Sectoral agreements touted as key to climate commitments of emerging economies

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A key question is how to get emerging economies such as China or Brazil to take on commitments in the form of greenhouse gas emission targets. After all, China is estimated to overtake the US as the largest CO2 emitter in the world in absolute terms (although on a per capita basis, China remains a low emitter). Developing countries (labelled “non-Annex I countries” in the UNFCCC jargon) are not subject to any such commitments under the Kyoto protocol.

An idea gathering traction is to get emerging economies to commit to emission targets merely for certain high-emitting sectors, such as the steel industry (which accounts for roughly 5% of global greenhouse gas emissions). Some of these industries compete globally – China has become by far the world’s largest steel producer – and Western firms (in “Annex I countries”) have voiced their fears about losing market shares if their countries take on ambitious emission reduction commitments without non-Annex I countries doing the same.

Sectoral agreements could take very different forms. At least in industries without a strong trade dimension (such as power generation), emerging economies would probably only accept targets that relate to CO2 intensity – in other words measured in terms of CO2 per output without any absolute emission ceiling.

In order to offer emerging economies an incentive to take on such commitments, several proposals for “carrots” are floated. A common element is to allow these countries to sell emission credits if they over-achieve on their targets, or to make them entitled to pre-defined support from rich countries (such as the financing of power plants equipped with carbon capture and storage). This would follow the logic of the existing Clean Development Mechanism (CDM), whose complex administrative procedures have frustrated many developing countries. Also, it would force emerging economies to take some action unilaterally before being able to sell credits.

The implicit idea is to put the emission targets for emerging countries at levels that will make it more alluring for them to over-achieve in order to be able to sell credits, than not to reach their targets. This would allow targets to be “no-lose”, i.e. that no penalty mechanism needs to exist in case targets are not reached.

Many loose ends exist and emerging economies have not even endorsed this approach, so there will be no quick fix. But expect to hear a lot more about sectoral agreements or approaches on the way to a new climate deal.