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Trade and the Environment – Kyoto Protocol. Bill Jones, Ph.D. Presentation to. MIM 513: Pacific RIM Economies, International Trade, & Markets. November 1 & 4, 2010.

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trade and the environment kyoto protocol
Trade and the Environment –Kyoto Protocol

Bill Jones, Ph.D.

Presentation to

MIM 513: Pacific RIM Economies,International Trade, & Markets

November 1 & 4, 2010

Alternative Presentation Title: Are We Really Capable of Successfully Mitigating Climate Change & Continuing Global Economic Development?
  • Lecture goals
  • Climate change context: climate science primer
  • Brief history: Kyoto Protocol major elements
  • Global implications
  • Trade impacts
  • International Trade
  • Shipping/transport
  • Energy consumption
  • Conclusions
  • Q&A


Climate change unique, complex, uncertain

Impact all things global & economic

International CC agreements create opportunities & obstacles

New markets & product

Offset trading

Continued emissions

North/south divide: developing and developed countries

Global trade challenges

Energy use is key

ghg global emission sources
GHG Global Emission Sources

Energy Consumption ≈ 65%

long term forecasts uncertain but suggest high concentrations remain for 100s of years
Long-Term Forecasts Uncertain But Suggest High Concentrations Remain For 100s Of Years

Irreversibility of climate change: 1,000 year time horizon impact

Inability of natural syncs to absorb carbon dioxide (18% decrease last 50 yrs.)

Source: Irreversible climate change due to carbon dioxide emissions; Susan Solomona,1, Gian-Kasper Plattnerb, Reto Knuttic, and Pierre Friedlingsteind, PNAS February 10, 2009

key kyoto protocol elements
Key Kyoto Protocol Elements

Signed December 1997, in force 2005, reduction period 2008-12 (140 nations ratified; now 192 nations)

Assign numerical GHG emission reduction targets

35 industrialized nations (Annex I) Initially: 55% of all 1990 Annex I nations’ GHG emissions (currently 55 Annex I)

Collective average GHG reduction 5.2% below 1990 benchmark by 2012

Covered private businesses assigned reduction targets

6 gases: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulhpur hexifluoride

Mitigation methods (least cost method):

Internal reductions: covered private sector businesses internal process mitigation

Allowance trading: Annex I undershoot trade to Annex I overshoot

Joint Implementation: Annex I nation develop GHG mitigation project in another Annex I nation for credit against emission allowance

Clean Development Mechanism (CDM): Annex I develop “offset” projects as a credit against Annex I nation target in non-Annex I countries (not bound by Kyoto target)

Spark investment in sustainable technologies & new business sectors: phase-out GHG emitting sectors

Win Win for World: socially, environmentally, economically

developing countries kyoto protocol why participate
Developing Countries & Kyoto Protocol: Why Participate?

No emission goals for non-Annex I nations (developing)

2016 responsible for 50% GHG emissions

Annex I assist developing countries reduce overall emissions

Significant commitment of Annex I nations:

Accelerate economic development in developing countries

Assist nations most vulnerable to CC

Minimize adverse social adverse & economic impacts

Article 10:

“Promote facilitate & transfer”technologies, know-how, practices, processes

Transfer environmentally sound technologies that are publicly owned & available to indigenous economies

Development & transfer of education, training & knowledge programs

Article 12

Developing countries share in project “proceeds” of CDM projects

why is kyoto unique
Why is Kyoto Unique?

First to recognize CC as a global threat & need for global response

First to bind responsible countries to emission reductions

First to set up a market mechanism (allowance trading, CDM) as most efficient method to meet GHG reduction targets

Multiple goals:

GHG emission reductions primary goal

Developing countries cooperate: developed countries invest in economic development (CDM)

Long term reductions

Impact global economy


International trade


Capital flows

Energy supply & consumption


Labor supply

kyoto protocol implications
Kyoto Protocol Implications

International trade

Economic relationships between countries (regulated, non-regulated)




Supply chain

Labor supply

Energy supply

trade ghg emissions
Trade & GHG Emissions

Kyoto Protocol Article 2.3 addresses international trade

Develop policies procedures that minimize adverse impacts on “international trade”

Recognizes emission targets can conflict with trade growth:

Trade growth directly related to energy demand (fossil fuel main energy source)

Trend to export manufacturing production from regulated to unregulated nations

Potential to handicap global economic growth both developed & developing nations

Greater Trade increase economic growth: energy consumption linked to growth & therefore increase in GHG emissions

Kyoto Protocol could create Leakage: where countries with more stringent environmental regulations shift production weaker regulated country

how trade impacted
How Trade Impacted


Shift to developing countries

Increase embodied carbon in goods (energy carbon intensity, transport)

Emission target impact

Emission leakage (regulated to unregulated countries)

Annex I meeting reduction targets


Cheaper labor developing nations

Lower investment costs

Economic development creates demand

Create new markets for EE & RE development (CDM)


How do regulated countries meet reduction targets?

Rapidly developing countries (BASIC) increase Share of GHG emissions

Technology shift too slow (clean energy, sustainable technologies)

embodied carbon traded goods
Embodied Carbon: Traded Goods

Balance of Emissions Embodied in Trade (BEET)

ghg gdp

CO2 Emissions Per Unit GDP


There is significant carbon embedded in export trade

Developing countries gain economic benefit but increase emissions

Developed countries reduce GHG emissions meet targets

Technology transfer not rapid enough

IP become a major concern (violate spirit of Kyoto Protocol)

Annex I concerned with competitive loss

BASIC countries:

Pressured to regulate future emissions

Before they agree (Cancun COP/MOP 16)

BASIC: want Annex I to meet reduction targets &

USA: Participate in reductions (7% below 1990 by 2012)

Other developing countries

Excluded or receive little benefit (Small Island Nations, Equatorial Africa)

transport energy forecast
Transport Energy Forecast

Non-OECD Energy Consumption Rapid Growth

freight energy growth
Freight Energy Growth

Freight Energy Use Greatest Increase

modes of transport
Modes of Transport

Modes of Transportation: International Trade

ghg transport
GHG & Transport

Transport Represents 24% Total GHG Emissions

transportation trade implication
Transportation & Trade Implication

GHG emissions continue to increase as trade increases

Little change in fuel carbon intensity

International trade will increase GHG emissions

energy use
Energy Use

Non OECD countries account for 86% energy increase

economic activity energy use
Economic Activity & Energy Use

Economic Activity & Population Increase Energy Use

increase petroleum based energy use
Increase Petroleum Based Energy Use

Nearly All Coal Based Energy Use in Non-OECD Asia Nations

renewables increase but remain small
Renewables Increase But Remain Small %

RE Fastest Growing, But Coal Continues to Dominate Generation

energy use implications
Energy Use Implications

Continued reliance on fossil-based fuels

Non OECD (mostly Annex I countries + USA) largest % increase

Increasing manufacture export & international trade will continue fossil fuel reliance

Kyoto Targets more difficult to achieve

Overall global emissions continue to grow

Increasing need for more restrictive targets

Political ramifications: nations unwilling to impede economic growth

North/South rancor over emissions controls


Global GHG targets increasingly difficult to achieve under Kyoto Protocol

Annex I countries concerned about:

Post 2012 agreement uncertainty

Pressure to impose GHG emissions targets for developing nations

IP & technology transfer protections (transparency & publicly owned technologies)

Developing countries

Not nations that created GHG concentrations

Want Annex I to continue investment in development

International trade

Cannot successfully reduce fossil fuel reliance & grow

Bleak outlook given current state of Kyoto

Need for drastic changes in global agreement