Managing Climate Change: The Institutional Architecture[1]
John Mathiason and Medani Bhandari
Maxwell School of Citizenship and Public Affairs, Syracuse University
At the end of the 20th Century, the international system began to construct an institutional architecture to manage climate change. While it was not the first set of institutions created to deal with a problem that cannot be solved by the actions of individual states, “coalitions of the willing” or the “magic of the marketplace”, it will surely be the largest, most complex and most international. This paper explores the emerging architecture, including the institutions that exist today and those that will exist tomorrow. It discusses whether this evolution will fundamentally change how the world sees the role and functioning of the new international public sector.
Introduction: Climate change as an international public management problem
As a recognized global problem, climate change is relatively recent. The science on which it is based only dates about thirty years. Determining how to deal with it is even more recent, dating back twenty years, and is not yet resolved politically.
As a consequence of International Geophysical Year in 1957-1958, data on the effect of carbon dioxide in the atmosphere on temperatures began to be collected systematically. By the 1972 United Nations Environmental Conference in Stockholm, the issue had begun to become important. Recommendation 70 of the Conference stated:
It is recommended that Governments be mindful of activities in which there is an appreciable risk of effects on climate, and to this end:
Carefully evaluate the likelihood and magnitude of climatic effects and disseminate their findings to the maximum extent feasible before embarking on such activities;
It further recommended establishing an international
research program “to understand
better the general circulation of the atmosphere and the causes of climatic
changes whether these causes are natural or the result of man's activities.” This was done through a series of programs
run by the World Meteorological Organization, the United Nations Environment
Program and various non-governmental organizations. These culminated in a conference on the
“Assessment of the Role of Carbon Dioxide and Other Greenhouse Gases in Climate
Variations and Associated Impacts” in 1985 at Villach, Austria that concluded
that climate change was occurring and it was human-caused (anthropogenic). This, in turn, led to the formation of the
Inter-Governmental Panel on Climate Change (IPCC) by the WMO and UNEP in 1988
that has, over the next twenty-two years, further expanded the diagnosis of the
causes and consequences of the changes provoked by greenhouse gas emissions. Behind the scene other organizations such as the
International Council for Science (ICSU-founded
in 1931), the IUCN (founded in 1948) and other UN agencies such as UNESCO,
FAO, WHO and countries like USA and the individual experts played important role for the foundation of the IPCC (Agrawala 1998; Morrissey 1998; IPCC 2010).
From the outset,
climate change has been identified as a problem that is borderless and affects
all countries (and within them, their citizens). There has been a consequent understanding, in
the United Nations Framework Convention on Climate Change (UNFCCC) which stated
that
The
ultimate objective of this Convention and any related legal instruments that
the Conference of the Parties may adopt is to achieve, in accordance with the
relevant provisions of the Convention, stabilization of greenhouse gas
concentrations in the atmosphere at a level that would prevent dangerous
anthropogenic interference with the climate system. Such a level should be
achieved within a time-frame sufficient to allow ecosystems to adapt naturally
to climate change, to ensure that food production is not threatened and to
enable economic development to proceed in a sustainable manner.
This has set in motion a process that has increasingly involved creating or modifying international institutions that can lead to adaptation to and mitigation of greenhouse gas concentrations in the atmosphere.
The process is not yet complete, since there is as yet no agreement on the goals to be pursued, nor on all of the responsibilities for mitigation, other than on the developed countries. These are currently under negotiation and, since the Kyoto Protocol, that included both objectives and some of the institutions, was never universally ratified and is due to expire in 2012; there is considerable uncertainty about the institutional structure.
What is not in doubt, however, is that much of the responsibility for managing climate change will devolve onto international institutions. In doing so, they will draw on the experience of the international public sector in other areas to put together a regime that can deal with the problem effectively.
