Energy and Climate Policy

This post is co-authored by Sagatom Saha, research associate for energy and foreign policy at the Council on Foreign Relations. Read "The Impact of Removing Tax Preferences for U.S. Oil and Gas Production," a Discussion Paper from CFR’s Program on Energy Security and Climate Change in the Center for Geoeconomic Studies. Last week, CFR published a paper weighing in on the decades-long debate over tax preferences for U.S. oil and gas production (the first tax preference is actually over a century old, and tax reform has been a contentious fixture in Congressional budget battles since the 1970s). Advocates for reform argue the preferences hinder climate goals and waste $4 billion a year. Defenders of the tax preferences argue that repealing them would decimate domestic oil and gas production, jeopardizing U.S. energy security, jobs, and the economy. To assess these dueling arguments, Gilbert Metcalf, professor of economics at Tufts University, quantifies the effects of removing the three major tax preferences for U.S. oil and gas production (expensing of intangible drilling costs, percentage depletion, and the domestic manufacturing tax deduction). He finds that: Domestic oil drilling activity could decline by roughly 9 percent, and domestic gas drilling activity could decline by roughly 11 percent, depending on natural gas prices. These declines in drilling would in turn lead to a long-run decline in domestic oil and gas production. As a result, the global price of oil could rise by 1 percent by 2030 and domestic production could drop 5 percent; global consumption could fall by less than 1 percent. Domestic natural gas prices, meanwhile, could rise between 7 and 10 percent, and both domestic production and consumption of natural gas could fall between 3 and 4 percent. This might mean an increase of two pennies per gallon of gasoline at the pump and seven dollars per month for an average household’s electricity bill—small effects compared to recent variations in prices. To date, no study that was transparent about its methodology had rigorously assessed how oil and gas firms might respond to tax reform. In particular, some previous studies had oversimplified the problem, assuming that the $4 billion in lost annual government revenue equaled the value of the preferences to firms. But since tax preferences increase firms’ immediate cash availability, they are even more valuable to the firms. On top of this, previous studies failed to hone in on marginal effects—that is, how the presence or absence of tax breaks affect which projects firms will consider profitable enough to drill. Recognizing that this paper improves upon past studies, The New York Times’ Eduardo Porter writes: Mr. Metcalf’s analysis is the most sophisticated yet on the impact of government supports, worth roughly $4 billion a year. Extrapolating from the observed reaction of energy companies to fluctuations in the price of oil and gas, he models how a loss of subsidies might curtail drilling and thus affect production, prices and consumer demand. After quantifying the minimal effects tax reform would have on oil and gas prices, production, and consumption, Metcalf concludes that its direct effects on U.S. energy security, greenhouse gas emissions, and economic health are also limited. But eliminating subsidies to fossil fuel producers can strengthen U.S. credibility and leverage in international climate diplomacy. In 2009, the G20 countries made a historic agreement to phase out fossil fuel subsidies. Yet the 2016 G20 energy ministerial recently concluded with a disappointing announcement that made no mention of a concrete timescale for achieving this goal. U.S. fossil fuel subsidy reform could help break the logjam. For example, the United States and China will each publish peer reviews of the other’s fossil fuel subsidies at the G20 general meeting in September, and U.S. action to repeal its own subsidies may spur China to make similar efforts. It would also strengthen U.S. leadership to call on other developed and developing countries to remove both producer and consumer fossil fuel subsidies that drive up emissions around the world.

This week, a World Trade Organization (WTO) panel decided in favor of the United States and against India in a dispute over Indian domestic content requirements for sourcing solar power. Reading the headlines, one might worry that “The WTO Just Ruled Against India’s Booming Solar Program” or, worse, that the “WTO swats down India’s massive solar initiative.” The histrionics from progressive media outlets are overblown. In fact, whereas judges of international law have reaffirmed that national procurement of renewable energy favoring domestic manufacturers is illegal, the jury is still out on whether this helps or hurts efforts to deploy clean energy worldwide. Because domestic content requirements can reduce supply and increase prices, I am inclined to call this ruling a small victory that makes it cheaper to combat climate change. But I do still worry that in the future, liberalized trade and prudent climate policies might come into conflict. WTO Panel TRIMs India’s Solar Program The WTO panel ruling did not overturn India’s solar program, the centerpiece of India’s plan to curb emissions growth. India is targeting 100 GW of solar—around half of the world’s current solar capacity—by 2022. And at the 2015 Paris Climate Change Conference, Prime Minister Modi unveiled the International Solar Alliance, a confederation of 120 solar-friendly countries, to be headquartered near Delhi. None of this is materially affected by the WTO ruling, which narrowly focused on solar installations accounting for about 0.5 percent of India’s 100 GW target. The panel found that in a portion of its solar procurement from 2010 to 2014, India violated international trade law by barring foreign-made solar panels and, in some cases, the constituent solar cells in a panel. This was accomplished through “domestic content requirements,” which applied to roughly 500 MW of solar capacity installed by private developers, from whom government agencies promised to purchase the solar energy for 25 years. The panel concluded that these domestic content requirements breached India’s obligation under the WTO Agreement on Trade-Related Investment Measures (TRIMs) not to “require the purchase or use by an enterprise of products of domestic origin or from any domestic source…” The panel also found that India had not followed its legal responsibility under the 1994 General Agreement on Tariffs and Trade (GATT): “The products of the territory of any Member imported into the territory of any other Member shall be accorded treatment no less favourable than that accorded to like products of national origin…” The direct consequences of this case are minimal. The panel concluded that India should “bring its measures into conformity with its obligations under the TRIMs Agreement and the GATT 1994.” But since the beginning of this case, India has proactively reduced its domestic content requirements, from 50 percent in 2013 to 33 percent in 2014 to just 12.5 percent in its ongoing procurement. Moreover, a very similar case decided in 2014 by the WTO Appellate Body, Canada—Renewable Energy, failed to find that these domestic content requirements constituted actionable subsidies that could legitimize retaliation. So India may have to curtail its already minimal domestic content requirements moving forward, but nothing else really happens.