Thomas Spencer, Institute for Sustainable Development and International Relations (IDDRI)

FU Sha, National Center for Climate Strategy and International Cooperation of China (NCSC) [1]

ZOU Ji, National Center for Climate Strategy and International Cooperation of China (NCSC) [2]

Michel Colombier, Institute for Sustainable Development and International Relations (IDDRI)

Forward

This paper is the fruit of many months of intensive collaboration between the authors, on the basis of the Memorandum of Understanding signed between the Institute of Sustainable Development and International Relations (IDDRI) and the National Centre for Climate Strategy and International Cooperation of China (NCSC) in December 2013.

This paper was an effort between researchers from different countries and with different backgrounds to achieve an agreed text on an important issue in the negotiations through a thought experiment of ‘think tank level negotiation’. As such it was conducted in a spirit of discussion and compromise. It does not necessarily represent the views of the governments of their respective countries; and differs somewhat from their own ideas as a result of compromise.    

It is a significant achievement for two groups of authors from China and Europe to have come this far. There is much that can be learnt from this thought experiment for the global negotiations.  

The global negotiations are moving into a new and important phase. Parties have agreed to put forward the elements of a draft text in Lima in 2014, in order to propose a draft agreement six months before the crucial Paris conference in 2015.

Part of the challenge is to define a new framework for mitigation, among the other elements of the agreement.  This framework will need to recognize the realities of different circumstances and interests in sovereign states, especially between developed and developing states, the international legal and institutional tools that can be mobilized, and the urgency of limiting warming to 2˚C. It will need to be equitable, ambitious, effective and dynamic. 

This paper represents the authors’ attempt to meet that challenge and contribute to the global discussion on effective responses to the common challenge of climate change.

This paper has benefited enormously from discussion with many colleagues, in many contexts. We would like to thank Emmanuel Guérin (SDSN), as well as Teresa Ribera, Henri Waisman, Michel Colombier, and Michael Jacobs at IDDRI. The authors would like to thank Mathilde Mathieu for her research assistance. 

Highlights

The Mitigation Framework in the New Climate Agreement

Countries have agreed to negotiate a new climate agreement by 2015. One of the key elements of this will be a new mitigation framework and new emissions targets for all. Enhanced action is urgently needed to limit warming to 2˚C. Otherwise, development and welfare will be put at significant risk. The new agreement needs to find a way to allow the continuous strengthening of the action of sovereign states, to reflect the 2˚C objective. The agreement should also recognize the spectrum of countries and changing circumstances, as well as remaining gaps between developed and developing country groups.

Climate Mitigation: Rebuilding the Machine from the Inside Out

Mitigation is a long-term structural challenge, involving profound changes in investment, infrastructure, technology and behaviour. Uncertainties in such structural processes may be particularly high in developing or emerging countries still undergoing industrialization, demographic shift, and urbanization. Mastering them requires long-term policy horizons, cooperation, technology innovation and policy learning, focusing on the drivers of emissions reductions.

From Targets to Pathways

The mitigation framework should consist of a more precise translation of the 2˚C target as a key directional reference, but not as the basis for top-down allocation. It is essential to integrate the long-term perspective in national policy making, international cooperation, and private sector anticipations. Under the new agreement, countries except Least Development Countries would put forward aspirational long-term low emissions pathways to 2050. These would be submitted after 2015 and regularly updated. Countries would also submit multi-sector, multi-timeframe operational targets in 2015, under the new agreement. These should reflect the drivers of emissions reductions, allowing for the most ambitious action where countries feel they can go furthest. These would be updated every 5 years in subsequent rounds of collective action.           

