Environment Trade Law Presentation

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Trade, Environment, & Climate Change

Trade, Environment, & Climate ChangeUPH-MTIC 23-27 June 2014Climate Change Policy, Command and Control, and Market Based ApproachesInvesting in Renewable Energy through Clean Development MechanismOther Types of Carbon MarketsInvesting in Forestry through REDD+Group ExerciseTable of Content3

31st chapter: FIRST SCIENCE REVEAL ON CLIMATE CHAGE- Global warming, UN assigned scientists to research on this called as the IPPCPage 3 and 4Carbon dioxide, trapped in the earths atmosphere, and it get thicker, it made the earth into a green house. Sun heats the earth.Green house affect, Indonesia not too much, more on the colder countriesBut in CFC eliminates the atmosphere as well, can cause skin cancer and creates more heat.8006004002000CO2 (ppmv)Thousands of Years Before PresentPresent CO2 concentration (386 ppmv)CO2 concentration after 50 years of unrestricted fossil fuel burning (600 ppmv)240300270210180The image shows the concentration of CO2 in the atmosphere over a period of time if emissions continue unaltered. For thousands of year, co2 level has remained study, but after the industrial era it spikes up and continues.4

Now 2.5 degrees warmerTyphoons, draught, hurricane. Weather changes, not predictable.New diseases.Animal extinct. 56Carbon dioxide (CO2)Source: fossil fuel combustion and land-use changes, particularly deforestation the most important GHG, but lowest global warming potential (GWP) - 1

Methane (CH4)Source: coal mining, landfill operations, livestock raising and natural gas/oil exploitation and transportationGWP - 21 ( 1t CH4 = 21 tCO2 in terms of global warming effect)

Nitrous oxide (N2O)Source: fertilizer manufacturing, fossil fuel combustion (mainly in transport sector) GWP 310Climate change causes: natural greenhouse gases (GHG)6Not only one emissions6 Greenhouse gasses.7Hydrofluorocarbons (HFCs) and Perfluorocarbons (PFCs)

Alternative to ozone depleting CFCs and HCFCs Source: manufacturing processes (e.g. refrigeration and air conditioning equipment)GWP: HFCs range from 140 to 11,700 (HFC23), CxFx range from 6.500 (CF4) to 9,200 (C2F6)

Sulphur hexofluoride (SF)

Used as a dielectric fluid (e.g. in power grids)GWP - 23,900Atmospheric lifetime of one molecule - 3,200 yearsMost dangerous anthropogenic-induced GHGsClimate change causes: engineered greenhouse gases (GHG)78Annual greenhouse gas emission by sector

Source: Global Warming Art8Emissions come from a whole range of sectors, everything that we do on a daily basis.Biomass: burning trees, Indonesia, 3rd polluter due to this

9

Climate change: General UN MessageScience is clear: warming of climate system is unequivocal and attributable to human activitiesSevere impacts of climate change are already being felt, particularly in developing countries, and demand an urgent responseEconomic assessments indicate that cost of inaction will exceed the cost of taking action now by several orders of magnitude. 9After the IPPC report the UN went into panic. The science is clear.Economic assessment: Theres a cost now and in the future. Its more efficient for us to act now than to act at a later date. The cost is much bigger. Precaution costs less than after the impact has been seen. (Stated to urge countries to take action before its too late.)At first they dont specify the cost to whom. This UN statement is too general. Cost to everybody, including the industrial sectors.Threat: Complete depletion of the resources.10Objective: stabilize global GHG concentrations in atmosphereUniversally agreed: 189 countries have ratified/accepted UNFCCCPrinciple of common but differentiated responsibilities:Industrialized countries (Annex I) aim to restore GHG emissions to 1990 levels (no mandatory commitments thus legally non-binding) Developing countries (Annex II) commit to build capacity of and facilitate technology transfer to developing countriesIdentifies two options to address climate change: mitigation of climate change by reducing GHG emissions and enhancing sinks, and adaptation to the impacts of climate change

