Environmental Law

30/06/2021

The Challenge of Meaningful Comparisons of ETS Systems: How Canada and the EU Price Emissions

By Michael Leach

Introduction

Scholars and policymakers have been considering emissions trading systems ever since at least the 1960s when Ronald Coase imagined pollution and emissions as factors of production that could be converted into transferable legal rights.^[1] Although it took a number of decades yet before the first markets for emissions trading took off, there are now a relatively limited pool of functional examples of emissions trading systems (ETS) around the world that provide some grounds for comparison and lesson learning as these systems continue to evolve and future ones are imagined. There is tendency among scholars to treat the puzzle of emissions trading as a kind of multi-case engineering design process that searches for optimally efficient mechanisms, system architectures, forms of regulatory market oversight. From such a perspective, the few examples of ETSs around the world can be mined for evidence about what models and practices work best, and then plugging them into existing systems in processes of technical refinement. What is less discussed, however, are the boundaries of what can be learned from such inter-system comparisons, something that becomes evident once ETSs are appreciated more as regulatory systems in and of themselves rather than as a specific kind of markets that are subject to regulatory oversight. This blogpost will draw attention to these limits through a very focused and cursory comparison of the EU ETS and the Canadian emissions reduction scheme under the Pan-Canadian Framework on Clean Growth and Climate Change along the narrow comparator of how the two are structured to produce prices on emissions.

ETS Comparisons

Comparative studies of ETSs are relatively few and far between, largely because the number of actual functioning ETS in the world is quite limited.^[2] Of those that exist, ETS comparisons have largely been done to evaluate the effectiveness of different ETSs in creating a functioning market and achieving actual emissions reductions goals.^[3] Other types of comparative studies have compared the experiences of different industrial sectors within single ETS systems to evaluate how well or poorly a given ETS incentivizes them to reduce their emissions and innovate cleaner technologies.^[4] Still others have compared different specific features of ETS systems,^[5] or have compared the relative effectiveness of ETS systems versus across-the-board carbon taxation to induce emissions reduction behavioural changes.^[6] In almost all cases, the metric of comparison is the same, namely how effectively a given ETS achieves its respective goals.

By framing ETSs as forms of regulatory technology, however, much is missed about how contingent the designs of such systems are on the socio-political and legal environments in which they are created. By focusing on the technical pursuit of optimal models for ETS system designs, scholars sometimes forget to ask why it is that those few ETS systems that exist currently in the world differ from one another in the ways that they do. In 2013 Sanja Bogojevic argued that the EU ETS system was sui generis and unique because of the EU’s unique supranational legal environment. In so doing, Bogojevic challenged the notion that transferring ETS design and technologies from one jurisdiction to another is technical and straightforward.^[7]

In the brief EU-Canada comparison offered below, the argument follows Bogojevic’s line of thought, not only to point out that the two achieve emissions prices differently, but also to argue that the reason for this difference is that both ETS frameworks are products of their respective idiosyncratic political contexts and constitutional legal regimes.

Comparing Europe and Canada

Both the EU ETS and the Pan Canadian Framework are based on a logic that markets can achieve prices for emissions in ways that will produce incentives for affected industries to reduce their emissions. Despite the similarity of their goals, the two systems achieve those prices in quite different ways, however. The reasons for these differences are not simply a matter of better or worse technical choice-making, but rather are intimately connected to the natures of the political and legal orders within which they are created. Indeed, any accounting for the differences between the Canadian and European ETS systems will always circle back to the constitutional natures of Canada and the EU as political unions, one being a national federation, the other a supranational federation.^[8]

The EU ETS is structured to achieve prices by centrally determining and limiting permissible levels of emissions throughout the EU though establishing a cap on a restricted number of emissions allowances. Regulated industries are permitted to emit provided within the limits of the allowances that they own. By creating increasing scarcity of allowances as the cap is lowered annually, the ETS achieve prices on emissions as increasingly scarce allowances are traded among affected industries. Emission caps are determined centrally by the EU Commission and allocated by a combination of an open auction as well as some given freely to Member States to allocate as they feel is important. How many emissions allowances should be produced and auctioned or distributed is calculated according to both environmental considerations as well as the relative economic development of the different Member States, where some poorer countries are receive relatively more allocations to emit than richer ones). Over the course of its existence, the ETS has produced considerable fluctuations in emissions prices, but generally has been criticized for prices ending up too low, creating insufficient incentives on industries to reduce emissions accordingly.^[9]

The Canadian system achieves emissions prices quite differently. The method for achieving emissions pricing proposed in the Pan Canadian Framework and promulgated with the 2016 Greenhouse Gas Pollution Pricing Act (GGPPA)^[10] sets a basement benchmark price for all of its subnational provinces and territories to either match or surpass, using whatever means they choose, whether through a straight carbon taxes or by using market-based trading systems. In contrast to the EU ETS, the structural logic employed here is to rely on market forces (in those provinces that choose to establish a price through a trading system) to achieve an efficient sub-national emissions reductions within a framework that is centrally constrained by a basement emissions price setting. The Canadian federal system does not centrally determine emissions caps like the EU does because the point is not to intervene by controlling scarcity, but rather to set an outer framework for achieving at least a minimal price and then relying on the cost of emissions as the mechanism to structure how emissions are efficiently allocated throughout the economy. While sub-national provinces and territories that choose to set up their own ETSs are entitled to set their own cap and allowance allocation mechanisms to provide sufficient scarcity in order to achieve that price (or higher), unlike the EU Commission, it is not the Federal Government in Ottawa that does this.

