Environmental Law

13/06/2017

Enhancing Soil Carbon Sequestration and Adaptation in Europe’s Agricultural Sector: Towards a New Approach under CAP and ETS

Soils contain large quantities of carbon, mainly made up of decomposing plant materials and microbes. The Earth’s soils contain around 2500 Gt of carbon, four times more than vegetation.^[1] Through soil degradation, much of natural soil carbon stocks has been lost. It has been estimated that the carbon sink capacity of the world’s agricultural and degraded soils is 50 to 60% of the historical carbon loss of 42 to 78 Gt of carbon.^[2] With around 40% of the world’s surface being used for agriculture, it is suggested that these agricultural lands may be used as an important sink for atmospheric carbon.^[3] Soil erosion control and soil restoration has an estimated carbon sequestration capacity of between 5 and 15% of global emissions.^[4] After peaking, a new equilibrium will be reached and the sequestration potential goes down. It should also be noted that the carbon stored in soils can be easily emitted again with deep tillage and significant soil disturbance.^[5]

(Photo: Flickr user Kai C. Schwarzer)

Increasing soil carbon sequestration has a very interesting positive impact on climate change adaptation. Measures aimed at soil carbon sequestration increases the ability of soils to hold moisture and to better withstand wind and water erosion, enriches ecosystem biodiversity, helps cropping systems to better withstand droughts and floods, increases fertility for crops through restoring healthy soil microbial communities, and increases livestock efficiency (sustainable intensification).^[6] Other potential positive side-effects of practices aimed at soil carbon sequestration are various environmental benefits, such as avoided use of chemical fertilizers and pesticides and improved biodiversity and wildlife.^[7]

Examples of soil carbon sequestration practices relevant for Europe are the application of conventional or organic no-till and conservation tillage systems, the use of periodic green fallows, winter cover crops and crop rotations that utilize semi-perennial crops, rotational grazing, decreased grassland management intensity, perennial cropping, nutrient management consisting of compost (crop residue addition) and organic manure, and judicious use of irrigation water.

Research shows that strong top-down policies that are linked with, and fed by, bottom-up initiatives, are needed to achieve the required level of adaptation in the agricultural sector.^[8] Holistic strategies have to be adopted that go beyond technical approaches aimed at stimulating autonomous farm-level risk reduction. So far, the EU did not focus much attention on agriculture in its climate change adaptation policy. The EU’s Adaptation Strategy refers to the Common Agricultural Policy (CAP) in which adaptation measures have been integrated to a limited extent.^[9] An assessment of the soil carbon related adaptation potential of the current CAP, however, shows that this potential is limited. Soil carbon projects can receive funding both under the green direct payments, and under the rural development policy. Whether such projects are actually carried out with CAP funding depends entirely on initiatives by farmers (for green direct payments), or by Member States (for the rural development policy). Unfortunately, there are not many indications that Member States radically focus their Rural Development Programmes (RDP) on climate change, perhaps with the exception of Ireland. The CAP also has several inherent constraints as far as soil carbon sequestration and associated adaptation are concerned, mostly due to the fact that CAP is not linked to the EU climate policy but serves as a separate instrument with a much wider policy goal than combatting climate change. The accounting rules, for example, do not require farm level quantification of the amount of carbon sequestered linked to the payment, so it cannot be assessed whether and in how far an increase in soil carbon levels is real, additional and verifiable. Integrating the CAP more into the EU’s climate policy requires rules to be set in place to assure a reliable measuring of the carbon sequestered. Payments, to give another example, are based on the amount of hectares per year of measures under the RDP, not on the amount of CO₂ sequestered. This is a consequence of the provision that payments can only cover additional costs and income forgone resulting from the commitments made.^[10] Such indirect payments, therefore, do not stimulate farmers to sequester as much carbon as possible. A third example of the CAP’s shortcomings with regard to soil carbon sequestration is that projects financed under the CAP are characterized by a relatively short lifespan, 1-5 years for green direct payments, and 5-7 years for projects under a RDP. Under a climate policy, such a lifespan is almost futile, as combatting climate change requires measures that cover decades, if not the entire 21^st century. That is why in Australia, carbon sequestration projects are required to run for twenty five or even a hundred years (see blog posts on Australia’s carbon farming legislation part 1 and part 2).

Towards an alternative approach: agriculture in the EU ETS

The conclusion that the current EU policy is completely inadequate to stimulate large scale soil carbon sequestration on agricultural land seems inevitable, also when taking into account the broader climate change mitigation policy. The recently presented proposal for a European Regulation on the inclusion of greenhouse gas emissions and removals from land use and forestry into the EU’s 2030 climate framework (LULUCF Regulation) is a good first, yet inadequate, step towards including agriculture’s emissions and sequestration potential into the EU’s climate policy (see for broader assessment of the climate policy instruments, the paper). That is why an alternative approach needs to be developed. A further stimulus to the adoption of soil carbon projects that currently is not being discussed but that needs to be investigated at European level soon is the inclusion of agriculture in the EU ETS through allowing regulated industries to buy offsets from the agricultural sector, following the examples set by California, Alberta, Australia, and more recently also China.^[11] These states show that it is possible to stimulate soil carbon sequestration (and other climate smart agriculture practices and technologies) through the ETS, provided an elaborate regulatory regime has been put in place to ensure integrity. When in place, sectors covered by the ETS will be allowed to finance sequestration projects on farm land, thus paying farmers for their efforts.

The recent report of the Agricultural Markets Task Force, a European Commission expert group, also proposes to incentivise to farm carbon in addition to crops. The Task force, however, proposes to do this through redirecting funds under the CAP after 2020. It is debatable, though, whether this will be a successful strategy given the inherent shortcomings mentioned above. Some of the current constraints can perhaps be repaired, such as the short commitment period, or the provision that payments can only cover additional costs and income forgone. It is highly unlikely, though, that the CAP budget will be big enough to cover an EU wide adoption of carbon farming practices. An evaluation of the Australian carbon farming legislation indicated that government funds will never suffice to roll out an incentive mechanism across all farms in the country and that private funds need to come in, either through a carbon tax or an ETS.^[12] The latter seems very suitable for the EU with its well-developed ETS that, hopefully, will pick up speed again after the structural reform takes effect in the fourth trading phase, which runs from 2021 until 2030. Regulation aimed at establishing a finance flow from large industrial emitters to the farming sector, with its capacity to sequester large quantities of carbon on farm land, seems a promising alternative, which is completely in line with the polluter pays principle as laid down in Article 191(2) of the Treaty on the Functioning of the EU.

[1] Daniel Kane, Carbon Sequestration Potential on Agricultural Lands: a Review of current Science and Available Practices (Breakthrough Strategies & Solutions, Takoma Park, Md 2015).

[2] Emanuele Lugato et al., ‘Potential carbon sequestration of European arable soils estimated by modelling a comprehensive set of management practices’, (2015) 20 Global Change Biology 3557.

[3] Pete Smith, ‘Agricultural Greenhouse Gas Mitigation Potential Globally, in Europe and in the UK: What Have We Learnt in the last 20 Years?’ (2012) 18 Global Change Biology 35.

[4] M.G. Rivera-Ferre et al., Re-framing the Climate Change Debate in the Livestock Sector: Mitigation and Adaptation Options, (2016) 7 WIREs Climate Change 869.

[5] Ibid.

[6] P. Smith et al., ‘Agriculture, Forestry and Other Land Use (AFOLU)’ in: O. Edenhofer et al. (eds.), Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge University Press 2015), 811, 846 and 847; J.R. Porter et al., ‘Food security and food production systems’ in: C.B. Field et al. (eds.), Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge University Press 2015), 485, 515 and 518.

[7] Annette Freibauer et al., ‘Carbon Sequestration in the Agricultural Soils of Europe’ (2004) 122 Geoderma 1.

[8] L. Bizikova et al., Climate Change Adaptation Planning in Agriculture: Processes, Experiences and Lessons Learned from Early Adapters, (2014) 19 Mitigation and Adaptation Strategies for Global Change 411.

[9] Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, An EU Strategy on Adaptation to Climate Change, COM (2013) 0216 final, 8.

