other generations (past and future)’ (para 10, citing inter alia Weiss’s In Fairness to Future Generations (n 18)). 84 85   Behring Sea Fur Seals case (1893) 1 Moore 755.   [1997] ICJ reports 1–27.

198    part iii.  principles, emerging norms, and concepts Hungary invoked the concept of preserving species for future generations as a ‘moral obligation’86 and in his Separate Opinion Judge Weeramantry recognized the concept of trusteeship over the Earth’s resources.87 In his Dissenting Opinion in the 1995 Nuclear Tests Case88 he referred to four emerging principles of particular relevance in the environmental field, including ‘the principle of intergenerational equity’ which he viewed as ‘an important and rapidly developing principle of contemporary international law’ while acknowledging that it has not yet crystallized as a generally recognized, binding norm of international law.89 Perhaps the clearest recognition is found in the Advisory Opinion of the ICJ in Legality of the Threat or Use of Nuclear Weapons where the Court noted that ‘it is imperative . . . to take account of the unique characteristics of nuclear weapons, and in particular their ability to cause damage to generations to come’.90 Judge Weeramantry, once again in a Dissenting Opinion, was even more forceful in his recognition that ‘the Court . . . must, in its jurisprudence, pay due recognition to the rights of future generations . . . [which] have passed the stage when they are merely an embryonic right struggling for recognition. They have woven themselves into international law . . . ’.91 However, in no case has the principle of inter-generational equity formed the legal basis for resolution of the dispute before the court92 nor has any case before an international tribunal expressly recognized the rights of future generations.93 Intergenerational responsibility ‘has yet to attract the international community’s imprimatur as [an] operational legal concept’; rather, transboundary impact has served as the principal conceptual vehicle for ascertaining rights and responsibilities regarding the environment,94 with the cases all involving ‘the present generation suing 87   Declaration by Hungary (1993) 32 ILM 1247.   n 85, at para 110.   Request for an Examination of the Situation in Accordance with Paragraph 63 of the Court’s Judgment of 20 December 1974 in the Nuclear Tests Case (New Zealand v France) (1995) ICJ Rep. 288. 89   Ibid, at para 98. 90   (1996) ICJ Rep 226, at 244. See also two separate opinions by Judge Cancado Trindade where he notes the influence of inter-generational equity, albeit in cautious language (‘forms part of conventional wisdom’; ‘marks presence’): Pulp Mills on the River Uruguay (Argentina v Uruguay), Judgment, ICJ Reports 2010, at para 122, and Whaling in the Antarctic (Australia v Japan; New Zealand intervening), Judgment, ICJ Reports 2014, at para 47. 91   Ibid, at 455. For general comment, see T. Stephens, ‘Sustainability Discourses in International Courts: What Place for Global Justice?’ in D. French (ed), Global Justice and Sustainable Develop­ ment (Martinus Nijhoff Publishers, 2010) 39, at pp. 51–6; on Judge Weeramantry, see D. French, ‘The Heroic Undertaking? The Separate and Dissenting Opinions of Judge Weeramantry during his time on the Bench of the International Court of Justice’ (2006) 11 Asian Yearbook of International Law 35–68. 92   Stephens, ibid; see also Weiss n 16. 93  BBR, n 7, at p. 121; E. Brown Weiss, ‘Opening the Door to the Environment and to Future Generations’ in L.B. de Chazournes and P. Sands (eds), International Law, the International Court of Justice and Nuclear Weapons (Cambridge University Press, 1999), 338–53; and Lowe, n 67. 94   G. Handl, ‘Transboundary Impacts’ in Bodansky et al., n 8, 531–49, at p. 532. 86 88

9. intra- and inter-generational equity   199 in respect of the misdeeds of the past, rather than a future generation challenging those of the present’.95 In sum, at best inter-generational equity may be said to constitute a ‘guiding principle’96 in the application of substantive norms, including existing treaty obligations, under international law.97 Whether this guiding principle has assumed more concrete form in addressing the ‘inherently inter-generational issues’ raised by climate change, and whether ‘the components of the principle will be further refined and the principle more widely referenced, implemented and applied at the a variety of levels in the international community’98 will depend, inter alia, on the crucial next steps in the evolution of the climate regime.

4.  Conclusion: The Future of an ‘Equitable’ Climate Regime The FCCC envisages further detailed rule-making to flesh out obligations balancing the interests of present and future generations and, until recently, the mandates for negotiation of the post-2012 climate change regime have routinely referenced the principles of the FCCC set out in Article 3.99 The possibility of a legally binding outcome remains on the table owing to careful drafting of the Durban outcome, the ‘Durban Platform’, which launched ‘a process to develop a protocol, another legal instrument or an agreed outcome with legal force under the Convention’ by 95   BBR, n 7, at p. 121. As such, to the extent that this results in distributing the burden of environmental protection efforts between members of the present generation, this may be seen as an expression of intra-generational equity. 96   Bodansky, n 9, at p. 501 notes that the open-ended character of principles, and the uncertainty as to where they might lead, was one of the United States’ objections to the inclusion of an article on general principles in the FCCC (as opposed to inclusion in the preamble as context for the interpretation of commitments, or as binding commitments per se). 97   Redgwell, n 18, at p. 123. Rajamani, citing a number of the binding and non-binding instruments noted above, concludes that the ‘notion of inter-generational equity, to the extent that it entails a responsibility to (and a consideration of) future generations for the care and use of the planet, is now well established in international environmental dialogue’: n 4 (Differential Treatment), at p. 84 (emphasis added). Given this qualifying language then, she unsurprisingly concludes that whether it is a legal obligation is less clear: ibid, at p. 85. Weiss acknowledges that the translation of expressed moral concern for future generations into legal rights and obligations is a task which still needs to be done: Weiss (1990) 84 AJIL at p. 202, and n 24, at p. 30. 98  This is the challenge—or the opportunity—raised by Weiss in her concluding observations: Weiss, n 16, para 35. 99  See, for example, the Bali Road map (accessed 4 August 2015) at 17 September 2009 para 1(a), and n 66 et seq above.

200    part iii.  principles, emerging norms, and concepts 2015.100 However, as noted above, the Durban Platform references neither equity nor CBDRRC, which at least in the latter instance is a reflection of the divergences which exist over its interpretation.101 The ‘battlelines’ for the 2015 negotiations in Paris were drawn at Warsaw in 2013, with agreement emerging on a hybrid architecture of top-down and bottom-up: nationally determined contributions with top-down elements on transparency and accounting, and some form of assessment or consultative process.102 Here again, however, explicit referencing of equity and CBDRRC is absent, though preambular reference is made to the ‘principles of the Convention’.103 In the current (June 2015) ‘non-paper’ illustrating possible elements of the Paris ‘package’ what little reference there is to general principles is located primarily in section III, headed ‘Provisions whose placement requires further clarity among Parties in relation to the draft agreement or draft decision’.104 The non-paper contains only one reference to future generations (in draft language on the applicable guiding principles in a draft agreement, cross-referring to Article 3 FCCC), fourteen references to ‘equity’ (e.g. in the context of the equity/fairness of commitments, especially regarding mitigation), and frequently in conjunction with reference to CBDRRC, but in the overwhelming majority of cases found in section III. Only one of these references to equity is explicitly inter-generational but it is extremely unlikely in its current form to escape unscathed at Paris.105 In keeping with its character as an umbrella concept incorporating other principles such as CBDRRC, intra-generational equity receives no explicit mention in the non-paper. Thus, under the climate regime to date there has been no general reinforcement of inter-generational equity and arguably a weakening—or ‘development towards’—reduced differentiation. This last may be interpreted either as a further weakening of the principle of CBDRRC or, the better interpretation, a shift in how it is to be applied. Thus one consequence of evolution in the climate change regime has been an apparent shift from differential treatment in favour of developing countries towards symmetry in legal requirements placed on (all) countries, 100  Decision 1/CP.17, ‘Establishment of an Ad Hoc Working Group on a Durban Platform for Enhanced Action, 2011’, available at (accessed 4 August 2015). For analysis see L. Rajamani, ‘The Durban Platform on Enhanced Action and the Future of the Climate Regime’ (2012) 61 ICLQ 501. 101   Rajamani, ‘Differentiation in a 2015 Climate Agreement’, n 53, at p. 1. 102   Rajamani, n 37. 103   Decision 1/CP.19, ‘Further Advancing the Durban Platform’, preambular recital 9, available at (accessed 4 August 2015). 104   ‘Co-Chairs’ Tool: A Non-Paper Illustrating Possible Elements of the Paris Package’, prepared in response to the request of Parties at the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP), 1–11 June 2015, Bonn (ADP 2.9), and expressly ‘without prejudice to the structure of the Paris agreement or to the placement of any provision within that structure’: Annex II, ADP 2015 available at (accessed 4 August 2015). 105   Ibid, p. 50.

9. intra- and inter-generational equity   201 a levelling-down of mitigation commitments, and an increased focus on bottomup processes with national determination of mitigation targets and monitoring of their fulfilment.106 In other words, the nature of differentiation is changing in the climate regime.107 Indeed, it has even been rather extravagantly suggested that the FCCC provisions on CBDRRC ‘seem rather outdated now’.108 Certainly there is a detectable trend away from ‘blanket differentiation’ towards issue-based differentiation,109 and, as Rajamani observes, the difficulty in crafting a single approach to differentiation to cater for all areas of the agreement—mitigation, adaptation, finance, technology, and transparency—means a hybrid approach to differentiation is the most likely outcome at Paris, with differentiation tailored to specific elements of the agreement.110 Differentiation is also becoming increasingly individualized with the explicit linkage between CBDRRC and ‘in accordance with different national circumstances’ found in recent documents,111 including in COP20’s encouragement to self-assessment of the fairness and ambition of submitted INDCs in the light of such circumstances.112 It remains to be seen just how far this ‘national c­ ircumstances’ language will dictate outcomes markedly different from the ‘individualization’ inherent in the ‘respective capabilities’ language which Article 3 FCCC first added to the principle of CBDR in 1992.113 106   D. French and L. Rajamani, ‘Climate Change and International Environmental Law: Musings on a Journey to Somewhere’ (2013) 25 Journal of Environmental Law 437; van Asselt et al. identify institutional fragmentation, the softening of commitments, the changing nature of differentiation, the rise of innovative policy instruments, and increased climate litigation: H. van Asselt, M. Mehling, and C.K. Siebert, ‘The Changing Architecture of International Climate Change Law’ in G. van Calster, W. Vandenberghe, and L. Reins (eds), Research Handbook on Climate Change Mitigation Law (Edward Elgar, 2015). However, and as the Lima Call for Climate Action underscores, there remains recognition of the special circumstances of particular categories of States (e.g. least developed and small island developing States): n 38, para 11. 107   Van Asselt et al., ibid; see also n 53 above. 108   B.J. Condon and T. Sinha, Climate Change in Global Economic Governance (Oxford University Press, 2013), at p. 35. However, this fails to take account of the evolution in the application of CBDRRC under the climate regime noted ibid; see more generally S. Schiele, Evolution of International Environmental Regimes: The Case of Climate Change (Cambridge University Press, 2014). 109   E.g. with capacity building initiatives in sub-Saharan Africa to promote ‘equitable distribution’ of CDM projects: van Asselt et al., n 106, p. 12. 110   Rajamani, ‘Differentiation in a 2015 Climate Agreement’, n 53, at p. 5. 111   See the Lima Call for Climate Action, n 38, para 3 (principle of CBDRRC, in the light of different national circumstances), and the US–China Joint Announcement on Climate Change of 14 November 2014, para 2 (committed to reaching an ambitious agreement in 2015 that reflects the principle of CBDRRC, in light of different national circumstances), available at: . 112   Lima Call for Climate Action, n 38, para 14. Many INDCs accordingly address this point: see, for example, the submissions by Kenya, Mexico, and the Marshall Islands, available at (accessed 4 August 2015). 113   Rajamani, for example, suggests that this phrase adds little to the existing requirement to take ‘respective capabilities’ into account: ‘Differentiation in a 2015 Climate Agreement’ n 53, p. 2.

Chapter 10


1. Introduction


2. The Common Concern of Humankind: Unpacking the Concept


3. Common Concerns and Climate Change


4. Conclusion


*  The views expressed in this article are the author’s and do not represent the views of the United Nations.

10. common concern of humankind   203

1. Introduction At the beginning of the twenty-first century, humankind’s dependence on the lifesustaining commons of the planet, in the first instance the climate, has become more obvious than ever before. Humanity’s collective impact on the planet’s natural systems has led some to herald that we are seeing a shift from one geological age, the Holocene, to a new geological age, the Anthropocene, distinguished by the planetaryscale influence of humankind.1 The influence of human behaviour on the atmosphere and other natural systems is so significant, it is argued, as to have ushered in a new geological epoch. A prominent mapping of nine so-called ‘planetary boundaries’ estimates that three of these—climate change, biodiversity loss, and the biogeochemical flow boundary—may already been crossed.2 As a result, the global commons—the oceans, Antarctica, the atmosphere, and their inter-related natural systems—are under unprecedented pressure. This comes despite vastly improved scientific understanding of global environmental change, in particular climate change. The international community has also developed in the latter half of the twentieth century a dense network of institutions, international agreements, treaties, and governance frameworks addressing regional and international environmental concerns.3 While the management and protection of the global commons is one of humanity’s most pressing concerns, the international community has also recognized that: ‘Poverty eradication is the greatest global challenge facing the world today and an indispensable requirement for sustainable development.’4 This reflects the reality that despite progress in overcoming poverty under the banner of the Millennium Development Goals, the material living conditions for vast numbers of persons remain highly unequal, with hundreds of millions lacking access to the rudiments of a decent life, such as clean water, sanitation, and clean energy for cooking and heating.5 Ultimately, hard-won social and economic gains—including the moral imperative of poverty eradication—will be eroded without meaningful action on climate change. In this regard, the scientific basis for aggressive action to cut greenhouse gas (GHG) emissions has become ever more compelling. Limiting the global average temperature increase to below 2°C—a level of warming associated with avoiding most, if not all, 1   The term has grown tremendously in currency. It was popularized by the chemist Paul Crutzen. See P. J. Crutzen and E. F. Stoermer (2000). ‘The “Anthropocene”’. Global Change Newsletter 41: 17–18. 2   Johan Rockström et al., ‘Planetary Boundaries: Exploring the Safe Operating Space for Humanity’, Ecology and Society 14(2): 32. 3   James Gustave Speth, Red Sky at Morning: America and the Crisis of the Global Environment (2005). 4  ‘The future we want’, outcome document of the United Nations Conference on Sustainable Development, para. 2. See A/RES/288, annex, GA resolution 288 of 27 July 2012. 5  United Nations, Millennium Development Goals Report (2012). United Nations Department of Economic and Social Affairs. See for the post-2015 period General Assembly resolution 70/1 of 25  September 2015, adopting the outcome document entitled Transforming our World: the 2030 Agenda for Sustainable Development.

204    part iii.  principles, emerging norms, and concepts dangerous climate impacts—will require a peak in global emissions within five years. Global emissions will need to be cut by 60–80 per cent by 2050. Staying within the safe boundary will require that developed countries, responsible for the largest share of cumulative emissions, begin immediately to reduce GHG emissions, with very deep reductions by the mid-century. In addition, the available (and finite) ‘global carbon budget’—consistent with holding the global temperature increase to below 2°C above pre-industrial levels—is rapidly being depleted.6 As a consequence, developing countries are also called upon to begin to constrain their emissions, that is, deviate from the business-as-usual scenario. Thus, developing countries are being asked to shoulder some of the mitigation burden, while at the same time pursuing poverty eradication and economic development strategies that depend on reliable and affordable access to energy. Yet the International Energy Agency estimates that globally 1.4 billion people lack access to electricity and 2.7 billion rely on traditional biomass for cooking and heating.7 Meeting developing countries’ rising energy demand in a climate-friendly manner will require the rapid deployment of low-carbon technologies, especially energy efficiency and renewable energy technologies. Against this backdrop, where poverty eradication, economic development, energy availability and use, and climate change are intricately interlinked, this entry examines the common concern of humankind. Common concern of humankind has found its most explicit reference in relation to climate change, in the UNFCCC, and the conservation of biological diversity in the Convention on Biological Diversity. It encompasses aspects of the global environment that, by virtue of their significance and the need for collective action to protect them, have been designated as common concern of humanity, either in treaties or through decisions of the United Nations General Assembly. The concept has over the years been the subject of considerable scholarship.8 Without delving into a discussion of customary law, this entry proceeds on the basis that the common concern of humankind can reasonably be described as a principle of international environmental law.9   Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. 7   International Energy Agency, World Energy Outlook (2010) at 237. 8   See Alan E. Boyle, ‘International Law and the Protection of the Global Atmosphere: Concepts, Categories and Principles’, in Robin Churchill and David Freestone (eds), International Law and Global Climate Change (1991), 7–19; Frank Biermann, ‘Common Concern of Humankind: The Emergence of a New Concept of Environmental Law’, Archiv des Völkerrechts, 34 (4)(December 1996), pp. 426–81; Alexandre Kiss, ‘The Common Concern of Mankind’, Environmental Policy and Law, 27(4) 1997, pp. 244–6; Jutta Brunnée, ‘Common Areas, Common Heritage, and Common Concern’, in Daniel Bodansky, Jutta Brunnée, and Ellen Hey (eds), The Oxford Handbook of International Environmental Law (2008), 550–73; Dinah Shelton, ‘Common Concern of Humanity’, Iustum Aequum Salutare 1 (2009) 33–40; Thomas Cottier and Sofya Matteoti-Berkutva, ‘International Environmental Law and the Evolving Concept of “Common Concern of Mankind”’, in Thomas Cottier, Olga Nartova, and Sadeq Z. Bigdeli (eds), International Trade Regulation and the Mitigation of Climate Change, 21–47 (2009). 9   See Jutta Brunnée, supra note 8. She refers to the report of the CSD Expert Group on the Principles of International Law for Sustainable Development, UN. Doc. E/CN.17./1996/Add.1 and the Report of 6

10. common concern of humankind   205

2.  The Common Concern of Humankind: Unpacking the Concept In broad terms, defining features of common concern are the special significance of the issue, and that its very nature means that it cannot be addressed by a single state on its own, but rather requires international cooperation and a collective response. Common concerns include issues within the jurisdiction of states (biodiversity) and those beyond state jurisdiction (atmosphere/climate). Common concern of humankind must be distinguished from related principles under international law, especially common areas and common heritage. In differentiating these concepts, Shelton states that: Common concern is related to, but different from the concepts of commons areas and the common heritage of mankind. International law has long recognized that there are common areas, like the high seas, Antarctica and outer space, which lie outside national boundaries, are not reducible to national or private appropriation, and where coherent and comprehensive regulation must be international.10

The principle of common areas, thus, has a spatial dimension that is not a necessary condition for common concerns, which may occur within the national borders, for example in the case of biodiversity, or outside areas of national jurisdiction, for example the atmosphere.11 When first introduced in the 1960s, common heritage was a controversial concept. This controversy includes issues of scope, content, and status, as well as questions concerning its relationship to other legal concepts.12 The concept of common heritage of humankind relates centrally to the status of a resource.13 Thus, in 1970, the United Nations General Assembly declared the sea-bed and its resources the ‘common heritage of mankind’.14 Although the common heritage concept was taken up in the United Nations Convention on the Law of the Sea (UNCLOS), it was not accepted by industrialized countries, who did not support the framework the expert group meeting on Identification of principles of international environmental law aiming at sustainable development, UN Doc. UNEP/IEL/WS/3/2.   Dinah Shelton, ‘Common Concern of Humanity’, Iustum Aequum Salutare 1 2009, 34.   Shelton, supra note 10. 12  Prue Taylor, ‘Common Heritage of Mankind Principle’, in Klaus Bosselmann, Daniel Fogel, and J. B. Ruhl, (eds), The Encyclopedia of Sustainability, Vol. 3: The Law and Politics of Sustainability 64–9; Kemal Baslar, ‘The Concept of the Common Heritage of Mankind in International Law’ (1997). (accessed 17 July 2015). 13   Brunnée, supra note 8 at 552. 14   General Assembly Resolution 2749 (XXV) of 12 December 1970 (A/RES/25/2749), Declaration of Principles Governing the Sea-Bed and the Ocean Floor, and the Subsoil Thereof, beyond the Limits of National Jurisdiction. 10 11

206    part iii.  principles, emerging norms, and concepts established for the exploitation of deep sea-bed minerals. In an effort to garner ratification of UNCLOS by developed countries, the implementation of the relevant part of the Convention was amended.15 Similarly, the application under the Moon Agreement of the common heritage concept to the moon also did not win universal agreement, in particular being rejected by the leading space powers.16 A distinguishing feature is that common heritage addresses allocation and exploitation of a given resource, such as deep sea-bed minerals under UNCLOS. The common heritage concept carries with it attempts to ensure that the industrialized countries leadership in technology did not disadvantage developing countries in sharing in the benefits of any areas newly opened to exploitation. By contrast, protection, not the establishment of international regimes for allocation or shared exploitation, is the animating purpose of common concern.17 The very notion of common concern, addressing issues of singular importance, whose resolution exceeds the reach of individual states, is emblematic of international environmental law itself. In positing issues of transcending global concern, it stands in some tension to the conception of states’ interests. In fact, one might argue that it goes ‘against the grain of foundational structures of international law’ in favouring common interests over individual state interests.18 If the point of departure in analysing common concern is tilted towards the state-centric, then its principal feature is the idea that all states benefit from actions taken in common.19 On this view, what counts are concerns and interests common to states, and concerns and interests that can be advanced and articulated by states. Common concern is then, in this sense, best understood as a product of the overlapping interests of states, defined by state actors. A slightly different understanding of common concern is not derived in the first place from the overlapping interests of states but, instead, from the ‘global concerns of humanity as a whole’.20 The words themselves—‘common concern of humankind’—invite a broader perspective that transcends the conception of an international community narrowly conceived of states pursuing their respective self-interests. From this perspective, the yardstick for assessing states’ actions is not their self-interest or even collectively agreed goals, but rather the protection and safeguarding of the interests of humanity and the planet as a whole.21  Frank Biermann, ‘Common Concern of Humankind: The Emergence of a New Concept of Environmental Law’, Archiv des Völkerrechts, 34 (4) (December 1996) at 429. See Agreement Relating to the Implementation of Part XI of the United Nations Convention on the Law of the Sea of 10 December 1982, contained in General Assembly Resolution 48/263 of 28 July 1994 (A/RES/48/263). 16  Agreement Governing the Activities of States on the Moon and Other Celestial Bodies of 5 December 1979, UNTS 1363 (1984) 3. 17  Frank Biermann, ‘Common Concern of Humankind: The Emergence of a New Concept of Environmental Law’, Archiv des Völkerrechts, 34 (4) (December 1996) at 430. 18 19   Brunnée, supra note 8 at 553.   Brunnée, supra note 8 at 553. 20   Case concerning the Gabčíkovo-Nagymaros Project (Hungary v Slovakia) 1997 ICJ Rep 7 (25 September), separate opinion of Vice-President Weeramantry, at 115. 21   Brunnée, supra note 8 at 554. 15

10. common concern of humankind   207 It has been suggested that issues of common concern are related to erga omnes obligations; that is, obligations owed to the international community as a whole and in the enforcement of which all states have an interest.22 Common concern and erga omnes obligations cover issues that involve interests of persons around the world. Erga omnes obligations are those which are ‘by their very nature the concern of all States’,23 and while there is no agreement on a list of such norms, the protection of the global environment may well come within this ambit. One practical effect of the erga omnes status of a norm is to confer enhanced standing, since all states have an interest in its enforcement. The core norms of the climate regime arguably concern all states. The concept of international obligations owed to the international community as a whole (erga omnes) was taken up in the Draft Articles on State Responsibility adopted by the International Law Commission (ILC) in 2001.24 Article 48(1) sets out the categories of obligations, which if breached, entitle a state other than the injured state to invoke state responsibility. Here a distinction is drawn between, first, obligations owed to a group of states and established to protect a collective interest of the group, and second, obligations owed to the international community as a whole.25 While the articles and commentary do not list obligations which under existing international law are owed to the international community, it is noted that the International Court of Justice (ICJ) has provided guidance covering genocide, protection from slavery and racial discrimination, and the right of self-determination of peoples.26 Whether or not a principle such as common concern ought properly to be classified as an obligation owed to the international community as a whole (erga omnes) is not a question that can be answered here. Moreover, in the climate context the issue of enhanced standing conferred by erga omnes status is essentially moot, given the (current) absence of climate litigation before international tribunals or unilateral enforcement of international law through counter-measures. Rather, the notion of obligations erga omnes can be regarded as having found expression in institutionalized forms of cooperation, including sharing of information, monitoring systems, and the development of compliance mechanisms. Drawing on the above, it is submitted that the fundamental characteristics of common concerns of humankind include the following: (a) the interests concerned extend beyond those of individual states and touch on values or ethics of global significance; 22   Shelton, supra note 10 at 34, 39. See the classic obiter dictum in Barcelona Traction, Light and Power Company Limited Case (Belgium v Spain) (Second Phase), International Court of Justice, 1970 ICJ Rep 3. 23   Bierman, supra note 8 at 451. 24   Draft Articles on Responsibility of States for Internationally Wrongful Acts with commentaries, 2001. International Law Commission (2008). See Edith Brown Weiss, ‘Invoking State Responsibility in the Twenty-First Century’, 96 Am. J. Int’l L. 798–816 (2002). 25   International Law Commission, supra n 24, at 127. See also Erika de Wet, ‘The International Constitutional Order’, 51 ICLQ 51–76 (2006). 26   International Law Commission, supra n 24, at 127.

208    part iii.  principles, emerging norms, and concepts (b) threats to the interests concerned are marked by their gravity and potential irreversibility of impacts; and (c) safeguarding the interests involved requires collective action and entails collective responsibility. What then is the legal import of the principle of common concern of humankind? Brunnée maintains that while the principle does not entail any direct rules or duties of conduct for states, it may narrow the freedom of action of states even in cases where their conduct has not affected the sovereign rights of other states.27 That is, it might constrain conduct, even where that conduct otherwise falls short of triggering the transboundary harm principle. This principle provides that no state has the right to use or permit the use of its territory in such a manner as to cause injury in another state, and is triggered where the harm is serious or appreciable and causation is clearly established.28 In short, in practice common concern is thus of less direct relevance to state responsibility for breaches of international law; rather, it is more properly regarded as encapsulating a requirement that all states address the concern through international cooperation.29 Under common concern regimes, the emphasis is on an equitable approach to cooperation and burden-sharing.

3.  Common Concerns and Climate Change Left unmitigated, climate change may pose an existential threat. A number of climate impacts could be irreversible, certainly on human timescales. The common concern to be addressed is thus significant and weighty. And, as scientific research on climate change has accumulated, this has further underlined the gravity of the problem and the challenges involved in achieving the ultimate objective of the Convention—that is, the ‘stabilization of the greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system’. In this respect, the climate system is defined in the Conven­ tion as ‘the totality of the atmosphere, hydrosphere, biosphere and geosphere and 27   ‘International Environmental Law: Rising to the Challenge of Common Concern?’ Jutta Brunnée, Proceedings of the Annual Meeting (American Society of International Law) vol. 100, (29 March– 1 April 2006), pp. 307–10; Brunnée, supra note 8 at 566. 28   Trail Smelter Case (United States v Canada), 16 April 1938 and 11 March 1941, Reports of International Arbitral Awards, vol. 3, 1905–1982. See Xue Hanqin, Transboundary Damage in International Law (2003). 29   Brunnée, supra note 8 at 566.

10. common concern of humankind   209 their interactions’.30 This comprehensive definition admirably captures the broad interests of humanity with respect to the climate system, albeit subject to the condition of ‘dangerous’ interference. References to ‘common interest’ are found in a number of treaties, particularly earlier treaties such as the 1946 International Convention for the Regulation of Whaling.31 Later environmental agreements more often made reference to the common concern of mankind.32 Then, in 1988, General Assembly resolution 43/53 stated that ‘climate change is the common concern of mankind, since climate is an essential condition which sustains life on Earth’.33 Two years later, the General Assembly established the Intergovernmental Negotiating Committee to prepare what became the United Nations Framework Convention on Climate Change (UNFCCC).34 The UNFCCC affirms in its preamble that ‘change in the Earth’s climate and its adverse effects are a common concern of humankind’. It is worth noting that while the concept of common concern is broad and open-ended, the manner in which it is reflected in the Convention is cautious and mindful of sovereignty concerns.35 Accordingly it is not the climate, as such, that is designated the common concern, but rather the change in climate and the adverse effects of this change that are addressed. Similarly, the Convention on Biodiversity affirms ‘that the conservation of biological diversity is a common concern of humankind’ [emphasis added]. Since common concern is open-ended, it may be deemed prudent from a legal perspective to confine its application as clearly as possible, in the process also minimizing interference with sovereignty. The responsibility for GHG emissions is common, given that such emissions are generally completely mixed in the atmosphere within two weeks, regardless of the location where they were emitted. Once in the atmosphere well-mixed GHGs cannot be directly attributed to the individual countries from which they were emitted. Crucially, the adverse impacts of climate change can be considered as a common concern of humankind because an effective response demands collective action if the problem is to be addressed. Effective mitigation requires the participation of all leading emitters of GHGs, in line with relevant principles under the UNFCCC, including the principle of common but differentiated responsibilities and respective capabilities. However, as with many problems depending on a collective response, there is the risk of free-riding, especially if the response imposes costs.   Article 1(3).   International Convention for the Regulation of Whaling of 2 December 1946, 161 UNTS 72. 32   See Bonn Convention on Conservation of Migratory Species of Wild Animals of 23 June 1979. 33   GA Resolution 43/53 of 6 December 1988 (A/RES/43/53). The same resolution welcomed the establishment of the Intergovernmental Panel on Climate Change (IPCC) and outlined issues to be addressed by the Panel. 34   GA Resolution 45/212 of 21 December 1990 (A/RES/45/212). 35   Brunnée, supra note 8 at 564; Dinah Shelton, ‘Common Concern of Humanity’, Iustum Aequum Salutare 1 2009 at 37. 30 31

210    part iii.  principles, emerging norms, and concepts Designating climate change as the common concern of humankind recognizes both the vital importance of maintaining a stable climate for development and human welfare, and the necessity of a cooperative approach involving all states. Thus, the preamble of the Convention provides that ‘climate change calls for the widest possible cooperation by all countries and their participation in an effective and appropriate international response’, while reaffirming ‘the principle of sovereignty of States in international cooperation to address climate change’. Article 4(1), which sets out the common commitments of all Parties, contains several further references to cooperation, for instance in relation to the development and diffusion of technologies, preparation for adaptation to the impacts of climate change, and the carrying out of scientific and other research. The relationship between common concern and the common but differentiated responsibilities (CBDR) also deserves to be mentioned. Article 3(1) of the Convention states that: ‘The [P]‌arties should protect the climate system for the benefit of present and future generations of humankind, on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities’. According to Rajamani, the dimension of responsibility in the CBDR principle is anchored in the principle of cooperation, which commits states to address transboundary pollution in a spirit of cooperation.36 In turn, she maintains that ‘common responsibility’ is derived from the common concern and common heritage of mankind concepts.37 On this account, common concern is one of the sources of CBDR, a key structural principle of the climate regime. The differentiation in responsibility is based on both the differing historical responsibility of states and differences in their present economic capabilities.38 Bierman identifies the legal differentiation between developed and developing countries as ‘a pivotal aspect of the notion of common concern of humankind’.39 The ambit of the CBDR principle is contested within the climate regime, with developed and developing countries advancing differing interpretations of its reach and application. With the relative share of current GHG emissions from developing countries on the rise, the debate around the application of CBDR can be expected to intensify. In such a situation, consideration of common concern, as a foundation for CBDR, could prove useful. The climate negotiations under the UNFCCC combine highly political and complex technical aspects. Common concern, as an unchallenged background principle, is not of immediate relevance to these negotiations, save through its link with CBDR, as noted above. In 2010, at the 16th Conference of the Parties (COP-16) of the UNFCCC, Parties to the Convention committed to a global goal to reduce greenhouse gas emissions so as to hold the increase in global average temperature below 2°C, and to consider a 1.5°C limit in the near future. Through the Cancun   Lavanya Rajamani, Differential Treatment in International Environmental Law (2006) at 134. 38 39   Ibid at 134.   Ibid at 136; Bierman, supra note 8 at 433.   Ibid at 434.

36 37

10. common concern of humankind   211 Agreements adopted at COP-16, Parties to the UNFCCC also established a series of institutions for implementing this agreement. At COP-17, the Parties to the UNFCCC achieved a breakthrough in launching a new platform—the Durban Platform for Enhanced Action—of negotiations under the Convention, with the mandate to deliver a new and universal greenhouse gas reduction protocol, legal instrument or other outcome with legal force by 2015 for the period beyond 2020.40 While common concern is not cited, the preamble to the decision states that: ‘climate change represents an urgent and potentially irreversible threat to human societies and the planet . . . and 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’.41

4. Conclusion It has been argued above that the common concern of humankind underpins the development of other principles of the climate change regime.42 That regime has developed into a complex web of international law, incorporating news forms of rule-making, for example the decisions of the Conferences of the Parties, or COPs,43 and implementation through regional and national legislation, for example the EU Emissions Trading Scheme (ETS). The question arises concerning the relationship between the principle of common concern and this detailed, specialized body of law. Does the principle retain any continued relevance? This question can be answered in the affirmative on at least two grounds. First, as specialized as the climate regime has become, the multilateral effort to combat and mitigate climate change will be on the international agenda for decades, if not centuries. In general, therefore, over that time, it seems quite conceivable that in addressing the evolving problem of climate change states may draw again on common concern of humankind. Second, there may already be one climate-related issue that could in the future conceivably implicate the principle of the common concern of humankind. This is the possible use of climate alteration techniques and technologies that fall under the heading of geo- or climate-engineering. This term encompasses various technologies that through large-scale, deliberate modifications, seek to reduce 40   Decision 1/CP.17, Report of the Conference of the Parties on its seventeenth session, held in Durban from 28 November to 11 December 2011, Part Two: Action taken by the Conference of the Parties at its seventeenth session, FCCC/CP/2011/9/Add.1. 41 42 43  Ibid.   Biermann, supra note 8.   Brunnée, supra note 8.

212    part iii.  principles, emerging norms, and concepts temperatures and combat climate change.44 Some technologies could be deployed domestically but with transboundary impacts, or carried out in areas beyond national jurisdiction, such as ocean fertilization on the high seas or in space. These techniques fall within the reach of individual countries, but have the potential for profound and far-reaching impacts on regional and global climate systems.45 While a number of instruments may be applicable, such as UNCLOS and the 1972 London Convention,46 geo-engineering technologies are not the subject of overall international regulation.47 Thus the invocation of common concern may serve as the basis for international initiatives to regulate the application of geo-engineering technologies. Looking forward, the principle of common concern of humanity remains a powerful reminder that, over and above political sparring, misinformation, and the welter of technicalities that at times dominate public discussion, combating climate change and adapting to its now inevitable impacts remains the shared concern of humanity. And if we are indeed witnessing a movement towards a community of nations in which international law plays a constitutive role, then common concern of humankind would justifiably be part of that firmament.