Both mitigation and adaptation are essential in reducing the risks of climate change!!!International Response: UN Framework Convention on Climate Change (UNFCCC) 199210Biggest International ResponseUNFCCC 1992Stabilize, keep it at that level189= universally acceptedDifferentiated industrial and developing countries, because of priorities, economic reason, industrialize has a better economic ability to change their policies and they were the ones who cause global warming in the first. So this construction aims to put more responsibility to the industrial countries rather than the developing country.Streams of funding, how to deal climate change: Mitigation (preventing , supressing) and Adaptation (adapting to the current issues)11Kyoto Protocol amended UNFCCC with 2 principal provisions:Assigns mandatory (legally-binding) GHG emission reduction targets to Annex I parties: Individual targets for each industrialized country: on average by 5% below 1990 levelsEstablish time-frame (Kyoto commitment period): 2008-12Developing countries and some economies in transition (non-Annex I) countries do not have reduction targets Introduce market mechanisms to allow industrialized countries to meet their commitment in most cost-effective way by purchasing GHG emission reductions from elsewhere:from financial exchanges (Emission Trading)from projects which reduce emissions (Clean Development Mechanism (CDM) or Joint Implementation (JI))International Response: Kyoto Protocol, 199711Kyoto Protocol t is supposed to be an implementing policy to the UNFCCC.Annex 1 Industrialized countriesPuts mandatory, legally binding commitments.Developing countries is still economic transition, so this does not apply to them. (Annex 2)GLOBAL WARMINGCONVENTIONS- UN Framework Convention on Climate Change (1992)

- Kyoto Protocol(1997)

- [Post-Kyoto?](2015)Mitigation

AdaptationSOLUTIONS Emissions Trading (ET)

Clean Development Mechanism (CDM)

Joint Implementation (JI) PROBLEMInternational Response MapWere at a gap, supposedly 2015 they are supposed to come to establish another protocol.Kyoto Protocol has expired since 2012.Achieved its purpose or became renewed. But at the time it retired, the countries did not come to a amicable negotiation.Still running in the market as a practice (i.e. ET, CDM, JI), but theres no legally binding action.Markets are being created (i.e. carbon trading).12Command & ControlTechnology (input) standardsRequired use of BBG/ biofuelsRequired use of CFL lightbulbs

Performance (output) standardsUS Clean Air Act > sets air quality standardsAMDAL

The government command and controls (CAC) the citizens to obey the law.A method to make people obey the law.CAC Tool: is the standard (clear and enforcable) v. requirement. AMDAL (Analisis Mengenai Dampak Lingkungan): They calculate the (liquid) waste of your company. Not exactly a CAC Tool because it doesnt create a standard. It is a requirement, for businesses to attain licenses. But it is kind of a Clean standard Required use of Bahan Bakar Gas (BBG), Indonesia, bajaj red=> blue. But not to all bajajs in IndonesiaCFL lightbulbs, more energy efficient.

Ambience standard levels of quality in the surrounding environment.Emission standard levels of emission.Technology that you have to use.

Problems:Costs, loose profit, compliance issues, exporting issues.13Command & ControlCompany ACompany 1Company 3Company 2Input StandardsTechnologyStandardTechnologyOutput standardsPenalViolationCompany B

PollutionStandardPenalViolationPollution14Pros:Easier enactment & implementationEasier monitoring Clear enforceability (in theory)Cons:Uniform costs blind to unique capacities Initial subsidies often neededHigh monitoring & enforcement costs Provides no incentive to do more than necessaryInformation asymmetry between govt & corporations

Command & ControlPros:1. Easy, simple to understand2. Easily monitored (e.g. requiring reports, random investigations, only check whether it complies)3. Easily enforced (only clear in theory), sanctionedSometimes standards are impossible to enforced.Cannot be monitoredNo sanction

Cons:Public consultations (US law requires that to be done before implementing a regulation)1. Doesnt care on the case by case basis or circumstances and conditions of the parties and as such it might compromise the varying interests in the market.2. Subsidies are often needed initially, the government has to create the market (e.g. Transjakarta shall change fuel to gas but the problem is that theres not enough gas stations, no government support.)3. High costs for monitoring and enforcement4. Provides no incentive to do more than necessary (because it is required by law)5. What govt know and what companies know are complete different (so theres always something that the government doesnt know), results in the standard that does not please every party

IndonesiaTimbal=LeadKopaja, no maintenance due to corruption and high costs15Market-Based MechanismsObjective: To Put a Price on Externalities

Externalities: cost not reflected in the market priceCost of operations, it does not include the pollution to the surrounding area, creating a cost to society (Social Cost) => should be more expensive (either to be paid by the producer or the consumer or both)The gap between the social cost and the private cost => externalities16An externality is a cost which results from an activity which affects an uninvolved party who did not choose to incur that cost. Pollution is an externality because although it is emitted by a producer, it affects the society, and society must pay for the cost ultimately (social cost).

Pricing exter