After a long time of negotations, a new climate accord has been reached by the 20th Conference of the Parties (COP20), in Lima, on the 14th December 2014. It is called the `Lima Accord‘, a draft text that is now viewed as a step towards the international climate conference to be held in Paris in 2015. I provide an overview of the main results, the difference to what had been decided before, and an overview of the different positions in the news.

What are the main results?

The Conference of the Parties

  • Underscores its commitment to reaching an ambitious agreement in 2015 that reflects the principle of common but differentiated responsibilities and respective capabilities, in light of different national circumstances
  • Recalling [the] Warsaw International Mechanism for Loss and Damage associated with Climate Change Impacts
  • Urges developed country Parties to provide and mobilize enhanced financial support to developing country Parties for ambitious mitigation and adaptation actions
  • Reiterates its invitation to all Parties to communicate their intended nationally determined contributions well in advance of the twenty-first session of the Conference of the Parties (by the first quarter of 2015 by those Parties ready to do so)
  • Agrees that each Party’s intended nationally determined contribution towards achieving the objective of the Convention as set out in its Article 2 will represent a progression beyond the current undertaking of that Party;
  • Prepare by 1 November 2015 a synthesis report on the aggregate effect of the intended nationally determined contributions communicated by Parties by 1 October 2015;

What is different to before?

The main difference to what has been decided previously is that now all countries are `invited’ to inform about their intended nationally determined contributions (INDC) towards achieving the objective of the Convention. In other words, countries should inform the rest of the world about their plans for emissions. This, in effect, suggests that all countries are now invited to think about their contribution to climate change. As such, it is in contrast to the rules of the Kyoto Protocoll, where only a subset of countries (Annex I, basically the rich) were subject to emission reductions, while other countries could undertake emission reductions if they wished to do so.

What are the issues with these changes?

Positive: We now see a somewhat transformed discussion, where not only the rich countries are required to do undertake emission reductions, but the developing world is `invited’ to do their share, too. One of the reasons for which this more inclusive Lima Accord was made possible is clearly that that the US and China have mutually committed to larger emission reductions or a stop on emission growth by 2030. As Robert Stavins noted,

“It was clear that the joint announcement on November 12th of national targets by China and the United States (under the future Paris agreement) provided necessary encouragement to negotiations that were continuously threatened by the usual developed-developing world political divide.

The delegates from the vast majority of countries were well aware of the fact that the announced China-USA INDCs move the world from the 14% of global CO2 emissions covered by nations participating (a subset of the Annex I countries) in the Kyoto Protocol’s current commitment period to a future Paris agreement that now covers more than 50% of global CO2 emissions, with Europe already on board.

Coverage of 80% to 90% of global emissions can be anticipated”

Negative: Many – especially developing nations –  had hoped that an agreement on the Green Climate Fund would be reached. Decisions concerning this were postponed again. As John Upton notes:

Developing nations, for example, wanted wealthy ones to lay out a plan at Lima for how they would satisfy a 2010 commitment to “mobilize” $100 billion a year by 2020 to help them adapt to climate change and reduce their climate impacts. Instead, the decision that was adopted “urges” developed countries to “provide and mobilize enhanced financial support” for “ambitious mitigation and adaptation actions” by the developing world.

Pawan Khera puts the frustration of the developing nations concerning the lack of consense regarding the Green Climate Fund into words:

Wealthy countries would not carry the burden of cutting carbon dioxide emissions. Neither does the agreement have any mention of the provision that the rich nations will compensate the poorer and vulnerable countries to adjust to climate change. Developed nations, which have had the first mover advantage both in industrial development and in polluting the earth without accountability, cannot now turn a blind eye to the need to fund green technologies and help developing nations avoid the very learning curve that polluted the earth in the first place.