1         Context and Introduction

Countries have agreed to negotiate a new global climate agreement by 2015, which will be applicable to all countries from 2020. According to the negotiation mandate, the 2015 agreement will cover mitigation, adaptation, finance, technology development and transfer, transparency of action and support, and capacity building.^[3] Negotiations are not starting from scratch; progress has been made since Copenhagen on each of these elements.[4]

Currently, all major economies, with a few exceptions, have proposed voluntary mitigation targets to 2020 under the framework of the Cancún Accords. These targets are only until 2020, and are recognized to be insufficient to meet the objective of keeping global average temperature change to less than 2˚C. The IPCC notes:

“…Estimated global GHG emissions levels in 2020 based on the Cancún Pledges are not consistent with cost-effective long-term mitigation trajectories … to limit temperature change to 2˚C relative to pre-industrial levels … The Cancún Pledges are broadly consistent with cost-effective scenarios that are likely to keep temperature change below 3°C relative to preindustrial levels…”[5]    

Negotiating new, stronger mitigation targets for the period after 2020 will therefore be one of the key tasks of the negotiation process. This paper focuses mainly on the issue of defining the mitigation framework, as one key element of the new comprehensive agreement.

The 2013 climate conference agreed that Parties should define the information framework for mitigation targets[6] by the Lima conference in 2014. This information, provided together with mitigation targets, should facilitate a better understanding, credibility and accountability of these targets. This is one of the key deliverables for the 2014 negotiations.

This paper addresses this issue of the design of the mitigation framework: how should we structure the information that Parties put forward with their mitigation targets, in order to promote participation, equity, transparency and ambition? It also addresses broader questions of the mitigation regime: how can it promote dynamic, long-term, transformational action?

Several issues should be made clear from the outset. Firstly, the 2013 Warsaw conference made clear that there is still some divergence of views regarding the legal form of mitigation targets. This paper leaves aside this question of legal form, and thus uses the neutral word mitigation ‘targets’. Secondly, the agreement, as mentioned above, will need to cover all the issues of the Durban Mandate. This paper mainly focuses on mitigation targets, and leaves aside this issue of other elements of the 2015 agreement. Further work should take up these issues urgently.[7]

Thirdly, the issue of the design of mitigation targets combines both elements of “structure” and “process”.[8] The transparency, credibility and understanding of mitigation targets can be facilitated by processes such as a reporting, verification and review, which can help Parties to understand each other’s actions. It can also be facilitated by the structure of the targets themselves, i.e. the rules and information that are used to define them. Ensuring a transparent outcome on mitigation will require optimizing both elements. This paper focuses on the issue of the “structure” of mitigation targets.

This paper is structured as follows. Section 2 outlines the key issues that the mitigation framework must address. These include the scale and rapidity of transformation, the need for long-term signals and policy coordination, and the need to address the multiple drivers of emissions trajectories. Section 3 then looks at the ad hoc structure that the Cancun Pledges have taken, in order to draw some lessons for the future design of the mitigation framework. Section 4 then proposes the basic pillars of the mitigation framework in the new agreement: the 2˚C target as a directional reference for global action; and a fundamental shift from a ‘logic of targets’ to a ‘logic of pathways’. Under a ‘logic of pathways’, countries would submit long-term, indicative low emissions pathways, combined with operational multi-sector, multi-timeframe target packages. Finally, section 5 concludes.    

2         Key Issues to be Addressed by the Mitigation Framework

2.1       The Urgency of Climate Change and the Need for Transformation

The recent series of IPCC reports have recalled the urgency of global climate change. The IPCC confirmed that without further mitigation efforts, global average surface temperatures will rise by 3.7 to 4.8˚C over the century, with the possibility of higher temperature increases not to be excluded.[9] This is clearly above the objective of limiting warming to 2˚C which was been set under the 2010 Cancun Agreements.[10] Unabated climate change at this level would pose great risks to economic development, vulnerable populations, and ecosystems.