[10] Art. 28(6) Regulation (EU) No 1305/2013.

[11] Jonathan Verschuuren, Towards a Regulatory Design for Reducing Emissions from Agriculture: Lessons from Australia’s Carbon Farming Initiative, (2017) 7:1 Climate Law 1; Dong Sun et al., Carbon Markets in China: Development and Challenges, (2016) 52:6 Emerging Markets Finance and Trade 1361.

[12] Verschuuren 2017.

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 This blog is a summary of a paper accepted for presentation at the 3rd European Climate Change Adaptation Conference ‘Our Climate Ready Future’, Glasgow, 5th-9th June 2017 (ECCA2017). My project has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 655565.

25/02/2017

Climate Change Impacts on Agriculture and Food Security: What Role for Disaster Law?

Agriculture depends on a stable climate. Crops need a fertile soil, sufficient water and temperatures that remain within a certain (plant specific) bandwidth, livestock needs healthy grazing land, sufficient water and livable temperatures. The climate needs to be predictable, so that farmers can plan their activities with the aim to secure the best possible harvest. Such stable conditions only occurred after the previous major climate change that took place on Earth and which marked the end of the last ice age, around 12,000 years ago. Around that time, man settled down and started to grow his own food through agriculture.

Given the dependence of agriculture on weather and climate, it does not come as a surprise that the agricultural sector is and will be hit hard by climate change impacts. The impacts are diverse and potentially disastrous for global food security. The latest IPCC report on the impacts on agriculture and food security gives a chilling image of what is expected to happen and, in fact, is already happening across the world.^[1] Water shortages in droughts and heat waves have a negative impact on crops as well as livestock. A surplus of water with excessive precipitation, floods and inundation, increased and changing occurrence of pests, weeds and diseases, are but a few examples of the other impacts of climate change that negatively affect agriculture. Extreme weather events, generally, hit rural areas hard with a profound negative impact on rural communities and food production.

Against this background of increasing climate change impacts on agriculture, both through slow- and sudden-onset disasters, it is particularly worrying that food demand is and will continue to grow over the next few decades until 2050. It is expected that increasing climate change impacts on agriculture and rising demand will lead to an increase of food prices across the globe. According to the IPCC, ‘it is very likely that changes in temperature and precipitation (…) will lead to increased food prices by 2050, with estimated increases ranging from 3 to 84%.^[2] A World Bank report adds that losses in the agricultural sector and spikes in food prices can push vulnerable consumers into poverty, as poor people spend a large part of their budget on food.^[3] The 2008 food spike caused around 100 million people to fall into poverty, and the 2010–2011 food price spike has been estimated to have pushed 44 million people below the basic needs poverty line across 28 countries.^[4] It can, therefore, be expected that there is a substantial risk of increasing famine in developing countries.

Developed countries, however, are not safe either. Consumers in developed countries are not only expected to face drastic price increases, but food safety issues as well.^[5] Rural communities in developed countries are particularly vulnerable for climate change impacts, for several reasons, such as the substantially higher average age compared to urban areas. The IPCC refers to the social impact of the prolonged drought in Australia during the early 2000s which led to ‘farm closures, increased poverty, increased off-farm work, and, hence, involuntary separation of families, increased social isolation, rising stress and associated health impacts, including suicide (especially of male farmers), accelerated rural depopulation, and closure of key services’.^[6]

Climate disaster law

Disaster law is the field of law that aims to respond to disasters, to compensate for the losses that occurred in a disaster and to facilitate recovery and rebuilding, as well as to mitigate the possible impact of future disasters. Climate disaster law is the rapidly developing new body of law which responds specifically to climate disasters. So far, however, attention for agriculture and food security has been fairly limited and it is clear that in this area, much needs to be done to prepare the world for increasing climate disasters hitting agriculture and food security.

Disaster mitigation in agriculture

The disaster mitigation phase, usually, is considered to be the most important phase of the disaster cycle (mitigation-response-rebuilding), not just because of the simple fact that prevention is better than curing, but also because of the nature of climate disasters. Adler rightfully observes that ‘drought and other disaster response policies that might be appropriate for occasional and difficult-to-foresee events may no longer be appropriate for conditions that will now occur with increasing frequency due to climate disruption’.^[7]

Disaster mitigation for agriculture starts with the adoption of climate smart practices and technologies. Most countries, around the globe, do not have comprehensive and effective legal instruments in place that stimulate farmers to adopt climate smart practices and technologies.^[8] To make the agricultural sector more resilient to climate change, it is essential that law and policymakers around the world rapidly start developing policies and laws so that climate-smart agricultural practices are commonplace soon. Financial instruments, such as subsidies or offset mechanisms under carbon pricing programmes can be used to achieve this goal. In addition, well-functioning early warning systems should be operational to help farmers to manage the hazards and avoid these turning into disasters. International collaboration and fundraising seems required to speed up the development and implementation of early warning systems for agricultural climate disasters. The same is true for climate and weather information and forecasts. These do exist, but have to be further developed to make the forecasts more useful for farmers.

Disaster response in agriculture

According to the FAO, between 2003 and 2013, about 3.4 percent of all humanitarian assistance was directed to the agriculture sector, with an average of around 374 million USD annually. The average annual crop and livestock production losses in developing countries, however, were much larger: an analysis of 140 disasters triggered by natural hazards found annual costs of crop and livestock losses to be 7 billion USD per year over the same period. With the expected increase of the number and size of disasters under climate change over the next few decades, much remains to be done to improve our ability to effectively respond to climate disasters, especially in the area of agriculture and food security. The current instrument of the Food Assistance Convention, that lays down a set of principles and best practices for effective and efficient food assistance for the most vulnerable people needs to be expanded to a full and comprehensive legal framework on international climate disaster response, so that the response efforts are well coordinated and aligned and so that domestic emergency managers are fully engaged and empowered.

Rebuilding: getting the farmer back into business asap

After a climate disaster, food production needs to be restored as soon as possible. Financial aid is usually needed so that farmers can clean up and prepare the land for agricultural activities, buy new seeds, new machines, new livestock etc. At the international level, organizations such as the World Bank, the International Fund for Agricultural Development, and the Special Climate Change Fund under the UNFCCC, put much effort into providing such financial aid. It is now well understood that farmers and communities should undertake investments with long term benefits, so that the next climate disaster has less impact. The compensation and rebuilding phase, therefore, is closely linked to the disaster mitigation phase.

A range of methods is explored for their suitability to compensate for the loss caused by climate change. Although private insurance has its limitations in the case of climate disasters, new insurance products are being developed, such as the ‘Broad Weather Insurance Policy’ which was developed by agricultural insurance companies together with agribusiness organisations and the government in the Netherlands to offer farmers insurance against climate change related crop damage.^[9] This policy covers financial loss caused by natural disasters, such as extreme rainfall, extreme drought, erosion, severe windstorms, hailstorms and fires (caused by lightning). This insurance does not cover all damages, but instead requires farmers to bear 30% of the loss. The government has a subsidy scheme in place to provide financial assistance to individual farmers to pay for the premium. Reinsurance firms are even starting to operate in developing countries in Africa, where micro-insurance policies have been developed for farmers to cover for loss of crops due to drought, storms, pests, and diseases.^[10] Private markets alone cannot provide the funding that is needed to develop and operate insurance products for farmers to protect them from financial losses caused by climate disasters. Some form of government intervention and cooperation between insurers, banks, governments and NGOs is essential to make climate disaster insurance for farmers a success. In order to avoid that farmers keep relying on government aid and insurance claims, and do not make the necessary changes to become more resilient to climate change, it is important that legal instruments in the area of disaster compensation reward the adaptive farmer.

[1] J.R. Porter et al., ‘Food Security and Food Production Systems’ in: Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (CUP 2014), 485-533. The IPCC is currently preparing a special report on climate change, desertification, land degradation, sustainable land management, food security, and greenhouse gas fluxes in terrestrial ecosystems. This report is due to come out in 2019.

[2] Id. at 512.

[3] S. Hallegatte et al., Shock waves. Managing the impacts of climate change on poverty (Worldbank 2016) at 5.