[1] In My Humble Opinio Juris… Even though the direct consequences of this ruling are minimal, the issues raised in the case have broader significance in the long run. This explains why twelve countries and the European Union followed the case as third-party observers, with some countries providing extensive comments cited in the final ruling.[2] Most observers sided with the United States; for example, Japan bluntly called India’s policies “protectionist.” But even though this particular case was relatively easy to decide, onlookers were deeply invested in the precedents this case could set. The clearest outcome from the case was a reaffirmation of the 2014 ruling in Canada—Renewable Energy that domestic content requirements for renewable energy are illegal. Some environmental groups object that outlawing such policies can reduce the incentive to deploy clean energy. Under free trade, they contend, countries will end up importing cheap solar panels from China and never build up a domestic industry that would create local economic benefits. This may well be true, but restricting trade also raises the price of clean energy. And the biggest obstacle to clean energy deployment that I’ve consistently heard from policymakers in the developing world is not that imports fail to create jobs but that the cost is too high. So my conclusion is that this ruling is a felicitous example of the trade agenda aligning well with the climate agenda; reducing barriers to trade can also speed the deployment of clean energy. But India raised another, more interesting, objection on energy security grounds to the U.S. allegation that its domestic content requirements were illegal. Under Article XX of the GATT, countries can derogate from their international trade obligations, i.e., enact contrary policies, so long as certain conditions are met. One such condition is met if a contrary policy is “essential to the acquisition or distribution of products in general or local short supply.” India argued that since it had “abysmally low” domestic production capacity, and since it plans to sharply ramp up its deployment of solar power, it could face a shortage of solar panels if foreign supply were to disappear. The panel was unmoved by this objection. Because India could not prove an “imminent” risk of shortage, the panel held that India could not shirk its legal responsibilities. Surprisingly, the third party observers concurred, and Japan was unsympathetic to India’s argument. As one of the most energy-insecure countries, following the Fukushima nuclear disaster, one might expect Japan to favor retaining the right to prioritize national energy security over international trade liberalization. In this particular case, though, Japan’s opposition to trade barriers in the solar industry has to do with the make-up of Japan’s own solar industry, which largely relies on importing and relabeling Chinese panels. Setting Japan aside, other countries will increasingly want to switch to renewable energy to reduce reliance on fossil fuel imports. But if renewable energy industries become heavily concentrated—as the solar industry has become in China—then countries may not want to shift from one source of concentrated energy imports to another. So the summary WTO panel ruling against India’s energy security objection could set a precedent that discourages renewable energy adoption in the future. The second interesting objection raised by India was that the auctions for solar energy were conducted by the government, and therefore the domestic content requirements counted as government procurement that is exempt under GATT Article III:8(a). Again, the panel disagreed, upholding the prior decision in Canada—Renewable Energy that the government was procuring electricity, not solar panels, so it did not have the right to preferentially procure domestic solar panels. In this case, this prohibition on using preferential government procurement probably does not impede clean energy deployment, again because free trade lowers prices. But I can think of examples in the future where preferential government procurement might be a good idea, especially for advancing new clean energy technology. For example, I advocate targeted U.S. government procurement of emerging technology as a stepping-stone toward free market competition. And it might be logical only to procure technologies that had previously received government research, development, and demonstration (RD&D) support, to ensure that government support follows technologies through every phase of technology readiness. But this sort of program may well give preference to domestic firms eligible to receive public RD&D funds. Following the precedent set by the WTO panel ruling against India, preferential government procurement of domestic clean energy may not be a legally acceptable instrument of technology policy. And since this might hinder efforts to bring new clean technologies to market, this is another potential example in the future where the trade and climate agenda might conflict. Outside of the issues raised in this case, another potential clash between the trade and climate agendas could be the future interaction between carbon pricing and trade barriers. I was (and still am) prepared to call the Trans-Pacific Partnership (TPP) a step forward for climate policy, but TPP does not explicitly authorize trade barriers based on a product’s carbon content. In a related proposal, William Nordhaus calls for “climate clubs," which would erect trade barriers against countries unwilling to enact harmonized climate policies. If such proposals gain momentum, the