date: Wed, 29 Nov 2000 11:13:20 -0500
from: "Tom Jacob" <Tom.Jacob@USA.dupont.com>
subject: REFLECTIONS ON THE HAGUE...
to: climatepolicy@ic.ac.uk, michael.grubb@ic.ac.uk, m.hession@ic.ac.uk, t.jackson@surrey.ac.uk, hadi@cmu.edu, sujatag@teri.res.in, a-michaelowa@hwwa.de, Emilio@ppe.ufrj.br, yamagata@nies.go.jp, Jorgen.Wettestad@fni.no, schellnhuber@pik-potsdam.de, gouvello@centre-cired.fr, EHaites@attcanada.ca, shs@leland.stanford.edu, jw18@soas.ac.uk, jonathan.pershing@iea.org, RKinley@unfccc.int, Sylvie.Faucheux@c3ed.uvsq.fr, m.hulme@uea.ac.uk, nkete@wri.org, Z.X.Zhang@Rechten.RUG.NL, pretel@chmi.cz, zkundze@man.poznan.pl, noble@rbs.anu.edu.au, jae@pnl.gov, ogunlade@energetic.uct.ac.za, Eberhard.Jochem@isi.fhg.de, hoesung@unitel.co.kr, naki@iiasa.ac.at, kchomitz@worldbank.org, enikitina@glas.apc.org, dlashof@nrdc.org, nishioka@iges.or.jp, pachuri@teri.res.in, tom.downing@eci.ox.ac.uk, mmunasinghe@eureka.lk, munasinghe@worldbank.org

"CLIMATE POLICY" EDITORIAL BOARD CONTACTS:  I am taking the liberty of
putting you on a large, predominantly industry, distribution list I have
been accumulating, with which I share various climate change documents.
Please advise if you want off.  Otherwise, FYI (reactions welcome)...

---------------------- Forwarded by Tom Jacob/AE/DuPont on 11/29/2000 11:08
---------------------------


Tom Jacob
11/29/2000 10:04

To:
cc:
Subject:  REFLECTIONS ON THE HAGUE...

GLOBAL INDUSTRY CLIMATE CONTACTS:  FYI, following is an impressionistic
summary of developments at The Hague, which I forwarded today to my
internal DuPont climate change network.  I offer it as food for thought and
reflection, and invite feedback...

CLIMATE CONTACTS:  The negotiations in The Hague failed to deliver even the
limited decisions and guidance which many of us expected, let alone the
final "package" for which some had hoped.  The failure of Saturday's
last-minute gambit by the US put a particularly disappointing punctuation
on the whole affair.  While some points were reportedly negotiated to
consensus during the ministerial dialogues last week, the fact is that
nothing was formally approved and it remains very uncertain just where the
process will pick up when it resumes (presumably in conjunction with the
already scheduled round of negotiations the last two weeks of May in Bonn).
The result of all this is an ever-larger question mark hanging over the
Kyoto Protocol, its aggressive (and fast-approaching) targets/timetables
and its innovative approaches to tapping the power of the market place.

The two weeks were not without significant developments, though.  The Hague
was a melange of ceremonial formality, tedious negotiation, high-stakes
back-room dealing, protests, and a seemingly endless stream of open
side-events and closed outside meetings.  On the surface, the affair was
distinctly lacking in coherence.  Beneath that surface, though, there were
threads emerging that, woven together, begin to fashion a most intriguing
tapestry.  Following are a few of the observations that may have important
implications as the process moves tentatively forward from last week's
session:

    Tightening The Scientific Noose
    Beyond Environment
    Reactionary Protests
    Ever-Widening Embrace Of Mechanisms
    The "Sinks" Thing
    Markets Finding A Way
    Keeping The U.S. Honest

Comments and disagreement more than welcome...

TIGHTENING THE SCIENTIFIC NOOSE:  Amid the pomp and circumstance of the
opening of the negotiation, the voice most keenly attended to was that of
one of the least-pretentious people on the planet, Bob Watson, Chair of the
Intergovernmental Panel on Climate Change -- the global scientific effort
supporting the work of the Framework Convention on Climate Change.  While
the IPCC's Third Assessment Report (TAR) has not yet been completed
(scheduled for release next year), Watson previewed some of its likely
themes by noting that:  "The weight of scientific evidence suggests that
the observed changes in the Earth's climate are, at least in part, due to
human activity."  He also concluded that:  "If actions are not taken to
reduce the projected increase in greenhouse gas emissions, the Earthe
climate is projected to change at a rate unprecedented in the last 10,000
years with adverse consequences for society, undermining the very
foundation of sustainable development."