  The Royal Society, Geoengineering the climate: science, governance and uncertainty (2009).  David G. Victor, M. Granger Morgan, Jay Apt, John Steinbruner, and Katharine Ricke, ‘The Geoengineering Option: A Last Resort Against Global Warming?’ 88(2) Foreign Affairs 64–76 (2009). 46   Convention on the Prevention of Marine Pollution by Dumping of Wastes and other Matter of 1972, 1046 UNTS 138. 47   But see Decision IX/16 C of the Ninth Conference of the Parties of the Convention on Biodiversity, which requests Parties to ensure that ocean fertilization activities do not take place until there is an adequate scientific basis on which to justify such activities. 44 45

Chapter 11


1. Introduction


2. Does Climate Change Interfere with the Enjoyment of Human Rights?


3. How Does Human Rights Law Require States to Address Climate Change?


4. Conclusion


214    part iii.  principles, emerging norms, and concepts

1. Introduction This chapter examines the application of international human rights law to climate change. Specifically, it looks at whether climate change interferes with the enjoyment of human rights recognized in international law and, if so, whether and how human rights law requires States to protect human rights from such interference. Two points should be emphasized at the outset. First, this chapter examines principles of human rights law, not morality or ethics.1 Of course, the seminal documents in international human rights law, especially the 1948 Universal Declaration of Human Rights, can also be read as statements of shared ethical principles. But legal norms differ from ethical principles in key respects. Even if human rights law often seems to be honored more in the breach than the observance, it still has claims to bindingness: it is set forth in treaties with which States have formally agreed to comply,2 and it is overseen by compliance mechanisms. Although those mechanisms are very far from completely effective, they may have concrete effects on behavior. At the same time, human rights law includes limits that may not exist in morality or ethics. For example, human rights treaties impose obligations primarily on States, not individuals or other non-State actors such as corporations, and they often provide that a State owes duties only to individuals within its jurisdiction or control. Second, the application of human rights law to climate change is still in its infancy. Human rights treaties do not address climate change explicitly, and climate treaties do not refer to human rights. The most famous attempt to bring a climate claim to a human rights tribunal—a petition brought by the Inuit people to the Inter-American Human Rights Commission in 2005—failed to obtain a decision on the merits. Nevertheless, the contours of the relationship between human rights and climate change are becoming clearer, as this chapter explains. Although human rights courts have not addressed climate change, other human rights bodies, including the United Nations Human Rights Council (UNHRC) and the UN Office of the High Commissioner for Human Rights (OHCHR), have examined the relationship,  as 1   For a collection of ethical perspectives on climate change, see Climate Ethics: Essential Readings (Gardiner et al., 2010). 2   Treaty law is not the only source of international human rights obligations, but it is the most important source relevant to climate change. The potential relevance of customary human rights law is limited partly by the near-universality of membership of major human rights treaties, and partly by the lack of consensus on how far customary obligations extend beyond a small number of heinous crimes. See Restatement (Third) of the Foreign Relations Law of the United States § 702 (1987) (listing duties of States under customary law not to practice, encourage, or condone: genocide; slavery or the slave trade; murder or causing individuals to disappear; torture or other cruel, inhuman or degrading treatment or punishment; prolonged arbitrary detention; systematic racial discrimination; and ‘a consistent pattern of gross violations of internationally recognized human rights’).

11.  human rights principles and climate change    215 have scholars (UNHRC, 2009a; OHCHR, 2009a).3 Perhaps most importantly, human rights tribunals and other bodies have developed a large and growing body of jurisprudence on the application of human rights norms to environmental harm generally. The principles of this emerging environmental human rights law have become much clearer in recent years, and it is possible to apply them to the enormous environmental challenge of climate change.

2.  Does Climate Change Interfere with the Enjoyment of Human Rights? Whether climate change interferes with the enjoyment of human rights is a separate question from whether climate change violates human rights law. Interference may be necessary for violation, but it is not sufficient. Whether climate change violates human rights law—or, more accurately, whether States violate human rights law as a result of their action (or inaction) relating to climate change—depends on whether States breach their legal obligations by failing to take steps to prevent or respond to the effects of climate change on human rights. That issue is addressed in section 3. This section focuses on the preliminary question: whether the effects of climate change interfere with the full enjoyment of human rights. The answer seems clear: there is widespread agreement among human rights bodies, States, and scholars that climate change does interfere with the enjoyment of human rights protected by international law, and that this interference will greatly increase over time unless current climate policy dramatically changes. Human rights are often divided into civil and political rights on the one hand and economic, social, and cultural rights on the other. The former group includes rights to life, liberty, property, and freedoms of expression and religion; the latter includes rights to education, work, social security, an adequate standard of living, and the highest attainable standard of health. The Universal Declaration includes both sets of rights, but when the rights in the Declaration were written into treaties, they were separated into an International Covenant on Civil and Political Rights (ICCPR) and an International Covenant on Economic, Social and Cultural Rights (ICESCR) 3   For scholarship on climate change and human rights, see, e.g., Human Rights and Climate Change (Humphreys, ed., 2010); International Council on Human Rights Policy, Climate Change and Human Rights, A Rough Guide (2008); Introduction: Climate Change and Human Rights: Unpacking the Issues (Bodansky, 2010); Restoring the Climate by Realizing Rights: The Role of the International Human Rights System (Cameron and Limon, 2012); Climate Change and Human Rights Law (Knox, 2009); The Janus-Head of Human Rights and Climate Change: Adaptation and Mitigation (Pedersen, 2011); Applying Human Rights Norms to Climate Change: The Elusive Remedy (Stephens, 2010).

216    part iii.  principles, emerging norms, and concepts (OHCHR, 1966a; OHCHR, 1966b). This division also appears in the European and Inter-American regional human rights regimes,4 although the African and Arab human rights agreements incorporate both types of rights without distinction (Organization of African Unity, 1981; League of Arab States, 2004). Another category of rights, which cuts across the first two, includes rights held by individuals because of their status as members of certain groups, as well as rights held by groups themselves. Both the ICCPR and the ICESCR, as well as regional human rights treaties, prohibit discrimination against individuals on the basis of race, gender, and religion, among other grounds (OHCHR, 1966a; OHCHR, 1966b; Organization of African Unity, 1981; League of Arab States, 2004).5 In addition, the members of some groups enjoy additional rights aimed at enabling the groups’ continued existence (OHCHR, 1966a).6 Finally, groups that qualify as ‘peoples’ have a few separately recognized rights, notably the right to self-determination (OHCHR, 1966a; OHCHR, 1966b; Organization of African Unity, 1981). None of the UN human rights treaties explicitly includes a right to a healthy environment or any other right to an environment of a certain quality. The lack of such a right appears increasingly anomalous when compared to the growing popularity of a right to a healthy environment at the regional7 and national8 levels. However,   Compare European Convention on Human Rights, 1950 and American Convention on Human Rights, 1969 (setting out civil and political rights), with European Social Charter (Council of Europe, 1961) and Additional (San Salvador) Protocol to the American Convention on Human Rights in the Area of Economic, Social and Cultural Rights, 1988 (setting out economic, social, and cultural rights). 5   ICCPR, Articles 2(1), 26; ICESCR, Article 2(2); African Charter, Article 2 (Organization of African Unity, 1981); American Convention, supra note 4, Article 1(1); European Convention, supra note 4, Article 14. Some treaties elaborate on non-discrimination on the basis of certain statuses, such as race and gender. E.g., International Convention on the Elimination of All Forms of Racial Discrimination (CERD), 1965; Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW), 1979. 6   See ICCPR Article 27 (‘persons belonging to [ethnic, religious, or linguistic] minorities shall not be denied the right, in community with other members of their group, to enjoy their own culture, to profess and practise their own religion, or to use their own language’). 7   Most of the regional human rights systems recognize some form of a right to a healthy environment. See African Charter, supra note 5, Article 24 (‘all peoples shall have the right to a general satisfactory environment favorable to their development’ (Article 24); San Salvador Protocol, supra note 4, Article 11(1) (‘everyone shall have the right to live in a healthy environment’); Arab Charter, Article 38 (including a right to a healthy environment as part of the right to an adequate standard of living that ensures well-being and a decent life) (League of Arab States, 2004); Association of Southeast Asian Nations, Human Rights Declaration, 2012 (incorporating a ‘right to a safe, clean and sustainable environment’ as an element of the right to an adequate standard of living). Although the European regional human rights regime does not incorporate an explicit right to a healthy environment, it has been recognized in a regional European environmental agreement. See (Aarhus) Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters, 1998, Article 1 (referring to ‘the right of every person of present and future generations to live in an environment adequate to his or her health and well-being’). 8   More than ninety States have adopted such a right in their national constitutions. See David Richard Boyd, The Environmental Rights Revolution: A Global Study of Constitutions, Human Rights, and the Environment (2012). 4

11.  human rights principles and climate change    217 the absence of a universally acknowledged right to a healthy environment is of less importance to the application of human rights law to the environment than it may first appear, because it is now well established that environmental harm can interfere with the enjoyment of many recognized human rights, including the rights to life and health. A few treaties make this link explicit. For example, the Convention on the Rights of the Child states that environmental pollution poses ‘dangers and risks’ to nutritious foods and clean drinking water, which Parties are required to take appropriate measures to provide in the course of pursuing full implementation of the right of the child to the highest attainable standard of health (UNGA, 1989). Similarly, the ICESCR provides that the steps Parties must take to achieve the full realization of the right to health ‘shall include those necessary for . . . the improvement of all aspects of environmental and industrial hygiene’ (OHCHR, 1966b). In other cases, the relationship between environmental harm and human rights has been clarified by international human rights bodies. The principal UN human rights organ, the Human Rights Council, appoints special rapporteurs and independent experts who issue reports addressing compliance with particular rights, and the two Human Rights Covenants, as well as other UN human rights treaties, have committees of independent experts with the authority to review reports by States on their implementation of the treaties and to hear claims by individuals against States that have accepted the committees’ jurisdiction over such claims. Statements by the Council-appointed experts and the human rights treaty bodies are not legally binding, although they may have persuasive effect. At the regional level, the African, European, and Inter-American human rights systems have established international courts whose decisions bind States subject to their jurisdiction.9 In addition, the African and Inter-American systems have human rights commissions that can issue non-binding decisions against States in their respective regions, whether or not the States are subject to the jurisdiction of the regional court. These human rights bodies have consistently stated that environmental harm can adversely affect the enjoyment of the human rights within their purview. For example, the Committee on Economic, Social and Cultural Rights, the committee of experts overseeing the ICESCR, has interpreted the right to health to include: the requirement to ensure an adequate supply of safe and potable water and basic sanitation; [and] the prevention and reduction of the population’s exposure to harmful substances such as radiation and harmful chemicals or other detrimental environmental conditions

  In the American and European systems, States that are party to the constitutive human rights agreement—the American Convention and the European Convention—are subject to the jurisdiction of the Inter-American Court of Human Rights and the European Court of Human Rights, respectively. In the African system, States become subject to the African Court on Human and Peoples’ Rights by joining a 1998 protocol to the African Charter. 9

218    part iii.  principles, emerging norms, and concepts that directly or indirectly impact upon human health. (Committee on Economic, Social and Cultural Rights, 2000)

Special rapporteurs appointed by the Human Rights Council have highlighted the adverse effects that environmental degradation can have on rights within their purview, including rights to health, adequate housing, and food (UNCHR, 2002; UNHRC, 2007; UNHRC, 2009b; UNHRC, 2012a). The special rapporteur on toxic waste has issued a series of reports identifying how illegal dumping of such waste can interfere with many rights, including rights to life and health (UNCHR, 2001).10 And the regional human rights systems have issued decisions holding that environmental harm can interfere with a broad array of rights, including rights to life, property, health, and respect for private and family life.11 In recent years, the Human Rights Council has taken note of this emerging environmental human rights law. In March 2011, it adopted a resolution stating that ‘environmental damage can have negative implications, both direct and indirect, for the effective enjoyment of human rights’ (UNGA, 2011). The following year, it appointed an independent expert on human rights and the environment to a threeyear mandate in order, inter alia, to clarify the human rights obligations relating to the environment. The present author was appointed in July 2012 to that position. In his first report, presented to the Council in March 2013, he concluded that one of the ‘firmly established’ aspects of the relationship between human rights and the environment is that ‘environmental degradation can and does adversely affect the enjoyment of a broad range of human rights, including rights to life, health, food and water’ (UNHRC, 2012b). The following year, his second report surveyed statements by treaty bodies, special rapporteurs, regional human rights tribunals, and many other sources, and concluded that ‘[v]‌irtually every source reviewed identifies rights whose enjoyment is infringed or threatened by environmental harm’ (UNHRC, 2013). There is no reason to think that climate change is qualitatively different from other types of environmental harm in this respect, and when human rights organs have examined climate change, they have not hesitated to conclude that it can interfere with human rights. The most detailed examination by a human rights body of the effect of climate change on human rights is a 2009 report prepared by the OHCHR at the request of the Human Rights Council (OHCHR, 2009). Drawing on the 2007 assessment report of the Intergovernmental Panel on Climate Change, the 10   E.g., Adverse effects of the illicit movement and dumping of toxic and dangerous products and wastes on the enjoyment of human rights (UNCHR, 2001). 11  See, e.g., Öneryildiz v Turkey at 115 (2004); Saramaka People v Suriname at para 95 (2007); Indigenous Cmty. Yakye Axa v Paraguay at para 143 (2005); Mayagna (Sumo) Awas Tingni Cmty v Nicaragua at para 148 (2001); Marangopoulos Foundation for Human Rights v Greece at para 195 (2006); Soc. & Econ. Rights Action Ctr. v Nigeria (Ogoniland case) at para 58 (2001); López Ostra v Spain at 277, 295 (1994); Fadeyeva v Russia at 255, 281 (2005); Taşkin v Turkey at 179, 205 (2004).

11.  human rights principles and climate change    219 OHCHR report describes the adverse effects of climate change on specific rights, including: the right to life, which will be threatened by several weather events such as floods, storms, and droughts, as well as by an increase in hunger and malnutrition; the right to food, which will be jeopardized by increased numbers of people facing malnutrition from decreased crop productivity; the right to water, adversely affected for the more than one billion people receiving melt water by the loss of glaciers and reductions in snow cover; the right to the highest attainable standard of health, which will be infringed not only by malnutrition and extreme weather events, but also by malaria and other diseases that thrive in warmer weather; the right to housing, which has already been compromised by the forced relocation of communities in the Arctic and low-lying island states; and the right of selfdetermination, which is threatened by the possible inundation and disappearance of small island States (UNHRC, 2009a). The OHCHR report also states that climate change will particularly affect vulnerable groups, including women, children, and indigenous peoples, whose rights are further protected by specific human rights treaties (UNHRC, 2009a). In response to the report, the Human Rights Council adopted a resolution in March 2009 agreeing that ‘climate change-related impacts have a range of implications, both direct and indirect, for the effective enjoyment of human rights’, including the rights to life, health, food, water, housing, and self-determination, and encouraging its special rapporteurs ‘to give consideration to the issue of climate change within their respective mandates’ (UNHCR, 2009a). A number of special rapporteurs have issued reports on the effects of climate change on the rights within their mandates, including on the right to housing and on the right to water (UNHRC, 2009b; OHCHR, 2010). In December 2009, before the Copenhagen Conference of the Parties (COP) to the UN Framework Convention on Climate Change, the special rapporteurs issued a joint statement drawing attention to the dangers that climate change presents to the enjoyment of human rights (OHCHR, 2009b). States generally seem to agree with these conclusions. Marc Limon has described the shift in the attitudes of government representatives to the Human Rights Council between 2008, when the Council first debated whether to request a report on the topic at all, and 2009, by which time: no delegation argued with the notion that climate change has implications for a wide-range of explicitly identified, internationally-protected human rights; that already vulnerable ‘climate frontline’ countries are most at risk (and the least able to adapt); and that the human rights impacts do not fall evenly across a given population, but rather target marginalized or vulnerable groups, such as women and children. (Limon, 2010)

Beyond the UN human rights bodies, the Conference of the Parties to the Framework Convention on Climate Change has also recognized the connection between climate change and human rights. The Cancun Agreements adopted by the COP in December 2010 quote language from the 2009 Human Rights Council

220    part iii.  principles, emerging norms, and concepts resolution recognizing that ‘the adverse effects of climate change have a range of direct and indirect implications for the effective enjoyment of human rights’ (UN Conference of the Parties, 2011). In short, there no longer appears to be any serious doubt that climate change can interfere with the enjoyment of human rights recognized and protected by international law. Indeed, some vulnerable communities are already experiencing such interference. For example, the Inuit, an indigenous people living in the Arctic region, have described to the Inter-American Human Rights Commission how rising temperatures in the Arctic have begun to infringe on their enjoyment of many human rights, including rights to life (because melting ice and permafrost make travel more dangerous), to property (melting permafrost undermines houses and forces residents to leave their traditional homes), and to health (changing temperatures cause the populations of animals on which the Inuit depend for sustenance to decline, leading to reduced nutrition) (Petition to the Inter-American Commission on Human Rights Seeking Relief from Violations Resulting from Global Warming Caused by Acts and Omissions of the United States, 2005). As changes in the climate become more severe and widespread, they will threaten the human rights of more and more people, as the OHCHR report explains.

3.  How Does Human Rights Law Require States to Address Climate Change? As noted above, interference with the enjoyment of a human right is not necessarily equivalent to violation of a legal obligation pertaining to that right. If a mudslide destroys my home, injuring or even killing me, it certainly prevents me from enjoying my human rights to life and health. But the mudslide itself was under no legal duty to respect those rights and therefore cannot violate them. To be a violation of human rights law, the interference with the enjoyment of human rights must be traced to action or inaction by an entity with legal obligations with respect to the human rights, whose action or inaction was inconsistent with those obligations. Because climate change is a type of environmental harm, albeit a particularly massive and intractable one, the human rights obligations that apply in the context of environmental harm generally should apply to climate change as well. Although the content of these obligations is still evolving, it has become much clearer in recent years. For the most part, the human rights obligations relating to environmental protection do not stem from a right to a healthy, safe, or sustainable environment, which some States might argue has not been universally

11.  human rights principles and climate change    221 recognized. Instead, the obligations have been developed and clarified on the basis of human rights, such as the rights to life and health, which are recognized in the Universal Declaration and included in human rights agreements at the UN and regional levels. Although different human rights bodies have derived environmental obligations from different agreements, and often from different rights, they have reached remarkably similar conclusions. The first section of this part of the chapter describes this emerging environmental human rights legal framework; the second applies it to climate change.

3.1 Human Rights Law and Environmental Protection As this section explains, human rights law imposes both procedural and substantive obligations upon States with respect to environmental threats to human rights (UNHRC, 2013). Procedurally, States have obligations to ensure that decisions with possible environmental effects are made through a process that provides for examination and dissemination of information about those effects, full and informed participation by those potentially affected, and effective legal remedies if the State fails to meet its obligations. Substantively, States have discretion to decide on appropriate levels of environmental protection, but their decisions cannot result in interference with the enjoyment of human rights beyond certain minimum standards. States are required to refrain from violating these obligations with respect to environmental harm they cause directly, and to protect against such harm caused by non-State actors such as corporations.

A. Procedural Obligations Some procedural duties in environmental matters are simply particular applications of more general obligations. For example, States’ general obligations to respect and protect rights to freedom of expression and association apply to environmental issues just as they do to other issues. However, human rights bodies have described more detailed procedural duties in the environmental context. They have held that when a State is deciding whether to adopt a decision that may result in environmental harm that interferes with the enjoyment of human rights, such as rights to life, health, water, and respect for private and family life, the State must incorporate certain procedural safeguards, including prior assessment of environmental impacts, full and informed participation by those affected, and effective remedies for States’ failure to comply with their obligations (UNHRC, 2013).12   See, e.g., ICESCR General Comment 15, para 56 (basing these requirements on the right to water) (UN Committee on Economic, Social and Cultural Rights, 2002); Taşkin, supra note 11, at 206–7 (right to respect for private and family life) (Taşkin v Turkey, 2004); Öneryildiz v Turkey (right to life) (Öneryildiz v Turkey, 2004); Ogoniland case para 53 (rights to health and to a satisfactory environment) 12

222    part iii.  principles, emerging norms, and concepts Some human rights bodies, including the Human Rights Committee, the body charged with overseeing compliance with the ICCPR, have not yet addressed these issues, and the decisions of the human rights bodies that have addressed them do not bind every country in the world. Nevertheless, the similarities in the approaches taken by so many different bodies is striking, as is the fact that the three core procedural obligations of assessment, participation, and remedy are set out in Principle 10 of the 1992 Rio Declaration and elaborated in the 1998 Aarhus Convention (UN Conference on Environment and Development, 1992; Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters, 1998). This convergence strongly suggests that these procedural duties are likely to continue to develop along these lines in forums that address environmental threats to the enjoyment of human rights.

B. Substantive Obligations States are expected to adopt legal frameworks that protect against environmental harm that interferes with the enjoyment of human rights (UNHRC, 2013). In setting substantive standards, States have significant discretion in deciding how to strike the balance between environmental protection and other societal interests, such as economic development.13 That discretion has limits, however. Regional tribunals have decided cases in which they concluded that States failed to take reasonably necessary steps to protect against environmental harm to human rights, or failed to strike a fair balance between environmental and other considerations.14 And after a State has struck such a balance by adopting particular environmental standards in its law, the State should adhere to those standards. The European Court of Human Rights, in particular, has often found that a State has violated its human rights obligations with respect to environmental harm when the State failed to follow its own environmental standards, with resulting interference with the enjoyment of human rights.15 (Soc. & Econ. Rights Action Ctr. v Nigeria, 2006). The human rights bodies have derived these duties from civil and political rights and from economic, social, and cultural rights, despite the fact that the two sets of rights are generally understood to give rise to two different types of duties. The agreements protecting civil and political rights generally require States to immediately respect and ensure those rights. E.g., ICCPR, supra note 5, Article 2(1) (OHCHR, 1966a); American Convention, supra note 4, Article 1 (American Convention on Human Rights, 1969); European Convention, supra note 4, Article 1 (European Convention on Human Rights, 1950). In contrast, most agreements protecting economic, social, and cultural rights require the parties to work towards their progressive realization. E.g., ICESCR, supra note 5, Article 2(1) (OHCHR, 1966b); San Salvador Protocol, supra note 4, Article 1 (Additional Protocol to the American Convention on Human Rights in the Area of Economic, Social and Cultural Rights, 1988); European Social Charter, supra note 4 pt I (Council of Europe, 1961). 13   See, e.g., Fadeyeva, supra note 11 at 285 (Fadeyeva v Russia, 2005); Giacomelli v Italy at 189, 217 (2006); Hatton v United Kingdom at 217 (2003). 14   See, e.g., López Ostra, supra note 11 (López Ostra v Spain, 1994); Tătar v Romania, 2009; Ogoniland case, supra note 11 (Soc. & Econ. Rights Action Ctr. v Nigeria, 2001). 15  E.g., López Ostra, supra note 11 (López Ostra v Spain, 1994; Fadeyeva, supra note 11 (Fadeyeva v Russia, 2005). The relevant environmental commitments may also include international environmental

11.  human rights principles and climate change    223 States cannot discriminate on prohibited grounds in the application of environmental law, any more than they can in the application of other laws (Mossville Action Now v United States, 2010; OHCHR, 1966a). Human rights bodies have described additional obligations on States with respect to groups particularly vulnerable to environmental harm, including women, children, and indigenous peoples (UNHRC, 2013). For example, the Inter-American Court has issued a series of decisions on the obligations of States relating to the rights of indigenous peoples. A leading decision is Saramaka People v Suriname, in which the Court held that States must meet certain minimum procedural standards, including consulting with an affected indigenous people regarding any proposed concessions or other activities that may affect their lands and natural resources, ensuring that no concession will be issued without a prior assessment of its environmental and social impacts, and guaranteeing that the community receives a ‘reasonable benefit’ from any such plan if approved. Moreover, the State must obtain the free, prior, and informed consent of the indigenous people with respect to ‘large-scale development or investment projects that would have a major impact within [its] territory’ (Saramaka People v Suriname, 2007). Requiring the prior consent of those most affected by measures that threaten enormous harm to human rights is a heightened procedural safeguard that avoids the need to set detailed substantive standards.

C. Application to Non-State Actors A State’s obligations under human rights law with respect to environmental harm extend beyond obligations concerning its own direct contributions to environmental degradation. The State also has obligations to protect against harm from other sources, including non-State actors. Although human rights treaties do not bind private parties directly, they have consistently been construed to require states to take steps to protect these rights from private conduct that interferes with their enjoyment.16 A State may violate its obligations directly by its own actions, or indirectly through failing to protect against harm caused by others. In the absence of more specific requirements, the State obligation is one of due diligence.17 These duties apply in the context of environmental harm as well. For example, the Committee on Economic, Social and Cultural Rights has stated that a State’s norms to which the State is subject. See Tătar, supra note 14 (Tătar v Romania, 2009); Dinah L. Shelton, Tătar c Roumanie, at 247 (2010).   See Human Rights Comm., General Comment 31, The Nature of the General Legal Obligation Imposed on States Parties to the Covenant, para 6 (UNCHR, 2004); Comm. on Economic, Social and Cultural Rights, General Comment 12, The Right to Adequate Food, para 15 (UN Committee on Economic, Social and Cultural Rights, 1999). Decisions from the regional human rights bodies include Commission Nationale de Droits de l’Homme et des Libertés v Chad (1995); Velásquez Rodríguez v Honduras (1988); Z and Others v United Kingdom (2001). 17   See generally Andrew Clapham, Human Rights Obligations of Non-State Actors (2006); John H. Knox, Horizontal Human Rights Law (2008). 16

224    part iii.  principles, emerging norms, and concepts obligations regarding the right to water require it not only to refrain from interfering with the enjoyment of the right directly by ‘unlawfully diminishing or polluting water . . . through waste from State-owned facilities’, but also to restrain third parties from interfering with the enjoyment of the right, including by pollution (UN Committee on Economic, Social and Cultural Rights, 2002). More generally, the Committee has stated that to respect and protect the right to health, States must not only refrain from ‘unlawfully polluting air, water and soil, for example, through industrial waste from State-owned facilities’, but must also adopt and implement ‘national policies aimed at reducing and eliminating pollution of air, water and soil’ (UN Committee on Economic, Social and Cultural Rights, 2000). The regional human rights systems have taken similar positions.18

3.2 Human Rights and Climate Change The framework described in the previous section suggests that States must meet certain obligations in addressing the threats that climate change poses to the enjoyment of human rights. Procedurally, States must thoroughly assess the possible environmental effects of their actions relating to climate change, disseminate information about those effects to those potentially affected, allow all those affected to participate in the decision-making processes relating to climate change, and provide legal remedies to ensure that these requirements are followed. Substantively, States have some discretion to strike a balance between protecting human rights from climate change and pursuing other legitimate social interests, but the balance cannot be unreasonable, and States should take into account the additional protections they may owe members of highly vulnerable groups. States should follow these obligations both with respect to their own actions and to the actions of nonState actors within their jurisdiction. However, there are obstacles to such a straightforward application of human rights principles to climate change. One possible obstacle is the difficulty of tracing clear causal links between anthropogenic contributions to climate change and the effects of climate change on the enjoyment of human rights. The OHCHR stated in its 2009 report that it is ‘virtually impossible to disentangle the complex causal relationships’ linking emissions from a particular source to a particular effect; climate change is often only one of many contributing factors to severe weather events or desertification, for example (OHCHR, 2009a). That many of the worst effects of climate change are expected to occur in the future makes determining causation even more difficult. Concerns about the difficulty of making these causal 18   See, e.g., Hatton v United Kingdom at 216 (Hatton v United Kingdom, 2003); López Ostra, supra note 11 (López Ostra v Spain, 1994); Ogoniland case, supra note 11, paras 44–47 (Soc. & Econ. Rights Action Ctr. v Nigeria, 2001); Inter-American Commission on Human Rights, Report on the Situation of Human Rights in Ecuador at 88–92 (1997).

11.  human rights principles and climate change    225 connections may have contributed to the refusal of the Inter-American Human Rights Commission to hear the complaint by the Inuit against the United States.19 Tracing causal links is less difficult, however, when contributions to and effects of climate change are considered in the aggregate. Taken as a whole, the connections between contributions of greenhouse gases, the effects of increasing greenhouse gases on global temperature, and the effects of rising temperatures on the enjoyment of human rights are relatively clear and rapidly becoming clearer. Further, it is possible to identify, at the aggregate level, the States whose emissions contribute most to the problem: combined, China and the United States contribute more than one-third of total emissions, and together with the European Union cause more than one-half of net global emissions.20 It is also possible to identify those communities that are the most vulnerable to climate change. To take just one example, the 2007 IPCC assessment report states with ‘very high confidence’ that in the polar regions there is already ‘strong evidence of the ongoing impacts of climate change on . . . communities’, and that ‘[w]‌arming and thawing of permafrost will bring detrimental impacts on community infrastructure’21 (IPCC, 2007). It states with ‘high confidence’ that ‘[s]ubstantial investments will be necessary to adapt or relocate physical structures and communities’ (IPCC, 2007). Moreover, whether a State has ‘caused’ climate change does not determine whether the State has any legal obligations to do something about its effects. As noted above, human rights law requires each State to do more than merely refrain from interfering with human rights itself; it also requires the State to undertake due diligence to protect against such harm from other sources. Although a mudslide cannot itself violate my rights, it may be the occasion of a violation if my State fails to take reasonable steps to protect me from its effects. This is not merely a hypothetical case: after mudslides devastated the town of Tyrnauz in the central Caucasus, the European Court of Human Rights held that Russia had violated its obligation to protect against threats to the right to life by failing to maintain observation posts and dams (Budayeva v Russia, 2008). This reasoning applies to climate change as well. Even if it is not possible to connect a particular release of greenhouse gases to a particular infringement of human rights, States may well have obligations to try to protect against the harm caused by climate change. In the 19   The Commission did not issue a formal decision; instead, it stated only that it was not possible to process the complaint ‘at present’ because ‘the information provided does not enable us to determine whether the alleged facts would tend to characterize a violation of rights protected by the American Declaration’. Letter from Ariel E. Dulitzsky, Assistant Executive Sec’y, Inter-American Commission on Human Rights, to Paul Crowley, Legal Representative of the Inuit (16 November 2006). 20   Any allocation of legal responsibility would be complicated by many other factors, including historical contributions, per capita emissions, and technical capacity. The point here is simply that the difficulty of tracing causal chains is not necessarily in itself an insuperable barrier to such an allocation, at least at an aggregate level. 21   ‘Very high confidence’ indicates at least 90 per cent certainty of being correct, and ‘high confidence’ 80 per cent confidence of being correct (IPCC, 2007).

226    part iii.  principles, emerging norms, and concepts words of the 2009 OHCHR report, ‘Irrespective of whether or not climate change effects can be construed as human rights violations, human rights obligations provide important protection to the individuals whose rights are affected by climate change’ (OHCHR, 2009a).22 The more fundamental problem with applying environmental human rights principles to climate change is that the principles were developed primarily to address environmental harm that does not cross international borders. Almost all of the regional jurisprudence, in particular, arises from cases in which the benefits and the costs of the environmental harm are felt within the domestic jurisdiction of one State.23 In such cases, it makes sense for human rights bodies to allow a State wide discretion in deciding how to strike a balance between environmental harm and other interests, as long as its decisions result from well-informed, careful consideration by all those affected. But this approach does not translate easily to transboundary problems such as climate change, where the benefits and the costs are not all incurred by the same polity. More generally, whether human rights law ever requires States to protect the human rights of those outside their own territory and jurisdiction is a difficult, disputed question. Some treaties, including the ICCPR and the American and European Conventions on Human Rights, include explicit jurisdictional limits.24 In contrast, the ICESCR requires each of its parties ‘to take steps, individually and through international assistance and co-operation, especially economic and technical, to the maximum of its available resources, with a view to achieving progressively the full realization of the rights recognized in the present Covenant by all appropriate means’ (OHCHR, 1966b; author’s emphasis). On the basis of this language, the Committee on Economic, Social and Cultural Rights has interpreted the Covenant to give rise to extraterritorial duties.25 In particular, it has stated that   Report on the Relationship between Climate Change and Human Rights at para 71. Questions of causation may well be relevant to the particular content of a State’s duties relating to climate change, however, as the following sections explain. 23   An exception is Tătar v Romania, supra note 14, which concerned, inter alia, transboundary water pollution from Romania to Hungary and Serbia (Tătar v Romania, 2009). The transboundary harm was not the principal focus of the case, however. See also General Comment 15, supra note 12, para 33 (statement by the Committee on Economic, Social and Cultural Rights that the parties to the ICESCR should take steps ‘to prevent their own citizens and companies from violating the right to water of individuals and communities in other countries’) (UN Committee on Economic, Social and Cultural Rights, 2002). 24  ICCPR, supra note 5, Article 2(1) (requiring each of its parties to respect and ensure the rights ‘to all individuals within its territory and subject to its jurisdiction’) (OHCHR, 1966a); American Convention, supra note 4, Article 1 (requiring the parties to ensure the rights ‘to all persons subject to their jurisdiction’) (American Convention on Human Rights, 1969); European Convention, supra note 4, Article 1 (the parties shall secure the rights ‘to everyone within their jurisdiction’) (European Convention on Human Rights, 1950). 25   Since 1999, almost every one of its general comments on particular rights, including the rights to food, health, water, work, social security, and to take part in cultural life, includes a section on such obligations. 22

11.  human rights principles and climate change    227 developed countries have obligations to assist developing countries to meet their obligations.26 However, developed countries have strongly disagreed with this interpretation (Craven, 2007). Because of the lack of clarity in the extraterritorial application of human rights obligations generally, and in the environmental context in particular, the human rights principles relevant to climate change are clearest with respect to action (or inaction) by a State that relates to the effects of climate change on the enjoyment of human rights within that State’s jurisdiction. These obligations may be called internal obligations, to contrast them with possible extraterritorial obligations relating to harm from the effects of climate change outside the State’s territorial jurisdiction. As explained below, it seems clear that a State’s internal obligations include duties to help those within its jurisdiction adapt to climate change, and may also include duties of the State to mitigate its own emissions. Although extraterritorial obligations are cloudier, it is still possible to discern some emerging principles.

A. Internal Obligations Just as human rights law requires a State to try to protect individuals from mudslides and other life-threatening natural disasters that were not caused by the State, it seems logical that it requires a State to try to protect its people from climate change whether or not the State substantially contributed to the problem. Of course, questions of causation may well be relevant to the particular content of a State’s duties relating to climate change. If a State’s contribution to global greenhouse gas concentrations is so minimal that lowering its emissions would have no appreciable effect on the effects of climate change on human rights, then it may be unreasonable to expect it to take Herculean measures to reduce its emissions. Even in that case, however, the State would still be obligated to help its people to adapt to the harms threatened by climate change. Thus, for many States, their obligations to take adaptation measures will often be clearer than their obligations to mitigate harm by reducing emissions (Hall and Weiss, 2012). The environmental human rights framework described in the preceding section informs the nature of the human rights obligations relating to climate change. According to that framework, a State should adhere to both procedural and substantive duties in addressing the internal effects of climate change. Procedurally, the State should carefully assess the likely impacts of climate change within its jurisdiction, disseminate information about those effects, allow full participation of all those affected in the process of deciding how to address the problem, and provide legal remedies to ensure that these procedures are followed. Decisions that   E.g., General Comment 14, para 45 (UN Committee on Economic, Social and Cultural Rights, 2000); General Comment 31, supra note 16, para 14 (UNCHR, 2004). 26

228    part iii.  principles, emerging norms, and concepts result from a fully informed, participatory process should be entitled to deference, although they could not violate minimal levels of human rights. For example, a small island State facing threats to life, health, and other human rights as a result of rising sea levels might consider a large number of potential responses, including constructing sea walls, consolidating its population on fewer islands, developing evaluation strategies, and so forth. It could reasonably take into account the options’ relative cost and feasibility, together with their effectiveness in protecting human rights. As long as its decision resulted from an informed, fully participatory process, the State would have a great deal of discretion to choose an optimal policy. The State could not, however, choose a policy that violates basic human rights standards. It could not, for example, fail to take steps to warn its people of foreseeable threats, or adopt climate policies that discriminate on the basis of sex, race, religion, or any other protected status. While States clearly have duties to try to adapt to climate change based solely on its internal effects, it is less obvious whether human rights law obligates a State to try to mitigate its contributions to climate change based solely on the effects of climate change on its own people. Most States contribute such a small fraction of global greenhouse gas emissions that even a sizable reduction by any one of them would have no significant effect on the enjoyment of human rights of its own people. This calculus is different for the largest emitters, such as China, the European Union, and the United States, each of which emits a substantial fraction of all greenhouse gases. Arguably, human rights law requires them to reduce their contribution to climate change based solely on the potential benefit such reductions would have for their own people, without taking into account the effects on those in other countries.27 Even States that emit relatively small amounts of greenhouse gases may be required to try to work towards a general agreement to reduce global emissions, based on their general duty not only to refrain from harming human rights themselves, but also to protect against harm from others. A State has limited influence over the conduct of other States, but it should use what influence it has to try to reduce global emissions to levels that do not interfere with the human rights of those within its jurisdiction. Apart from legal rights that States may have vis-à-vis other States based on other norms of international law, they may try to influence one another through bargaining or persuasion. Because meaningful reductions in global emissions require action by more than one State, as a practical matter this obligation may require each State to seek an effective international agreement to reduce greenhouse gas emissions to levels that protect its own people from the adverse effects of climate change. In that context, its duties to its own people may obligate it to commit to reductions in its own emissions, as part of its effort to obtain   Again, per capita emissions, past contributions, and technical capacity would be complicating factors. 27

11.  human rights principles and climate change    229 such a global agreement (International Council on Human Rights Policy, Climate Change and Human Rights: A Rough Guide, 2008). Human rights standards apply not only to decisions about how much climate protection to adopt, but also to the measures through which the protection was achieved. For example, efforts to mitigate climate change through the promotion of biofuels, emissions reduction projects, and forest preservation have been accused of violating the human rights of individuals directly affected by the projects (RohtArriaza, 2010). The States in which such projects occur have duties to protect against their harmful effects on the individuals within their territory.