Now, one can spend time wondering whether the European or Canadian ETS as they are structured will better achieve behavioural and emissions reduction goals. There is considerable debate in Europe, for instance, about whether or not to include a basement price equivalent (often referred to as an ‘auction reserve price’), while discussions in Canada have debated the value of a single national trading market instead of a sub-nationally variable one. To date, such a study has not been done, but its utility would be limited because the differences between the two systems are quite significant. The question of interest here, however, is not which system works better, but rather why it is that they are different to begin with. The choice of how a given political order will design its ETS to achieve prices is as much a political and structural question as it is a technical and economic one.

The fact that emissions prices in Canada and the EU are achieved through different forms of state intervention to manipulate prices, as well as the different roles and purposes that each system gives to the market to allocate resources and costs reminds us that both are fundamentally market-based regulatory systems, rather than merely emissions markets that are subjected to regulation. This framing nuance is important because whereas the latter suggests that achieving optimal prices should be possible through tinkering with forms of regulatory oversight to get the right fit, the former appreciates how the systems that produce prices are contextually sensitive and structurally determined by the political and legal frameworks in which they are created.^[11]

Although Canada and the EU are both forms of federations, the manner by and purposes for which power and legal authority is distributed within each is critically important for understanding why the ETS systems that each designed look the ways they do. The most obvious difference between the two is that the EU ETS is a single system for the whole union, while the Pan Canadian Framework holds together a patchwork of different provincial approaches to pricing emissions, united by a common benchmark price floor. While the EU ETS was originally designed specifically to avoid the prospect of a balkanization of different national emissions trading markets within the union,^[12] under the principle of subsidiarity that trading was more effectively done on a union-wide basis,^[13] the legal and political logic of Canadian federalism precludes the possibility for the central federal government to construct a single carbon market for the entire country in the same way.

The Canadian form of federalism is based on a series of historical agreements that united British colonial provinces under a single federal government on the condition that provincial autonomy was protected from interference by the centre within certain designated areas of governance, including economic activity.^[14] Section 92 of the Constitution Act of 1867 confers jurisdiction to provinces over much of the trade, industry, and resource extraction that are responsible for GHG emissions.^[15] It is because of this that it would constitutionally difficult, if not impossible, for the Federal Government in Ottawa to play the same regulatory role that the EU Commission does when it determines emissions quota for Member States. Similarly, because the EU is historically a federal project to create a supranational, liberal, internal market among sovereign Member States, it would face a different constitutional legal challenge if the Commission were to impose a single price floor or benchmark (in EU ETS literature this is often referred to as an ‘auction reserve price’)^[16] on the internal market in the way that the GGPPA does in Canada. While some scholars have argued that EU law would be permissive of such an action, they have also reported hesitancy on the part of economists in the Commission to consider it, concerned that if it were interpreted as a fiscal measure then passing it would be politically difficult, requiring a unanimous vote within the European Council.^[17]  In the absence of a centrally mandated basement price for emissions, however, the early phases of trading in the ETS is generally considered a failure for not producing high enough prices to sufficiently incentivize affected industries to reduce their emissions, helped in large part by giving too much discretion to Member States to freely allocate allowances through their National Allocation Plans (NAP) in ways that created competitive distortions and undesirably large windfall gains for some industries.^[18]

Conclusion

The point here is not to argue that comparing ETS systems is not possible, nor that regulatory tinkering with ETS systems cannot be inspired by other examples around the world. Rather, the aim is only to emphasize the challenges that are involved in making comparisons between ETS systems. Indeed, in order for comparisons to be meaningful requires going well beyond technical considerations of economic and regulatory cause and effect. Just because a particular mechanism successfully structures a market in ways that do induce emissions reductions in one place does not necessarily mean that it will be feasible elsewhere.

Understanding the socio-legal embededness of ETS systems is important because if we assume that all of them (both those that currently exist and any future ones) differ in how they are politically, legally, and economically embedded, or, alternatively how the legal, political and economic contexts of each delimit the range of technical options available to their designers to a bounded set of technical options, then this poses certain difficulties when imagining the transplantation of ETS technologies from one place to another.

Furthermore, by viewing ETS systems as sui generis and embedded regulatory systems, rather than as differently regulated markets, one can also appreciate how difficult it will be to achieve any future integration of ETS markets globally, as some have called for.^[19] Again, this is not to say that cross jurisdictional integration is impossible, and the case of the Western Climate Initiative that links the ETS markets of the state of California and Quebec proves its feasibility. At the same time, however, any such cross-border integration will require creating new sui generis ETS frameworks, as the EU did in 2003, but which will likely not be possible within Canada on a national scale.

This research is made possible through funding from the Netherlands Research Council NWO under grant number 406.18.RB.004.