It is significant that, while there is still uncertainty in the science and
still sniping from the margins, the voices challenging the fundamental
premises of the Framework Convention and its Kyoto Protocol (particularly
in the US) have diminished in both their number and their pitch in the past
several years.  More and more, even those that continue to challenge the
Protocol as a strategy, acknowledge concern regarding climate change as
warranting attention.  Similarly, even the countries that seemed most at
odds with the sense of the negotiation on many points (Saudi Arabia and
some OPEC allies) have not challenged the fundamental legitimacy of the
concerns driving the effort.

BEYOND ENVIRONMENT:  While the Framework Convention is certainly an
environmentally motivated agreement, it is equally an economic agreement.
The harsh reality of climate change is that effectively responding to it
will ultimately require a fundamental restructuring of  foundations of the
global economy.  At DuPont, we have long voiced this view of climate change
as a serious, complex issue with major risks associated with both the
environmental and economic realities.  Countries are now increasingly
acting as if they understand that fact, and economic considerations seem to
be rising in prominence accordingly.  Certainly at this session, a hugely
important theme was a consistent and very loud voice of the Group of 77 &
China on a range of economics-driven concerns that came to be known as the
"developing country issues."  These included funding for technology
transfer, for adaptation to climate change effects, for adaptation to the
economic effects of climate change action (compensation for fossil-fuel
resource economies); and for meeting specific needs of least-developed
economies.  While often couched in terms of sustainable development, the
core concerns tend to be driven by perceptions of the traditional
north/south economic gulf and need to bridge that gulf, and the
prescriptions always seemed to boil down to more and more money from the
north for use by the south.

Similarly, even within the developed world, economic drivers are proving
hugely important in policies countries take.  Certainly the messages from
Capitol Hill driving US policy on both flexible mechanisms/supplementarity
and developing country participation have been motivated as much by concern
over the economic impact of various options as by the (growing) concern
over climate change.   Within industry circles in the US, the perceptions
of economic risk have always been very high, though they have in past
couple of years begun to be more broadly matched by growing perceptions
that the environmental risk may, indeed, be equally high.  Interestingly,
there is now a convergence, here, as European industry has begun to become
more concerned about economic impacts of climate action.  Long more willing
than many of their US counterparts to acknowledge the legitimacy of
environmental climate concerns, they had been relatively less focused upon
economic risks attendant the Kyoto targets/timetable, until growing
concerns about Europe's ability to meet its targets began to erode some of
the government assurances that had moderated industry's concerns.

REACTIONARY PROTESTS:  It is perhaps not coincidental that as economic
concerns have begun to rise, both in the increasingly serious consideration
to market mechanisms and the emerging dialogue about economic impacts of
climate action, we have begun to see an increase in traditional,
confrontational environmental protests.  Even in Kyoto, demonstrations were
small and relatively non-confrontational reminders of the environmental
concerns.  In The Hague, we saw for the first time organized disruption of
the conduct of negotiation and publicly staged confrontations.  While
organized and deeply committed environmental activism has long been an
important part of the UNFCCC process through major groups such as NRDC,
EDF/ED, WWF and Greenpeace, they have operated within the structure as
constructive participants in the policy-setting process, along with
industry.  At The Hague, this "inside" role was supplemented by hundreds of
young, relatively nave demonstrators brought in specifically to energize
the environmental presence and confront the process.  Even some within the
ranks of the more established participants -- while disavowing the takeover
of the negotiating room -- saw fit to publicly offer Minister Pronk and the

UNFCCC Secretariate a veiled threat of "Seattle" if the process failed to
deliver.

In the context of this resurgence of "environmental fundamentalism" it is
also interesting to contrast the dynamics of the final give-and-take
between the US and the EU in The Hague.  The US has always approached major
treaty negotiations such as this from a policy process that brings each of
the potentially involved agencies (ministries) together to jointly frame
priorities and strategy, with the process in the field managed by the State
Department (foreign service) and the White House -- not, typically, by any
particular agency "minister" (Carol Browner, head of US EPA, for example,
has not represented the US in these sessions).  In contrast, EU policy and
representation in "environmental" forums such as The Hague is vested more
narrowly in the Council of Environment Ministers -- opting to give priority
to providing each country an opportunity to participate through their
environment minister, but in the processes constraining the range of
perspectives such that all the key players are answerable to the similar
constituencies.  Obviously, there are limits to the implications one can
draw from this, but it may be significant that it was one of those
Ministers for whom the portfolio is most broadly drawn (Deputy Prime
Minister John Prescott) that was central in shaping the initial deal with
the US, while those implicated by public accounts in turning down the deal
(Voyner, and Trittin in particular) are among those with closest ties to
their more activist constituencies.