Climate change management involves the creation of an international regime, as defined by international relations theory. A regime, as the standard definition goes, consists of “sets of implicit or explicit principles, norms, rules, and decision-making procedures around which actors' expectations converge in a given area of international relations” (Krasner 1983:2). Translated into more accessible language, this means that States reach agreements on how to achieve order in dealing with problems that they perceive that individually they cannot solve. In the 1980’s, when international regimes were perceived to be rare, Krasner could assert that “under certain restrictive conditions involving the failure of individual action to secure Pareto-optimal outcomes, international regimes may have a significant impact even in an anarchic world” (Krasner 1983: 2). Climate change is one of those “restrictive conditions” and the international public sector needs to be seen in the context of creating that regime.
Existing institutions
The first international institution to be established specifically to deal with climate change is the IPCC, but in addition institutions like the Clean Development Mechanism, the Joint Implementation machinery and the Global Environment Fund (GEF) were consequences of the Kyoto Protocol and the Environmental Conferences.
There are
several Global Conventions and Forums (through Conference of Parties, Technical
Committees and Participants) and Global Institutions and Institutional Networks
established to address the global environmental issues including the climate
change, Table 1
|
Global
Conventions and Forums (through Conference of Parties, Technical Committees
and Participants) |
Global
Institutions and Institutional Networks |
|
Barcelona
Convention Covenant on
Environment and Development Convention
on the International Trade of Endangered Species (CITES) International
Union for Conservation of Nature (IUCN) Ramsar Convention on Wetlands UN
Convention on Biological Diversity (CBD) UN
Convention to Combat Desertification (UNCCD) UN
Convention on the Law of the Sea (UNCLOS) UN Fish
Stock Agreement UN Framework
Convention on Climate Change (UNFCCC) United
Nations Environment Program World Conservation Monitoring Centre (UNEP-WCMC) World
Heritage Convention World
Summit on Sustainable Development (WSSD) World Water
Forum and Ministerial Conference |
Collaborative
Partnership on Forests (CPF) Global
Coral Reef Monitoring Network Global
Biodiversity Forum (GBF) International
Coral Reef Initiative International
Council on Mining and Metals (ICMM) International
Finance Corporation (IFC) International
Seabed Authority International
Tropical Timber Organization (ITTO) Royal Dutch
Shell UN
Development Program (UNDP) United
Nations Educational, Scientific and Cultural Organization (UNESCO) UN Forum on
Forests (UNFF) UN General
Assembly World Bank
and GEF World
Intellectual Property Organization (WIPO) World Trade
Organization (WTO) Millennium
Development Goals (MDGs) IPCC Clean
Development Mechanism (CDM) Institutional Investors Group on Climate Change
(IIGCC) |
Source: IUCN 2003 and 2005; UNIVERSALIA 2009
In
addition to these major these major institutions there are also several
regional authorities, frameworks, forums and institutional networks, and
national and sub-national frameworks, authorities and forums created to address
the global environmental issues with the combined efforts from both public and
private sectors. These forums present a basis for institutions to deal with
climate change, and their experience has been mixed. However, in this paper we
highlight only the IPCC, GEF, CDM and IIGCC, as well as UNEP.
IPCC
The IPCC is without a doubt the most successful institution to date. An innovative synthesis of scientific and intergovernmental consensus-making, its four assessments have increased the understanding of climate change, its causes and its consequences. Each assessment influenced the process of regime creation by establishing a factual basis for agreement. In regime theory, the first element in successful negotiation is an agreement on the facts (called principles in the theory). The IPCC, through its consensus provided the facts. The first assessment influenced the adoption of the UNFCCC (which included a reference to the IPCC). The second influenced the content of the Kyoto Protocol. The Third and Fourth were instrumental in the agreement on the Bali Roadmap, that was a consensus decision to pursue a successor to Kyoto.