29/06/2021

Setting Up Carbon Offset Farming in the EU: Identifying Benefits and Risks

The Intergovernmental Panel on Climate Change (IPCC) has estimated that the international community has until 2030 to cut human-caused carbon dioxide (CO2) emissions in half to maintain a 50% chance of avoiding the worst effects of climate change. By 2050 CO2 emissions will need to reach ‘net zero’ – where emissions are in balance with removals – to meet this challenge. The urgency is clear: States, organizations and business will need to use every tool at their disposal to achieve these ambitious emission reduction goals. At the EU level climate action is at the heart of the European Green Deal – an package of measures. This includes importantly  the European Climate Law that was this week adopted by the Council to enshrine the 2050 climate-neutrality objective into EU law and a 2030 Climate Target Plan to further reduce net greenhouse gas emissions by at least 55% by 2030. Just like the Paris Agreement (Article 6 of the Paris Agreement explicitly recognizes the possibility for international cooperation through the transfer of emission reductions) and national policies, the EU Climate action framework is an transitional path towards climate net neutrality rather than a response to calls in climate science for a more radical transformation. This means that a lot of the current debate revolves around ‘negative emissions’ and ‘carbon offsets’ as a tools for speedy action to avert dangerous climate change.

Carbon offset credits are used to bring a net climate benefit from one entity to another, and the theory goes that as GHGs enter the global atmosphere, it does not matter where exactly they are reduced. These carbon offset projects could also produce so called co-benefits such as social and environmental benefits; improved air or water quality and biodiversity. An offset project needs to be adopted, implemented, monitored and verified to determine the quantity of emission reductions it has generated. Carbon offset credits can be produced by wide range of national and international projects that reduce GHG emissions or increase carbon sequestration. These carbon offset projects can include agriculture. For example, the agricultural sector can enhance the capability of its land to be used as a sink, so that CO₂ from the atmosphere is naturally removed and stored in the soil or in above-ground biomass. While the contribution of agriculture to the GDP is relatively small (approximately 1.1% of the EU’s GDP), its direct contribution to EU GHG emissions is high, approximately 15% , but is also indirectly responsible for significant additional emissions. Agricultural emissions include those resulting from the growing of crops, the rearing of livestock and the management of soil to maximise production.

The agricultural sector has however long escaped environmental regulation, especially regarding agricultural emissions. Only as of 2021, agricultural GHG emissions have to be balanced under Regulation 2018/841/EU on Emissions from Land Use and Forestry (LULUCF Regulation). However, emissions from livestock are for example not included. Last week, The European Parliament and EU governments agreed on a reform of the Common Agricultural Policy (CAP). One of the biggest challenges is the alignment of the CAP with the Green Deal, the Farm to Fork strategy and  Biodiversity strategy. The problem remains that the CAP is not a climate instrument and there is no GHG-MRV connected to CAP funded projects. This was also the outcome of a recent report of the Court of Auditors : during the 2014-2020 period, the Commission attributed over a quarter of the Common Agricultural Policy (CAP)’s budget to mitigate and adapt to climate change. It was found that the €100 billion of CAP funds attributed to climate action had little impact on agricultural emissions, which have not changed significantly since 2010. In the new reform for the period 2023-2027  sealed this week a compromise was reached that 25% of the direct payments should be dedicated to eco-schemes that shift farmers toward environmentally friendly methods. However, it is not clear how these eco-schemes are defined and they depend on implementation by member states. The compromise has therefore been received with fierce criticism from the EEB and other NGOs for having too many loopholes and potential for ‘greenwashing’ EU farm policy.

Meanwhile, the Farm to Fork Strategy establishes that a new EU Carbon Farming Initiative will be launched in 2021, in order to reward climate-friendly farming practices, via the Common Agricultural Policy (CAP) or through other public or private initiatives linked to carbon markets. Carbon farming refers to the management of carbon pools, flows and GHG fluxes at farm level, with the purpose of mitigating climate change. This involves the management of both land and livestock, all pools of carbon in soils, materials and vegetation plus fluxes of CO2 and CH4, as well as N2O. It includes carbon removal from the atmosphere, avoided GHG emissions and emission reductions from ongoing agricultural practices. The Strategy establishes that the Commission will develop a regulatory framework for carbon credits but this is currently in its infancy and one of the questions is if and how market based approaches like carbon offsets or emission trading can and will be deployed.

Market-based approaches to climate change such as carbon offsets have also raised concerns and criticism.  Several studies have identified serious credibility issues with some carbon offset credits due to lacking ‘environmental integrity’. For example, studies of the two largest offset programs – the Clean Development Mechanism (CDM) and Joint Implementation (JI), both administered by the United Nations under the Kyoto Protocol – established  that the majority of their offset credits may not represent valid GHG reductions. It is not easy to measure and ascertain the quality of carbon offset credits. There are several conditions that must be met for the GHG reductions or removals to be real and effective: Carbon offset credits must be additional, meaning they would not have occurred in the absence of a market for offset credits. They should be accurate and overestimated (measurable), not be doubly accounted for and they should be permanent. Effects of CO2 emissions are very long- lasting, and once a GHG reduction or removal is reversed it obviously loses its offset function. Lastly, they should not be the cause for social inequality or other environmental harms.

To oversee that the quality is reached offset programs have been developed, usually by independent non-governmental organization. These programs develop standards that set criteria for the quality of carbon offset credits; third-party verifiers review if these standards are met, and there is a registry for transfer. Assessing the abovementioned quality criteria is however ambiguous and complex, and it is here where much of the debate is being played out, and where science and law meet. Article 6 of the Paris Agreement states that double counting will be avoided through ‘robust’ accounting methods. Nevertheless, the EU has phased out participation in CDM projects under the EU ETS, and  Participants in the EU ETS could only use international credits from CDM and JI towards fulfilling part of their obligations under the EU ETS until 2020. The EU ETS, currently, does not include agricultural emissions nor has it used the potential to acquire allowances from offsets in agriculture, either via avoided emissions or increased sequestration.   This is different in other carbon markets, such as those in California, Canada and Australia. Even though most of these offset programs have not yet generated huge volumes of offsets it is clear from the above that their relevance will become more prominent – as was also recently announced by the Biden Administration.

