Role of G20 in Addressing the Concerns of Climate Change

Amidst all the uncertainties and debate among scientists regarding the impact of climate change two things are undisputed. First, that the level of greenhouse gases (GHGs) in earth’s atmosphere has been increasing largely due to human activity. Secondly, that these GHGs lead to a rise in temperature of earth’s surface because these gases let through the ultraviolet rays of sun but block and reradiate infrared energy emitted by earth. Even though the exact impact of this ‘greenhouse effect’ has not been known, the prospect of this phenomena being irreversible has made people world over think about taking measures to avert its potentially catastrophic effects. It was also felt that since any climate change would have trans-boundary effects, though the degree may vary from one country to another, any climate change mitigation strategy has to be implemented through some international or multilateral arrangement. This led to formation of an international climate change regime led by the United Nations Framework Convention on Climate Change (UNFCCC), which came into existence during the international negotiations at the Rio Earth Summit organized by the United Nations in 1992.

At Kyoto during COP-3 of UNFCCC in 1997, legally binding emission targets were set for the industrialized countries by adopting ‘Kyoto Protocol’ (KP). The ‘Annex-B’ of KP lists 38 industrialized countries and their specified annual GHG emission limits. Each country’s limit is expressed as a percentage of its emissions in 1990. All Annex-B countries taken together need to reduce their total GHG emissions during Phase-I of the commitment period, i.e., 2008-2012, to 95% of their 1990 emission level. The range for individual countries varies from 92%-110%. A strong case for concerted action was made out by the Stern Committee, which in its Review suggested a strong, immediate action in the form of an annual expenditure of about 1% of global GDP in order to thwart the possibility of damages amounting to as much as 20% of GDP. However, UNFCCC has attained limited success in addressing the issue of climate change mitigation, and the future course of KP in its Phase-II, post 2012, is not clear because negotiations have not been fruitful due to diverse and often conflicting interests of developed and developing countries.

In the context of the concerns of climate change mitigation, the G20, a group of 20 significant developed and developing countries of the world, assumes a significant role because these countries account for a significant proportion of greenhouse gas emissions. This paper analyses as to how G20 can help in strengthening the existing international climate change regime. This includes mobilizing financial resources for mitigation and improved governance of the regime. This paper also looks at the possibilities of G20 providing a roadmap for enhanced multilateral cooperation for improving carbon footprint of the global economic growth.

The next section looks at the historical background of evolution of the international climate change regime and the problems it is plagued with at this juncture. The following section outlines the role that the G20 can play in improving governance of climate change regime. It also explores the possibilities through which the G20 can address the problem of global climate change finance. The concluding section contains policy suggestions for future deliberations at the G20.

Historical Background and Present Scenario

Working Group I of the Fifth Assessment Report of Intergovernmental Panel on Climate Change (IPCC) has stated that warming of the climate system is unequivocal and that “each of the last three decades has been successively warmer at the Earth’s surface than any preceding decade since 1850.” Over the last several decades, the rapid economic and industrial growth has been based on increased consumption of fossil fuels and activities which release GHGs in the Earth’s atmosphere. This increased flow of GHGs released has led to an ever increasing concentration of these gases in the Earth’s atmosphere, which has led to global warming because these gases let through the ultraviolet rays of sun but block and reradiate infrared energy emitted by the Earth.Scientific evidence suggests that concentration of GHGs (consisting of CO2, CH4 and N2O) in the atmosphere has increased “to levels unprecedented in at least the last 800,000 years, with CO2 levels at 391 ppm in 2011, 40% above the pre-industrial levels.” Further that there is evidence to suggest that the increase in GHGs is due to anthropogenic activities. An even more alarming fact is that the process of concentration of GHGs in the Earth’s atmosphere has a ‘ratchet effect’ implying that emissions built up in the atmosphere are irreversible and, at the very least, difficult to remove.

