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TABLE OF CONTENTS

IDGEC Scientific Planning Committee

Preface

Summary

Introduction and Welcome

Session I: Introduction to the IDGEC and CMRA

Theme 1: Institutional Issues Related to the Administering the Current Climate Regime

Session 2: Internation and National Implications of the Kyoto Mechanisms

Session 3: Climate Regimes and Sustainable Development

Theme II: The (Re)Design of the Climate Regime Through 2005 and Beyond

Session 4: Compliance and Long Term Implementation

Session 5: Adjustment and Learning Processes in the Climate Change Regime

Session 6: Linkages and Organizational Issues

Conclusions

Appendix A: IDGEC Carbon Management Research Activity Scoping Report

Appendix B: List of Participants

Appendix C: International Climate Change Regime Simulation Proposal

Theme 2: The (Re)Design of the Climate Regime Through 2005 and Beyond

The CMRA's second theme focuses on the longer-term on the evolution and redesign of the climate regime itself. The Kyoto Protocol sets the year 2005 as a point at which Annex I countries are to have achieved their emissions reduction targets. It is thus a useful landmark around which to build research efforts on questions about the adjustment of the climate change regime to both national experiences and changes in technology, scientific understanding, and global socioeconomic conditions. The CMRA will explore two important sets of institutional issues in this regard: (1) those issues pertaining to the evolution of compliance mechanisms and the long-term implementation of the regime; and (2) the processes of regime adjustment and learning to account for changes in knowledge and external conditions.

- CMRA Scoping Report

Session 4: Compliance and Long-Term Implementation

Session Chair:
Dr. Oran Young, Chairman, Institutional Dimensions of Global Environmental Change, Dartmouth College

Presenters:
Jan Linehan, Visiting Scholar, NYU School of Law
Jan Bandsma, Joint Implementation Network, The Netherlands
Taishi Sugiyama, Central Research Institute of Electric Power Industry (CRIEPI)

This set of issues focuses on the institutional challenges of treaty compliance and the means through which the climate regime can evolve to meet these challenges. Changes in social and economic systems of the scale required to meet the mandates of the FCCC and the KP take time to accomplish. While the FCCC has existed for seven years and the KP for two, mechanisms for managing the implementation of and ensuring compliance with the regime remain underdeveloped and poorly understood. Compliance issues that arise in the context of a global emissions trading regime, such as that of liability, are particularly important because of the private sector's unique role in this regime.

- CMRA Scoping Report

Compliance and the International Legal Perspective

Jan Linehan
Visiting Scholar,
NYU School of Law

Thank you. What I want to talk about this afternoon is to think a little about whether there is such a thing as a legal perspective. I think it is useful to understand a little bit about how international lawyers approach issues of compliance, particularly if we are to engage in a broad-ranging, interdisciplinary research exercise. When I talk about the legal perspective, I am trying to set it up as something that will provide insight into a particular way of approaching issues. However, it is also a bit of a straw person, as international lawyers have developed an attachment to interdisciplinary work and are now recognizing the value of other perspectives, particularly those drawn from economics and international relations theory. So the first thing I want to do is explore whether there is such a thing as the legal perspective. I will then talk a little about what is happening in the negotiations and what might happen at COP 6. I also want to talk about compliance post-COP 6 in terms of ideas and institutions that might be examined, and finally I want to pose some questions for future research efforts.

Before I launch into this straw person of a legal perspective, let me say that I think that there might be some real points of commonality in a group such as this regarding the importance of compliance. Compliance matters. It matters in terms of achieving the overall objective of the Convention and Kyoto Protocol. It matters because the impacts of climate change are both very real in human terms and in terms of the cost of non-compliance. It also matters to the private sector, as the private sector will value carbon prices in accordance with its confidence in the compliance regime at the international level. These are some points of commonality among most international lawyers involved in thinking about the issue and involved in the negotiations process.

What is not revealed in this commonality is three or four issues in which there is quite a lot of scope for different views. For which aspects or elements of the climate regime does compliance matter? How much compliance is necessary? How do we assess compliance? How should be react in situations of non-compliance?

The legal perspective on these issues is not monolithic. There are different views among international legal scholars, as scholars come from different traditions and negotiators come from different countries. Nor is there is not a clear commonality of North-South perspectives on legal issues. It is important to factor in these different approaches to international law in trying to describe a legal perspective. It is the case that there is probably a set of assumptions obtained from general international and public law that have been modified for the situation of international environmental law. It is also the case that international law is not static. This means that the kinds of analysis or perspectives that I mention now will not necessarily pertain over the longer term. But it is useful to think about them because they inform the negotiations process and provide useful ways of approaching the issues of compliance over the longer term.

A Straw Person of the International Legal Perspective
International lawyers are concerned with why states comply. That might appear to be an odd thing to say, as international relation specialists are also concerned with why states comply with international law. However, international lawyers have a particular discourse amongst themselves that reflects an anxiety about the role of law in a decentralized system where there is no natural enforcement mechanism. As Oran Young mentioned, part of the background noise to this discussion is that enforcement opportunities are limited and the environment is essentially enforcement poor. International lawyers have an underlying anxiety regarding whether international law will be obeyed, and this underlying anxiety suggests that international lawyers will be inclined towards enforcement models.

There are different ways that international lawyers look at compliance that do not involve an enforcement approach. Many international lawyers would say that there is a normative compliance pool in international law regardless of enforcement or the absence of enforcement. Various student would say that law is internalized at the domestic level and that it is internalized by transnational actors. Constructivists would say that law plays a role in constructing identities. Outside of this theoretical framework, most lawyers believe that, as a matter of culture, almost all states comply with almost all international law almost all of the time. This is Louis Henkin's formula for compliance. This "why" question has an almost intuitive feeling about it, which is part of the theoretical debate that goes on among international lawyers.

International lawyers also focus on the "do" question. Do states in fact comply with international law? The testing of the description by Louis Henkin has been a preoccupation of international lawyers for the past twenty years, with differing results. A lot of international environmental lawyers would say that compliance is fairly patchy. Peter Sand has said in a different context that compliance is almost non-existent. Lawyers do think that the "do" question encourages study, and they raise their own internal discourse about the methodological problems associated with compliance. So they focus on the "why" and the "do", and there is a programmatic tendency amongst international lawyers that has them working towards the questions of how we can get states to comply more.

It is probably the case that lawyers focus too much on hard law and bindingness rather than soft law. This means that many international lawyers will attempt to prioritize norms. As a result, they also focus too much on technical rules related to breach and how states can react to that situation. It is also probably the case that lawyers tend to focus more on disputes and how one can resolve disputes. They have anxieties about whether those disputes will in fact be resolved in a world where there is limited adjudication as well as limited enforcement. Furthermore, international lawyers tend to focus on states as actors rather than on private actors, resulting in an exclusion of civil society.

This is my straw person of the international legal perspective. You might, if you like, say that international lawyers fall very much on the enforcement side of the compliance issue rather than on the management side. They do so both because it uses techniques with which they are comfortable from the domestic setting and it satisfies these underlying anxieties. The reality is that most international lawyers are operating in an environment where they know many states do comply with international law without an enforcement approach. The reason that I am belaboring this point is that it becomes very relevant in terms of the development of the compliance mechanism under the Kyoto Protocol.

Moving from this straw person of the legal perspective, which I think has some use or utility as a research approach, to the perspectives of international lawyers working in the international environmental law, it is probably the case that most have internalized the managerial approach. While they may have underlying anxieties about enforcement, their experiences both in the regimes that have been developed to date and the work of people like Abraham and Antonio Chayes have suggested that the managerial approach is in fact quite a viable approach in dealing with compliance issues. Many international environmental lawyers have internalized the lessons of the New Institutionalism, which means that their perspective is not nearly as norm-bound as I suggested earlier. Most international lawyers are also very aware of the interactions of law and economics, which means, for example, that they find the choice of the liability rule in relation to the mechanisms is just as important as the choice of a particular compliance vehicle under the Kyoto Protocol. It is also probably the case that the statist focus of international norms is overstated and will move away from this over time. Many international lawyers are concerned with the need to have greater participation by civil society both in its own terms and for legitimacy reasons, and they are also very well aware of the importance of addressing multinational corporations both in the environment and in other social contexts. There is a lot of work being done in this area. So these particular focuses are much broader than the straw person or paradigm that I have set up.