B. Extraterritorial Obligations The previous section explains that even if human rights law is viewed as giving rise to no extraterritorial obligations at all, each State still has duties to ameliorate the effects of climate change on the human rights of those within its own jurisdiction. But this seems to be a radically incomplete method of addressing a global problem whose effects are inherently transboundary. There are at least three arguments that human rights law also requires States to take into account the extraterritorial effects of their contributions to climate change. First, one might argue that the language in the ICCPR and the American and European Conventions that limits a State’s obligations to individuals within its jurisdiction28 is broad enough to include those in other countries who are affected by the extraterritorial consequences of the State’s contributions to climate change. To be within the jurisdiction of a State within the meaning of these agreements, an individual must be within the ‘effective control’ of the State.29 It might be possible to argue that the effects of climate change could be severe enough in some cases to place an affected community under the effective control of other, more powerful States, although the argument would require an expansive interpretation of the ‘effective control’ standard. Second, one might argue that States have an obligation not to interfere with other States in the implementation of their own human rights obligations, based on the general principle of good faith in carrying out treaty obligations.30 For example, 28   Although the ICCPR actually refers to duties extending only to individuals ‘within [the State’s] territory and subject to its jurisdiction’, the general view is that the language should be read disjunctively, to require the State to respect and ensure the rights of those within its territory and those within its jurisdiction. Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, Advisory Opinion, para 111 (2004); To Respect and to Ensure: State Obligations and Permissible Derogations at 74 (Buergenthal, 1981); Extraterritoriality of Human Rights Treaties at 79 (Meron, 1995). 29  General Comment 31, supra note 16, para 10 (UNCHR, 2004); Banković v Belgium (2001); Alejandre v Cuba, para 25 (referring to ‘authority’) (Alejandre v Cuba, 1999). ‘Effective control’ of individuals may include not only their arrest or capture, but also their presence in a territory under the military control of the State (Al-Skeini v United Kingdom, 2011). 30   Vienna Convention on the Law of Treaties, Article 26 (‘Every treaty in force is binding upon the parties to it and must be performed by them in good faith’) (Vienna Convention on the Law of Treaties,

230    part iii.  principles, emerging norms, and concepts even if a State refuses to accept the interpretation of the Committee on Economic, Social and Cultural Rights that the ICESCR imposes extraterritorial obligations of assistance, at a minimum it could be read to require each State, as Matthew Craven has written, ‘to ensure that it does not undermine the enjoyment of rights of those in foreign territory’ (Craven, 2007). Under this view, each State has an obligation to try to avoid actions that would prevent other States from carrying out their own duties to fulfill the rights to health, food, and water of those within their jurisdiction.31 Contributing to climate change obviously makes it more difficult for other States to fulfill those obligations. There are difficulties with this argument, however. Developed countries have not embraced the Committee’s expansive view of extraterritorial obligations, as noted above, and the United States—a particularly important contributor of greenhouse gas emissions—is not a party to the ICESCR. Moreover, even if these arguments for extraterritorial duties were accepted, it is unclear how well they would support the application of the environmental human rights framework to climate change. In accordance with that framework, each State may comply with its obligations to protect the human rights of individuals within its own jurisdiction by following procedural requirements and ensuring that the resulting decisions do not violate minimum standards. But this approach has its limits when applied extraterritorially. Even if a State undertakes transboundary environmental impact assessments, provides information to those potentially affected by the actions under its jurisdiction, and allows them to participate in the decision-making process, those living abroad will still not have the same rights as those within the State, including the right to vote. As a result, the source country will retain the authority to decide whether to proceed with the activities threatening transboundary harm. A third argument for extraterritorial obligations would try to avoid the objections to the first two by relying on a duty of international cooperation (Knox, 2009). The 2009 report of the OHCHR emphasizes the relevance to climate change of this obligation,32 which is based not only on the ICESCR, but also, and more fundamentally, on the Charter of the United Nations. In the Charter, all UN Member States 1969); see Mark E. Villiger, Commentary on the 1969 Vienna Convention on the Law of Treaties at 367 (Villiger, 2009). 31   See ICESCR General Comment 15, supra note 12, para 31 (UN Committee on Economic, Social and Cultural Rights, 2002); ICESCR General Comment 14, supra note 26, para 41 (UN Committee on Economic, Social and Cultural Rights, 2000); ICESCR General Comment 12, supra note 16, para 37 (UN Committee on Economic, Social and Cultural Rights, 1999). This obligation to refrain from interfering with other States’ ability to carry out their own obligations could also require a State to take steps to prevent private parties under its jurisdiction or control from harming human rights in other states. See ICESCR General Comment 14, supra note 26, para 39 (UN Committee on Economic, Social and Cultural Rights, 2000). 32   OHCHR Report, supra note 22, para 99 (‘International human rights law complements the United Nations Framework Convention on Climate Change by underlining that international cooperation is not only expedient but also a human rights obligation and that its central objective is the realization of human rights’) (OHCHR, 2009a).

11.  human rights principles and climate change    231 ‘pledge themselves to take joint and separate action in co-operation with the Organi­ zation for the achievement of [inter alia] universal respect for, and observance of, human rights and fundamental freedoms for all’ (OHCHR, 2009a; Charter of the United Nations, 1945). While this language is very general, it strongly suggests that States have committed to take joint action to address global challenges to human rights. States have often worked together to address such threats in the past,33 and climate change is inherently a global problem that requires global cooperation to solve. The duty to cooperate could require States to negotiate and implement international climate accords that meet human rights minimum standards. In particular, the accords should strive to protect against the adverse effects of climate change on human rights. To that end, the agreements must provide both for the reduction of greenhouse gases to levels that will not interfere with the human rights of those vulnerable to climate change, and for adaptation to unavoidable changes that would otherwise harm their human rights. The environmental human rights framework could inform these principles. As applied at the level of international cooperation, the procedural requirements of that framework would require, for example, that States jointly assess the effects of their actions,34 that they bring those assessments to the attention of the public, and that they provide for informed public participation in international climate decisions. Substantively, that framework acknowledges that States have to make trade-offs in deciding on levels of environmental protection, but requires that the trade-offs not violate minimum human rights standards. Although those minimum standards still require further clarification, it seems likely that they would preclude policies that would result in the destruction of entire communities through, for example, the inundation of small island States.

4. Conclusion The human rights principles that apply to environmental harm have become much clearer in recent years. In order to protect a wide range of human rights from environmental harm, human rights bodies have described obligations on States to assess the environmental impacts of proposed actions, to disseminate environmental 33   See, e.g., Reservations to the Convention on the Prevention and Punishment of the Crime of Genocide at 23 (1951) (noting ‘the universal character both of the condemnation of genocide and of the co-operation required “in order to liberate mankind from such an odious scourge”’) (quoting Genocide Convention, 1948). 34   The IPCC reports go a long way towards satisfying this requirement, although they could do much more to assess the effects of climate change on the enjoyment of human rights in particular.

232    part iii.  principles, emerging norms, and concepts information, to provide for public participation in environmental decision-making (including by safeguarding rights of freedom of expression and association), and to ensure effective remedies for environmental interference with the enjoyment of human rights. States have obligations to adopt legal protections against environmental harm that interferes with the enjoyment of human rights, including harm caused by private actors. Human rights law does not require States to prohibit all activities that may cause any environmental degradation. They have discretion to strike a balance between environmental protection and other legitimate societal interests, but the balance should be reasonable and should not result in unjustified infringements of human rights. Finally, States have a general requirement of non-discrimination in the application of environmental laws, as well as specific obligations to members of groups particularly vulnerable to environmental harm, such as indigenous peoples. Applying this environmental human rights framework to climate change is simplest with respect to internal obligations—that is, obligations of States relating to the effects of climate change within their own territory and jurisdiction. It is relatively clear that States must protect their people from the harmful effects of climate change on the enjoyment of human rights, and that such protection includes reasonable adaptation measures and, in some cases, mitigation as well. However, it is more difficult to identify clear obligations on each State relating to the extraterritorial effects of actions within its jurisdiction. There are legal arguments for such obligations, but until they are more widely accepted, the effective application of human rights law to the most urgent and grave threats of climate change will be severely limited.

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Part IV


Chapter 12


1. Introduction


2. Emissions Trading Programs


3. Pigouvian Taxes


4. Conclusion


240    part iv.  setting up the int'l mitigation regime

1. Introduction The publication of the book Silent Spring,1 by American biologist Rachel Carson, is widely credited with catalyzing the modern-day environmental movement.2 US Supreme Court Justice William O. Douglas pronounced Silent Spring to be ‘the most important chronicle of this century for the human race’.3 Prompted in part by Carson’s influential book and aided by growing appeals from scientists to lawmakers to change some of the most obviously harmful industrial practices, the environmental movement quickly became part of the political landscape. Virtually all of the major federal environmental statutes were enacted by Congress in the following decade,4 including the National Environmental Policy Act.5 As a result, the earliest forms of pollution regulation were, unsurprisingly, designed by environmental lawyers. It is much less celebrated (also unsurprisingly, perhaps) that economists were concurrently developing their own ideas about how to address environmental problems. In 1968, Canadian economist John H. Dales wrote Pollution, Property and Prices: An Essay in Policy-making and Economics,6 in which he propounded the idea of pollution permit-trading. Dales argued that instead of regulating pollution on a source-by-source or emitter class-by-emitter class basis (as the legal mandates of the US federal statutes of the 1970s tended to do), a regulatory agency should begin by limiting the overall amount of pollution allowed. Firms could then trade amongst themselves, effectively using the market to determine which of them should be able to pollute, how much, and when. Dales’s insight was that pollution abatement costs are heterogeneous across facilities, firms, and over time.7 What pollution permit-trading allows, through market trades, is the flow of pollution permits to their highest-valued users— those firms and those facilities for which pollution abatement is the most costly, and which will wind up as net buyers of tradable pollution permits. Conversely,

  Rachel Carson, Silent Spring (Houghton-Mifflin, 1962).   Eliza Griswold, How ‘Silent Spring’ Ignited the Environmental Movement, N.Y. Times, September 21, 2012, at MM36. 3   ‘Are we poisoning ourselves?’, September 8, 1962, pp. 36–8, Business Week. 4   For example, the Clean Air Act was passed in 1970 (84 Stat. 485, P.L. 91-604), the Clean Water Act was passed in 1972 (formally, the Federal Water Pollution Control Act Amendments of 1972) (Publ. L. 92-500, October 18, 1972), and the Endangered Species Act in 1973 (87 Stat. 884, Publ. L 93-205). 5   National Environmental Policy Act of 1969 (83 Stat. 852, Pub. L. 91-190). 6   John Harkness Dales, Pollution, Property & Prices: An Essay in Policy-making and Economics (Toronto, 1968). 7  Dales, supra note 6, at 86; Tom Tietenberg and Lynne Lewis, Environmental and Natural Resource Economics, p. 357 (Pearson, 10th edn, 2014). 1


12. international market mechanisms   241 those firms and facilities for which pollution abatement is cheaper than the market price of the permit will be net sellers of permits. In a well-functioning market, emissions reductions are undertaken by those for which abatement is the least expensive, thereby minimizing overall economy-wide pollution abatement costs. This fundamental tenet of emissions trading—the exploitation of cost heterogeneity to minimize overall compliance costs8—has served as the animating theme of a wide variety of environmental initiatives around the world. The centrality of the market in achieving an economic objective—cost minimization—has led to coinage of the term ‘market mechanisms’ to describe policy instruments that seek to harness market forces to either reduce pollution, reduce compliance costs, or, most commonly, both.9 This idea has become so powerful that domestic and international environmental laws are now presumed to function more efficiently if they embody some form of a market mechanism. While the environmental statutes enacted in the 1970s tended to create administratively centered, ‘command-and-control’ mandates, market mechanisms have become a favored approach to regulating at the domestic and international levels. The Montreal Protocol,10 which reduced the production and consumption of ozone-depleting substances and the Kyoto Protocol,11 which sought to reduce greenhouse gas (GHG) emissions, were both predicated on an emissions trading model. Further, the European Union Emissions Trading System (EU ETS), created to assist in meeting Kyoto Protocol emissions reduction targets in a way that minimizes costs for industry, was one of the first market mechanisms adopted jointly by a group of States. Since cost heterogeneity is the predicate condition that must exist in order for market mechanisms to be useful, it would stand to reason that its use in a larger market will yield greater efficiency benefits. If a market mechanism can be designed so that it applies to many States and creates an international market, the cost heterogeneity would be greater, and permit trading should achieve greater efficiency gains. Moreover, trading across countries is also likely to take advantage of a greater variety of heterogeneous conditions than would be the case in a domestic market, even one as large as the United States. Vastly different economic conditions, for example, might make emissions reduction efforts much cheaper in a developing country than in a developed country. Little wonder, then, that market   William J. Baumol and Wallace E. Oates, The Theory of Environmental Policy, pp. 21–3 (Cambridge University Press, 2nd edn, 1988); Tom Tietenberg and Lynne Lewis, Environmental and Natural Resource Economics, p. 357 (Pearson, 10th edn, 2014). 9   See, e.g., Shi-Ling Hsu, ‘Fairness Versus Efficiency in Environmental Law’, 31 Ecol. L. Q. 303, 377–93 (2004). 10   ‘Montreal Protocol on Substances that Deplete the Ozone Layer’, 1522 UNTS 3; 26 ILM 1550 (1987). 11   The Kyoto Protocol to the United Nations Framework Convention on Climate Change, UN Doc FCCC/CP/1997/7/Add. 1 Dec. 10, 1997; 37 ILM 22 (1998). 8

242    part iv.  setting up the int'l mitigation regime mechanisms have been at least as popular in the transnational context as they have been in domestic contexts. Market mechanisms are thus policy instruments that seek to not just reduce pollution, but to minimize the costs of doing so. Whereas a traditional regulatory regime would, in its clumsiest forms, mandate similar methods of emissions reduction for broad classes of emitters, a market mechanism would provide emitters with the flexibility to defer, accelerate, deflect, or even take on additional emissions reductions that a traditional command-and-control scheme might not require or allow. Command-and-control regulatory regimes have evolved considerably to reduce the rigidity that characterized their earlier versions, but fundamentally, these systems depend upon an administrative adjudication to determine the legality of emissions, by contrast, market mechanisms decentralize decisions about emissions reductions so that private firms are given considerable autonomy. International market mechanisms, then, are these mechanisms carried out among States. Given the difficulty of setting up a transnational administrative body that could make adjudicatory decisions at an international level, setting up a decentralized trading system would appear to be a less onerous global solution. Another policy instrument considered to be a ‘market mechanism’ is a Pigouvian tax. Named after economist A.C. Pigou, a Pigouvian tax is a tax levied per unit of pollution emitted.12 Pigouvian taxes are meant to internalize ‘externalities’, generally understood to be positive or negative side-effects from economic production that are not reflected in the price of production. A classic externality is environmental harm from polluting activities that is not properly taken into account by the polluter.13 By pricing these external costs and forcing polluters to consider them in their private calculus, Pigouvian taxes force polluters to balance the social costs and their private economic benefits of polluting. A Pigouvian tax thus recruits private polluters for the task of making a social determination of the optimal level of pollution. A Pigouvian tax is a market mechanism that shares many features with emissions trading. First, there is a devolution of abatement decisions to emitters, and away from regulatory agencies. The private emitter now determines, through market decisions based, in part, on the imposition of a tax, how much to pollute, and when. Second, 12   French economist Alfred Pigou pioneered the idea that through taxes and subsidies, governments could introduce incentives to encourage fewer activities that generated negative externalities, and more activities that generated positive externalities. In other words, through taxes and subsidies, the government could equate the private marginal cost and the social marginal cost of an activity, and the private marginal benefit and social marginal benefit of an activity. A.C. Pigou, The Economics of Welfare, pp. 131–5 (1928). Taxes that reflected the extent of negative externality thus became known as ‘Pigouvian’ taxes. William J. Baumol and Wallace E. Oates, The Theory of Environmental Policy, pp. 21–3 (2nd edn, 1988). 13  An externality is an effect of a decision, on a party other than the decision-maker, that the decision-maker does not take into account. Shi-Ling Hsu, ‘Fairness Versus Efficiency in Environmental Law’, 31 Ecol. L. Q. 303, 341, n. 157 (2004).

12. international market mechanisms   243 public control over emissions decisions is reduced to one central decision: in the case of emissions trading, the total quantity of permits allowed; in the case of Pigouvian tax rate, the tax rate for emissions. Third, both policy instruments internalize to some extent the external costs of polluting. In the case of Pigouvian taxation, the price paid is directly set by legislative or regulatory action as the tax rate. In the case of emissions trading, the price paid is set by market forces; legislative or regulatory action establishes an emissions ‘cap’ and private trading for emissions permits will determine the price paid by emitters. There is no guarantee that the Pigouvian tax rate or the emissions cap is socially optimal. Finally, because both instruments impose a marginal cost on polluting, they introduce an incentive to reduce emissions in innovative ways that might not have been the specific course mandated by agency regulators. The extent to which this has actually occurred, and to which innovation has been spurred by market mechanisms, is the subject of some debate.14 But it is widely accepted that the incentives presented by market mechanisms are generally greater than under the traditional style approach to pollution, even including the more modern flexible and enlightened versions of these systems.15 Both emissions trading and Pigouvian taxes have at times been greeted with skepticism by environmental lawyers. For one thing, the objective of these market mechanisms seems more of an economic one, not an environmental one: the point of market mechanisms is to minimize compliance costs, and achieving environmental goals is not obviously related to the trading itself. If emissions reductions can be made less expensive, polluters will be willing to undertake deeper cuts in overall reductions. In that sense, viewing economic and environmental considerations as independent of each other misses the point. Economic savings make environmental benefits more feasibly obtained. This argument has not always been satisfying to detractors of market mechanisms, some of whom have continued to emphasize, not without reason, that the persistent undervaluation of environmental amenities and the difficulty in assessing the value of different environmental amenities complicates this process. What has been most troubling for such detractors is the notion that decisions that seem public in nature have been devolved to private actors. In a traditional and administratively centered regulatory regime, an agency ultimately controls, through administrative adjudications, the vast majority of pollution abatement decisions. By contrast, under emissions trading and Pigouvian tax regimes, private actors make the vast majority of abatement decisions. This devolution of abatement decisions, many environmental lawyers worry, may have adverse environmental and equity consequences such as the development of pollution ‘hot spots’, 14   Suzi Kerr and Richard Newell, ‘Policy-Induced Technology Adoption: Evidence from the US Lead Phasedown’, 51 J. Industrial Econ. 317 (2003). 15  Hsu, supra note 13 at 381–5.

244    part iv.  setting up the int'l mitigation regime geographic areas in which a polluter can freely accumulate permits to pollute as much as they wish as long as they are willing to bear the cost of the tax.16 Finally, environmental lawyers no doubt also worry that with many administrative decisions being devolved to private actors, there could well be less of a need for environmental lawyers with expertise in handling complicated environmental legal questions.

2.  Emissions Trading Programs The most efficient emissions trading system is a ‘cap-and-trade’ system, in which an established quantity of emissions permits are allocated to emitters, and are traded amongst the emitters (or even non-emitting permit speculators) to determine where and when emissions take place. A cap-and-trade system takes as relatively fixed the overall quantity of allowed emissions in the form of a hard cap, and contemplates a well-defined set of emissions sources that would be covered under the system. In such a closed system, the one central public decision, the overall quantity of emissions, will determine the environmental effectiveness of the program. However, while the simple idea of emissions trading has spawned the phrase ‘market mechanism’, over time, the phrase has come to include several variations on this fundamental idea. The Canadian province of Alberta instituted a variation of the cap-and-trade idea by capping emissions intensity instead of establishing a fixed quantity of emissions.17 The Alberta program only requires emitters to reduce the amount of emissions per unit of output. So, for example, Alberta’s oil sands industry can increase emissions if their productive efficiency increases by a greater amount. If they can reduce GHG emissions per barrel of oil produced, they can claim some of that efficiency gain as a credit for emissions reductions. Such a program is not really a cap-and-trade program per se, but a performance standard with some added flexibility. That is, emitting industries are—as they often are under more traditional schemes—expected to achieve a certain maximum rate of emissions, and if they manage to achieve an even lower rate, they can claim tradable credits for that efficiency gain. But there is no guarantee of an absolute

16   Jonathan Remy Nash and Richard L. Revesz, ‘Market and Geography: Designing Marketable Permit Schemes to Control Local and Regional Pollutants’, 28 Ecol. L. Q. 569, 574 (2001). 17   Climate Change and Emissions Management Act, Statutes of Alberta 2003, ch. C-16.7, s 3; Alberta §§ 3–4 (2007).

12. international market mechanisms   245 emissions decrease; an entity can be more efficient with emissions but still increase emissions overall. Other variations of emissions trading emerged in the 1970s under regulatory initiatives by the US Environmental Protection Agency (EPA) to introduce some regulatory flexibility for air pollution emitters. EPA’s ‘bubbling’ rule allowed some facilities to measure facility emission rates from combined smokestacks or facilities.18 The bubbling rule was simply a cap-and-trade system applied to only one firm possessing multiple polluting facilities.19 As part of this 1970s regulatory flexibility initiative, the EPA also introduced a ‘netting’ rule that allowed firms to trade credits so that a firm could emit more as part of a change in technology.20 Credits could be generated by a project or action that supposedly decreased emissions, such as a plant shut-down, or a pollution abatement project.21 Also as part of this initiative, the EPA created an ‘offsets’ rule that allowed a new polluting source to begin operations only if it had achieved emissions reductions or obtained emissions reduction credits comparable to the emissions from the new source.22 All of these rules required the EPA to make a determination as to whether an emitter would be permitted to invoke the rule. Because these 1970’s rules only permitted bubbling, netting, or offset transactions to take place with the approval of the EPA, these rules were not truly ‘market’ mechanisms, but rather regulatory efforts by the EPA to allow polluters some flexibility over emissions. A ‘market’ mechanism is one in which transactions are voluntarily made among two or more private parties, and in which one party supplies some environmental benefit. In such a transaction, there is little or no administrative adjudication. In these 1970’s EPA rules, transactions are between a private party and the EPA. An environmental benefit is putatively supplied by the private party, but the job of determining the extent of the emissions reduction, and whether it would fully compensate for an emission increase in another time or place, was left to the EPA. The environmental ‘value’ or benefit of the trade was thus an administrative matter, not readily ascertainable in an open and free-flowing market. This value uncertainty, providing for the ad hoc nature of trading, as well as delays by EPA in approving trades, created transaction costs that inhibited the search for cheaper emissions reductions, and limited 18   US Environmental Protection Agency, Requirements for Preparation, Adoption and Submittal of Implementation Plans and Approval and Promulgation of Implementation Plans, 46 Fed. Reg. 50,766 (1981) (codified at 40 C.F.R. § 52.24 (1984). 19   Thomas J. Stukane, ‘EPA’s Bubble Concept After Chevron v. NRDC: Who is to Guard the Guards Themselves?’ 17 Nat. Res. Lawyer 647, 648 (1985). 20   US Environmental Protection Agency, Air Pollution Control; Recommendations for Alternative Emission Reduction Options Within State Implementation Plans, 44 Fed. Reg. 71,779 (1986); amended, Emissions Trading Policy Statement, 51 Fed. Reg. 43,814 (1986). 21   Robert W. Hahn and Gordon L. Hester, Marketable Permits: Lessons for Theory and Practice, 16 Ecol. L. Q. 361, 402 (1989). 22   Supra note 20.

246    part iv.  setting up the int'l mitigation regime the cost savings for firms.23 By contrast, a more decentralized trading system— one in which market transactions could be consummated with little or no clearance from an administrative authority such as the EPA—would take on more of a market character, and be more consistent with Dales’s original emissions trading idea. These EPA rules were also applied erratically, suffering from both underinclusion and overinclusion. Some projects were allowed to move forward even as they caused environmental harm, while other projects were rejected even though they would have reduced emissions and achieved cost savings. That is not to say that a pure cap-and-trade system would always avoid such errors; that would depend on the rules governing formation of emission allowances. But the administrative involvement in determining the value of emissions reduction transactions created legal and market uncertainty. The EPA was more successful in the 1980s in using a market mechanism to phase out the use of lead as a gasoline additive. The EPA introduced a tradable permit system for refineries, in which refiners were given a performance standard for lead content in the gasoline they produced.24 Absent trading, refiners were required to produce gasoline containing no more than 1.1 grams of lead per gallon.25 However, if a particular refiner was able to produce gasoline containing even less than 1.1 grams of lead per gallon, that refiner could sell to other refiners the rights to produce gasoline with lead concentrations exceeding the 1.1-gram standard. Over time, the 1.1-gram standard was ratcheted down to 0.1 grams per gallon, and lead was ultimately banned as a fuel additive in 1996.26 By most accounts, the lead trading system was very successful in phasing out the use of lead as a gasoline additive,27 and in inducing the kind of technological innovation that accelerated the phase-out.28 Market mechanisms made a critical appearance on the international stage with the Montreal Protocol29 to phase out the ozone-depleting substances (ODS). In 1989, in connection with the Montreal Protocol, the United States banned most uses of chlorofluorcarbons (CFCs) and initiated a phase-out of other ODS by 1996. But like the lead phase-down program discussed above, a tradable permit system was employed to allow producers and consumers of ODS to trade with each other to allocate production and use. The results were, like the lead phase-down, impressive. Actual production was much lower than the permitted

23  Richard A. Liroff, Reforming Air Pollution Regulation: The Toil and Trouble of EPA’s Bubble (Conservation Foundation, 1986). 24   US Environmental Protection Agency, Regulation of Fuel and Fuel Additives, 47 Fed. Reg. 49,322 (1982), expired, 50 Fed. Reg. 13,116 (1985). 25 26   47 Fed. Reg. at 49, 322.   End to Trading, 40 C.F.R. §80.20(a), (d)(4) (1988). 27 28   Hahn and Hester, supra note 21, at 389.   Kerr and Newell, supra note 14. 29   Montreal Protocol on Substances that Deplete the Ozone Layer, 1522 UNTS 3; 26 ILM 1550 (1987).

12. international market mechanisms   247 amounts in every year, and some ODS were completely phased out ahead of schedule.30 Some have lauded the lower transaction costs of the lead and ODS phase-down programs as the reason that compliance costs were kept to a minimum.31 There is certainly some truth to this, as both programs were simpler by degrees and were more akin to a pure cap-and-trade program. Trades in lead did not require preapproval by the EPA.32 Trades in ODS did require EPA approval, but the EPA committed to approving each trade within three days.33 However, the most important factor contributing to the success of both programs appeared to be the ready availability of economically feasible substitutes for the underlying substance. In the case of lead, alcohol, and other additives were already emerging as substitutes for lead as an anti-knocking ingredient, and in the case of ODS, substitutes were already available by the time that the Montreal Protocol was signed. Indeed, some accounts suggest that there was industry obstruction of scientific research and international negotiations until the substitutes appeared almost ready for deployment.34 In any case, it is clear that a variety of factors affect the economic and environmental performance of market mechanisms. These early experiences with market mechanisms greatly influenced (not always for the better) the design of subsequent programs. The apparent success of the simpler, less administratively complex programs (lead and ODS) led to the development of the sulfur dioxide cap-and-trade program under the 1990 Clean Air Act Amendments (the ‘SO2 program’). Under the SO2 program, tradable allowances to emit sulfur dioxide were allocated to 246 specifically named coal-fired power plants.35 The nationwide cap was also specified in the statute, 8.90 million tons,36 albeit subject to a number of adjustments. For example, firms could ‘opt in’ facilities not initially covered under the program, and would be allocated some additional allowances for these facilities.37 Absolutely critical to the smooth functioning and environmental performance of the program was the use of continuous emissions monitors, a technological breakthrough because it allowed constant, automated, remote measurement of sulfur dioxide emissions. Both SO2 emitters and the EPA thus had accurate and transparent information on emissions, and because allowance trades did not have to be approved in advance by EPA, the program had an administrative certainty that was absent from EPA’s 1970s rules.   Richard E. Benedick, Ozone Diplomacy 195 (Harvard University Press, 1998).   Hahn and Hester, supra note 21, at 390. 32   David Sohn and Madeline Cohen, ‘From Smokestacks to Species: Extending the Tradable Permit Approach From Air Pollution to Habitat Conservation’, 15 Stan. Envtl. L.J. 405, 431 (1996). 33   40 C.F.R. §80.12(a)(2) (1993). 34   Some accounts point to the industry obstruction of scientific research and international negotiations until the substitutes appeared almost ready for deployment. See Benedick, supra note 30, at 119. 35   Clean Air Act § 404(e); 42 USC § 7651c(e) (1990). 36   Clean Air Act § 403(a)(1); 42 USC § 7651b(a)(1) (1990). 37   Clean Air Act § 404(d); 42 USC § 7651c(d) (1990). 30 31

248    part iv.  setting up the int'l mitigation regime The flexibility of the SO2 program produced some unexpected environmental benefits that might not have occurred under a more traditional regulatory program. For example, by imposing a price for emissions of SO2, the program induced firms to utilize older, dirtier plants less intensively than they might have had they only been required to comply with the original mandates typically found in the Clean Air Act regulations. While a disappointingly small number of coal-fired power plants were actually shut down, electricity generating firms relied on them much more sparingly, opting for natural gas-fired power plants instead. Natural gas plants soon became a constant, all-day, baseload power source, as well as a source for shortterm, peak electricity demands.38 Moreover, the SO2 program generated entrepreneurial activity around the reduction of SO2 emissions so that the program yielded indirect benefits. Attention towards SO2 emissions reductions led to more innovation for emissions reductions, both technical and logistical. The costs of emissions reduction lowered to a point that firms could afford to undertake more emissions reductions. Further, cheaper allowances induced firms to establish a reserve of excess allowances, essentially inducing them to ‘overcomply’ and hold more allowances than required.39 Although that the lead program and the ODS trading program were politically salable because affordable alternatives existed, it is an important benefit for a program to create opportunities for cheaper alternatives to be discovered and exploited. When emissions reductions are cheaper, overcompliance becomes cheaper, and the leap to next generation emissions reduction becomes cheaper as well. Lowering compliance costs is thus very much connected to lowering emissions. First, to the extent that environmental performance is one of several objectives in a private firm’s decision environment, a more cost-efficient way to reduce emissions enhances environmental performance. Second, cap-and-trade programs produce more incentives for innovation for emissions reductions. Finally, cap-and-trade expands the range of opportunities for emissions reductions and engages a larger group of actors in efforts to address pollution reduction and further innovation. Early experiences with market mechanisms have profoundly influenced efforts to reduce the emissions of GHGs to address climate change. Most prominently, the Kyoto Protocol40 contemplated a global cap-and-trade system meant to apply to developed countries, and eventually all countries.41 In addition, some parties to the Kyoto Protocol created their own domestic cap-and-trade programs that could be linked with those of other parties.   A. Denny Ellerman et al., Markets for Clean Air, p.130 (Cambridge University Press, 2000).  Ellerman, supra note 38, at 148–51. 40   The Kyoto Protocol to the United Nations Framework Convention on Climate Change, UN Doc FCCC/CP/1997/7/Add. 1 Dec. 10, 1997; 37 ILM 22 (1998). 41  Tim Profeta, ‘Weaker Kyoto Protocol Extended at International Climate Negotiations’, Nat’l Geographic (Dec. 13, 2012), (accessed 5 August 2015). 38


12. international market mechanisms   249 The Kyoto Protocol also established a form of offsets, somewhat like those envisioned in EPA’s 1970s offset rule.42 GHG emitters in a developed country could fund projects in developing countries that reduce GHG emissions and obtain offset credits. This is known as the Clean Development Mechanism (CDM).43 GHG emitters in developed countries can also fund projects in other developed countries, under the Joint Implementation (JI) program.44 These initiatives were to be overseen by the CDM Executive Board and the JI Supervisory Committee, respectively, both of which were created under the Kyoto Protocol. In the early days of implementation, the CDM and JI programs produced numerous mistakes of overinclusion—approval of projects that did not really reduce emissions—and of underinclusion—the rejection of projects that would have produced an emissions reduction. For instance, a huge number of CDM projects in China purported to reduce emissions of HFC-23, a powerful GHG and byproduct of the production process, generating credits that could be used by emitters in developed countries in lieu of actually reducing GHG emissions. The problem was that the value of the credits far exceeded the value of the captured refrigerants. The plants producing HFC-23 had no real purpose other than the generation of credits; refrigerants were a mere pretense for such generation.45 The issuance of these credits subjected the CDM Board to considerable criticism and cast doubt on the soundness of the entire offset idea.46 At the same time, the paucity of approved CDM projects in developing countries other than China and India—those countries that might have the most to offer in terms of inexpensive emissions reductions (and would benefit the most from capital inflows)—suggest that the CDM program is bureaucratically burdensome enough to exclude many meritorious projects. The underlying problem with the offset concept is that there is rarely a clear counterfactual for the project. What would the emissions have been in the absence of the offset program? If a proposed project does not achieve any real reduction from the ‘business as usual’ course of events, then any credits issued for the project are sham credits, and only serve to increase the overall cap on emissions. At the sub-global level, the European Union has instituted its own cap-andtrade program to reduce GHGs. The European Union Emissions Trading System (EU ETS)47 covers approximately 11,500 stationary sources of emissions, including 43   Kyoto Protocol, Article 12.   Kyoto Protocol, Article 12.   Kyoto Protocol, Article 6. 45   Michael W. Wara, ‘Measuring the Clean Development Mechanism’s Performance and Potential’, 55 UCLA. L. Rev. 1759, 1783–86 (2008); see also Michael W. Wara and David G. Victor, ‘A Realistic Policy on International Carbon Offsets’, Working Paper, online at (accessed 5 August 2015). 46  Wara, supra note 45; Wara and Victor, supra note 45. 47   European Commission, The EU Emission Trading Scheme, online at policies/ets/index_en.htm (accessed 5 August 2015). 42


250    part iv.  setting up the int'l mitigation regime cement, steel, glass, metal manufacturing, pulp and paper processing, and oil refining facilities, the most carbon-intensive industries. However, the EU ETS still only covers facilities that account for about forty-five percent of the EU’s CO2 emissions.48 The history of the EU ETS has also been fraught with mismanagement. In moving from an initial phase of the system to a more permanent one, the transition rules for carrying over allowances were poorly designed, and led to a collapse in allowance prices to nearly zero.49 Also, because GHG emissions are very highly correlated with economic activity, the global recession of 2008–2009 and continuing economic weakness throughout Europe led to a sharp decrease in GHG emissions, which caused EU ETS allowance prices to collapse again.50 The EU considered propping up allowance prices in 2013, but voted against it.51 Several other cap-and-trade programs exist. The Regional Greenhouse Gas Initiative (RGGI), a program among nine (originally ten) Northeastern American states, requires power plants in those states to participate in a cap-and-trade program. Also, in the United States, California pioneered a regional cap-and-trade system, the Western Climate Initiative, and garnered the participation of seven other American states as well as four Canadian provinces, only to have all except one withdraw. California, with its landmark GHG legislation AB32,52 established a capand-trade program for major industrial emitters in the state. The discouraging experiences with emissions trading for GHGs, however, are due more to the intractability of climate change politics than any fundamental flaw with emissions trading systems. Indeed, GHGs would seem to be an ideal pollutant for a cap-and-trade program, since all GHGs are globally uniformly mixed pollutants, such that emissions of GHGs have the same effect on the global climate systems no matter where in the world they were emitted. No GHG is toxic enough to form any ‘hot spots’ that could endanger local populations. Moreover, there is enormous potential for legitimate offset projects such as reforestation and low-impact agriculture, so that emissions reductions could really be achieved for a fraction of the cost of abatement technologies. However, the politics at every level are fraught. Internationally, the refusal of developing countries, led by China and India, to assume binding caps on their national emissions led to the unraveling of support for GHG pricing among 48   European Commission, The EU Emissions Trading System (EU ETS) (11 June 2014). (‘EUETS [c]‌over around 45% of the EU’s greenhouse gas emissions.’) 49  A. Denny Ellerman and Barbara K. Buchner, Over-Allocation or Abatement? A Preliminary Analysis of the EU ETS Based on the 2005–06 Emissions Data, 41 Envtl. Res. Econ. 267, 270 (2008). 50   Bruno Declerq, Erik Dalarue, and William D’haeseleer, ‘Impact of the Economic Recession on the European Power Sector’s CO2 Emissions’, 39 Energy Pol’y. 1677, 1678 (2011). 51   ‘European Parliament Votes Down Carbon Permit “Backloading” Proposal’, 17 Bridges (18 April 2013); (accessed 5 August 2015). 52   Global Warming Solutions Act of 2006, CAL. HEALTH & SAFETY CODE §§ 38500-38599, available at (accessed 16 June 2014).