Similarly, there is some degree of frustration about the lack of enforcable emission targets. E.g. Pawan Khera notes:

Critics apprehend that self-regulation may not be enough for countries to enact domestic laws and put in place a plan to reduce carbon emissions by March 31. These Intended Nationally Determined Contributions will constitute the Paris deal. The absence of a legally binding language makes the Lima Accord a short-term achievement, but in the long term unquantifiable, unpredictable and unenforceable. After all, the world does not just depend on “peer pressure” for nuclear disarmament.

Thus, what the Lima Accord basically suggests is a bottom-up approach to emission reductions: Each country can define how much they want to emit, and then the total is seemingly what we have to accept as the maximum emission reductions that the world will undertake. This has an advantage and many disadvantages. The advantage is that countries are now subject to peer pressure. They need to present clear targets by the middle of 2015, and if they fall short of what may be viewed as an internationally-acceptable emission target, then they face the blame. Name and shame is the new climate game. As Dave McEvoy notes:

The agreement compels countries to be transparent with their pledges, and so perhaps behavioral motivators like “peer pressure” or “shame” can move countries to ambitious emissions reductions. Comparing the equivalence of emissions abatement pledges between developed and developing countries is a very subjective analysis.

But this name-and-share game won’t work. Firstly, once countries decided to settle upon a path for their emissions by middle 2015, then by November 2015 we will know whether the total of these emissions falls short (or long) of what needs to be done to curb climate change. The question is whether the peer pressure will make it possible to come away at the long end, and it is unlikely to be strong enough. After all, the reason for which we are currently in round 20 of COP, and 23 years behind scedule (the first UNFCCC conference was 1992) on our world wide emission reductions, shows that peer pressure plays little role in emission reductions or in achieving binding agreements. National interests are too much economic growth and short-term oriented. The recent decision by India to place economic growth highest on the agenda and to scrap environmental targets clearly shows this. Similarly, Australia has decided to drop its carbon tax, saying that it did more harm than good. The problem is that countries are extremely different, and politicians seem to have a difficult time to come up with objective measures for a country’s responsability and capacity to reduce emissions. As a result, it will prove difficult to name-and-shame.

Another issue is raised by Carlo Carraro, who writes that

One of government’s main roles in enabling climate finance is to send a clear, consistent, long-term signal to investors that there is a safe market for low-carbon technologies… Carbon pricing is one of the strongest signals that governments can send to say they are serious about low-carbon. Not only does this provide a way – if effectively implemented – of progressively moving away from fossil fuel energy, it also provides financial benefits. Lobbying and sideline action abounded with pressure to develop carbon pricing mechanisms. Like the drop of water on stone, this is making an impact nation by nation. However, no concrete progress came forth from COP20 on this, even though important signals came from the UN Summit in New York last September and much more will emerge in 2015 in preparation to COP 21.

Consequently, in the middle of 2015 we are likely to see that we fall short of the required world emission reductions, and then the whole process will have to restart. The Lima Accord is only really a useful, or a meaningful step, if the intended nationally determined contributions (INDC) to emission reductions are in total at least as large as what will be required to achieve the world’s climate target. If these contributions fall short, then we would need to see coercive mechanisms in addition to the INDC, and then we are (nearly) back again to where we were before.

And now more clearly for economists: The move in Lima towards a mechanism that one may call private provision of public goods with peer pressure is only likely to lead to the optimal amount of emissions if the peer pressure exerts exactly the amount of pressure that makes countries internalize their externality. How likely is that? What really is the cost of not succumbing to the peer pressure? How is peer pressure going to work if the responsabilities or capabilities are somewhat vague? It should be clear that the participants at the Conference of the Parties know this as well. So all the Lima Accord really does is provide an intermediary step by saying all countries bear responsability for their emissions. Hence, in Paris we need to see a clearer definition of all parties’ responsabilities and capabilities, and hopefully a more definite result on the Green Climate Fund. That’ll be a big agenda!


P.S.: A good discussion of additional topics covered in Lima is HERE  by the World Resource Institute.