The Conference on Climate Change held in Bali on 3 to 15 December 2007 launched the negotiations on a future agreement on measures to curb climate change once the Kyoto Protocol* expires in 2012. How much was achieved at the Bali Conference?

Jos Delbeke: The European Union was hoping that the conference would agree on a precise agenda for negotiations as well as a firm deadline. These two goals were achieved, so the conference had a positive outcome, even though public opinion has focused above all on the absence of any decisions on concrete measures. The Action Plan agreed on in Bali includes up a “road map” for negotiating an agreement to take over from the Kyoto Protocol when it expires in 2012. The deadline set for this agreement is November 2009.
Another positive result is this: we think that climate change is a fully international problem and that any solution requires the participation of all the main players (the United States, the European Union, China, the emerging economies, etc.). The fact that the United States has accepted the United Nations as a negotiating forum is significant; it would be hard to finalise an agreement if the world’s leading economic power was not involved. United States participation is fundamental to the success of this enterprise.
Jiahua Pan: The Bali Conference was a symbolic first step. As Mr Delbeke mentions, the conference drew up a road map. But I must say that the outcome did not meet initial expectations. No concrete targets were set and there were a lot of issues on which the parties present did not reach any agreement. However, despite these shortcomings the overall outcome of the conference is very positive. But we can expect the future negotiations to be difficult.
Henry Jacoby: The main goal of the Bali Conference was to define guidelines for the negotiators. Those taking part did manage to establish an Ad Hoc Working Group on Long-term Cooperative Action to do the negotiating. This is an important step forward. However, I think that the road map faces a number of difficulties. To start with, the time allotted for negotiations is very short. Real negotiations won’t get under way until March 2008 and the goal is an agreement by November 2009. I question whether an agreement can be reached in such a short time, and the negotiators will have to be flexible and not consider the 2009 dead- line as absolutely binding. One problem is that the timetable fits badly with America’s presidential election calendar. A new Administration will be taking over in January 2009 and I imagine it will have a different view of things and will want to take a more constructive role in the process. The problem is that each incoming U.S. Administration takes around six months to become fully operational. It will be difficult for the new team to start playing a part in negotiations so rapidly. And, of course, the new Congress also will have an important role to play in determining a U.S. position and it has its own time-consuming procedures. Lastly, I don’t think that negotiation of a post-2012 agreement will be restricted to the usual purview of the United Nations Framework Convention on Climate Change (UNFCCC*). The Ad Hoc Working Group set up in the Bali Action Plan includes representatives of almost all world nations, so the process is going to be slow and complicated. In fact, a large amount of negotiating will likely take place outside the Bali framework, in smaller formal or informal forums, which might then be woven into a larger multi-nation architecture of agreement.

Given the data available so far, how successful do you think the Kyoto Protocol has been?

Jiahua Pan: The Kyoto Protocol was an historic event. No agreement of that type had ever been reached before. Innovative measures were put in place to allow countries to reduce their greenhouse gas emissions. Europe has set up an emissions trading market open to 11,500 industrial companies; thanks to the law of supply and demand, this system allows us to determine a world carbon price. This did not exist until now.
Then there is the Clean Development Mechanism (CDM), which encourages industrial countries to launch new low-carbon projects in developing countries and so be able to trade the carbon credits they earn. This mechanism has stimulated investment in developing countries and has encouraged the development of clean technologies. Furthermore, Kyoto has shown up interesting differences in objectives and approaches between countries depending on their stage of development. But I am much less satisfied with the way the Protocol has been applied. To start with it took a very long time, eight years, to agree on just how it was to be applied, when negotiations on the targets themselves took only three years. Secondly,actual emissions have not been reduced as much as agreed; only the former socialist economies in Central and Eastern Europe are able to meet the targets. This has generated a negative perception of emissions reductions in general in developing countries. This being said, public opinion worldwide now has a much better understanding of the need to take action against climate change. At the end of the day, despite its shortcomings, I see the Kyoto Protocol as a decisive first step that will now allow us to go further.
Jos Delbeke: The Kyoto Protocol was a useful and necessary first step, and we have learned a number of lessons from the experience. As Professor Pan points out, the existence of a carbon price is an important plus. Thanks to tools such as emissions trading and CDM, the carbon market is today a reality. If the emissions that companies generate remain free, those companies will never invest in the equipment necessary to reduce those emissions. The major European companies have today factored into their strategy the fact that carbon now carries a price tag. The second lesson is that Kyoto did not pay sufficient attention to the application of new technologies to power generation and transport. These technologies are widely known but they are not being implemented enough. In any future agreement we should include mechanisms that will encourage private investors to become more involved in the use of these technologies.
Henry Jacoby: Professor Pan and Mr. Delbeke properly call attention to some of the real achievements of the process so far. And, as they also point out there are both good and bad sides to the Protocol itself. Indeed, it wouldn’t have been realistic to expect to do better given the difficulty of the task and the confluence of national political positions at the time it was negotiated. Having said that, it seems to me that the problem with the Protocol is not so much its conceptual basis, national targets and timetables, as the way they were implemented. The political pressures of the day led the teams negotiating Kyoto to set target reductions before agreeing how those targets would be precisely defined. What is even more serious is that United States negotiators agreed to a reduction target when it was well known that there was not yet sufficient public support to achieve Senate ratification of an agreement in this form. Furthermore, Kyoto endorsed a principle set in the Climate Convention of a common responsibility but one differentiated according to the stage of development of individual countries. Thus the Protocol relieves developing countries of any binding obligation to reduce emissions. This differentiation is logical and so it will be difficult to bring it into question in subsequent negotiations. However, I do feel that the developing countries will have to make more of a commitment than was required by the Kyoto Protocol, else an extension beyond 2012 with wider participation, including the U.S., may be difficult to achieve.