12. international market mechanisms   251 developed countries. Regionally, the flagging economic fortunes of the EU made the EU ETS seem like more and more of a luxury, especially when the United States, Canada, China, Russia, and India—collectively accounting for about fifty-five percent of global emissions—were refusing to even consider GHG pricing. At the individual state level, the politics may be smaller and appear more tractable, but they often are trumped by concerns with economic competitiveness and carbon leakage. The very pervasiveness of GHG emissions that makes it such an ideal pollutant for emissions trading also makes the politics of implementation especially complicated.

3.  Pigouvian Taxes The other frequently discussed ‘market mechanism’ is the Pigouvian tax. Whereas a cap-and-trade program fixes the quantity of pollution and allows the price to be set by the market, a Pigouvian tax fixes the price and allows the overall quantity of pollution to vary. In a world with perfect information, there would be no difference in economic efficiency (including the economic value of environmental quality) between the two instruments. However, if there is uncertainty about either marginal pollution abatement costs or marginal social costs of pollution, then there can be significant welfare consequences in choosing between a cap and trade program and a tax. In his seminal paper, economist Martin Weitzman set out the conditions under which a cap-and-trade program would minimize the risk of deadweight loss—the economic loss resulting from the misallocation of resources due to excess emissions or abatement—and the converse conditions under which a Pigouvian tax would minimize waste.53 The paper remains relevant today, as economists debate whether GHGs should be subject to a cap-and-trade program or a carbon tax. As has been the case with emissions trading, the simple idea of a Pigouvian tax has morphed into variants that achieve some, but not all, of its objectives. Gasoline taxes have long been in effect in the United States, but have been considered revenue sources for road construction and maintenance rather than a Pigouvian tax aimed at reducing emissions from driving.54 At the 2015 American average of less than 50 cents per gallon of gasoline, the United States has one of the lowest gas taxes in the world.55 The only other levy in the United States that could have been considered a Pigouvian tax was a chemical feedstock tax adopted pursuant to the   Martin L. Weitzman, ‘Prices vs. Quantities’, 41 Rev. Econ. Stud. 477 (1974).   It is telling that the federal gasoline tax was instituted under the Revenue Act of 1932. Revenue Act of 1932, Ch. 209, § 617(a), 47 Stat. 169, 266. 55   Ian W.H. Parry, ‘Is Gasoline Undertaxed in the United States?’ 148 Resources 28, 28 (2002) (accessed 15 September 2015). 53


252    part iv.  setting up the int'l mitigation regime ‘Superfund’ law, or the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA),56 which imposed a tax on the production of petroleum and on forty-two chemicals.57 The feedstock tax was used to fund prosecutions for violations of CERCLA and to fund cleanups of contaminated sites, rather than create a price signifying the social cost of producing chemicals. The tax expired in 1996 and was not reauthorized.58 Beyond the United States, Europe, which faced enormous revenue needs after the Second World War, is much more accustomed to higher gasoline taxes, and is generally more tolerant than the United States of taxation. The minimum EU tax on unleaded gasoline of 359 euros per 1000 liters translates into $1.76 per gallon in the United States,59 and every EU Member State, except Romania, exceeds that rate. The rate in the Netherlands is more than double the minimum rate, at 746 euros per 1000 liters.60 Europe is also where environmental taxes are the most common and have their greatest effect. Taxes are levied on the production or consumption of a broad range of goods with negative environmental effects, such as coal and coke, natural gas, kerosene, heavy fuel oil, mineral oil, and electricity.61 For instance, the Scandinavian countries impose taxes on nitrogen oxides (NOx) and SO2.62 Sweden rebates NOx tax proceeds in proportion to energy output, offering at once carrots to firms that are able to reduce NOx emissions and punishing those that do not.63 Whereas a pure Pigouvian tax is simply the tax, the Swedish NOx tax is a variant in its recycling of revenues back to producers, presumably to blunt some of the political opposition to the tax. Most significantly, several European countries have instituted some form of a carbon tax to reduce emissions of CO2 and other GHGs. A carbon tax is a unitary tax on a fossil fuel or other carbon-containing compound that is levied on the basis of carbon content, on the assumption that all of the embedded carbon would be oxidized in combustion and released into the atmosphere as CO2.64 The complication with imposing carbon taxes in Europe is that they are layered on top of a variety of existing electricity and energy taxes. Also, some countries with carbon taxes carve out exemptions 56   ‘Comprehensive Environmental Response, Compensation, and Liability Act of 1980’, Publ. L. 95–510, 94 Stat. 2767 (1980). 57   CERCLA, Subtitle A, Publ. L. 95–510, amended Superfund Amendments and Reauthorization Act of 1986 (P.L. 99–499). 58   Omnibus Budget Reconciliation Act of 1990, P.L. 101–508, §11231 (1990). 59   Taking the exchange rate at $1 to 0.74 euros, in effect on 13 June 2014. 60   European Commission, Excise Duty Tables, Part II—Energy Products and Electricity (January 2013); (accessed 5 August 2015). 61   Ibid, at 4. 62  Jean-Phillppe Barde, ‘Implementing Green Tax Reforms in OECD Countries: Progress and Barriers’, in 2 Critical Issues in Environmental Taxation, International and comparative Perspectives 8–11 (J. Milne, K. Deketeleare, L. Kreiser, and H. Ashiabor eds, 2005). 63   Stephen Smith, ‘Environmental and Public Finance Aspects of the Taxation of Energy’, Oxford Review of Economic Policy, 14(4):64–83, 70–3 (1998). 64   Shi-Ling Hsu, The Case for a Carbon Tax: Getting Past Our Hang-ups to Effective Climate Policy 17 (Island Press, 2011).

12. international market mechanisms   253 for favored industries or industries deemed to be vulnerable to international competition from firms in countries lacking comparable GHG emissions regulation. Carbon taxes nevertheless exist in some form in Finland,65 Sweden,66 Norway,67 Denmark,68 Iceland,69 Ireland,70 Japan,71 Switzerland,72 France,73 the United Kingdom,74 Mexico,75 and Chile.76 Finland, Sweden, Denmark, and Norway all 65   Act on Excise Duty on Electricity and Certain Fuels of 30 December 1996 (1260/96) (Fin.). See Org. for Econ. Cooperation & Dev., Inventory of Estimated Budgetary Support & Tax Expenditures for Fossil Fuels 2013 at 153–64, available at (accessed 5 August 2015). See also Stefan Speck et al., ‘The Use of Economic Instruments in Nordic and Baltic Environmental Policy 2001–2005’ at 99–113 (2006), available at (accessed 5 August 2015). 66  Act (1994:1776) on the Taxation of Energy (Swe.), available at (accessed 5 August 2015). See also Int’l Energy Agency, Energy Policies of IEA Countries: Sweden 2013 Review, available at (accessed 5 August 2015). 67   See Law on Tax on Emissions of CO2 in the Petroleum Activities on the Continental Shelf, LOV1990-12-21-72 (Nor.), available at (accessed 5 August 2015). See Stefan Speck et al., ‘The Use of Economic Instruments in Nordic and Baltic Environmental Policy 2001–2005’ at 169–90 (2006), available at> (accessed 5 August 2015). 68  Act. No. 888 of 1991 (Den.), available at (accessed 5 August 2015); amended by Consolidation Act. No. 321 of 2011 (Den.), available at (accessed 5 August 2015). See Speck, supra note 67. 69   Government of Iceland, Legislation on Environmental and Resource Taxes (December 23, 2009), available at (accessed 5 August 2015). 70  Finance Act 2010, Chs. 1–3 (Ir.), available at (accessed 5 August 2015). 71   Government of Japan, Tax Reform Act of Mar 31, 2012, Special Provisions for Carbon Dioxide Tax of Global Warming Measures (31 March 2012), available at (accessed 5 August 2015). 72   Government of Switzerland, Federal Act on the Reduction of CO2 Emissions (23 December 2011), available at (accessed 5 August 2015). 73  Government of France, Act No. 2013-1279 of December 29, 2013 Supplementary Budget for 2013(1) (27 March 2014), available at (accessed 5 August 2015). 74   Sch. 6, Finance Act 2000, as amended by Finance Act 2013; Climate Change Levy (General) Regulations, 2001, S.I. 2001/838), as amended by the Climate Change Levy (General) (Amendment) Regulations, 2013, S.I. 2013/713), available at (accessed 5 August 2015). 75   Government of Mexico, Diario Oficial, 11 December 2013, at Second Section, p. 1–10, available at (authorized access only). 76   Government of Chile, Diario Oficial de la Republica de Chile, 29 September 2014, at I-39; Kate Galbraith, ‘Climate Change Concerns Push Chile to Forefront of Carbon Tax Movement’, N.Y. Times, 29 October 2014, (accessed 5 August 2015).

254    part iv.  setting up the int'l mitigation regime introduced their carbon taxes between 1990 and 1992. Finland instituted the world’s first carbon tax in 1990,77 while Sweden imposes the highest carbon tax, at about $150 per ton of CO2.78 Nominally, the carbon tax rates range among the four Scandinavian countries from about $15 per ton of CO2 in Denmark to $150 per ton in Sweden. However, all four countries offer significant exemptions and rate reductions for electricity, energy-intensive industries, and other industries deemed to be economically vulnerable to trade competition.79 Because electricity must cross borders within the European Union, the EU regulates the amount of taxes that can be imposed by Member States on electricity. EU Regulations thus restrict the Member State’s ability to tax electricity in a way that might be discriminatory.80 The four Scandinavian EU Member States all exempt fossil fuels used for generating electricity from their respective carbon taxes. At least in Sweden, which derives over eighty-five percent of its electricity from either nuclear power or hydropower,81 and in Norway, which derives almost all of its electricity from hydropower, these electricity exemptions are not highly distortionary. For the most part, the other Scandinavian countries rely on a variety of other policies to try to shift fossil fuel-fired electricity generation away from coal and natural gas. For example, Denmark is one of the leading wind power generating countries in the world, relying upon offshore wind energy for twenty-eight percent of its electricity needs, but has not relied upon its carbon tax to induce change.82 Thus, the high rates of renewable energy generation in Scandinavian countries are not due to market mechanisms. Among the EU Member States, the United Kingdom is the most recent country to have adopted something like a carbon tax. The 2001 Climate Change Levy (CCL), however, is a tax on energy consumption, not carbon content, and so is not really a carbon tax.83 It also excludes residential uses and transportation fuels (which, like all European countries, are subject to high rates of taxation   J. Andrew Hoerner and Benoît Bosquet, Environmental Tax Reform: The European Experience, (Washington, D.C.: Center for a Sustainable Economy, 2001), available at (accessed 5 August 2015). 78   Cite exchange rate of 0.15 USD per krona, 110 ore/kg CO2 Miljo-och-klimat/Mal-och-styrmedel/ (both accessed 5 August 2015). 79   Annegrete Bruvoll and Bodil Merethe Larsen, Statistics Nor., Research Dep’t, ‘Greenhouse Gas Emissions in Norway: Do Carbon Taxes Work?’ 16 (2002), available at (accessed 5 August 2015). 80  Philipp Genschel and Markus Jachtenfuchs, How the European Union Constrains the State: Multilevel Governance of Taxation, 50 EUR. J. POL. RES. 293 (2011). 81   Swedish Energy Agency, Energy in Sweden 2013, available at (accessed 5 August 2015). 82   Danish Energy Agency, Energy Statistics 2012 at 9 (2014), available at (accessed 5 August 2015). 83   Finance Act 2010 (Eng.) supra note 74. 77

12. international market mechanisms   255 anyway).84 Similar to what occurs in the Scandinavian countries, the UK consciously shifted electricity production away from coal and towards natural gas using other policies. However, imposing a tax on electricity consumption instead of carbon emissions misses an opportunity to use the levy to encourage renewable energy production. Beyond early developments in the EU, a second wave of carbon tax laws began in 2008, with Switzerland and the Canadian province of British Columbia (BC) enacting carbon taxes in 2008, Ireland and Iceland in 2010, Mexico and Japan in 2012, and France and Chile in 2014.85 The taxes are generally modest, ranging in cost from about US$2 per ton of CO2 to US$30. With the exception of BC, the most broadbased of the taxes all contain very significant exemptions, typically for energy usage or for entities already subject to the EU ETS. The BC tax is particularly interesting because it is the only carbon tax in North America, as well as being one of the more effective carbon taxes in the world. The BC Carbon Tax Act86 imposed a gradually increasing tax on emissions from the combustion of fossil fuels and other specified combustibles based on carbon content. As a provincial tax, it applies to emissions only within the Province, and excludes or specifically exempts fuels exported from British Columbia and fuels used for inter-jurisdictional commercial marine and aviation purposes.87 Introduced in 2008, the tax rate ramped up from an initial rate of approximately $10 per ton of CO2-equivalent emissions, to its current rate of $30 per ton.88 The tax was intended to be ‘revenue neutral’, and so was packaged with reductions in the marginal income tax rates of the lowest two tax brackets, as well as reductions in the corporate income tax rate.89 However, the BC carbon tax has turned out to be persistently revenue-negative, taking in much less in revenues than it is believed to have cost the province.90 As North America has always been much more hostile to Pigouvian taxes,91 the BC carbon tax faced several political challenges, but appears to be politically safe from repeal for the foreseeable future.   Sch. 6, Finance Act 2010 (Eng.) supra note 74.   World Bank, Putting a Price on Carbon with a Tax (no date), online: (accessed 5 August 2015). 86 87   Carbon Tax Act, SBC 2008, Ch. 40 (2008).   Carbon Tax Act, supra note 86, § 10. 88   Carbon Tax Act, supra note 86, Schedule 1. 89   Kathryn Harrison, ‘The Political Economy of British Columbia’s Carbon Tax’, OECD Environment Working Papers No. 63 9 (2013), (accessed 5 August 2015). 90  Harrison, supra note 89, at 9. 91   Henrik Hammar, Asa Lofgren, and Thomas Sterner, ‘Political Economy Obstacles to Fuel Taxation’, 25 Energy Journal 1 (2004). 84 85

256    part iv.  setting up the int'l mitigation regime

4. Conclusion The market-based ideas of Pigou and J.H. Dales have easily stood the test of time as being theoretically the most efficient means of reducing pollution. However, in order for Pigouvian taxation and emissions trading to work in practice, a number of implementation issues need to be addressed. Experience with market mechanisms domestically and internationally have demonstrated that some implementation issues prove especially thorny. For example, while the idea of using offsets as part of an emissions trading scheme may be theoretically sound, care must be taken to ensure that fraudulent projects do not form the basis of emissions reductions credits. The experience with the Clean Development Mechanism under the Kyoto Protocol serves as a stark reminder of that difficulty. Beyond implementation issues, the development of market mechanisms has often encountered stiff political resistance, as opponents have exploited populist fears of high prices and job losses to mobilize opposition to a carbon tax or emissions trading programs. Finally, it is worth noting that in addressing opposition concerns, the environmental objectives of market mechanisms have sometimes been compromised. For example, while Scandinavian countries have led the way in implementing carbon taxes, the many exemptions that are built into those taxes have reduced their effectiveness in reducing emissions. Striking a balance between environmental effectiveness and political feasibility appears to be surprisingly difficult. All that being said, the limited experience to date with domestic and international market mechanisms are cause for optimism: environmental and economic objectives can be simultaneously achieved in one program. Market mechanisms make explicit a truism about international environmental law and policy: that environmental and economic objectives are inextricably linked, and cannot be separated in the pursuit of successful emissions reductions strategies.

Chapter 13


1. Introduction: Linking in Theory and Practice


2. Definitions and Concepts


3. Overview of Linking Research


4. The Role of Law and Institutions


5. Outlook: Future Perspectives for Linking


6. Conclusions


258    part iv.  setting up the int'l mitigation regime

1.  Introduction: Linking in Theory and Practice Were political rhetoric and scholarly research to serve as a benchmark, the creation of links between domestic and regional emissions trading systems might seem a necessary or at least highly desirable option for the future evolution of global climate governance. Proponents have ascribed considerable benefits to the integration of carbon markets through a trading link (Edenhofer et al., 2007: 10; Flachsland et al., 2009; House of Commons, 2015; ICAP, 2015; Jaffe et al., 2009). By its very nature, linkage results in an enlarged market, promising greater diversity of abatement costs and thus more efficient achievement of climate change mitigation objectives (Alexeeva and et al., 2015: 17-8; Green et al., 2014a: 5-9; IPCC, 2014: 1052; Lazarowicz, 2009: 42; Rehdanz and Tol, 2005: 410; Stern, 2007: 545-6; Anger, 2008: 2040-1). Linkage is also credited with promoting liquidity and reduced price volatility in the carbon market, helping reduce the likelihood of manipulation and abuse (Jaffe et al., 2009: 800). With concerns about the competitiveness impact of greenhouse gas constraints a central obstacle to ambitious policy efforts, moreover, the convergence of carbon prices resulting from a market link could help avert the specter of production and investment relocation, which in turn could limit the risk of emissions leakage (Hausotter et al., 2012: 47; Larsson, 2009; Tiche et al., 2014: 100; Tuerk, 2011). And finally, linking of emissions trading systems may prove one among a diminishing range of policy options through which the international community can engage in meaningful collective action (Burtraw et al., 2013: 2; Ranson and Stavins, 2012; Tangen and Hasselknippe, 2005: 7). Given these potential benefits, a majority of jurisdictions with operating carbon markets have announced an interest in or actively pursued linking to other trading systems, often including a formal mandate or ‘docking provision’ in their domestic legislation (see infra, Sec. 4). Occasionally, a favorable attitude towards linking has even translated into vigorous foreign policy engagement, as observed with the European Union and its carbon market outreach strategy (European Commission, 2015; Wettestad and Jevnaker, 2014). What a survey of linkages to date also reveals, however, is that the foregoing advantages have proven difficult to leverage in practice. Few markets have become integrated by way of linkage, and some recent efforts to establish trading links have seen negotiations stall or become mired in technicalities. What economic theory suggests to be an attractive and straightforward policy option is, in effect, procedurally demanding and politically complex. A number of potential risks have been discussed in connection with linking, and they may partly account for the relative scarcity of existing market links (Burtraw et al., 2013). Once linked, for instance, certain design features in one system—such as price controls and offset rules—will extend to other systems, possibly compromising the achievement

13.  linking national emissions trading systems    259 of environmental objectives and limiting sovereign control over the design and operation of the carbon market (Jaffe and Stavins, 2007: 18-20). More generally, convergence of prices across linked trading systems may have distributional impacts on market participants and other stakeholders (Baron and Philibert, 2005: 137; Bohm, 1992), potentially resulting in substantial capital flows across borders and undermining political support for continued linkage (Green et al., 2014b: 1066; Kruger et al., 2007: 119). Some degree of market alignment as well as procedures governing the conditions of linkage and of subsequent adjustments to either the linked trading systems or the link itself will thus be indispensable to allow full market integration, and that can prove politically challenging (Burtraw et al., 2013; Green et al., 2014a). Yet politics are not the only obstacle to market links. Often neglected at the conceptual stage and in initial engagement, legal and institutional considerations can ultimately determine whether an emissions trading link becomes operational. What this chapter attempts, therefore, is to trace such considerations, starting with a brief background on the concept of carbon market linkages and an overview of relevant scholarly research to date. Actual experiences with linking then help inform a discussion of the specific role of law and institutions in explaining success or failure of linking efforts. A final section explores the conditions of, and prospects for, an international carbon market based on links between domestic trading systems.

2.  Definitions and Concepts Numerous definitions of linking have been brought forward to date, and they tend to share a set of common features. Generally speaking, emissions trading systems are linked if a participant in one system can use a carbon unit issued under another system to meet compliance obligations (Haites, 2003: 5). As a result of linking, units are considered fungible, or equivalent for compliance purposes, without requiring individual review and approval prior to each transaction (Stewart and Sands, 2001: 9). In its most basic rendition, therefore, a link can consist of a simple provision stating the equivalence of foreign units. Although at the heart of any link, such recognition of foreign units does not in itself suffice to render the link operational. Additionally, a process has to be in place allowing foreign units to be actually applied towards domestic compliance. Different approaches are available to that effect (Commonwealth of Australia/ European Commission, 2013: 17-23), with the most straightforward being the creation of a joint registry or connection of registries across systems that permits the direct transfer of units from the account of a participant in one system to the account of a participant in another system (Mace et al., 2008: 3). Registry integration may

260    part iv.  setting up the int'l mitigation regime not always be desirable or politically expedient, however, as it may limit sovereign control over the link. In such cases, the flow of units can also be accomplished by creating a mechanism that accounts for cancellation of units in one system and issues a corresponding amount of units in the linked system (Roßnagel, 2008: 397), an option that is particularly viable where foreign entities are eligible to open and maintain registry accounts. Even absent such arrangements, market participants may engage in trading activities that have repercussions across two or more trading systems, for instance by engaging in arbitrage through local intermediaries (Haites and Mullins, 2001: 72).1 A link between carbon markets can assume various forms, with differences in degree, scope, and the direction of trading flows. Conceptually, a link can be either direct or indirect, with direct linking conditional on an explicit decision by at least one of the linked jurisdictions (Jaffe and Stavins, 2007: 11). Direct links allow trade both within and between different systems (Ellis and Tirpak, 2006: 8), and can be further distinguished by whether unit flows are possible in one or more directions. In theory, the greatest economic benefits will follow from a direct bilateral or multilateral link, in which two or more jurisdictions agree on the mutual recognition of units and trade can occur in all directions across systems (Mehling and Haites, 2009: 181). Direct linking does not necessarily have to allow bi- or multidirectional flow of units, however. A direct link can also be purely unilateral, meaning that a jurisdiction recognizes units from one or more foreign systems, without those systems necessarily reciprocating. While unilateral linking can be accompanied by cooperation and even entail a direct registry connection,2 its appeal largely derives from the fact that it can be implemented without prior negotiations or mutual commitments. Because of the resulting flexibility, unilateral linking has been implemented in several trading systems and is also the type of link commonly used to allow use of credits from international offset mechanisms (Mehling and Haites, 2009: 172-3). Indirect linking, by contrast, is usually an unintended consequence of links with the same third party. An indirect link occurs when one system links to a second system that, in turn, is linked to a third system. Although the first and third systems are not directly linked, their indirect connection through the second system allows developments in any one system to affect supply of and demand for units, and 1   In such cases, even where the jurisdictions have not established a link, participants with market positions and compliance obligations in both jurisdictions might enter a bilateral transaction where one participant decides to transfer units to another participant in one system in return for obtaining a commensurate amount of units from that participant in another system. Still, such cases are likely to be very limited, and would not achieve most of the benefits ascribed to a formal link. 2   A unilateral link allowing use of European Union allowances for compliance in Australia was considered for the period from 1 July 2015 to 30 June 2018, and one option under consideration was a direct registry connection to facilitate the transfer of allowances, where the net flow would have been unidirectional (Commonwealth of Australia et al., 2013: 17-25).

13.  linking national emissions trading systems    261 hence unit prices, across all systems (Mehling and Haites, 2009: 171). So far, indirect links have mostly occurred when different trading systems accepted the same offset credit, such as Certified Emission Reductions (CERs) or Emission Reduction Units (ERUs) issued pursuant to the project mechanisms of the Kyoto Protocol, the Clean Development Mechanism (CDM) and Joint Implementation (JI) (Dellink et al., 2010). A conceptual distinction—albeit with only limited practical significance—can become necessary in the case of multiple integrated jurisdictions, for instance in a federal system of government or under a regional organization of economic integration. When two or more trading systems evolve under such a common regulatory framework, it can be difficult to distinguish whether the emerging market is the result of a single trading system covering multiple jurisdictions, or whether it is formed by linkage of independent trading systems. Where affected jurisdictions have no or very limited discretion on whether and how they set up a trading system within their territory, it stands to argue that the resulting market is a uniform emissions trading system.3 Even then, however, borderline cases—such as the expansion of the European Union emissions trading system (EU ETS) to the European Free Trade Agreement (EFTA) member states Norway, Iceland, and Liechtenstein—defy straightforward categorization. Perhaps the strongest indication of a single trading system, therefore, is the existence of a common governance framework, such as a central administrator, central institutions, and central decision-making and enforcement procedures,4 and the use of a common tradable unit.

3.  Overview of Linking Research A considerable body of research studying links between emissions trading systems has accumulated over the past decade and a half. In an attempt to categorize this   Again, the EU ETS would likely be considered a single trading system because its adoption is mandatory for Member States, and the majority of design features are already specified in great detail in supranational legislation. By contrast, in the Regional Greenhouse Gas Initiative (RGGI) and the Western Climate Initiative (WCI), the common regulatory framework is set out in non-binding policy documents, and the harmonization of design features and use of common institutional structures is therefore purely voluntary. Hence, the carbon markets emerging under RGGI and the WCI could be considered linked systems. 4   If this is to be the primary criterion, the European Union emissions trading system (EU ETS) could have been described as a complex of national linked trading systems during the early trading phases, when a majority of institutional arrangements (such as registries) and decisions (such as national allocation plans) were still taken at the Member State level; from the third trading period onward, however, important decision making powers and institutional structures have been centralized, such as the allocation process and common registry. 3

262    part iv.  setting up the int'l mitigation regime wealth of research output, one might broadly distinguish three phases of research, each with its own primary research interests and approaches: • an exploratory conceptual phase, which saw the definition of central linking concepts and modalities as well as early enquiry into its potential effects; • an instrumental phase, focused on the identification of specific conditions and mechanisms for successful linking and their evaluation in empirical case studies; • and a more emancipated critical phase, in which the focus of investigation has moved beyond primarily technical assessments to acknowledge the role of political dynamics in the linking process, partly in response to the challenges encountered in practice. While boundaries between these research categories are neither definite nor absolute, they serve a heuristic purpose and allow grouping individual research efforts along common themes and preoccupations. Each phase is described in further detail below, with reference to representative studies and research projects.

3.1 Conceptual Phase Research on linkages between emissions trading systems dates back to the early 2000s, a time when policy makers in developed countries were considering domestic strategies to achieve the quantified emission limitation and reduction objectives entered under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC). As signatory states contemplated market-based instruments among their compliance options, mirroring the flexible mechanisms included in the Kyoto Protocol, attention soon extended to the potential for future connections between domestic trading systems. Some of the earliest studies on linking already set out the concept in substantial detail, assessing the implications of different market design options and linking approaches, and weighing the prospects for future linkages between the trading systems emerging at the time, including voluntary markets and pilot trading systems within industry (Haites and Mullins, 2001; Haites, 2003; Stewart and Sands, 2001). Research during this phase also considered how international emissions trading and linked national or regional markets could exist alongside each other once the Kyoto Protocol entered into force (Baron and Bygrave, 2003; Bodansky, 2002; Bode, 2003). Expected economic and distributional impacts and actor dynamics featured in this early phase (Anger, 2008; Rehdanz and Tol, 2005), as did specific issues affecting compatibility between emissions trading systems, for instance the nature of mitigation targets (Fischer, 2003; Marschinski, 2008).

13.  linking national emissions trading systems    263 Driving actors in this early phase included the Organisation for Economic Co-operation and Development (OECD) through its Global Forum on Sustainable Development (GFSD), the Concerted Action on Tradeable Emissions Permits (CATEP) research network, and the Joint Emissions Trading as a Socio-Ecological Transformation (JET-SET) project, all of which convened a series of pertinent events and yielded numerous important insights. Over time, the research questions explored in the foregoing studies were revisited in view of changing political developments, including the emerging discussion on architecture of global climate cooperation beyond 2012, as well as initial feedback from the practical operation of trading systems such as the EU ETS (Ellis and Tirpak, 2006; Jaffe and Stavins, 2007; Jaffe et al., 2009; Sterk et al., 2006).

3.2 Instrumental Phase Building on the foregoing conceptual work, the following phase witnessed an extensive body of research on the prospects for links between specific jurisdictions. Most of this work centered around the EU ETS (Bazelmans, 2008; Blyth and Bosi, 2004; de Cendra de Larragán, 2010; Convery and Redmond, 2013; Flachsland et al., 2008; Goers and Pflüglmayer, 2012a; IETA, 2007; Schüle and Sterk, 2008; Springer et al., 2006), which by this time had not only started to yield empirical insights into the functioning of greenhouse gas emissions trading across national jurisdictions, but was also actively pursuing links with other trading systems (Wettestad and Jevnaker, 2014). Accordingly, several case studies addressed opportunities for links between the EU ETS and other existing or expected trading systems, comparing design features and assessing overall system compatibility (California: Zetterberg, 2012; Japan: Roßnagel et al., 2008; Korea: Hawkins and Jegou, 2014; Regional Greenhouse Gas Initiative: Mehling, 2007; Persson, 2009; Russia: Golub et al., 2009; Switzerland: Rutherford, 2015). Before anticipation of a U.S. federal emissions trading system was dashed with the demise of corresponding legislation in Congress, several case studies also evaluated opportunities for a broader transatlantic carbon market (Chapman, 2009; Hardy, 2007; Haug, 2005; Mehling et al., 2011; Sterk and Kruger, 2009). But despite a clear dominance of research focused on the EU ETS, the gradual evolution of policy proposals and discussion on emissions trading in other jurisdictions also gave rise to research focused beyond Europe, for instance on Australia (Jotzo and Betz, 2009), Japan (Kimura and Tuerk, 2008) and North America (IISD and WRI, 2007; Haites and Mehling, 2009; Sawyer and Fischer, 2010). More recently, progress at the subnational level has yielded surveys of the link between California and Québec (Purdon et al., 2014; Benoit and Côté, 2014). Output from a multinational research consortium convened by Climate Strategies, meanwhile,

264    part iv.  setting up the int'l mitigation regime informed a series of publications covering multiple jurisdictions and evaluating the prospects for broad linking across the globe (Carbon Trust, 2009; Mehling, 2009b; Tuerk et al., 2009a; Tuerk et al., 2009b; see also Goers et al., 2012b). Case studies in this phase were not limited to geographical comparisons, however. Several studies also addressed the implications of linking carbon markets to specific sectors, such as aviation and shipping (Haites, 2009), land-use (Tuerk et al., 2008), and forestry (Streck et al., 2009). Likewise, integration of offset credits through a carbon market link featured extensively in exploratory research (multiple contributions in OECD, 2004) as well as studies focused on offsets in particular trading systems, such as the link created between the EU ETS and the project mechanisms of the Kyoto Protocol (Bygrave and Bosi, 2004; Criqui and Kitous, 2003; de Sépibus, 2008; Jepma, 2003; Mehling, 2005). Simultaneously, a number of operational questions received attention as researchers began to consider the practical steps of implementing a link between carbon markets. Designing mechanisms to facilitate a link between emissions trading systems (Mehling, 2009a) and to help manage system changes over time (Haites et al., 2009) formed part of this research agenda, as did orderly termination of a link once one or more linking partners decide to withdraw (Pizer and Yates, 2014). With the increasing focus on practical challenges, this research also extended to the legal (Mace et al., 2008; Mace and Anderson, 2008; Betz and Stafford, 2008; Mehling, 2007; Mehling, 2009a; Roßnagel, 2008; Roßnagel et al., 2008) and economic implications of linking (Anger et al., 2009; Anger, 2008; Anger and Böhringer, 2006; Anger et al., 2006; Edenhofer et al., 2007). A recent overview document summarized much of the foregoing research agenda (Kachi et al., 2015).

3.3 Critical Phase By this point, the concept of a link between emissions trading systems had become well established in the debate on carbon markets as well as the broader climate policy discussion. Several domestic legislatures (European Parliament, 2009; House of Commons, 2015) held official proceedings on the prospects of carbon market linkages, the host of the 2015 Group of Seven (G7) summit commissioned a report on linking (Haug et al., 2015), and the Intergovernmental Panel on Climate Change dedicated a number of paragraphs to the topic in its latest assessment report (IPCC, 2014: 1052). Arguably, this surge in interest was driven by the increasingly evident barriers to traditional multilateralism as the dominant paradigm of international climate cooperation. Earlier expectations of a centralized governance framework for international carbon trading seemed less and less realistic after the watershed 15th Conference of the Parties (COP15) to the UNFCCC in Copenhagen in 2009,

13.  linking national emissions trading systems    265 focusing renewed attention on alternative pathways to a global trading architecture (Jaffe et al., 2009; Ranson and Stavins, 2012). Yet at the very moment that public interest in the concept seems to have reached a pinnacle, with disillusioned observers of the international negotiations deriving new hope from expanding domestic carbon markets, research on linking also saw the emergence of a more critical strain of scholarship, reflecting, as it were, the slow progress in actual implementation of market linkages as well as the growing complexity revealed by prior research. Increased adoption of emissions trading worldwide notwithstanding, early research of this more critical bent highlighted the heterogeneity of system designs, growing complexity of governance structures, and the diverse political preferences of implementing jurisdictions as an obstacle to overcome (Sterk and Schüle, 2009; Driesen, 2009). A cointegration assessment of price developments across different carbon markets suggested a diminishing likelihood of price convergence after a 2009 peak (Mizrach, 2012: 336), likewise underscoring the wavering confidence in the future prospects of the global carbon market. But perhaps most indicative of the evolving perception of linking was a highly critical assessment by an advocacy group, suggesting that linkage to other trading systems poses a substantial risk to the environmental integrity of the carbon market in the European Union (Carbon Market Watch, 2015). While some research seized on this opportunity to draw lessons from past linking experience (Ranson and Stavins, 2015) and discuss ways of invigorating moribund market segments (Michaelowa, 2014), other work conceded the political barriers to formal links and instead offered recommendations for incremental carbon market integration (Burtraw et al, 2013; Green et al., 2014a) or use of qualitative and quantitative restrictions (Lazarus et al., 2015). Economic analysis of the price and distributional effects of linking continued throughout (Alexeeva and Anger, 2015; Marschinski et al., 2010), although it tended to focus on more specific research questions, such as barriers to price convergence (Grüll and Taschini, 2010) and market implications of linkage (Cason and Gangadharan, 2011; Kanamura, 2015), and employed more sophisticated research methods, including recursive-dynamic general equilibrium modeling (Qi et al., 2013). Concern about the ethical (Lenz et al., 2014; Onigkeit et al., 2009) implications of linking has been another feature of recent scholarship, indicating a transition beyond the instrumentalism dominating earlier research. Interestingly, some newer work has even begun to extend the notion of linking beyond carbon markets to encompass broader climate policy coordination, acknowledging the heterogeneity of policy approaches evolving in jurisdictions around the world (Metcalf and Taschini, 2012) and exploring the role of the international climate regime beyond 2020 in facilitating or obstructing policy convergence (Bodansky et al., 2014).

266    part iv.  setting up the int'l mitigation regime

4.  The Role of Law and Institutions


As highlighted in the preceding section, much of the past research on linking has focused on the mutual compatibility of different emissions trading systems and the potential effects of a link on their economic and environmental performance. Scholarly output to date has largely suggested that variations in the design of emissions trading systems can hamper the prospects for a market link (Green et al., 2014b: 1066), and while technical solutions may help overcome such differences, they tend to lessen the benefits of linking or affect the environmental integrity of underlying markets (Haites and Mullins, 2001: 67; Kruger et al., 2007: 122–5). Importantly, however, linking remains possible even when a number of design elements differ between trading systems (Mace et al., 2008: 51; Jaffe and Stavins, 2007: ES-5). Assessing the compatibility of carbon markets thus largely becomes a matter of politics, and requires balancing many competing priorities as well as the ability to compromise. It would be mistaken, however, to assume that linking can occur free of any legal or normative constraints. Adopted by regulatory decision, emissions trading systems operate in a multilayered framework of established rules, principles, and procedures constituting the legal order within any given jurisdiction. Carbon markets are highly regulated, and their dependence on the normative framework also extends to a link between such markets. Just as the trading systems it aspires to connect, the link will emerge within a legal framework from which derogation is not merely a matter of political expedience, with transactions subject to rules governing property, contracts, tort, accounting, taxation, and the provision of financial services (Anttonen et al., 2007: 96). Occasionally, differences in the legal context of linked systems may also have consequences as trading occurs across the link: when units afford their holders in one jurisdiction a more favorable status under contractual or property rules than their counterparts in other jurisdictions, such preferential treatment may prompt a strategic shift of units and ‘forum shopping’ (Betz and Stafford, 2008: 27). Likewise, legal remedies available in one jurisdiction may still be applicable to units after they have been transferred across a trading link, affording, for instance, compensation rights in the event of breach of contract. Strictly speaking, however, these implications are neither a condition nor consequence of the link itself, but a result of the general differences between the underlying legal systems. Within limits, a link may account for such differences; yet circumstances will differ in each individual case. Some legal and normative questions are genuinely related to the link, be it during the actual process of establishing the link, which necessitates recourse to recognized   The following section draws on Mehling (2009a).