Looking forward to this, the EU already has already a rich experience with monitoring, reporting and verification (MRV) under the EU ETS on which it can built  for carbon offset projects. It can also learn from the successes and failures of existing protocols of agricultural offsets to identify design elements that can create or reduce barriers to effective mechanisms. For example, the EU can gain from Australian experiences with its extensive methodologies on a range of carbon farming methods since 2011. See our earlier blogpost here and here.   California and the provinces of Alberta and Quebec in Canada also offer interesting case studies: all offer the agriculture sector opportunities to sell offset credits and protocols for this are adopted (e.g. for dairy digesters). The programs in these different jurisdictions vary in (economic) design, functioning and compliance – making them interesting to study and compare. Fascinating as well, California’s program is linked with Quebec’s program since 2014 (and briefly to Ontario’s program in 2018) meaning that offsets and allowances can be traded across jurisdictions.   In two follow-up blogposts we will zoom in on the experiences with the offset carbon markets for agricultural emissions in California and Canada with a focus on the identified challenges above.

This research is made possible through funding from the Netherlands Research Council NWO under grant number 406.18.RB.004.

18/05/2021

Towards EU carbon farming legislation: what is the role of the ETS?

This is the first in a series of blogposts on a new project which we, at Tilburg Law School, have embarked on.[1] The projects starts from the recognition that the Paris Climate Agreement goals can only be achieved when greenhouse gas emissions from agriculture and land use are reduced and the sequestration capacity of these sectors is fully utilized. In most countries around the world, including in the EU, the heart of climate change mitigation policy consists of some form of carbon pricing mechanism. It seems inevitable that agricultural activities have to be included in carbon pricing mechanisms, such as the EU Emissions Trading Scheme (ETS). So far, however, policy makers have been reluctant to do so, partly because of the lack of political will, and partly because of the difficulty of measuring emissions and emission reductions at farm level.  With the improvement of measuring technologies and carbon accounting methods, however, the possibility to also regulate agriculture under the EU emissions trading scheme has become within reach.

This project aims to develop a regulatory framework that allows agricultural greenhouse gas emissions to be included in the EU ETS and to be aligned with the Common Agricultural Policy (CAP). This will be achieved through an ex post assessment of novel regulatory approaches in Alberta, California, China, and Australia and through an ex-ante assessment of inclusion of agricultural emissions under the EU ETS, either indirectly, through allowing on farm offsets, or directly, through requiring farmers to surrender allowances. Various models of inclusion of agriculture in the EU ETS will be developed and tested under a traditional ex-ante assessment methodology consisting of focus groups and stakeholder interviews.

The project runs from 2020 until 2023, so our proposals can be included in the first discussions for the post 2030 trading phase. An earlier adoption is not very likely, since inclusion of the agricultural sector in the EU ETS will have a big impact on the system. Changing the rules of the game in the middle of the current trading phase, which runs from 2020 until 2030, is not entirely impossible, but also not advisable due to the disruption of the carbon market it may cause. The European Commission, however, is stepping up its efforts to reduce agricultural GHG emissions through its European Green Deal Policy, which includes a proposal for a European Climate Law and a Farm to Fork Strategy.

The 2020 proposal for a European Climate Law introduces an ambitious overall target for the EU’s mitigation policy as it requires the Member States to have emissions and removals of greenhouse gases balanced at the level of the EU at the latest by 2050, and to pursue a new 2030 target of 50 to 55% emission reductions compared to 1990. Although the AFOLU sector is not specifically mentioned in the European Climate Law, it is impossible to achieve such targets without a drastic reduction of emissions from this sector. It comes as no surprise, therefore, that the EU 2030 Climate Target Plan, presented in September 2020, does pay ample attention both to agriculture and to land use, land use change and forestry (LULUCF). The 2030 Climate Target Plan states that new measures are being considered for the 2030-2050 period, including an expansion of the LULUCF Regulation to also cover non-CO₂ emissions from agriculture. The European Commission does not mention the option to integrate agricultural emissions into the EU ETS. Instead,

‘(o)vertime, the Commission clearly sees merit in the creation of an Agriculture, Forestry and Land Use sector with its own specific policy framework covering all emissions and removals of these sectors and to become the first sector to deliver net zero greenhouse gas emissions. Subsequently, this sector would generate carbon removals to balance remaining emissions in other sectors induced by a robust carbon removal certification system.’ ^[2]

Similarly, in the 2020 Farm to Fork Strategy, the European Commission is hinting at a new EU carbon farming initiative:

‘An example of a new green business model is carbon sequestration by farmers and foresters. Farming practices that remove CO₂ from the atmosphere contribute to the climate neutrality objective and should be rewarded, either via the common agricultural policy (CAP) or other public or private initiatives (carbon market). A new EU carbon farming initiative under the Climate Pact will promote this new business model, which provides farmers with a new source of income and helps other sectors to decarbonise the food chain. As announced in the Circular Economy Action Plan (CEAP), the Commission will develop a regulatory framework for certifying carbon removals based on robust and transparent carbon accounting to monitor and verify the authenticity of carbon removals.’^[3]

So far, most attention is focused on using the CAP to promote carbon farming. In April 2021, the European Commission published a Technical Guidance Handbook on this. There are, however, a couple of disadvantages connected to the CAP, most of which are caused by the fact that the CAP has not been designed as a climate change instrument. I discussed this in an earlier blogpost. It is important, therefore, to also look into climate change instruments to see whether these can be used to promote carbon farming.