Climate change is expected to have a myriad of physical and socio-economic consequences. These include warming of oceans, melting of the Greenland and the Antarctic ice sheets, rise in sea levels leading to flooding and/or submergence of low-lying areas, change in human geography necessitated by relocations of affected population, changed degree and patterns of precipitation, reduced productivity of resources such as lower agricultural yield, risks to human and animal lives due to heat waves and increased incidences of tropical diseases and damage to biodiversity.An important consequence of climate change is that its effects may take several decades to manifest themselves. Therefore, if action on ‘managing’ climate change is postponed till its impact is clearly visible, it will be a delayed action and may lead to extraordinary costs in managing. Another important feature of the consequences of climate change is that it will have the same effect on global warming irrespective of the place where the GHGs have been emitted from. In other words, the consequences may be trans-boundary. Thus, we have a case of ‘externality’ as actions of one agent, the polluter, may damage the prospects of others without the polluter bearing the costs of the damage. It is important because it implies that the main coordinating mechanism of the market, the price, is not an appropriate signal in this case. The problem in case of climate change is unique in the sense that it involves a question of inter-generational equity, that is, those whose prospects are being damaged by the emitters are missing because they are from the future generation. Thus viewed, climate change is the biggest and most glaring example of market failure. Because of the scale of market failure that the issue of climate change involves, it became necessary to cooperate on global level to ‘manage’ or mitigation of climate change. An urgent action on this front is required to allay the fears that the present generation is “gambling the planet” and to minimize the cost and risks involved.

Formation of UNFCCC in 1992 is the watershed event in the world’s attempt to deal with the issues pertaining to climate change.Interestingly, the UNFCCC, in its Article 2, sets stabilizing GHG concentrations in the atmosphere within a time frame as its objective. The issues of inter-generational and international equities have been sought to be addressed in the concept of ‘common but differentiated responsibility (CBDR)’ as mentioned in the Article 3 of the Convention. Article 4 of the Convention urges the countries to cooperate towards mitigation of climate change and adaptation to its consequences. The ‘Berlin Mandate’ adopted during Conference Of Parties-1 (COP-1) in 1995 noted that the UNFCCC would have little effect on GHG emissions unless industrialized countries (put into Annex-I of UNFCCC document) were held to ‘quantified limitation and reduction objectives within specified time frames’. But it was only at Kyoto during COP-3 in 1997 that legally binding emission targets were set for these industrialized countries by adopting ‘Kyoto Protocol’ (KP). The ‘Annex-B’ of KP lists 38 industrialized countries and their specified annual GHG emission limits. Each country’s limit is expressed as a percentage of its emissions in 1990.

All Annex-B countries taken together need to reduce their total GHG emissions during Phase-I of the commitment period, i.e., 2008-2012, to 95% of their 1990 emission level. Any attempt to reduce emission levels would necessarily involve some cost. These costs may be direct and indirect. For example, direct costs would include costs of moving to clean technologies and indirect costs will be in the form of loss of income due to lower level of energy consumption. The idea behind introducing flexibility mechanisms in KP was to minimize the cost of emission reductions. Three kinds of flexibility mechanisms were evolved in KP:Emission Trading among Annex I countries that commit to emission reduction, Joint Implementation for project-level trades among the Annex I countries, and Clean Development Mechanism, which provides for the use of project-level emissions offsets created in non-Annex I (developing) countries to help meet the compliance obligations of firms in Annex I countries.KP came into force in 2005 despite the USA, largest GHG emitter at that time, not ratifying it. During COP 16 at Cancun in 2010, a ‘Green Climate Fund’ was decided to be set up to scale up long-term financing to support projects in developing countries. At COP 17 at Doha in 2011, a roadmap was prepared which included continuation of the current international legal system through a second commitment period of the KP and launch a new platform of negotiations for a new GHG reduction protocol by 2015 for the period beyond 2020.

Even after the first commitment phase under KP is over, negotiations for the second commitment phase have not been concluded. Reason for the negotiations not being successful in fixing the action plan regarding emission reductions in future is simple: strong, diverse, and often conflicting interests of the countries. The normative question is which countries should bear the responsibility of reducing emissions and ensuring that the concentration of GHGs is within a stipulated level.

Strengths & Weaknesses of KP

The most striking aspect of KP is that it is the first serious and credible step in the direction of international cooperation to address the challenges posed by climate change. As a first step, KP has correctly laid down the basic principles of international engagement/ cooperation. This is evident in the recognition of equity issues in the form of its CBDR principles. Further, the issue of minimizing the cost of managing climate change is also kept in consideration and the same is reflected in the provision of flexibility mechanisms. It is also important to note that the Protocol was signed by more than 180 countries. Several Annex B countries actually ratified the Protocol and agreed to undertake the emission reduction mandated under the Protocol. All these underline the fact that KP has been a good first step.