13.  linking national emissions trading systems    267 sources of law and legal procedures, or in the event of a conflict between the link and substantive legal norms and principles, whether these originate in international, regional, or domestic law. The first category relates to the different instruments available under the law to set up a link and govern its continued operation, including procedures required for their adoption; the second category relates to the subsequent interactions of the link—notably the mechanisms and procedures used for its operationalization—with substantive rules and principles at the level of international or domestic law, which may range from tensions and conflicts to mutual synergies.

4.1 Legal Form A link between emissions trading systems can assume varying degrees of formality, with implications for its legal nature and the procedural requirements of its adoption (Mehling, 2007: 47; Mace and Anderson, 2008: 193–4). A purely unilateral link can be established through inclusion of a simple clause in the legal framework of a trading system, specifying the conditions for recognition of foreign units and any applicable restrictions, for instance on the type or amount of units. Because a unilateral link remains within the domain of national jurisdiction, it can be altered or terminated at any point in time. Absent some form of international commitment, the implementing entity will not be bound by its decision to create a link.6 It is this flexibility which also explains why a majority of links currently in place are unilateral, and usually specify the eligibility of units from an external offset crediting mechanism.7 Unilateral links to emissions trading systems have also existed, for instance allowing use of European Union Allowances (EUAs) in the—now defunct— Chicago Climate Exchange (CCX), or allowing conditional use of foreign allowances in RGGI prior to the 2012 program review.8 Likewise, before the Australian 6   An illustration is Directive 2004/101/EC of 27 October 2004 amending Directive 2003/87/EC establishing a Scheme for Greenhouse Gas Emission Allowance Trading within the Community, in respect of the Kyoto Protocol’s Project Mechanisms, OJ 2004 L338/18, which links the EU ETS to the CDM and JI; it is a secondary act of legislation adopted by the EU, and can be repealed or amended at any time by the EU legislator. 7   Among currently operating emissions trading systems, for instance, the EU ETS and the New Zealand ETS allow for recognition of CERs and ERUs from the project mechanisms of the Kyoto Protocol, subject to specific restrictions on the type and volume of credits. Likewise, the Chicago Climate Exchange (CCX) and, prior to its 2012 program review, RGGI unilaterally allowed foreign credits, again subject to certain conditions, such as exceeding a carbon price threshold in the domestic market. For further detail, see Mehling et al., 2009a: 172-3. 8   See the original Regional Greenhouse Gas Initiative Model Rule of 15 August 2006 sec. XX-10.3(b)(1): ‘CO2 emissions credit retirements include the permanent retirement of greenhouse gas allowances or credits issued pursuant to any governmental mandatory carbon constraining program outside the United States that places a specific tonnage limit on greenhouse gas emissions, or certified greenhouse gas emissions reduction credits issued pursuant to the United Nations Framework Convention on Climate Change (UNFCCC) or protocols adopted through the UNFCCC process.’

268    part iv.  setting up the int'l mitigation regime Carbon Pricing Mechanism (CPM) was repealed in 2014, the EU and Australia had announced a plan to link their carbon markets, starting with a unilateral direct link allowing use of EUAs under the CPM from 1 July 2015 (Commonwealth of Australia and European Commission, 2013: 8). In a bilateral or multilateral link, by contrast, recognition must be mutual so as to allow trading flows in more than one direction. As a result, these links will generally necessitate some form of coordination between systems to synchronize the required adjustments, ranging from the mere decision to simultaneously accept foreign units for compliance purposes to more ambitious levels of integration, such as an agreement upon the trajectory of reduction obligations in each scheme (Jaffe and Stavins, 2007: 51). Different modalities are available to achieve this coordination. In Europe, for instance, the directive establishing the EU ETS contains an express mandate to conclude ‘[a]‌greements . . . with third countries listed in Annex B to the Kyoto Protocol which have ratified the Protocol to provide for the mutual recognition of allowances between the Community scheme and other greenhouse gas emissions trading schemes’, and refers to the procedure for negotiation of a formal international treaty set out in Article 218 of the Treaty on the Functioning of the European Union (TFEU).9 Mentioned earlier, the link between the Australian CPM and the EU ETS would have converted into a bilateral link by 1 July 2018, and both parties had already announced their intention to adhere to the formal procedure resulting in adoption of a binding international treaty.10 Due to their formal nature, treaties offer a transparent and predictable framework for transactions across linked trading systems; yet they are also subject to a number of restrictions. As one of the recognized sources of international law,11 a treaty is an expression of state sovereignty bounded by voluntary consent, and 9   See Art. 25 (1) of Directive 2003/87/EC of 13 October 2003 establishing a Scheme for Greenhouse Gas Emission Allowance Trading within the Community and amending Council Directive 96/61/EC, OJ 2003 L275/32, as amended. Additionally, Art. 25 specifies that ‘1a. Agreements may be made to provide for the recognition of allowances between the Community scheme and compatible mandatory greenhouse gas emissions trading systems with absolute emissions caps established in any other country or in sub-federal or regional entities’; and ‘1b. Non-binding arrangements may be made with third countries or with sub-federal or regional entities to provide for administrative and technical coordination in relation to allowances in the Community scheme or other mandatory greenhouse gas emissions trading systems with absolute emissions caps’. 10   In a preparatory document, both parties affirmed that ‘[i]‌t is necessary to conclude a treaty between the EU and Australia for the establishment of a full two-way link’ so as not to ‘reduce the combined environmental integrity of the EU ETS and the Australian ETS’ (Commonwealth of Australia et al., 2013: 8, 16). Adhering to the procedure set out in Art. 218 TFEU, which is referenced in Art. 25 Para. 1 of the EU ETS Directive, the Commissions submitted a recommendation to the Council on 14 January 2013 to initiate formal negotiations on linking the EU ETS to Australia’s CPM, see European Commission 2013. A mandate was not issued before the Australian CPM was repealed, obviating the need for formal negotiations. 11  See Statute of the International Court of Justice (adopted 26 June 1945, entered into force 24 October 1945) (1945) AJIL Supplement 39: 215, Art. 38(1).

13.  linking national emissions trading systems    269 is governed by international law in relation to its validity, application, interpretation, and enforceability. Failure to observe the terms set out under the treaty counts as a breach of international law, incurring consequences under customary international law and the possibility of countermeasures. Only formal subjects of international law may enter into treaties, notably sovereign states and certain international organizations, meaning that regional and local entities, such as the constituent units of a federation, will be excluded unless otherwise specified in the national constitution (Aust, 2014: 55). In a majority of cases, the adoption of international treaties also entails a cumbersome ratification process, with restrictions set out both under international law and in domestic constitutions or organizational mandates. Likewise, withdrawal from the treaty and subsequent amendments are subject to formal constraints, implying that any provision for adjustment or suspension of the link, for instance to account for changing circumstances, should already be included in the treaty from the outset (Haites and Wang, 2009: 474-5; Pizer and Yates, 2014: 34). Finally, a bilateral or multilateral link can also be created by way of a political understanding on the mutual recognition of carbon units, coupled with domestic legislation adjusting each system. In legal terms, this alternative will be similar to the unilateral link described earlier in this section, albeit with the difference that affected jurisdictions will establish unilateral links on a reciprocal basis. Such reciprocal links have the benefit of obviating lengthy ratification procedures and avoiding other restrictions imposed by international law, such as the exclusion of subnational jurisdictions; moreover, they leave each scheme with the flexibility to terminate the link or adapt it to changing circumstances as needed. Coordination between markets can then be achieved through informal negotiations, or—at a slightly more formal level—by way of a Memorandum of Understanding (Aust, 2014: 28) and technical standards. Still, while they document a common intent and desired outcome, each of these options lacks the binding power of a formal commitment, meaning that the link will likely remain operational only for as long as parties find it expedient. Sudden adjustments or even suspension by one of the participating jurisdictions without a predictable and transparent process can have a significant impact on the market for carbon units and the broader economies of participating jurisdictions (Mace et al., 2008: 75-6; Pizer and Yates, 2014). On 1 October 2013, California and Québec entered an arrangement to link their respective trading systems by 1 January 2014. Despite being designated an ‘agreement’, however, the linking arrangement is a political document comparable to a Memorandum of Understanding, given the lacking power of federate states and provinces to conclude formal treaties under public international law. California and Québec implicitly acknowledge this in the preamble when they state that ‘the present Agreement does not, will not and cannot be interpreted to restrict, limit or otherwise prevail over each

270    part iv.  setting up the int'l mitigation regime Party’s sovereign right and authority to adopt, maintain, modify or repeal any of their respective program regulations’.12

4.2 Material Provisions Aside from the question of legal form, normative considerations also arise with regard to the material provisions of the link. At the very least, it requires that foreign units be recognized for compliance, a determination that will generally be made effective through an amendment of the instruments establishing each trading system. Additionally, the link may need to adjust for differences in the type and definition of tradable units (Bodansky, 2002) and impose restrictions on eligible foreign units, such as aggregate import limits. In the case of bilateral or reciprocal unilateral linking, a treaty or informal arrangement between parties to the link may set out rules, principles, and procedures that specify the rights and duties of parties under the link. For one, it can define harmonization requirements and minimum design standards that have to be met before the link can become operational in the first place. More commonly, it will define the routine operation of the link, for instance by ensuring transparency through information and consultation requirements, or setting out a process to adopt decisions that affect the compatibility of the linked systems (Mehling and Haites, 2009). Such provisions become particularly important when it comes to managing critical changes to the link, to the linked trading systems, or to the context they operate in. Such changes could consist in suspension or termination of the link, intentional amendments to design features of a trading system, or unexpected economic or environmental circumstances affecting the integrity of the carbon market (Haites and Wang, 2009; Mace et al., 2008; Pizer and Yates, 2014). Likewise, clear procedures and penalty provisions are advisable in case a dispute arises. As emissions trading systems become more integrated, parties may also choose to create joint institutional structures, such as a common registry or auctioning platform. Valuable insights into the material provisions of a link are offered by the arrangement concluded between California and Québec. Overall, this arrangement is structured in five chapters, titled ‘General Provisions’, ‘Harmonization and Integration Process’, ‘Operation of the Agreement’, ‘Miscellaneous’, and ‘Final Provisions’. Central to the establishment of the link is the commitment to ‘provide for the equivalence and interchangeability of compliance instruments issued by the Parties for the purpose of compliance with their respective cap-and-trade programs’ and ‘permit the transfer and exchange of compliance instruments between entities registered with 12   Agreement between the California Air Resources Board and the Gouvernement du Québec concerning the harmonization and integration of cap-and-trade programs for reducing greenhouse gas emissions.

13.  linking national emissions trading systems    271 the Parties’ respective cap-and-trade programs using a common secure registry’.13 As stated in the preamble, implementation of this objective and other provisions has required domestic regulatory adjustments by each party.14 Regulatory harmonization is also defined as one of the primary objectives of the linking arrangement. In the event of differences or potential design changes, the linking arrangement mandates consultations and cooperative efforts at harmonization between both parties.15 Parties also undertake to cooperate in the application of these harmonized rules, for instance in the area of market supervision and enforcement.16 A further tenet in the linking arrangement between California and Québec is the agreement to promote ‘the sharing of information to support effective analysis, operation, enforcement and supervision of the market for compliance instruments’.17 In terms of institutional structures, the linking arrangement specifies that parties ‘shall continue coordinating administrative and technical support through the WCI, Inc.’,18 a non-profit corporation established in 2011 to provide administrative and technical support to participants in the Western Climate Initiative (WCI, 2010: 25). Among its functions is the administration of a joint registry and joint auctions carried out by California and Québec (IETA, 2014: 9). Additionally, California and Québec have formed several staff workgroups as a standing forum to assess the linking arrangement and its operation, and to discuss improvements where needed (ARB 2013: 12).19 In addition to the staff workgroups, the parties have 13   Articles 1b and c; Article 6 further clarifies that “mutual recognition of the Parties’ compliance instruments shall occur as provided for under their respective cap-and-trade program regulation.” In addition, “[e]‌ach Party recognizes and respects the authority of the other Party to take actions to recover or void compliance instruments that have been surrendered or that are held by registered entities in their respective cap-and-trade programs.” 14  Preamble: “the Parties recognize that the harmonization and integration of their mandatory greenhouse gas emissions reporting programs and their cap-and-trade programs are to be attained by means of regulations adopted by each Party”. 15   Article 4; more specific harmonization obligations are set out in the provisions on offset protocols, joint auctions, and a common program registry. Whenever consultations are called for, Article 3 specifies that these “shall build on existing working relationships and shall enable Parties’ staff to work constructively through workgroups”, albeit under observance of the “procedural requirements of each Party . . . including appropriate and effective openness and transparency of each Party’s public consultations.” 16   Article 10 requires parties to “work cooperatively to prevent fraud, abuse and market manipulation and to ensure the reliability of the joint auction and their respective program” and to “work cooperatively in applying the rules, laws and regulations governing the supervision of all transactions carried out among registered entities of each of the Parties and of any auction or reserve sale.” 17   Article 1f; Article 14 further affirms the importance of information, calling on parties to “jointly arrange to share information collected and developed under their respective programs” in order to “support and enhance the supervision and enforcement of the Parties’ respective program regulations.” More specific information duties are inter alia stipulated for developments potentially affecting market integrity, supervision and enforcement, and public announcements. Confidentiality of sensitive information is also addressed. 18   Article 11. 19   Working groups include a Tracking System Workgroup (TSWG) to discuss development and operation of the joint registry, the “Compliance Instrument Tracking System Service (CITSS)”, an Auction and Monitoring Workgroup (AMWG) to discuss the development of the joint auction

272    part iv.  setting up the int'l mitigation regime established a Consultation Committee composed of one representative from each party, a role assigned ex officio to specific offices in each jurisdiction, who meet ‘as needed to ensure timely and effective consultation in support of the objectives of this Agreement’.20

4.3 Legal Consistency Over time, the sustained viability and political acceptance of a trading link will depend on its ability to secure consistency with a number of written and unwritten norms, principles, and material provisions of international, regional, and municipal law. Otherwise, it not only risks being annulled through a judicial challenge, but also may undermine the validity of any transactions carried out under the link. Generalizations are difficult when assessing the relationship of a link to positive law, as any such assessment will, by necessity, depend on the particular legal context. Under public international law, a number of issue areas can acquire relevance for links between emissions trading. By default, any linking arrangement created and operating within the realm of international law will be bound by the stipulations of general international law and the international law of treaties, both of which set out doctrines and procedures necessary to any legal system. Where linking partners are also parties to the Kyoto Protocol and have entered quantified emission limitation and reduction obligations, parties may need to ensure consistency between their emissions and the number of units assigned under the Protocol (Bazelmans, 2008: 301). If two parties to the Kyoto Protocol link their national trading systems, they can ensure congruence between Kyoto units retired at the end of the compliance period and real emissions by either basing their domestic units on units recognized under the Kyoto Protocol or by ‘shadowing’ each trade of domestic units across schemes with a concurrent transfer of Kyoto units between jurisdictions; alternately, they may create an exchange mechanism for domestic units, with trade across jurisdictions occurring only in Kyoto units (Haites, 2003: 12). In the context of international law, attention has also been directed at the interface of emissions trading and international trade. Because carbon units as such—and hence their trade across a market link—are not currently governed by international trade law (Werksman, 1999: 1), concern is largely focused on the trade disciplines set out for trade in services, such as the provision of brokerage and exchange services (Munro, 2014). platform and the conduct of joint auctions, and a Management Workgroup (MWG) to set the overall priorities and track the progress of the staff-level work groups.   More specifically, the Consultation Committee is mandated with monitoring the implementation of all harmonization and integration efforts for the trading systems and greenhouse gas emissions reporting rules, making related recommendations, providing an annual report on the results of the linking arrangement, and—as a catch-all clause—address any other issues raised by the parties, see Article 12. 20

13.  linking national emissions trading systems    273 When linking systems established at the national and regional level, it stands to reason that municipal law—that is, the domestic law of states and constituent entities, and of organizations of regional economic integration such as the European Union—will be of relevance on a number of levels. First and foremost, municipal law will be important in that it sets out the regulatory architecture of the trading system, with all the related administrative and institutional features. But municipal law can also have a bearing on emissions trading, and hence linking, through all the other rules and principles affecting trade in allowances and associated economic activities, be it by way of fiscal and accounting requirements, supervision of financial markets, or regulation of exchanges, banking, and insurance services. Interactions may also occur with the wider body of environmental and energy legislation already in place in linked jurisdictions. And finally, the institutional powers and responsibilities set out under municipal law may determine which entities have the ability to engage in linking arrangements with foreign jurisdictions.

5.  Outlook: Future Perspectives for Linking So far, linking between emissions trading systems has been largely limited to unilateral or bilateral links. Yet with continued growth in the number of jurisdictions that have introduced, or plan to introduce, some form of emissions trading, the expected benefits of linking have prompted several major appeals to work towards multilateral integration of local, regional, and national trading systems (Carbon Pricing Leadership Coalition, 2014; ICAP, 2014: 4; House of Commons, 2015: 11–12). Conceptually, any link between three or more trading systems constitutes multilateral linkage,21 although political appeals such as the foregoing tend to envision a de facto global carbon market built on comprehensive regional or even universal participation (Jaffe et al., 2009: 806). As carbon market integration extends beyond bilateral relationships, however, it will also be accompanied by new challenges, some of which are additional and distinct to those already faced in a bilateral link. Critical design features—such as 21   At the most elementary level, a multilateral link will emerge when one or more parties to a bilateral link decide to link to a third system, with further expansion of the market occurring whenever any of the parties enters additional links. Even if only one party creates a new link, the other parties will still become indirectly linked by virtue of their shared connection to the same partner; if units are not fully fungible across all systems, units can flow across the indirect link through displacement of units from the shared linking partner, for instance through arbitrage activities to profit from a price differential.

274    part iv.  setting up the int'l mitigation regime price management provisions—can affect all linked systems, requiring that minimum conditions for linking be met by the entire group of participating jurisdictions. Parties entering a link will therefore have an incentive to specify transparent procedures and material conditions for any subsequent extension of the link. But such restrictions and conditions may narrow the range of viable linking options to a lowest common denominator; procedures that require the active involvement of each party will become more complex to manage. As a rule, thus, while the benefits of linking may increase with wider participation, so will its legal and institutional complexity (Görlach et al., 2015).22 Rising complexity in an expanding market should create pressure towards greater coordination and streamlining across linked systems. Where parties have the political will for coordination, they can leverage a variety of approaches to avoid unintended consequences and improve the efficiency of linking. One such option is the alignment of system designs and regulatory frameworks through use of harmonized standards, whose implementation becomes a condition for accession to the multilateral link. Not only can use of a common framework obviate the need for lengthy negotiations prior to each individual link,23 but the adherence to a shared design will also limit or eliminate differences between trading systems and thereby ensure a high degree of compatibility. Joint institutions—for instance a common registry or auctioning platform—can help leverage further efficiency gains from streamlining and consolidation. Such a harmonized design and institutional framework has been implemented successfully at the subnational level with the WCI, which has elaborated a common design template guiding participating states and provinces in the establishment of their emissions trading systems (‘Design for the WCI Regional Program’) and draws on a central institution—WCI, Inc.—to carry out a number of oversight, support, and management functions. As such a market expands—and especially if it affords growing evidence of the benefits of linking—it may exert a gravity pull through its sheer size and the aggregate political and economic weight of participating jurisdictions, potentially turning it into a docking point, or ‘hub’, for accelerated expansion (Haug et al., 2015: 11; for the EU ETS: Wettestad, 2014). But full legal and institutional harmonization will not always be politically viable, and 22   Because the number of direct and indirect links will rapidly grow with each additional system, the governance of such a multilateral link is likely to be heterogeneous, with institutional and regulatory functions exercised through various layers of bilateral arrangements. 23   Entry barriers could be reduced by simplifying the process of accession, for instance by rendering it automatic upon adherence to specified membership conditions and a simplified application procedure. Such a procedure could involve a vote by a central decision-making body with delegated powers, as in the case of accession to the International Monetary Fund (IMF), which requires a vote by its Board of Governors to decide on an application for membership by a third country, without case-by-case negotiations or parliamentary ratification procedures, see Art. II Sec. 2 of the Articles of Agreement of the International Monetary Fund (Bretton Woods, N.H., 22 July 1944).

13.  linking national emissions trading systems    275 will mostly be limited to instances where jurisdictions are able to align their trading systems from the outset. With trading systems already in operation, path dependencies arising from the difficult compromises between regulators and domestic constituencies will normally prevent the comprehensive design changes needed for system alignment, unless a jurisdiction has an overriding interest in linking.24 Going forward, however, heterogeneity of system design is expected to increase rather than diminish (Metcalfe and Weisbach, 2012: 110), reducing the likelihood of a global carbon market based on harmonization of domestic trading systems. Even where clusters or ‘clubs’ (Keohane et al., 2015) of carbon markets emerge through alignment of system parameters, they may become locked into their own path dependencies, resulting in harmonization within clusters unintentionally impeding harmonization between clusters. But inability to streamline rules and institutions does not necessarily preclude multilateral linking of emissions trading systems: parties interested in carbon market integration may, for instance, use quantitative or qualitative restrictions on trading to mitigate the potential impact of design differences, even though doing so will lower the efficiency gains from linking. Alternatively, the fungibility of traded units can also be based on a guiding principle other than full system compatibility and equal unit value, and instead rely on a metric of comparability. Rather than requiring the alignment of design features, thus, participation in a common market could be based on adherence to a set of minimum conditions, such as a ‘minimum list’ of design requirements; a ‘negative list’ precluding certain problematic design features; or a ‘positive list’ of acceptable or recommended design features (Keohane et al., 2015). Even trading systems with substantial differences in design and level of ambition—that is, incompatible in a conventional sense—could still be accommodated in a multilateral link by using mechanisms to account for these divergences. Such mechanisms include the use of discount factors, ratios, or exchange rates, which can be applied in a way that favors robust systems and penalizes systems with lacking environmental or regulatory integrity (Burtraw et al., 2013: 6).25 Theoretically, the ability to adjust mitigation value on the basis of a rating would even allow linkage to policies other than emissions   One such reason can be small market size with low liquidity, in which case the jurisdiction may be willing to embrace the harmonized design of one or more larger systems in order to link, becoming a ‘price taker’ in the process, that is, allowing supply and demand dynamics in the larger system to dominate price formation in the joint market. 25   Units from systems with insufficient environmental ambition, lacking credibility of enforcement, or other problematic design features would thus be subject to a discount or disadvantageous exchange rate, reducing their value for compliance in other systems without altogether sacrificing fungibility. By making such units less desirable, a ratio or exchange rate would reduce unit flows across systems, limiting distributional impacts in a way similar to quantitative or qualitative restrictions, and would also create an incentive for systems to improve their environmental integrity so that their units may be traded without a penalty. 24

276    part iv.  setting up the int'l mitigation regime trading, such as carbon taxes or even regulation through performance standards (Metcalfe and Weisbach, 2012). Although each jurisdiction could theoretically introduce its own set of ratios or exchange rates and apply these independently, a centralized administration would significantly increase transparency and lower transaction costs. Probably the most comprehensive exploration to date of a hub-based architecture for carbon trading systems employing exchange rates is the concept of ‘Networked Carbon Markets’ (NCM) advanced by the World Bank Task Force to Catalyze Climate Action. It would introduce a multi-tiered, risk-based carbon asset rating process to guide the central definition of exchange rates and provide a frame of reference for carbon value (World Bank Task Force to Catalyze Climate Action, 2013). Jurisdictions that have introduced carbon markets could voluntarily ‘opt in’ if they agree to having their traded units (or ‘carbon asset classes’) rated for their ‘Mitigation Value’ (MV) by independent private rating agencies on the basis of a standardized process and formula.26 A set of designated institutions would render the foregoing rating system operational: an ‘International Carbon Asset Reserve’ (ICAR) would convert ratings into exchange rates, serve as a market maker to improve liquidity, and help address market risks and price extremes (Füssler and Herren, 2015). Additionally, an ‘International Settlement Platform’ would track cross-border trading, increase market transparency, help manage counterparty risk, and exercise certain supervisory functions to prevent fraud. Yet while the departure from an approach premised on the compatibility of systems and equivalence of traded units to one that seeks to quantify and compare mitigation efforts offers interesting perspectives, the process of comparing efforts will also undoubtedly give rise to political controversy, raising similar challenges to those that have slowed progress in the UNFCCC negotiations. Ultimately, the path to a global carbon market will be significantly easier to navigate if multilateral cooperation under the UNFCCC can serve a facilitating role, for instance by providing common definitions, methodologies and institutions. Of particular importance are provisions to accurately account for shifts in greenhouse gas abatement between jurisdictions due to net carbon flows in a linked market when measuring achievement of international pledges or commitments, such as the ‘Intended Nationally Determined Contributions’ (INDCs) submitted by parties for the period beyond 2020 (Bodansky et al., 2014).   The proposed formula reads as follows: Rating = f {program rating, credibility rating, ambition adjustment. Specifically, the program rating (or ‘Program Level Rating’) would denote the carbon integrity risk, based on the risk that the policy or program will not achieve its stated carbon emission reduction target; the credibility rating (or ‘Jurisdiction Level Rating’) quantifies the policy and regulatory risk, based on the credibility of the stated climate change mitigation target or pledge of each jurisdiction, and the risk that it will not meet that target; and the ambition adjustment (or ‘Global Level Rating’) would adjust for relative climate mitigation contribution. 26

13.  linking national emissions trading systems    277

6. Conclusions Emissions trading has followed a remarkable trajectory as a policy instrument, starting as an academic concept only a few decades ago to becoming the central pillar of greenhouse gas mitigation efforts in a growing number of influential jurisdictions. As they have evolved to date, these trading systems are proving to be complex entities, embedded in sophisticated networks of contingent interests, traditionally diverse approaches to governance, and distinct regulatory constraints. Reconciling the inevitable differences between two or more trading systems in pursuit of greater integration is not primarily a task for lawyers or the law, but an inherently political project. For lawyers, the challenge is much rather to translate the negotiated consensus into legally viable arrangements, observing applicable rules of domestic, regional, and international law. As this chapter has shown, a link can be created with a fairly straightforward decision on the acceptance of foreign units. Legal challenges—both procedural and substantive—tend to follow as the link becomes operational, when it is expected to meet certain requirements regarding its formality and binding force, its institutional design, and its interactions with other areas of law. A formal and legally binding arrangement may offer the most reliable basis for linking between two or more jurisdictions, yet it also gives rise to a number of legal and political complications. As so often, simplicity and flexibility tend to compete with the objectives of transparency and certainty. To date, successful links between emissions trading systems have been largely unilateral or evolved within the context of a broader process of economic and political integration. An early link between the European Union and Norway as well as the more recent link between California and Québec underscore the value of an existing forum of cooperation, such as the European Economic Area (EEA) or the Western Climate Initiative (WCI). But even prior economic alignment will not always ensure expedient linking, as the lengthy negotiations between Switzerland and the European Union—both parties to the European Free Trade Agreement (EFTA)—have shown. What these examples also may highlight are the virtues of a functional, flexible arrangement—such as the political agreement between California and Québec—over a binding international treaty, where consensus on all required elements can necessitate a difficult and time-consuming process. For the foreseeable future, linking of emissions trading systems may be limited to geographically adjacent and socioeconomically attuned jurisdictions. Over time, however, the appeal of broader market integration is likely to increase as domestic abatement options are successively exhausted and the cost of meeting pledged emission reductions surges. At that point, jurisdictions may wish to explore new forms of cooperation, such as multilateral linking with a centralized institutional

278    part iv.  setting up the int'l mitigation regime architecture. But as the last section of this chapter has highlighted, growth in participation also intensifies the manifold complexities of linking, inviting consideration of flexible approaches that provide the required degree of regulatory convergence while ensuring low entry barriers and accommodating different system designs and ambition levels. Recent developments in international climate cooperation suggest a trend towards greater heterogeneity of domestic approaches and a diminishing role for traditional multilateralism. While the drive towards a global carbon market based on formal and informal cooperation between states, regions, provinces, local municipalities, and businesses (Egenhofer and Fujiwara, 2006: 8) will yield no shortage of legal challenges, overcoming the attendant obstacles will primarily be a matter of political deliberation. If past experience with carbon trading is any guide, solutions will be found for the immediate legal questions raised by linking; arguably, a more central normative concern emerging in the long term will extend beyond the rules and principles of positive law, and relate to the legitimacy of this global market as an effective means of addressing climate change while offering sufficient transparency and accountability to all of its stakeholders, that is, the entire international community (see, e.g., Bodansky, 1999).

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284    part iv.  setting up the int'l mitigation regime Schüle, R., and Sterk, W. (2006). Options and Implications of Linking the EU ETS with other Emissions Trading Schemes, Brussels: European Parliament. Springer, U. et al. (2006). Linking Domestic Emissions Trading Schemes to the EU ETS, Berne: Ecoplan. Sterk, W. et al. (2006). Ready to Link Up? Implications of Design Differences for Linking Emissions Trading Schemes, Wuppertal: Wuppertal Institute for Climate, Environment and Energy. Sterk, W., and Kruger, J. (2009). ‘Establishing a Transatlantic Carbon Market’, Climate Policy 9(4): 389–401. Sterk, W., and Schüle, R. (2009). ‘Advancing the Climate Regime through Linking Domestic Emission Trading Systems?’, Mitigation and Adaptation Strategies for Global Change 14(5): 409–431. Stern, N. (2007). The Economics of Climate Change, Cambridge: Cambridge University Press. Stewart, R.B., and Sands, P. (2001). ‘The Legal and Institutional Framework for a Plurilateral Greenhouse Gas Emissions Trading System’, in UNCTAD (ed.), Greenhouse Gas Market Perspectives: Trade and Investment Implications of the Climate Change Regime, Geneva: UNCTAD, 5–34. Streck, C., Tuerk, A. and Schlamadinger, B. (2009). ‘Foresty Offsets in Emissions Trading Systems: A Link Between Systems?’ Mitigation and Adaptation Strategies for Global Change 14(5): 455–463. Tangen, K., and Hasselknippe, H. (2005). ‘Converging Markets’, International Environmental Agreements: Policy, Law and Economics 5: 47–64. Tiche, F.G., Weishaar, S.E., and Couwenberg, O. (2014). ‘Carbon Leakage, Free Allocation and Linking Emissions Trading Schemes’, Carbon and Climate Law Review 8(2): 96–104. Tuerk, A. (2011). Implications of Linking on Leakage, Vienna: Österreichisches Institut für Wirtschaftsforschung (WIFO). Tuerk, A., Mehling, M., Flachsland, C., and Sterk, W. (2009a). ‘Linking Carbon Markets: Concepts, Case Studies and Pathways’, Climate Policy 9: 341–357. Tuerk, A., et al. (2009b). Linking Emissions Trading Schemes. Cambridge: Climate Strategies. Tuerk, A., Streck, C., Johns, T., and Pena, N. (2008). The Role of Land-based Offsets in Emissions Trading Systems: Key Design Aspects and Considerations for Linking, Cambridge: Climate Strategies. Western Climate Initiative (2010). Design for the WCI Regional Program, Sacramento, Cal.: WCI. Werksman, J. (1999). ‘Greenhouse Gas Emissions Trading and the WTO’, Review of European Community and International Environmental Law 8(3): 251–264. Wettestad, J., and Jevnaker, T. (2014). ‘The EU’s Quest for Linked Carbon Markets: Turbulence and Headwind’, in Cherry, T., Hovi, J., and McEvoy, D. (eds.), Toward a New Climate Agreement: Conflict, Resolution and Governance, London: Routledge, 266–279. World Bank Task Force to Catalyze Climate Action (2013). Globally Networked Carbon Markets, Washington, DC: International Bank for Reconstruction and Development. Zetterberg, L. (2012). Linking the Emissions Trading Systems in EU and California, Stockholm: Swedish Environmental Research Institute (IVL).

Chapter 14


1. The Phenomenon of Carbon Leakage


2. Industry Responses to Carbon Cost Increases


3. Climate Change Law and Carbon Leakage


4. Measures to Address Carbon Leakage


5. National Measures to Address Carbon Leakage: European Union


6. National Measures to Address Carbon Leakage: United States


7. National Measures to Address Carbon Leakage: South Africa


8. Conclusion


*  The views expressed herein are exclusively those of the authors and not those of their institution.

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1.  The Phenomenon of Carbon Leakage The United Nations Framework Convention on Climate Change (UNFCCC)1 and the Kyoto Protocol,2 based on the principle of ‘common but differentiated responsibilities and respective capabilities’,3 appear to envision asymmetrical implementation of carbon control policies to reduce carbon emissions.4 Pursuant to the differentiated commitments established by the Kyoto Protocol, some (but not all) developed countries have imposed tough, legally binding greenhouse gas (GHG) emission targets, while most developing countries have not adopted any carbon reduction measures. This imbalance has the potential to result in carbon leakage: the phenomenon whereby reductions made in carbon-regulated countries are wholly or partially offset by an increase in carbon emissions in countries without carbon reduction measures.5 Carbon leakage is typically thought to arise in two ways.6 First, if only a select number of States impose carbon control measures, energy-intensive installations could shift to regions without such controls.7 Second, carbon control measures could lead to a reduction in fossil fuel usage, which in turn would decrease the global price of fossil fuels, and as a perverse result, increase the net global demand for fossil fuels.8 Researchers disagree as to the magnitude of the phenomenon of leakage, or whether it is happening at all. While most empirical studies have found that the impact of carbon regulation, or the absence thereof, on trade flows and investment is uncertain or minor, a number of studies have found some evidence of carbon leakage taking place in carbon-intensive industries.9 Part of what explains this ambiguity is that the net effect of carbon reduction measures on competitiveness is   United Nations Framework Convention on Climate Change (UNFCCC), open for signature at Rio 4 June 1992 (No. I-30822), United Nations Treaty Series (1994), available at (accessed 14 May 2014). 2  Kyoto Protocol to the United Nations Framework Convention on Climate Change (Kyoto Protocol), open for signature at New York 16 March 1998 (No. A-30822), United Nations Treaty Series (2005), available at (accessed 14 May 2014). 3   UNFCCC, Article 3.1. 4   Parker, L. and Blodgett, J. (2008). ‘“Carbon Leakage” and Trade: Issues and Approaches’, CRS Report for Congress, 1. 5   ‘Carbon leakage is defined as the increase in CO2 emissions outside the countries taking domestic mitigation action divided by the reduction in the emissions of these countries.’ IPCC, Climate Change 2007: Working Group III: Mitigation of Climate Change, section 11.7.2, available at (accessed 25 October 2013). 6   Elliot, Joshua et al. (2012). ‘Unilateral Carbon Taxes, Border Tax Adjustment and Carbon Leakage’, Institute for Law and Economics, Working Paper 600, 2nd Series, 2. 7 8  Ibid.   Ibid at 6. 9   See, for example, Ecorys (2013). ‘Carbon Leakage Evidence Project’ (finding no evidence of carbon leakage occurring during EU ETS phase 1); Sartor, Oliver. (2012). ‘Carbon Leakage in the Primary Aluminium Sector: What evidence after 6½ years of the EU ETS?’ (finding no evidence of carbon 1

14.  carbon leakage and private emitters    287 contingent upon industry-specific characteristics, which are difficult to account for in econometric modelling.10 In addition, it is hard to isolate the impact of climate change measures given the complexity of factors involved when firms decide to relocate or reduce production.11 Despite this ambiguity, carbon leakage remains an area of great concern to States and industries seeking to reduce carbon emissions, as it has the potential to undermine the effectiveness of carbon reduction measures and hurt the competitiveness of the industries that decide to remain in those States. In fact, at times, carbon leakage concerns have galvanized industry opposition to carbon control measures. To address these concerns, States have taken various measures to limit the risk of carbon leakage, including allocating free allowances of GHG emissions to energyintensive sector producers that are likely to relocate production, providing financial support to help industries absorb the imputed cost of carbon emissions reductions as an operating expense, and investing in abatement techniques. This chapter provides an overview of these and other measures that States, regional entities, and industry have taken to combat the possibility of carbon leakage. Specifically, this chapter examines carbon leakage prevention measures under the European Union Emissions Trading Scheme (EU ETS) and under similar carbon regulation measures in South Africa and the United States. In addition, it examines, where relevant, the legal impediments to applying carbon leakage reduction measures.