Compliance In The Context of the Kyoto Mechanisms
I would like to mention a little bit about where things are going with the development of a compliance regime for the Kyoto Protocol. This is not because I do not think that compliance with the FCCC is important, and I do not want to prioritize the discussion. But the compliance mechanism for the Protocol is the issue that is being discussed now, and it is the place where this dialogue is currently being worked out. It is expected that at this round of subsidiary body meetings the shape of the compliance regime will become much clearer. Most of my friends who are natural pessimists still maintain that there will be an agreement on a compliance regime at COP 6. The first thing that I want to say is that compliance is obviously much broader than the work that is being undertaken in the joint working group. In terms of the negotiations, there is work being done in the context of the development of the mechanisms that is integral to compliance. There is work being done on Articles 5, 7, and 8, which are reporting, monitoring, and the work of expert group review teams. At some point one hopes that someone with the wisdom of Solomon is going to bring all of these elements together with a set of COP decisions that will form a holistic compliance regime.

I think it is impossible to speak of compliance in the context of the negotiations without undergoing the task of trying to relate the different elements. It is a complex task given that there are so many options on the table and there is so much disagreement among the parties about very fundamental issues. It is also not a very transparent process, as most of you all know. However, I think if we are to make any judgments about the compliance regime for Kyoto, we have to try to do so. Having said that, I will take you to the work of the lawyers, which is usually the unfavorable description given to the group of people who attend the joint working group discussions.

If you look at the note from the Chairman of the Joint Working Group on Compliance, you will see that there is a range of options for setting up different kinds of institutions. I do not want to go through the options in any detail, but make an observation that the options that are most likely to find favor at the moment reflect experience with other conventions and suggest a more managerial approach rather than an enforcement model. Having said that, some of options being considered are clearly consistent with the managerial model in that they treat compliance as basically a problem of capacity and systemic uncertainty rather than one of volition. There are also among the options some very serious sanctions, ranging from loss of access to the mechanisms to subtractions of tons of carbon equivalents from future commitment periods. Thinking about where states will be at the end of the first commitment period will give you a context in which to put this range of consequences, as not all consequences will be relevant to situations of non-compliance during the commitment period. So you see in these options the soft approach, which I think has been internalized at a procedural level, and then the harder approach in terms of reactions to non-compliance.

I am not going to hazard a guess as to which of these is likely to end up being a consequence under the regime that is developed. I would note that, historically, ideas like these have been on the table throughout the climate change negotiations and have not been accepted for a range of reasons. Some of these reasons are concerned with sovereignty, dislike of heavy responses, and recognition that hard sanctions may not be appropriate because this is an on-going process with large degrees of uncertainty. However, it seems to me that there is a very strong possibility that some of these harder reactions to non-compliance will be included given the fact that hard targets are involved in the Kyoto Protocol. States will have a range of imperatives, including, for example, trade competitiveness, which would suggest the need for a harder law if you want to guarantee that the other players will, in fact, go along with the commitments.

One other thing to think about in the development of the compliance regime is also the extent to which particular decision-making models are going to work. Some of you know that there are problems with the consensus model in the context of compliance, and I think it is useful to think about whether the particular decision-making models or modalities are likely to be viable in the longer term.

Future Research
There are a whole bundle of issues that I have touched on here that are worth thinking about for future research efforts. The compliance regime may be settled this year and adopted reasonably soon after, and some of you may be aware that there are legal problems with trying to have binding consequences that will make the process very messy. This could complicate the development or finalization of the package of measures. But over the longer term, we should look at this as a first cut at a compliance regime. This is the regime that will apply for the first commitment period, and the experience of this compliance regime will be critical in developing the rules for the next and successive commitment periods. Of course, there are some difficulties here, as many of these issues will not have been worked through when we are to start negotiating the next commitment period in 2005. So I am really taking a very long-term view when I say that experience here will be relevant in the future.

One thing to think about is whether a more elaborated dispute resolution body or bodies will be required at some stage. The experience within the WTO, for example, was to move towards a more legal dispute resolution body. It will be interesting to see whether the experience under the Law of the Sea Convention, which provides for binding arbitration in relation to a number of issues, will also inform ideas about the long-term compliance problems and compliance institutions. It may be useful to look hard at the experience and conclusions we draw from other multilateral environmental agreements and see whether those observations are true in a climate context, recognizing that the climate context is much bigger, much more complex, and much more uncertain than most of the regimes we are looking at.

The other major set of issues is the interaction of the international and the domestic systems. Whether we have heavy compliance or light compliance, there will be some form of compliance system at the national level that will come into play in the compliance regime. The interaction of private contract law is also something we should think about, as is the regulation of multinational corporations as major actors in the climate context. A lot of work is being done on this issue in terms of more general environment concerns and human rights concerns, and it would be useful to think about whether these approaches can be translated to the climate context. It would also be useful to think about the extent to which both international law and national law provide ways of controlling multinational corporations. It is a dispiriting exercise to go through the history of efforts to regulate multinational corporations, but I think we may be at a time when there is a greater will to see greater regulation of the activities of multinational corporations.

Finally, I think it would be very useful to look at participation by non-state actors, both in the compliance process and more generally in the negotiations. By this, I mean civil society as well as multinational corporations. There is a debate in the WTO, for instance, about the involvement of NGOs and interest groups in the dispute resolution process. I think there will be a move in the not too distant future towards much greater participation by civil society not just in the COP decision-making process but in the compliance mechanism as well.

Implementation Issues:
Lessons from the AIJ pilot phase of the Netherlands and the USA

Jan Bandsma
Joint Implementation Network
The Netherlands

My name is Jan Bandsma. I am from the Joint Implementation Network. We are mostly known for our magazine, Joint Implementation Quarterly. We are also a research and documentation center about the Kyoto Mechanisms. I have been asked to say something about implementation issues. I want to do this on the basis of the AIJ Pilot Phase by looking at the way that the Dutch and American governments implemented their AIJ projects and seeing what implementation issues are raised by their experience. First, I will say something about the AIJ pilot phase. Next, I will talk about the organizational structure of the AIJ pilot phase in both countries and take a look at the roles of both the private sector and the government. Then I will talk about the implication of those roles and the implementation issues that they raise. Finally, I will talk about a new JI program being created by the Netherlands, the Eru-PT program, and how they incorporated their experiences into this new regime.

The AIJ Pilot Phase
The purpose of the AIJ Pilot Phase was to learn about the problems that might arise with the implementation of this sort of project-based program. As we all know, JI and the CDM have a lot of technical and institutional issues and problems that need to be examined closely. A pilot phase provides an opportunity for doing so. A successful AIJ Pilot Phase should closely resemble the final program so that valid comparisons can be made between the two. There should also be a diversity of projects so that all the aspects of these different projects can be examined. Finally, the number of projects in the pilot phase should be sufficiently large that there is strong basis for evaluating the effort and examine the problems that arose. A successful pilot phase will make the implementation of the full effort much easier. Significant problems with the pilot phase might also suggest that the JI and CDM mechanisms may have too many problems to be implemented successfully, but I do not think this is the case.

Organizational Structures of the AIJ Programs
The Dutch Ministry of Environment provided overall coordination of the Dutch AIJ program. Article 6, or JI-type, projects, which are projects in central and eastern Europe, are handled by the Ministry of Economic Affairs through an agency called Senter. The CDM-type projects are run by the Department of Development Cooperation in the Ministry of Foreign Affairs. This distinction was made because the Ministry of Economic Affairs has a great deal of experience in setting up projects in central and eastern Europe, so they could simply incorporate the AIJ projects into their normal program. Similarly, the Ministry of Foreign Affairs has an existing program that sets up projects in developing countries, making the incorporation of the CDM-type projects into their normal program relatively easy. One thing that needed to be done was the establishment of an organization that registered, verified, and certified the emissions reductions. This was done by an agency called the Joint Implementation Registration Center (JIRC) that was run by Senter and another organization known as KEMA.

The AIJ program in the United States, the US Initiative on Joint Implementation (USIJI), is coordinated by an interagency Working Group chaired by the Department of State. An Evaluation Panel, established jointly by the Environmental Protection Agency (EPA) and the Department of Energy (DOE), approved IJI projects, and an IJI Secretariat handled registration and the day-to-day operation of the program. The Secretariat is run jointly by the EPA, DOE, the U.S. Agency for International Development (AID), and the Department of Commerce (DOC). It is important to note that the EPA and DOE are also involved in the registration and approval of the projects.