Do you think that the next agreement should be seen as an extension of Kyoto or should a different approach be adopted now? What sort of approach do you advocate?

Jos Delbeke: If it is to be effective, any climate-change agreement covering the post-Kyoto period must have worldwide scope and involve all players. The industrialised countries need legally binding emissions-reduction targets. That is the only way to ensure that the necessary efforts are made. The European Union decided to reduce its emissions by 20% (compared to 1990 levels) by 2020, and by 30% in the event of an international agreement on that figure. The developing countries are not ready to comply with binding targets. Their per capita emissions are quite low and they also need to pursue their economic and social development, which implies an increase in their emissions. Any post-Kyoto agreement will have to take this into account. The major emerging economies such as China, India and Brazil could commit to relative targets, which could for example be based on improvement in energy efficiency or the share of renewables in their energy mix. For the least-developed countries, targets are not necessary and should be replaced by a qualitative approach in terms of support for adaptation to the impacts of climate change.
Jiahua Pan: If we are to stabilise the concentration of greenhouse gases in the atmosphere we have to have targets. But like Mr. Delbeke, I think the new agreement should stipulate different types of target for the two sides of the North-South divide. The major economies in the South, such as India and China, must be able to continue to develop, and this means they must be permitted to generate increasing amounts of CO₂ emissions. But at the same time, these countries must be more attentive to climate change and must shift towards a low-carbon development model. Developing nations could agree to effective mitigation actions rather than non- realistic targets. Their policies on economic development, environmental protection or birth control could also be seen as possible contributions to the effort to curb climate change. China, which ratified the Kyoto Protocol in 2002, considers sustainable development to be an integral part of its growth strategy. During the period 1998-2005, the country’s investments in environmental protection and ecosystem conservation – two essential vectors in the effort to curb climate change – accounted for sums equivalent to 1.3% of China’s GDP. Energy efficiency in China is about 10% lower than that of developed countries. The country’s 11th Five Year Plan (2006-2010) aims to reduce energy consumption by 20% per unit of GDP by the end of that period. The share of renewable energies in China’s energy mix is expected to grow from 7.5% in 2005 (compared with 6.38% in the EU) to 10% in 2010 (12% in the EU) and 15% by 2020 (20% in the EU).
As for the least-developed countries, such as those in Africa, their emissions are quite low but they are often the most vulnerable to the consequences of climate change. So we must pay greater attention to finding ways to provide better protection for them.
Henry Jacoby: Any new climate-change agreement will surely be more complex than the Kyoto Protocol and it will need to accommodate the varying approaches that will be acceptable to nations in very different circumstances. It may include relative targets, like emissions per unit of economic activity, and agreements on policies and measures, as Professor Pan and Dr. Delbeke suggest. Also, provisions to deal with emissions from tropical deforestation, not necessarily through quantitative targets, are likely to be brought into the mix.

The Kyoto Protocol is based on the principle of binding targets for reducing emissions. You seem to think this type of measure should no longer have priority.

Jiahua Pan: The industrialised countries must take the lead and demonstrate in curbing emissions because they generate most of them. But I do feel that the developing countries should be encouraged to meet emissions-reduction targets, appropriate to their specific situation and conditional to the support from the developed nations. And I don’t think legally binding targets are suitable here.
Jos Delbeke: We already have instruments that have shown they work. The emissions trading system that is already operating in Europe is expanding fast. The market was only set up on 1 January 2005 and trading tripled in 2006 to reach €18 billion. If you add in the €5 billion in credits sold to industrialised countries by developing countries under the CDM provisions then you have a market worth €23 billion ($28 billion). We want to encourage companies to make greater use of instruments such as these. CDM is a promising solution, but we have to ease the constraints, particularly bureaucratic complexity, that are still holding back its growth. For example, all investment projects must be validated by the Secretariat of the United Nations Framework Convention of Climate Change. The procedure is long and complex.
Henry Jacoby: When negotiating the post-Kyoto agreement, I think all the parties need keep an open mind regarding a necessary continuation of legally binding national targets. In particular, I hope that parties that want to emphasize national targets – and here I’m thinking of the European Union – will be prepared to be flexible. Some sort of national targets likely will be an aspect of any follow-on system, but it may be that wide agreement cannot be achieved if they must be legally binding. Some form of softer targets for national emissions reduction and other measures could be the result, with enforcement by risk to reputation.