Because the IPCC was the international standard on the facts of climate change, it was a target of climate change deniers, who sought to discredit it. Their means included identification of a few findings that were later shown to be inaccurate (but not wrong), the hacking of e-mails from a major British research institute that was influential in climate change, and attacks on the Chair of the IPCC. All have been disproven, but the attacks provoked a review of the institutional structure and management of the IPCC by a group designated by the United Nations Secretary-General, the InterAcademy Council, an organization of national academies of science.
When originally established, the IPCC was expected to have a very light structure. Its secretariat was seen as purely technical (i.e. would organize meetings and provide basic administrative tasks, like reimbursing air fare). The officers, including the Chair, Working Group Chairs and Vice-chairs would be elected by the membership. The Secretariat would be provided by the WMO (the Secretary) and UNEP (the Deputy Secretary). The review found that this structure was not adequate and recommended creating a more robust organization, including an Executive Secretary at a reasonably high UN rank. This would address a problem that had been noted by external observers, namely that the IPCC did not seem to carry approaches from one assessment to the next, but rather would structure each as self-standing. There were elements in the reform proposal that implied some precedents and, as a result, decision-making on the recommendations has been deferred to 2011.
The administrative reforms have not affected the preparations of the Fifth Appraisal, which should be available to governments at the point that they undertake an agreed critical review of the response to climate change in 2015.
GEF
It was recognized by the end of the 1980’s that funds would have to be made available to developing countries to deal with the consequences of environmental change. The first of these was the Global Environment Facility (GEF), established in 1991 by the World Bank, with an initial funding of $1 billion. A problem was that many countries had difficulty with having the GEF as part of the World Bank group with its weighted voting system. As a result, in 1994 it was formally established as an independent fund, with partnerships of the United Nations Development Program and the United Nations Environment Program, both of which functioned on the basis of one-country, one-vote. While formally independent, the GEF is managed by the World Bank.
The GEF was formally established as the financial mechanism for the UN Framework Convention on Climate change as well as the conventions on biological diversity, desertification, the Montreal Protocol of the Vienna Convention on Ozone Layer Depleting Substances. Like other institutions connected with the World Bank that provide grant-based funding, it has had five replenishments, the current one funding projects through 2014. It is a project-based facility, with projects grouped by focal area (climate change, biodiversity, international waters, ozone layer depletion, persistent organic pollutants, land degradation and multifocal projects). Over its first four replenishments, it funded 2,389 projects for a total of $8.6 billion. Of these, 659 projects were in climate change, with a total cost of $2.9 billion (or an average size of $4.1 million each) (Global Environment Facility, 2010). There was also a Small Grants Program (SGF) managed by UNDP that was considered effective. In the climate change focus, the largest amount of funding has gone to large countries like China, India, South Africa, Brazil and Mexico.
The evaluation of the fourth replenishment (Global Environment Facility, 2010, vi.) concluded that
Given the comparatively small role that the GEF can play, it has to be catalytic to ensure that any success will be replicated on a scale that will make a difference. Evaluative evidence on this catalytic role shows that the GEF modalities will strongly support up-scaling: first, the enabling environment is created through foundational interventions, in which regulatory frameworks, policies, and national priorities are developed; then demonstration of new technologies, market changes, or new approaches to interaction with the environment are put in place; and, lastly, investments ensure the national implementation or up-scaling of these new approaches. Unfortunately, the same evidence reveals that the GEF did not have sufficient funds to apply all of these modalities in all recipient countries. Least developed countries and small island developing states especially have not progressed far in terms of demonstration and investment.
It also argued that a project-based approach should be replaced by a portfolio approach and that the organization needed a more effective results-based management approach.
The GEF, with a complex structure, uncertain funding and highly varied priorities is still an institutional work in progress, only partly related to climate change management.