A significant change of course is therefore required in order to address climate change. According to the IPCC, emissions need to be reduced by 40-70% by 2050 in order to have a likely chance (>66%) of keeping warming below 2˚C.[11] This would require significant transformations in energy supply, energy use, and agriculture, forestry and other land-use.[12] The key sectoral transformations required have been characterized by the IPCC’s WGIII report. These include the significant up-scaling of low-carbon energy supply, and improvements in energy efficiency and the switch to low-carbon energy sources in buildings, transport and industry:[13]

·         Energy supply: the share of low carbon energy will need to triple or quadruple by 2050.[14] Low-carbon electricity supply increases from the current share of around 30% to more than 80% by 2050.[15]

·         Transport: energy demand for transport would need to be reduced by 10-45% from baseline by 2050, through more efficient technology and reduction in structural transport demand through e.g. urban planning. Low-carbon energy supply in transport would need to reach around 30-45% of final energy consumption in 2050.[16]

·         Buildings: final energy demand will need to be reduced by about 15-35% compared to baseline by 2050 through energy efficiency, and low-carbon energy to increase to 45-60% of final energy consumption in the buildings sector by 2050.[17]   

·         Industry: final energy demand will need to be reduced by about 18-28% by 2050 compared to baseline, through a combination of energy efficiency and structural measures such as material efficiency, recycling and reuse. Low-carbon energy supply will need to increase to about 45-55% of final energy consumption in the industry sector, largely through a switch to electricity and industrial CCS.[18]

It should be noted that such figures against ‘baseline’ scenarios mask a number of factors. Firstly, evolutions within the baseline scenarios:  for example, massive growth in energy demand in baseline scenarios will drive high fossil fuel prices, and therefore high efforts in efficiency and fossil fuel substitution, even within baseline scenarios. Secondly, there are significant differences in the regional evolutions of growth, demand and energy supply which are not explicit in such global ‘baseline’ results. For example, for mature (OECD) countries economic growth and energy demand are expected to be slow: the transformation will involve significant refurbishment and replacement of existing capital stock. By comparison, in developing countries growth, investment and energy demand will be stronger, presenting challenges of greening new investment decisions, etc. This means that measured against ‘baseline’ the scale and nature of transformation facing different regions is not the same. Such issues are addressed further in section 2.2 below.   

Nonetheless, these references can give a sense of the direction, technologies and strategies required sector by sector.

2.2       The Diversity of Countries and Remaining Gaps between Groups

According to the Durban Mandate, the new agreement should be “under the Convention [and] applicable to all Parties”.[19] It is widely expected that all major countries should take on new mitigation targets in the context of this new agreement, with Least Developed Countries doing so probably at their discretion. This creates the important challenge of finding a mitigation framework that can take into account the wide diversity of countries, while providing transparency.

Figure 1 provides one indicator of this diversity between countries, showing GDP per capita in purchasing power terms. As can been seen, there is a very wide spectrum of countries, based on this indicator. To provide another point of comparison, Figure 2 shows CO₂ emissions per capita for the same group of countries. Clearly, any framework to include mitigation targets from such a diverse range of countries will need to be flexible, in order to accommodate the spectrum of national circumstances, and the diversities of policies and strategies which are available for reducing emissions in each country.

In order to give a sense of the evolution of broad groups of countries overtime, we present GDP/capita (since 1990) and CO₂/capita (since 1992) in Figure 3 and Figure 4 below for five groups of countries.[21]

It should be noted that the groups represented are purely illustrative. The Warsaw decision stated that mitigation targets would be nationally-determined.[22] In addition, any groupings are of course subject to discussion, given the imperfect overlap between different internationally used classifications, negotiation groups, and different objective criteria like GDP per capita or overall economic size. Furthermore, it is difficult to capture the mitigation and development opportunities and challenges faced by countries only using one or two indicators. In this sense the figures below are intended to give merely an illustration of how conditions have changed in broad groupings since 1990. This can help give an insight into the different kinds of mitigation challenges that the members of the different groups tend to face.    

The five groups of countries represented are as follows:

1.       Annex 1 countries. All countries represented in Annex 1 of the Convention. It should be noted that even this group contains significant diversity, e.g. between Ukraine and the US. 