EVER-WIDENING EMBRACE OF MECHANISMS:  While some in the environmental
community continue to react against the emerging attention to economic
concerns, the innovative "Kyoto mechanisms" which would attempt to tap
market economic forces to encourage economic activity responsive to the
environmental concerns have continued to grow broader support.  Even within
developing countries for whom the notion of market mechanisms was most
foreign at the time of Kyoto, there is growing recognition of the potential
benefits -- particularly the potential economic and sustainable development
benefits of the Clean Development Mechanism (including ideas of
"unilateral" and south/south CDM projects that promise far greater control
for developing nations in exploiting their potential value).  While there
is been pressure to constrain the use of these mechanisms so they cannot be
exploited by developed nations, the broad understanding and engagement
among developing countries has been one of the most remarkable evolutionary
changes resulting from the past several years of climate discussions.  Even
among the developed nations there has been a transformation, with the EU
now supporting the mechanisms conceptually, despite its ongoing preference
for mandatory policies & measures (in the US analogue:   command &
control).   There has even been some discussion suggesting that recent
studies show the EU may end up being as much or more dependant upon such
mechanisms as the US in meeting its targets (obviously, this would clearly
be the case if the EU acknowledged its own "bubble" to be a form of
emissions trading).

The schism emerging within the environmental community between those
pushing a return to confrontation politics and those seeking new approaches
to securing environmental progress is nowhere more evident than in the
groups responses to market mechanisms.  Organizations such as Environmental
Defense and WRI have recognized the capability of broadening the base of
environmental action and delivering more environmental benefit for each
dollar invested by harnessing the market place; and they have sought to
actively shape the way in which the mechanisms operate to ensure their
environmental integrity.  Other groups have remained skeptical --
particularly of open-ended access to emissions trading or consideration of
sinks.  Ironically, even within industry, there had been division on
mechanisms, particularly in the US.  Some interests have viewed them less
as a tool to find least-cost opportunities for action that would otherwise
still be required, than as a tool to induce action where it would otherwise
not be required.  The latter sentiment seems increasingly to be moderating,
however, and the market mechanisms now seem to have evolved to quite broad
support among industry,

THE "SINKS" THING:  The one exception in the broadening consensus seems to
be sinks.  Certainly it was no surprise that this was a major point of
disagreement.  The tradeoffs that led to the Kyoto Protocol clearly
included the notion of sequestration as a legitimate consideration in
determining a country's contribution to greenhouse gas loadings.  What was
not clear at the time was what would, in fact, end up being encompassed by
this category.  The scientific work done since Kyoto, especially by the
IPCC, has answered a number of questions, but pointed to a number of others
that are not amenable to scientific answers.  The potential reach of
sequestration has broadened conceptually beyond the simplistic notions of
rainforest protection that dominated pre-Kyoto discussion.  With this
broadening has come both accounting and political questions.

MARKETS FINDING A WAY:  One of the major themes of The Hague was the
continued evolution of private sector initiative in advancing both the
policy and reality of market mechanisms.  Some of the best-attended of COP6
side events were those which brought together industry panels to discuss
actions and opportunities to get out in front and make these emerging
markets work.  Traders are trading; buyers & sellers are buying & selling;
and companies/accountants are looking systematically at how to standardize
documentation to facilitate those market activities.  It is all happening
in spite of the lack of concrete action defining a global framework.  It is
the private sector gearing up to seize the moment as government regulators
find themselves both challenged by the magnitude of their emission
reduction task and tantalized by the possibility of harnessing global
markets to advance to that end.

KEEPING THE U.S. HONEST:  Perhaps above all, this negotiation was conducted
with all eyes on the US.  The US has been a target in climate change from
the outset, with its disproportionate consumption of energy resources and
unparalleled economic prosperity.  There is a lingering (but withering)
perception that the US is fundamentally resisting any serious action on
climate change.  This had been accentuated by the Byrd-Hagel Resolution
passed the US Senate in the buildup to Kyoto, and by concerted and very
visible effort by a core group within US industry (the Global Climate
Coalition) to deny legitimacy to the climate change issue.  However,
through leadership companies in groups such as the Pew Center on Global
Climate Change and the International Climate Change Partnership, the
message has gradually sunk-in on the global stage that more and more US
companies are, in fact, coming to recognize the seriousness of climate
change and are trying to play a more constructive role in responding to it.
This and the shear hard work and leadership of the US negotiating team have
gradually begun to erode this "just say no!" image of the US; but the
economic imbalances continue to dominate the perspectives of many regarding
these negotiations and will continue to keep the US (and US industry) in
the target zone.




                            - - - - - - - - - -
                              Thomas R. Jacob
            DuPont -- Manager, International & Industry Affairs
                Internet Address:  tom.jacob@usa.dupont.com
                Wilmington:  302-774-6873    fax:  773-2010
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