So you think that the European union’s approach, to set reduction targets in hard figures, is not the right way to solve the problem? Mr. Delbeke, would you care to comment on this often-repeated criticism?

Jos Delbeke: Curbing climate change is obviously going to be a long-term battle, but it is indispensable for us to have concrete and binding objectives for the short term, meaning 2020. We shouldn’t use the long-term nature of the problem as a pretext for putting off any action now. I think that the targets that we have announced are definitely achievable, and are thus quite credible. The technologies exist. The real problem is an economic one: we need to create a business environment that encourages the private sector to invest more in these technologies. But the European Union also has other regulatory instruments that can operate in a number of areas: CO₂ emissions from motor transport, biofuels, energy efficiency, etc. We have adopted a pragmatic approach that combines market forces and regulatory constraints.

It seems that any serious climate-change policy necessarily includes implementation of technologies designed to reduce CO₂ emissions. What can be achieved here, in concrete terms?

Jiahua Pan: The introduction of new technologies can be a way to get developing countries to play a greater role in curbing climate change. But these countries do not always have the ability to do this. Generally speaking, developing countries are unable to take the lead here because they don’t have the necessary financial resources, organisational capacity or technologies. Any post-Kyoto agreement should include provisions for international technology transfer and cooperation, and above all a special fund to cover this. Furthermore, technology for the capture and storage of CO₂ from coal-fired power stations has not yet been shown to be both efficient and economically viable.
Henry Jacoby: Getting a price on CO₂ emissions, as in the European Trading System, is the first and essential task. Then I see two priorities for urgent work on technology: electric power and personal transport. In the power sector, we should step up research and demonstration of CO₂ capture and storage technology applied to coal-fired power stations. Coal is cheap so there are a lot of coal-fired plants worldwide. The barriers Professor Pan cites are real, so there is an urgent need to develop this technology. Also, it is indispensable to take further efforts to remove some of the barriers to nuclear power, such as concerns with cost, waste disposal and weapons proliferation. Things are moving too slowly here. And of course we should continue to expand the use of renewable energies for electricity generation. For transport, the points of focus are improved vehicle design, substitution of biofuels, and movement of some of the projected transport energy from liquid fuels to the electric system though the plug-in hybrid car.
Jos Delbeke: I agree with both of these gentlemen on the urgent need to start using CO₂ capture and storage technology to reduce the emissions generated by coal-fired power stations. This is a very promising solution. As I said earlier, we should continue to encourage the private sector to invest in technologies that can reduce emissions. I agree with Henry Jacoby on the importance of nuclear energy, but we are unlikely to see massive growth in nuclear power generation in Europe or the United States in the next few years. However, I note that no decline is expected: according to the latest scenario published by the International Energy Agency (IEA), the share of nuclear energy should remain stable.

To what extent can consumers also play a part in curbing climate change?

Jiahua Pan: It is essential to set up a veritable carbon market. We will not be able to reduce greenhouse gas emissions unless we set up market-based incentive mechanisms. In fact, I think we should go even further than existing schemes and devise a system where every person on our plant has his or her own personal carbon quota to be used up as desired over the person’s lifetime. If emissions are below the limit, that person can use more in future or else receive a subsidy. If they are above the quota, that person must pay a “fine” that would increase sharply as the excess emissions increased. With a system like that, every individual would feel responsible for his or her own emissions and would play a direct role in helping solve the problem of climate change. Furthermore, the system would be equitable, because poor people generate only a small amount of emissions. Personal carbon quotas would be a way of sharing the effort equally throughout the world. It would also involve energy consumption, where at present only the supply side is taxed.
Henry Jacoby: Professor Pan has an interesting idea, and equitable sharing of the effort worldwide will be a continuing issue in international negotiations. But with more than 6 billion people on Earth an individual-level system would be very difficult to out into action.
The closest we can get to this idea, I’m afraid, is with national quotas, with each state responsible for sharing the emissions-reduction effort among its citizens. And the best way to involve consumers is to have a carbon price: if I consume, I pay and if I don’t consume, I don’t pay.
Jos Delbeke: It would be hard to apply that to all people living on Earth, but I like the idea because it emphasises the role every citizen can play in slowing climate change. It is important to inform consumers of the situation and to make them aware of just what can be achieved here by taking advantage of incentives, particularly tax breaks. Regarding the CO₂ emissions generated by motor transport, for example, we have measures to encourage consumers to buy low-emission vehicles. These measures complement the regulations aimed at car manufacturers. Our policy is to act on both supply and demand.

(*) The United Nations Framework Convention on Climate Change (UNFCCC), agreed on at the Rio Earth Summit in 1992, committed the international community to curb the increase in the greenhouse effect due to human activities. The Kyoto Protocol, agreed in 1997, translated this commitment into legally binding targets.