[4] W.N. Adger et al., Human security in Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (CUP 2014) at 763.

[5] M. Miraglia et al., Climate Change and Food Safety: An Emerging Issue with Special Focus on Europe, (2009) 47(5) Food and Chemical Toxicology 1009–21.

[6] A. Reisinger et al., ‘Australasia’ in: Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part B: Regional Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (CUP 2014) at 1398.

[7] Robert W. Adler, Balancing Compassion and Risk in Climate Adaptation: U.S. Water, Drought, and Agricultural Law, (2012) 64(1) Florida Law Review 201, 265.

[8] Jonathan Verschuuren, Towards a Regulatory Design for Reducing Emissions from Agriculture: Lessons from Australia’s Carbon Farming Initiative, (2017) 7(1) Climate Law at 6-10.

[9] W.J. Wouter Botzen, Managing Extreme Climate Change Risks through Insurance 57 (2012). For an up-to-date description of the cover of the current policy, see agricultural insurance company ‘AgriVer’ website, http://www.agriver.nl/gewassen-te-velde.html (in Dutch).

10/11/2016

WTO limitations for domestic climate smart agriculture policies

Achieving the Paris Agreement’s climate goals will require states to start focusing both on reducing emissions from agriculture and on the sequestration potential of agriculture and land use.  The imminent rise in global food demand coupled with the decline in fertile agricultural land caused by climate change will further necessitate the drafting and implementation of effective policies. These policies have to aim for mitigation, adaptation and food security, the three pillars of ‘climate smart agriculture’. Climate smart agriculture is an approach to developing the technical, policy and investment conditions to achieve sustainable agricultural development for food security under climate change (FAO 2013).  Examples of climate smart practices are the introduction of rotational grazing management schemes, crop rotation, minimum tilling, permanent native vegetation on farmland and the use of compost and other soil additives to increase soil carbon levels.  Examples of climate smart technologies are sophisticated, computerized drip-irrigation systems, and methane capture and conversion technologies in animal raising facilities.  A comprehensive regulatory framework to incentivize the agricultural sector to convert from conventional practices to become climate smart is still largely lacking, not just in the EU, but worldwide. Incentives that already are applied on a small scale are subsidies and tradable offsets under a carbon pricing mechanism. It is expected that future policies aimed at advancing the implementation of climate smart practices and technologies in the farming sector will use one of these or both instruments.

Both are voluntary instruments in the sense that farmers can choose not to apply for a subsidy or participate in an offset scheme, yet both do have an impact on trade because these instruments incentivize certain agricultural practices thus favouring some domestic farmers and their products over foreign farmers and their (imported or exported) products. When drafting a policy aimed at stimulating climate smart agriculture, it is, therefore, important to remain within the legal boundaries set by international trade law. There has been remarkable little attention for these trade law limitations to domestic policies in the area of climate smart agriculture. In Australia, for example, there does not seem to have been any debate on possible WTO requirements for the domestic Australian carbon farming initiative, which is a scheme aimed at stimulating farmers to reduce emissions or increase sequestration through offsets that are bought up by the government in reversed auctions. Academic literature does exist, but mostly focuses on the WTO boundaries for domestic climate law in a broad sense. That literature is rather worrying. Because it takes a broad perspective and deals with all potential instruments that may infringe upon a wide range of WTO instruments, it looks as if the WTO is a huge stumbling block for domestic policies.^[1]

In my view, it is more worthwhile to focus on the two most likely instruments. As stated above, policies aimed at stimulating climate smart agriculture are likely to be some sort of government subsidy of a system of offsets from agriculture that are allowed in the carbon market. These instruments primarily have to be assessed against the requirements of two WTO instruments: the Agreement on Agriculture (AoA) and the Agreement on Subsidies and Countervailing Measures (SCM).

Domestic policies aimed at stimulating the adoption of climate smart agricultural practices and technologies are environmental protection programmes that, in principle, are allowed under the so-called ‘Green Box’ of the AoA, provided the support is only given in the start-up phase and is terminated after the benefits from the conversion to climate smart practices, be it from improved productivity, the generation of energy or from the sale of carbon credits on the private carbon market, greatly surpass the costs involved. Incentives that have a positive impact on production, such as for soil carbon projects, and that are not allowed under the AoA’s Green Box, are actionable under the SCM Agreement. It is hard to say in general whether payments to farmers, be it through a subsidy or through the carbon market, are not actionable because they do not cause adverse effects on competing producers in other countries. This very much depends on the individual case.

Several carbon farming methodologies definitely have production-enhancing co-benefits and would, therefore be actionable under the SCM Agreement. Soil sequestration projects, for example, are known to have a tremendous positive impact on the production of crops. Financing such projects could, therefore, be seen as granting an actionable subsidy, as long as they are not covered by the AoA. This means that it is up to the injured WTO member state to prove these subsidies caused serious prejudice to its interests, i.e., that because of the subsidy, it suffers from displaced imports into the market of the subsidizing country, displaced exports to third countries, significant price suppression, or an increase in the world market share by the subsidizing country.  Should a country succeed and subsequent consultations not lead to an agreement, the injured state can take countermeasures.

The accused state could argue that the subsidies are non-actionable because these are meant to promote adaptation of existing facilities to new environmental requirements imposed by law and/or regulations, as allowed under the SCM Agreement.  It is, however, unlikely that all of the six conditions for this exception clause to apply are met as current schemes are voluntary, the subsidies are not one-time but re-occur every time new abatement has been achieved, and the payments are not limited to 20 per cent of the cost of adaptation.  The condition that financial assistance should be directly linked to and proportionate to a firm’s pollution reduction,  is only met in case of emissions abatement projects, such as methane capture. Sequestration projects are not covered as these do not reduce the firm’s own emissions. Whether the condition that the financial assistance needs to be available to all firms which can adopt the new equipment and/or production processes is met, depends on the design of the regulatory scheme. The Australian scheme, for example, under which only farmers with winning bids in a reversed auction receive government funds, seems incompatible with the latter condition.

The other WTO instruments are only relevant to a very limited extend. The GATT and TBT Agreement, generally, are not applicable in the case of the two instruments that are most likely to be used to stimulate climate smart agriculture. The GATS requires a policy to enable foreign service providers to be active under a carbon pricing mechanism aimed at offsets from agriculture. The TRIP Agreement requires states to protect the invention of climate smart technologies to be protected under patent law. Should policies be aimed at a rapid adoption of patented climate smart technologies, then states can opt for excluding a climate smart technology from patentability based on grounds of avoiding serious prejudice to the environment.

To further facilitate the adoption and implementation of policies promoting climate smart agriculture, the international community should take action in the area of international trade law. Unfortunately, climate change is not addressed in a comprehensive manner in the ongoing negotiations on liberalizing environmental goods and services, on the relationship between the WTO and the UNFCCC and the Paris Agreement, and on agriculture, nor in the regular meetings of the Committee on Trade and the Environment and the TBT Committee.  It is clear that policies aimed at stimulating climate smart agriculture cannot be neatly assessed under one of the current WTO Agreements, but instead are situated in between and across the various agreements, depending on the specific type of measure and the specific activity that is incentivized. It seems that it is difficult to give due consideration to climate smart agriculture in all of the ongoing negotiations and discussions within the WTO framework, although several realistic options to at least create more room do exist. The most realistic and feasible options in my view are including climate smart agriculture technologies in the yet to be concluded WTO Agreement on Environmental Goods and Services and to recognize carbon sequestration as an agricultural product under the AoA so that it becomes possible to support farmers’ sequestration measures under the Green Box.