CDM
A second major institution, deriving its authority from the
Kyoto Protocol, is the Clean Development Mechanism. Agreed in 2001, it became operational in 2004
(when the Protocol entered into force). “The CDM
allows emission-reduction projects in developing countries to earn certified
emission reduction (CER) credits, each equivalent to one tonne
of CO2. These CERs can be traded and sold, and used by industrialized countries
to a meet a part of their emission reduction targets under the Kyoto Protocol.”[2] As such, the CDM is an institution concerned
with mitigation.
According to its 2010 Management Plan,
the CDM had 2200 registered projects in 67 countries and another 2000-plus
projects in the validation/registration pipeline. (CDM, 2010, 2) However, most
of these were in large developing countries like China, India, Brazil, South
Africa and Mexico, rather than in smaller countries (Figure 1, from the 2010
Executive Board Report). The procedures
for registering projects have been found to be particularly complex, especially
for smaller countries. Yuya Takabayashi (2010), a
mid-career graduate student at the Maxwell School, undertook an internship with
UNDP in Ghana in 2009, during which he worked on a possibility analysis of CDM
implementation in Ghana. He concluded
that “CDM implementation in less developed countries is faced with some
deep-seated structural challenges.”
The organizational structure of the CDM
is also complex. It is formally managed
by an Executive Board that reports to the Conference of Parties of the UNFCCC,
supported by a secretariat provided by the UNFCCC and a number of panels and
teams (see Figure 2).
Figure 2: UNFCC panel team
There have been continuous methodological issues in approving projects and in monitoring and evaluating performance. As the Chair of the CDM Executive Board put it in the 2010 Annual Report (p.3):
Yet, there remains much to be done – the frustrations of project developers are palpable, the calls for more projects in more developing countries is louder, and understandably so. Why is it then, that as we approach 3500 registered projects – and here I include the almost 1000 component project activities associated with programs of activities – we do not have a mechanism that is better able to serve the needs of developing countries and meet the expectations of the market.
Some of the answers lie in the fundamental structure of the CDM, others lie in the performance of the Board and its support structure, still others rest with project developers themselves. The Board is committed to improving and scaling up the CDM, and counts on all stakeholders and Parties to join in the effort, building on what clearly is, despite expectations, a remarkable, ever-improving mechanism. We must work together.
The future operations of the CDM are largely dependent on the final agreement on the replacement for the Kyoto Protocol which has made emissions reductions in developed countries mandatory, and therefore has created a market for the kinds of emission reduction credits that the CDM is expected to generate. The institution is also a work in progress.
Institutional Investors Group on Climate
Change (IIGCC)
The IIGCC is a forum for collaboration between asset owners and
asset managers that was established to address the investment risks and
opportunities associated with climate change. It seeks to: (a) provide members
with the knowledge and tools to assess the investment implications of climate
change on the assets they own in order to preserve and enhance their value; (b)
encourage investors to manage the investment implications of climate change and
to integrate climate risk into investment analysis; and (c) advocate public policy
and market solutions that ensure an orderly and efficient transition to a
secure climate system which is consistent with long-term investment objectives
(IIGCC (2010:5).
According to
the Global Investor Statement on Climate Change: Reducing Risks, Seizing
Opportunities & Closing the Climate Investment Gap of November 2010, the
IIGCC invites governments and international
institutions for a dialogue on the policies
and finance tools needed to catalyze private investment in the low-carbon
economy in the following agendas.
- “Domestic policy frameworks to catalyze
renewable energy, energy efficiency, and other low-carbon infrastructure,
so as to provide investors with the certainty needed to invest with
confidence in receiving long-term risk-adjusted returns.
- International agreement on climate
financial architecture, delivery of climate funding, reducing
deforestation, robust measurement, reporting, and verification, and other
areas necessary to set the global rules of the road, bolster investor
confidence, and allow financing to flow.
- International finance tools that help
mitigate the high levels of risk private investors face in making
climate-related investments in developing countries, enabling dramatic
increases in private investment” (IIGCC 2010:1).