climate agenda could run afoul of the trade liberalization agenda. As countries around the world implement climate policies and seek to expand clean energy, many more trade disputes will arise. Trying to forecast future rulings at this point is pure speculation. But even if the outcome of this case is far less exciting than the headlines suggest, it hints at what to look out for in the next one. [1] In fact, it is not entirely clear why the United States continued to pursue this case. India’s initial domestic content requirements from 2010–2012 actually helped the United States, by screening out silicon solar panels and cells that China specializes in while enabling U.S. companies like First Solar to export their thin-film products to India. Recognizing that their domestic content requirements had shifted, rather than deterred, solar imports, India revised domestic content requirements from 2012–2014 to plug the loophole, banning all foreign panels. But now that India has generally scaled back all domestic content requirements, the United States has little to gain in the Indian market from a ruling in its favor. One explanation for pursuing the case is that the United States may instead have been seeking a broader precedent to prevent other countries from passing similar domestic content requirements. [2] There was some intrigue about this third-party participation. On behalf of all the third parties, Canada requested “enhanced third-party rights” to make oral statements during hearings and provide several written submissions. It contended that “issues relating to ‘green energy measures’ are of systemic importance to WTO Members.” Both the United and India effectively told Canada to mind its own business, and the panel rejected the request. Undeterred, Canada, Japan, and the European Union submitted extensive comments to the WTO panel. Oddly, China, which had by far the most at stake in this case, remained totally silent, perhaps content to let the other countries make arguments in China’s favor.

This post is coauthored by Varun Sivaram and Michael Levi. Congress is set to vote on a budget deal that would permanently end the long-standing ban on crude oil exports in exchange for temporary extensions of tax credits that support solar and wind energy. Michael wrote on Tuesday about the market, climate, and geopolitical impact of lifting the oil export ban. In this post we’re going to estimate the climate impact of the renewables tax credit extensions. We focus on 2016-2020 for three reasons: (a) it’s the period for which we have the best data; (b) beyond 2020, complex interactions with the Clean Power Plan make things much tougher to model; and (c) most important, beyond 2020, the primary effect of the ITC/PTC extension should be to make reducing emissions cheaper, and thus enable stronger policy, something that can’t be quantitatively modeled. Our bottom line: Extension of the tax credits will do far more to reduce carbon dioxide emissions over the next five years than lifting the export ban will do to increase them. While this post offers no judgement of the budget deal as a whole, the deal, if passed, looks like a win for climate. What the Budget Deal Includes The tax credit extensions would be a big deal for the renewable energy industry. The solar investment tax credit (ITC) is especially lucrative—new solar installations that begin operating before 2020 will continue to receive a tax credit equal to 30 percent of their system cost. The ITC steps down to 10 percent by the end of 2021, but projects that commence construction in 2020 and 2021 are still eligible for 26 and 22 percent tax credits, respectively. Given that solar industry leaders like SolarCity and First Solar have tailored their business models to withstand the impending ITC cliff (without this deal, the ITC would plunge down to 10 percent for any project completed after 2016), the six-year extension/phasedown is an unexpected Christmas present. The revival of the currently expired PTC is also a welcome development for the wind industry. The PTC—which compensates wind generators for ten years after they begin operating for the power they produce—would return to its full value of 2.3 cents per kilowatt-hour (kWh) for any project under construction by the end of 2016. The proposed budget bill articulates a five-year phase-out (1.84 cents/kWh for projects commencing construction in 2017, 1.38 cents/kWh in 2018, 0.92 cents/kWh in 2019, and nothing thereafter) that gives the industry visibility into the future. This is important because over the last decade, the wind industry has been plagued by boom and bust cycles driven by uncertainty over the future of the PTC. Even though the PTC would phase out faster than the ITC, then, the wind industry arguably needs policy stability as much as policy support. That should make the PTC deal a welcome development for the wind industry. Impact of the Budget Deal on Wind and Solar Deployment The first step toward estimating climate benefits is to project the effect of the new tax credit policies on renewable energy adoption. GTM Research published a helpful research note projecting solar adoption through 2020 with and without the proposed ITC extension. The contrast is stark—whereas installed solar capacity was set to peak in 2016 and then plunge over a cliff as the ITC expired, under the budget proposal there is a smaller pause in solar deployment in 2017 as the glut of projects in the current pipeline get built. From 2017 onward, all three industry segments—residential, commercial, and utility-scale solar—grow faster than without the ITC extension. This leads to around 25 gigawatts (GW) of additional capacity under the budget proposal by 2020. To estimate the impact of the PTC extension, we used analysis released this week by Bloomberg New Energy Finance comparing wind deployment under the proposed PTC phase-out to deployment without any PTC support at all for the next five years. Again, there is a stark contrast between the two projections. Without the extension, wind deployment is projected to peak in 2016, as developers rush to take advantage of the Internal Revenue Service’s determination that projects operational before 2017 will be eligible for the full 2.3 cent/kWh PTC that expired in 2014. Now, under the budget proposal, the steep cliff in capacity coming online in 2017 is replaced by a gentle hill and then a flurry of new construction to take advantage of the PTC extension. By 2020, around 19 GW of incremental wind capacity is projected to come online because of the budget