Keeping major players onside will be key to making success of Kyoto

Date: 06/06/02

By Thomas Legge

Last week's ratification of the Kyoto Protocol marked only the beginning of the challenge which lies ahead - implementing the climate change pact. And Russia's participation is vital.

LAST Friday (31 May), in a ceremony at the UN headquarters in New York, representatives of the 15 member states and the European Commission simultaneously ratified the Kyoto Protocol.

Climate change is regarded as the most serious environmental problem facing the planet, and the EU has constantly defended the Protocol as the 'only show in town' to tackle it. As much as anything, last week's photogenic events were about the EU demonstrating its commitment in the face of US rejection of the pact last year.

Ratification is one thing, though; the real challenge lies in implementing Kyoto, particularly if some other key countries choose to walk away from it.

What ratification means for the EU.

The first practical implication of the EU's ratification is that the 'Burden Sharing Agreement' will be implemented in member states.

The Kyoto Protocol requires the EU to reduce its 'greenhouse gas' (GHG) emissions by 8 below 1990 levels, but the agreement distributes the overall target across the bloc to take account of special national conditions.

So Germany, which is heavily industrialised, has a target of 21 below 1990 levels, whereas the relatively underdeveloped Spain, Portugal, Greece and Ireland are allowed to increase their emissions by up to 27.

But the EU target will only become legally binding if the Kyoto Protocol actually comes into force - by no means a foregone conclusion. The rules require the Protocol to pass two thresholds. First, 55 countries must ratify, a condition more than satisfied by joint EU ratification. The second threshold is trickier: the ratifying countries must collectively represent at least 55 of the 1990 emissions from industrialised countries. As the United States alone was responsible for over 36 of these emissions, enforcement requires ratification by almost every other industrialised country.

Of these, the central and eastern European countries and New Zealand have declared that they will ratify. Japan, which wavered for months between supporting its close ally the US and backing the treaty that bears the name of its ancient capital, finally decided to ratify on Tuesday (4 June). Canada and Australia are lukewarm, but the Protocol could just about survive their withdrawal because their emissions only accounted for 5.4 of the total. In the end it is Russia, responsible for 17.4 of emissions, that holds the casting vote on whether or not the Protocol comes into force.

Russia holds all the cards.

Everyone assumes that Russia will be only too happy to ratify the Protocol.

Russian industry was clobbered by the post-Soviet collapse of the 1990s, and as a result the country's emissions will fall below Kyoto's target of stabilisation of GHG emissions by 2010.

This means that Russia will have emission-reduction credits to spare - estimates range between 7 and 30 below its 1990 baseline. (Under the recently finalised rules of the Kyoto Protocol, countries that beat their targets may sell their surplus credits to countries that find their targets difficult to meet.)

Russia stood to gain billions of euro from such 'emissions trading', but the withdrawal of the US robs Russia of its main potential customer.

The disappearance of this pot of gold and an aversion to the other requirements that membership of the Protocol might bring (including future reduction commitments) could dissuade Russia from ratifying.

If Russia does not ratify and the Protocol does not enter into force, will the EU still accept its 8 target?

The EU has nailed its colours to the mast of the Kyoto Protocol, and last year at Göteborg the member states committed themselves to reducing their emissions in accordance with the Protocol, whether or not it comes into force. But if Kyoto does not come into force, will businesses and certain member states agree to be bound by a non-existent treaty while their competitors and neighbours are allowed to burn as much coal and oil as they wish?

However, even if Russia does not ratify this year, it could do so at any time over the next decade. In this case, assuming that the Russian entry pushed the Kyoto Protocol over its second threshold, every country that had already ratified the treaty would suddenly become legally obliged to meet their targets. The prospect of Russian ratification sometime in the future is a sword of Damocles that hangs over the whole EU, and it is an eventuality for which we must be prepared.

How the EU can hedge its bets.

Europe's GHG emissions today are marginally below 1990 levels, and this positive trend can be maintained if the EU and the member states implement existing or in-the-pipeline policies. These range from schemes to promote cleaner forms of energy production to an internal EU-wide CO2-trading scheme. In this way, the EU hopes to be able to get close to its 8 target.

But it may not be enough. The fastest-growing contributors to Europe's GHG emissions are the transport and household sectors. These are also the sectors that are most politically difficult to control. Tackling climate change may be a popular cause in most European countries, but citizens don't like the necessary consequences, like more expensive petrol, as the 1999 protests against high fuel prices dramatically demonstrated.

If these sectors prove impossible to tame, how will the EU meet its targets?

The solution, ironically, might be through buying permits from abroad. Throughout the climate negotiations, the EU opposed such 'international emissions trading' on the grounds that it was simply giving money for 'hot air', the term often applied to GHG emission reductions that are due to coincidental events like Russia's depressed economy, rather than specific climate policy. But there are signs that the EU could change its mind about emissions trading.

The European Commission has proposed an EU-wide emissions-trading scheme

for the industrial sector, although this proposal is legally and technically distinct from the trading that would take place under the Kyoto Protocol, and does not suffer from the 'hot air' problem.

The chances are that, if the Protocol comes into force, the EU will opt to take advantage of the very measure that it long sought to keep out of the Protocol.

In fact, it is in the EU's interests to ensure that international emissions trading can take place as an environmentally and politically acceptable policy instrument.

One option is to buy the excess permits that exist in the central and eastern European countries. These countries, many of which will soon join the EU, all have easy targets under the Kyoto Protocol and should have considerable excess emission credits to sell to the EU.

Another proposal is the Green Investment Scheme, an idea that would allow Russia and other economies in transition to sell their surplus emission credits but on condition that they recycle the revenues into domestic measures that reduce GHG emissions.

The advantage of such a scheme, apart from the considerable cost savings it would afford the EU in meeting its targets, is that it would go some way to answering the concerns of some governments and environmentalists about international emissions trading.

The scheme could be doubly interesting to the EU in light of its burgeoning relations with Russia.

The revenues from such trading could be recycled into energy-efficiency projects in the cash-strapped Russian energy sector. In this way the EU would at once increase its energy security of supply through the energy savings in its biggest energy supplier, Russia would earn much-needed investment in its energy sector and global GHG emissions would be reduced.

No less importantly for European prestige as well as the environment, such a scheme could go a long way towards persuading Russia to ratify the Kyoto Protocol and bring the treaty into force.

• The author is a research fellow at the Brussels-based Centre for European Policy Studies think-tank. www.ceps.be.

Major feature on the Kyoto Protocol, which was ratified on 31 May 2002.

http://unfccc.int/resource/docs/convkp/kpeng.html http://unfccc.int/resource/docs/convkp/kpeng.html

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