AIJ Program Characteristics
The Dutch program was large, with a budget of $42 million in 1999. The government set up most of the projects, but hired the private sector to implement them. The projects themselves were owned by the government, however. It could do this because it had a very large budget. Most of the projects are taking place in central and eastern Europe because of the shorter pipelines for getting projects started. EU aid rules also required that the Dutch government provide one hundred percent of the financing for projects in eastern and central Europe. This made it very easy to set up projects.

The U.S. program was much smaller, with a budget of only $1.5 million in 1999. They did have cooperative agreements with some private organizations, which made this budget a little bigger. The main difference, however, is that the private sector owns the projects. They develop project proposals that are submitted to the government for approval. The government then decides if they should be approved as part of the US IJI program. The private sector then implements the project. Most USIJI projects are in South and Central America, as the private sector in the United States has good contacts with their counterparts in these areas, more so than central Europe. Most projects that are done in Europe are done in Russia, as the Americans has an agency there that provides their private sector with good contacts. So the contacts issue is very important.

Implications
These different characteristics have a number of implications. For the Dutch program, it meant that many projects became operational. This provided the Dutch government with a great deal of experience. Because most of the projects were in central and eastern Europe, however, it did not get much experience in working with developing countries. Another problem was the requirement that the Dutch government provide all of the financing, as a JI program would involve a great deal of financing by the private sector. It is also questionable whether the government had an impartial role, as Senter not only owned and operated the project, but was involved in the certification and verification of the project. This created a conflict of interest.

The U.S. program did not have as many operational projects. Only about one third of all proposed projects became operational, primarily because of funding issues. Funding was not a requirement for project approval, and many project owners had difficulties raising the necessary funds. The government provide little or no funding for the projects. This caused a problem because the owners had to show that the project was not economically feasible, that is, it had to show a negative rate of return, in order to qualify for the US IJI program. This was done in order to meet the criteria of additionality. If the project had a positive rate of return, it could be argued that it would have occurred anyway. A good thing about the U.S. program was that the government had a very impartial role in its operation. Even though the EPA and DOE had roles in both the evaluation and registration of projects, they were not involved in the development and operation of the projects themselves.

Implementation Issues
The experiences of the U.S. and the Dutch AIJ programs raise a number of implementation issues. The United States and the Netherlands both had to develop a pilot phase, but they did so in completely different ways. One big difference was culture. The role of the government in the Netherlands has always been more dominant, so it was natural for the government to develop and implement the projects. There has also always been close cooperation between the government and private sector in the Netherlands, whereas in the United States the government just sets the rules and the private sector is more or less free to move within those boundaries. The Netherlands also has a large history of development cooperation and in setting up projects, so it was natural for it to set of the AIJ pilot phase in this way. The EU state aid rules also meant that the Dutch projects had to either receive full funding from the government or nothing at all. This was a big difference between U.S. and Dutch projects carried out in eastern Europe. The capacity of the host country was also an important issue. This included not just institutional and technical capacity, but also knowledge about AIJ, JI and the CDM. This was often an obstacle for implementing projects.

Beyond AIJ: The Dutch Eru-PT Program
The Netherlands government is now initiating an Emissions Reduction Unit Procurement Tender (Eru-PT) Program. This program, which is only for central and eastern Europe, is being carried out by the Ministry of Economic Affairs, and has a budget of $150 million through the year 2003. While the government is not providing full funding for projects, it is an open tender program in that any private company within the EU can submit a project proposal. It thus complies with EU state aid rules. There is also validation by independent organizations, and the Joint Implementation Registration Center is no longer operational.

Because the Kyoto Protocol does not state that private entities can own ERUs, the transfer of ERUs has to be done from one government to another. In the AIJ pilot phase, the project partners received the emissions reductions and the credits went from the host country to the investing country. In the new program, the project partners only implement the projects, while the credits that are generated from the project are transferred to the government through claims on the emissions reduction units. The actual ERUs are transferred from the host country governments to that of the investing country government. This bypasses the problem of institutional capacity, as the relationship between the host country governments and their private sector is often very poor. Memoranda of Understanding have been established with Romania, Bulgaria, and Slovakia for the transfer of ERUs from those countries to the Netherlands. Latvia and Poland may be coming soon. The first tender of $20 million was from May 25 to July 15, 2000. So the Dutch government learned a lot from its AIJ program, and used this knowledge to set up a new program that looks very promising.

Reconciling the Design of CDM with the Inborn Paradox of the Additionality Concept

Taishi Sugiyama
Central Research Institute of the Electric Power Industry (CRIEPI)

Thank you very much. As time is limited, I will not go into the details of the paper that has been distributed. I just want to mention that the compliance issue is closely related to scientific uncertainty and the subjectiveness of rules. In the case of the CDM, there seems to be a paradox from the beginning of the design. The CDM was established to promote the most cost-effective projects to reduce GHG emissions. However, the most "cost-effective" projects may be the least "additional," and strict project additionality could give perverse policy incentives. If everyone agrees that a project is additional, it means that the project is not cost-effective. On the other hand, if people do not agree that the project is additional, then it might possibly be cost-effective. This is one example of the prevailing subjectiveness and scientific uncertainty that makes designing such institutions difficult. This relates to the compliance system because if you have scientific uncertainties and if you have subjectiveness, how should the compliance system be designed? One solution that I suggest here is to turn the subjectiveness and scientific uncertainty to some positive use by providing some discretionary elements or flexibility in the design of CDM projects. This corresponds to the management school of compliance that I discussed earlier. With this management approach, subjectiveness and scientific uncertainty can be incorporated into flexibility for the Parties, and the Parties can use this flexibility to enhance cooperation on reducing GHG emissions.

Another important point is that the compliance system cannot be separated from other elements of the Kyoto Protocol. This includes the Kyoto Mechanisms, sinks, and other elements. I am not sure that it is productive to consider the compliance system is considered in only a narrow sense. If you talk about the compliance system, you have to talk about all the elements of the Kyoto Mechanisms. Thank you.

Session 4 Discussion Summary:
Research Questions Concerning the Institutional Dimensions of Compliance and Implementation

The core research question described in the CMRA Scoping Report is: what are the essential factors shaping compliance with and long-term implementation of the evolving climate change regime?

Much of the discussion during Session 4 focused on issues of variance in the context of compliance and implementation. The major research questions that participants brought up during this discussion include:

• Given the uncertainties associated with Kyoto Mechanisms and the role of the private sector in their effective operation, can a compliance mechanism be created that is effective in targeting the cause of the non-compliance?
  It may prove difficult to hold a State responsible for non-compliance if it has acted in good faith to meet its obligations but failures on the part of the private sector are responsible for the non-compliance. Similarly, a scenario can be envisioned in which a Party that sells ERUs to others under an emissions trading regime is found to be in non-compliance at the end of the first compliance period. Is that Party alone to be held responsible? Should other Parties be held responsible as well even if they bought the ERUs in good faith? Do we need to look at a range of mechanisms to address non-compliance? If a company is in breach, can normal contract provisions be used to promote compliance? This may become a particularly important issue as the Kyoto Mechanisms become operational.
  
  
• What are the implications of cultural and North-South differences for compliance and compliance mechanisms?
  The predominantly Western orientation of international law may cause difficulties when applied in many non-Western settings. For example, while European nations accept international arbitration as an accepted approach to dispute resolution, there is a dislike for this approach among many developing nations, as they are seen as a Westphalian or European mechanism. This has not been an issue thus far because targets and timetables have only been established for industrialized countries. However, disputes involving developing countries will undoubtedly arise in the future as the regime matures and the Kyoto Mechanisms become operational. As we have seen in the case of AIJ, one approach for the compliance mechanism may not fit all Annex 1 countries, and it certainly will not fit all Annex 1 and non-Annex 1 countries. It is not clear that we understand how differences among countries in terms of culture, legal systems, or other factors could affect operation of the compliance mechanism, or which of these factors are most important in doing so.
  
  
• What is the relationship between the compliance mechanism for the Kyoto Protocol and compliance under the Framework Convention?
  Because it is not yet clear if and when the Kyoto Protocol will enter into force, the Framework Convention is the only agreement at the present time with which states must comply. The FCCC does have some very real mandates with which states much comply. What might be the implications for compliance under the FCCC if the Kyoto Protocol does not enter into force?
  
