1. introduction
High hopes for the December 2009 Copenhagen Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC)Footnote 1 were dashed when the conference failed to reach agreement on legally binding measures for climate change mitigation after 2012,Footnote 2 when the first commitment period under the Kyoto ProtocolFootnote 3 ends. The main product of the COP – the Copenhagen AccordFootnote 4 – was a political agreement rather than a legal document,Footnote 5 permitting developed and developing countries to determine and notify their own emissions reduction commitments or mitigation actions subject to some level of international scrutiny.Footnote 6 The outcome of negotiations at the subsequent UNFCCC COP in Cancún, Mexico, in December 2010 exceeded the (low) expectations of the meeting,Footnote 7 with some modest progress made on issues such as adaptation financing and the need to strengthen efforts towards ‘Reducing Emissions from Deforestation and Forest Degradation in Developing Countries’ (REDD+).Footnote 8 In addition, parties agreed to include their self-nominated emissions reduction and mitigation pledges formally within the UNFCCC process,Footnote 9 giving them greater legitimacy and enhancing prospects that they will eventually be inscribed in treaty form.Footnote 10
Most recently, at COP17 in Durban, South Africa, in December 2011, parties agreed to launch a new process aiming to reach a universal climate change agreement of ‘legal force’ by 2015, to come into effect by 2020.Footnote 11 In return for developing countries such as China and India agreeing to this process, the Kyoto Protocol will be extended to a second commitment period commencing 1 January 2013 and ending either in 2017 or 2020.Footnote 12 However, it is currently unclear how many developed countries, beyond those of the European Union (EU), will accept emissions reduction obligations for this period. Accordingly, much remains to be done if the international community is to achieve its agreed objective of holding ‘the increase in global average temperature below 2°C above pre-industrial levels’.Footnote 13 Still lacking is international agreement on targets and responsibility for future reductions of greenhouse gas (GHG) emissions that will be adequate to meet the 2°C goal. Moreover, in pushing out the start date of any new climate change international legal arrangement to 2020, the disjuncture between climate change science (urging immediate action), and the international political process has been starkly highlighted.Footnote 14
Uncertainty over the nature of the post-2012 international climate change regime, as well as concerns that an international legal agreement – if it emerges – will come too late to prevent dangerous levels of global warming, has led the environmental legal and policy community to reconsider the future development of climate change law and governance. As Dan Bodansky put it, ‘many negotiators left Copenhagen with a sense that the UNFCCC process is broken, [however] there is no viable alternative at the moment’.Footnote 15 Although, for some, Cancún and Durban have restored faith in the capacity of ‘the multilateral climate change process to deliver results’,Footnote 16 there remain many substantive ‘surviving disagreements’ regarding the future international climate change regime.Footnote 17 These raise serious questions over the wisdom of relying predominantly upon a climate governance model based on a ‘top-down’ system of international target-setting translated into domestic regulatory measures such as cap-and-trade emissions trading schemes (ETS).Footnote 18 At the same time, an entirely ‘bottom-up’ approach, based on an aggregation of voluntary national commitments,Footnote 19 has proven less than satisfactory. The emissions reduction pledges announced by countries under the Copenhagen Accord are unlikely to be sufficient to meet the goal of limiting warming to no more than 2°C above pre-industrial levels.Footnote 20 Consequently at Durban, parties decided that the new negotiation process should ‘raise the level of ambition’, albeit without further elaborating upon how to bridge ‘the significant gap between the aggregate effect of Parties’ mitigation pledges in terms of global annual emissions of greenhouse gases by 2020 and aggregate emission pathways consistent with having a likely chance of holding the increase in global average temperature below 2°C or 1.5°C above pre-industrial levels’.Footnote 21
The difficulties presented by both the conventional ‘top-down’ climate governance model and the ‘bottom-up’ alternative embraced in the Copenhagen Accord and Cancún Agreements open up possibilities to consider alternative or supplementary modes of climate governance and law-making that might prove more effective in averting dangerous climate change and minimizing its adverse effects. Post-Copenhagen, several authors have envisaged how climate governance might develop beyond the international regime constituted by the UNFCCC and the Kyoto Protocol.Footnote 22 Others such as Bodansky and Diringer seek the middle ground between top-down and bottom-up climate governance approaches, advocating a ‘multi-track’ climate framework.Footnote 23 Eleanor Ostrom suggests that a ‘polycentric’ approach, with diverse regulatory efforts at multiple scales, might make a more effective contribution to addressing the problem of climate change.Footnote 24 A general theme is the way in which regulatory action taken at multiple levels of governance (including regional, national and sub-national levels) can contribute towards global goals of emissions reduction and climate change adaptation. As we discuss further in Section 2 below, multi-level governance envisages a necessarily decentralized approach, whereby development of climate change regulation takes place on many fronts and in different fora, but ideally subject to certain defining parameters agreed at more aggregated levels of governance (for example, national, transnational or international bodies).
