The most important achievement in the global effort to fight climate change to date is the creation of greenhouse-gas emission reductions as an economic good through permit trading schemes such as the European Trading Scheme and, most importantly, the international emission cap-and-trade regime of the Kyoto Protocol.

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By creating monetary value for emission reductions, these trading schemes can catalyse research and development of emission reducing (low- or no-carbon) technologies. But unlike them, cap-and-trade regimes can also efficiently drive the dissemination of these technologies among the “engine of the global economy” – that is, consumers in the rich countries.

More environmentally-friendly technologies developed and adopted in the rich north will eventually find their way to the south through technology exports. And it would, of course, be possible to promote such exports in the absence of domestic caps and emission trading. Indeed, that is the intention behind a recent United States climate-change legislation proposal, the Climate Change Technology Deployment in Developing Countries Act 2005 by Senator Chuck Hagel (erstwhile co-sponsor of the infamous Byrd-Hagel Resolution).

But it would be difficult for such a scheme to compete with the spill-over of old-style high-carbon technologies that would continue to be demanded by the northern economic engine with “business-as-usual appetites” – not to mention the doubtful moral situation this would raise.

The success of emission trading in helping to reduce emissions depends on the participants expecting these markets to be here to stay, and the value of the permits to increase significantly over time. The only reliable way of achieving this is by way of a sequence of ever-tightening mandatory caps on permissible emissions – that is, by continuing the Kyoto regime – possibly with some “safety-valves” such as the introduction of maximum permit prices.

The American exception

Ever since President George W Bush repudiated the Kyoto Protocol in early 2001, his administration has been openly opposed to the idea of carbon-emission caps, and has instead opted for a voluntary regime with “intensity targets” and technology (export) initiatives. It has officially ruled out a review of its climate change plan before 2012, and has repeatedly indicated that it will not participate in any Kyoto follow-up negotiations, certainly not before this internal review.

But at the sub-national (state, city, corporate and community) level, a lot of measures are underway which could lend themselves to be integrated with Kyoto Protocol-type flexibility mechanisms, be it emission trading or joint implementation.

Based on the United Nations Framework Convention’s principle of “common but differentiated responsibilities and capabilities”, most developing countries categorically refuse even to contemplate emission-reduction targets for the near- to medium-term. At the same time, many of them are, and have been, carrying out significant emission mitigation efforts, and they are putting their hope in the Clean Development Mechanism to support and enhance these efforts.

Yet the refusal – especially by the large developing-country emitters such as China and India – to take on reduction commitments continues to fuel the spectre of an “unfair” competitive disadvantage under a regime that would continue to exempt these countries from adopting emission-reduction targets.

The worst course of action by industrialised countries would be to undermine the expectation about the longevity of emission-trading markets and about the increasing value of the permits. But precisely this would be the effect of moving away from the idea of mandatory emission caps on the global economic motor towards the kind of emissions/GDP intensity regime advocated by the Bush administration-style regime or something like Senator Hagel’s Technology Deployment Act.

Britain and Europe: a time for leadership

The focus of British and European policy must remain on genuine leadership to continue the Kyoto-track negotiations, but with modifications that allow certain changes in the rules (such as the introduction of price “safety valves”) and the participation by sub-national entities of “non-Parties” (Australia and the United States) in the flexibility mechanisms.

This would, for one thing, lend support to the current efforts at the sub-national level in the United States, and might thus help put domestic pressure on the federal authorities. (It could also have larger, longer-term benefits. The United States has a long tradition of handling treaties “as-if-ratified”: many international treaties are, and historically have been signed, and ultimately kept to, even when not ratified for long periods).

With regard to the present US federal administration, however, the only way forward is to engage with them where they are willing to engage – to forge some joint technology initiatives. But this must be a complement to the Kyoto-track, not a substitute.

Engaging the emerging economies

In the 1990s the United States, the European Union and Japan were able to push forward with climate negotiations pretty much on their own. But the concerns of developing countries can no longer be ignored.

Most developing countries are less concerned about what kind of arrangements are made for after the 2008-2012 Kyoto commitment period than they are about how the already rich industrialised countries will “participate meaningfully” in dealing with the impacts of climate. For developing countries, climate change is not only a matter of mitigation or adaptation; it is a crosscutting issue of disaster management, desertification, biodiversity, trade, and, above all, development.

Thus, it cannot be in the interest of anyone who is intent on leading the multilateral climate-change efforts either to force a post-Kyoto mitigation agenda at the expense of negotiations on adaptation and impacts, or to isolate climate change from being discussed in these crosscutting areas. Indeed, it has to be in the interest of anyone concerned about the problem, north or south, to work together and counteract vigorously any attempts to isolate climate change in conceptually and practically nonsensical ghetto.

In relation to post-2012 mitigation strategies for developing countries, there are a number of reasons why emission-reduction targets, which have been put forward in particular as a means to address the aforementioned competitiveness worries, are unlikely to be an acceptable way forward for most developing countries, including Brazil, China and India.

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Apart from the well-known equity-based objections regarding the north-south difference in existing responsibilities, there are factors such as the fact that, unlike industrialised countries – which will largely develop the low-carbon technologies – developing countries could not comply with emission reduction targets without spending considerable sums on importing these technologies (“technology transfer” is like to remain largely a euphemism for technology exports from north to south).

But there are a number of ways short of imposing emission-reduction targets to address both the problem of rising developing-country emissions and industrialised-country concerns about unfair competitive advantages associated with the Kyoto architecture. Developing-country emissions can be addressed by, for example, supporting the Clean Development Mechanism or by reforming the export credit rules (see Can the Transatlantic Partners Help in Addressing Developing Country Emissions at www.OxfordClimatePolicy.org).

Meanwhile, a possibility for addressing the competitiveness worries of capped industrialised countries without introducing developing-country reduction targets would be to follow the recent Chinese example of meeting the same worries (particularly in the US) in the context of the abolition of the international textile quota system by introducing export duties on carbon-intensive developing-country products (See Overcoming the Meaningful Participation Impasse, www.OxfordEnergy.org).

Beyond Kyoto

The key to both meaningful United States participation and developing-country engagement in global climate-change policy is to acknowledge that there are significant differences between the interests and capabilities of industrialised and developing countries, and to take account of these in the successor to the Kyoto Protocol.

The key points in finding a way forward for an international climate regime beyond 2012 are:

• resist attempts to force climate change into a ghetto and ensure that issues of adaptation and impacts are not driven off-stage in the course of negotiating a post-2012 mitigation regime
• keep the Kyoto-track (i.e. differentiated mandatory emission caps & flexibilities) negotiations for industrialised countries
• make provisions for “as-if-Parties” who are willing (and able) to play by the rules of the treaty but have not managed to (or cannot) get formal ratification by their governments
• engage developing countries by addressing their emissions without imposing additional economic burdens.

This article draws on a note presented at the G8 Stakeholder Conference in March 2005

This article appears as part of openDemocracy‘s online debate on the politics of climate change. The debate was developed in partnership with the British Council as part of their ZeroCarbonCity initiative – a two year global campaign to raise awareness and stimulate debate around the challenges of climate change.