- Let us now return to our main narrative. Kyoto set emissions targets until 2020 but long before that it became clear that even the systems set up under Kyoto would be insufficient to bring about the required level of carbon change. Zahar analyses (convincingly to my mind) the next step in the international story as one where, without stating it, the countries agreed to a modified form of ‘polluter pays’. They did so at COP 15 Copenhagen 2009/COP 16 Cancun 2010 where they promulgated for the first time the requirement that temperature change should be limited to no more than 2 o centigrade
- Zahar starts from the proposition that all countries are polluters when it comes to GHG. He continues that they were always thus: so why the earlier approach of CBDR – which left most countries free not to have to reduce their emissions? He answers this question by reference to the temperature limit which was set at Copenhagen. It was only when it had been decided to limit the temperature rise could one then ‘reverse engineer’ a wider market in carbon offset
- Question 1: what is the limit on the production/emission of GHG needed in order to keep warming below 2 degrees? “X”
- Question 2: without taking any mitigating steps how much GHG would be emitted over time? “Y”
- Question 3: what is the financial cost of achieving X and avoiding Y?
Once those questions have been answered, the overall cost has been calculated and a market created in avoiding the outcome. Once that market is set up, a ‘polluter pays’ system can equally be created.
- The modification to the ‘polluter pays’ identified by Zahar is that it was recognised in Copenhagen/Cancun that the developed nations would have to transfer wealth to the less developed nations to permit the latter to meet the penalties of ‘polluter pays’: i.e. it would be the case that many of the poorest nations in fact paid nothing from their own resources at all, but would still meet the target to reduce carbon.
- It is at this stage we reach the final substantial point I want to make: that in order to meet these targets, two aspects were becoming ever more important: first, that offsetting and the offsetting market would need to expand in order to complement actual reductions in emissions (for example it will be recalled that the target inserted into the Climate Change Act 2008 is that of ‘net zero’ by 2050: i.e. offsetting will be required for the residual emissions which simply can’t be avoided); and second, that the duty to mitigate and hence the requirement to rely on offsetting was starting to diffuse down from states through corporates to individuals. Let me develop this point further.
- At the time of Copenhagen, the COP was seen politically to be a failure in that no continuance of Kyoto could be agreed principally between China and the USA. Bernstein et al put the point in the following way:
“To focus on the apparent failure of Copenhagen is to mask the deep consensus that continues around the importance of carbon markets to climate governance. Forged in the Kyoto era, but with roots that date back at least to the early 1990s, this normative consensus continued despite the superficial ‘rejection’ of Kyoto that Copenhagen represents……Most participants assumed market development and transactions would forge ahead.”
- Streck records that increasingly through the treaties, NGOs were seen to be active participants in reduction of carbon emissions and that this reached its height within the Paris Agreement of 2015. This sets out within its preamble that it is essential to engage “all levels of government and various actors”. That phrase must be seen in the light of the Copenhagen agreement which sets out at paragraph 8 that the collective commitment contained within it to raise substantial capital for the purposes set out above “will come from a wide variety of sources, public and private…including alternative sources of finance” (all emphasis added). Again, to quote Bernstein
“Above, we have shown demonstrated the centrality of carbon markets to climate change governance. But what this also shows is that the complex interactions between actors and practices in carbon markets blurs the boundaries between ‘public’ and ‘private’ governance. It is no longer useful, and perhaps not even defensible, to regard multilateral treaty-making efforts as the dominant mode of responding to climate change.”
- Streck set out why this should be so
“Private actors do not only possess technology and organizational capacity, they also command finance. Depleted public budgets require private investments to fill holes where public funding falls short and the private sector is expected to bear the brunt of the financial burden imposed by climate change. Attracting private investment to climate change mitigation and adaptation has become a cornerstone of the of the debate around ‘resource mobilization’. Such resources are needed to further accelerate the deployment of …sustainable agriculture and land use…. While private actors have to bring the bulk of the money, fiscal incentives – such as carbon pricing instruments and regulation can steer finance, and are mandated to do so by the Paris Agreement which demands to make “finance flows consistent with a path- way towards low greenhouse gas emissions and low carbon development ” Policy makers and public finance organizations have to cancel fiscal incentives for high emitting activities and stimulate investment through green bonds, smart subsidies, guarantees, preferential loans, among others. Carbon finance instruments can also help bring new private capital to developing countries, where abatement costs are, in general, lower than in industrialized countries.”