However, the Protocol has its weaknesses, which is reflected in its not being very effective in containing the GHG emission to a desirable level. The biggest problem with the Protocol is lack of an enforcement mechanism. The biggest emitter at the time of signing of the Protocol, the USA did not ratify it on the pretext that the rapidly growing developing economies such as China and India have been kept out of the purview of mandatory emission reduction.This is a major issue of governance and will be dwelt upon in greater detail in later parts of this paper. Second, the emission trading under the Article 17 of the Protocol provides for trading among the national governments only. For emissions trading to be effective in minimizing cost of emissions reduction, private firms need to brought under the scope of this mechanism. It is well accepted that private firms, and not national governments, are cost-minimizing entities and represent the competitive forces of a market-based mechanism. Third, the CDM mechanism has not been effective and participation of developing countries in the efforts towards managing climate change has been rather limited. This is because transfer of clean technologies to developing countries has not been scaled up to the desired level. Fourth, there is a problem of inadequate investment in mitigation initiatives particularly in developing countries. Capacity of developing countries to finance such initiatives is limited and mobilizing financial resources is where the developed and emerging economies can, and need to, play a greater role. Fifth, the Protocol aims at solving a gigantic problem and yet its first phase of implementation was of 5 years (2008-2012) only. This time horizon is inadequate to seriously address an inherently long-term problem such as climate change. It is important that the Protocol adopts a long-term view with provisions for periodic review of the modalities, which can be decided upon by multilateral negotiations.

Because of the diverse and conflicting interests of various countries in the UNFCCC, the climate change negotiations have been slow and until now there has been no agreement for emission reductions post-2012.Climate change negotiations have become complex with many blocks of countries getting formed on the lines of common interests. Also that the countries are at different levels of development, different levels of emission and they have different capabilities in managing the climate change.

A major problem in the present international climate change regime is that individual countries face the trade-off of slowing theirown economic growth for the sake of benefit of the world at large. That is, we are facing a free-rider situation. The question is, how we can incentivize emission reduction?Further, the adverse impact of climate change is more pronounced for the poor developing countries, whereas historically the developed countries are responsible for the increased concentration in earth’s atmosphere. The architecture of any international climate change regime has to address this problem of double inequity to be fair and effective. It is here that a group like G20 consisting of both the developed and middle income countries can play a role of bridge between the two major blocks of developed and developing countries and can help in breaking the deadlock at the climate change negotiations.

G20 & Climate Change

The Group of Twenty (G20) is the premier forum for international cooperation consisting of 20 developed and emerging market economies (EMEs). G20 countries together account for almost 90% of the global GDP, 80% of international global-trade, 2/3 of the total world population and 84% of all fossil fuel emissions. Since the third G20 Leaders Summit at Pittsburg in 2009 strategies to manage climate change have been included in the Summit agenda. Energy security and climate change was among the 8 major issues laid out in the agenda at the Pittsburg Summit. The Summit Leaders’ Statement at Pittsburgh, inter alia, (a) asked the World Bank to strengthen “contributions to financing the transition to a green economy through investment in sustainable clean energy generation and use, energy efficiency and climate resilience; this includes responding to countries needs to integrate climate change concerns into their core development strategies, improved domestic policies, and to access new sources of climate finance,” and (b) “reaffirm[ed] the objective, provisions, and principles of the United Nations Framework Convention on Climate Change (UNFCCC), including common but differentiated responsibilities.” Taking note of the fact that an increase in energy efficiency can play a critical role in combating climate change, the Leaders sought to correct the problems emanating from inefficient fossil fuel subsidies. Emphasis was also laid on promoting investments needed to increase energy efficiency, enlarging the supply of clean and renewable energy, and assisting developing nations in carrying out relevant projects in order to deal with the threats of climate change.

Climate change was one of the major issues in the Leaders’ Statement of Toronto Summit in 2010, wherein the G20 Leaders expressed their commitment “to engage in negotiations under the UNFCCC on the basis of its objective provisions and principles including common but differentiated responsibilities and respective capabilities.”In the next Summit at Seoul in 2010, the G20 Leaders reaffirmed their “commitment to fight climate change.” In the Seoul Summit Document the Leaders expressed their commitment to “achieving a successful, balanced result that includes the core issues of mitigation,transparency, finance, technology, adaptation, and forest preservation”.As for climate change finance, the Leaders supported and encouraged the delivery of fast-start finance commitments.