proposal. The resulting projections are displayed in Figure 1. The two panels at left show the cumulative installed capacity of solar and wind in a world without tax credits and under the budget proposal. The middle panel plots the annual capacity that is incremental to the budget proposal—that is, all new solar and wind excluding projects that would be built anyway without the budget proposal. The rightmost panel shows the cumulative capacity additions due to the new policy. Two trends are important to note. Both incremental solar and wind deployment are actually negative in 2016, reflecting the forecast that under an extended ITC and PTC, there would no longer be a mad rush to build projects before a 2016 cliff. However, solar and wind deployment trends diverge in later years. Through 2020 incremental solar construction accelerates as solar becomes cheaper while the tax credit remains at 30 percent. But incremental wind deployment peaks in 2017–2018, because developers that begin construction on projects in 2016 will be eligible for the full value of the PTC (even if the projects are only operational in subsequent years). Then as the PTC phases out to zero in 2020, additional wind capacity spurred by the budget deal will decline, so by 2020 the additions under the budget proposal are roughly similar to the additions without any tax credit extensions. Emissions Impact We can use these projections of incremental capacity additions to estimate the climate benefits of the new renewable energy. We conservatively focus on the 2016–2020 period before Clean Power Plan incentives kick in fully; this means that we’re going to underestimate the climate benefits of the ITC/PTC extension. Figure 2 details the assumptions in this calculation. First, we assume that new solar and wind will on average displace a mix of fossil-fuels—coal and natural gas—as well as nuclear power in some cases. (All other sources have zero marginal cost and therefore won’t be displaced.) Nuclear power will be displaced in big chunks (if it is displaced at all), corresponding to retirements of entire plants, because as a baseload, low marginal cost resource, nuclear plants either run at near-full capacity or not at all (and some argue that zero-marginal cost renewable energy like wind and solar can make a nuclear plant’s operation unprofitable enough that it may have to shut down). To be safe, we investigated a range of values of the carbon intensity—or the emissions per unit power—of the electricity sources that solar and wind displace. At the low end, we considered the emissions intensity of a mix of nuclear, coal, and gas, weighted by their generation. And at the high end, we assumed that no nuclear reactors close because of renewable energy and instead stipulated that renewable energy displaces a mix of coal and natural gas, again weighted by generation. Second, we assume that since the solar and wind plants that will be incentivized by the tax credit extensions will be new projects, they will have high capacity factors—that is, they will be relatively efficient at generating power compared with older counterparts. New utility-scale solar plants now boast capacity factors of 30 percent. New residential solar installations deliver half that. New wind plants perform at a capacity factor of around 37 percent. Third, to be conservative, we consider an effect of up to 10 percent additional emissions from integrating renewable energy into the grid. Because renewable energy is intermittent—that is, solar and wind only produce when the sun shines and the wind blows—the rest of the power plant fleet must compensate for this added unpredictability. This leads to natural gas plants changing their power output rapidly, which reduces their efficiency and requires them to emit more CO2 per unit of generated electricity. Moreover, more power plants may have to be kept running on standby as “reserve margin” to compensate for any unanticipated shortage of renewable energy. Our final assumption deals with an early compliance mechanism for the Clean Power Plan, the Clean Energy Incentive Program, which kicks in from 2020 onward. Under the proposed program, which has not yet been finalized, states can claim credits for renewable energy projects commencing construction after September 2018, and they can use these credits to avoid equivalent emissions cuts from 2022 onward when the Clean Power Plan takes full effect. This suggests that any savings in emissions from renewable energy that gets built thanks to the tax credit extensions may result in a future emissions increase because states will have additional emissions headroom to comply with the Clean Power Plan. Because this early compliance mechanism has yet to be finalized, we excluded the effect of future offsetting emissions from our central 2020 estimate of CO2 reductions; we do, however, include it in assessing the full range of possible impacts. To express the sensitivity of our central emissions estimates to the assumptions outlined above, we have added uncertainty ranges to the bars in in Figure 2 to indicate uncertainty. The pronounced uncertainty range in 2020 reflects the open question of whether emissions saved by renewable energy will be offset by future Clean Power Plan compliance headroom. The take-home point from this figure is that the emissions reductions from solar and wind energy through 2020 is substantial, reaching as much as 90 million metric tons of avoided CO2 per year in 2020. The average annual emissions reduction over the 2016-2020 period is 25-46 million metric tons with a most likely value around 40 million metric tons. For reference, the Obama administration’s Clean Power Plan is projected to reduce CO2 emissions by about six times that level, or 240 million metric tons per year, in 2025. Putting It All Together: Renewable Energy Climate Impact Overwhelms That of Oil Exports In contrast to the considerable emissions savings from renewable energy, the climate impact of lifting the crude oil export ban is likely to be small. A previous post estimated the average annual emissions impact of lifting the oil export ban as around 10 million metric tons of CO2 per year over 2016-2025 (with a possible range of 0–20). Over the time period we have examined in this post, 2016–2020, the same methodology yields an estimate of 2 million metric tons of CO2 annually (with a possible range of 0–5). Figure 3 extends the previous figure by adding the range of positive emissions from crude oil exports to the emissions savings from new renewable energy incentivized by the budget deal.  