The
IIGCC is a forum for collaboration on climate change for European investors. The group’s objective is to catalyze greater investment
in a low-carbon economy by bringing investors together to use their collective
influence with companies, policymakers and investors. The group currently has
over 70 members, representing assets of around €5 trillion (IIGCC home page). In
addition to the IIGCC in Europe, there are other four similar networks
of business organizations in US, Australia / New Zealand and a global forum
manage by the United Nations Environment Program, (see
text box below).
|
· Investor Network on Climate Risk (INCR) which “is a North
American network of institutional investors focused on addressing the
financial risks and investment opportunities posed by climate change. INCR
currently has over 95 members with more than US$9 trillion in assets. INCR is
a project of Ceres, a coalition of investors and environmental groups working
to integrate sustainability into the capital markets”. · The Investor Group on Climate Change Australia/New Zealand
(IGCC)
represents institutional investors operating in Australia and New Zealand,
with assets of over A$600 billion, and others in the investment community
addressing the impact of climate change on investments. The IGCC aims to
ensure that the risks and opportunities associated with climate change are
incorporated into investment decisions for the ultimate benefit of individual
investors. · The United Nations Environment Program Finance Initiative
(UNEP FI)
is a strategic public-private partnership between UNEP and the global
financial sector. UNEP works with nearly 200 banks, investment firms,
insurers and a range of partner organizations, to understand the impacts of
environmental, social and governance issues on financial performance and
sustainable development. Through a global program encompassing research,
training, events and regional activities, UNEP FI identifies, promotes and
realizes the adoption of best environmental and sustainability practice at
all levels of institutional operations. Through its Climate Change Working
Group (CCWG), UNEP FI aims to understand the roles of the finance sector in
addressing climate change, as well as to advance the integration of climate
change factors – both risks and opportunities – into financial
decision-making. · The Principles for Responsible Investment, convened by UNEP FI and the UN Global
Compact, provide a framework for helping investors build environmental,
social and governance considerations into the investment process, thereby
achieving better long term returns and more sustainable investment markets.
The six Principles of the PRI Initiative were developed by, and for,
institutional asset owners and investment managers. The Initiative has over
800 signatories from 45 countries with roughly US$ 22 trillion of assets
under management (IIGCC 2010:6[3]). |
In addition to these business related financial mechanism to
mitigate the climate change, there several other such forums in the regional
level. However, at the global stage, the UNEP initiative is the major initiatives
as described in brief in the following paragraphs.
The United
Nations and UNEP
The United Nations has sought to be the major umbrella
organization to address global environmental and developmental problems. It is visible in every aspect of social, economic,
environmental and political issues through its forty plus affiliated
organizations (UN, 2010). In addition to
closely working with member governments, the UN also has a tradition of
establishing new institutions to address emerging issues and works
collaboratively with other IGOs or INGOs on the global or the transboundary issues and with NGOs.
The UN has been changing its role according to global demand. It has
been exploring options to tackle the severe risks emerging from climate change.
One particularly important new effort is the Green Economic Initiatives, whereas
it search the option for the massive green investments worldwide and explore for
the workable solutions to remove financial, policy, institutional, market and
other constraints on making such investments (UNEP 2011).
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What
is a Green Economy? UNEP
defines a green economy as one that results in improved human well-being and
social equity, while significantly reducing environmental risks and ecological
scarcities. In its simplest expression, a green economy can be thought of as
one which is low carbon, resource efficient and socially inclusive. In a
green economy, growth in income and employment should be driven by public and
private investments that reduce carbon emissions and pollution, enhance
energy and resource efficiency, and prevent the loss of biodiversity and
ecosystem services. These investments need to be catalyzed and supported by
targeted public expenditure, policy reforms and regulation changes. The
development path should maintain, enhance and, where necessary, rebuild
natural capital as a critical economic asset and as a source of public
benefits, especially for poor people whose livelihoods and security depend on
nature (UNEP 2011:2). |
Broadly
since 2008, the global conservation movements have taken a different path, with
the especial focus towards the Green Economic Initiatives. The major
stakeholder of global environmental governance ‘the United Nation’ has been
advocating in the international forums to integrate the conservation and
development themes and establish for the collaborative platform, where all
concern stakeholders could contribute for the health of the planet.