[1] For example, David Blandford and Tim Josling, Greenhouse Gas Reduction Policies and Agriculture: Implications for Production Incentives and International Trade Disciplines (Geneva: International Centre for Trade and Sustainable Development, 2009); David Blandford, “Climate Change Policies for Agriculture and WTO Agreements”, in Joseph A. McMahon, Melaku Geboye Desta (eds.), Research Handbook on the WTO Agriculture Agreement. New and Emerging Issues on International Agricultural Trade Law (Cheltenham: Edward Elgar, 2012), pp. 223 et sqq.; David Blandford, International Trade Disciplines and Policy Measures to Address Climate Change Mitigation and Adaptation in Agriculture, E15 Expert Group on Agriculture, Trade and Food Security Challenges Think Piece (Geneva: ICTSD/WEF, 2013); Andrew Green, “Climate Change, Regulatory Policy and the WTO. How Constraining are Trade rules?”, 8:1 Journal of International Economic Law (2005), pp. 143 et sqq.; Christian Hberli, WTO Rules Can Prevent Climate Change Mitigation for Agriculture, Working Paper No. 2016/06 (London: Society of International Economic Law, 2016); Deok-Young Park (ed.), Legal Issues on Climate Change and International Trade Law (Cham: Springer International, 2016); Richard G. Tarasofsky, “Heating Up International Trade Law: Challenges and Opportunities Posed by Efforts to Combat Climate Change”, 2:1 Carbon and Climate Law Review (2008), pp. 7 et sqq.

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This project has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 655565.

25/07/2016

Reducing Emissions from Agriculture: Australia’s Unique Approach (Part 2)

In my previous blog, I showed how various countries around the world are in the process of setting up offset schemes for agriculture, in an attempt to reduce greenhouse gas emissions from this sector. I also explained that Australia has a unique position as it has the longest operating system in place, and one that currently is not linked to emissions trading but is a stand-alone system. Technically, therefore, Australia’s Carbon Farming Initiative, is not an offset instrument, but a regulatory instrument aimed at achieving emissions reductions in the land use sector on its own. In this blog, I will focus on some of the results that have been achieved with the system so far, based on an empirical research that I carried out.^[1] In case studies into selected CFI-projects and in a series of interviews with the key stakeholders, I searched for the experiences with the scheme in Australia, with the objective to draw lessons for other countries, including the EU as a whole, that wish to establish a policy aimed at reducing emissions from agriculture.

Sunset over rural Australia (Photo: J. Verschuuren)

My research found that the current legislation on carbon farming in Australia provides an elaborate, yet reliable legal framework that seems well suited to assess project applications and issue credits to participating farmers who, through these projects, generated real and additional emission reductions. It was especially interesting to find that a major overhaul of the legislation in 2015, delinking the scheme from emissions trading, really pushed the scheme forward. Not having to sell credits on the volatile international carbon market, but being able to rely on long term, fixed government money (called ‘Emissions Reduction Fund’), spurred Australia’s farmers into action. It shows that it is important to create long term certainty for farmers. Farmers who want to introduce carbon farming have to implement structural changes to their farming practices with long term impacts on their business. The policy environment, as well as the agribusiness’ financial environment, has to accommodate such long term impacts. This also implies that relying on the carbon market for funding should only be done when there is long term certainty that carbon credits will earn an acceptable minimum price.

Another interesting finding is that, although Australia’s carbon farming policy and the associated regulatory framework is only aimed at achieving as much greenhouse gas abatement as possible against the lowest possible costs, many project actually have important co-benefits. These co-benefits often are an as important and sometimes even more important stimulus for farmers to convert to carbon farming than the direct financial benefits arising from selling generated carbon credits to the government. Generally, it is found that the policy is leading to the introduction of better farming methods in an overall conservative sector. These methods are not just good for combatting climate change, but have many benefits for farmers and even for food security. Vegetation projects generally reduce salination and erosion and improve water retention. Soil carbon projects were especially mentioned for having an astonishing impact on soil quality. Research indicates that an increase in the level of soil organic carbon, leads to a drastic increase of water availability and fertility, and thus to an increase in agricultural production. One respondent referred to an example he knew, of two brothers who had farmland adjacent to each other: ‘One of them was involved in a soil carbon project, the other was not. After a while, you could clearly see the difference, with much more and better growing crops on the land of the first. The other brother had to drive across his brother’s land to reach his own land and saw the difference every day.’ Although many respondents stressed that conservatism, especially among older farmers, slows down the adoption of these new climate smart practices, they all felt that the farming sector is slowly changing and is taking up these new practices. Assessing the impact of soil carbon projects, however, is complex and several stakeholders indicated that ‘we are still learning how to do it under different circumstances.’ Since the regulatory framework requires farmers to carefully monitor what is happening in the soil, a lot of new knowledge is generated. One respondent said: ‘We are in fact doing large scale experiments with soil carbon, all thanks to the Emissions Reduction Fund.’ There are many interesting case studies available remarkable results of reduced carbon emissions, better growing conditions, more water availability, and more biodiversity under such programmes as ‘soils for life’ and ‘healthy soils’.

Increasing soil carbon, therefore, has strong positive side-effects on adaptation as they increase the resilience of the land and lead to greater efficiency. Here, mitigation and adaptation go hand in hand. The same is true for some of the other sequestration methods that are allowed under the Australian scheme, such as native tree planting in arid and semi-arid areas both to store carbon and to stop degradation and salinization of farmland.

Sometimes, there are also direct economic co-benefits associated to carbon farming projects. In the piggeries sector, for example, there are producers who save A$ 15,000 (roughly € 10,000) per month on energy bills and earn an additional A$ 15,000 by delivering energy to the grid after having adopted methane capture and biogas production technology. When asked whether the CFI/ERF was the push factor, or the expected economic co-benefit, the respondent from the pork sector said that the CFI/ERF was the main driver for the distribution of this technology: ‘About half of the participating producers jumped because of the CFI/ERF push. It especially pushes medium sized producers, because it increases their payback just enough to get involved. Eighteen biogas projects in piggeries have to date generated A$ 6 million (€3.9m) a year in electricity savings and A$ 10.2 million (€ 6.6m) through carbon credits under the Emissions Reduction Fund. The Fund really was the driver for most of these eighteen producers.’ It is clear, though, that for the longer term, these co-benefits will continue to exist on a yearly basis, also without carbon credits being purchased by the government.

Grazing land regeneration project in western New South Wales (Photo: http://www.soilsforlife.org.au)

From these findings, the lesson can be drawn that a policy that has a wider focus on adaptation, food security, resilient and sustainable farm businesses and securing and creating jobs in the agribusiness sector, is likely to be more successful than one that only focuses on reducing emissions from agriculture. Several of the methods accepted or under development in Australia, such as those dealing with soil carbon, show that such co-benefits can indeed be achieved. Developing climate smart methodologies that not only deliver real, additional, measurable and verifiable emission reductions but also foster long term innovation and create economic, social and environmental co-benefits is essential for the success of any policy aimed at stimulating climate smart agriculture. Science has to be central in the development and adoption of methods that are accepted under the regulatory framework. In Australia, much research effort has already gone into method development. This now has to be taken to a global level. In order to avoid that every country is trying to invent the wheel, international collaboration in method development is pivotal. The aim has to be to roll out climate smart agriculture policies across the world, so as to stimulate our farmers to make a switch from conventional farming to climate smart farming.

[1] An article covering all the results of the project will be published in early 2017.

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This project has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 655565.

24/05/2016

Reducing Emissions from Agriculture: Australia’s Unique Approach (Part I)

Not many countries have regulatory schemes in place aimed at reducing greenhouse gas emissions from agriculture. As indicated in the blog on the Paris Agreement and agriculture, the agricultural sector is responsible for almost 25% of anthropogenic GHG emissions, both through CO₂ emissions caused by deforestation and peatland drainage, and through methane (NH₄) emitted by livestock and rice cultivation, as well as through nitrous oxide (N₂O) emissions caused by the use of synthetic fertilizers and the application of manure on soils and pasture. There is a dark cloud hanging over this because emissions are expected to rise over the coming years and decades because of an expected sharp rise in food demand. The Australian Climate Change Authority, in a 2014 climate change policy review for that country, for example, reports that the agricultural sector is expecting a doubling of demand for agrifood commodities in emerging economies in Asia, particularly China and India. It is expected that Australia is in a good position to meet this increased demand, as a consequence of which Australia’s production of agrifood is expected to increase by 77% in 2050 (from 2007 level). The Climate Change Authority in its  report is pessimistic about what that means for climate change. Because of the strong economic incentives of the global food market, increasing emissions are inevitable: the expected production growth is likely to offset emission reductions achieved through the introduction of climate smart agriculture practices and technologies.