Regulation of climate change at multiple governance levels is not just a theoretical proposition. Despite concerns that unilateral regulatory action on the part of national or sub-national government entities might lead to carbon leakage and competitive disadvantage, and may be ineffective to address the global problem of excessive GHG emissions,Footnote 25 it is clear that such regulatory action is taking place in many states and across a range of sectors.Footnote 26 While the reasons why regions, nations and cities might opt to pursue unilateral action despite the potential drawbacks are disputed,Footnote 27 it is nevertheless important to understand how and where this landscape of multi-level regulatory efforts is evolving and its consequences for the development of climate change law.
A multi-level approach to climate change governance must be cognizant not just of legal developments at the international level but also, particularly, those at the regional, national and sub-national levels, since its premise is the importance of examining strategies adopted to deal with climate change at a range of scales. In addition, an analytical model of multi-level governance departs from the state-centric view common to international law, allowing consideration of the contribution made by the activities of non-state actors, such as businesses, environmental groups and communities.Footnote 28 In Sections 3 to 7 of this article we discuss several case studies that illustrate the multi-level nature of governance structures emerging in climate change law. They include:
• the fragmented system of global GHG regulation based upon different ETS in multiple jurisdictions;
• developing arrangements governing forests and land-based sinks, including REDD+;
• the growth of climate litigation mounted in domestic and international courts which may play a role in articulating transnational liability principles and establishing responsibility for GHG emissions;
• multi-level efforts to ensure adaptation to unavoidable climate change; and
• the emergence of a decentralized approach to climate-related law-making prominent in countries with a federal governance system, such as Australia and the United States (US).
Finally, in Section 8, we consider the potential advantages, as well as the challenges, posed by a multi-level climate governance framework. As we argue, although this mode of climate governance and regulatory development offers significant flexibility and the potential for participation by a greater range of actors than the conventional top-down model, a major concern remains as to whether the multiplicity of different regulations will ultimately ‘add up’ to what is required in order to meet broader global goals of climate change mitigation and adaptation.
2. multi-level governance of climate change
The difficulties encountered through the international climate change negotiating process in transforming scientific consensus on the need for deep cuts in global GHG emissions into binding, timely international legal commitments has led to criticism of the UNFCCC-led process and the largely top-down model of climate governance it embodies. The ‘inadequate results’ achieved by the international climate change regime are ascribed to several factors, including the attempt made – principally in the UNFCCC – to articulate a comprehensive framework for climate change regulation that encompasses a wide variety of different sectors, and its commitment to a multilateral approach based upon procedures of consensus-based decision-making.Footnote 29 With the number of states parties to the UNFCCC now standing at 194, the prospects of agreeing upon robust measures for reducing emissions under such constraints seem diminishingly small. In this context, it should be remembered that although the ‘Platform for Enhanced Action’ agreed at Durban brings the US, China and India into the negotiating process for a new international climate change legal arrangement, the platform merely articulates an agreement to reach a future agreement, with little specification as to what that agreement might contain.