2.  Industry Responses to Carbon Cost Increases Stronger carbon reduction measures may result in a direct loss of competitiveness of industry in carbon-regulated States as these measures increase production costs leakage in the EU aluminium sector); Kee et al. (2010). ‘The Effects of Domestic Climate Change Measures on International Competitiveness’, World Bank Policy Research Paper 5309 (finding no conclusive evidence in support of relocation of carbon intensive industries as a result of climate change policies); Mani, M. (2007). ‘The effects of climate change policies on international trade and competitiveness’, Bridges Trade BioRes Review, 1/1(2007) (finding minor evidence of leakage taking place in carbon intensive industries). For a detailed overview of studies measuring carbon leakage, see Varma, Adarsh et al. (2012). ‘Cumulative Impacts of Energy and Climate Change Policies on Carbon Leakage’, Department for Business Innovation and Skill, UK, 17. 10   Varma, Adarsh et al. (2012). ‘Cumulative Impacts of Energy and Climate Change Policies on Carbon Leakage’, Department for Business, Innovation and Skills, UK, 17. 11   Ibid at 35.

288    part iv.  setting up the int'l mitigation regime relative to those in States without such measures. The extent to which industry may lose competitiveness depends on multiple factors, including the direct and indirect cost increases incurred in complying with the carbon reduction measures.12 Direct costs arise when a company is forced to purchase carbon offsets for excess carbon emissions that occur during the production process itself.13 The magnitude of these direct costs depends upon: (1) the difference between the emission reduction target and the level of ‘business as usual’ emissions; (2) the price of carbon; and (3) the ability to offset these increases through abatement.14 As for indirect costs, carbon reduction measures increase production costs in energy-intensive sectors as the increase the price of energy. A good illustration of this is grid-electricity consumption in the European Union. As a result of carbon control measures under the EU ETS, the price of grid-electricity in the EU has increased significantly.15 This increase in the price of grid-electricity reflects the cost of allowances required to offset carbon emitted during the electricity-generating process, the opportunity cost incurred by refraining from selling emission allowances received free of charge,16 higher risks perceived by investors, and an increase in the price of alternative energy sources.17 Industry is responding to these direct and indirect cost increases in various ways. For example, European energy companies are largely avoiding such costs by passing on the full carbon price increase to consumers through higher electricity prices. They were able to do this due to the particular characteristics of energy: it cannot be purchased at a low cost and stored, it lacks an adequate substitute on a large scale, and it has low price-elasticity.18 Producers that are less structurally positioned to pass on a high percentage of their increased costs to consumers are looking into other ways to reduce the impact of increased carbon costs. One option is to improve the efficiency of the energy-production process through abatement techniques such as fuel switching, raw material substitu­ tion, or replacement of materials used in the upstream production processes with imports, all of which often result in changes to process management and logistics.19 Theoretically, firms or producers will invest in abatement techniques up to the point where the costs incurred exceed the market price of carbon emissions allowances, at which point it will be cheaper for a firm simply to purchase the 12   Reinaud, Julia. (2008). ‘Issues Behind Competitiveness and Carbon Leakage’, International Energy Agency and OECD, Information Paper, 19. 13 14  Ibid.   Ibid at 20. 15   Sato, Misato et al. (2013). ‘Sectors under Scrutiny—Evaluation of Indicators to Assess the Risk of Carbon Leakage in the UK and Germany’, Center for Climate Change Economics and Policy, Working Paper 134, 8–9. 16   Producers that choose to produce electricity expected it to bring additional income worth more than what they would have made had they sold the allowances on the market. Hyvarinen, E. ‘The Downside of European Union Emission Trading—A View From the Pulp and Paper Industry’, in Unasylva 222, 56/3 (2005), 39–40. 17   Reinaud, ‘Issues Behind Competitiveness’, 20. 18   Hyvarinen, ‘The Downside of European Union Emission Trading’, 41. 19   Reinaud, ‘Issues Behind Competitiveness’, 19.

14.  carbon leakage and private emitters    289 allowances.20 If the prices for the allowances raise total production costs to an unsustainably high level, however, firms may choose to scale-down, relocate to States with limited or no carbon reduction requirements, or close down their facilities rather than investing in abatement techniques. In theory, if carbon costs are high relative to the annual fixed costs of an installation, firms are expected to scale down production.21 If the carbon costs of production and fixed annual costs are both large, firms may decide to close an installation.22 Otherwise, firms may relocate to States with minimal carbon control measures and take advantage of limited emission reduction requirements. In practice, other considerations such as trade exposure, entry and exit barriers, international competition, and production costs represent an important factor that a firm looks at when deciding to close down, relocate, or scale down production.23

3.  Climate Change Law and Carbon Leakage International climate change law, as reflected in the UNFCCC, does not speak directly to carbon leakage. Yet the drafters of the UNFCCC and the Kyoto Protocol described the conditions most likely to give rise to carbon leakage and articulated standards relevant to the behaviour of national and sub-national governments. Article 3.1 of the UNFCCC provides that ‘the developed country Parties should take the lead in combatting climate change and the adverse effects thereof ’, while in the third preambular paragraph of the Convention, the drafters observed that ‘the share of global emissions originating in developing countries should grow to meet their social and development needs’. This asymmetry in the Parties’ obligations under both the UNFCCC and the Kyoto Protocol, exacerbated by the lower costs of labour in developing country States, fuels the need for carbon leakage measures. The UNFCCC creates very few specific obligations and it does not mandate conditions that would directly lead to carbon leakage. All parties to the UNFCCC and the Kyoto Protocol, however, do share some common obligations and, if fulfilled, these common obligations could help mitigate leakage concerns. Pursuant to Article 4.1, all Parties commit to share information about GHG emissions and their respective measures to address it. Moreover, the sixth preambular paragraph acknowledges the need for international cooperation:   Ibid at 19–20.   Makipaa, Arttu et al. (2008). ‘Competitive Distortions and Leakage in a World of Different Carbon Prices’, European Parliament’s Temporary Committee on Climate Change, 15. 22 23  Ibid.   Reinaud, ‘Issues Behind Competitiveness’, 54. 20 21

290    part iv.  setting up the int'l mitigation regime 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.

Carbon leakage could be avoided through the ‘widest possible cooperation by all countries’.24 National governments could structure their respective internal emission control measures in light of measures adopted ‘by all countries’.25 The threat of carbon leakage can undermine the effectiveness or the appropriateness of an international response to climate change. Holding all other factors equal, an international response that prevents carbon leakage should achieve greater reductions in overall GHG emissions than if the phenomenon of carbon leakage is ignored. Yet the UNFCCC does not explicitly discipline States with respect to the encouragement or prevention of carbon leakage. Rather, the State parties to the UNFCCC looked at the key provisions of the chapeau of Article XX of the General Agreement on Tariffs and Trade 1994, the core agreement on trade in goods administered by the World Trade Organization (WTO), when drafting Article 3.5, which attempts to discipline climate change measures. Thus, Article 3.5 provides that ‘measures taken to combat climate change, including unilateral ones, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade’.

4.  Measures to Address Carbon Leakage States have adopted a variety of measures to address carbon leakage. Classified broadly, there are three types of measures that a government can consider: (i) measures directly supporting domestic industry; (ii) measures targeting imports and exports; and (iii) bilateral or multilateral agreements to address carbon leakage. These measures are not necessarily mutually exclusive. A mix of them may be appropriate, especially where measures are tailored to different sectors.

4.1 Measures Directly Supporting Domestic Industry These measures are designed to support domestic industry in preserving its current competitive position. In essence, the objective is to compensate domestic producers for the negative economic effects of carbon reduction measures. The support   Kyoto Protocol, 6th preamble.




14.  carbon leakage and private emitters    291 measure may be tailored to counter the negative economic and financial consequences from the carbon reduction measure (e.g., free allowances under a cap-andtrade scheme), or may take a more generic form (e.g., cash payments).26

A. Measures under a Cap-and-Trade Scheme: Allocation of Free Allowances Under a cap-and-trade scheme, an allowance permitting GHG emissions has a tradable value akin to a currency. Instead of requiring producers to buy allowances for all their emissions, the government could allocate a certain quantity of allowances to producers for free. This would mitigate some of the costs of complying with a cap-and-trade scheme. The government could go further and fully protect current domestic producers from incurring compliance costs by granting free allowances for their current emission levels. This would grandfather in the current emissions at no additional cost to the producer. Producers will only need to buy allowances if they increase their emissions. Conversely, if producers lower their emissions, they will be able to sell the excess allowances in the market, even though they received them initially for free. Such grandfathering would enable the current domestic producers to continue generating current levels of emissions at no extra cost. However, this would not necessarily eliminate the possibility of carbon leakage. New producers entering the market would still face the costs of buying allowances in the regulated jurisdiction, and may be incentivized to locate in another jurisdiction instead. This would constitute carbon leakage if the new producer would have located in the regulated jurisdiction in the absence of the regulation, and the regulation merely shifts emissions to a non-regulated jurisdiction. Even current producers may still consider relocating to another jurisdiction if they plan to expand their operations, as they would face the costs of buying allowances if they increase their emissions within the cap-and-trade scheme. In addition to these drawbacks, grandfathering imposes an additional drawback of rewarding the producers that have so far not invested in carbon-abating processes; it would be relatively easy for them to now adopt carbon-abating processes and sell excess allowances on the market. In order to address some of the drawbacks of grandfathering, the government could condition the allocation of free allowances on meeting emission averages or using the best available technologies. This would mean that producers are allocated free allowances according to the desired emission levels—that is, the emissions are   For a discussion of various policy options to address climate change, see: Pauwelyn, J. (2013). ‘Carbon Leakage Measures and Border Tax Adjustments under WTO Law’, in Research Handbook on Environment, Health and the WTO, edited by Geert Van Calsterand Denise Prevost. See also Parker, L. and Blodgett, J. (2008). ‘“Carbon Leakage” and Trade: Issues and Approaches’, Congressional Research Service. 26

292    part iv.  setting up the int'l mitigation regime allocated in accordance with industry averages—or the producers are required to use best available technologies. The government could also allocate a number of free allowances to new producers or existing producers that expand operations.

B. Measures under a Cap-and-Trade Scheme: Carbon Offsets To further reduce the incentive for producers to relocate, States could offer producers additional flexibility to lower the costs of compliance with the cap-andtrade scheme. For example, carbon offsets could be generated by carbon-abating investments in developing countries, similar to the existing Clean Development Mechanism under the Kyoto Protocol, and by forestry or agricultural projects or activities that reduce carbon emissions. If such offsets can be used with allowances under the cap-and-trade scheme, then domestic producers will find it easier to comply with their emission reduction requirements and, therefore, have less incentive to relocate to another jurisdiction.27

C. Measures under a Cap-and-Trade Scheme: Safety Valves The market price of allowances will fluctuate under a cap-and-trade scheme, and may potentially climb to a level at which it is difficult for domestic producers to sustain operations. To manage this risk, States could impose a maximum price (or ‘safety valve’) for trading emission permits. This safety valve could be accompanied by a periodic review of carbon reduction measures of other States, in order to track the differential between the costs faced by domestic producers and those faced by competing producers from other States.28

D. Sector Carve-Outs Another way to prevent leakage is to exclude certain sectors from emission reduction requirements.29 Eligible sectors will likely be those selected based on energy intensity and the identification of the sector’s products as being subject to a high level of international trade. Despite the decreased rate of emission reductions in those sectors, a State’s overall carbon reduction target could still be met by imposing reductions in other sectors. 27   However, such offset mechanisms must be designed to achieve emissions that are truly additional. The Clean Development Mechanism has been criticized for generating offsets for carbon abating investments that should have been made regardless of the offset mechanism. 28   See, for example, H.R.5049, Keep America Competitive Global Warming Policy Act of 2006, sec. 5 (introduced by Mr. Udall and Mr. Petri, 109th Cong., 29 March 2006). 29   For example, the first phase of the EU Emissions Trading Scheme excluded, inter alia, the waste, ­chemicals, aluminium, and transport sectors. See European Parliament and Council Dir. 2003/87/EC, establishing a scheme for greenhouse gas emission allowance trading within the Community and ­amending Council Directive 96/61/EC.

14.  carbon leakage and private emitters    293

E. Fund Transfers as Cross-Subsidization Revenues raised by auctioning allowances under a cap-and-trade system or from a carbon tax could be used to channel funds to domestic producers to lower their compliance costs. Funds could come from other sources. The money available could be directly transferred to the producers. The funds could be directed towards specific activities, such as research, development, and demonstration of carbon abatement technologies, or be made generally available to abate other production costs. In order to ensure long-range climate change benefits, funds may be made available only to producers that invest in certain climate-friendly technologies.

F. Tax Credits An alternative way to support domestic industry is through tax credits. As with fund transfers, States have a range of options in how to apply tax credits, whether for producers making specific expenditures or for all producers whose operations are subject to carbon measures. Where a carbon tax is applied, a tax credit could be made available to reduce the costs for domestic producers. This tax credit could produce a benefit for domestic carbon-emitting producers similar to the allocation of free allowances under a capand-trade scheme.

4.2 Measures Targeting Imports and Exports Instead of measures supporting domestic production writ large or benefitting one particular sector, a State could address carbon leakage by adopting measures that specifically target imports and exports. These measures could be applied to imports from and exports to countries that do not have comparable carbon measures in place.30 If such measures are applied in addition to measures that directly support domestic industry, they may discriminate against imported products by compensating domestic producers for their own compliance costs.31 This may create the risk that the measures are inconsistent with international trade obligations relating to national treatment. 30   For countries that do have comparable carbon measures, carbon leakage will likely not be a concern. Although compliance costs may differ by jurisdiction, this is also the case for other costs of production, such as labour and other regulatory compliance, and generally would not justify border adjustment measures. 31   For example, if domestic producers are allocated free allowances for a certain quantity of their current emissions, this should be taken into account when imposing a border adjustment cost on imports.

294    part iv.  setting up the int'l mitigation regime

A. Measures Targeting Imports Measures targeting imports subject the imported good to measures equivalent to what is imposed on domestic industry. Domestic producers would still face the costs of compliance with the carbon measures for products marketed domestically. Producers would not have an incentive to relocate to another jurisdiction, as imports would face the same costs of compliance with the carbon measures. In fact, these measures could induce producers to keep their operations inside the State’s territory.

i.  Ban or quantitative restriction on non-compliant imports Carbon reduction measures will rarely include an outright ban or quantitative restriction on carbon-intensive imports. However, certain product standards may have an effect that is equivalent to a ban or restriction, in practice, by adversely affecting the competitive opportunities for imported products. Product standards may be designed to address emissions emitted during a product’s use. These are intended to apply equally to domestic and imported products. For example, cars may be made subject to local emission standards, and electrical goods may be subject to energy efficiency standards. Foreign-based producers are subject to the same standards as domestic producers, after the products are imported, without the need for a specific border adjustment measure. If they do not meet the standard, the products will be banned from being sold on the market. Measures that address emissions generated during the production process may present greater difficulties for foreign producers. Regulations governing the production process may differ in the producer country. Further, some producers may use more carbon-intensive processes than others. If a measure sets standards on emissions generated during the production process, this could de facto discriminate between products based on their origin.32 Such measures will need to be designed and applied with particular attention to WTO obligations that prohibit such discrimination.

ii.  Border adjustment duties The lack of comparable carbon reduction laws and regulations in other States could provide the basis for regulators to impose additional duties on the embedded 32   For example, see the EU’s sustainability criteria for biofuels in Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/ EC, Article 17.1 (‘Irrespective of whether the raw materials were cultivated inside or outside the territory of the Community, energy from biofuels and bioliquids shall be taken into account for the purposes referred to in points (a), (b) and (c) only if they fulfill the sustainability criteria set out in paragraphs 2 to 6’).

14.  carbon leakage and private emitters    295 carbon in imported goods.33 For carbon taxes, the additional duty would be equivalent to the level of tax on the embedded carbon on the domestic product. For carbon reduction measures such as those under a cap-and-trade scheme, the additional duty would be based on an average allowance price paid by domestic producers. Alternatively, a border adjustment could take the form of an anti-dumping or countervailing duty. The lack of comparable carbon reduction measures in the importing country may be viewed as a form of subsidy. However, such offsetting duties will need to be carefully designed and applied, as they may be vulnerable to challenge under WTO law.

iii.  International Reserve Allowances International Reserve Allowances (IRAs) could be issued under a cap-and-trade scheme. For example, the International Brotherhood of Electrical Workers and American Electric Power proposed in 2009 that IRAs be included in any US climate change legislation. Under this proposal, importers would be required to submit IRAs sufficient to cover the emissions attributable to greenhouse gas intensive products they are importing into the United States. The allowance requirement would only apply to imports from States that do not take ‘comparable action’ to limit their emissions, as compared to those taken in the United States. Failure to submit such allowances would bar entry of covered goods into the United States. IRAs would be traded separately from the allowances generated under the domestic cap-and-trade scheme. This would ensure that the demand for, and use of, IRAs would not affect the availability, price or use of domestic allowances.34 IRAs have been proposed as a way to regulate the carbon emissions of imports in a manner consistent with WTO law.35 Nevertheless, they will still need to be designed and applied in a manner that is consistent with international trade obligations considering the potential for them to discriminate against imported products. 33  For example, see the discussion on a proposed border adjustment measure for the EU’s Emission Trading Scheme in ‘Europe’s Green Summit is Seeking to Bury the Carbon Past’, Financial Times, 8 March 2007. (‘Ms. Merkel has dismissed—at this stage—a French idea that Europe should impose a “Kyoto tax” on countries that undercut European producers at the expense of the environment’). 34   See the Summary of Testimony of Martin McBroom, Director Federal Environmental Affairs, American Electric Power before the House Subcommittee on Energy and Environment. Available at: (accessed 10 August 2015). 35   For example, see the proposal for IRAs from the International Brotherhood of Electrical Workers and American Electric Power, as reflected in the US Senator Barbara Boxer’s ‘Manager’s Amendment’ to s 3036 and as discussed in Bordoff, J. and Shoyer, A. (2008/2009). ‘International Trade Law and the Economics of Climate Policy: Evaluating the Legality and Effectiveness of Proposals to Address Competitiveness and Leakage Concerns’, Brookings Trade Forum, ‘Climate Change, Trade, and Competitiveness: Is a Collision Inevitable?’

296    part iv.  setting up the int'l mitigation regime

B. Measures Targeting Exports Domestically produced goods will also compete with foreign-produced goods in other markets. Measures targeting imports intend to level the playing field in the domestic markets. However, domestically produced goods may still face a competitive disadvantage in foreign markets where the carbon reduction regulations are less strict. This could encourage domestic producers to relocate to those markets in order to avoid incurring high regulatory costs in their home country. To combat this, a State may consider adopting measures to reduce the costs for producing goods destined for export. This could be effected through a border adjustment tax credit or a rebate for exports. These types of measures may produce negative consequences for the effectiveness of domestic carbon reduction measures, however. Producers now have an incentive to focus on export markets without seeking to invest in emission reduction technologies in order to meet domestic carbon reduction emission targets.

4.3 Measures in Bilateral or Multilateral Agreements A robust global agreement on climate change where all States would impose equivalent carbon reduction measures would obviate the need for unilateral measures to combat carbon leakage. In the absence of a global climate change agreement, there are still bilateral and multilateral approaches that can be taken to reduce carbon leakage in a targeted manner.

A. Sectoral Agreements An international agreement could cover a particular industrial sector. Multilateral sectoral agreements36 may be voluntary or mandatory. They may be incorporated into cap-and-trade schemes, or function outside of such schemes. Whatever the form of the agreement, or how they interact with other carbon reduction measures, they can reduce or prevent carbon leakage if a significant proportion of the sectors in various States abide by the same regulatory requirements. For example, the steel sector has proposed a carbon intensity cap on steel, which would be determined on a per-ton basis as the embedded carbon in steel divided by its weight.37 The cap could be implemented in the major steel producing States. Sectoral emission-related standards for the aviation sector have been a subject of discussion in the International Civil Aviation Organization, and have been adopted for the shipping sector by the International Maritime Organization.38 36   Sectoral approaches address emissions from individual industrial sectors. They may be confined to domestic industry. This section, however, focuses on multilateral sectoral agreements. 37  International Iron and Steel Institute (2007). ‘A Global Sector Approach to CO2 Emissions Reduction for the Steel Industry’. 38  The International Civil Aviation Organization adopted a mandate to negotiate a global market-based measure for airlines at its 38th Assembly in October 2013. The International

14.  carbon leakage and private emitters    297 Sectoral agreement proposals are generally based on three elements.39 First, there needs to be an agreement on benchmarks for performance metrics and indicators for emission-related practices. Second, best practices within the sector to increase efficiency and transfer of technology are shared. Third, producers in the sectors are encouraged to adopt those best practices. For those sectors in developing countries, this could be facilitated through providing technical assistance, technology transfer, or greenhouse gas credits for emission reductions.

B. Bilateral and Preferential Trade Agreements with Emission-related Provisions Free trade agreements and other agreements that provide developing countries with preferential duties frequently feature provisions on environmental and social standards. These agreements can be used to promote convergence on carbon reduction measures and thereby reduce the risk of carbon leakage. The EU has already been employing this strategy with regard to the Kyoto Protocol. The Kyoto Protocol is one of the international agreements listed in the EU’s Regulation for the Generalised System of Preferences for reduced-duty access to the EU market by goods from developing countries.40

5.  National Measures to Address Carbon Leakage: European Union In response to its commitments made under the Kyoto Protocol, the EU launched the Emissions Trading System in 2005, the first and largest mandatory international trading system for GHG emission allowances.41 The EU ETS is based on a ‘cap-andtrade’ approach, whereby a cap—which is reduced each year—is set on the total amount of GHGs that installations and power plants are allowed to emit.42 Within this cap, firms receive or buy emission allowances that they can trade with other Maritime Organization made the Energy Efficient Design Index mandatory for new ships and the Ship Energy Efficiency Management Plan for all ships in its Resolution MEPC.203(62), adopted on 15 July 2011.   See the discussion of sectoral approaches in Parker, L. and Blodgett, J. (2008). ‘“Carbon Leakage” and Trade: Issues and Approaches’, Congressional Research Service. 40   It has also been reported that the EU agreed to Russia’s accession to the WTO in exchange for Russia ratifying the Kyoto Protocol (see Frankel, J. (2005). ‘Climate Change and Trade, Links between the Kyoto Protocol and WTO’, Environment, 47(7): 8–19). 41   European Commission, The EU Emissions Trading Scheme, at (accessed 25 July 2013). 42  Ibid. 39

298    part iv.  setting up the int'l mitigation regime firms if so required.43 By limiting the amount of total emission allowances available, the cost of allowances increases, incentivizing firms to reduce their GHG emissions and possibly sell off unused allowances for higher prices.44 Since its launch in 2005, the EU ETS has gone through three different phases with constant revisions.45 The third phase began in 2013, when the 2009 amendments went into effect.46 During the third phase, the EU ETS: (1) introduced a single, EU-wide emissions cap, in contrast to the different caps that existed in EU Member States; (2) made auctioning, instead of trading, the default method to allocate allowances; (3) harmonized allocation rules for free allowances; and (4) included more sectors and distinct GHG compounds than did the first and second phases.47 In the third phase, the EU ETS covers forty-five per cent of the EU’s GHG emissions, including 11,000 heavy energy-using installations in power generation and manufacturing, as well as the aviation sector.48 Due to the third phase’s broader coverage, the 2009 amendments include a variety of measures Member States can take to mitigate carbon leakage risks. For example, Member States are given the option to provide free and temporarily free49 allowances to industry as well as financial measures to help industry offset indirect cost increases. The EU ETS also attempted to introduce carbon inclusion mechanisms, which would require importers of products manufactured outside the EU to comply with the EU ETS carbon reduction measures.50

5.1 Policy Responses to Address Carbon Leakage Concerns Under the third phase of the EU ETS, Member States may provide free allocation of allowances to sectors and sub-sectors that are considered ‘exposed to a  Ibid.   44 Ibid.   Phase I (2005–2007); Phase II (2008–2012); Phase III (2013–2020). Input for phase IV (post-2020) is currently being solicited. 46  European Parliament and Council Dir. 2009/29/EC, amending Dir. 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community [2009] OJ L140/63. 47   European Commission, The EU Emission Trading Scheme, at (accessed 25 July 2013). 48  Ibid. 49   For example, during Phase III, free allowances are not generally available to the power sector. Until 2019 (i.e., the ‘transitional’ period), however, ten Member States may choose to allocate a limited number of allowances for free. See, e.g., Emissions trading: rules on transitional free allocation of allowances to the power sector adopted, at (accessed 15 May 2014). 50   European Parliament and Council Dir. 2009/29/EC, amending Dir. 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community [2009] OJ L140/63; Euractiv, France details plans for ‘carbon inclusion mechanism’, at (accessed 14 May 2014). 43 45

14.  carbon leakage and private emitters    299 significantly high risk of carbon leakage’. 51 Sectors and sub-sectors that are not considered to be at ‘significant risk’ are entitled to transitional free allowances. Under the transitional scheme, companies within these sectors can receive eighty per cent of their emissions allowances for free in 2013, decreasing to less than thirty per cent of a company’s emissions allowances in 2020. No free allowances will be available by 2027.52 There are three ways that a sector or subsector can be deemed to be ‘exposed to a significantly high risk of carbon leakage’: (1) the sum of the direct and indirect costs induced in complying with the EU ETS increases production costs by at least five per cent and the trade intensity of the sector (that is, the percentage of imports from and exports to the sector or sub-sector with non-EU States) is above ten per cent; (2) the sum of direct and indirect additional costs is at least thirty per cent; or (3) trade intensity with non-EU States exceeds thirty per cent.53 Based on these criteria, every five years the Commission is required to create a list of the sectors it considers to be exposed to a significant risk of leakage. The first list (2009–2014) includes approximately sixty per cent of industrial sectors in the EU, covering over ninety-five per cent of industrial emissions under the EU ETS.54 The free allocation of allowances to industry at high risk of leakage unexpectedly led energy-intensive industries to accumulate significant surpluses in free allowances. A firm’s carbon emissions exceeded those covered under the free allowances. This phenomenon can be attributed, in part, to the economic crisis and related reductions in production, as well as a decline in the price of carbon, due to the reduced demand for carbon.55 In addition, it reflects unrealistic premises about the expected price of carbon in determining whether a sector is at significant risk of carbon leakage and, thus, eligible for free allowances. A carbon price of €30 a tonne by 2020 was the basis on which to apply the criteria used to establish which sectors were on the list.56 However, it has been predicted that the price will not exceed €12 by 2020.57 Another core, but inaccurate, assumption was that sixty per cent of emissions would be above the benchmark and thus be auctioned.58 Twenty per cent now seems more realistic.59  Ibid.   European Parliament and Council Dir. 2009/29/EC, [2009] OJ L140/63, para 21. 53   ETS Dir. Article 10(a); European Commission, Carbon Leakage, at (accessed 26 July 2013). 54   De Bruyn, S., Nelissen, D., and Koopman, M. (2013). ‘Carbon Leakage and the Future of the EU ETS market: Impact of Recent Developments in the EU ETS on the List of Sectors Deemed to be Exposed to Carbon Leakage,’ CE Delft, 37. 55   European Commission, Climate Action, at (accessed 13 May 2014). 56   De Bruyn, S., Nelissen, D., and Koopman, M. (2013). ‘Carbon Leakage and the Future of the EU ETS market: Impact of Recent Developments in the EU ETS on the List of Sectors Deemed to be Exposed to Carbon Leakage,’ CE Delft, 5-7. 57 58 59  Ibid.  Ibid.  Ibid. 51


300    part iv.  setting up the int'l mitigation regime Another inaccurate premise was that there would be limited participation of nonEU States in the EU ETS.60 One study predicts that if the assessment criteria were to be revised to reflect more current realities, the proportion of sectors deemed at risk of carbon leakage would be reduced from sixty per cent to thirty-three per cent, accounting for ten per cent of industrial emissions rather than ninety-five per cent.61 Notwithstanding these concerns, the second carbon leakage list covering 2015–2019, which went into effect in October 2014, has been based on the existing assessment criteria.62 The 2009 Amendments also allow Member States to compensate the most carbon-intensive sectors exposed to significant risk of carbon leakage for indirect cost increases related to GHG emissions regulations, that is, the increased costs of electricity and electricity products.63 Before any assistance may be granted, however, it has to be approved by the Commission in accordance with the Treaty for the Functioning of the European Union (TFEU).64 The EU has also allowed for carbon inclusion mechanisms to combat carbon leakage concerns by subjecting imported products to the same carbon reduction emission measures as domestic goods. For the aviation sector, in 2008, the EU issued a Directive requiring all airlines—including non-European airlines—to obtain allowances for their carbon emissions.65 By covering both intra-European flights and flights to and from the EU, the Directive aimed to shore up the competitive advantage non-European airlines held as a result of the EU ETS which only applied to European carriers. However, in response to fierce international opposition from the airline industry and from non-EU States whose airlines fly into the EU and progress made by the International Civil Aviation Organization towards developing a global market-based mechanism to reduce aviation emissions, the EU has postponed the application of the scheme to international flights outside the EU until December 2016.66 Beyond the ETS, the EU has adopted other measures to reduce carbon leakage risks. Under the 2003 Energy Taxation Directive, energy products and electricity  Ibid.   61  Ibid at 35.   European Commission, Carbon Leakage, at (accessed 23 August 2015). 63   European Parliament and Council Dir. 2009/29/EC, [2009] OJ L140/63, para 27. 64   European Commission, Carbon Leakage, at (accessed 23 August 2015). 65   European Parliament and Council Dir. 2008/101/EC, amending Dir. 2003/87/EC so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community [2008] OJ L8; European Commission, Reducing Emissions from the Aviation Sector, at (accessed 1 August 2013). 66  Cleantechnica, EU Commission postpones International Airline Tax, at (accessed 1 August 2013); European Commission, Climate Action, at (accessed 24 October 2014). 60 62

14.  carbon leakage and private emitters    301 consumed by energy-intensive businesses in the EU are entirely exempt from taxation. The tax is reduced by fifty per cent for energy products consumed by nonenergy-intensive businesses.67 The Commission submitted a proposal in 2011—which was subsequently turned down by the EU Parliament—to expand the Directive’s scope to impose ‘carbon taxes’, that is, taxes on fuels based on their carbon emissions.68 For purposes of ensuring compatibility with the EU ETS, the proposed amendments applied only to sectors not covered by the EU ETS. Sectors that were not subject to the EU ETS (such as aluminium and basic chemical production) were thought generally to be smaller and less susceptible to international competition, and thus carbon leakage concerns were minimal.69 The proposed amendments to the 2003 Energy Tax Directive also provided for transitional periods and tax credits for sectors at high risk of leakage, thereby demonstrating awareness of the need to address the potential risk of carbon leakage, notwithstanding the ultimate rejection of the proposal.70

5.2 Legal Implications of Carbon Leakage Reduction Measures As described above, the Commission provides Member States several options to mitigate the risks of carbon leakage. As with any new and broad-sweeping programme, some of the initiatives have raised interesting legal questions, a number of which have precipitated legal proceedings. The inclusion of aviation in the EU ETS has been challenged before the European Court of Justice (ECJ)71 while the benchmarking determinations for free allocation of carbon emissions allowances have come before the European General Court (EGC).72 Measures involving state aid, like financial measures to help offset indirect costs due to electricity price increases, have been given special attention by the Commission to ensure compatibility with the TFEU.73 This section provides a brief overview of some of the main legal issues that have arisen in relation to measures taken to reduce carbon leakage.   Council Dir. 2003/96/EC on restructuring the Community Framework for the Taxation of Energy Products and Electricity [2003] OJ L283. 68   International Network for Sustainable Energy. EU Energy Policy: Energy-Tax Directive, at (accessed 1 August 2013). 69   Europa. (2011). ‘Revision of the Energy Taxation Directive, Questions and Answers’, at (accessed 1 August 2013). 70  Ibid. 71   See e.g., Case C-366/10, Air Transport Association of America and Others v Secretary of State for Energy and Climate Change [2011] ECR I-0000; Case T-370/11 Poland v EC Commission [2013] OJ C114/34. 72   Case T-370/11 Poland v EC Commission [2013] OJ C114/34. 73   Council Regulation 994/98 on the application of Articles 87 (former Article 92) and 88 (former Article 93) of the Treaty establishing the European Community to certain categories of horizontal state aid, [1998] OJ L 142. 67

302    part iv.  setting up the int'l mitigation regime Some carbon leakage reduction measures can be categorized as ‘state aid’ within the meaning of TFEU Article 107(1).74 These include financial measures provided to installations to compensate for indirect emission costs, investment aid to highly efficient power plants, and optional transitional allowances in the electricity sector. While Article 107(1) prohibits state aid that distorts competition, an exception is carved out for aid used ‘to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest’.75 The Commission has provided Member States with specific guidelines76 to ensure that state aid provided in the context of the EU ETS is compatible with the TFEU.77 These guidelines incorporate a balancing test previously formulated in the 2005 State Aid Action Plan, under which a State needs to ensure that its aid measures ‘will result in a higher reduction of greenhouse gas emissions than would occur without the aid and to ensure that the positive effects of the aid outweigh its negative effects in terms of distortions of competition in the internal market’.78 In addition, the guidelines stipulate that the aid provided is necessary to achieve the objective of the EU ETS, and that it be limited to the minimum level required to achieve the objectives without creating undue market distortions.79 The guidelines also establish quantity thresholds for the maximum percentage of aid that may be granted for different types of aid. For example, aid provided to offset indirect emission costs due to electricity cost increases must not exceed eighty-five per cent, with the percentage to be gradually reduced after 2015.80 Investment aid provided to build highly efficient power plants is limited to the total costs of investment in equipment and land in the new installation to the extent that the equipment and land are strictly necessary for construction.81 State aid provided to help modernize a Member State’s electricity sector must not exceed the total costs of investments undertaken by the recipient of free allowances.

74   TFEU, Article 107(1) states that: ‘Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’. 75   TFEU, Article 103(3). 76   Guidelines on Certain State Aid Measures in the Context of Greenhouse Gas Emission Allowance Trading Scheme Post-2012 [2012] OJ C158/04. 77   European Commission, Carbon Leakage, at (accessed 26 July 2013). 78 79   Guidelines on Certain State Aid Measures, [2012] OJ C158/04, para 5.  Ibid. 80   Ibid. Aid intensity must not exceed eighty-five per cent of the eligible costs in 2013, 2014, and 2015, eighty per cent of the eligible costs in 2016, 2017, and 2018, and seventy-five per cent of the eligible costs in 2019 and 2020. 81  Ibid.

14.  carbon leakage and private emitters    303 The inclusion of aviation in the EU ETS is another initiative that has been the subject of legal proceedings. In 2009, a number of American and Canadian airlines and airline associations brought a case against the EU before the ECJ, arguing that the inclusion of aviation emissions within the EU ETS was contrary to European and international law.82 The ECJ upheld the measure’s legality. It first determined the applicable law and found that the Chicago Convention83 does not bind the EU because it is not a Party to the Convention and has not assumed ‘the powers previously exercised by the Member States [which are party to the Convention] in the field of application of the Chicago Convention’.84 The ECJ also rejected the claims of violation of the Kyoto Protocol, noting that Parties subject to the Kyoto Protocol have discretion to implement their obligations and, more specifically, that Article 2(2) of the Protocol regarding the reduction of GHGs from aviation bunker fuels ‘cannot in any event . . . confer on individuals the right to rely on it in legal proceedings to contest the validity of Directive 2008/101’.85 As the Court found that agreements could not be relied upon to assess the validity of the Directive, the ECJ examined certain provisions of the Transport Agreement concluded between the European Union/European Communities and its Member States, and the European Union/European Communities agreement with the United States (the ‘Open Skies Agreement’)86 as well as three principles of customary international law: the sovereignty of States over their airspace, sovereignty over the high seas, and the freedom to fly over the high seas.87 Based upon these considerations, the ECJ found that the Directive did not infringe upon the principle of territoriality or sovereignty of third States regarding the high seas because ‘[I]‌t is only if the operator of . . . an aircraft has chosen to operate a commercial air route arriving at or departing from an aerodrome situated in the territory of a Member State that the operator, because its aircraft is in the territory of that Member State, will be subject to the allowance trading scheme’.88 The ECJ found that the Directive is consistent with the Open Skies Agreement’s fuel load and grant exemptions as it amounts to a market-based tax and is not ‘a form of obligatory levy in favour of the public authorities that might be regarded as constituting a customs duty, tax, fee or charge on fuel held or consumed by aircraft operators’.89 Based on all of these intermediate conclusions and findings, the ECJ 82   Case C-366/10, Air Transport Association of America and Others v Secretary of State for Energy and Climate Change [2011] ECR I-0000, para 71. 83   Convention on International Civil Aviation, 7 December 1944, (1994). 15 U.N.T.S. 295. 84   Case C-366/10, Air Transport Association of America and Others v Secretary of State for Energy and Climate Change [2011] ECR I-0000, para 71. 85   Ibid at paras 76–7. 86   Treaty on Open Skies, Helsinki, 24 March 1992 (‘Open Skies Agreement’). 87   Ibid at paras 4–5. 88   Case C-366/10, Air Transport Association of America and Others v Secretary of State for Energy and Climate Change [2011] ECR I-0000, para 127. 89   Ibid at para 145.