In
fostering this concept the UNEP called for a Global Green New Deal, in the wake
of unprecedented economic stimulus packages a recent UNEP report released in
December 2008 called for a Global Green New Deal and a subsequent Policy Brief
to G20 heads of states urging them to turn the crisis into an opportunity by
enabling a global green economy driven by massive job creation from a more
efficient use of resources, energy-efficient building and construction,
widespread use of modern clean public transport, the scaling up of renewable
energy, sustainable waste management as highly lucrative sectors, and
sustainable agriculture that reflects the latest thinking in ecosystem
management and biodiversity and water conservation (UNEP-GRID 2009:4). The
concept of a GE, and its policy implications, will apply differently across
countries, reflecting national circumstances and priorities. However, for
developing countries in particular, widespread opportunities exist to
strengthen economic development, including poverty reduction as well as food
and water security in developing countries, through improved environmental and
natural resource management (UNEP 2010:5). The UNEP assumes that Greening is a
new engine for growth, sizing sectoral opportunities,
addressing hurdles & enabling conditions, it demonstrate the value of
ecosystems & biodiversity, capturing these values, and reversing the
vicious cycle of environmental losses and persistent poverty by reversing the
Vicious Cycle of environmental losses and persistent poverty. The major players
of fostering the GE include UNDP, UNEP, UNIDO, ILO,
CBD, Multilateral and bilateral Institutions, member Countries, Regional
Forums, Business & Civil Society Groups, Universities and Regional
Commissions and international and national NGOs etc.
According to the Synthesis for Policy Makers, (Summary of the
Conclusions), of the Towards a Green Economy: Pathways to Sustainable
Development and Poverty Eradication report 2011, the green economy initiatives
has achieved a significant results within a short span of time.
· Investing
just 2% of global GDP into ten key sectors can kick-start a transition towards
a low-carbon, resource-efficient economy
· Greening
the economy not only generates growth, and in particular gains in natural
capital, but it also produces a higher growth in GDP and GDP per capita.
· A green
economy values and invests in natural capital.
· A green
economy can contribute to poverty alleviation.
· In a
transition to a green economy, new jobs will be created, which over time exceed
the losses in “brown economy” jobs.
· Prioritizing
government investment and spending in areas that stimulate the greening of
economic sectors is on the critical path.
· The scale
of financing required for a green economy transition is substantial, but an
order of magnitude smaller than annual global investment
· The move
towards a green economy is happening on a scale and at a speed never seen
before.
· It is
expected to generate as much growth and employment – or more –
compared to the current business as usual scenario, and it outperforms economic
projections in the medium and long term, while yielding significantly more
environmental and social benefits (UNEP 2011:1-2).
In sum up, the green economy concept is based on the people first
approach and the sustainability is based on the planet first or treats equally
approach. Furthermore, green economy concept accepts the environment as the
foundation for the development and development as the process of furthering
people’s well-being; by increasing the asset base and its productivity;
empowering poor people and marginalized communities; reducing and managing
risks; and taking a long-term perspective with regard to intra- and
intergenerational equity (UNEP 2007). It is
important to acknowledge that the former and current secretory general of the
United Nation, as well the Director General of the UNEP have been trying to
implement policy directive through its line agencies. Although there are few
indications of positive direction; it is too early, to state the effectiveness
of the initiatives.
Emerging institutions
Additional institutions are beginning to emerge, mostly as a consequence of the climate change negotiations. These have primarily been in the financial area and some are not new, even though they have just started up.