Photo by Flickr user Oli.

Doing nothing, however, is no option, as this will lead to an even bigger rise in emissions. And what is more: the agricultural sector has the potential to store large quantities of carbon in soils and vegetation. Domestic regulators, however, have been reluctant to address agricultural emissions, partly because of regulatory difficulties. It is, for example, difficult to measure emissions at the individual farm level since a variety of factors determine the amount of emissions (such as the diet of individual animals, soil composition, weather systems of individual regions, the way in which fertilizer is applied, etc.). In addition to emissions, removals are relevant as well since crops and other vegetation absorb CO₂ from the air, and lots of carbon is stored in soils (more carbon is stored in soils than what is present in vegetation and the atmosphere). Soil carbon may be released, or remains there, or is increased, depending on how you manage the land.

A growing number of countries is setting up regulatory schemes aimed at reducing emissions from agriculture, mostly in the form of an offsets scheme linked to emissions trading. Under these schemes, industries and energy producers can buy credits generated by agriculture, and use these partly to comply with their obligation to hand in allowances equal to their emissions. This is the case in California, Quebec, Alberta, and Ontario. Under the California ETS, two types of agricultural offset projects are accepted, both aimed at reducing methane emissions: biogas systems in dairy cattle and swine farms, and rice cultivation projects. In Alberta, agricultural offsets include a wide range of projects: nitrous oxide emission reductions, biofuel production and usage, waste biomass projects, conservation cropping, several types of projects concerning beef production, projects aimed at reducing emissions from dairy cattle and biogas production.

The country with the longest experience in this area, however, is Australia. Despite the country’s much criticized poor overall climate policy, Australia adopted a Carbon Farming Initiative (CFI) as early as 2011, which spurred farmers into action and, therefore, potentially provides the rest of the world with a model to reduce emissions from agriculture. In 2011, the CFI originally was set up as an offset scheme under its ETS. Since the repeal of the ETS in 2015 (just before trading was set to start), the initiative, now called Emissions Reduction Fund (ERF) functions on its own and is enjoying rapidly increasing attention from farmers.

Instead of having to rely on the (unreliable) international carbon market, under the ERF farmers can offer the credits that they generated to the government through reversed auctions. Farmers can obtain credits for both emission avoidance projects and sequestration projects and offer these credits to the government. The government buys up credits from projects that achieved the biggest emissions cuts against the lowest costs. Agricultural emission avoidance projects mostly focus on methane emissions reductions: methane capture and combustion from livestock manure and methane emissions reduction through manipulation of digestive processes of livestock. A third important emission avoidance project for the agricultural sector is the application of urease or nitrification inhibitors aimed at reducing fertilizer and manure emissions. Sequestration projects are for example projects aimed at sequestering carbon in soils in grazing systems, on farm revegetation, rangeland or wetland restoration, the application of biochar to the soil, and the establishment of permanent plantings on farmland.

Since 2011, an enormous amount of expertise has been built up in Australia, and a very elaborate and effective regulatory system has been developed that on the one hand seems to ensure a high level of environmental integrity, while on the other hand not overburdening farmers with costly administrative obligations. The Australian scheme, therefore, is an interesting example for the rest of the world, particularly for the EU, that has yet to tackle emissions from agriculture. A government funded, project based system of emissions reductions seems to fit well in the EU’s Common Agricultural Policy.

In May 2016, the results from the latest auction were released. After three auctions a total of 309 carbon abatement contracts have been awarded by the Australian government to deliver more than 143 million tonnes of CO₂ equivalent abatement, earning the project proponents a total of A$1.7 billion (about € 1 billion). The vast majority of abatement is by vegetation projects, which often are on farmland (but not always). Carbon farming has grown into an important new income stream for farmers in Australia. In a country prone to droughts, floods and bush fires, the scheme, therefore, not only helps to reduce emissions from agriculture, it also assists in diversification of agricultural practices and leads to a more resilient sector.

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This project has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 655565.

26/04/2016

Solar Climate Engineering and Intellectual Property

A schematic of stratospheric aerosol injection climate engineering. Image by Hugh Hunt, Creative Commons Attribution-ShareAlike 3.0 Unported.

Climate change has been the focus of much legal and policy activity in the last year: the Paris Agreement, the Urgenda ruling in the Netherlands, aggressive climate targets in China’s latest five year plan, the release of the final US Clean Power Plan, and the legal challenge to it. Not surprisingly, these each concern controlling greenhouse gas emissions, the approach that has long dominated efforts to reduce climate change risks.

Yet last week, an alternative approach received a major—but little noticed—boost. For the first time, a federal budget bill included an allocation specifically for so-called “solar climate engineering.” This set of radical proposed technologies would address climate change by reducing the amount of incoming solar radiation. These would globally cool the planet, counteracting global warming. For example, humans might be able to mimic the well-known cooling caused by large volcanos via injecting a reflective aerosol into the upper atmosphere. Research thus far – which has been limited to modeling – indicates that solar climate engineering (SCE) would be effective at reducing climate change, rapidly felt, reversible in its direct climatic effects, and remarkably inexpensive. It would also pose risks that are both environmental – such as difficult-to-predict changes to rainfall patterns – and social – such as the potential for international disagreement regarding its implementation.

The potential role of private actors in SCE is unclear. On the one hand, decisions regarding whether and how to intentionally alter the planet’s climate should be made through legitimate state-based processes. On the other hand, the private sector has long been the site of great innovation, which SCE technology development requires. Such private innovation is both stimulated and governed through governmental intellectual property (IP) policies. Notably, SCE is not a typical emerging technology and might warrant novel IP policies. For example, some observers have argued that SCE should be a patent-free endeavor.

In order to clarify the potential role of IP in SCE (focusing on patents, trade secrets, and research data), Jorge Contreras of the University of Utah, Joshua Sarnoff of DePaul University, and I wrote an article that was recently accepted and scheduled for publication by the Minnesota Journal of Law, Science & Technology.  The article explains the need for coordinated and open licensing and data sharing policies in the SCE technology space.

SCE research today is occurring primarily at universities and other traditional research institutions, largely through public funding. However, we predict that private actors are likely to play a growing role in developing products and services to serve large scale SCE research and implementation, most likely through public procurement arrangements. The prospect of such future innovation should be not stifled through restrictive IP policies. At the same time, we identify several potential challenges for SCE technology research, development, and deployment that are related to rights in IP and data for such technologies. Some of these challenges have been seen in regard to other emerging technologies, such as the risk that excessive early patenting would lead to a patent thicket with attendant anti-commons effects. Others are more particular to SCE, such as oft-expressed concerns that holders of valuable patents might unduly attempt to influence public policy regarding SCE implementation. Fortunately, a review of existing patents, policies, and practices reveals a current opportunity that may soon be lost.   There are presently only a handful of SCE-specific patents; research is being undertaken transparently and at traditional institutions; and SCE researchers are generally sharing their data.

After reviewing various options and proposals, we make tentative suggestions to manage SCE IP and data. First, an open technical framework for SCE data sharing should be established. Second, SCE researchers and their institutions should develop and join an IP pledge community.  They would pledge, among other things, to not assert SCE patents to block legitimate SCE research and development activities, to share their data, to publish in peer reviewed scientific journals, and to not retain valuable technical information as trade secrets. Third, an international panel—ideally with representatives from relevant national and regional patent offices—should monitor and assess SCE patenting activity and make policy recommendations. We believe that such policies could head off potential problems regarding SCE IP rights and data sharing, yet could feasibly be implemented within a relatively short time span.

Our article, “Solar Climate Engineering and Intellectual Property: Toward a Research Commons,” is available online as a preliminary version. We welcome comments, especially in the next couple months as we revise it for publication later this year.

02/02/2016

The Paris Climate Agreement: silent about agriculture

In our previous blog on the Paris Climate Agreement, we already showed that there are important things missing from the Agreement, such as a collective emissions reduction target and a proper enforcement mechanism. This time, I would like to focus on another missing and completely underestimated issue: the impact of climate change on agriculture and vice versa.