Again, the underlining is added but it vital to the argument. To parallel the duty relationship between states i.e. ‘the developed have a duty to transfer funds: the developing have a duty to receive them and apply them for their purpose’ is the duty relationship between states and their internal actors i.e. ‘the non-state actors have a duty to make private capital available for GHG mitigation but the state must not put barriers in their way’. This does not amount to special pleading on the part of private enterprise: it represents the law. The UK having signed the Paris agreement must now, pursuant to Article 27 of the Vienna Convention on International Treaties, avoid invoking internal legal codes as a justification for failing to comply with its international obligations – in this case to ensure private capital flows to developing countries for this purpose. In some critical respects the UK tax code does not comply with this obligation.
- In any event, the desire to include outside actors has been given practical application by the UN when it set up in 2014 the Non-State Actor Zone for Climate Action (linked to the Global Climate Action Portal). It is claimed that 1/3 of the 2000 largest global companies committed in Paris to climate action and that in combination they have a market value equivalent to the GDP of China, Germany and Japan (ibid).
- A brief look at the pages on the World Bank website or that of international think tanks such as the Overseas Development Institute show that there is an increasing need for corporate bodies to include the price that their carbon production costs the globe within their accounts and to either reduce or to offset the same. Shareholder activism will force the slower into doing so. All of this requires that there is a robust system of verification and access to the advice which points to ensuring that shareholder value is not wasted on schemes which simply amount to the shuffling of paper. This is a voluntary market for the moment (outside the aviation industry and those large emitters regulated directly via the EU-ETS for which the designated national authority in the UK is the Department of the Environment) but that may change over time. Subsequent blogs will look at the effect of EU Withdrawal and international regulation for those businesses whose business takes them abroad.
- When corporate bodies seek to comply with their global citizenship duties, they will seek to pass the cost on to us. There are three ways that they can do so: the first is by assessing the cost to the planet of their activities and seeking to offset that full cost by the purchase of carbon offsets, the second is by taking steps to mitigate their emissions and the third is by asking consumers to volunteer to make additional payments for carbon mitigation at the point of sale. It can be seen that the first two forms of activity create ‘hidden’ cost which the consumer presumably is asked to absorb when they choose to buy whereas the third is an open supplement to the price. The question which the customer must always ask in the latter is ‘what is the verification standing behind the offset?’. I will return to that also in later blogs. There is a very great deal of ‘smoke and mirrors’ in this market at present. The vendor of offsets as an adjunct to the point of sale (i.e. the fuel company asking you to add 10p to each sale of fuel etc) should be expressly clear about which verification system is being used.
- A finally, what of the individual? Academic ink has been spilt on the topic of individual carbon budgets and a preliminary assay has been undertaken by the Government (As Dijkshoorn pointed out in his article “Personal Carbon Trading: The Holy Grail for Severe Emissions Reductions” total emission output for which individuals were responsible were measured in the UK at 42% of the country’s total in 2010. Since then new technologies such as blockchain and the internet of things would render personal ‘cap and trade’ systems entirely verifiable and indeed might very well increase the engagement of us all in the vital global process. Perhaps. But it also amounts to an enormous power, both in terms of information held and control over, how we live our lives and I suspect the leap is too great. Until then there is always voluntary offsetting for individuals and again, I will return to this in due course.
I hope that was all helpful
1.I am a barrister in independent practice at 12 King’s Bench Walk, Temple, London EC4Y 7EL and Kings
Chambers, Manchester M3 3FT. However, I write this blog in my capacity as an independent non-executive
director of MPL
2. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_dat
a/file/776083/2017_Final_emissions_statistics_one_page_summary.pdf
3 These figures are derived from Dijkshoorn ‘Personal Carbon Trading: The Holy Grail for Severe Emission
Reductions’ [2019] 3 CCLR 208, citing Wallace ‘Public Attitudes to Personal Carbon Allowances: Findings
from a mixed-methods study’ (2010) 10 Climate Policy 4,386
4 https://www.gov.uk/government/publications/clean-growth-strategy
5 A target inserted into s1 by The Climate Change Act 2008 (2050 Target Amendment) Order 2019 (S.I.
2019/1056), arts. 1, 2
6 In this section, I largely adopt the analysis of Zahar, ‘Climate Change Finance and International Law’
(Routledge 2017)
7. It is most unfortunate that one of the many victims of COVID has been COP 26 Glasgow scheduled in
November 2020 but now adjourned