The diamonds represent the central estimates of the net emissions impact of oil exports and new renewable energy, and the dotted bars represent the uncertainty range of how much oil exports could increase emissions. The net impact of the exports-for-renewables-credits trade, then, is to reduce carbon dioxide emissions by at least 20-40 million metric tons annual over the 2016-2020 period. The most likely emissions reduction in our estimate is around 35 million metric tons. The climate benefit of the tax credit extension is over a factor of ten larger than the climate cost of removing the oil export ban over this period. What About the Longer Run? This of course does not answer the question of what will happen over the longer run. The impact of lifting the oil export ban will persist while the ITC/PTC will be phased out. One could, in principle, extend the analysis above through 2025. (A very simple extension of the central estimates through 2025, assuming no emissions savings from the PTC/ITC after 2020, leaves one with an ITC/PTC impact considerably outweighing that of oil exports.) This would, however, be misleading. Extension of the PTC/ITC should drive down zero-carbon energy costs and reduce business as usual emissions beyond 2020. Both factors should enable stronger rules under the Clean Power Plan (or other policies that are additional to the plan). This is part of the potential payoff of an ITC/PTC extension. This can’t, of course, be modeled quantitatively. But it is the right way to think about the longer run impact of the budget deal.

LE BOURGET, FRANCE – The Paris climate summit (also known as COP 21) has adopted a new “Paris Agreement”. The agreement has the potential to mark a laudable and historic shift in how the world negotiates cooperation on climate change. It does not justify the over-the-top claims that some are making – that it spells the end of fossil fuels or assures that temperatures will rise no more than two degrees – but those who negotiated it never believed it could. Nor does it deserve to be pilloried (a rarer but still real reaction) for failing to save the planet – an entirely unreasonable expectation. Instead it begins to set up a framework for transparency and review of countries’ nationally driven emissions-cutting efforts and a process for encouraging stronger efforts over time. In doing so it meets the modest but important goals that were sensibly set for the negotiations. Only time will tell, though, whether the full promise of the Paris Agreement is achieved. Why the New Architecture Makes Sense The world has come a long way from the vision that animated United Nations (UN) climate negotiations for most of the 1990s and 2000s. That vision centered on a firm division between developed and developing countries. Negotiations focused on dividing up responsibility among developed countries for cutting emissions and assigned them each targets. Those were to be enforced through international law. The Paris Agreement is fundamentally different. All countries, not just developed ones, are supposed to curb emissions. Negotiations did not focus on dividing up that responsibility – instead each country developed its own plans based on its national circumstances. Rather than enforcing these through international law (which has proven to be toothless for climate) the Paris Agreement aims to mobilize political pressure. It does that mainly by mandating a set of transparency measures and a process for regularly and publicly reviewing each country’s progress (though much of the detail on each remains to be developed). It also establishes a process under which each country is supposed to put forward stronger national emissions reduction plans every five years. Nothing in the agreement actually compels countries to do this. But the experience of the past two years suggests that the specter of Paris, where countries were similarly expected to present new emissions cutting plans, spurred meaningful efforts in most major emitters to develop more substantial emissions cutting agendas than they had before. It’s not unreasonable to expect that the twice-a-decade cycle set up under the Paris Agreement could catalyze a similar ratcheting up of ambition on a regular basis. All of this is much more in tune with the underlying political and economic reality of dealing with climate change than most previous international efforts were. The main barriers to strong action are domestic, not international, so letting the process of setting goals play out within each country, rather than around a negotiating table, makes eminent sense. Countries are not yet prepared to pursue tough punishments for counterparts that don’t follow through on their goals. (If they were, then anticipating that, each country would probably ratchet its goal down, itself problematic.) Given that, the best an international agreement can do is boost the political prospects of serious climate efforts in each major country, and strengthen countries’ technical capacity to deliver. The Paris Agreement is a push in that direction. Mandatory transparency and international review, pursued properly, should highlight successes and shortfalls in each country, empowering not only international pressure but, at least as important, domestic political forces that favor stronger and more effective action on climate change too. It’s Too Soon to Fully Judge the Agreement Yet we have, in important ways, been here before. The Copenhagen Accord, agreed to by every major economy at the 2009 UN climate summit, appeared to dissolve old distinctions between developed and developing countries, requiring everyone to reduce emissions and allowing commitments to policies rather than just to emissions targets; it seemed to include provisions for both transparency and for international review of countries’ efforts; it looked like it had left the Kyoto Protocol in the past. But within days after negotiators departed the Copenhagen summit, itself a procedural mess that ended in spectacular acrimony, prominent parties were disavowing each of these elements. When the next UN summit convened in Cancun a year later, almost every major element of the Copenhagen agreement was relitigated, almost as if the Copenhagen summit had never happened. Indeed many of the core debates at the Paris talks remained the same as those at Copenhagen. Why Paris Could Last and Where the Deal Falls Short But two big positives set Paris apart. There are also some areas where it underwhelms. Updating Emissions-Cutting Efforts The first is the agreed