  
• How can we learn from dispute settlement processes in other areas to shed light on the compliance issue given the tremendous differences between the climate and other regimes?
  For example, trade disputes tend to focus on resolving differences among Parties rather than achieving certain goals. The overall emphasis of dispute settlement under the GATT and WTO is not to achieve compliance as such but to make some sort of adjustment among parties so that the process could continue. There is also the existence of injured parties in the trade disputes, as industries can be identified that are clearly affected by rule violations. In the case of global warming, however, the damage is very diffuse such that there are no clear-cut injured parties. Given this, it is worth thinking about how to resolve disputes that arise in the climate regime, as disputes among parties will arise as the regime is implemented. It may be the case that the compliance process that we establish now may not have the legitimacy or pull to resolve these disputes.
  
  
• Can incentives be created that might be effective in bringing about compliance?
  In the Law of the Sea Convention, new approaches are being considered that bring different communities into the process in order to get around the dilemma that national sovereignty raises for compliance. It may be useful to look specifically at combined economic/environmental regimes such as the Law of the Sea to see what alternative approaches might be used to promote compliance.
  
  
• What are the institutional implications for an effective verification regime or system?
  What is the relationship between the verification system and the compliance mechanism? It is impossible to judge the success of an emissions trading or joint implementation program until we have an agreement on the baseline and verification issues. Verification in particular is something that can only be done over time, however. How can we create an effective verification system that operates over time but is also linked to the compliance mechanism?

Session 5: Adjustment and Learning Processes in the Climate Change Regime

Session Chair:
Dr. Jill Jaeger, International Human Dimensions Programme On Global Environmental Change (IHDP)

Presenters:
Mr. Richard Morgenstern, Senior Fellow, Resources for the Future
Prof. Adil Najam, Department of International Relations, Center for Energy, and Environmental Studies, Boston University

The second set of longer-term issues on which the CMRA will focus is the adjustment and learning processes that enable the climate change regime to adapt changing technology, scientific understanding, and global socioeconomic conditions. All regimes must adapt to changing circumstances and underlying conditions if they are to persist. Adaptation and evolution are particularly important for regimes addressing large-scale environmental problems such as climate change, as these problems involve poorly understood complex systems that are subject to rapid, nonlinear change over short time frames.

Because the processes through which international treaties are negotiated unfold over years to decades, opportunities exist for learning and adaptation. Negotiations on the FCCC and the Kyoto Protocol were initiated in 1988 and are expected to continue into the foreseeable future. Considerable progress has been made over this period in resolving some of the scientific and economic uncertainties, and more will be made over the next ten years. The processes through which national climate change policies are developed and implemented have also been found to foster learning and adaptation. Questions remain, however, as to how regimes go about adapting to changes in science and socioeconomic conditions, how scientific issues are brought into the political processes, and the roles of environmental and business interests, the media and the public in overall learning and adaptation process.

- CMRA Scoping Report

Domestic Trading: A Credible Early Action

Dr. Richard Morgenstern
Senior Fellow
Resources for the Future

Thank you. Let me make a confession at the outset regarding flexibility and learning. I am an economist, and economists, after all, specialize in flexibility. Some people think that we overspecialize in flexibility. I am also from a country that puts me squarely in the enforcement school. I said that earlier, so I just wanted to make that clear. I am also from a country where we have two television characters that may not be known to all of you who are not American named Harry and Louise. Harry and Louise first made their debut in the United States when there was a battle against the Clinton Administration's health care proposal. Harry and Louise were a middle-aged couple sitting around the breakfast table, and Louise would say, "Gee, I really want to have universal health care." Then Harry would say, "Yes, but I don't want to lose my job," and "This is really going to be painful for me." This Harry and Louise ad is credited with crystallizing public opinion against President Clinton's health care proposal at that time.

In the run-up to Kyoto, Harry and Louise reappeared on our television sets in the United States. This time it was sponsored by the carbon emitters in the United States. Louise was saying, "Gee, I really want to do the right thing for the environment" and "I really care about the environment," but again, Harry is saying, "You know, I don't want to lose my job", "I'm going to be unable to heat my home," and so forth. So we had this debate played out on our television screen.

In the rather open, transparent society that we have in the United States, this was seen as a shot across the bow of the negotiators, and I think it remains a big issue. That is to say, can we really mobilize wide-scale public support for a Protocol of this sort when we have such a well-organized opposition, as we obviously do in the United States. Let me go on to say that I believe as an economist that one of the issues that is very important, not just in the United States but in fact all countries, is the cost uncertainty question. That is to say, if you look at respectable forecasts of the costs of complying with Kyoto, there is a huge variation. I was running the policy office of the Environmental Protection Agency in a former life, and I am accustomed to seeing cost estimates in dispute with each other. This happens all the time. But when you look at the climate cost estimates provided by respectable models, you see that they vary by a factor of five and sometimes by a factor of ten. This is a frightening source of variation, particularly when you have the Harry and Louise characters out there just waiting to capitalize on these variations and highlighting for the American public the outliers that make their case. As a result, we have a very difficult problem trying to get a consensus on action.

Let me also say by way of introduction that there are some, and I suspect I put myself in this category, who believe that the famous phrase "meaningful participation" may in fact have an element of code to it. It may really be code for "Keep the costs down." What the Senate is really saying is, "We want to have the developing countries participate in part because we can't, as politicians, move ahead with a commitment that the American people are not going to buy into." This is a dynamic that exists very openly in the United States and, I would suggest, exists a little less openly in other countries as well.

What I want to do today is get beyond these generalities but use this as a bit of a backdrop for a proposal that several of my colleagues and I have put together at Resources for the Future about a domestic policy that might be pursued in the United States as an early action proposal. I want to put this before you because this proposal embodies a mechanism that reveals the cost uncertainties. I believe that it has some useful lessons that we can translate into the international arena, and I want to return in my last few minutes to some of the compliance issues that we discussed in the last session because I think that there is a very clear linkage.

An Emissions Permit Program
I think that it is well known to us that, dating back to the days of the Framework Convention, emissions have obviously risen a fair amount over the last decade, and there is interest in doing something to begin making some actual reductions. What we are proposing is an emissions permit program that would require tradable carbon emissions permits beginning in 2002. This program would allow the United States to take early action to reduce carbon emissions while taking into account the cost uncertainties.

There are three key features of this program. The first is that the program would have broad coverage. The breadth of the coverage is critical to understanding the ability of a country to truly control its emissions. Secondly, we are building in what I am referring to as a modest goal with cost containment. Finally, there is an equitable burden-sharing. I will talk about each of these points in turn.

The first point is broad coverage. We are proposing that we administer an "upstream" permit program to obtain the broadest possible coverage for carbon. "Upstream" means regulating carbon at the wellhead or the mine mouth rather than at the point of emission to the atmosphere. We are leaving for the moment non-carbon emissions.

Secondly, we are proposing that the permits that would be required of people that are in the business of drilling for oil or gas, mining coal, or importing any of these fuels. Energy producers would be required to obtain permits equivalent to the volume of carbon dioxide eventually released to the atmosphere. These would be essentially the IPCC numbers. In the United States, by the way, there are approximately 2,500 companies in the business of either primary sales of energy of this sort or importation. This is a manageable number, even for a country as large as the United States, as compared to "downstream" permit systems where there literally hundreds of thousands or even millions of points that one would have to control. Obviously, this would be much more difficult and much more subject to abuse.

We are proposing that the United States issue permits for 1.3 billion tons of carbon, which is roughly equivalent to 1990 annual emissions levels for the United States. This would be consistent with the intent of the Framework Convention on Climate Change, which was ratified by the U.S. Senate in October, 1992. It would not be tied to the Kyoto Protocol, which the United States has not yet ratified.

The cost containment is the innovative feature of this proposal. We are proposing is at the same time that permits are required for all carbon that is put into commerce, there also be a second window that is opened up for the sale of additional permits. So the initial distribution would be the sale of permits equal to the 1990 emissions levels. But then there is this second window that would open up in which permits would be sold at a predetermined price. In the United States, we have a food store called 7-11 that is open all the time. This window would be a store, literally, that would sell additional permits at any time at a predetermined price. We are proposing that this price be $25 per ton of carbon, and that this price increases by seven percent in real terms each year. This would mean that the price would roughly double by 2012. So the idea here is that additional permits could be introduced into the system at this price, and thus contain the overall cost of the emissions reduction effort.

An additional element of this is that there would be equitable burden-sharing. When these carbon producers buy these permits, they will pass the costs along to consumers. We do not kid ourselves by thinking that the producers will reduce their profits as a result of this. We will pay more for products and fuels that have carbon embodied in them. We are proposing, therefore, that the permits be auctioned, not grand fathered. This is a critical point. Secondly, the revenues generated from this auction would be returned to households, for the most part. We propose three-fourths to households and one-fourth to the States. So what we are doing is auctioning off permits, generating a fair amount of revenue, but we are returning these revenues to households.

