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Trading Carbon : December - January 2011
l the targets could be conditional or be specified as a range, as are many of the Copenhagen pledges, rather than a single, fixed number, such as existing Kyoto targets; l as a result, the targets would not be able to generate AAUs, which could be deposited in a registry and traded. Instead, trading would have to be done on an ad hoc basis, through bilateral arrangements between countries that mutually recognise each other's allowances; and l the rules on accounting, sinks, and monitoring, reporting and verification could be changed to reflect the political rather than legal character of the regime. For example, states could apply their own rules on accounting, sinks and project-based credits, rather than apply internationally- defined rules. As in scenario two, scenario three would raise the question: Which countries would assume second period targets and which would prefer to proceed under Copenhagen/Cancun track? It would also raise questions about linkages between the Kyoto and convention tracks of the negotiations during the transitional period before the development of a new legal agreement. For example, could states with targets under Copenhagen/Cancun be able to buy CDM credits or could states with targets be able to trade across the tracks? Finally, scenario three is intended as a transitional arrangement, in anticipation of the development of a legally- binding regime. But it leaves open the question: In the future, would the regime consist of two legal agreements or a single comprehensive agreement? Kyoto establishes a complex and ambitious regime, in architecture if not stringency. The problem is that relatively few countries, representing only about a quarter of the world's emissions, have been willing to assume emission targets under the protocol. And even some of these seem unwilling to continue down the same path, certainly not if others do not join the effort as well. The future of the Protocol seems doubtful at best. Even the most optimistic scenario, a new round of emissions targets couldn't be agreed in time to prevent a gap between the first and second periods. A possible middle ground would be to establish a transitional regime that is political in nature, but that could evolve over time into a legally-binding regime. Under the UNFCCC, the Copenhagen/Cancun process has begun down this road, starting with a bottom-up process of national pledges, coupled with significant financial assistance and an embryonic process of international "consultation and analysis". A political second period would establish a parallel process under the Kyoto Protocol, thereby keeping it alive so that it can (potentially) fight again another day. l *This article is based on a wider paper published by the Harvard Project on Climate Agreements (Available at http://belfercenter. ksg.harvard.edu/project/56/harvard_project_on_climate_ agreements.html) and a presentation made to a workshop organised by the Pew Center on Global Climate Change in Konigswinter, Germany in June 2011 Daniel Bodansky is a professor at the Sandra Day O'Connor College of Law at Arizona State University Email: Daniel.Bodansky@asu.edu S13 POST 2012 more credible and effective than non-legal agreements because they require greater domestic buy-in, signal a greater intensity and seriousness of intent, create a stronger internal sense of obligation and involve higher reputational costs for violation. The relative effectiveness of "political" versus "legal" commitments, however, varies depending on the circumstances. Sometimes, countries take political agreements seriously, or legal agreements lightly. On the one hand, the 1975 Helsinki Accords and the UN General Assembly resolution on high seas driftnet fishing were extremely influential, despite not been legally-binding. On the other hand, Kyoto has had little, if any, influence in curbing the emissions of some parties, such as Canada. Whatever differences might exist between a political and legal commitment period, they would be even less so if a legal second commitment period were being applied only provisionally, as is likely for an extended period of time. Finally, to the extent that states do see political commitments as leaving them with greater flexibility and hence less risky than legal obligations, they may be willing to accept more environmentally-ambitious commitments under a political than a legal second period under Kyoto. Critical issues In establishing a political second commitment period, a crucial issue would be the extent to which it would continue along the same lines as the first period. At one extreme, a political second period could extend Kyoto essentially unchanged, with the same types of targets and rules for accounting, mechanisms, reporting, review and compliance. The targets would not be legally-binding, but everything else would look the same. Kyoto rules wouldn't apply directly, because the targets would not be adopted through an amendment to Annex B. But the parties could adopt decisions that apply the Kyoto/Marrakesh rules to the new commitment period. Under this approach, the targets would be specified as a single, fixed number and would apply on an economy- wide basis; they would generate AAUs; the AAUs would be deposited in a state's registry and could be traded; sinks would be accounted for as they are under the Marrakesh rules; states would be able to undertake CDM projects that generate credits that states could use to satisfy their targets; states would submit inventories, which would be reviewed by expert review teams; and questions about compliance would be addressed by the Compliance Committee. Since the targets would be political, failure to meet them would not represent a legal violation and would not have legal consequences. But, then again, under the existing Kyoto regime, states have never adopted an amendment to make the decisions of the Compliance Committee legally-binding, so the difference might not be so great. Alternatively, the Kyoto parties could decide to establish a less ambitious second commitment period, which incorporated elements of the Copenhagen/Cancun approach. For example: l the second period targets could be defined through unilateral pledges, as in the Copenhagen/Cancun process, rather than through top-down international negotiations; Dec 2011/Jan 2012