Adaptation Fund
The Adaptation Fund was created under the Kyoto Protocol to provide funding for adaptation projects. It is expected to be financed from a 2 percent change on shares of proceeds from the Certified Emission Reduction Units from the CDM. Since these funds have only recently begun to be generated, the first call for proposals was only issued in April, 2010. Very few projects have been approved.
The Fund has a board that meets twice a year and a small secretariat. The first project to be funded was “Adaptation to Coastal Erosion in Vulnerable Areas” in Senegal. To cover administrative expenses, the Fund has received support from Finland, France, Japan, Norway, Switzerland, Germany, Monaco, Spain and Sweden.
The slowness in start-up as well as what appear to be concerns from funders led the Board at Cancun to organize a review of the Adaptation Fund, to be done in late 2011. Presumably this will lead to more activity by the fund.
Green Fund
The Cancun Conference of Parties moved to implement the Green Fund that had been largely agreed at the previous year’s COP in Copenhagen. It agreed that the fund would initially be managed by the World Bank, under the direction of a 24 member board, whose composition and working arrangements are yet to be agreed.
It is expected that the Fund will process the $30 billion of “fast-start finance” that is expected to be delivered between 2010 and 2012. However, there are as yet no details on how this will function.
Technology Mechanism
Cancun also established a Technology Mechanism, as described by the World Resources Institute reporting, including a Technology Executive Committee made up of experts “who will identify technology needs, coordinate international efforts, and make them more effective.”[4] It will also include the Climate Change Technology Center and Network (CTCN) consisting of “a small center and large network, probably including regional units.” The details of both elements are still to be negotiated.
Institutions to emerge
As climate change agreements are made, additional institutions will emerge, even though they have not yet been part of the negotiations. This is because several key actions will require some form of international regulation or monitoring if they are to be successful. Two of these are certain: an institution to oversee emissions trading, and an institution that can verify whether states are in compliance with their accepted obligations with regards to emissions reduction. Although these issues have been addressed to a small degree in the existing institutional structure, if they become central processes, the need for elaborating them further will become clear.
Emissions trading regulator
One alternative to dealing with greenhouse gases in the context of reduction targets is to provide firms who have surpluses against emissions caps to sell these to firms that are in deficit. This is “cap and trade,” which has a decent history, at least at the national level (e.g. when sulfur dioxide emissions were traded in the United States). The economic aspects of emissions trading (and other means of dealing with emissions) are dealt with in an extensive and growing literature.[5]
There are few regulatory problems at the national level, because authoritative institutions can be created to ensure that the markets function according to rule. The same is not the case at the international level. As Nordhaus (2007, 39) put it:
An additional question, applying particularly to international environmental agreements, concerns the administration of programs in a world in which governments vary in terms of honesty, transparency, and effective administration. Quantity-type systems are much more susceptible to corruption than price-type regimes. An emissions-trading system creates valuable assets in the form of tradable emissions permits and allocates these to countries. Limiting emissions creates a scarcity where none previously existed. It is a rent-creating program. The dangers of quantity as compared to price approaches have been demonstrated frequently when quotas are compared with tariffs in international trade interventions.
At present there is no international organization with a mandate to oversee a global trading system. The European Union has an Emissions Trading Scheme that is overseen by the European Commission based on political decisions. The EU, however, in this respect is more like a State than an international organization since it has compliance authority.
If the kinds of dysfunction that Nordhaus predicts are to be avoided, there will have to be an institution charged with oversight. It should be noted that in a number of areas, such oversight mechanisms exist. A good example is the Financial Action Task Force (FATF) that oversees international action to prevent money-laundering by examining banking systems.
Verification organization
One of the key disagreements in the Copenhagen and Cancun negotiations centred on reporting on compliance with obligations to reduce emissions. One position, advocated strongly by China (and others) was that reporting was voluntary and national. The argument was based on national sovereignty as a basis. This argument has been advanced successfully in other areas as well. In the regime for elimination of weapons of mass destruction, for example, the initial responsibility for reporting is national (Andemicael and Mathiason, 2005).