process for ratcheting up countries’ emissions-cutting efforts. Every five years, beginning in 2020, each country will be expected to contribute a new national plan for reducing emissions. Ideally this will mean that, rather than dissipating most of their energies fighting over the architecture of a global climate agreement, countries will focus productively on their emissions-cutting initiatives instead. In principle, then, the Paris Agreement could last decades, only with new emissions-cutting efforts every five years. Not since Kyoto has a UN climate agreement been structured this way. Limits and Weaknesses There are other novel elements in the Paris agreement that will draw broad attention, most notably an aspirational goal of limiting global temperature increases to 1.5 degrees Celsius (2.4 degrees Fahrenheit) above preindustrial levels, and a promise to grow financial support for poorer countries beyond $100 billion after 2020. These were essential to the diplomatic bargain that sealed the Paris Agreement. But they are so disconnected from the forces that will actually shape policy that they do not rank among the substantively important parts of the deal. There are also elements that the deal would be better off without. One cannot help but be struck by the repeated invocation of “common but differentiated responsibilities” – often used by developing countries to argue that they are subject to weaker obligations than developing countries – in the text. There are, similarly, many places where the demands on developing and developed countries are qualitatively different. Some of these make substantive sense: one shouldn’t expect, for example, India to assist poor countries in transitioning to low-carbon economies in the same way that Europe ought to. But most of these are vestiges of an old way of thinking and are a sign that some fundamental debates aren’t yet resolved. This is particularly worrying in the section on transparency, and may presage intense battles to come. Fortunately, though, sharp differentiation between developing and developed countries is largely absent where it matters most – particularly in most of the basic contours of the process for promoting transparency and scrutinizing countries’ national efforts. Public Perception The second big distinction from past agreements is the way that the Paris Agreement was concluded. Expectations were kept modest, in line with what might be reasonably expected from an international climate agreement, rather than ratcheted to the stratosphere. The negotiating process was far smoother than the one in Copenhagen, and indeed less contentious than any in recent memory. (That doesn’t mean that there weren’t serious fights – this was, after all, a negotiation.) Negotiators were pleased enough with the process to largely dispense with the usual leaks and often-nasty attacks that typically characterize UN climate summits. The deal concluded also contains many legally binding elements. That may not matter much as a matter of substance (countries violate legally binding international agreements all the time) but it is a stamp of seriousness in many countries that matter. All of this should sum up to make the Paris Agreement appear more legitimate in peoples’ eyes, and thus tougher for countries to backtrack on. What to Watch to See if Paris Really Succeeds Still no one should judge the Paris Agreement too quickly. Its first test will be in the coming days and weeks as leaders and major media around the world talk about the deal. What leaders say will signal how much they see the Paris deal as settled and how they interpret the language that treats developed and developing countries differently. How the media describe the Agreement will shape how the broader public views it, and hence how much of a penalty leaders might face for later backtracking or spinning what the deal says. Its next trial will be at the next UN climate summit in November 2016 in Morocco. Part will be substantive: How will countries flesh out the provisions for transparency, review, and updating of national efforts that are outlined in the Paris Agreement? Part will be more fundamental: How many of the fights that the Paris Agreement appears to resolve will be refought? The biggest test will come in 2020 when countries are supposed to contribute new emissions-cutting plans. Will they actually do that? The Kyoto Protocol was supposed to be a lasting structure for climate cooperation. Countries initially made commitments for the 2008-2012 period and were supposed to extend those to a second “commitment period” around 2009, allowing the Protocol to evolve. When most decided not to do that, Kyoto was effectively dead, and negotiations proceeded to focus on rewriting the entire climate regime. Paris is the result of that process. Like the Kyoto Protocol, the Paris Agreement aspires to be an enduring framework for international climate cooperation. If countries follow the Agreement and come to the table in 2020 with serious new climate efforts, Paris will have succeeded where Kyoto failed, and will establish itself as a more enduring international framework. The Bottom Line The ultimate test of any climate change effort, of course, is whether it substantially reduces the risks of dangerous climate change. We will not know whether Paris meets this test for a long time. The Paris Agreement could survive as an international framework even as national actions on climate change turn out to be woefully inadequate to dealing with climate change. This could be the case even if the Paris Agreement were perfect (which it is not) since it is national politics and policies, not international agreements, that are the prime drivers of emissions-reducing actions. Paris looks like a success in part because, understanding that national politics and policies are paramount, its organizers wisely downplayed expectations for any deal. No one should forget that it is these modest expectations that Paris has largely met. For the time being, though, the Paris Agreement deserves applause. It is a far sounder substantive foundation for international climate cooperation than the Kyoto Protocol ever was, and appears likely to enjoy much more legitimacy and thus staying power than the Copenhagen Accord ever managed. Foreign policy should be judged against the realistically available alternatives – and Paris, whatever one might reasonably say about what it doesn’t do, looks like a success against that measure. Now the hard work of building on it, within each country and internationally, begins.

