Multilateralism Ain't Dead: A Climate Deal in Durban

Well here's a pleasant surprise: while the fine print remains to be hammered out and non-ratification by the countries concerned remains a distinct possibility, the broad outlines of a multilateral climate deal are in place. While many economics and even IPE blogs do not cover climate change, it is obviously an important and relevant topic since efforts to combat it (a) indirectly place limits on economic activity, (b) shift the relative attractiveness of more- and less-carbon intensive industries and (c) implicate North-South technology transfer in reducing LDC emissions. As my post title intones, there's also the matter of it (d) indicating appetite for multilateral negotiations in general.

Of particular interest it that the world's worst climate offenders, China and the US, have both (tentatively?) assented to having their carbon emissions bound by international law. This result gets around the "if [China; the US] refuses to be involved despite being a major emitter, then why should we?" sort of weaselling out prevalent in the past.

The four elements of the deal are (1) an extension of the Kyoto Protocol, (2) the enabling of a $100B Green Climate Fund to give LDCs technical assistance in reducing GHG emissions, (3) an agreement to make all countries involved sign a deal in 2015 to cut emissions by 2020, and (4) a plan for next year. The first thus concerns Kyoto:

Sunday's deal extends Kyoto, whose first phase of emissions cuts run from 2008 to the end of 2012. The second commitment period will run from January 1 2013 until the end of 2017.

The next one deals with funding and operationalizing the Green Climate Fund I discussed in an earlier post. (However, a proposed tax on trade to contribute to this fund proved unworkable.) Still, you have to wonder if hard-hit industrialized countries are excited about funding it:

Poor nations are most in need of finance to help pay for adapting to global warming and introducing low emission energy and industrial processes. Against the backdrop of a sovereign debt crisis, developed nations are also ill-placed to commit money beyond short-term financing that runs out at the end of next year.

The Durban talks made headway on agreeing the design of Green Climate Fund to channel up to $100 billion a year by 2020 to poorer nations, but achieved little on establishing where the money will come from to fill it. A proposal last week to generate cash from charging international shipping for the carbon emissions it generates faced such opposition it did not survive in the final text [my emphasis].

Then we get to the heart of the matter in the form of a legally binding treaty:

Delegates agreed to start negotiations for a new legally binding treaty to be decided by 2015 and to come into force by 2020. The process for doing so, called the Durban Platform for Enhanced Action, would "develop a new protocol, another legal instrument or agreed outcome with legal force that will be applicable to all Parties to the UN climate convention," under a working group.

The exact nature of what "legal instrument" or "agreed outcome" has not yet been decided. Delegates decided the process towards developing a new legal instrument would "raise levels of ambition" in reducing greenhouse gas emissions.

Lastly, there's ongoing work towards making a "single market" in carbon credits that avoids splintering of the trading activity that could result in "carbon diversion" effects to borrow a phrase from international trade:

Talks agreed to define new market mechanisms under a successor treaty to the Kyoto Protocol, but pushed forward a decision to develop rules for them until next year. Delegates decided the mechanisms would operate under the UNFCCC Conference of the Parties and "bear in mind different circumstances of developed and developing countries."

The EU wants any new market mechanisms to cut greenhouse gas emissions outside of Kyoto anchored in international law, in order to avoid fragmentation of the international carbon market. Parties will now work on developing a framework for new mechanisms over the next 12 months with a view to making recommendations at a summit in Qatar at the end of 2012. The rules must ensure environmental integrity of new markets, seek to avoid double counting and ensure that a net decrease in CO2 emissions is achieved.

What would I prefer, completing the Doha Round or this? I much prefer the latter outcome given the potential consequences of irrevocable climate change as most studies on the subject suggest. It is perhaps with a touch of irony that the next climate shindig (COP 18) will occur in Doha at the end of next year--the tenth anniversary of the launching of the WTO Doha Round.

At the very least, though, it does show that multilateralism is not entirely dead and that there is a growing consensus about the magnitude of the climate problem. While some may quibble with the magnitude of the emissions cuts on the table, the alternative--no deal--would have left us with a greater distance to a meaningful bargain.