One of the “other public initiatives” for a carbon market mentioned in the Farm to Fork Strategy might very well be integration of agricultural emissions in the EU ETS. In the remainder of this blogpost, I will have a first brief look at what carbon farming as part of the EU ETS might look like.

Two models of integration: direct inclusion in the ETS or through offsets

In the EU, the ETS has gradually expanded to require GHG emitting activities to surrender allowances for the amount of GHGs emitted. Directly requiring farmers to surrender allowances for their emissions under an ETS has not been proposed much and is not a requirement in any of the emissions trading systems around the world. The direct inclusion of farming in an ETS is considered problematic because of the difficulty of measuring emissions and emission reductions at the farm level because of the variety of factors involved (such as the diet of individual animals, tillage intensity, soil composition, weather systems of individual regions, the way in which fertilizer is applied, etc.). In addition, most farms also remove CO₂ through sequestration in soils and vegetation. For a small number of farming activities, however, direct inclusion in the ETS seems possible, especially for large scale livestock keeping within closed buildings, such as piggeries. Methane emissions can easily be monitored here, technologies to capture the methane and convert it into biogas exist, thus allowing farmers to choose between  buying allowances or investing in such technologies. With the improvement of measuring technologies and carbon accounting methods, however, the possibility to also regulate more forms of agriculture with high GHG emissions may become within grasp.

Most countries that have an ETS, have included agricultural emissions as offsets. This is true for most newly created emissions trading schemes, for example Alberta (2012), California (2014), and China (2018) (Ontario had it, but there, the ETS was revoked in 2018). All of these schemes allow regulated industries to acquire allowances from offsets in agriculture, either avoided emissions or increased sequestration. The latter incentivizes farmers to farm carbon in addition to crops as was also suggested as a policy option for the EU by the Agricultural Markets Task Force. The Canadian province of Alberta, for example, allows farmers to register and implement such projects as conservation  cropping, agriculture nitrous oxide emission reduction, changed beef  feed, methane reducing dairy production and biogas production from manure. The offsets generated under these projects can then be sold by the farmers to Alberta’s industrial emitters that have not met their provincially mandated reduction obligation.

The country with the longest experience in financing farmers for their avoided emissions and increased sequestration is Australia with its Carbon Farming Initiative (2011). Although this formally is not part of an emissions trading system as here the government acquires the offsets rather than regulated industries, the legal rules governing the Australian system are very similar to those in an ETS and can be used as a source of inspiration for a modified EU ETS that includes agricultural emissions. A positive evaluation of the Australian scheme shows that the EU, indeed, can rely on the Australian experiences with its extensive methodologies on a range of carbon farming methods. See our earlier blogpost here and here. These include for example soil carbon sequestration, beef cattle herd management, and beef cattle feed methods. The evaluation does show, though, that the drafting of many rules and regulations is needed, such as rules that require farmers to establish a baseline level of soil carbon, and to monitor, report and verify the amount of CO₂ sequestered in the projects allowed under the ETS offsets regime, as well as rules on commitment periods.

Relationship to other policy instruments

In the EU, as of 2021, agricultural GHG emissions will be regulated under Regulation 2018/841/EU on Emissions from Land Use and Forestry (LULUCF Regulation). It requires emissions and removals in land use and forestry sectors, including agricultural land use for arable crops and grassland, to be balanced. This will require some sequestration efforts due to losses occurring under conventional agricultural practices, but this can also be achieved in for instance the forestry sector. Furthermore, emissions from livestock are not included. Integration of agricultural emissions into the EU ETS, either directly or through offsets, will have to be aligned with the LULUCF Regulation.

Alignment with the EU’s Common Agriculture Policy (CAP) will also be necessary. The CAP currently  encourages farmers to apply climate-friendly practices and techniques. Both the cross-compliance mechanism, the direct payments and the subsidies for rural development relate partly to taking climate measures. It has generally been accepted in literature, however, that current EU climate and agriculture policies are largely insufficient. A much stronger focus of the CAP on climate change is advocated, for instance in this recent study published by the European Commission.

Several individual countries have introduced or are considering the introduction of domestic carbon taxes or even a meat tax aimed at further reducing GHG emissions, beyond the requirements of current EU instruments.  These domestic instruments should also be taken into account when designing a new pricing mechanism for agricultural emissions.

Impact on food security

Research by the World Bank shows that mitigation policies using a global carbon price which does not account for food production implications, will hurt crop and livestock production. To avoid such negative impacts, carbon pricing policies should be developed thoughtfully, and aim for adaptation and food production co-benefits. As discussed in an earlier blogpost, increased resilience and reduced emissions can sometimes go hand-in-hand. It is evident, however, that changes in consumption will be necessary as well. The difficulty of reducing emissions from free roaming cattle and the sheer amount of land needed to grow animal fodder for a world population of around 10 billion in 2050 necessitate dietary changes with households moving away from meat and towards plant based food and seasonal produce, reduced overconsumption of food and reduced food waste. In a great recent article in the new journal Nature Food, Rockström et al. argue that recent modelling analysis suggests ‘that it is biophysically possible to feed 10 billion people a healthy diet within planetary boundaries, and in ways that leave at least 50% of natural ecosystems intact’ as long as there is a global shifting towards healthy diets, increased productivity while transitioning to regenerative production practices, and reduced food waste and loss by 50%. Any regulatory approach towards reducing GHG emissions from agriculture has to contribute to this bigger aim to achieve a global food transition.