304    part iv.  setting up the int'l mitigation regime held that the application of the EU ETS to international aviation emissions was consistent with international law. Another element of the EU ETS that has been challenged in legal proceedings is the Commission’s benchmarking determinations for free allocation of carbon emissions allowances for the period of 2013–2020. In response to the 2003 Directive establishing GHG emission allowance trading within the EU,90 the Commission introduced benchmarking to determine the allocation of free emission allowances. Specifically, it decided to calculate free allowances for 2013 based on the average performance of the most efficient installations for the years 2007 and 2008.91 Poland brought a case against the EU, arguing that the Commission’s benchmarking decision violates the Directive’s equal treatment requirement as well as the TFEU.92 The EGC held that the Commission’s benchmarking standards, which involve treating installations that are using different fuels similarly, did not violate the principle of equal treatment which requires that ‘comparable situations must not be treated differently and that different situations must not be treated in the same way, unless such treatment is objectively justified’.93 In reaching this decision, the EGC noted that distinguishing product benchmarks based on the type of fuel used in different installations would not only fail to incentivize carbon-intensive installations to reduce their emissions, but could even result in an increase in emissions, as installations using low carbon emission fuel may be incentivized to replace it with high carbon emission fuel to optimize free emission allowances.94 The EGC also determined that the Directive provides ‘appropriate consideration to the economic and social consequences of the measures’ as it allows for gradual introduction of the measure and grants a larger number of allowances to installations with high carbon emissions. Thus, the EU’s benchmarking to determine the free allocation of carbon emissions allowances was found to be in accordance with EU law. In sum, the design of the emissions trading scheme in the EU reflects carbon leakage concerns. The scheme has provided various options to mitigate these risks. While some of these options have been the source of legal proceedings challenging their validity, they have been found by European courts to be consistent with international and European Union law.   European Parliament and Council Dir. 2009/29/EC, [2009] OJ L140/63.   European Parliament and Council Dir. 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Dir. 96/61/EC, [2003] OJ L275/32, Article 10(a)(2). 92   Case T-370/11 Poland v EC Commission [2013] OJ C114/34, para 15. The European General Court (EGC) found that the Directive establishing a GHG emission allowances trading scheme within the EU is valid under the TFEU as the measure was taken to implement the Directive, which was adopted on the basis of the TFEU. 93   Ibid at para 30. 94   Ibid at paras 35–9; GCE, Press Release No 26/13, Judgment in Case T-370/11, Poland v Commission (7 March 2013), available at (accessed 24 October 2014). 90 91

14.  carbon leakage and private emitters    305

6.  National Measures to Address Carbon Leakage: United States As of 2011, the United States remained the largest emitter of greenhouse gases among the UNFCCC Annex I (i.e., developed country) States.95 The United States has not introduced comprehensive climate change legislation at the federal level. Yet carbon leakage, and an appropriate response to it, was at the core of debate surrounding the preparation of proposed legislation between 2007 and 2010. In an editorial published in February 2007, the CEO of a major US electrical power generator and the leader of a major US trade union argued that the United States should not pass comprehensive climate change legislation without addressing carbon leakage and the loss of competitiveness.96 These ideas were later incorporated into the American Clean Energy and Security Act of 2009, also known as the Waxman-Markey Bill, which was passed by the US House of Representatives in 2009 but eventually died in the Senate.97 The proposed legislation included establishing a national cap-andtrade programme.98 It would also have addressed carbon leakage99 by granting emission allowance rebates per unit of production to eligible industrial sectors.100 In addition, if no international agreement on climate change was reached by 1 January 2018, the President would be required to impose on importers of certain goods originating in certain countries, the obligation to secure emissions allowances from an ‘international reserve’ separate from the pool of allowances available for use by domestic industries.101 While the federal government has not yet passed comprehensive climate change legislation, the state of California has done so, including provisions that address 95   UNFCCC Subsidiary Body for Implementation, National greenhouse gas inventory data for the period 1990–2011, FCCC/SBI/2013/19 (24 October 2013), 14, (accessed 14 May 2014). 96  Morris, M. and Hill, E. (2007). Trade is the Key to Climate Change, The Energy Daily 35 (20 February), 33. 97   Title IV, H.R. 2454, Congressional Digest H7584 (26 June 2009). See also Condon, M. and A. Ignaciuk (2013). ‘Border Carbon Adjustment and International Trade: A Literature Review’, OECD Trade and Environment Working Papers, 2013/06, OECD Publishing, 11. (accessed 23 August 2015). 98   Title III, H.R. 2454, Congressional Digest H7542 (26 June 2009). 99   ‘The term “carbon leakage” means any substantial increase (as determined by the Administrator [of the Environmental Protection Agency] in greenhouse gas emissions by industrial entities located in other countries if such increase is caused by an incremental cost of production increase in the United States resulting from the implementation of this [bill].’ Title IV, H.R. 2454, Congressional Digest H7585 (26 June 2009) (adding §762(1) to the Clean Air Act). 100   Title IV, H.R. 2454, Congressional Digest H7585 (26 June 2009) (adding §763 to the Clean Air Act). 101   Title IV, H.R. 2454, Congressional Digest H7588 (26 June 2009) (adding §§766(b)(1) and 768 to the Clean Air Act).

306    part iv.  setting up the int'l mitigation regime carbon leakage. California’s Low Carbon Fuel Standard (LCFS) Regulation applies to transportation fuels and regulates the total amount of carbon emitted during the entire life cycle of the fuel (including its extraction, refinement, and production process as well as transportation to California).102 This applies to non-California and Californiaproduced fuels. Therefore, it combats risks of carbon leakage by applying the LCFS’s lifecycle analysis in calculating GHG emissions to both domestic and imported fuels. The LCFS has been subject to a legal challenge before US courts, highlighting the legal complexities of a measure that intends to reduce the risks of carbon leakage. The US District Court ruled that the LCFS discriminated against out-of-state fuels as compared to California fuels and was inconsistent with the dormant Commerce Clause in the US Constitution.103 However, on appeal, a panel of the Ninth Circuit Court of Appeals reinstated the LCFS, ruling that it does not constitute extraterritorial regulation prohibited by the dormant Commerce Clause.104 The challengers to the LCFS sought rehearing by the full Ninth Circuit Court and also a review by the United States Supreme Court, but both requests were denied. The LCFS remains in force, although it may continue to face legal disputes.

7.  National Measures to Address Carbon Leakage: South Africa As the host of the 17th UNFCCC Conference of Parties in Durban in November– December 2011, South Africa’s government had particularly strong incentives for active engagement in climate change policy. But in setting its climate change agenda, South Africa was clearly concerned about the debate in the United States and elsewhere on carbon leakage and the threat of border measures. In its National Climate Change Response Green Paper, published in 2010, South Africa: recognise[d]‌that measures taken by developed countries in their efforts to respond to climate change may have detrimental effects on high carbon and energy intensive economies  Information available at (accessed 10 August 2015) in particular, the Low Carbon Fuel Standard Regulation of April 2010. Cal. Code Regs. tit. 17, §§95480–95490. 103   Rocky Mountain Farmers Union et al. v James N. Goldstene, Executive Officer of the California Air Resources Board, Order on Summary Adjudication Motion, No. CV-F-09-2234 LJO DLB, US District Court for the Eastern District of California (Judge O’Neill), 29 December 2011 (concluding that the LCFS ‘discriminates against out-of-state corn-derived ethanol while favoring in-state corn ethanol and impermissibly regulates extraterritorial conduct. In addition, Defendants have failed to establish that there are no alternative methods to advance its goals of reducing GHG emissions to combat global warming’). 104   Rocky Mountain Farmers Union v Corey, No. 12-15131, 9th Circuit, 18 September 2013. 102

14.  carbon leakage and private emitters    307 such as South Africa. These response measures may include trade measures including border tax adjustments, and could be reflected in a reluctance to trade in goods with a high carbon footprint. South Africa’s climate change strategy must recognise and address this and also create mechanisms that will give high carbon sectors the support and time to move to lower carbon forms of product.105

In the Green Paper, South Africa proposed using ‘market-based measures such as an escalating carbon tax to price carbon and internalise the external costs of climate change’.106 The South African National Treasury published a carbon tax discussion paper in December 2010, and further developed those ideas in May 2013 in a Carbon Tax Policy Paper.107 At that time, the National Treasury announced that it would implement a carbon tax as of 1 January 2015. In February 2014, the National Treasury announced that the implementation of the tax would be delayed until 1 January 2016.108 If it implements a carbon tax, South Africa would become one of the first developing countries to adopt an economically significant carbon policy. Just as was the case in the United States, carbon leakage appears to be at the heart of the National Treasury’s development of its carbon tax. In its 2013 Policy Paper, the National Treasury acknowledged the same concern that the Department of Environmental Affairs had noted in 2010 regarding the threat to South African exports represented by border measures imposed by other States to address carbon leakage.109 It then noted that: the implementation of a carbon price [in South Africa], without equivalent policies for mitigating climate change in other countries, could affect the competitiveness of certain emissions-intensive industries. It could also result in carbon leakage . . .  Under the emissions trading scheme, such as the EU ETS and others, this issue has been partially addressed by the allocation of free allowances. The carbon tax design for South Africa, with its proposed initial relatively high tax-free thresholds, mimics such allocation of free allowances and should go some way to address the concerns about competitiveness and carbon leakage.110

In its 2013 Policy Paper, the National Treasury rejects the use of border measures to address carbon leakage. Instead, it would offer comfort to energy-intensive and trade-intensive sectors by creating a graduated schedule of tax-free thresholds up to one hundred per cent.111 A basic tax-free threshold of sixty per cent will apply to all sectors. Additional allowances will be made for certain process emissions and 105   South Africa Department of Environmental Affairs, National Climate Change Response Green Paper 2000, 7, at (accessed 14 May 2014). 106   Ibid, 14. 107   Carbon Tax Policy Paper, South Africa National Treasury, 2 May 2013, at (accessed 28 October 2013). 108   Cohen, M., ‘South Africa Delays Carbon Tax, Plans Levies on Acid Mine Water’, Bloomberg (26 February 2014), at (accessed 14 May 2014). 109   Carbon Tax Policy Paper, South Africa National Treasury, 2 May 2013, para 3. 110   Ibid, para 199.    111  Ibid, Table 1.

308    part iv.  setting up the int'l mitigation regime for trade exposure. Trade-intensive sectors, such as basic iron and steel, basic nonferrous metals, mining and quarrying, and machinery and equipment, are those industries in which exports and imports combined are more than forty per cent of their domestic output.112 Of these, the sectors other than machinery and equipment would be considered both energy-intensive and trade-intensive (EITI) sectors.113 For EITI sectors, there would be an additional ten per cent tax-free threshold.114 South Africa will also use carbon offsets to lower the cost of the carbon tax for firms. The National Treasury proposed in April 2014 that firms be able to reduce their carbon tax liability by up to ten per cent of their actual emissions through carbon offsets.115 Offsets must be generated through eligible projects. Two of the criteria for eligible projects would be:116 • Only South African-based credits will be eligible for use within the carbon offsets scheme, to encourage the development of locally based projects and GHGmitigation in South Africa. • Projects that generate carbon offset credits must occur outside the scope of activities that are subject to the carbon tax. This is to prevent double counting of the carbon reduction benefit should an offset project be implemented on an activity that is subject to the carbon tax. By combining the basic tax-free threshold, additional allowance for process emissions, additional allowance for trade exposure, and carbon offsets, some sectors (including agriculture and waste) will be one hundred per cent tax-free.117 In addition, at least one commentator has suggested that South Africa will address the risk of carbon leakage by setting a ceiling on the price of the carbon tax because the probability of a company paying more than that for a carbon credit is very low.118

8. Conclusion International climate change law, at least as reflected in the UNFCCC, provides governments a rudimentary tool to address climate leakage—it commits them to exchange information on their respective mitigation measures and to cooperate   Ibid, para 203 and Table 10.    113 Ibid. 115   Ibid, para 204.   Carbon Offsets Paper, South Africa National Treasury, April 2014. 116   Ibid, para 11.    117  Ibid, Table 1. 118   Gonzalez, G. (5 September 2013), ‘South Africa Aims To Blend Carbon Tax With Offsets’, Ecosystem Marketplace, (accessed 28 October 2013). 112


14.  carbon leakage and private emitters    309 fully in the formulation and implementation of those measures. In the absence of an international agreement that binds substantially all States to reduce emissions, however, carbon leakage remains a real concern for many policymakers. This chapter has described a range of responses to carbon leakage. The experience in the European Union is the most instructive, given the number of years that the ETS has been in place and the extent to which officials and private stakeholders have discussed measures to address carbon leakage. Yet the experiences in the United States and South Africa of carbon leakage provides perhaps the most interesting lessons: concerns about carbon leakage and loss of competitiveness are closely linked, and these concerns animate lawmakers (as in South Africa) but also create significant limitations (as in the United States). Indeed, as long as asymmetric implementation of mitigation efforts remains a reality, States will face the threat of carbon leakage, creating legitimate concerns for those who wish to take meaningful action to address GHG emissions, and for those who see such action as a politically saleable excuse offered by others for inaction.

References American Clean Energy and Security Act of 2009, H.R. 2454, Congressional Digest H7471-H7619 (26 June 2009). Bordoff, J. and Shoyer, A. (2008/2009). ‘International Trade Law and the Economics of Climate Policy: Evaluating the Legality and Effectiveness of Proposals to Address Competitiveness and Leakage Concerns’, Brookings Trade Forum, ‘Climate Change, Trade, and Competitiveness: Is a Collision Inevitable?’ Case C-366/10, Air Transport Association of America and Others v Secretary of State for Energy and Climate Change [2011] ECR I-0000. Case T-370/11, Poland v EC Commission [2013] OJ C114/34. Cleantechnica, EU Commission postpones International Airline Tax, at (accessed 1 August 2013). Cohen, M. (2014). ‘South Africa Delays Carbon Tax, Plans Levies on Acid Mine Water’, Bloomberg (26 February 2014), at (accessed 14 May 2014). Condon, M. and A. Ignaciuk (2013). ‘Border Carbon Adjustment and International Trade: A Literature Review’, OECD Trade and Environment Working Papers, 2013/06, OECD Publishing. (accessed 23 August 2015). Council Dir. 2003/96/EC on restructuring the Community Framework for the Taxation of Energy Products and Electricity [2003] OJ L283.

310    part iv.  setting up the int'l mitigation regime Council Regulation 994/98 on the application of Articles 87 (former Article 92) and 88 (former Article 93) of the Treaty establishing the European Community to certain categories of horizontal State aid, [1998] OJ L142. De Bruyn, S., Nelissen, D., and Koopman, M. (2013). ‘Carbon Leakage and the Future of the EU ETS market: Impact of Recent Developments in the EU ETS on the List of Sectors Deemed to be Exposed to Carbon Leakage,’ CE Delft, 37. Ecorys. (2013). ‘Carbon Leakage Evidence Project’, at (accessed 13 November 2015). Elliot, Joshua et al. (2012). ‘Unilateral Carbon Taxes, Border Tax Adjustment and Carbon Leakage,’ Institute for Law and Economics, Working Paper 600, 2nd Series. Europa (2011). ‘Revision of the Energy Taxation Directive, Questions and Answers’, at (accessed 1 August 2013). European Commission, Carbon Leakage, at (accessed 23 August 2015). European Commission, Climate Action, at (accessed 24 October 2014). European Commission, Emissions Trading System: Rules on transitional free allocation of allowances to the power sector, at (accessed 15 May 2014). European Commission, Reducing Emissions from the Aviation Sector, (accessed 1 August 2013). European Commission, The EU Emission Trading Scheme, at (accessed 25 July 2013). European Parliament and Council Dir. 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Dir. 96/61/EC, [2003] OJ L275/32. European Parliament and Council Dir. 2008/101/EC, amending Dir. 2003/87/EC so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community [2008] OJ L8. European Parliament and Council Dir. 2009/28/EC, on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/ EC and 2003/30/EC, Article 17.1. European Parliament and Council Dir. 2009/29/EC, amending Dir. 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community [2009] OJ L140/63. Financial Times (8 March 2007), ‘Europe’s Green Summit is Seeking to Bury the Carbon Past’, at (accessed 28 October 2013). Frankel, J. (2005). ‘Climate Change and Trade, Links between the Kyoto Protocol and WTO’, Environment, 47(7): 8–19. Gonzalez, G. (5 September 2013), ‘South Africa Aims To Blend Carbon Tax With Offsets’, Ecosystem Marketplace, at (accessed 28 October 2013). Guidelines on Certain State Aid Measures in the Context of Greenhouse Gas Emission Allowance Trading Scheme Post-2012 [2012] OJ C158/04. H.R.5049, Keep America Competitive Global Warming Policy Act of 2006 (introduced by Mr. Udall and Mr. Petri, 109th Cong., 29 March 2006).

14.  carbon leakage and private emitters    311 Hyvarinen, E. (2005). ‘The Downside of European Union Emission Trading—A View From the Pulp and Paper Industry’, in Unasylva 222, 56/3: 39–41. International Iron and Steel Institute (December 2007). ‘A Global Sector Approach to CO2 Emissions Reduction for the Steel Industry’, at (accessed 28 October 2013). International Network for Sustainable Energy. EU Energy Policy: Energy-Tax Directive, at (accessed 1 August 2013). Kee, Hiau Looi et al. (2010). ‘The Effects of Domestic Climate Change Measures on International Competitiveness’, World Bank Policy Research Paper 5309, at (accessed 13 November 2015). Kyoto Protocol to the United Nations Framework Convention on Climate Change (‘Kyoto Protocol’), open for signature at New York 16 March 1998 (No. A-30822), United Nations Treaty Series (2005), at (accessed 14 May 2014). Low Carbon Fuel Standard Regulation of April 2010. Cal. Code Regs. tit. 17, §§95480–95490, at . Makipaa, Arttu et al. (2008). ‘Competitive Distortions and Leakage in a World of Different Carbon Prices’, European Parliament’s Temporary Committee on Climate Change, available at (accessed 23 August 2015). Mani, M. (2007). ‘The effects of climate change policies on international trade and competitiveness’, Bridges Trade BioRes Review, 1/1(2007). Morris, M. and Hill, E. (2007). Trade is the Key to Climate Change, The Energy Daily 35 (20 February), 33. Parker, L. and Blodgett, J. (2008). ‘“Carbon Leakage” and Trade: Issues and Approaches’, CRS Report for Congress. Pauwelyn, J. (2013). ‘Carbon Leakage Measures and Border Tax Adjustments under WTO Law’, in Research Handbook on Environment, Health and the WTO (ed. Geert Van Calster and Denise Prevost), Edward Elgar, Cheltenham, UK. Reinaud, Julia. (2008). ‘Issues Behind Competitiveness and Carbon Leakage’, International Energy Agency and OECD, Information Paper. Rocky Mountain Farmers Union et al. v James N. Goldstene, Executive Officer of the California Air Resources Board, Order on Summary Adjudication Motion, No. CV-F-092234 LJO DLB, US District Court for the Eastern District of California (Judge O’Neill), 29 December 2011. Rocky Mountain Farmers Union v Corey, No. 12-15131, US Court of Appeal for the 9th Circuit, 18 September 2013. Sartor, Oliver. (2012). ‘Carbon Leakage in the Primary Aluminium Sector: What evidence after 6½ years of the EU ETS?’, at (accessed 13 November 2015). Sato, Misato et al. (2013). ‘Sectors under Scrutiny—Evaluation of Indicators to Assess the Risk of Carbon Leakage in the UK and Germany’, Center for Climate Change Economics and Policy, Working Paper 134. South Africa Department of Environmental Affairs, National Climate Change Response Green Paper 2000, at (accessed 14 May 2014).

312    part iv.  setting up the int'l mitigation regime South Africa National Treasury (2013). Carbon Tax Policy Paper, at (accessed 28 October 2013). UNFCCC Subsidiary Body for Implementation, National greenhouse gas inventory data for the period 1990–2011, FCCC/SBI/2013/19 (24 October 2013), at (accessed 14 May 2014). United Nations Framework Convention on Climate Change (UNFCCC), open for signature at Rio 4 June 1992 (No. I-30822), United Nations Treaty Series (1994), at (accessed 14 May 2014). Varma, Adarsh et al. (2012). ‘Cumulative Impact of Energy and Climate Change Policies on Carbon Leakage’, Department for Business, Innovation and Skills, UK.

Chapter 15


1. Introduction


2. Carbon Leakage, Competitiveness Concerns, and Energy Security


3. National Climate Measures


4. National Climate Measures and the WTO


5. Conclusion


*  I would like to thank Kevin Gray for his comments and editorial work on this chapter.

314    part iv.  setting up the int'l mitigation regime

1. Introduction Climate change is one of the most daunting challenges that the international community must face.1 Dealing with climate change requires a revolutionary change in the global socio-economic patterns of production and consumption.2 Furthermore, moving towards a low-carbon society, which is what States and other stakeholders need to do to properly tackle climate change,3 is rather difficult when there does not seem to be a clear definition of what a low-carbon society actually means and how to achieve it.4 Finally, leading a revolution to a low-carbon society is such a highlevel task that it cannot be done by one State alone, let alone a group of States, no matter how relevant and powerful they may be. This is a responsibility States agreed to at the multilateral level, under the auspices of the international climate change regime.5 Yet the climate regime is currently at a crucial stage.6 In fact, it is close to finalizing a new legal instrument that could provide the necessary platform leading 1   The conclusions stemming from the Fifth Assessment Report are discouraging. See IPCC, Fifth Assessment Report. Climate Change 2014: Synthesis Report, available at (accessed 5 August 2015). Current climate change trends are very likely to be anthropogenic, with serious effects being felt worldwide, such as increasing loss of biodiversity, negative effects on human health, amongst many others. One of the most concerning scenarios refers to sea level rise which, if unchecked, may lead to the disappearance of communities and, in the worst case scenario, of sovereign States. No wonder climate change has, and still is, being considered a security issue. On climate change and security see F. Sindico, ‘Climate Change: A Security (Council) Issue?’ (2007) 1 Carbon and Climate Law Review 26 and S.V. Scott, ‘The Securitization of Climate Change in World Politics: How Close Have We Come and Would Full Securitization Enhance the Efficacy of Global Climate Change Policy?’ (2012) 21.3 Review of European Community & International Environmental Law 220. 2   C. Figueres, Robert Schuman Lecture, Eco-Innovation Summit, Bruxelles, 9 November 2011, available at (accessed 5 August 2015). 3   See the reference to low-carbon society in Decision 1/CP.16, The Cancun Agreements: Outcome of the work of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention, para 10: ‘Realizes that addressing climate change requires a paradigm shift towards building a low-carbon society that offers substantial opportunities and ensures continued high growth and sustainable development, based on innovative technologies and more sustainable production and consumption and lifestyles, while ensuring a just transition of the workforce that creates decent work and quality jobs.’ 4   E. Morgera, ‘A Legal and Conceptual Perspective of the Green Economy’ (2013) 22:1 Review of European, Comparative and International Environmental Law 14–29, and J. Vinuales, ‘The Rise and Fall of Sustainable Development’ (2013) 22:1 Review of European, Comparative and International Environmental Law 3–13. 5   In particular, through the United Nations Framework Convention on Climate Change (adopted 9 May 1992, entered into force 21 March 1994) (1992), 31 ILM 822 (UNFCCC) and the Kyoto Protocol to the 1992 Framework Convention on Climate Change (adopted 10 December 1997) 37 ILM 22 (1998). 6   UNFCCC Member States are currently involved in ‘a process to develop a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties’, Decision 1/CP.17, Establishment of an Ad Hoc Working Group on the Durban Platform for Enhanced Action, para 2.

15.  national measures and wto consistency    315 to a low-carbon society revolution. Failing that, or in parallel with a new broadly applicable multilateral instrument, the regime may also disaggregate into particular initiatives that address climate change, focusing on multi-sectorial and fragmented instruments based on a bottom-up approach to international climate change obligations.7 Against this background, States have developed, and will continue to develop, national measures aimed at tackling climate change (mitigation measures) or at dealing with its effects (adaptation measures). In this chapter, we will focus our attention only on those measures aimed (explicitly or not) at preventing carbon leakage and levelling the playing field.8 The chapter aims to examine the consistency of these measures, referred to as national climate measures with World Trade Organization (WTO) obligations. In the second section, we will discuss the reasons for national climate measures that potentially end in conflict with WTO rules. In this context we will discuss how these measures are motivated by carbon leakage, loss of competitiveness, and energy security concerns, or a combination of all three. The third section will highlight certain national climate measures presented: border tax adjustments (BTAs), border adjustment measures linked to emission trading schemes, climate change related ‘technical regulations’ (as that term is understood in the WTO Agreement on Technical Barriers to Trade (TBT Agreement)), and green energy domestic support policies, such as feed-in tariffs (FITs). Section 4 will assess the WTO consistency of some of those national climate measures. The last section will provide some conclusions and thoughts on further research needed in the field of climate change and international trade obligations. 7   From the Copenhagen Accord (Conference of the Parties to the United Nations Framework Convention on Climate Change, Fifteenth Sess., Dec. 7–18, 2009, Copenhagen, Den., Draft Decision -/CP 15: Proposal by the President, Copenhagen Accord, U.N. Doc. FCCC/CP/2009/L.7 (Dec. 18, 2009) [hereinafter Copenhagen Accord], available at (accessed 5 August 2015) onwards, the international climate change regime has been moving away from a set of binding emission reduction targets to a more flexible system based on voluntary pledges. For a discussion about this trend see F. Sindico, ‘The Copenhagen Accord and the future of the International Climate Change Regime’ (2010) 1.1 Revista Catalana de Dret Ambiental 1; D. Bodansky, ‘The Copenhagen Climate Change Conference—A Post-Mortem’ (2010) 104 American Journal of International Law 230–40, and L. Massai, ‘The Long Way to the Copenhagen Accord: Climate Change Negotiations in 2009’ (2010) 19.1 RECIEL 104–21. For an interesting perspective of the future of the international climate change regime see R. Falkner, H. Stephan, et al., ‘International Climate Policy after Copenhagen: Towards a “Building Blocks” Approach’ (2010) 1.3 Global Policy 252. 8   The GLOBE report on national climate change legislation, M. Nachmany, S. Fankhauser, et al. (2014), The GLOBE Climate Legislation Study: A Review of Climate Change Legislation in 66 Countries (4th edn, 2014), 36 refers to the latter as ‘[L]‌egislation, or regulations, policies and decrees with a comparable status, that refer specifically to climate change or that relate to reducing energy demand, promoting low-carbon energy supply, tackling deforestation, promoting sustainable land use, sustainable transportation, or adaptation to climate impacts.’

316    part iv.  setting up the int'l mitigation regime

2.  Carbon Leakage, Competitiveness Concerns, and Energy Security Why should a government developing a national climate measure be concerned about its obligations under the WTO? These environmental measures, as argued, should not be scrutinized by a regime oriented towards the promotion of economic development through increased trade liberalization.9 However, a measure whose goal is to protect the environment (i.e. to mitigate climate change) may end up affecting the transboundary movements of goods and services by discriminating against goods whose production is more harmful to climate change or encouraging climate-friendly products over others. Measures that reflect a shift in consumption patterns towards a low-carbon society can end up raising international trade law concerns due to their potential inconsistency with WTO obligations. Despite any potential conflicts with WTO law, there are three drivers that will lead States to consider and possibly adopt national climate measures. The first two (carbon leakage and economic competitiveness) are the two sides of the same coin.10 The third, energy security, represents a distinct concern independent of the other two. Carbon leakage occurs in the absence of harmonized international climate standards where one State has lower standards than another.11 A firm in one State with 9   The first recital of the preamble to the Marrakech Agreement Establishing the WTO, 1995, can be interpreted as an effort to reconcile free trade and environmental protection. It states ‘Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development’. 10  See for example Doc. COM/2008/0030 final, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, 20 20 by 2020—Europe’s climate change opportunity (2008), p. 11: ‘Energy-intensive industries . . . would face a particular challenge during the transition to a climate-friendly economy . . . they would under normal circumstances take part in the auctions for ETS allowances: an additional cost not faced by their competitors in countries without low-carbon measures. This not only has implications for competitiveness and jobs, it also carries the risk that production and the consequent pollution just shifts to countries with no low-carbon policies’. 11   See IPCC, Climate Change 2007: Working Group III: Mitigation of Climate Change, section 11.7.6: ‘Carbon leakage is defined as the increase in CO2 emissions outside the countries taking domestic mitigation action divided by the reduction in the emissions of these countries. It has been demonstrated that an increase in local fossil fuel prices resulting, for example, from mitigation policies may lead to the re-allocation of production to regions with less stringent mitigation rules (or with no rules at all), leading to higher emissions in those regions and therefore to carbon leakage’.

15.  national measures and wto consistency    317 high carbon-intensive production may relocate to another State with lower regulatory standards.12 Although evidence of carbon leakage where firms move to a different jurisdiction to take advantage of lower emission reduction requirements is scattered, States have interpreted such potential as warranting responses through things such as BTAs and border adjustment measures.13 Some of these sectors from which migrating firms emerge often feature high levels of employment and are a valuable source of economic production for their home countries. Based on how important these sectors are for the economy, State governments appear to be receptive to complaints about loss of competitiveness. Whether perceived or real, tackling carbon leakage has been put forward by States as the rationale supporting climate-related trade measures. The third driver behind national climate measures is energy security.14 States seek affordable, safe, and secure supplies of energy. Most States rely on energy sources outside their borders, often from politically or economically unstable States, which potentially compromises a State’s energy security.15 Within this context, some States 12   For example Voestalpine, an Austrian steel firm, maintained that if the company did not get a clear signal from the European Commission on how it planned to deal with the competitiveness concerns arising from energy intensive sectors, it would consider investing in a new plant outside of the EU. See Voestalpine, Annual Report 2007–08, at 48, available at (accessed 5 August 2015). 13   In fact, there could be a net increase in greenhouse gas emissions if a company, which has now moved to the State with less strict greenhouse gas reduction requirements, can lawfully emit more GHGs. According to this scenario, a company would decide to relocate its production based also on the carbon content of the goods it produces because of its higher productions costs. While this may be the case, in the past there did not seem to be overwhelming empirical evidence stating that carbon-intensive sectors would relocate based solely on climate change considerations. See R. Ratnayake, ‘Do Stringent Environmental Regulations Reduce International Competitiveness? Evidence from an Inter-industry Analysis’ (1998) 5 International Journal of the Economics of Business 77. However, other studies have shown that relocation is being considered by an increasing number of carbon-intensive sectors, such as the cement and the aluminum sectors. See OECD, The competitiveness impacts of CO2 emissions reductions in the cement sector (2005), available at (accessed 5 August 2015) and European Commission, McKinsey & Company, Ecofys (2006), ‘EU ETS Review. Report on International Competitiveness’ at 37–41. Businesses will also take into account other considerations, such as labour costs, reputation on relevant markets, etc, when deciding where to locate their operations. 14   According to the International Energy Agency (IEA), (accessed 5 August 2015): ‘[E]‌nergy security refers to the uninterrupted availability of energy sources at an affordable price’ and can be framed as long-term or short-term, the former being interested in ‘timely investments to supply energy in line with economic developments and environmental needs’ and the latter (short-term energy security) mainly concerned with ‘the ability of the energy system to react promptly to sudden changes in the supply-demand balance’. 15   The Middle East has been for many countries the main source of energy. This has meant (and for some States still does) that political unrest in this region could negatively impact energy security. Another example of energy security concerns arises amidst growing tensions between Russia and Ukraine. On the geo-politics of energy security see C. Pascual, ‘The Geopolitics of Energy: From Security to Survival’ (2008) Brookings Paper, available at (accessed 5 August 2015) and F. Verrastro et al., The Geopolitics

318    part iv.  setting up the int'l mitigation regime have started to adopt policies aimed at promoting energy security by creating incentives to domestic energy suppliers to play a greater role in providing such security. While this may be politically attractive, these measures are susceptible to a conflict with WTO obligations. In sum, carbon leakage, competitiveness concerns, and energy security are three drivers that have led States to consider or adopt national climate measures. Such measures can have an effect on international trade and end up violating WTO obligations. One important point to highlight at this stage is that using carbon leakage as the rationale for a national climate measure can support characterizing the measures as an environmental measure, since the main goal is to mitigate climate change. If the national climate measure is driven by competitiveness concerns, it will more likely be an economic measure, since the main goal will be to protect jobs and ensure economic development by levelling the playing field between the State with higher climate standards and the ‘climate rogue State’. Finally, national climate measures adopted on energy security grounds can be considered both environmental and economic measures, depending on the nature of the energy source supported and the structure of the measure itself. In the following sections we will highlight which driver appears to be behind the different national climate measures that have led to trade tensions between States.

3.  National Climate Measures In this section, we will briefly assess three national climate measures: BTAs, border adjustment measures linked to the existence of an emissions trading scheme, and green energy domestic support policies, such as FITs. This list is by no means exhaustive. Many measures can be designed as national climate measures as these prescribe the concerns of policy-makers and commentators. However, I have limited the analysis in the chapter to the three aforementioned measures as these have been the focus of concerns for policy-makers and commentators.

of Energy: Emerging Trends, Changing Landscapes, Uncertain Times (2010), available at (accessed 5 August 2015). Furthermore, in the last few years, especially in the United States, debates on energy security have touched upon energy independence, which would be a situation in which a State does not have to rely in any way on energy imported from other States. Some studies suggest that due to the exploitation of shale gas reserves, the United States could become energy-independent by 2035; see IEA (2012), World Energy Outlook.

15.  national measures and wto consistency    319

3.1 Border Tax Adjustment BTAs related to national climate change measures were high on the agenda for several European Union (EU) Member States in 2006. In particular, the French government voiced several times that the EU had to consider BTAs in order not to undermine its global position on climate change.16 Both carbon leakage and competitiveness concerns were raised as grounds upon which to justify the adoption of such measures.17 BTAs are designed to apply to imports coming from States with no, or limited climate change regulatory requirements.18 The amount of the tax levied at the border would be the same as that which producers of products pay. Despite the attractiveness of climate-related BTAs, the EU finally decided not to use them.19 They are not currently on the agenda of the Commission or of any other EU Member State.