Policymakers should look to reductions in potent, short-lived pollutants to reduce warming faster than cuts to carbon dioxide emissions alone, write Nobel Prize-winner Mario Molina and Institute for Governance and Sustainable Development founder Durwood Zaelke in this guest post. This piece is part of our ongoing guest blog series surrounding the Paris climate talks, which has included posts on China’s political rhetoric, international climate institutions beyond the UN talks, and the links between climate and conflict in northern Nigeria. The Paris meeting to negotiate a climate agreement is about spirit and trust as much as any specific numerical emissions target. This is because whatever the delegates are prepared to agree to in Paris will not, on its own, slow warming fast enough to keep us safe. This doesn’t mean humanity is doomed. But it does mean that negotiators need to reach an agreement that fosters a level of trust and a spirit of urgent optimism to raise our ambition after Paris, both as the Paris agreement evolves in the coming years, and, immediately, through other national and international venues. And it means that policymakers need to look beyond the national carbon dioxide (CO2) limits that are the primary focus at the Paris talks, to the highly potent short-term climate pollutants that can make a faster contribution to limiting warming. Targets and Timelines The nominal upper warming limit, driven by economics and politics more than science, is that temperatures should not be allowed to increase more than two degrees Celsius above pre-Industrial levels. But the impacts already being seen at the current increased warming of about one degree Celsius strongly suggest that two degrees is too risky. At this point, the rate of the warming is becoming as important as the absolute limit. The rate is accelerating and in the process triggering self-reinforcing feedback mechanisms, where the initial warming feeds upon itself and causes still more warming. One illustration is the reduction of Arctic sea ice, a white shield that reflects incoming solar energy back to space. The warming since 1979 has reduced the ice shield enough to add another quarter as much warming as carbon dioxide caused during this period. Another example is the northward migration of permafrost, where soil that was once permanently frozen is now melting and releasing methane that causes still more warming. At the current accelerating rate of warming, there is not enough time for ecosystems to adapt, nor to protect food production and economic development. The rate of warming needs to be reduced quickly, to slow these feedbacks, and to reduce climate impacts that are already hammering many areas of the world, including floods made worse by climate change such as those that have been destroying parts of India in recent days, and the sea-level rise and more powerful storm surges that are already damaging low-lying island and coastal countries. Lever One: Carbon Dioxide Emissions There are two main levers to slow climate warming. The first lever is to reduce the carbon dioxide emitted when coal and other fossil fuels are burned. To insure long-term stabilization of climate pollutants this lever should be pulled, now, as fast and as far as possible, promoting energy efficiency and clean energy sources to slow and ultimately halt carbon dioxide emissions. Forests and other natural processes that pull carbon dioxide from the atmosphere must also be protected. But, while it is essential to pull back this carbon dioxide lever, it does not do enough to cut the current rate of warming: by mid-century an aggressive effort to reduce carbon dioxide can avoid about 0.1 degrees Celsius of warming, out of an expected two degrees Celsius or more of warming by 2050 under business as usual. Lever Two: Short-Lived Climate Pollutants This means policymakers need to pull back the other lever and reduce the short-lived climate pollutants, including black carbon (soot) air pollution, tropospheric ozone (the principal component of smog), methane, and hydrofluorocarbons (HFCs) — factory-made gases used in air conditioning and refrigeration. Pulling this lever can avoid about 0.6 degrees Celsius of warming by mid-century, much more than the carbon dioxide can in this same period. At the end of the century, the avoided warming from cutting the short-lived climate pollutants is 1.5 degrees Celsius compared to 1.1 degrees for carbon dioxide. Strategies that reduce short-lived climate pollutants provide fast mitigation that can slow the rate of warming this decade. While all climate models have uncertainties, there is little doubt about the relative speed at which these strategies can produce their results. Black carbon stays in the air for only a matter of weeks, and methane and most HFCs last only for one or two decades. In contrast, carbon dioxide can last far longer—five hundred years to thousands of years. Both the carbon dioxide and short-lived climate pollutant strategies are essential at this point—and probably still-to-be developed carbon removal strategies will be, as well. Paris and Beyond During his speech in Paris, President Obama noted what may be the fastest strategy available today. He first reminded the world that climate is changing faster than our solutions and that one of the enemies is cynicism—the notion that humanity can’t do anything about it. But he added that that last “month in Dubai, after years of delay, the world agreed to work together to cut the super-pollutants known as HFCs. That’s progress." And such progress should give people hope. The strategy to phase down HFCs under the Montreal Protocol was initiated by the Federated States of Micronesia and other low-lying states, and then championed by Mexico, Canada, and the United States,  which negotiated bilateral agreements to support the HFC phase-down with China, India, Brazil, and Pakistan. The HFC phase-down will eliminate warming from one of the six main greenhouse gases, avoiding up to 0.5 degrees Celsius by the end of the century, and the equivalent of up to 100 billion tons of carbon dioxide by 2050. Parallel improvements in the efficiency of the air conditioners as manufacturers phase down HFCs refrigerants can avoid another 100 billion tons of carbon dioxide by 2050, according to a recent report by the Lawrence Berkeley National Laboratory. With the threat of terrorism on everyone’s mind in Paris, many are asking what the connection may be with climate change.  The answer is that climate change is the envelope within which all of society’s other problems are unfolding. If the rate of warming continues to accelerate, and if impacts including sea-level rise and super storms continue with greater frequency, then the world will have to divert more and more of its scarce governance resources to conflict management, disaster relief, and the resettlement of millions of climate refugees.  The wiser and more economic course is to cut the rate of warming immediately by cutting the short-lived climate pollutants as fast as possible. When the Paris talks conclude there must be a new level of not just trust and optimism, but also a far greater appreciation of the urgent need for speed, which must become the rallying cry going forward. Mario Molina, who shared the Nobel Prize in Chemistry in 1995 for his work on chlorofluorocarbons in the atmosphere, teaches at the University of California, San Diego, and is President of the Mario Molina Center for Strategic Studies, in Mexico.  Durwood J. Zaelke is the founder of the Institute for Governance and Sustainable Development, and co-directs a related program at UC Santa Barbara. 

Climate change is nothing new in northern Nigeria, writes John Campbell, senior fellow for Africa Studies and former U.S. Ambassador to Nigeria, and its influence in local conflicts can already be felt. In his contribution to our guest series surrounding the UN climate conference in Paris, Ambassador Campbell notes that the changing climate is, if not the cause, then certainly part of the context of the rise of militant groups like Boko Haram.  Climate change has long been a contributing factor to conflict in Nigeria. Even before Boko Haram, ethnic and religious tensions were strained because of the changing environment in northern Nigeria. Nigerian President Muhammadu Buhari addressed the issue at the Paris talks on Tuesday, saying that no fewer than five million people had been displaced in the Lake Chad basin due to the depletion of the lake. Conflict has been growing in Nigeria as ethnic groups are pushed by climate change toward the Middle Belt. This is the zone where mixed ethnicities and the predominately Christian south and the predominately Muslim north overlap. Ethnic, religious, and land use boundaries traditionally coincide to a remarkable extent in parts of the region: Fulani Muslim herdsmen on the one hand, predominantly Barome Christian farmers on the other. Now these boundaries are being pushed. The pattern over the past thirty years has been the steady migration toward the south by Fulani herdsmen, leading to competition with farmers over land use. Conflict is exacerbated by a population explosion while the availability of land for agricultural use is declining. As much as thirty-five percent of the land that could be cultivated fifty years ago is now desert in eleven of the most northern of Nigeria’s thirty-six states. In that region, the rainy season has shrunk from 150 days a year to 120. Crop yields have declined by 20 percent. Climate change is also accompanied by erratic rainfall and hotter temperatures. The Sahara desert pushes toward the south. For the Fulani, not only is there a reduction in pasturage available for their cattle, they say their animals are now exposed to new and strange diseases. The search for pasturage drives the Fulani to the south in regions historically occupied by Christian farmers. Migration tends to weaken traditional social structures, including the tolerant Islam long characteristic of West Africa’s Sahel. Conflict would seem to be inevitable. It is made worse by the Nigerian governance principle of “indignity.” At the state and local government levels, participation in governance is largely limited to those belonging to ethnic groups that are “indigenous” to a particular region. Hence, the Fulani, “indigenous” to more northern regions, are regarded as second class citizens in parts of the Middle Belt. Desertification and resulting migration exacerbates poverty in northern Nigeria, especially its northeast. It is the poorest part of the country, with the worst social indicators. The northeast, especially, is where Boko Haram is rooted. If not the cause of Boko Haram and other forms of jihadist terrorism, climate change and its social and economic dislocations is certainly part of the context.