These are some of the legal and governance issues that need to be dealt with in the development of a regulatory framework to address greenhouse gas emissions from agriculture. For a full overview of all issues that need to be considered by law and policy makers, the FAO just published this comprehensive legislative study ‘Agriculture and climate change. Law and governance in support of climate smart agriculture and international climate change goals’. In our project, we will be focusing on the EU ETS as a vehicle for reducing agricultural GHG emissions. We will keep you updated here!

26/08/2019

Taxing and Managing Meat: An Integrated Approach to Tackle Climate Change

By Maria Alejandra Serra Barney, Nathalia Cortez Gomez, Lorena Perez Roa and Melanie Auvray (Alumni Tilburg Law School)

A few months ago, a team of four master students from Tilburg University participated in the Geneva Challenge 2018 on Climate Change. Our proposal aimed to tackle greenhouse gas emissions of the livestock industry, by creating a Global Tax Meat Scheme, that would allow countries from all over the world to have a profound transition to a cleaner industry while achieving a change on consumer’s behavior.

Climate Change is one of the biggest challenges of our generation. Action and cooperation from every country is needed, as well as from every sector and industry. While several actions to mitigate Climate Change have been developed in the most acknowledged pollutant industries, such as transportation, mining, or product manufacturing, the severe environmental impacts of the livestock industry have managed to remain in the shadows. Livestock industry alone is responsible for 14.5% of the annual worldwide Greenhouse Gas (GHG) emissions of Carbon Dioxide (CO₂), Methane (CH₄) and Nitrogen Dioxide (N₂O), exceeding the emissions produced by the entire global transportation sector^[1]. Nevertheless, a survey developed by Chatham House along with the Glasgow University in 2014^[2], revealed that livestock sector is not recognized by people as a contributor to climate change^[3]. As a matter of fact, one-quarter of people considered that ‘meat and dairy production contributes either little or nothing to climate change’^[4].

Accordingly, and contrary to popular belief, the livestock industry is responsible for a large amount of the global Greenhouse Gas (GHG) emissions, which are generated through animal physiology (enteric fermentation, respiration and excretions), animal housing, feed crops, manure handling, processing of livestock products and bi-products, transportation and land use for livestock production (deforestation, desertification)^[5]. This should not come as a surprise, considering its strong place in the economies of both developed and developing countries, as the main supplier of global calories, proteins, and essential micronutrients^[6]. Likewise, livestock production is a good alternative in some developing countries that have difficulty growing crops and need to ensure the nutrition of their population^[7], however relying almost exclusively in livestock products entails risks for human health and food security itself. The consumption of meat in developed countries is five times higher than in the developing countries^[8], which increases the risk of colorectal cancer, pancreatic cancer and prostate cancer^[9]. According to the World Health Organization (WHO), red meat (beef, veal, pork, lamb, mutton, horse and goat) has been classified as Group 2A: “probably carcinogenic to humans”; and processed meat (‘hot dogs’, ham, sausages, corned beef, beef jerky, canned meat and meat-based preparations and sauces) as Group 1: “carcinogenic to humans”^[10], just as tobacco smoking and asbestos. This is why the WHO stresses the importance of the reduction on consumption of processed meat^[11], which makes the leading role that meat products have in food security nowadays questionable.

In addition, the increase in the global temperature will have a direct impact on the health and life of livestock animals^[12]. According to experts, the rise in the temperature will enable the acceleration in the growth of pathogens and parasites^[13], which might generate shifts in disease spreading, outbreaks of severe diseases or even introduce new ones^[14], increasing the risk of morbidity and death of livestock. Therefore, relying on livestock products to guarantee the food security in the world might lead to a food crisis in the future.

For environmental, health and food security reasons, livestock production should be limited and regulated. However, when it comes to international environmental treaties and agreements, even though there is a commitment and a mandate for countries to reduce GHG emissions, livestock industry is not really targeted, even though the projections indicate that animal product consumption will continue to increase^[15]. Indeed, UNFCCC and Kyoto Protocol only formulate a fragmented set of rules’^[16] and the Paris Agreement gives general recommendations that prioritize food security rather than targeting livestock industry. Regarding the health and food security issues related to the livestock industry, some countries are already using taxation to encourage healthy eating habits on its population, for instance by raising the prices of sugary soft drinks or sweets. Nevertheless, this approach has never been used on livestock products that, as it was explained before, are known to cause several health issues when consumed in excess.

In this sense, a study on the results on taxing beef, pork and chicken^[17] in Denmark, succeeded to prove that a possible tax on meat would reduce GHG emissions between 10.4% and 19.4% for an average household^[18]. However, we believe that these figures are not enough. Our proposal for the Geneva Challenge 2018 consisted in the establishment of a Global Meat Tax Scheme, which would consider the application of taxes in developed countries and levied on the consumers in order to directly induce changes in meat consumption. It should be collected by national authorities which must ensure that tax revenues are given back to specific actors so they can invest in the development of eco-efficient technologies to support technological improvements of the livestock industry management, or to invest in high protein food alternatives^[19]. Likewise, governments shall cooperate with international organizations in order to promote and support the transition into cleaner technology and farming processes in developing countries .