2.       Major oil and gas exporters non-Annex 1. These are the members of the Major Petroleum and Gas Exporters classification of the United Nations Conference on Trade and Development (UNCTAD), with GDP per capita at PPP above USD 15 000 in 2012 and members of non-Annex 1. These countries have a particular challenge of economic diversification and the management of large resource rents, as well as high emissions and GDP per capita.[23]    

3.       Higher GDP, non-Annex 1 countries. These countries are non-Annex 1 countries with a GDP per capita above USD 15 000 in 2012, who do not fall into group 2 above. These countries include some newly industrialized countries, which have largely gone through important structural processes of demographic shift, urbanization and industrialization.[24]  

4.       Emerging non-Annex 1 countries. This group includes all countries with a GDP/capita between USD 7 000 and 15 000. Of course this cut-off is subject to discussion, although the largest countries weigh most on the outcome here and adjusting the cut-off is unlikely to significantly impact the group weighted average. Clearly, the group contains some small countries which would not normally be ranked among the ‘emerging countries’ due to smaller market size. However, to be consistent they have been placed in this group based on the quantitative criteria of GDP/capita. The only exception to this quantitative criteria is India, which has been placed in this group due to its large size, traditional place in international classifications of emerging countries, and role within the BASIC group in the climate negotiations. On GDP/capita alone, it would not be part of this group. Countries in this group often face similar challenges of on-going urbanization and industrialization processes. Even though this group contains a diversity of countries, the results in Figure 3 and Figure 4 are dominated by the largest countries such as China, India, Brazil, South Africa, Thailand and Indonesia which make up 88% of GDP in this group.[25]

5.       The rest of non-Annex 1. All other non-Annex 1 countries which do not figure in the above four groups. It should be noted that this group contains countries which are often placed in international classifications of emerging countries, due to their market size. However, on the objective criteria of GDP/capita they are placed in this group (with the exception of India, noted above).     

It should be noted that Figure 3 and Figure 4 take the weighted average of GDP or CO₂/capita among the countries within the group. That is, they sum GDP and CO₂ for each group and divide by the summed population of the group. This means that larger countries are taken into account.  

A number of insights can be drawn from the two figures. Firstly, it is clear that there remain significant differences between the groups as defined, with an increasing income gap in absolute terms when compared with the 1990 level between emerging and Annex 1 economies, for example. Secondly, there has been a process of relative convergence, albeit quite incomplete. Between 1990 and 2012, the gap in GDP/capita reduced by 13 percentage points between Annex 1 and emerging non-Annex 1 countries, for example, although in 2012 it was still 75% below the Annex 1 average. The gap in GDP/capita reduced by 16 percentage points between the Annex 1 group and higher GDP non-Annex 1 countries between 1990 and 2012. It reduced only slightly (0.4 percentage points) between the rest of non-Annex 1 and Annex 1. Thirdly, it is interesting to note that emerging non-Annex 1 and the rest of Annex 1 group have started to diverge since 1990.

In sum: the new agreement will have to include a wide diversity of countries. Variation is particularly large within the non-Annex I group. This means that the new agreement should acknowledge the difference between fast-growing, higher capacity emerging economies and the rest of the non-Annex I group. However, the gaps between Annex I and non-Annex I group are still large. In this regard, the new agreement will thus need to provide a flexible and equitable framework for mitigation targets, to reflect this large spectrum of countries and gaps in the development of different country groups.

2.3       Climate Change as a Long-Term Structural Challenge and the Need for Global Coordination

Climate change is often described as a “wicked problem”. GHG emissions come from all sectors and all activities within the economy. Climate policy has many interactions with other development agendas, such as growth, poverty alleviation, job creation, environmental quality, and energy security and access.

These interactions, opportunities and uncertainties have implications for the capacity of countries to credibly commit to emissions reduction targets. This in turn has implications for the design of the mitigation framework. In this regard, it is useful to distinguish between three different ‘levels’ of uncertainty, each of which entails implications for the design of the mitigation framework.