The complexity of the climate change problem also places significant obstacles in the way of efforts to agree on comprehensive, international measures for long-term cooperative action in the area. On one view:
Copenhagen has shown us the limits of what can be achieved on climate change through centralising and hyperbolic multilateralism. Climate change – least of all the version of climate change we have chosen to construct – cannot be addressed through any single, governing, coherent and enforceable thing called ‘climate policy’.Footnote 30
Concern over the continuing feasibility of a top-down climate governance model led by international law has prompted a flurry of proposals investigating alternative modes of climate change governance.Footnote 31 Many such proposals advocate a multi-pronged approach that both deals with smaller, potentially more manageable aspects of the climate change problem, and concedes that the multi-scalar nature of climate change may necessitate regulatory action at multiple levels of governance.Footnote 32 Recognition of the need for a multi-level governance approach is consistent with developments in the broader area of international environmental law, which acknowledge that trends towards fragmentation, decentralization and grassroots empowerment are producing a more ‘kaleidoscopic’ world consisting of a ‘multi-layered system’ of activity undertaken by states, international institutions, the private sector and non-governmental organizations.Footnote 33 A multi-level or (in Ostrom’s terminology) ‘polycentric’ governance approach may also be cast more positively as a mechanism for technological innovation and institutional learning as a result of experimental policy efforts undertaken at multiple scales.Footnote 34
Before we turn to consider manifestations of multi-level governance in climate law, it is incumbent upon us to explain how we are using the term ‘multi-level governance’, not least because the concept itself is a contested one.Footnote 35 As a theory, the multi-level governance idea had its genesis in EU studies scholarship,Footnote 36 but has since gained wider currency, across a range of disciplines including law.Footnote 37 Our understanding of multi-level governance is based on the work of Bache and Flinders, who describe two key elements as being, first, an interest in decision-making taking place at a range of territorial levels or scales (including sub-national levels) and, secondly, recognition of the role played by non-state actors in governance, alongside governments.Footnote 38 To these two elements we would add a third dimension that sees the complexity of the problem at hand, namely climate change, as requiring a multi-faceted regulatory response, rather than a single approach (e.g. emissions reduction targets implemented via ETS).Footnote 39
While many authors posit multi-level governance as a normative concept connoting a superior mode of allocating governing authority, in this article we employ it primarily as an analytical model for understanding current trends in the development of climate change regulation. In this sense, we seek to use the multi-level governance idea to ‘contribute to our understanding of the changing nature of policy-making’ in the climate change field.Footnote 40 Selection of the multi-level concept over alternatives such as polycentricity is not intended to connote the existence of a formal hierarchy between the different governance levels examined. However, we would argue that the potential of multi-level governance to realize climate change mitigation and adaptation benefits will require some mechanism – most likely situated at a ‘higher’ level of governance – for coordinating and evaluating different regulatory actions. Further, as policy-making is not permanent but rather ‘a process of successive approximation to some desired objectives in which what is desired itself continues to change under reconsideration’,Footnote 41 there will be a need for ongoing processes of review and modification.
The following sections examine case studies of climate change regulation occurring across multiple levels of governance and addressing specific aspects of the broader climate change problem. These case studies illustrate how climate change regulation is already taking on the characteristics of a multi-level governance system and the challenges that this mode of regulatory development may pose. In some instances, multi-level governance is evident in the adoption of climate law on a particular topic by jurisdictional authorities at many different levels (international, regional, national and sub-national).Footnote 42 In other cases, there are multiple, coexisting and largely independent centres of decision-making operating in a specific climate policy area.Footnote 43
3. fragmented regulation of ghg emissions
The pressures leading to multi-level governance regimes in the climate field have contributed to a more fragmented global emissions trading market based upon a proliferation of carbon price regulation on international, transnational, regional and national scales. While the UNFCCC framework and the 1997 Kyoto Protocol envisaged a globally consistent approach, current international negotiations suggest that any targets that emerge for GHG emissions reductions during the Protocol’s second commitment period (2013 to 2017 or 2020) are likely to be the result of a bottom-up process reflecting national imperatives.Footnote 44 The Copenhagen Accord and the agreements reached at Cancún allowed countries to nominate their own pledges with regard to future emissions reduction but, unlike targets under the Kyoto Protocol, these nominations have been made in a variety of ways, with a variety of baselines, making it difficult to discern any consistent approach.Footnote 45 Greater consistency will be required of those developed countries that agree to the proposed second commitment period under the Kyoto Protocol, but even so targets are likely to reflect countries’ existing 2020 emissions reduction pledges.Footnote 46 As the Durban COP acknowledged, current pledges will be insufficient to avert dangerous global warming, highlighting the need for ongoing negotiations over reduction targets and responsibility for their realization.