Photo by Flickr user philHendley

The very few references that earlier versions of the negotiating texts made to agriculture all disappeared from the Agreement. As a consequence, the Agreement does not mention agriculture at all. This is a missed opportunity. There are pressing reasons for the international community to start regulating both emissions from agriculture and adaptation in this sector. The agricultural sector is responsible for almost 25% of anthropogenic GHG emissions, both through CO₂ emissions caused by deforestation and peatland drainage, and through methane (NH₄) emitted by livestock and rice cultivation, as well as through nitrous oxide (N₂O) emissions caused by the use of synthetic fertilizers and the application of manure on soils and pasture. The latter two substances have a 25 times and 300 times stronger impact on the climate than CO₂ respectively. With a sharp rise in food demand ahead of us, these emissions can be expected to go up drastically when no regulatory caps are in place.

Agriculture is also among the sectors that will suffer the largest negative impacts of climate change, for which, consequently, huge adaptation efforts are needed. Local temperature increases of 2°C or more without adaptation will negatively impact production of the major crops in tropical and temperate regions (wheat, rice and maize) and irrigation demand will increase by more than 40% across Europe, USA, and parts of Asia. The negotiators of the Paris Climate Agreement were worried about the food security issues and mentioned in the preamble that they recognize the fundamental priority of safeguarding food security and ending hunger, and the particular vulnerabilities of food production systems to the adverse impacts of climate change. This is a much weaker version, though, of an earlier proposal to include a binding adaptation goal in the Agreement on “maintaining food security”. The first part of the preambular provision on food security seems to imply that maintaining food security might be a reason to not impose mitigation measures on the agricultural sector. In the negotiating texts, food production regularly emerged as a limiting factor to mitigation actions. In the final version of the Paris Climate Agreement, only one such reference survived. One of the objectives of the Agreement, laid down in Article 2, is: “Increasing the ability to adapt to the adverse impacts of climate change and foster climate resilience and low greenhouse gas emissions development, in a manner that does not threaten food production”.

Given the contribution of agriculture to climate change and the impact of climate change on agriculture, it is disappointing that so little attention is paid to agriculture in the Paris Climate Agreement, as this document is expected to set the tone for the world’s climate policies of the coming years.

The European Union opted for a much firmer approach toward agriculture. In the run-up to the Paris Climate Agreement, the European Commission announced that it would encourage “climate friendly and resilient food production, while optimising the sector’s contribution to greenhouse gas mitigation and sequestration.” For example, it proposed to include cropland and grazing land management in its policy from 2020, developing instruments to do so before 2020. The EU even proposed to focus its future climate change instruments on all agricultural activities, such as enteric fermentation, manure management, rice cultivation, agricultural soils, prescribed burning of savannahs, field burning of agricultural residues, liming, urea application, other carbon-containing fertilisers, cropland management and grazing land management and “other.” As a consequence, the EU proposed to fully include agriculture in the Paris Climate Agreement in two ways: as a source of greenhouse gas emissions, and as a means of CO₂ absorption and sequestration. This would mean that the agricultural sector has to undergo a drastic transition from conventional farming to farming using climate smart agricultural practices.

The above account of what survived the negotiations shows that the EU negotiators were not able to convince the others of the importance of including agriculture in the Paris Climate Agreement.

The fact that the Paris Climate Agreement does not pay attention to agriculture, however, does not mean that the document will not be important for the sector at all. Article 4 states that a balance needs to be achieved between anthropogenic emissions by sources and removals by sinks of greenhouse gasses in the second half of this century, in order to hold the increase in the global average temperature well below 2°C. It is obvious that this automatically implies that drastic mitigation actions are needed to reduce emissions from a sector that is responsible for almost 25% of the greenhouse gas emissions. Apparently, the world leaders were afraid to tell you…

Similarly in the area of adaptation, the silence about agriculture does not mean nothing will happen. Many of the provisions on adaptation and finance aim at giving increased support to developing countries to meet their adaptation needs, both through greater emphasis on providing financial resources and through the transfer of technology and capacity building. Given the impact of climate change on agriculture and the dependence of developing countries on this sector, it is beyond doubt that implementation of these new provisions will in fact largely focus on agriculture. The same might be true for the role National Adaptation Plans will play. Article 7(9) of the Paris Climate Agreement requires states to have such a plan aimed at building the resilience of “socioeconomic systems”. Agriculture definitely falls in this category.

Within only two decades a drastic transformation of the entire agricultural sector across the world, in developed and developing countries, is needed. This requires tremendous efforts of policymakers, farmers and the entire agribusiness. Let us hope that, despite the remarkable and regrettable silence of the Paris Climate Agreement about agriculture, states understand the urge to start to develop effective policies aimed at reducing emissions from agriculture while at the same time helping the sector to become more resilient to climate change.

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This project has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 655565.

20/12/2015

The Paris climate agreement: Some hesitations from a legal perspective

by Jonathan Verschuuren and Jesse Reynolds

Reason to celebrate? (Photo via UNFCCC)

Bringing the entire international community to agreement on a legally binding international environmental instrument is an extraordinary achievement. The primary achievement is not so much its substance, but the simple fact that there is a new agreement that offers a way forward that is endorsed by representatives of all countries. The Paris climate agreement establishes the contours of a future ongoing process for cutting greenhouse gas (GHG) emissions. The next ten to twenty years will show whether this actually significantly reduces climate change. The drawback of such an agreement that is acceptable to every state is that it must be modest in its commitments. Indeed, many original elements had to be deleted or watered down considerably.

Can the agreement [PDF] achieve its goal, that of holding the increase in global average temperature to below 2 degrees Celsius, and ideally even to 1.5 degrees Celsius? The unfortunate truth is that doing so seems to be unattainable unless we allow overshooting [PDF].  That means that we would initially go beyond atmospheric GHG concentrations that would lead to 2 degrees, but then later lower them. This would require the rollout of “negative emission technologies” that could remove carbon dioxide—the leading GHG—from the atmosphere. Article 4 implicitly endorses this, stating that in the second half of the century a balance should be achieved between anthropogenic (i.e.human-caused) GHG emissions and “removals by sinks.” Article 5 (as well as the original UN Framework Convention on Climate Change [PDF]) call for “sinks and reservoirs” of GHGs to be enhanced as well, something which many negative emission technologies would strive to do. However, these techniques remain untested and potentially risky at such scales.

Furthermore, the agreement’s commitments with regard to GHG emission cuts (called “mitigation” in climate-speak) lack clear focus. States are to make voluntary pledges, called Nationally Determined Contributions (NDCs). This bottom-up approach is not entirely new, as these were the outcome of the 2009 Copenhagen climate summit. The pledges that have since been submitted are estimated to lead to a 2.7 to 3.7 degree temperature rise by the end of this century. Countries are to submit new, more ambitious commitments every five years. Although this seems tepid, it is arguably the best that could be expected from an agreement with global participation. For the most part, countries are simply unwilling to undertake costly major GHG emissions cuts while their economic competitors do not. At the same time, this system of stepwise “ratcheting up” might be able to provide decision makers with assurance that all other countries are also taking action.

The effectiveness of this instrument thus still needs to be proven. Several mechanisms are in place to at least monitor the implementation of the NDCs. In 2023, the first “global stocktaking” will be performed “to assess the collective progress towards achieving the purpose of this Agreement and its long-term goals” (Art. 14). The outcome of this will merely “inform” countries in updating and enhancing their policies, “in a nationally determined manner” (Art. 14.3). The enforcement provision was diluted considerably as well. Article 15 now just states that there will be a committee of experts that will facilitate compliance, “in a manner that is (…) non-adversarial and non-punitive.” It is unfortunate that the expertise that was built up within the Kyoto Protocol’s Enforcement Branch will not be better utilized under the Paris Agreement. Without a proper enforcement mechanism it remains to be seen how effective the NDCs will be.