3.2 Emissions Trading and Border Adjustment Measures More and more States have adopted,20 or are considering establishing,21 emissions trading schemes as part of their efforts to tackle climate change. The proliferation   See the 2006 French proposal in J. Wiers, ‘French Ideas on Climate and Trade Policies’ (2008) 2 Carbon and Climate Law Review at 18. In a letter sent in 2010 to the President of the Commission, Jose Manuel Barroso, the French government, this time joined by the Italian government, has shied away from BTAs and moved towards more general climate-related border adjustment measures. The letter is available at (accessed 5 August 2015) and it makes clear that any measure would be adopted to tackle the ‘fuite de carbon’ (carbon leakage) and that it must be adopted in accordance with the law of the WTO. 17   A BTA would have discouraged carbon-intensive sectors from the EU to relocate to pollution havens. Greenhouse gas emissions would have not increased since the company would have stayed in the EU and had to fulfill the stricter EU regulations. Furthermore, a BTA, by avoiding relocation of carbon-intensive sectors, also would have had the effect of keeping jobs in the EU and not displacing the economic development linked to carbon-intensive sectors. 18   For further information on climate change-related BTAs and how they would work, see B. Lockwood and J. Whalley, ‘Carbon-motivated Border Tax Adjustments: Old Wine in Green Bottles?’ (2010) 33.6 The World Economy 810 and J. Elliott et al., ‘Unilateral Carbon Taxes, Border Tax Adjustments, and Carbon Leakage’ (2012) Research Paper No. 600, University of Chicago Institute for Law & Economics. 19   See ‘EU attacks carbon border tax initiative’, Financial Times, 14 October 2009. 20  The following countries or regions have already established an emissions trading scheme as part of their climate change policy: the EU in 2005; Japan operates a Tokyo metropolitan trading scheme from 2010 (voluntary scheme); New Zealand in 2008; Switzerland in 2008 (voluntary); the United Kingdom in 2010 through its CRC Energy Efficiency Scheme (formerly Carbon Reduction Commitment); California in 2012; a group of north east states in the US through the Regional Greenhouse Gas Initiative in 2008; and the Republic of Korea in 2015. For a brief overview of existing and future schemes see information on the New Zealand Emissions Trading Scheme web page available at (accessed 5 August 2015) and Factbox: Carbon trading schemes around the world, Reuters, 26 September 2012. 21   The following countries are considering establishing an emissions trading scheme in the near future: Mexico (voluntary) but no entry date has been specified; and Vietnam in 2018. 16

320    part iv.  setting up the int'l mitigation regime of such schemes can be considered as one the key characteristics of current (and possibly future) efforts of States amidst the backdrop of an international carbon market, which, even if struggling, is still alive and kicking.22 An emissions trading scheme effectively puts a price on carbon and provides a tangible economic incentive to firms (or States in the case of the international carbon market) to comply with their greenhouse gas emissions requirements.23 The success, or environmental effectiveness, of emission trading schemes is addressed elsewhere in this book.24 This chapter highlights a specific element of these schemes that has led to trade tensions with other States. Importers are often required to purchase emission allowances in order to be granted market access.25 Border adjustment measures have been proposed in the EU26 and in United States’ emission trading systems.27 22   In previous work, I had highlighted the proliferation of carbon trading schemes as one of the key trends in the international efforts to tackle climate change; see F. Sindico, ‘International Climate Change Practice and Trade’ in P. Farah ed., China’s Influence on Non Trade Concerns in International Economic Law (Ashgate Publishing: London, 2015). 23   On the economics of emission trading schemes and its alleged benefits, see D. Driesen, ‘Economic Instruments for Sustainable Development’ in S. Wood and B. J. Richardson, Environmental Law for Sustainability: A Critical Reader (Hart Publishing: United Kingdom, 2005). 24  See Chapter 16 by H. van Asselt in this book and S. Bogojević, ‘Ending the Honeymoon: Deconstructing Emissions Trading Discourses’ (2009) 21.3 Journal of Environmental Law 443. 25   In other words, carbon-intensive goods (i.e. carbon-intensive in terms of their production) are allowed in the territory of an emissions trading scheme only if the foreign manufacturer purchases the required amount of emission allowances. 26   The EU has been the frontrunner in terms of emission trading schemes. It has been the first to design and adopt a binding scheme (Commission Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC), which is now in its third commitment period. In 2008 the Commission reviewed the Directive (COM(2008) 16 final, ‘Proposal for a Directive amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading system of the Community’, 23.1.2008) laying the foundations of the EU emissions trading scheme and considered ways to deal with both carbon leakage and competiveness concerns. This review led to the adoption of a new piece of legislation in 2009 (Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community), which now regulates how the scheme works. While no direct climate-related border adjustment measure was ultimately adopted, the Directive does leave the door open, should carbon leakage and competiveness concerns be serious enough to warrant them. See recital 25: ‘[A]‌n effective carbon equalization system could be introduced with a view to putting installations from the Community which are at a significant risk of carbon leakage and those from third countries on a comparable footing.’ 27   During the first Obama administration, several climate bills were presented to the Congress and to the Senate (110th Cong., American Climate Security Act, § 2191 (2007); 110th Cong. 2nd Sess, Lieberman-Warner Climate Security Act, § 3036 (2008); 110th Congress, American Clean Energy and Security Act, H.R. 2454 (2009); and 110th Cong., American Power Act (2010)). The bills provided for a very detailed federal wide emissions trading scheme, which included addressing provisions on carbon leakage and competitiveness concerns. More clearly than in the EU ETS, the US draft bill mandated the inclusion of provisions aimed at levelling the playing field with States that have lower climate standards. In the first version of the draft bill, the section aimed at pursuing such a goal actually targeted imports based on the climate record of the State from which the product came from. See American Climate Security Act (2007), section 6006(b)(3)(A): ‘the President shall identify and publish in a list,

15.  national measures and wto consistency    321 In both scenarios, the proposed measures also provided free allowances for domestic carbon-intensive sectors.28

3.3 Green Energy Domestic Support Policies Green energy domestic support schemes, such as FITs, are another example of climate measures that can be seen as trying to tackle carbon leakage and levelling the playing field. FIT programs, which ensure a favorable price for green energy producers, are attractive to governments. This is particularly evident in the initial phase of the development of a renewable energy technology, because they provide those wishing to invest in renewables with the necessary level of certainty regarding their economic return for a determined period of time. In 2009, the Canadian province of Ontario29 introduced a tariff scheme that aimed to facilitate greater use of solar and wind energy. In order to obtain contracts with high tariffs, which would offset the high costs of solar and wind energy production, suppliers were required to use generation equipment, a portion of which had to be produced locally. The domestic content requirement generated controversy and led to a WTO dispute regarding the consistency of the FIT program with WTO obligations.30 Similar programs introduced by other WTO members have led to other WTO challenges that are currently working their way through the WTO dispute settlement process.31 to be known as the “covered list”, each foreign country the covered goods of which are subject to the requirements of this section’. In other words, the drafters endorsed an origin-based climate-related trade measure, which, as we will see later in this chapter, would have called into question its WTO consistency because of the discrimination against imports from specific States. Possibly due to the appreciation of these looming WTO legal hurdles, the section on carbon leakage and competitiveness concerns was somewhat nuanced in a later version of the US climate change bill. In the second version of the draft legislation, products were targeted based on their carbon content, rather than just their origin. See Lieberman-Warner Climate Security Act (2008), section 1306(d)(1)(A). On US climate change efforts see C. Piñon Carlarne, Climate Change Law and Policy: EU and US Approaches (Oxford University Press: Oxford; 2010), M.B. Gerrard (ed.), Global Climate Change and U.S. Law (American Bar Association: Washington, D.C.; 2007); and D. Driesen, ‘The Changing Climate for United States Law’ (2007) 1.1 Carbon and Climate Law Review 35.  The European emissions trading scheme, even in its revised version (Directive 2009/29/EC, Article 10b 1.a), provides domestic carbon-intensive sectors with some further flexibility in the implementation of the scheme by granting them a certain amount of allowances for free on competitiveness concerns grounds. A very similar approach can be found in the proposed US climate change legislation; see Lieberman-Warner Climate Security Act (2008), Title V, subtitles E, F, G, and H. 29   For a full description of all of the measures that made up the FIT program, see Appellate Body Reports, Canada—Certain Measures Affecting the Renewable Energy Generation Sector/Canada—Measures Relating to the Feed-in Tariff Program, WT/DS412/AB/R/WT/DS426/AB/R, adopted 24 May 2013, at 16. 30   Canada—Certain Measures Affecting the Renewable Energy Generation Sector/Canada—Measures Relating to the Feed-in Tariff Program. 31   India—Certain Measures Relating to Solar Cells and Solar Modules, WT/DS456. China has requested consultations with the European Union alleging that the FIT schemes in Italy and Greece 28

322    part iv.  setting up the int'l mitigation regime The inconsistency of the FIT Program with WTO obligations was successfully challenged by Japan and the European Union. Ontario’s measures were found to be inconsistent with Article III:4 of the General Agreement on Tariffs and Trade (GATT) and Article 2.1 of the Agreement on Trade-Related Investment Measures (TRIMs), although they were not inconsistent with the Subsidies and Countervailing Measures Agreement. Canada did not raise, as a defence, that its measure was justifiable on environmental protection or climate change mitigation grounds. Therefore, little can be drawn from the dispute about whether FIT regimes, introduced to develop renewable energy, even if they include discriminatory domestic content requirements, are consistent with WTO obligations because of the objectives the measures are seeking.32

4.  National Climate Measures and the WTO Despite slow progress within the current Doha Round of negotiations, the WTO is an effective organization due to the creation of a strong dispute settlement system. Many WTO disputes have addressed the consistency of environment-related measures and WTO obligations,33 although no disputes have involved measures specifically relating to climate change objectives. As noted above, some of the recent disputes concerning FIT measures have involved measures concerning the development of renewable energy markets although the parties to these disputes have not attempted to justify the violations on the basis of environmental protection relating to climate change prevention. This section provides an overview of the key legal analysis related to the WTO consistency of the national climate measures.

are inconsistent with WTO obligations due to, in part, the domestic content requirements. At the time of the writing of this chapter, China had not requested to the Dispute Settlement Body the establishment of a WTO Panel. See European Union and certain Member States—Certain Measures Affecting the Renewable Energy Generation Sector (DS 452). 32   India is claiming its measure is justifiable under Article XX of the GATT and how it relates to India’s goals to develop its renewable energy sector and obtain energy security, although India is not explicitly relying on the specific environment-related exceptions. 33  For example, see Appellate Body Reports, United States—Standards for Reformulated and Conventional Gasoline (‘US—Gasoline’), WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, p. 3; United States—Import Prohibition of Certain Shrimp and Shrimp Products (‘US—Shrimp’), WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, p. 2755; Brazil—Measures Affecting Imports of Retreaded Tyres (‘Brazil—Tyres’), WT/DS332/AB/R, adopted 17 December 2007, DSR 2007:IV, p. 1527; United States—Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, WT/DS381/ AB/R, adopted 13 June 2012, DSR 2012:IV, p. 1837.

15.  national measures and wto consistency    323 Furthermore, rather than provide a technical and detailed lengthy analysis of the WTO consistency of such measures that has been assessed at length by commentators, the goal of this chapter is to discuss whether adopting a national climate measure aims to combat carbon leakage, protect local producers at a competitive disadvantage, and/or ensure energy security. We will begin by looking at the application of the GATT 1994 and the TBT Agreement provisions to BTAs, border adjustment measures related to emission trading schemes, and climate changerelated technical regulations. We will then move on to discuss the WTO consistency of green energy domestic support policies such as FITs with domestic content requirements.

4.1 BTAs, Border Adjustment Measures related to Emission Trading Schemes and the GATT Measures of WTO members aiming to mitigate climate change must be in accordance with the principle of non-discrimination (i.e. national treatment and most favored nation (MFN)), which is one of the cornerstone obligations of the WTO agreements.34 The MFN obligation under Article I:1 of the GATT requires a WTO member to accord treatment to products from one WTO member immediately and unconditionally to like products originating from other WTO members. The national treatment provision set out, for example in GATT 1994 Article III:4, requires treatment no less favorable than that accorded to imported products. The less favorable treatment obligation has been interpreted in the WTO jurisprudence as not changing the conditions of competition to the detriment of the imported products.35 GATT Article III:2, which applies to fiscal measures, requires imported like products to not be subject to a tax or other internal charge in excess of those applied to domestic products. It further requires under the second sentence of Article III:2 that the products subject to a tax and a directly competitive or substitutable product are not similarly taxed. If taxes or charges pursuant to a BTA regime or other climate-related border adjustment measures linked to an emission trading scheme are to be compatible with Article III, then the amount of the levy imposed upon imported like products, or the amount of emissions required to be purchased in order for the imported like 34  Appellate Body Reports, Canada—Certain Measures Affecting the Automotive Industry, WT/ DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000, DSR 2000:VI, p. 2985, para 69; United States—Section 211 Omnibus Appropriations Act of 1998, WT/DS176/AB/R, adopted 1 February 2002, DSR 2002:II, p. 589, para 297 35  Appellate Body Report, Korea—Measures Affecting Imports of Fresh, Chilled and Frozen Beef (‘Korea—Various Measures on Beef ’), WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001, DSR 2001:I, p. 5

324    part iv.  setting up the int'l mitigation regime product to be granted market access, becomes particularly relevant.36 On the one hand, a BTA will most likely be considered a taxation measure subject to GATT Article III.2. Border adjustment measures linked to an emissions trading scheme are more likely to be considered a law, regulation, or requirement under GATT Article III.4, which contains the no less favorable treatment obligation. The difference between the obligations governing the treatment of imported products could be a factor for WTO members in designing climate change mitigation measures that affect imported products. The WTO Agreement does not define ‘like’ products. The jurisprudence has laid out factors to determine whether domestic and imported products are ‘like’. A determination of ‘likeness’ is ‘fundamentally, a determination about the nature and extent of a competitive relationship between and among products’.37 The four criteria that are often considered relevant in assessing that relationship are; the properties, nature and quality of the products; the end-uses of the products; consumers’ tastes and habits in respect of the products; and the tariff classification of the products.38 In many instances, climate change-related measures distinguish between products based on the emissions generated during the production and processing of the products. This may not fall under the criteria assessing the properties, nature, and quality of the products since the process and production method (PPM) may not result in any tangible physical differences between the products. However, the carbon intensity involved in the production of a product may be something that consumers consider in distinguishing between products. Notwithstanding the debate on like products and PPMs, BTAs and border adjustment measures linked to emission trading schemes can also result in differential treatment between products based on origin. This will be the case if the WTO member’s measures apply to imported products in a way that differs from domestic products and the domestic products benefit from a regime that provides flexibility in its application to them or, more explicitly, compensates domestic carbon-intensive industries due to competitiveness concerns. WTO inconsistency 36   One of the difficulties in passing from the rhetoric of BTAs to the actual adoption and implementation thereof has always been how to arrive at the appropriate amount of the tax levied upon imports. Would the EU, or any other WTO member, just levy the same tax levied upon national carbon-intensive products when calculating the level of the tax imposed on the imported product? Or should the government adopting the BTA consider the carbon content of the imported products? Similar questions are relevant also for border adjustment measures linked to emission trading schemes. How many allowances should the importer purchase? Based on what criteria? Based on the carbon content of the product produced in another State and therefore not subject to the emissions trading scheme, or based on the average carbon content of the same products within the emissions trading scheme? 37  Appellate Body Report, European Communities—Measures Affecting Asbestos and AsbestosContaining Products (EC—Asbestos), WT/DS135/AB/R, adopted 5 April 2001, DSR 2001:VII, 3243, para 99. 38   EC—Asbestos, para 101.

15.  national measures and wto consistency    325 is easily found where the measures condition less favorable treatment on the ­origin of the products. The grounds upon which a national climate measure is taken will thus become the focal point in the assessment of the measure’s consistency with WTO obligations. GATT Article XX requires WTO members, whose national measures have been deemed to be inconsistent with GATT 1994 obligations, with an excption based on the objectives enumerated therein. GATT Article XX has been the key provision at the heart of the trade and environment debate. The jurisprudence under Article XX has developed the analytical framework to determine how much scope there is for WTO members to justify any violations in their pursuit of non-trade objectives. The framework involves a twofold analysis.39 First, the WTO member attempting to defend its measure must prove that it falls within the scope of one or more of the exceptions enumerated in Article XX. Recent jurisprudence has indicated that this is nominally easy for a WTO member to establish.40 However, the measures must have the requisite ‘degree of connection or relationship between the measure under appraisal and the state interest or policy sought to be promoted or realized’.41 The two exceptions that are most relevant to a climate change measure are those that are necessary to protect human, animal, plant life, or health under Article XX(b) or relating to the conservation of exhaustible natural resources under Article XX(g). Article XX(b) involves a weighing and balancing of factors including the relative importance of the common interest or values sought to be protected by the measure, the extent to which the measure contributes to the realization of the policy objective, and the degree of trade-restrictiveness of the measure.42 Article XX(g) requires that the measure ‘relate to the conservation of exhaustible natural resources’, which has been interpreted to mean that there must be a ‘substantial relationship’43 or a ‘close and genuine relationship between means and ends’.44

  Appellate Body Reports, US—Gasoline, p. 23 and US—Shrimp, paras 118–19.   See Appellate Body Reports, European Communities—Measures Prohibiting the Importation and Marketing of Seal Products (‘EC—Seal Products’), WT/DS400/AB/R/WT/DS401/AB/R, adopted 18 June 2014. 41   Appellate Body Report, US—Gasoline, p. 18. 42   Appellate Body Reports, Brazil—Tyres, para 178; Korea—Various Measures on Beef, para 164; China—Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, WT/DS363/AB/R, adopted 19 January 2010, DSR 2010:I, p. 3, para 239. 43   Panel Report, United States—Standards for Reformulated and Conventional Gasoline, WT/DS2/R, adopted 20 May 1996, as modified by Appellate Body Report WT/DS2/AB/R, DSR 1996:I, 29 at p. 17. 44   Appellate Body Report, US—Shrimp, para 136. 39


326    part iv.  setting up the int'l mitigation regime A measure whose stated goal is to deal with carbon leakage (i.e. mitigating climate change through controlling CO2 emissions) will likely fall under the policy objectives in subparagraph (b) or (g)).45 Climate change has been linked to serious threats to the global environment that can be extended to adverse effects on human, animal, and plant life or health. Further, as clean air has been considered an ‘exhaustible natural resource’46 pursuant to Article XX(g), a measure that aims to reduce carbon emissions in the atmosphere would likely fall under the ­subparagraph. Further, measures designed to prevent climate leakage could be characterized as being substantially related to the policy objective of addressing climate change. What may be less certain, in the context of a measure that treats domestic and imported products less favorably, is whether the measure contains similar restrictions in order to meet the requirement under Article XX(g) of it being even-handed.47 A national climate measure whose goal is to promote energy security could be covered by Articles XX(b) and (g), if the link between the measure aimed at ­promoting energy security and climate change mitigation can be demonstrated. However, if the climate change measure is interpreted as contributing less to mitigating climate change and more to protecting domestic industry or otherwise ensuring job protection and economic development, there is a risk that it would not fall under the Article XX exceptions. This could arise under an analysis where the measure’s intentions undermine its ability to contribute to mitigating climate change or indicate that it is not the least trade-restrictive alternative for the WTO member. These findings will depend on specific facts relating to a measure. Nevertheless, WTO members that design their measures to assist domestic producers facing stringent carbon emission reduction requirements and penalize producers from other WTO members with little or no carbon regulation could weaken the link between the measures and the objective of mitigating climate change. Measures that overtly attempt to assist domestic producers also run the risk that they could be interpreted as a disguised restriction on international trade set out in the Article chapeau requirements. A WTO member whose measure is provisionally justifiable under Article XX must still prove that it is consistent with the chapeau requirements which state that the measure should not be ‘applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade’. Most of the

 See US—Gasoline, Appellate Body Report (Doc. WT/DS2/AB/R, 29 April 1996) section III.B. There is no reason why the atmosphere, threatened by the current level of greenhouse gases in it, should not be considered an exhaustible natural resource. This position is shared by authors like J. Wiers, Trade and Environment in the EC and in the WTO: A Legal Analysis (2002) at 239 and C. Voigt, ‘WTO Law and International Emissions Trading: Is there Potential for Conflict?’ (2008) 2.1 Carbon and Climate Law Review 54, at 61. 46   Panel Report, US—Gasoline, para 6.37.    47  Appellate Body Report, US—Gasoline, p. 19. 45

15.  national measures and wto consistency    327 trade-related environment measures that have been subject to the Article XX ana­ lysis in WTO dispute settlement have failed to meet the chapeau requirements.48 Nevertheless, the jurisprudence developed by the Appellate Body has provided guidance on how such measures, including those relating to climate change mitigation, could be consistent with the chapeau. The chapeau is concerned with the manner in which the measure is applied.49 This ‘can be most often discerned from the design, the architecture, and the revealing structure of a measure’.50 A number of factors need to be assessed to determine whether a measure constitutes a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail. In that regard, one of the most important factors in assessing arbitrary or unjustifiable discrimination is whether the discrimination is rationally related to, or goes against, the policy objective under Article XX.51 Other factors can include the vagueness of the measure and the incidentally broad discretion that could be applied when implementing it,52 the rigidity and inflexibility in how the measure is applied,53 due process concerns,54 and the absence of any effort by the WTO member to pursue cooperative arrangements with other WTO members for market access.55 Climate change measures that address carbon leakage and other concerns relating to the WTO member’s efforts to mitigate climate change are unilateral in nature. Although unilateral measures are not prima facie inconsistent with the chapeau requirements, measures that intend to achieve an objective that is global in nature and conditions market access upon meeting the WTO member’s regulatory standards, have generally faced more scrutiny from the WTO Appellate Body. This could include an inquiry into whether the WTO member has entered, in good faith, negotiations with other WTO members to develop a particular regulatory standard.56 The negotiations do not have to yield a specific result in order for the ­measure to be found consistent with the chapeau requirements.57 Further, a measure which

  Appellate Body Reports, US—Gasoline, US—Shrimp, Brazil—Tyres.   Appellate Body Reports, US—Gasoline, pp. 23–4, US—Shrimp, para 160, EC—Seal Products, para 5.302. 50   Japan—Taxes on Alcoholic Beverages, Reports of Appellate Body, WT/DS8/ABR, WT/DS10/ABR, WT/DS11/ABR, adopted October 4, 1996, DSR 1996. 51   Appellate Body Reports, Brazil—Tyres, para 227; US—Shrimp, para 165. 52   Appellate Body Reports, EC—Seal Products, paras 5.325–5.328; US—Shrimp, para 181. 53   Appellate Body Report, US—Shrimp, para 177. 54   Appellate Body Report, US—Shrimp, para 182. 55   See Appellate Body Report, EC—Seal Products, para 5.337. 56   Appellate Body Report, US—Shrimp, para 172. 57   United States—Import Prohibition of Certain Shrimp and Shrimp Products: Recourse to Article 21.5 of the DSU by Malaysia, Report of the Appellate Body, WT/DS58/AB/RW, adopted November 21, 2001, para 5.67. The efforts by the EU to reach an international agreement within the International Civil Aviation Organization (ICAO) on aviation emissions prior to the unilateral inclusion of aviation-related 48


328    part iv.  setting up the int'l mitigation regime permits the importing WTO member to assess whether its exported ­products meet  the requisite standard would also be considered to be less unjustifiable ­compared to a regime that does not afford any flexibility for those members to demonstrate that its measures can achieve the same regulatory objective.58 Finally, an absence of any due process in the decision-making to determining compliance with the importing WTO member’s requirements could also lead to a ­finding that the measure is applied in an unjustifiable manner. Further, the chapeau requires that measures provisionally justified under Article XX do not constitute a disguised restriction on trade. A measure that aims to level the playing field between products due to more stringent climate change requirements can provide a reasonable basis for a WTO panel to make such a finding. For instance, if a border adjustment measure linked to an emissions trading scheme aims to lend support to the products from domestic carbonintensive sectors by giving them a certain amount of free allowances, this could likely lead to a finding of a disguised restriction on trade. A measure motivated by concerns of economic competitiveness, despite aiming to reward producers whose production complies with a climate change measure, reveals an intent to protect domestic producers. Any national climate measure that is adopted to address competitiveness concerns will be vulnerable to being found to be trade-distortive. Blatant recognition of a WTO member’s loss of competitiveness in the measure or its supporting documentation could prejudice any claim that a climate change measure is justifiable under Article XX. Even measures that aim to address climate change leakage could be viewed as veiled economic protectionism by upsetting trade flows through incentives for domestic industry not to relocate. A measure striving towards energy security could stand a better chance of being justified under Article XX. Such a claim will ultimately depend on the environmental nature of the energy security considerations in addition to the design and application of the measure.

4.2 Climate Change-related Technical Regulations and the TBT Agreement The TBT Agreement applies to ‘technical regulations and standards, including packaging, marking and labelling requirements’, requiring that they do not discriminate against imported products vis-à-vis domestic products (national treatment)

emissions within the proposed EU emissions trading scheme could have supported the EU’s claims under the chapeau, had a dispute before the WTO been triggered.   Appellate Body Report, US—Shrimp, paras 173–175.


15.  national measures and wto consistency    329 or products originating in another country.59 In addition, technical regulations cannot be more trade-restrictive than necessary.60 Technical regulations are defined under the TBT Agreement in accordance with the first sentence of Annex 1.1 of the TBT Agreement. They must apply to an ‘identifiable group of products’,61 lay down product characteristics or their related process and production methods,62 and compliance with the product characteristics must be mandatory.63 Climate change measures may not lay down product characteristics as that requirement has been explained in the jurisprudence. Product characteristics include ‘objectively definable features, qualities, attributes, or other distinguishing mark of a product’.64 They can also relate to ‘a product’s composition, size, shape, colour, texture, hardness, tensile strength, flammability, conductivity, density, or viscosity’.65 In this case, climate change measures are more directed to the carbon intensity of the product’s production rather than physically definable features, qualities, and attributes. Alternatively, the second criteria could be met if the measure lays down a process and production method related to product characteristics. Thus, if the carbon intensity or energy consumed can be associated with the product characteristic, it could constitute a technical regulation. In most instances, however, the carbon dioxide emitted in the production is not physically evident in the product itself. Thus, the process and production method requirements, which govern CO2 emissions, would not constitute a process and production method that relates to the product characteristics. According to the Appellate Body in EC—Seal Products, a ‘related’ PPM is one that is ‘connected’ or ‘has a relation’ to the characteristics of the product.66 Thus, a measure that lays down related PPMs is one where the process and production methods prescribed by the measure ‘have a sufficient nexus’ to the characteristics of the product.67 The nexus could include PPMs whose effects are not physically evident in the final product. If so, climate change measures that regulate a product based on the carbon intensity of its production could be technical regulations under the TBT Agreement. If the climate change measure is a technical regulation, it would be subject to the national treatment and MFN obligations set out in Article 2.1 of the TBT Agreement. The same analytical test as undertaken in Articles III:4 and I:1 of the GATT would apply.68 Both the ‘like products’ and ‘less favorable treatment’ analyses

60 61   Article 2.1.   Article 2.2.   Appellate Body Report, EC—Asbestos, para 70.   Appellate Body Report, EC—Asbestos, para 67. 63   Appellate Body Report, EC—Asbestos, para 68. 64   Appellate Body Report, EC—Asbestos, para 67. 65   Appellate Body Report, EC—Asbestos, para 67. 66   Appellate Body Reports, EC—Seal Products, para 5.12. 67   Appellate Body Reports, EC—Seal Products, para 5.12. 68   Article I:1 of the GATT 1994 does not feature a less favorable treatment test although the analysis under Article I:1 is still an assessment of whether the equality of opportunities for the products from one WTO member have been adversely affected. See Appellate Body Reports, EC—Seal Products, para 5.87. 59


330    part iv.  setting up the int'l mitigation regime are applied. However, under Article 2.1, if a detrimental impact against the product of a WTO member can be established, it can still be justified exclusively by a legitimate regulatory distinction rather than reflect discrimination. The legitimate regulatory distinction test was developed by the Appellate Body in the TBT Trilogy cases,69 particularly to ensure the same balance between WTO rules regarding nondiscrimination and a WTO member’s right to regulate in the TBT Agreement as that in the GATT 1994 between Articles I:1 and III:4 and the Article XX exceptions. Article 2.2 requires technical regulations to be not more trade-restrictive than necessary. The analytical test to determine whether there has been a violation of Article 2.2 is similar to the necessity test under Article XX. The recent jurisprudence on the TBT Agreement lends importance to WTO members who attempt to introduce climate change measures. If the measures are technical regulations, it subjects them to a different WTO Agreement that incorporates concerns regarding the right to regulate into the Agreement rather than that right being manifest as an exception. WTO members could therefore adopt trade restrictive measures that pursue legitimate objectives explicitly recognized in the TBT Agreement such as the ‘protection of human health or safety, animal or plant life or health, or the environment’. If a technical regulation is origin-neutral and seeks to achieve a legitimate policy, the detrimental impact upon imported like products may be justifiable. Further, if the climate change-related technical regulation is based on an international standard, there is a presumption of compatibility with the TBT Agreement.70

5. Conclusion This chapter has discussed the WTO consistency of a number of national climate measures aimed at tackling carbon leakage and levelling the playing field. BTAs, border adjustment measures linked to emission trading schemes, and green energy domestic support policies have led to international trade tensions and in some cases even to formal disputes before the WTO Dispute Settlement  Appellate Body Reports, United States—Measures Affecting the Production and Sale of Clove Cigarettes (‘US—Clove’), WT/DS406/AB/R, adopted 24 April 2012; United States—Tuna II (‘Mexico’); United States—Certain Country of Origin Labelling (COOL) Requirements (‘US—COOL’), WT/DS384/ AB/R/WT/DS386/AB/R, adopted 23 July 2012. 70   TBT Agreement, Article 2.5: ‘Whenever a technical regulation is prepared, adopted or applied for one of the legitimate objectives explicitly mentioned in paragraph 2, and is in accordance with relevant international standards, it shall be rebuttably presumed not to create an unnecessary obstacle to international trade.’ 69

15.  national measures and wto consistency    331 Body (DSB). National climate measures aimed at preventing carbon leakage (i.e. mitigating climate change) have a better chance to be considered WTO consistent than measures solely targeting concerns of loss of competitiveness and trying to level the playing field. The fate of national climate measures based on energy security grounds will depend very much on whether they are genuinely environmentally motivated. In sum, the policy driver (mitigation of climate change) is obviously relevant for justifying WTO violations, but may not predetermine that result. The domestic content requirement attached to a FIT scheme, or the possibility for the domestic carbon-intensive sector to receive free allowances within an emissions trading scheme, could reveal intentions to protect domestic industry thus undermining the bona fide objectives of the measure. The recent jurisprudence interpreting various provisions of the TBT Agreement provides some room for the consistency of national climate measures. The TBT Agreement incorporates the legitimacy of objectives such as those aimed at climate change mitigation into its substantive obligations. However, the TBT Agreement still imposes similar disciplines to address trade-protectionism and arbitrary or unjustifiable discrimination that could apply to climate change measures originating from concerns of carbon leakage and competitiveness. In conclusion, national climate measures can be expected to face an uphill battle, although not insurmountable, in being found consistent with WTO obligations.

Chapter 16


1. Introduction: The Quest for the Holy Grail


2. The Evolution and Diffusion of Emissions Trading


3. From Theory to Practice: Designing and Implementing Emissions Trading


4. The Future of Emissions Trading in Climate Change Law and Policy


*  I am indebted to Sanja Bogojević, David Driesen, Kevin Gray, and Michael Mehling for valuable comments on an earlier draft.

16.  design and implementation of emissions trading    333

1.  Introduction: The Quest for the Holy Grail At the turn of the twenty-first century, greenhouse gas emissions trading rapidly became regulators’ weapon of choice in the battle to slow global climate change. Following the launch of the world’s first supranational emissions trading system (ETS) in the European Union in 2005, emissions trading spread across the developed world. Trading schemes were initiated in the United States, where subnational systems were adopted in the absence of progress at the federal level, as well as in other industrialized countries. By the early 2010s, trading schemes were also increasingly being adopted or considered by various developing countries. With their purported advantages of cost-effectiveness, environmental effectiveness, flexibility, predictability, inducing innovation, and democratic legitimacy (Ackerman and Stewart, 1985; Hahn and Stavins, 1991), market mechanisms such as emissions trading provide policymakers with a theoretically appealing alternative to traditional regulation.1 As regulators often view emissions trading as marrying environmental effectiveness with economic efficiency, it appears to have become the holy grail of climate change law and policy. Notwithstanding these theoretical advantages and the mounting level of attention from policymakers, emissions trading has struggled to live up to expectations. Practical experiences to date show that emissions trading is not (yet) the unequivocal success story that its proponents hoped it would be. Actual evidence of emission reductions due to trading programmes is scattered at best. Further, after a promising start, prices in several greenhouse gas emissions trading schemes dropped and remained very low (e.g., Stavins, 2012). While a low price does not necessarily jeopardize the environmental outcome, it means that it is unlikely that the full social and environmental costs of greenhouse gas emissions are being internalized by polluters. Moreover, low prices do not offer a strong incentive for the large-scale investments required for the shift towards a low-carbon society. Further complicating an already imperfect picture, the inclusion of emission offsets in trading schemes has drawn criticism, particularly from observers concerned about the environmental integrity of trading systems (Schneider, 2007; Wara and Victor, 2008). From a different perspective, industries covered by trading systems have become increasingly worried about the effects of carbon pricing on their international competitiveness, notwithstanding that such effects may be more limited under a trading system than under traditional regulation. Their concern is related to the problem of carbon leakage, 1   Economic theory suggests that many of the advantages that hold for price control instruments, such as emissions trading, also hold for quantity control instruments such as taxation. Trading is, however, considered to be preferable when there is uncertainty about the costs of compliance (Weitzman, 1974).

334    part iv.  setting up the int'l mitigation regime where the implementation of emissions trading schemes in one jurisdiction may lead to an increase in emissions elsewhere (van Asselt and Biermann, 2007). Lastly, there have been instances of fraud related to carbon markets, even though such cases have been largely restricted to the EU ETS (Walters and Martin, 2012).2 While these experiences point to serious problems, they do not necessarily mean that greenhouse gas emissions trading is bound to fail. For proponents, emissions trading is a ‘learn-by-doing’ instrument, where important lessons on how to design and implement a trading scheme are learned along the way, and the instrument is adapted to new realities (Newell et al., 2013: 143). Moreover, emissions trading advocates point out that, in most cases, emissions trading functions exactly how it ought to, and that low prices do not affect the pre-determined environmental outcome. Rather than lingering on these general arguments on the promises and pitfalls of emissions trading, this chapter offers a cross-jurisdictional analysis of the ways in which mandatory emissions trading schemes have been designed and implemented. More specifically, it examines various design and implementation choices that regulators across the globe are faced with. The chapter shows, first, that these choices strongly influence the performance of emissions trading systems; and, second, that these choices themselves are dependent on contextual factors, which both explains divergence in ETS design and implementation and points to a need for caution in transferring lessons from one jurisdiction to another. The design and implementation of emissions trading is of high importance for the future direction of climate change law and policy in various jurisdictions. The EU ETS, for instance, is Europe’s flagship policy to meet its overarching climate and energy objectives. Moreover, the performance of the EU ETS will affect other trading schemes around the globe, both through direct and indirect linkages as well as through its exemplary nature. The functioning of the EU ETS thus informs the debate on instrument choice in climate law and policy in various jurisdictions (Keohane et al., 1998; Stewart, 2007). The chapter starts with a recapitulation of how emissions trading as a climate policy instrument has evolved and spread across jurisdictions. It then highlights several key choices regulators must make when designing and implementing a trading scheme. The overview of choices, drawing on illustrations from several trading schemes, sets the stage for a discussion of the future of emissions trading in climate law and policy. The underlying question here is whether problems caused by design choices can be addressed through a ‘quick fix’ redesign, or whether there are more fundamental issues at play that will continue to affect the performance of emissions trading in the long-term. 2   For instance, there were several instances of value added tax (VAT) fraud (also known as ‘carousel fraud’), with individuals involved in buying and selling allowances claiming VAT without paying this VAT to EU Member State governments.

16.  design and implementation of emissions trading    335

2.  The Evolution and Diffusion of Emissions Trading Emissions trading’s long and winding journey from economic theory to practical implementation has been well documented (Voß, 2007; Baldwin, 2008). In brief, following Coasean logic, which suggests that externalities can be dealt with efficiently if property rights are well defined and there are no or low transaction costs, economists such as Dales (1968) argued that by conferring property rights to environmental resources such as air and water, and creating markets for trading these rights, it is possible to achieve a certain level of environmental protection at the lowest possible cost. After initial experiments at a local and regional level, the domestic sulphur dioxide emissions trading scheme (‘acid rain programme’) in the United States, implemented through an amendment of the Clean Air Act in 1990,3 launched the first large-scale, countrywide trading system (Ellerman et al., 2000). This was the birthplace of large-scale emissions trading systems and from this point onwards, ETS began to spread across jurisdictions. First, through a process of ‘vertical legal borrowing’ in which US policymakers and researchers played a crucial role, emissions trading became a part of international climate change law (Wiener, 2001). Although initial attempts by the US government to incorporate market-based mechanisms in the United Nations Framework Convention on Climate Change (UNFCCC) were abandoned (Bodansky, 1993: 522), three flexibility mechanisms were included in the Kyoto Protocol: international emissions trading, the Clean Development Mechanism (CDM), and Joint Implementation. The inclusion of these mechanisms was driven by a need to enhance the cost-effectiveness of climate policies and measures, as well as to ensure broad participation in the international climate regime (van Asselt and Gupta, 2009: 331–6). Second, emissions trading systems were also adopted in several other countries. The exact path of the diffusion of the instrument is difficult to trace. In the late 1990s, states like Denmark and the United Kingdom and companies like BP began to experiment with greenhouse gas emissions trading, whereas other countries, such as Norway and Sweden, also started to consider it (Ellerman and Buchner, 2007) . While these initiatives may have been influenced by the acid rain pro