COLUMN-The trouble with Kyoto: Gerard Wynn

Fri Nov 16, 2012 9:27am EST

(The author is a Reuters market analyst. The views expressed
are his own.)
    By Gerard Wynn
    LONDON, Nov 16 (Reuters) - The next round of talks on the
Kyoto Protocol will show the flaws of a strategy based on
setting national caps on carbon emissions and the need for an
entirely different approach. 
    In Doha, Qatar, at the end of this month, countries will try
to thrash out agreement on a second round of the Kyoto accord
after the first ends on Dec. 31.
    But the talks have scant hope of success due to a continuing
focus on national emissions targets. Most countries refuse to
accept carbon caps in the first place, and their use under the
first round of Kyoto has created an accounting framework that
Russia and Ukraine could use to weaken future climate agreements
indefinitely.
    Kyoto failed to impact the world's four biggest carbon
emitters. 
    The United States, at No. 2, did not ratify because Kyoto
did not cap emerging economies including China, No. 1, and
India, No. 3. Russia, No. 4, only ratified because its cap was
too generous. 
    Russia and Japan are dropping out of the second round,
saying they prefer to wait for a wider deal meant to come into
force in 2020 that would cap all countries including emerging
economies. But such a wider deal has been elusive since the
start of talks in 2007.
    Only Europe, Australia, Ukraine and a handful of smaller
industrialised countries remain in the only global climate
agreement from 2013 to either 2017 or 2020 (yet to be decided),
limiting just 14 percent or so of the world's greenhouse gases. 
    As if that were not bad enough, the Doha talks must solve an
accounting wrangle. Countries that had an easy ride in the first
round from 2008 to 2012 now want to carry forward their surplus
emissions rights, undermining future deals. 
    At this point, persistence with negotiations on carbon caps
seems a flawed strategy.
    An alternative focus on negotiating common global policies
is likely to be more effective, including such measures as: 
    * Phasing out fossil fuel subsides, already an initiative
under the G20 group of leading countries
    * Improving the fuel economy of cars, an area in which the
United States, the European Union and China have parallel
initiatives, and
    * Stepping up global efficiency standards for home
appliances, a measure unlikely to court controversy as it saves
households money while making vast carbon savings. 
    
    SURPLUS
    Under Kyoto, industrialised countries got quotas of
emissions rights, called assigned amount units (AAUs), each
equivalent to 1 tonne of greenhouse gases. 
    Now that the round is drawing to a close, it is clear that
the quotas set for former communist countries were far too
generous. 
    The surpluses arose because the Kyoto targets used a
baseline of 1990 for emissions cuts. That was one year after the
fall of communism, when the collapse of Soviet-era industries in
eastern Europe, Russia and former Soviet republics including
Ukraine led to sharp drops in emissions, making any target
against that year easy to achieve. 
    Collectively, countries have accumulated a surplus of more
than 13 billion tonnes of AAUs, equivalent to the annual
emissions of China and the United States combined, according to
Thomson Reuters Point Carbon. (see Chart 1)
    ***************************************
    Chart 1: link.reuters.com/muv93t
    Chart 2: link.reuters.com/puv93t
    ***************************************
    Under Kyoto, countries with surplus emissions rights can
sell these to others that fall short, and some 314 million
tonnes have traded under Kyoto in this way, according to Point
Carbon. Such a trading mechanism further motivates countries to
hold out for softer caps. 
    Under the Kyoto Protocol, the default situation would allow
full carryover of surplus AAUs from the first to the second
commitment period and beyond.
    "If the emissions of a party ... in a commitment period are
less than its assigned amount under this article, this
difference shall, on request of that party, be added to the
assigned amount for that party for subsequent commitment
periods." (Article 3, Paragraph 13)
    It would suit Russia, Ukraine and eastern European countries
to cling to their massive surpluses in the next round of Kyoto
or beyond, from 2020. The final position will depend on
decisions taken at the Nov. 26-Dec. 7 conference in Doha. 
    The carryover problem is a negotiating priority. 
    "Resolving this issue in Doha is imperative but parties'
views still appear to be divergent, and a concerted effort may
be needed to find a solution which is acceptable to all parties
concerned," said the chair of the Kyoto Protocol talks in a U.N.
memo dated Nov. 12. 
    The European Union has not taken a position except to point
out that if countries agree to ban AAU carryover altogether,
that will conflict with its emissions trading scheme (ETS).
    The EU ETS allows companies to transfer surplus emissions
allowances from 2012 to 2013 and beyond, meaning banning a
carryover of AAUs would result in an accounting headache. 
    
    OPTIONS
    So far the only countries that have suggested changes to the
default scenario are developing countries with nothing to lose. 
    The Alliance of Small Island States in May proposed that
countries could carry forward their surpluses, but only if their
targets in the next round of Kyoto are below their recent
historical emissions. In September, the main "G77 Group" of
developing countries endorsed a similar idea.
    Such a system would rule out Russia, which projects a rise
over the next decade, and Eastern Europe, whose 2020 targets
under the EU climate package also project rising emissions. (see
Chart 2)
    A group of African countries has also proposed preventing
any carryover across more than one commitment period, which
would stop Russia from hoarding its surplus beyond 2020. 
    Russia and the European Union have been silent on the issue.
    Ukraine, the only affected country to express its view,
indicated in August that there must be no change on previous
rules allowing unlimited carryover. It demanded in its
submission that, "There are no amendments made in paragraph 13
of Article 3 of the Kyoto Protocol". 
    Such irreconcilable positions in advance of U.N. meetings,
where decisions are agreed by unanimity, are the backdrop of
climate negotiations over the past decade. 
    Those talks must continue as a forum especially for weaker
and poorer countries most affected by more extreme weather and
to review climate science and political progress.
    But the time is overdue for an alternative focus on measures
on which countries can agree, especially focused on efficiency
and the phasing out of support for fossil fuels.

 (editing by Jane Baird)
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