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MEA Bulletin - Guest Article No. 57a - Thursday, 6 November 2008
May the Second Best Win: Another Look at the Lessons for Climate Change Mitigation from the Montreal Protocol
By Asger Garnak, Senior climate change economist, COWI, agk@cowi.dk.
Full Article

The Montreal Protocol (MP) inspired several aspects of the climate change agreements – the UN Framework Convention on Climate Change (UNFCCC) and its Kyoto Protocol. However, important lessons remain for consideration in the negotiation of a 2009 Copenhagen Agreement.

1. A strong foundation of independent professional technical and economic advice

The MP’s Technology and Economic Assessment Panel (TEAP) has over the years provided Parties and the MP’s funding mechanism - the Montreal Fund - with invaluable support enabling the MP to work effectively based on:

  • Expert technology and economic assessment and information;
  • Promotion of sector and technology specific best practice policies and measures;
  • Globally respected & influential experts operating under stringent rules of conduct, providing independent advice free from distortion and political interference;
  • A proactive and up-front approach to new knowledge on emerging technologies and active promotion of new technologies by communicating opportunities; and
  • Identification of barriers and targeted measures and support to overcoming them.

In the climate regime, there is a woeful absence of strong international institutions that can play a similar role to support climate-friendly technologies in the key sectors.

Does all of this seem technical and trivial? It is not, and neither is it uncontroversial. It has been claimed that the very success of the MP TEAP was the reason why some countries refused to establish a parallel institution in the climate agreement. It is now high time to make up for the omission and include an institutional setup providing similar functions in the Copenhagen Agreement, keeping in mind that the devil is in the details and that it is critical to get them right.

2. A sound approach to reciprocity

The complexity and scale of the climate challenge, together with delays and unfulfilled commitments by industrialized countries, have led to a much lower level of confidence in the climate negotiations than in the MP process.

However, this should not mislead one to think that the inherent problems of managing a global public good have not been present in the MP process. The difference is that they have been managed in a sensible way acceptable to all parties.

  • Firstly, the transfers to support developing country emission reductions have been predictable and based on regular replenishments, and the burden has been shared among developed countries according to an agreed formula.
  • Secondly, financial support has been provided in exchange for mitigation action by developing countries based on well-defined, monitorable and verifiable country programs. These programmes include support for improved emissions inventories, short-term goals in the form of strategies and action programs, and implementation of policies and measures that provide incentives through regulations, taxes etc. This approach has far greater potential than the more ad hoc, project oriented approach of the main climate-related funding vehicles for developing country mitigation: the CDM and current GEF funding.

In order to solve the climate crisis, the Copenhagen Agreement must lead to unprecedented levels of funding being transferred to developing country mitigation (and adaptation). To be effective in this, it is in the common interest of the parties that this is accompanied by equally unprecedented levels of transparency in mitigation-related actions by all countries and in the use of funds to ensure that the highest possible level of mitigation is realized. This will touch sensitivities but not be really controversial as long as country programs reflect national priorities. At the same time, it is the obligation of all parties to oversee that the funding provided gives the highest possible benefit to the global environment. This is where the high-quality, no-nonsense technical and economic assessments of an independent panel of experts can be of great help.

These principles are applied successfully in the MP context, based on a foundation of trust reflecting that early action by developed countries and the concept of common but differentiated responsibilities have been implemented in practice. In other words, the agreement is perceived as fundamentally fair, which must be the foundation of any workable agreement.

An important difference not to be overlooked between the MP and the climate agreement is that the MP contains a “stick” to entice the participation and compliance by reluctant countries in the form of trade measures. There is widespread agreement that applying the same to the climate area would be immensely complicated. Therefore, as long as a treaty has to rely exclusively or mostly on "carrots" - e.g. through funding provisions - all parties have a huge responsibility to get as much mitigation as possible out of these positive incentives. This should not be compromised either because of developing country sensitivities or national interests of developed countries.

3. Rehabilitating incremental costs

The funding mechanism under MP is an important part of the success story, providing financing for implementation of developing country mitigation action according to the principle of agreed incremental costs. It is a paradox that the incremental cost concept in association with a fund instrument has fallen into disrepute in the climate change arena. The successful application of the principle by the Montreal Fund suggests that it is not the concept as such, but rather the way it has been applied in the climate context that is the problem. Too much ad hoc project focus, an insufficient institutional and technical foundation, insignificant funding compared to the challenges, and controversies regarding governance could be put forward as parts of the explanation. However, the currently available alternative - the CDM - is even more characterised by disparate project interventions and provides little leverage in terms of addressing market and policy imperfections, while also failing to provide certainty of future funding streams. Enabling environments, market transformation, provision of incentives, and targeted support for technology transfer would all be key elements of carefully crafted country programmes financed on the basis of a pragmatic interpretation of the incremental cost concept.

In conclusion, “the best is the enemy of the good,” and no time should be wasted looking for an ideal approach to global climate mitigation. Still, negotiators should endeavour to achieve a “second best.” This means carefully designing incentives and institutions to encourage all parties of a Copenhagen Agreement to participate and contribute, and here the Montreal Protocol can still teach us a few lessons. Fortunately, there are still veterans from the MP process around who are active in communicating the lessons learnt, like Stephen O. Andersen (founding TEAP co-chair) and K. Madhava Sarma (former Executive Secretary of the Ozone Secretariat). Practitioners such as these should be called in to help draft negotiating text on the subject, as part of a “climate rescue squad”. They already helped save both the ozone layer and the climate once!

The essay is based on the author's personal observations in the context of the seminar “The Montreal Protocol and climate negotiations: Lessons for technology transfer and financing toward COP15” held in Copenhagen on 28 October 2008 and sponsored by COWI, http://www.cowi.com
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