The particulars of this auction system are as follows. Quarterly permit auctions would be held, with 75 percent of all proceeds in the first year funding a direct payment to all legal U.S. residents. This would be on a per capita basis, which would be slightly progressive, as people with higher incomes tend to consume more energy. They would not be compensated for this, however, as everyone would receive the same payment. To address special hardships, which could include industry as well as labor, we are proposing to use the states as a vehicle for returning the remaining 25 percent of the funds. This 25 percent would be gradually reduced by 2.5 percent annually.

This is a proposal that was put forth last year. While people were initially skeptical about it, I would say that interest is gathering, at least in a quiet way. There is now an advocacy organization that has been established to promote this idea. Some of you might know the head of the organization, Rafe Pomerance, who was formally a Deputy Assistant Secretary of State and has a long and distinguished record in this field. I am not going to sit here and tell you that it is about to be adopted by the United States Senate, but it is alive and people are moving ahead on it.

Application to the International Arena
What I would like to do in my remaining few minutes is to try to translate some of the ideas embodied in this domestic policy into the international arena and see if there is a way to link them. Let me say that this is still work in progress so I would welcome any ideas that people have, but the way that I have thought about this is in the context of the compliance regime. The different alternatives for a compliance regime that are before us fall into several categories. Some of them are in the technical assistance mode. That is to say, if a country does not comply, an international body will give them aid and assistance in learning how to comply. Other ideas are in the category of borrowing. If a country does not meet its target, then it would be able to borrow tons from a future, as yet unspecified, commitment. Another set of ideas involves a penalty payment, where a country that cannot meet its target would pay a penalty on top of the then-market price that exists for permits.

An alternative approach that I would like to discuss with you here is a scheme that can be referred to as a compliance fund. Now the compliance fund is an idea that actually has its origins in the Brazilian proposal that was made pre-Kyoto. What Brazil proposed at that point was that a country that did not meet its obligations would be obliged to make a payment of a set amount into an international fund. They in fact suggested a number, but, obviously, one need not be bound by that number. That fund would then be obliged to disperse the revenues according to procedures that would need to be established, presumably by the international community.

The idea that I would like to advance today is really a two-part idea. The first is modeled very closely on the Brazilian idea in that a pre-determined payment would be introduced that would be made by countries that are not able to meet their targets under Kyoto. The advantage of the pre-determined payment, much like I tried to demonstrate in the domestic approach, is that it would eliminate the cost uncertainty. Whereas I said that there were huge questions associated with the costs of complying with Kyoto, the advantages of having a pre-determined payment is that the cost uncertainty is eliminated. So when Harry and Louise go on television to talk about how Kyoto may be very costly, there would no longer be the uncertainty of those high ranges of numbers. They would have been taken off of the chart by an agreement in advance on a very specific number. Thus scare tactics cannot be used beyond the normal uncertainties that we have fought. So one can imagine this sort of Brazilian approach in which you had a pre-determined payment that went into the fund.

There is then the question of what happens to the money at the other end. This is an issue for which there is an opportunity for a great deal of research on and thinking about an institutional mechanism, but certainly the most transparent and simplest approach would be to have a mandate that this institution that receives the money would be obliged to spend it over, for example, a five-year period to buy tons of carbon on the open market. Thus this institution would become purchasers of tons just as countries would be purchasers of tons. This is one simple formulation, and one could obviously devise others that would be attractive to different interests.

A second permutation on this that may have more political appeal to Annex 1 countries, and probably less political appeal to non-Annex 1 countries, would be to devise a series of domestic compliance funds. If you think about one of the barriers to an international compliance fund being the unwillingness of Annex 1 countries to make large payments to an international institution, then you could imagine there being a host of domestic compliance funds set up in Annex 1 countries that would be subject to very strict reporting requirements, be required to use the funds for perhaps environmental purposes, and perhaps having an obligation to spend some portion of the funds on international projects.

To tie this together, I want to say that, sitting in a country like the United States as I do, there is a lot of concern about the uncertainty of the costs associated with Kyoto. I think this is a major stumbling block to having Kyoto ratified and hence become effective. The beauty of having a pre-determined penalty or a pre-determined payment that one can make is that it removes the uncertainty by definition. You can then think of there being an international version as well as several domestic versions. Obviously, there are many subtleties here as to how to design this, and I think that a group like this could shed some light on the questions of how it should be designed and its institutional implications. The debate we have been having about sustainable development, what it means and how to operationalize it fits into this as well, as there are tremendous opportunities in how the funds are used. Thank you.

Long-Term Learning And the Climate Regime

Prof. Adil Najam
Department of International Relations
Center for Energy, and Environmental Studies
Boston University

Thank you very much. I have a feeling that a lot of people will be very unhappy with me by the time I am done here. And it is not just because I am last and am standing between you and your dinner. I was asked to think about the learning question in the Scoping Report, and that is what I am going to do.

There are a lot of ways to think about the learning question. One of the obvious and easy ones would be to look at the institutions that are out there right now for the purpose of learning like the IPCC and talk about them. I am not going to do that. First, by talking about the IPCC, I would only incriminate myself. Second, we are talking long-term learning, and long-term is the key word here. I am not sure if these same institutions would or should be around to perform their tasks over the type of long term that I want to talk about. So I do want to focus on the issue of long term because I think it is critical to the climate change question. I want to organize my comments around various types of long-term: the short long-term, the medium long-term, and the long long-term.

The Long Term
I do seriously believe that the issue of long-term is really critical to climate change. Climate change is unique not just because it is global, but because it is truly long-term. There are many things that are called long-term, but are really not as long-term as the climate issue. The length of the long-term really makes this a unique issue. My own charge on the policymakers as well as the academics have really somehow mistakenly translated long-term policy as if it meant that you take short-term measures, but you take them over a very long period of time. The only people who have really thought about this as a really long-term issue are the civil society actors, although there are, of course, exceptions to this. These are the people who are really thinking about what will happen in 2100. Much of the talk of CDM, compliance, the Kyoto Mechanisms, and so forth has really been focused on taking a short-term measure and doing it for a long period of time in hopes that something will happen.

I suggest that this is not the case. The CDM and the Kyoto Mechanisms are not important because they can reduce emissions. The important issue is where we will be in 2100 in relation to a world that is fair, that is equitable, that is just, and that is climate-stable. Therefore, the focus has to be on that world and how we get there rather than these little baby steps. These are given much more importance than I think they deserve.

In the short long-term, precedent matters. This is where I take the lawyers' perspective because the lawyers will tell you how important precedent it. I think this is very important to the climate change issue because whatever we design and put on the table today will determine what will happen in the very long-term. It may be possible that we are already too late. It may be that the strengths of the Kyoto Protocol, which are very few, and the faults, which are many, will be with us to stay. That is what is important in the Kyoto design. The year 2008 is around the corner, and 2012 will come and go. The impact of Kyoto is not whether countries meet their targets. This is not important at all. The impact of Kyoto is the imprint that it will or will not leave on the truly long-term design. And this is the short-term question. I am not really a friend of the Kyoto agreement, as I think that it is full of holes. However, I am enough of a friend of the principles of the UNFCCC and the principles of the Kyoto Protocol to live with the belief that we need to make the best of the agreement despite all of its faults. The Kyoto Protocol suffers from all of the faults of international environmental negotiations that we have seen before it. It was the lowest common denominator and it is an agreement of convenience. It therefore has all the faults of agreements of convenience. Yet here we are designing something that is meant to last literally for centuries, unlike many other agreements.

Let me focus now on the medium long-term. The fact of the matter is that there is no Kyoto Protocol at this point. The fact of the matter is that there is no CDM. There may be a CDM in the future, but the Kyoto Protocol has not been ratified. I would like to believe my friends who tell me that it will be ratified. But as of this point in time, it is not. Therefore, if we are thinking in terms of the long-term, we need to be thinking of what could be. It seems to me that if you want to do a quick scenario exercise, there are at least two types of things might occur in the medium long-term, say 2010. The first is that the Kyoto Protocol is ratified and implemented. This is one possibility. Another is that it is ratified but not implemented. A third world is that the Protocol is not ratified at all. This is at least a possibility.

On the other hand, the world of 2010 could also vary by a number of other factors. One of these might be the developing countries level of development. In one world, all developing countries have miraculously developed enough that they are now ripe for having commitments like those in Kyoto. In another scenario, some of them, like Argentina, have either developed enough or are willing to join that community. A third world is one in which none of them want to change their position. So as we think of the long term, we need to think about these various permutations and possibilities.

