A Critical Appraisal of the Vattenfall Proposal for a Fair Climate Regime
By Paul Baer & Tom Athanasiou (Ecoequity)
In November of 2006, Vattenfall, a large, Northern European utility with substantial investments in nuclear energy and lignite based power plants, released a report called Curbing Climate Change: an outline of a framework leading to a low carbon emitting society. With this report it crossed an important line, stepping beyond generalities and (a first for the business sector, at least as far as we know) making a specific, quantitative proposal for a global burden sharing framework. For these reasons alone it merits our attention.
The Vattenfall Proposal raises a number of questions, the most important being if it could actually work. This is the first question to ask about any framework proposal, but it’s particularly interesting in this case because the authors of the Vattenfall Proposal take pains to be seen as fair. They do so for many reasons, though one of them, clearly, is that fairness is key to acceptability. [pp. 21-22]
What Vattenfall actually proposes is a global cap and trade system in which national permit allocations are proportional (with slight modification) to Gross Domestic Product. Is such a system fair? And would it be acceptable? The answers to these questions depend on its consequences for different types of countries, and in this case, the key consequence is that the rich countries get the bulk of the emissions permits. Furthermore, after a short period of unrestricted growth, during which their per capita emissions (and per capita incomes) remain much smaller than those of the industrialized countries, developing countries face rates of emissions reductions equal to or greater than (and in some cases much greater than) those required of industrialized countries. Such an allocation system, as we will explain below, is extremely unlikely to be seen by developing countries as fair, or even fair enough to be accepted.
Why, then, is this proposal worth discussing? There are three reasons.
First, Vattenfall appears to be serious about climate protection. Heavily criticized for its initial advocacy of a 550 ppm CO2-e concentration target, it changed its position. Given this, it’s possible that it will change its position again as it comes to more deeply understand the demands of the climate problem.
Second, Vattenfall seems to wield considerable influence with its climate policy proposals. It has started a business initiative called 3C – “Combat Climate Change” (see http://www.combatclimatechange.org/) – which seeks to rally business support for a comprehensive climate protection framework. Vattenfall’s CEO Josefsson has been appointed as a climate policy advisor to German Chancellor Merkel. This is especially significant as Germany is currently holding both the presidencies of the EU and the G8 at a critical stage of the international climate policy debate.
Third, Vattenfall acknowledges the importance of equity, and this too could indicate an openness to further reconsideration of the problems of climate protection. For the moment, Vattenfall’s understanding of equity can be seen in its proposal’s “adjustment mechanisms,” which are designed to meet two explicit design principles [p. 8]:
- “No poor country shall be denied its right to economic development – no extra cost burden on the poorest”
- “No rich country shall have to go through disruptive change”
These two principles, noted as elements in a longer list of “overriding principles,” are unfortunately easy to put into pointed contradiction with each other. And under the stringent sorts of emissions trajectories that are needed, such a contradiction is going to be difficult to avoid.
To quickly see this, look at Figure 8, on page 15 of Curbing Climate Change (reproduced on page 17 of this document). Here you’ll see a plot of total emissions allocations (under the “early peak” variant of a 550 CO2-e scenario) for selected countries and regions. Note particularly that in 2025, just as India’s total emissions reach the US level, they plummet drastically, while US emissions – by virtue of an adjustment mechanism designed to set a
“maximum rate of emissions decline” for Annex I (but not non-Annex I) countries, and thus save them from any compulsion towards “disruptive change” – continue to gradually decline. Further, this happens while India’s per capita emissions are still only about a quarter of those in the US! Moreover, this is not a contingent result, but rather an unavoidable consequence of the proposal’s allocation mechanism, and it is extremely unlikely that India would ever agree to any framework designed to produce such results.
And all of this takes place under the lax 550 CO2-e target. Under a more stringent target, emissions would have to fall even more rapidly, to the point where the fatal logic of this architecture would become entirely undeniable. Either that or Vattenfall’s “maximum rate of reductions” protection for Annex I countries would have to be essentially repealed. Despite this and other related problems, Vattenfall’s endorsement of “the right to economic development” as a foundational principle is extremely interesting, and its inclusion of a development threshold (below which countries are not obligated to accept mitigation commitments) is more than interesting. It is both important and commendable.