·         Level 1: uncertainty about the level and structure of future economic activity. Climate policies aim to effect long-term change in inert systems: to alter investment flows and economic incentives, the composition of long-lived capital stock, and consumption choices. Such economic, physical and social change takes time. Long-term developments such as urbanization patterns, the rate and structure of growth, international demand for goods and services, and societal evolutions can have very significant impacts on long-term emissions. In the short-term these uncertainties are often seen as ‘exogenous’ to climate policy. However, such structural factors need to be included in long-term mitigation strategies.

Such uncertainties are particularly large in fast growing developing countries, e.g. concerning growth rate and structure, societal consumption patterns, urbanization, and external demand for goods from emitting sectors. This can be seen looking back at past projections of emissions performances, compared to actual outcomes. Figure 5 compares the CO₂ emissions projections of the World Energy Outlook 2000 and the World Energy Outlook 2002, for the years 2010 and 2020, with actual historical emissions in 2010. It can be seen that actual outcomes in 2010 deviated significantly from projections. The deviation amounted to an overestimation of actual 2010 emissions by 9-13% for the OECD North America and 9-16% for Europe. It amounted to an underestimation of 50-75% for China and 7-28% for India.[27] For some large and rapidly growing countries the very concept of ‘business as usual’ is an oxymoron, due to the rapidity and extent of economic and social change.

·         Level 2: distinguishing the ‘signal’ of serious decarbonisation effort amid short-term uncertainty and inertia; implications for the cooperative framework: the above observation has implications for the design of the mitigation framework. It is clearly difficult for countries, while they undergo such rapid structural change, to ‘firmly’ commit to long-term emissions ‘quotas’. Nor is it effective to have only short-term commitments. Climate change mitigation is a long-term challenge, and profound transformation is a long-term process. Short-term policy strategies are importantly conditioned by the long-term pathway.

This level of uncertainty also raises important questions for the cooperation framework. Other countries need to be given clarity about the level of effort from their partners, even if it may be difficult for these partners to commit to firm emissions quotas. This can be seen with the Cancun Pledges, which provided significant flexibility for countries to adopt different targets, but did not facilitate much understanding of the level of effort of different parties.

The key question is therefore how to combine flexibility of the mitigation framework with short-term credibility and the long-term achievement of environmental goals. In this regard, two elements of the mitigation framework appear particularly important. Firstly, it is important to combine short and long-term perspectives in a dynamic, iterative cooperation framework, which allows for regular updating and adjustment of targets. This is the ‘time’ element of the mitigation framework. Short-term targets can be designed to give more flexibility while retaining credibility, which in turn can be reinforced by the long-term perspective. Secondly, a mitigation framework is needed which allows countries to put forward different kinds of targets, which can allow flexibility while providing maximum information about their transformation for other partners. This is the ‘structure’ element of the mitigation framework. It is discussed further below.         

·         Level 3: capacity to deliver: reaching deep emissions reductions will require significant technology innovation to bring down costs and to demonstrate and commercialize less mature technologies. Some of the required technologies are ‘global’ in the sense that they operate in highly traded product markets (batteries, for example). Here assumptions about global innovation, demonstration and deployment are crucial. Other technologies are ‘global’ in the sense that they confer no private benefits in the absence of strong policy to solve global climate change. CCS is a case in point. Global policy and technology cooperation and coordination will be required to reduce technology uncertainties. Climate policies also require significant administrative capacity. For some countries this may be a real issue in the short-term. These uncertainties mean that an iterative learning process is required which allows for increased understanding on policy, technology and economic evolutions within and between parties. 

One way to address these three levels of uncertainty is to directly address the drivers of emissions reductions. Emissions drivers can be conceptualized by looking at the so-called “Kaya identity”, which describes emissions at the outcome of four parameters: population, GDP, energy intensity of GDP, and carbon intensity of energy. In order to give more detail, these can be broken down further into a “sectoral Kaya identity”, which describes sectoral emissions as the product of four parameters: sectoral activity level, sectoral structure, energy intensity, and carbon intensity of energy consumption. Table 1 gives an example of the Kaya identity for the macro economy and transport sector.

It is important to note that this breakdown with the Kaya identity presented here gives only a snapshot, a static representation of emissions drivers.