If the Kyoto Protocol is ultimately ratified and implemented, should we be happy? I am not so sure. If this best of all Kyoto worlds happens, then the Annex 1 emissions will be exactly where they were in 1997. Having said that, my own sense is that Kyoto will be ratified, if only because there are too many people whose careers depend on it, and have invested too much of their institutional interest in making this happen. But I do not think that it will be implemented. At least not all the targets will be met. One or two of the developing countries will be able to move over, but most will not. Therefore, the medium long-term world will probably not be too different from the world that we have right now. It will still be an unequal world, and it will still be a treaty that is not really about the environment but about economics. Therefore, the long-term design should incorporate these two facts whether we like them or not.

What are the questions for research for the long long-term? This, I think, is the only real long-term. My own sense is that, in the long long-term, we need not be constrained by the realities of today. In the long long-term, we can think, we can dream, we can imagine what the world might be and then move back to identify constraints and see which of these we can or cannot move. This, I think, is the strength of the scenarios approach. By looking forward to where we could be, by looking forward to where we want to be, and then working backwards to where we are and seeing how we could change things.

The Research Questions
My one comment on the Scoping Report is that it overstressed the importance of science. I do not foresee the big surprises coming from science. The real questions are in the economic and sociology domains. These include the question of ratification, the questions of implementation, and the question of economic costs. The big science question that I would think would make a difference is if someone really formed an agreement around where we want to be as a world so that we could allocate. Beyond that, I think science will happen, some things will come, but there will not be the climate equivalent of the ozone hole. It will happen at its own pace, and not much will happen beyond that. So I am not sure that science will be an important factor.

The real question of institutional design, and the question that I think Kyoto sidetracked, is going to be the question of allocation. The reason that I think the Kyoto Protocol is a bad treaty is that it is a treaty without any theory. It is a treaty without any basis. I have looked carefully, but have not found any reason why Japan's target is five percent. Why is that of the United States eight percent? There is no basis for these decisions. If you are looking at the long long-term, on what basis will a target for Bangladesh be decided? What about that for Pakistan? At whatever point at which commitments are accepted, what is the rationale or basis for these commitments? My own preference is for a per capita basis, but this is only one option. It is important, however, that there is some reason for why one country has one commitment and another country has something else. In the long long-term, there needs to be clarity, so that when others follow, there is some sense of why they are being asked to follow one way versus another.

The allocation question is dear to my heart and I could go on and on about it, but I will not do that. One of the things that really gets me boiling is the stock statement, "By the way, by 2035, the developing countries are going to produce as much as industrialized countries." What they are really saying is, "Even by 2035, two-thirds of the world will be producing only as much as the remaining one-third." What they are really saying is that the present inequities should be perpetuated. So some sense of where and when the allocations will be made and how they will happen is important.

Imagine now a Kyoto Protocol and a Framework Convention that has targets for Pakistan. Pakistan has already sold their low-hanging fruit to Japan. How will the regime account for this? This goes back to some of the issues we discussed earlier. Who is Pakistan going to get involved with in the CDM? There is one thing about the Kyoto Protocol that is better than any other agreement that I know of. That is, it says exactly what it sets out to do. The purpose of the Kyoto Protocol is to allow developing countries to assist Annex 1 countries in meeting their obligations. One of the most truthful lines I have ever seen. But this becomes the implementation question. It is not what happens to the Kyoto Protocol right now, but how the Protocol or the FCCC will be implemented in the year 2100. Answering this question will require addressing these complex, long long-term issues. Thank you very much.

Session 5 Discussion Summary: Research Questions Concerning Adjustment and Learning Processes in the Climate Change Regime

The core research question put forth in the CMRA Scoping Paper is: how can flexibility, self-correcting procedures, and social learning processes be incorporated into the evolving climate change regime?

With this question and the presentations as background, meeting participants outlined the following important institutional research questions:

• What opportunities and threats do the Kyoto Protocol and the climate regime that it embodies pose to the global economic system?
  Many countries view the regime as a long-term threat for a variety of reasons, but little analysis has been conducted on the range of opportunities and threats over the course of the next century that could demystify these issues and take some of the thorns out of the system.
  
  
• What are the alternative learning mechanisms that can be used to break out of the current mode of thinking about climate change?
  Can a research effort be designed that could take a more long-term view and suggest some scenarios of a more equitable and climate stable world and how such a world can come to pass? Are there certain institutional arrangements that promote or at least allow for new ways of thinking about these issues? It is not clear that the IPCC can serve this purpose, as much of the IPCC's current mandate is focused on the Kyoto Protocol. One mechanism might be to realign the established learning mechanisms, such as the IPCC, not around the day-to-day events but around these larger questions.
  
  
• When we talk of capacity-building, what are the capacities that are required?
  Many who seek capacity think in terms of a three-week course at Harvard or a training workshop with speakers. However, the kind of capacity that is needed may not be met by these approaches. This is particularly true if the focus of the capacity is institutions. It is not just a question of how many people and what they are doing. For example, the country that had the greatest impact on the final form of the desertification convention was Benin. Benin had only one-half of a delegate, but that half-delegate wrote a good part of the final text of the Convention. Those who are doing research on this topic have not done a very good job of saying what the capacity is for, who it is for, and how it is different from simply training another academic to perpetuate research on capacity-building.
  
  
• How can capacity be build for social science research on climate change?
  Social scientists, in contrast to natural scientists, have relatively limited experience with the conduct of large-scale, collaborative research programs. While there is room for individual contributions within the common framework of these programs, there is generally a consensus on how to define some of the key variables, how to make data sets accessible to researchers, and how to make datasets sufficiently harmonized so that they are sufficiently close to measuring the same things. It is very difficult to say meaningful things about the differences and similarities among conclusions reached in different research efforts. The challenge of scientific capacity-building is one of the greatest that social scientists face. Social scientists also face the challenge of socializing funding agencies to understand the need for their collective capacity to engage in substantial coordinated projects just as it is needed in the natural sciences.
  
  
• What can we learn from other international regimes about the learning processes and the development of global norms, particularly those involving long-term or quantitative targets or goals?
  For example, the nuclear non-proliferation regime sets as a long-range goal the elimination of nuclear weapons. It would be useful to gain a better understanding of how these agreements contribute to the changing of norms and obtaining long-term objectives.
  
  
• How do countries and regions differ in their interpretation of international agreements and quantitative targets such as those contained in the Kyoto Protocol?
  For example, international agreements are viewed very differently in Japan than they are in many European countries. Similarly, an emissions trading system in the United States would operate very differently than one in Japan. How do we account for these differences in the evolution of the regime over the long term?

Session 6: Linkages and Organizational Issues

Session Chair
Dr. Oran Young, Chairman, Institutional Dimensions of Global Environmental Change, Dartmouth College

Presenters:
Dr. Kilaparti Ramakrishna, Deputy Director, Woods Hole Research Center
Dr. Jill Jaeger, International Human Dimensions Programme On Global Environmental Change (IHDP)
Dr. Josep Canadell, Executive Director, Global Change and Terrestrial Ecosystems (GCTE), GCTE International Project Office, CSIRO Wildlife and Ecology

The IDGEC will undertake the CMRA through extensive collaboration with other projects. Such partnerships can stimulate scientific progress, produce practical benefits, and increase the likelihood that research results will find their way into the policy stream. These collaborations include coordination with other IDGEC research activities and with other programs and research projects that have institutional dimensions, as well as other policy and natural science research efforts related to global carbon management. These include activities being undertaken by the International Geosphere-Biosphere Program (IGBP), the World Climate Research Program (WCRP), and other programs of the International Human Dimensions Program (IDHP), as well as policy research efforts being undertaken by the FCCC Secretariat, non-profit organizations, and industry groups.

Creating an organizational structure that would make these linkages effectively and satisfy the CMRA's objective of generating policy-relevant research presents a significant organizational challenge, however, as climate change policy is evolving at a faster pace than the research community can comfortably accommodate. With the Conference of the Parties meeting every year and the subsidiary bodies meeting every four to six months, policy-makers generally have time horizons of only six months or so. Researchers, however, tend to have time horizons of several years, as it generally takes this long to generate significant research questions, work out methodologies and acquire funding.