To make sure that tax revenue funds are safe and utilized solely for the intended purposes, we suggest the utilization of blockchain technology, which would enhance the security of the scheme, guaranteeing the transparency of all transactions being made, and as a consequence promoting trust among governmental entities and individuals. Likewise, States would be under the monitoring and supervision of an international authority, which would assess the compliance of the States and the adequate utilization of the funds.

We invite you to read our full project report for further explanations on this “Global Meat Tax Scheme” and its complementary adaptation and mitigation measures which would allow countries from all over the world to have a profound transition of the industry to cleaner livestock management while achieving a change on consumer’s behavior.

09/10/2018

Urgenda Climate Change Judgment Survives Appeal in the Netherlands

Today, the Court of Appeal in the Dutch city of The Hague rendered its judgment in the Urgenda case. As explained here, in 2015, the District Court decided that the Dutch State acted negligently and therefore unlawfully towards the environmental NGO Urgenda by implementing a policy aimed at achieving a GHG emissions reduction for 2020 of less than 25% compared to the year 1990. The government of the Netherlands appealed the case mainly because it objected against the interference by the court with the content of government policies which should be discussed in Parliament rather than in Court, following the principle of separation of powers.

Climate change impacts affect the enjoyment of human rights: courts have to intervene

In another sensational judgment, the Court of Appeal today rejected all objections by the State in firm and straightforward language. The Court of Appeal stated that there is an imminent and real danger that the right to life and the right to private and family life as protected under the European Convention on Human Rights (Articles 2 and 8 respectively) will be infringed by climate change impacts. To reach this conclusion, the Court of Appeal, like the District Court in 2015, follows IPCC reports, but also resolutions adopted on all UNFCCC COPs of the past decade, which all indicate that the CO₂ concentration in the atmosphere has to remain within the 450ppm limit or even within a 430ppm limit if the 1.5 degree target were to be observed. The Court of Appeal briefly summarized the impacts that are considered certain when global average temperatures reach 2 degrees Celsius (No. 44).

The State is obliged, under this human rights treaty, to take protective action. When so asked by individuals or NGOs,^[1] courts are obliged to test government actions (including policies) against human rights. So no infringement of the principle of separation of powers. On the contrary: testing government actions against human rights belongs to the core of the power of courts. By only setting the required outcome of policies (at least 25% emissions reduction by the end of 2020), the court leaves it up to the Cabinet and Parliament to discuss through which policy interventions this aim will be achieved, thus avoiding interference with policy-making.

In remarkably clear language, the Court of Appeal rejected all other objections that the State had brought forward and which resemble arguments brought forward in many of the other climate litigation cases across the world. I will deal here with the most relevant ones:

Uncertainty and precautionary principle

The State argued that climate change impacts are too uncertain a basis for claims like the one by Urgenda. Here, the Court of Appeal invokes the precautionary principle. The Court of Appeal stressed the importance of the precautionary principle, which it considers a binding principle in cases like these (referring to the text of the UNFCCC and the 2009 Tatar case decision of the European Court of Human Rights). Opposite to what the State argues, it is precisely the uncertainty (especially with regard to the existence of dangerous tipping points) that requires the State to have a proactive and effective climate policy (No. 73).

Causal link

Many cases elsewhere were unsuccessful because of a lack of causal link between the government policy on the one hand and climate change impacts on the other. In this case, the Court of Appeal argues that causality is less of an issue as no damages have been claimed, just an order to implement a certain policy. In that case, it “it suffices (in brief) that there is a real risk of the danger for which measures have to be taken. It has been established that this is the case” (No. 64).

Relationship to EU policies

The State argued that it has to follow and is following EU laws and policies and cannot be required to do more, as within the EU climate laws have for a large part been harmonized. The Court rejects this statement by referring to the latest Dutch policy goals for 2030, which aim at 49% reduction, which is more than the current EU target for that year. If the State wants to do more than the EU in 2030, it cannot argue that it cannot do more in 2020. Furthermore, the State did not substantiate its claims that having a stricter policy in place than that required by the EU harms the level playing field for Dutch companies. (Nos. 57-58)

Relationship to adaptation measures

According to the Dutch government, the Court should have taken into account the adaptation policies that have been put in place to protect the Dutch population against climate change impacts. This argument was rejected too. The Court of Appeal considered it unlikely that all severe climate change impacts can be dealt with through adaptation measures. (No. 59)

Interdependence policies other countries

The Dutch government also indicated that avoiding dangerous climate change impacts requires strict policies to be adopted across the world: since it cannot influence these domestic policies abroad, the Netherlands cannot be required to reduce emissions on its own. The Court of Appeal simply rejects this by referring to the special position of the Netherlands as a rich, developed state that has gained much of its wealth through extensive use of fossil fuels. Quite humourful, it adds: “Moreover, if the opinion of the State were to be followed, an effective legal remedy for a global problem as complex as this one would be lacking. After all, each state held accountable would then be able to argue that it does not have to take measures if other states do not so either. That is a consequence that cannot be accepted, also because Urgenda does not have the option to summon all eligible states to appear in a Dutch court.” (No. 64) There was an outbreak of laughter in the Court room after the latter sentence was spoken by the president of the Court of Appeal!