In this context, the ‘global carbon market’ for the foreseeable future is most likely to consist of a number of individual domestic, regional and voluntary trading schemes, each covered by its own specific legislation and governance arrangements. Within this complex array of diverse emissions trading schemes, linkage between schemes is likely to remain a central issue. The design of emissions trading scheme interlinkages may become more problematic as nations ‘hedge their bets’ as to whether a comprehensive and centralized market will emerge. Clearly, individual contracts between entities trading in emissions credits can provide a private law mechanism for linking between discrete emissions trading schemes that may emerge in the absence of an agreed, internationally regulated model. However, significant questions remain about the extent to which it is desirable to allow private contractual ordering to be the predominant form of interscheme linkage, given that many of the measures of public accountability and transparency will not apply without specific adoption under transnational procedures.
Moreover, there are indications of declining enthusiasm for a market-based approach for dealing with climate change as a sole measure,Footnote 47 although the EU remains strongly committed to ensuring that the ETS model is successful.Footnote 48 In some jurisdictions a reassessment of climate change policy responses has seen a return to traditional regulatory approaches, typically in association with measures promoting renewable energy uptake. The challenge here is one of effective integration between a spectrum of regulatory measures to ensure that the multi-level governance model is not characterized by disparate objectives and implementation strategies.
Even within the general advocacy of market-based instruments as the preferred approach to climate change mitigation, there remains debate over the relative merits of specific regulatory instruments, such as ETS and carbon taxes.Footnote 49 Of pertinence for multi-level governance is that ETS are open to transnational linkage if it is possible to harmonize the emissions units that are to be traded or to create equivalent exchange values.Footnote 50 The use of existing contract law mechanisms to provide linkages, and to harmonize values through price-setting, has been referred to in this context. The operation of transnational treaties governing trading relations will provide yet another layer to these ‘party to party’ arrangements. In addition, there will be a role for the financial sector in providing ‘de-facto’ standard setting and private certification to govern the operation of the carbon market through a variety of legal and ‘soft law’ measures. Thus, the fungibility of carbon credits across schemes will remain feasible, notwithstanding the vagaries of whether agreement is achieved at a central UNFCCC level. This fungibility will be facilitated by allowing carbon trading to continue to devolve to ‘party to party’ negotiations governed by private law. However, the potential difficulties of ensuring that the carbon market continues to function in a manner that effectively aligns with the emissions reductions goals that it is designed to achieve should not be underestimated. Recent international experience with financial markets should sound a warning in this regard.
Notwithstanding these issues around ensuring effective scheme linkages and the fungibility of emissions credits across various schemes, the prospects for a harmonized system remain stronger than where carbon taxation measures are adopted. In contrast to ETS, carbon taxation regimes are difficult to harmonize across states.Footnote 51 Despite this drawback from a transnational perspective, carbon taxes do already operate in a range of jurisdictions, including within EU countries. However, the case for ETS over carbon taxes has been furthered by their adoption in key jurisdictions as the primary climate change mitigation instrument. In this light it is pertinent to examine the major ETS in operation – that of the EU.