- CMRA Scoping Report

Needs and Constraints of the Policy Community

Kilaparti Ramakrishna
Deputy Director
Woods Hole Research Center

Thank you. I will try to be very brief. When Gran asked me to speak at this session, he said that he was hoping to get someone from the FCCC Secretariat to talk about what they see as their needs and constraints in doing the job that they need to do. Then he and I went on to talk about whether that would be enough, and whether the needs and constraints of the Parties to the FCCC should also be considered. So my object here is to talk not just about the Secretariat but a number of other actors, including the FCCC Bureau, the leadership of the Subsidiary Bodies, the Parties, and environmental and industry non-governmental organizations. I want to focus in particular on the G-77 Parties, and will talk about why in a few minutes. In addition, one of the topics that has been part of this discussion from the outset is capacity-building, and I want to look at the needs and constraints that the policy community faces under that rubric.

The Secretariat
The Secretariat exists to serve the Parties, and the mandates that it gets are from decisions of the Conference of the Parties. We know that once there is a mandate, the Secretariat can go and do its business. Oran and several others had looked at how Secretariats function and where they get their ideas. Do they wait for the Conference of the Parties to give them decisions or do they initiate them? If they were to initiate their own activities, how do they go about doing this? Do they try to build constituencies within the Parties? Do they try to build them outside of the Parties among the science and social science communities? The answers are quite revealing. Some said that they take a very literal interpretation of their role, which is that they receive the mandate, try to fulfill it, and the Parties say whether or not they have done the job. Others try to do things differently. If we were to limit our comments to the Climate Convention, then I would say that this is a Secretariat that does things differently than other Secretariats that began their work about the same time. They obviously listen to the Parties and their decisions, but they also went out about creating support for various initiatives. They have been doing this by reaching out to people like us and saying, "We need to get this done. Can you come up with a set of ideas?" They then take this information back to the Parties. This is all done informally in that they did not have any mandate to do this. But they have done it quite successfully. It is important to realize that whatever needs and constraints that we are talking about in a broad sense apply to the climate change secretariat as well. It may be that the climate secretariat is doing a better job than many others, but if you want to take a step back and look not just at climate change but at how the overarching principles of sustainable development and, more importantly, questions of equity and capacity-building are to be addressed, then we want to look at this as a candidate.

The Parties
Once we are done with the Secretariat, we move on to the Parties. The Bureau is a group of individuals elected amongst the Parties to be, in some sense, the managers of the entire group of Parties. They are expected not to be playing the part that is assigned to them when they lead their country's delegation. They are expected to be discharging the functions assigned to the Bureau in the convention process. They also have very specific needs and constraints in terms of their ability to operate freely. This may not be very obvious to us because we do not see how the bureaus function, as either the membership is restricted or meetings occur in a closed room. But if you are privy to those discussions, you would realize that some members are very well prepared and others are inadequately prepared.

In the case of the leadership of the Subsidiary Bodies, the differences between those who are prepared and those who are not are very obvious because you can see them. You see them conduct the meetings, and you see how some do a very good job and others do a very poor job. The question again is how they get the tools and information they use in the performance of their functions.

The specifics of what I am talking about come when we talk about the G-77 countries and its groupings. I said that I am going to talk about capacity building in particular. The reason I picked this topic is, first, the general interest we all seem to have in the topic, and, second, it is one of the major decisions that will be taken at COP 6. I know that it is terribly short-term, but what COP 6 is expected to do is put into place a long-term series of measures that would address the concerns, needs and constraints of the policy community in the future. The Secretariat sent out a questionnaire to all the Parties asking them to list their capacity-building needs and to indicate what they wanted the Conference of the Parties to do. They received three responses out of the 133 countries that comprise the G-77. So the Secretariat had to put out a document on capacity-building based on three responses. They also looked at the national communications of approximately 20 developing countries to get a sense of the capacity-building needs the countries had identified in those documents. So the reason that I am focusing on capacity-building is that, if there is going to be a major decision and the preparation for that major decision is very inadequate, we should think about how we might contribute to that.

To complete the picture from my point of view, the NGOs, both environment and industry organizations, also have a capacity problem. By industry organizations, I mean the so-called "green" industry groups that are often very friendly with environmental organizations. Groups such as the Global Climate Coalition have all the resources they need to participate effectively. But for these other NGOs, the complexity of the subject matter and the inability of all the NGO participants to follow the details of the negotiations, questions arise concerning the details of the various meetings and how to prepare for them. We often go through a lecture session before the meetings to go through the issues, point out where the environmental community stands on them, and suggest ways for the participants to keep track of what is going on.

Capacity-Building Needs of the G-77
Before we talk about the G-77, I think that it is useful to talk about the purpose of the G-77. The Group of 77 was created in 1964, and the membership has now nearly doubled to 133 countries. The G-77 was established in order to articulate and promote its collective economic interests in the international arena. However, while the G-77 was initially in such a way that it was prepared to deal with these economic issues, it has not been able to grow in such a way that these new issues are incorporated effectively. If you go to some of the G-77 proceedings in New York, you will get the feeling that you are still in the 1970s.

What are the needs here and how might we proceed with them? While I have tried to compile some of these here, I do not want to suggest that these are by any means exhaustive. That said, the first need is to identify issues of common concern to the membership. The reason I put this in is that when you look at the Secretariat document, you will find a lot of needs identified with a reference to national communications. This is not surprising, as that is where the Secretariat got its information. But G-77 negotiators would say that they need negotiator training, and those people involved in the CDM and project development would say that they need assistance with that. Even as recently as in Montreal, where the IPCC Summary for Policy Makers of the Land Use and Forestry report was adopted, the capacity needs identified there were quite different. So you will get a completely different response depending on the subject matter and who is asked. Before we talk about a decision by COP 6, I think we need to come up with some broad, overarching needs that Parties can rally around. There is quite a bit of existing material that needs to be accessed for this.

There is also a need to build capacity to formulate individual country views. This is extremely important, but not all countries do so. In India, when delegations go to a negotiating session for which there is no official government view, the delegates have been known to go there and "wing it." When delegates do this, however, they are not protecting their interests and are not able to articulate what is in the best interest of their country.

It is also necessary to build a capacity to formulate group positions before global negotiations. These group negotiations are extremely important. There are quite a few different groups within the G-77, and these groups often have interests that conflict with each other. The G-77 needs to be able to determine what issues are of common concern to all such that they could have a common front and what issues need to be dealt with differently.

Elements of Capacity Building
I want to make just a couple of points on the elements of capacity building. One important element is institutional strengthening. When we talk about institutional strengthening, it is important to think about where these institutions are and how we plan to strengthen them. If you talk to UNDP personnel or look through the UNDP's Capacity 21 document to find out what they have done on climate change, you will find very little. There are enough institutions in developing countries that need to be strengthened in terms of resources. However, it is not in terms of creating positions in the Secretariat to sit in Bonn and coordinate these issues. That is not the way to further the issue in the long-term. Another element is the development of human resources at the country and regional levels to analyze technical data and design appropriate policy options. The South Center seeks to do this, but we need other institutions to do this as well.

One last point is that whenever there is a topic like this that is going to be a major issue in the future, it is important that this is not just a topic that we keep talking about, cutting up the meaning in the process, and then cannot say even if we have been with it for ten years or twenty years whether anything has been accomplished. Unfortunately, technology transfer has turned out to be one such topic. On conclusion that the IPCC came to in the special report that it adopted recently is that the reason why the developing countries still go to these meetings and say that nothing is done on technology transfer and the industrialized countries still go to these meetings and say that they give and give without any recognition is because there is no set procedure to say what is needed, establish a timetable for meeting these needs, and follow through with the assistance. So it is extremely important that we have a clear definition and program design, and then measure it so that at the end of the program we can say that we have done it. Now this is not going to happen by COP 6. Clearly, however, the Parties that are trying advance this issue need guidance and help with how they might move forward with this.

One last point before I conclude. We should not see capacity-building needs in terms of having people in ministries responsible for the topic for one hundred percent of their time. It is not that. I do not think that this is the problem. I can tell you from our own experience with the climate negotiations, the fact that there was only one delegate from a country did not that person even though that person might be doing ten other things back in the capital. So it is not a question of the amount of time that is given to it. It is a question of the determination that is there at the national level to take this as a priority issue. It will not be a priority issue unless it is seen in the whole calculus of what the country needs in terms of its own development goals. Thank you.