Climate change also figured in the next Summit at Cannes in 2011. As a part of efforts to fight climate change, the leaders promised to vote for South Africa as a chair country and exert efforts to reap fruitful results at the 2011 Durban Climate Change Conference. They reaffirmed that they were ready to establish and run Green Climate Fund based on reports produced at the Durban Conference. The G20 leaders pledged to set a joint goal of raising $100 billion every year until 2020 to assist developing countries in mitigating climate change and enabling them to adapt to climate change. This Fund was proposed to consist of innovative financial sources raised by public-private partnership, and bilateral and multilateral cooperation. Besides, the G20 Leaders asked multilateral development banks to develop new financial techniques to attract investment from the private sector.

At the Los Cabos Summit in 2012, green growth and climate change was one of the agendas. The G20 Leaders welcomed the Green Growth Knowledge Platform (GGKP) and requested that an effective mechanism be made to mobilize public and private funds with aims to boost inclusive green growth investments in developing countries. The Leaders reaffirmed their commitment to support operationalization of the Green Climate Fund (GCF).

At the Saint Petersburg Summit in 2013, the G20 Leaders underscored their commitment to work together to address the problem of climate change, which is a global problem that requires a global solution. They also expressed their support to operationalization of the GCF and welcomed the report of the G20 Climate Finance Study Groupon G20 countries’ experiences on ways to effectively mobilize climate finance taking into account the objectives, provisions, and principles of the UNFCCC.Besides,the Saint Petersburg Declaration also reaffirmed the commitment of the G20 to support the full implementation of the agreed outcomes under the UNFCCC.

The foregoing analysis shows that the G20 has taken a serious view of the challenges posed by climate change. An area which has been consistently emphasized is inefficient fossil fuel subsidies, which are sought by the G20 to be rationalized and phased out and which is expected to reduce emissions by promoting efficient and optimal use of energy.

How can G20 contribute?

To begin with, the G20 has to work towards strengthening the climate change negotiation process at the existing multilateral forum of UNFCCC and it should not aim at addressing the issue on its own. It is because the G20 lacks the legitimacy which comes from representation of all the affected parties/countries. The G20 can help in strengthening the UNFCCC largely by the ways of improving its governance, providing climate finance and facilitating transfer of cleantechnology to the developing countries.

A major problem in climate change negotiations is borne out of the USA insisting that China and India be brought into the purview of mandatory emissions reduction. If we look at the composition of the G20, it consists of all the major emitters including Annex B countries of the Kyoto Protocol and Non-Annex B countries. Presently, China is the biggest GHG emitter. India has also emerged a major emitter because of increasing consumption of fossil fuels. Brazil and Indonesia have become major emitters largely because of massive deforestation. However, if we look at the emissions in per capita terms, China and India are still a long way down. Further, it must be considered that these countries have millions of poor and compromising on economic growth will make it difficult for these countries to lift the poor out of poverty. Therefore, any attempt to bring these countries in the ambit of mandatory emission reductions may prove to be unacceptable to these countries and run counter to efforts of these countries to alleviate poverty. At the same time, all the major countries are alive to the dangers posed by the climate change. In fact, the USA, China and India have all formulated their national strategies to improve the carbon footprint of their economies. The G20 can be very useful in coordinating these national policies and further linking them with the UNFCCC process. The G20 can also act as a forum where the some preliminary negotiations between the developed and the emerging economies can take place and agreements reached that can supplement efforts to break the deadlock at the climate change negotiations. There is a need of polycentric regime to fully appreciate different positions and perspectives on this complex issue and the G20 has a significant role to play here.