3.1. European Union ETS
The importance of the EU scheme lies both in the model it has offered for the design and implementation of an ETS,Footnote 52 and its influence in promoting a transnational approach to climate change mitigation. The ETS is at the heart of the EU’s international climate change strategy, which is based on an emergent global carbon market, whereby regional and national schemes integrate over time.Footnote 53 While putatively a supranational framework, the embedded multi-level dimensions of the EU ETS and its associated ‘offset’ components must be acknowledged.
Despite having expressed initial concerns during the Kyoto Protocol negotiations that emissions trading could ‘hollow out responsibility’, the EU experimented with several policy instruments, including a carbon/energy tax proposal, before achieving broad consensus around adoption of an ETS.Footnote 54 As Joanne Scott has discussed, one explanation may be that the EU saw development of its ETS as a means of establishing global leadership in the climate change field. She argues that the EU ETS contributes to multi-level climate governance in two ways: in demonstrating the feasibility of particular climate change measures, such as ETS (Scott calls this the ‘global dimension’) and as regards the division of powers over GHG emissions regulation between the EU and Member States (Scott terms this the ‘federalism dimension’).Footnote 55
A model for ETS design and implementation
Europe’s emissions trading regime commenced in 2005 as an urgent response to climate change. Much subsequent analysis of the EU ETS has centred on assessing whether the scheme will effectively drive low carbon investment, and how the design problems identified in earlier phases of the scheme can be progressively ameliorated with the regime now into its second trading period (2008–12),Footnote 56 and substantial changes in place for the third phase.Footnote 57
In the EU, the ETS covers the power sector and energy intensive industries in the EU, Norway, Iceland and Lichtenstein with airline emissions included from 1 January 2012, and coverage of maritime emissions is also under consideration. The number of tradeable emissions allowances is progressively lowered over time, with some credits able to be generated outside the EU under the Kyoto Protocol’s Clean Development Mechanism (CDM) and Joint Implementation. During Phase 1, the EU ETS conducted a lively trade in carbon emissions, although the extent to which the trade will translate into long-term emissions reductions is being actively evaluated.Footnote 58
The economic theory underlying cap-and-trade is premised on the view that industry will innovate to reduce emissions, leading to overall emissions reduction on a cost-effective basis.Footnote 59 As Egenhofer et al. note, ‘[w]hile the EU objective is “cost effectiveness”, ultimately, any climate strategy will have to be measured against its capacity to foster first the development and then investments in new low carbon technologies’.Footnote 60 These authors contend that it is too optimistic to expect the ETS to induce all the structural changes required on its own. This finding reinforces trends to institute multiple instruments and, indeed, multi-level forms of climate change response in the EU.
Alternatively, other research indicates that the EU ETS carbon price has achieved significant innovation and at less cost than expected. Grubb, for example, highlights the significant innovations in the cement industry in EU countries that have been driven by carbon pricing.Footnote 61 Ellerman et al. also conclude that there has been effective emissions abatement in EU industry and energy sectors consequent upon the introduction of the ETS.Footnote 62 However, the record across individual nations within the EU is more patchy, a conclusion that accords with Scott’s model of federalism in EU climate governance. At another scale, there are other multi-level effects, for example, as the ETS appears to have influenced investment patterns for large-scale industries far more than it has for smaller enterprises.Footnote 63
Overall, evaluations of the effectiveness of the EU ETS highlight the critical nature of the design of the scheme, which is integral to how such schemes institute various modes of governance. Beyond the immediate question of the caps and overall target for any scheme, design issues include questions of scheme coverage, the method of allocation of permits, permitted banking and borrowing of permits, allowable offsets (for example, carbon credits from forestry sequestration activities), and ensuring compliance through appropriate systems of monitoring, reporting and verification.Footnote 64 A collateral issue to ETS design is whether compensation is to be provided to trade-exposed, emissions-intensive industries. The latter policy choices are critical where not all jurisdictions have carbon mitigation measures in place. The potential for carbon leakage underscores the point that any ETS will operate in a transnational context, whether it is of a regional or national character.
