Flexibility in the Kyoto Protocol, while a good idea in principle, creates perverse incentives that thwart the purpose of the Protocol, and create a question of whether or not it can be an effective method of curbing the effects of anthropogenic climate change. First, before even getting to the Flexibility Mechanisms, allowing non-Annex II countries (former Soviet bloc countries) “hot air” starts the program off on the wrong foot. Second, the Clean Development Mechanism has been abused by companies seeking to take advantage of loopholes within it.
Hot air is the academic or theoretic inflation of GHG emissions in certain countries by setting baseline years differently than other Annex I countries (developed country Parties). The thought is that those countries whose economies collapsed with the fall of the Soviet Union should get to set their baseline at their greatest emission rate rather than their emissions at the time the Protocol was developed, which were far lower because of the loss of industry and financial turmoil. The gap between those two baseline levels is millions of megatons of GHG emissions per year.
When combined with carbon trading markets, so-called hot air creates an enormous commodity market where the commodity itself simply doesn’t exist. It seems fair not to penalize countries in economic transition. But the purpose of the United Nations Framework Convention on Climate Change “UNFCCC” and as a platform to realize that purpose, the Kyoto Protocol, is to stabilize GHG’s in the atmosphere. “Fair” is thus an illusion. It is debatable whether or not it is fair to those countries that stand the most to lose, small island states like Tuvalu where a few meter rise in sea level will wipe out the entire country. The same goes for least developed countries that have neither the money nor the sophistication to deal with the effects of climate change, like desertification and lack of potable water.
One of the defining principles of the UNFCCC is “common but differentiated responsibilities.” The notion that climate change is a problem that we all face, but that some have a higher duty than others. Those countries that most contributed to the skyrocketing of anthropogenic GHG’s in the atmosphere have a higher duty to mitigate and help others adapt. Those countries that had economic growth based on fossil fuel energy owe a duty to those countries whose economies have not developed.[1] Hot air countries are included in that group.
The Clean Development Mechanism (CDM) offers a particularly interesting issue. CDM serves the dual purpose of assisting Annex I (developed country Parties to the UNFCCC) to meet their quantified emission limitations, and to assist developing country Parties achieve sustainable development.[2]
One broad issue is how CDM is being implemented on the ground. The issue of HFC-23 provides insight into the broader problem. HFC-23 is a powerful greenhouse gas. It is a bi-product of HCFC-22, which is a gas covered under the Montreal Protocol. As HCFC-22 is destroyed, it creates HFC-23. Companies in developing countries, like China, purposefully created HCFC-22 for the sole purpose of destroying it, so that it would create HFC-23, which they would destroy under joint CDM projects and create CDM credits for Annex I countries. These companies “gamed” the system by creating HFC-22 so they could destroy its byproduct HFC-23. Since HFC-23 has a global warming potential 11,700 times that of carbon dioxide, the credits generated are huge.[3] The credits were not real, because the HFC-23 that generated them was created only to generate the credits. The Parties to the Kyoto Protocol have since put a stop to this practice, but the example is evidence of how the Flexibility Mechanisms within Kyoto can be gamed.
The Kyoto Protocol Flexibility Mechanisms helped garner consensus among the Parties to the UNFCCC. But, they are illustrative of the overarching problem with international agreement on climate change: Countries around the world are still not taking greenhouse gas emission reductions seriously. Climate change will continue to occur because of dangerous levels of anthropogenic climate interference. As the Kyoto Protocol commitment period ends next year the UNFCCC Parties have an opportunity to take action to curb the effects of climate change. The Parties can get serious about curbing greenhouse gas emissions, or they can continue to allow loopholes like the Flexibility Mechanism, and put countries like Tuvalu at risk.
[1] There is a similar argument major emitters, like China and India, owe a duty to particularly vulnerable countries. China and India are considered developing countries in the Kyoto Protocol, so they do not have emissions limitations that developed countries have. The argument is well taken, but this blog focuses solely on the Flexibility Mechanisms in the Kyoto Protocol.
[2] Wold, Hunter, Powers; Climate Change and the Law. LexisNexis, 2009. 232-233.
[3] Id at 253