The question, of course, is whether the reporting is accurate and truthful. While the assumption in all international conventions is that states who ratify will comply with their obligations. The reality is that there are often doubts about compliance (or, as Ronald Reagan put it “trust but verify”). In other regimes where failure to comply would have global implications, institutions have been established to verify compliance. For example, in weapons of mass destruction organizations have been established for nuclear and chemical weapons to verify that states comply. The Safeguards Department of the International Atomic Energy Agency is a successful case.
The verification issues in climate change are complex. First, there need to be standards for each type of greenhouse gas emission. This is complex because emissions are determined by the source and not all sources have simple measurement. For example, the emissions from power plants can be computed fairly easily, but those from trees and soils not.
Second, there has to be standardized reporting so that it can be sure that emissions are reported by different countries in the same way (i.e. the reporting is reliable.)
Finally, there needs to be a mechanism for removing doubts about whether the reporting is valid and reliable. In the weapons of mass destruction regime, this is done through agreed procedures for inspection.
At present, no such institution has been created in the climate change regime, although some work on standards is being done in the context of the CDM, where verification is essential in order to ensure that projects that have been approved have actually met their targets. This, however, is not the same as verifying at the national level.
Conclusion: Implications for the International Public Sector
An active international public sector that deals with issues of managing climate change is emerging. But its architecture resembles a bidonville more than an elegant Frank Gery structure. Climate change links with everything, in one way or another, international organizations do, and therefore it can be argued that each has a stake. At the same time, in terms of financial scale and regulatory complexity, none of the existing organizations can claim responsibility.
The institution concerned with scientific fact (the IPCC) is connected loosely with the World Meteorological Organization and the United Nations Environment Program and even this is now being reviewed by the IPCC in the light of recommendations on re-structuring made in 2010 by an evaluation. It has a loose relationship with the Secretariat of the UNFCCC, whose responsibilities include servicing the negotiations to replace Kyoto and generally see to the implementation of the Convention. This secretariat, which is growing quickly, also manages the CDM and several other financial institutions.
Finance is largely managed, directly or indirectly (in the case of the GEF) by the World Bank. The Bank has received the task because there is no alternative institution currently in place, but it is doubtful that the Bank will be able to retain that role without a significant modification of its statutes. Since the Bank is a weighted voting organization it is unlikely that a dominant role for it can be accepted.
There are a large number of competitors for the role of coordinator of the international public sector in climate change. The Secretary-General of the United Nations has sought to provide leadership through various interagency mechanisms, for example. These, however, do not have authority over resources.
Whenever the international system, in the past, has encountered this kind of problem it has either tried to set up an institution that encompasses most responsibility, or a coordination network that provides the illusion of central consistency. There are few successful precedents.
Evans and Steven (2009) have argued that there are three possible scenarios for the architecture. They are:
The Age of Climatocracy, in which no institutional arrangement emerges, shows how success in negotiations can nonetheless fail to lead to a sustainable deal, with growing climate impacts leading to steadily declining levels of international effectiveness. It illustrates the dangers of achieving cosmetic agreement that is not backed by a process of institutional change.
In Multilateral Zombie, an early breakdown in international co-operation is followed by the eventual emergence of a new order based on a patchwork of bottom up solutions.
in Operating System, a long-term deal proves sufficiently robust to deliver results, based on an ambitious effort to integrate all aspects of international reform, and an approach based on agreeing shared principles and a long-term route map rather than just incremental initiatives.
The preferred scenario is the last one, but it is perhaps the most difficult (even if it is the most effective). It will require an international public sector that can deliver results better than any previous effort.
We have argued that climate change provides a management challenge for the international public sector. To meet it, we will need, as scholars and practitioners, to help define a new, innovative and ambitious architecture. That will be a task for the coming years.
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