Explaining the Variation in Commitment to the Kyoto Protocol in Annex I and Non-Annex I Countries

Nicholas Schneider1 & Glenn Fox2

September 28, 2007

1.MSc Guelph, now Fraser Institute2.Professor, Food, Agriculture and Resource

Economics, Guelph

Background• United Nations Framework Convention on Climate

Change (1992)– “…stabilization of [GHG] concentrations [to] prevent dangerous

anthropogenic interference with the climate system.”

• Groups countries into – Annex I: Developed and some EIT countries– Non-Annex I: Everyone else

• Only Annex I countries have GHG reduction responsibilities– Singapore both affluent and emissions intensive, but not

Annex I

Reduction targets

• Kyoto Protocol (1997) set out reduction targets relative to 1990

– Canada agreed to a 6% reduction– Iceland agreed to “reduction” target of a 10%

increase

Targets reported by the UNFCCC

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However…

• The “reduction” targets for non-1990 base year countries (such as Slovenia – 1986)

• The “reduction” targets EU BSA countries– Agreed to common 8% reduction target in

1997, reallocated in 1999– In the end, only about half of Annex I

countries agreed to reduce emissions relative to 1990

Actual targets relative to 1990E

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Status of ratificationRatified Not Currently

RatifiedAustriaBelarus (no target)BelgiumBulgariaCanadaCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreece

HungaryIcelandIrelandItalyJapanLatviaKazakhstan(no target)LiechtensteinLithuaniaLuxembourgMonacoNetherlandsNew Zealand

NorwayPolandPortugalRomaniaRussian FederationSlovak RepublicSloveniaSpainSwedenSwitzerlandUkraineUnited Kingdom

+ 138 Non-Annex I Countries

AustraliaCroatiaTurkeyUnited States

Emissions reductions

• Canada is about 30% above 1990 levels

• Portugal, Spain and Turkey are more than 30% above

• Most former Communist Bloc countries are more than 30% below

Change in GHG emissions, 1990-2004

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Background - Summary

• There is a wide variation in actual targets, emissions, and progress towards meeting targets

• Why? That’s a good question, which the federal government is asking.

• Especially if Canada is to continue into further rounds of Kyoto-like agreements

Current Policy Statements

“[A]ny future approaches to new targets for developed countries should reflect a country’s specific national circumstances – considerations such as the nature of the economy and energy sources” Hon. Rona Ambrose (2006)

“The future international climate change arrangement needs to reflect differences in economic and social conditions among economies and be consistent with our common but differentiated responsibilities and respective capabilities.” (APEC, 2007)

Research Problem

• How have various economic and political factors specific to each country thus far influenced commitment to the Kyoto Protocol?

Measure of commitment?

• Existing measures use ratification as proxy for commitment – Doesn’t allow for any variation in commitment among

those that ratified– Doesn’t account for “symbolic” ratification

• Ratification doesn’t fulfill the main objective of the Kyoto Protocol– “[T]o pursue a stabilization of GHG concentrations in

the atmosphere…”

Better measures of commitment

• Two different measures of Kyoto commitment– The chosen greenhouse gas reduction target– The actual change in GHG emissions, 1990-2003

More commitment if:– A stricter reduction target is chosen– GHG emissions (1990 to 2004) shows a larger

reduction (or smaller increase)

• Existing literature tends to use only a few explanatory factors

• Instead, we test most, and adopt a Public Choice perspective

• 5 categories of explanatory factors, identified from previous literature– Interest group pressure– Geophysical characteristics– Economic growth– Economic structure– Previous climate change policy decisions

What affects commitment?

Interest group pressure

Level of commitment

Size of Environmental NGO (ENGO) lobby

Higher

Size of Coal energy lobby Higher or lower?

Size of Academic lobby Higher

Geophysical characteristics

Level of commitment

Risk of coastal flooding Higher

Average temperature (approximated by latitude) – REMOVED

Higher

Economic growth

Level of commitment

Population growth Lower

GDP per caput growth Lower

GHG intensity growth

(GHG/GDP)

Lower

• Why these three factors?

How to reduce emissions?

• Situation in Canada (1990-2004)- 14% emissions intensity+ 28% income per caput+ 15% population= Overall increase in GHG emissions

1. GHG = GHG/GDP * GDP/Pop * Pop

= Emissions Intensity (e) * GDP per caput (y) * Population (p)

2. %∆E = %∆e + %∆y + %∆p

Decomposition in Annex I countries

Latv

iaLi

thua

nia

Ukr

aine

Est

onia

Rus

sia

Bel

arus

Bul

garia

Rom

ania

Slo

vaki

aC

zech

Rep

ublic

Hun

gary

Ger

man

yP

olan

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nite

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iaIc

elan

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wed

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enm

ark

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nce

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mbo

urg

Sw

itzer

land

Bel

gium

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Nor

way

Italy

Fin

land

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tria

US

AN

ew Z

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alia

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ece

Can

ada

Por

tuga

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pain

Tur

key

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ge,

19

90

-20

04

-100

-50

0

50

100

Population GDP per Capita Emissions Intensity GHG Emissions

Economic structureLevel of commitment

Economic Freedom Higher or lower?

Affluence Higher

Transportation intensity Lower

Size of primary resource sector Lower

Share of global CO2 emissions Lower

Previous climate change policy decisions

Level of commitment

Reduction target

(higher is less strict)

Lower

Kyoto Protocol ratification Higher

Empirical framework• Reduction targets estimated using OLS

• Change in GHG emissions indirectly measured as system of 3 equations

GHG = GHG/GDP * GDP/Pop * Pop

Explaining the target: significant results (OLS)

A lower (-) target is stricter (higher commitment)• GHG intensity growth (+)• GDP per caput growth (+)• Population growth not significant

– 2 of 3 economic growth variables are +, significant

• Transportation dependency (+)

Emissions change in Annex I

• Change in population and GDP/caput explained by: education, life expectancy, economic freedom, gross capital formation, and inflation

• A few variables significant to explaining the change in GHG intensity, but one variable explains most of the variation:

• A higher (less strict) reduction target was associated with a larger increase in GHG emissions (1990-2003)

• Only 2 variable significant to explaining the change in GHG intensity (proxied by CO2/GDP)

• A higher transportation dependency is associated with a larger increase in GHG[CO2] emissions intensity

• Annex I countries are associated with lower increases in emissions intensity

Emissions change in Annex I and non-Annex I

Summary of results

Category F-StatisticTarget GHG Emissions CO2 Emissions

Interest Group Pressure

Geophysical Significant

Economic Growth Significant

Economic Structure Significant Significant Significant

Previous Climate Change Policy Decisions

Significant

• Joint significance tests of categories

Conclusions

• Results suggest that Kyoto targets and emissions best explained by expectations of future economic growth (or lack thereof)– Those countries that could more easily agree to strict targets did

so.– Those who could more easily chose stricter targets, more easily

reduced emissions– This may suggest that compliance with the Kyoto Protocol is a

by-product of changes in national emissions, rather than the goal.

• Interest group lobbying has been mentioned frequently in policy discussions– Lobbying is likely occurring, but these results suggest not

dominant influence

Future research

• First commitment period (2008-2012) hasn’t even started. Some countries may have significantly different level of emissions by 2012.

• Some approximations could be improved– ENGO pressure proxied by number of ENGOs/caput– Actual membership or donation per caput would be better

• Are other international environmental agreements more symbolic than substantive?

Thank you. Any questions?