Needs and Constraints of Social Science Researchers

Dr. Jill Jaeger
International Human Dimensions Programme
On Global Environmental Change (IHDP)

Thank you. As I mentioned this morning, the International Human Dimensions Program is one of three research programs at the present time that are dealing with the issues of global environmental change. If you look historically, the World Climate Research Program is the oldest of the research programs, starting after the first World Climate Conference in 1979. The International Geosphere-Biosphere (IGBP) Program is the second oldest of the programs. It started in the mid-1980s. The IHDP in its present form started in 1996, and is much younger than the other programs.

The reason why the IHDP program took off in 1996 was the recognized need for some coordination of research on the human dimensions as opposed to the research that was being conducted on atmospheric questions in the World Climate Research Program and the biogeophysical questions that were being raised in the IGBP. There is a need for this coordination of research largely from the social sciences that tackle human dimensions issues. It is not only the social science community that needs this coordination, and even now we are seeing a move to coordinate between the World Climate Research Program, the IGBP, and the IHDP. We recognize the need to carry on doing the projects that we have within IHDP on the human dimensions but at the same time to begin to work much more closely with the other partner programs on global environmental change.

As I said, there was recognition as we set up IHDP in the second half of the 1990s of the need to coordinate research. In terms of the needs of the community, we also recognize the need for information exchange. How do we find out who is doing what on these kinds of projects? There is a lot of human dimensions research being done, and there is a need to find out how much is being done, where it is being done, and who is doing it. We have found two particularly good ways of doing this. One is working through national organizations that do inventories of human dimensions research in their counties and collecting this information at the IHDP Secretariat. Slowly but surely we are accumulating an inventory of research that is going on at the national level or in particular countries or regions. We also communicate this information to the community at large by making it available on the IHDP website and through the IHDP newsletter.

The other way that we have been successful in finding out where interesting human dimensions work is being done is by sponsoring open meetings on human dimensions research. There have been three of these meetings thus far: one in 1995 at Duke University, one in 1997 at IIASA, and last year in Shonan Village in Japan. By bringing together on the order of 300 researchers to present their on-going research activities is again showing us the broad range of what is being done. The Japan meeting in particular has provided an up-to-date documentation of the breadth of human dimensions research in the form of a meeting report and a compilation of abstracts. The next open meeting on human dimensions research is to be held in Brazil in October, 2001.

In addition to finding out what is being done and coordinating what is being done, the other need is capacity building for social science research. The Human Dimensions Program has done various things to develop capacity both in terms of running workshops and doing training workshops for scholars from developing countries. The next one will be held in September of this year.

The constraints facing the human dimensions community are fairly obvious. One of the biggest constraints that we have begun to discuss in quite a lot of detail is a data coordination effort. There are a lot of projects going on, and a lot are planned. But we have not done very well so far in the human dimensions research area for centralizing data and making it available for other scholars in the community.

The second constraint or challenge is the scale issue. This came up several times yesterday. A lot of research is being done at a very local scale, and we have to find interesting or useful ways for moving up and down among the different scales. This needs to be done in the spatial dimension as well as the time dimension.

The last constraint or challenge that I see is one that we see in this meeting. There is an obvious, near-term demand for quick answers to key policy questions, but at the same time a demand for a long-term, strategic research agenda on human dimensions. Trying to meet both of those demands with the small community of scholars that we have is a big challenge.

The International Carbon Research Project

Dr. Josep Canadell
Executive Director, Global Change and Terrestrial Ecosystems (GCTE)
GCTE International Project Office
CSIRO Wildlife and Ecology

Thank you. Jill was talking earlier about the three international global environmental change research projects. The first was climate, many years ago. Then we realized after a few years that climate is not there on its own, but that it is modulated by the oceans and the terrestrial environment. So we created the IGBP. Then later on we realized that interactions among the climate and the biosphere were no longer natural and that there was a human dimension that was modulating these interactions as well. This brought about the establishment of the IHDP.

We now recognize that the planet is a complex system made out of these three components interacting in a complex, non-linear way. The IGBP, IHDP and the WCRP have agreed to develop a cross-cutting activity on the carbon cycle. Figure 1 shows the major components of this system, oceans, geosphere, land, and atmosphere, all within the circle of the troposphere, which is modulating all of these interactions. The IGBP has started a very complex process of working with geological societies to reach an agreement that the Holocene period ended about 50 years and that we are now in the Anthropocene period. This is in recognition that humans are now one more of the biogeochemical forces shaping the earth's system.

It is useful at this point to go though how global change research is coordinated. There are many international programs and national space and other agencies trying to monitor carbon dioxide, land use change, and other factors that contribute to climate change. Individuals engaged in these monitoring activities interact with the researchers participating in the WCRP, IGBP and IHDP programs to research the functioning of the climate system. Every three to five years, the IPCC compiles the information generated through this research in an assessment report. These groups are interactive, with the IPCC identifying all sorts of new gaps that the researchers can explore. At the same time, researchers put new issues on the table that they think should be included in the next IPCC assessment. The whole system is highly interactive, with each group having a niche. However, we need to coordinate even better.

The first thing that is being developed under this cross-cutting activity is to develop a carbon research framework. A number of overarching questions have now been developed for this framework. First, we want to know the spatial distribution of the current carbon sources and sinks? Second, we want to understand the patterns of temporal variability in the carbon cycle. Third, we want to know the nature of human perturbation of the carbon cycle. As I said, the carbon cycle no longer works as a system of feedbacks between the atmosphere, the oceans, and the biosphere. Finally, we want to know how carbon cycle dynamics will work in the future.

Institutions connect all the different points of the carbon cycle together. Figure 1 shows this cycle and these linking points. The black boxes are the components of the cycle: atmosphere, oceans, land and fossil fuels. There are major institutions associated with these, including energy, land use, and climate that modulate the transfer of carbon from one box to another and feeding it back. We want to understand how our physical carbon cycle interacts with these institutions. Similarly, climate and climate change is filtered by human perceptions of climate change and its impact on human welfare, which in turn affect how institutions react to effect these transfers of carbon.

To investigate this, we will have to look at all sorts of linkages and scales. In particular, we need to think carefully about issues of scale. Institutions in the carbon cycle vary in scale, and include global institutions, nations, regional markets, local communities, and individuals. We want to explore how we can make linkages at various scales, linking, for example, global institutions with the biosphere. We must recognize, however, that we may not be able to establish an equal relationship with some of the scales that are important at both the human dimensions level and at the terrestrial or carbon level.

There are a number of specific institutional questions that we want to investigate as part of this effort. These include:

• What are the probable trajectories of fossil fuel and land-cover change emissions and uptakes of carbon dioxide over the next century?
  
• What institutions could manage the carbon cycle effectively at global to local scales?
  
• What are the key scales in time and space for linking institutions to the carbon cycle?
  
• How much historical land use information is needed to understand the current and future carbon cycle, and how can it be obtained?
  
• What techniques can be used to sustain and increase the production of food, timber and other benefits from the land, while continuing to take up and store carbon?
  
• What are the consequences for the global carbon cycle and global and local economies of partial (as opposed to full) carbon measurement and of making some or all of the carbon a tradable commodity?
  

What we want to do now is to establish a process by which the various research communities that would have a role in this research effort can start thinking about how they can contribute to the research plan. We are planning a big meeting in October where representatives from all of these communities can come together to elaborate this plan. We hope that by February of next year that the various Steering Committees of the WCRP, IGBP and IHDP will approve it, and we hope to publish in May, 2001, at the same time that the IPCC's Third Assessment Report is published. Thus at the same time that the IPCC assessment is put on the table, there is a reaction from the research community with a plan for how we are going to proceed for the next five years before a new assessment is prepared.

I want to make it clear that this is only an overarching framework for a research program that we want to carry out. We are not trying to prescribe the kinds of research that should be done. It is hard to develop a common ground that will allow all these different groups to work together, to integrate, and to really answer the questions that we know we can not answer from just a social science perspective or a natural science perspective. But this is a place to start.

Thank you very much.

Theme 2

Session 4

Compliance and the International Legal Perspective

Implementation Issues: Lessons from the AIJ Pilot Phase of the Netherlands and the USA

Reconciling the Design of CDM with the Inborn Paradox of the Additionality Concept

Session 4 Discussion Summary: Research Questions Concerning the Institutional Dimensions of Compliance and Implementation

Session 5

Domestic Trading: A Credible Early Action

Long-Term Learning And the Climate Regime

Session 5 Discussion Summary: Research Questions Concerning Adjustment and Learning Processes in the Climate Change Regime

Session 6: Linkages and Organizational Issues

Needs and Constraints of the Policy Community

Needs and Constraints of Social Science Researchers

The International Carbon Research Project