Perhaps the most important role for the G20 is in mobilizing financial resources for managing climate change. In fact, many G20 countries already have some mechanism for climate fund. The G20 can play an important role in coordinating among these funds regarding the use these funds are being put to so as to achieve a greater synergy. Moreover, the G20 countries will be the likely source to finance the Global Climate Fund as only these countries have the ability to provide finance for a global public good. In the COP at Copenhagen, the rich countries have already pledged a sum of USD 100 billion a year by 2020 towards climate change mitigation and adaptation.The challenge for the G20 is to find ways to mobilize finance towards this. This challenge is accentuated by the Eurozone crisis and slowdown in the global economy. Therefore, the G20 countries need to look at options other than the public funds. They need to facilitate an increasing finance from the private sources and from multilateral development banks. Other innovative options need to be explored as well. The G20 countries will have to take initiatives and they can learn from the experiences of other countries. For example, the EU has introduce an emissions trading system, which has advantages in terms of efficiency (emission reduction at least cost), certainty (emission reduction target is achieved due to the cap) and flexibility (possible adjustment of ambition level). On the other hand in countries where there is no cap on emissions, the experience of carbon tax as implemented by South Africa can be useful. There are implementation issues in these modes of mobilizing climate finance, which calls for increased interaction and cooperation among such countries to enable them learn from each other’s experiences.This is where the G20 can, and should, play a significant role. Another important issue here is to ensure that this fund is optimally utilized. In this context, Richard N. Cooper cautions that the fund “for mitigation and adaptationshould not be used for mitigation by commercial firms in developing countries, since that would artificiallycreate competitive advantage for such firms and provoke protectionist reactions in the rich countrieswhere firms must bear the costs of mitigation.” It is necessary to consider the absorption capacity of the recipient country and minimize the transaction costs in mobilizing and utilizing the climate finance. All these require enhanced cooperation among the countries for which the G20 may prove to be an appropriate forum.

Another area where the G20 can make a significant contribution is that of transfer of clean technology to the developing countries. Transfer of technology and its appropriate application in the developing countries requires greater cooperation among the countries which are high on the technology ladder. There is also a case for procurement of clean technology using a special corpus of fund and making such technology available to the developing countries atan affordable price.

The G20 has a significant role to play in improving the administrative, monitoring and evaluation system, particularly regarding the project activities under the clean development mechanism. Standardization of the monitoring and evaluation methods is the first step here. Further, to ensure that abatement of GHG emission is credible, appropriate evaluation and certification is required to establish that the emission reduction is over and above what could have been achieved in business as usual scenario. This problem of evaluation and quantification of emission reduction is most pronounced in land use land use change and forestry (LULUCF) activities. The problem with project activities in LULUCF sector is essentially that the sequestered carbon can be release back in the atmosphere by felling the trees. Therefore, there is a need to evolve appropriate methodology for monitoring and evaluation, wards which the G20 can play a significant role.
Conclusion

Despite the urgent need of addressing the concerns of potential impacts of climate change, the climate change negotiations have witnessed a deadlock in recent years. UNFCCC is the representative agency with more than 180 member countries. However, the fact that a supra-national agency has its own limitations in enforcing its decisions on a sovereign country became apparent when the USA refused to ratify the Kyoto Protocol on the pretext that the large emitters from the developing world should also be mandate with emission reductions. Phase I of the Kyoto Protocol ended in 2012 without any consensus on the path of emission reduction in subsequent years. In this background, this paper argues that the G20 can provide traction to international efforts to manage climate change without actually being the main agency of climate change negotiations, for which the UNFCCC is a more appropriate forum on the grounds of legitimacy based on representation. It is also argued that because most of the G20 countries have their own national plans to manage climate change, the G20 can enhance the effectiveness of these national plans by providing opportunities for increased cooperation and synergy among these national plans. The G20 can also be the main forum for mobilizing climate finance and transfer of clean technology to developing countries. Another important role for the G20 is to evolve appropriate methodology for monitoring and evaluation to enhance the effectiveness of effortsto mitigate and abate the GHG emissions.

Ashwini Kumar is an IES Officer presently working as Joint Director, Department of Economic Affairs, Ministry of Finance. Views expressed in the paper are strictly personal and not of the organization he is working with.

An earlier version of this paper was presented at the G20 Global Leadership Program for Middle Managers organised by KDI School of Public Policy, Seoul on November 1, 2013.

Bibliography

Cooper, Richard N. Financing for Climate Change, Energy Economics, 34(2012):S29-S33.
G20. Leaders’ Statements and Communiqués, Several years. Available at http://g20.org/documents/

IPCC. Summary for Policymakers, Working Group I, Fifth Assessment Report .Geneva, 2013.Available online at http://www.climatechange2013.org/images/uploads/WGIAR5-SPM_Approved27Sep2013.pdf.

McKibbin, Warwick J. and Peter J. Wilcoxen.“The Role of Economics in Climate Change Policy”.Journal of Economic Perspectives 16, no. 2 (2002):107-129.

Stern, Nicholas. The Global Deal: Climate Change and the Creation of a New Era of Progress and Prosperity. New York: Public Affairs, 2009.

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