2020:  too short notice

Drastic policy changes like the one ordered by the Court in first instance are unattainable, we need more time. This argument used by the State in appeal was rejected too. The Court of Appeal simply referred to the fact that the State was aware of the IPCC reports dating back to 2007, and even, originally, had a much stricter policy in place for 2020. That policy, however, was changed in 2011, following elections. It now comes back as a boomerang!

Role of future generations

In the 2015 Court judgment, the Court indicated that the State also acts unlawful towards future generations. In today’s judgment, the Court of Appeal does not repeat this, but instead argues that human rights infringements are imminent already for current generations, so there is no need to also go into the question whether legal obligation towards future generations exist. (No. 37)

We will engineer ourselves out of the problems 

The State argued that its policy goals partly rely on climate engineering (“negative emissions technologies”) through which CO₂ can later be removed from the atmosphere. The Court, however, is not willing to take these future technologies into account: “the option to remove CO₂ from the atmosphere with certain technologies in the future is highly uncertain [..] (and) the climate scenarios based on such technologies are not very realistic considering the current state of affairs”(No. 49).

Today the Dutch Court of Appeal followed the bold move by the District Court in the world’s first successful climate litigation case of Urgenda. That first judgment of 2015 has sparked many initiatives across the world to start similar proceedings. The decision in appeal shows that the legal arguments used are valid. The new decision will, in my view, therefore, further boost global climate litigation.

[1] Here, Dutch law goes beyond what is required by the European Convention on Human Rights as under case law by the European Court of Human Rights (ECtHR) environmental NGOs cannot invoke human rights in an attempt to defend the environment as a general interest. According to the ECtHR, NGOs are only allowed to represent the individual interests of their members in case their members are potential victims of human right infringements. See extensively Jonathan Verschuuren, Contribution of the case law of the European Court of Human Rights to sustainable development in Europe, in: W. Scholtz and J. Verschuuren (eds.), Regional Environmental Law: Transregional Comparative Lessons in Pursuit of Sustainable Development (Edward Elgar 2015) 363, at 371-372.

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.

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.   

30/05/2011

Cycling in Sydney

Cycling to work in Sydney is only recommended if you get a real kick out of danger and don’t really mind whether you arrive in one piece or not. Basically it involves dicing with death. In an attempt to reduce greenhouse gas emissions and relieve the pressure on Sydney’s overloaded traffic infrastructure, the government is trying to encourage people to take up cycling. Policy papers are being drawn up, short sections of cycle paths are being constructed here and there, and they have even produced a very nice plan of the city which shows the location of all those little pieces of cycle path. Many companies have installed showers for employees who cycle to work and want to shower and change before starting work, because cyclists here generally use racing bikes and wear cycling gear.

But it’s a risky undertaking. Those stretches of cycle path begin and end abruptly. When you do come across one, you’ll be happy that you can cycle safely for a while, but then when you suddenly reach the end of that particular stretch of cycle path, you’ll have to work out how to cross five busy lanes of traffic so you can continue your journey on the correct side of the road. Many roads in the city center are full to capacity. There is limited space, with as many lanes of traffic are squeezed in as possible. Basically, there’s no room for cyclists, and if you decide simply to ‘make room’, the best you can expect is to be hooted at by irritated motorists. In the worst case, car drivers will simply take back the space that you are occupying and run you off the road. Motorists tend to get angry with cyclists, which is understandable to some extent when you see how cyclists behave on the road. They are mostly tough young guys (think: broad-shouldered, tattooed Australian surfers). They use the footpath to avoid queues of traffic, cycle diagonally over intersections, ride straight through red stoplights – basically, they ignore all the rules of the road. And even the more cautious cyclists – and I count myself among them – often choose to cycle on the footpath. That is not allowed either, but in reality the police tolerate it because they understand that it is safer than cycling on the road.

Sydney still has a long way to go before cycling becomes as easy and as normal as it is in the Netherlands. But there is one similarity: on the very first day I used my bike here, it got stolen…

02/05/2011

Historic swing

28 March, 2011

Elections were held last Saturday for the parliament of New South Wales, the state where one third of the Australian population live (and of this third, more than half live in Sydney). These elections are crucial because the vast majority of policy issues, including environmental policy, are decided at the state level. We watched TV every night, astonished at the political ads that consisted of little more than insinuations and slurs. “What else does he have to answer for?” and other sentences along these lines. And hardly any information at all about the policy intentions of the ad’s sponsor.

The elections resulted in a historic loss for the incumbent Labor government. Never before in the history of Australia did so many districts switch their electoral preference (of the 50 Labor seats in the 93-seat parliament, there are now only 17 left). Labor had been in power here for 16 consecutive years. Until today. Wiped out, mainly through a series of internal disputes and scandals, including bribery scandals involving major projects. For many voters, the Labor coalition had become symbolic for deals in which project developers filled their pockets and for the unabated rise in the cost of living for ordinary people.

Opinion polls have shown that the climate tax proposed by the prime minister (also Labor) at the federal level, which I wrote about previously, played a crucial role in Labor’s monumental defeat in New South Wales. The coalition of the Liberal Party and National Party used this convenient little ‘present’ to underscore Labor’s role in the tenacious inflationary trends plaguing the country. High energy prices, layoffs, a real campaign of fear mongering on the climate tax issue. There were some who voiced dissent, of course, basing their opinions on lessons learned from experiences in Europe. They pointed out the number of jobs created in Germany because of the government’s commitment to renewable energy. However, this small voice of reason was drowned out completely by the bombastic rhetoric used by politicians down under.