Without a collective emissions reduction target, and instead a rather vague (and unattainable) target, one might wonder how national authorities are to decide which targets they should each adopt. Mitigation policies are typically long-term ones that require a clear path for several decades, with associated planned measures and available funds. Fortunately, several countries have recognized this and have laws that do that. The United Kingdom is a prime example, with its 2008 Climate Change Act, which plans ahead until 2050, when an 80% emission cut is to be achieved (relative to 1990). The EU as a whole has set GHG emissions targets for 2020, 2030, and 2050 (20%, 40%, and 80% GHG emissions reduction, respectively, relative to 1990 levels). The Paris summit showed that the international community as a whole is not willing to adopting such commitments in a binding fashion.

Ultimately, the Paris Agreement does not bring much that is truly new. It mostly codifies what has been developed over the past years under the UN process. This is true not only for GHG emissions cuts, but also for other topics such as adaptation, finances, technology transfer, and loss & damage. The work that is already being done under the existing mechanisms, such as the Financial Mechanism, the Technology Mechanism, and the Warsaw International Mechanism for Loss and Damage, is reaffirmed  in a binding legal document, albeit in rather soft language that often utilizes the verb “should” instead of “shall.” However, the proposal to codify the emerging scheme on “Reducing Emissions from Deforestation and Forest Degradation” (REDD+) did not survive the Paris negotiations, nor did the proposal to set up a Climate Change Displacement Coordination Facility. Both of these topics are important and bound to return to the negotiating table in future years.

Although Paris means a step forward, the reality is that the international community is unwilling to do what is needed and justified in order to prevent dangerous climate change. To a large degree, this can be explained by the fact that climate change presents an extremely difficult—if not “wicked”—problem. Genuinely effective action would require that leaders take steps whose costs are borne in the short term by their constituents but whose benefits are shared by the whole world and experienced in the future. Such bold decision-making would likely come at a steep political price. In the meantime, voluntary but hopefully escalating commitments may be best that we—and future generations—can expect.

25/06/2015

Spectacular judgment by Dutch Court in climate change case

Court orders State to achieve reduction target of 25% in 2020

Palace of Justice, The Hague (photo by Flickr user Elvin)

In an unprecedented and unexpected decision, a Dutch court found that the Netherlands government has acted negligently and therefore unlawfully towards Urgenda by implementing a policy aimed at achieving a reduction for 2020 of less than 25% compared to the year 1990. The court had to overcome many obstacles to reach this decision, such as the obstacle of causation (from a global perspective, the Netherlands has a relatively small contribution to climate change, so how can the Dutch State by liable for climate change damage suffered by individual Dutch citizens?) and the obstacle of the principle of separation of powers, which does not allow courts to move into politics (setting mitigation targets is usually considered to be a policy matter, of which courts should remain clear). In other countries, particularly the United States, where many climate change suits have been decided or are ongoing, these two obstacles present the main reason why most climate change cases went nowhere, so far…

In its decision of June 24^th, 2015, which was rightfully translated in English as international interest in the judgment will be massive, the Court orders the State to limit the joint volume of Dutch annual greenhouse gas emissions, or have them limited, so that this volume will have reduced by at least 25% at the end of 2020 compared to the level of the year 1990. How did the Court reach this decision, and, more importantly, how did it overcome the two obstacles mentioned above?

The case was initiated by Urgenda, a foundation that was established in 2008 with the aim to stimulate and accelerate the transition processes to a more sustainable society, beginning in the Netherlands, by, among other things, legal action. More than 800 individual citizens joined the suit, so the case was lodged by Urgenda acting on its own behalf as well as in its capacity as representative of these individuals. Under Dutch tort law, NGOs are allowed to initiate public interest cases (see extensively Berthy van den Broek, Liesbeth Enneking, Public Interest Litigation in the Netherlands. A Multidimensional Take on the Promotion of Environmental Interests by Private Parties through the Courts, 2014 Utrecht Law Review 10:3). On standing, the Court not only finds that Urgenda is allowed to represent current generations, but also future generations, because the foundation is aimed at achieving a sustainable development (see judgment under 4.6-4.8). This makes this case a landmark case for the debate on intergenerational equity as well.

The question that the court had to address is whether the State acts unlawfully by “only” pursuing the reduction targets that were imposed upon the Netherlands by EU-law for 2020: a 21% reduction for sectors covered by the EU Emissions Trading Scheme (basically large industry and power stations), and a 16% reduction for non-EU ETS sectors (such as transport and agriculture). Under Dutch tort law, there are two ways in which unlawful action or inaction can be established: actions contrary to legal norms, or actions that are not contrary to written legal norms, but that are considered to be violating the standard of due care. First, the Court finds that the state did not breach its legal obligations under a range of legal instruments, such as the UNFCCC, Kyoto Protocol, various EU climate change instruments, the European Convention of Human Rights, etc.

Then, however, the Court tests whether the State fulfilled its duty of care towards its citizens. This is where the case becomes really interesting, because in order to establish what exactly, in this case, this duty of care entails, the Court relies on a large number of binding and non-binding rules and principles (such as the precautionary principle and the principle of ‘fairness’), policy statements, and even ‘scientific consensus’, to determine what can be expected of the State. The Court then finds: ‘Due to the severity of the consequences of climate change and the great risk of hazardous climate change occurring – without mitigating measures – the court concludes that the State has a duty of care to take mitigation measures. The circumstance that the Dutch contribution to the present global greenhouse gas emissions is currently small does not affect this. (…) It is an established fact that with the current emission reduction policy (…) the State does not meet the standard which according to the latest scientific knowledge and in the international climate policy is required for Annex I countries to meet the 2°C target.’

How did the Court overcome the two obstacles mentioned above: causation and separation of powers?

On causation, the Court uses earlier case law on joint liability: the fact that one actor’s contribution to damage is minor, does not allow courts to reject liability. On the contrary, this actor can, under certain circumstances, be hold liable for the entire damage by those who suffer the damage. It is then up to the targeted tortfeasor to reclaim part of these costs from the other tortfeasors. After having referred to this jurisprudence, the Court states: ‘The fact that the amount of the Dutch emissions is small compared to other countries does not affect the obligation to take precautionary measures in view of the State’s obligation to exercise care. After all, it has been established that any anthropogenic greenhouse gas emission, no matter how minor, contributes to an increase of CO2 levels in the atmosphere and therefore to hazardous climate change.’ Interestingly, the Court follows the principle of common-but-differentiated responsibilities that is one of the main principles of the UNFCCC to argue that it is only fair that the Netherlands takes a proactive approach when it comes to mitigation: ‘Here too, the court takes into account that in view of a fair distribution the Netherlands, like the other Annex I countries, has taken the lead in taking mitigation measures and has therefore committed to a more than proportionate contribution to reduction. Moreover, it is beyond dispute that the Dutch per capita emissions are one of the highest in the world.’ The Court then concludes:

From the above considerations (…) it follows that a sufficient causal link can be assumed to exist between the Dutch greenhouse gas emissions, global climate change and the effects (now and in the future) on the Dutch living climate. The fact that the current Dutch greenhouse gas emissions are limited on a global scale does not alter the fact that these emission contribute to climate change. The court has taken into consideration in this respect as well that the Dutch greenhouse emissions have contributed to climate change and by their nature will also continue to contribute to climate change.

The Court spends a good deal of considerations on the separation of powers. It apparently is very conscious of the fact that it is encroaching upon the realm of policy-making.  The government defended its policy by stating that it is working towards remaining within the 2 degrees limit. To achieve this, bigger emission cuts would be required in 2030. It was a policy decision, backed up by a majority in Parliament, to stall emission cuts a bit (also with a view to the economic crisis), and to speed up emission reductions later. According to the government, this is a legitimate political decision that should not be reviewed by courts.

The Court, however, takes a firm position in the separation of powers debate: ‘It is worthwhile noting that a judge, although not elected and therefore has no democratic legitimacy, has democratic legitimacy in another – but vital – respect. His authority and ensuing “power” are based on democratically established legislation, whether national or international, which has assigned him the task of settling legal disputes. This task also extends to cases in which citizens, individually or collectively, have turned against government authorities. The task of providing legal protection from government authorities, such as the State, pre-eminently belong to the domain of a judge. This task is also enshrined in legislation.’ According to the Court, this is exactly what the claim asks of them: provide legal protection against negligence on the part of the State. The Court acknowledges that by granting judicial review in this case, it will moving into the policy arena: ‘This does not mean that allowing one or more components of the claim can also have political consequences and in that respect can affect political decision-making. However, this is inherent in the role of the court with respect to government authorities in a state under the rule of law. The possibility – and in this case even certainty – that the issue is also and mainly the subject of political decision-making is no reason for curbing the judge in his task and authority to settle disputes. Whether or not there is a “political support base” for the outcome is not relevant in the court’s decision-making process.’

This is a firm statement indeed! The Court does acknowledge that there has to remain room for political decision-making, hence they only set the minimum reduction target of 25% reduction, without imposing the measures that need to be taken to achieve this target, nor preventing (future) decision-makers to go beyond this target. Why 25%? The court bases this decision upon scientific data, but also upon previous policy statements by Dutch authorities and upon the statement in court that a 25% emission cut in itself would not be entirely impossible to achieve. The Court rejects the policy decision to stall the reduction speed until 2030, by arguing that this approach ‘will cause a cumulation effect, which will result in higher levels of CO2 in the atmosphere in comparison to a more even procentual or linear decrease of emissions starting today. A higher reduction target for 2020 (40%, 30% or 25%) will cause lower total, cumulated greenhouse gas emissions across a longer period of time in comparison with the target of less than 20% chosen by the State. The court agrees with Urgenda that by choosing this reduction path, even though it is also aimed at realising the 2°C target, will in fact make significant contributions to the risk of hazardous climate change and can therefore not be deemed as a sufficient and acceptable alternative to the scientifically proven and acknowledged higher reduction path of 25-40% in 2020.’

There are many very important elements in this judgement that warrant further discussion and research. It is clear that the Dutch Court provided a break-through in climate change litigation, at least in the Netherlands. We have to wait and see whether this approach is copied by courts in other countries, and, first, whether this spectacular decision survives appeal. The Dutch government did not yet indicate whether it will appeal the judgement. It currently ‘studies’ the decision.

Update: Subsequent to the writing of this blogpost, the government of the Netherlands indeed appealed the Urgenda case. On 9 October 2018, the Higher Court in The Hague rejected all objections by the State. An explanation of this second sensational judgment is available here.   

26/05/2015

Enforcement of the EU ETS in the Member States: Further improvements needed

Although the EU Emissions Trading Scheme (EU ETS) has been operating now in three trading phases for ten years and has been extensively covered by legal research, there has been remarkably little attention for the enforcement of the ETS. Although, generally, we have seen an increasing centralization of the EU ETS, monitoring and enforcement still are largely in the hands of the emissions authorities in the states in which the EU ETS operates: 28 EU Member States plus Norway, Liechtenstein and Iceland. As part of the EU funded FP7-project ENTRACTE (Economic iNsTRuments to Achieve Climate Targets in Europe), we did an ex-post evaluation of the legal implementation of the EU ETS at Member State level with a focus on compliance. We wanted to know whether the effectiveness of the compliance mechanism of the EU ETS has been improved over the years and what further improvements (if any) are necessary. We reviewed the relevant EU law in each of the three phases, reviewed previous evaluations and relevant research projects, and evaluated the implementation of the EU ETS in selected Member States, both through existing sources and through interviews with key players in the compliance mechanism at Member State level. The Member States that we studied were Germany, the Netherlands, Hungary, Greece, Poland and the UK.

The EU ETS is the largest trading program in the world designed to combat global climate change.  The theory behind emissions trading is that a market mechanism is established in order to mitigate greenhouse gasses. After a cap is set and potential polluting firms have obtained allowances to emit, they can either (1) reduce their emissions and sell their allowances by for example investing in technological innovation; (2) use their allowances in order to cover their emissions; or, (3) increase their emissions by buying additional allowances on the market. The crucial importance of a well-developed and operationalized compliance chain has been neglected in the original design. In fact, a striking paradox of the EU ETS is that while the idea is that the market should be the place to regulate greenhouse gas (hereafter: GHG) emissions, the system only functions if it operates in a highly regulated context. Market participants must have the confidence that the system is transparent and consistent, and that it guarantees a level playing field for all actors in the 31 participating States because every firm complies with the rules. Effective enforcement of the rules is, therefore, crucial.

The EU ETS legislation originally left a considerable amount of discretion to Member States. This particularly included operational elements of emission trading, such as registration, monitoring, verification, reporting and enforcement issues. Only after European law enforcement agencies signalled that in some European countries carbon trading fraudsters may have accounted for up to 90% of all market activity, with criminals pocketing billions, the compliance issue received increased attention. Moreover, different strategies for ensuring compliance among Member States give rise to distortions of the market for greenhouse gas allowances. The effectiveness and reliability of the ETS, therefore, to a significant extent depends on the effort of each of the Member States. Lack of compliance of only a few or even a single Member State can harm the functioning of the ETS in the entire EU.

We, as well as other researchers in the consortium (see the London School of Economic’ report on compliance), found that compliance with the EU ETS is high.  Most infringements are caused by genuine mistakes and lack of knowledge, not by deliberate actions to evade obligations. The majority of offences concerns the operation of an installation without holding the required permit, exceeding the deadline for submitting the emission report or not monitoring in accordance with the monitoring plan. It is also believed that the verification process pays off: many mistakes are discovered by private verifiers and subsequently rectified. Since prices of allowances have been very low, the majority of allowances are surrendered and not traded. Hence, the EU ETS has not been tested to the full yet, and it remains to be seen whether compliance will be as high in a market under stress (with high prices due to limited availability of allowances).

There are many indications that current enforcement activities will not suffice in a market under stress, although there a big variations among countries. The number of staff employed in the national emissions authorities, for example, differs enormously, ranging from 4 to 5 in Greece and Hungary to 150 in Germany, 40-50 of whom are devoted to inspecting compliance by installations, i.e., checking emission reports, monitoring reports etc. No need to explain what this means for effective enforcement. The biggest loophole that we found in our evaluation is the absence of site visits. Site visits are not yet part of the standard enforcement strategy of most Member States we studied. Only the UK and the Netherlands have a well-developed blueprint for conducting regular site visits on the basis of a risk assessment. There is a considerable risk that non-compliant behaviour will remain undetected when inspectors rely on data provided by the “paper work” that goes with the EU ETS in its  automated system. In the UK, the competent authority regularly conducts site visits as part of its enforcement strategy; 5% of the operators are audited each year. Operators receive notice of these audits since their purpose is more to check than to inspect, although formally the regulator could use its power of entry to perform an unannounced inspection. Regulators in England and Wales have developed a common format for reporting the results of site visits, which are entered into an electronic database. The details include a summary of the visit, any instances of non-compliance detected follow-up actions that have been agreed with the operator.  The findings of the site visit may also be shared with other government bodies. Non-compliance is explicitly recorded to create a database of historical performance for future reference. Follow-up varies from a phone call or a visit to slightly more invasive forms such as a warning. By comparison, in Germany inspection was until 2013 mainly an administrative process done behind the desk at the emissions authority.  This is true for most of the EU Member States. Germany has very recently changed its policy and now officers of the ETS authority do joint inspections together with officers responsible for the enforcement of regular environmental permits, thus benefiting from the experience and knowledge on past performance of the individual company that the latter usually has.

There is not enough space here to cover all the elements of the enforcement system in the Member States that can be improved. Overall, we concluded that Member States can learn a lot from each other’s attempts to close loopholes and fix weak spots in the compliance mechanism. Overall, more efforts should be undertaken to harmonize enforcement practices of the national competent authorities responsible for the enforcement of the EU ETS. This is not easily achieved. Our research clearly shows that compliance assistance is regarded as the most important element of the compliance cycle of the EU ETS: helping companies to apply with this complex regulatory instrument. Such compliance assistance is best offered at the national level in the national context. In addition, we think that the EU, with the extensive legislative framework for the EU ETS that was developed over the years, has exhausted its legislative powers in this area. Therefore, other forms of harmonization (e.g., network based peer review) need to be explored.