The EU ETS provides a basis for considering whether the ETS model can be readily extrapolated in order to form the integrated and linked system that the EU seeks to achieve at a global scale. A ‘one-scheme-fits-all’ approach now appears unlikely in jurisdictions beyond the EU,Footnote 65 but the extent to which jurisdiction-specific schemes can interlink through the carbon trading/exchange process will be vital. The EU scheme uses the internationally endorsed public law frameworks where it interlinks with the CDM and Joint Implementation initiative under the auspices of the Kyoto Protocol. Such interlinkages look set to continue with the decision at Durban to extend the Kyoto Protocol to a second commitment period. Meanwhile, the EU continues to deploy and refine its flagship ETS. The problems encountered with the scheme under Phases 1 and 2 are acknowledged as testament to the difficulties in implementing an effective market-based regime that can transcend regional and national political vicissitudes to produce clear benefits in substantial GHG emissions reductions.Footnote 66
Federalism dimension of the EU ETS
The EU Directive 2003/87/EC,Footnote 67 since amended by Directive 2009/29/EC,Footnote 68 set up the European scheme as the largest multi-national ETS in the world. While at one level the EU ETS is a highly centralized and integrated regulatory framework, at another it adopts a decentralized governance approach as Member States were allowed significant leeway in implementing the EU ETS Directive in their domestic legal systems.Footnote 69 This situation contributed to the initial ineffectiveness of the ETS,Footnote 70 although tightening of the scheme design occurred with Phase 2. The European Commission was given the power to reject or modify national plans with all permits for power producers auctioned in Phase 2 and a wider range of GHG emissions included. From Phase 3, even more permits are to be auctioned, with full auctioning to occur by 2027.Footnote 71 In a move that highlights the complexity of the multi-level climate governance approach within the EU, a new climate energy legislative package to refine the ETS was introduced in April 2009, together with initiatives to promote renewable energy uptake.Footnote 72
Implementation issues should not overshadow the fact that the EU emissions reduction targets are the most progressive internationally, with a commitment to reductions of GHG emissions of at least 20% below 1990 levels by 2020. There is a corresponding commitment to reducing energy consumption to 20% below current projected levels by enhanced energy efficiency and by strengthening renewable sources.Footnote 73 Pertinently, stronger central control by the Commission in ETS governance has been accompanied by a widening of the regulatory spectrum for addressing GHG emissions.
Contention remains though around the relative merits of centralization and decentralization in the EU, with tensions around which ETS rules should be decided nationally, and which should fall within the competence of the European Commission.Footnote 74 This question of ‘subsidiarity’ or ‘federalism’ finds resonances in many other jurisdictions. However, the EU situation differs from jurisdictions such the US, where decentralized and multi-faceted regulatory approaches are gaining momentum, given the absence of a national ETS.
3.2. Regional and National ETS
Despite a series of policy and legislative initiatives in the climate change arena, the US remains a long way from developing a comprehensive ETS of the character of that of the EU. Nonetheless, the common perception that the US is ‘doing nothing’ on climate change is a false one, with action being taken at a sub-national level, including the development of regional and state-based emissions trading schemes.Footnote 75 Concerns around carbon leakage and industry protectionism have been prominent in the US and these issues have influenced the nature and extent of ETS.Footnote 76
Many of the sub-national schemes in the US had their impetus in the failure of the national government to adopt mandatory targets for GHG emissions. Accordingly, schemes such as the Regional Greenhouse Gas Initiative (RGGI)Footnote 77 have an explicit goal of promoting action at a national level, while simultaneously providing a ‘demonstration’ cap-and-trade model. This activism has not been welcomed by all, with some arguing that regional schemes, such as the RGGI, amount to a usurpation of federal legislative power in the climate change field, with constitutional implications.Footnote 78 As in the EU, this illustrates the persistence of tensions within a framework of multi-level climate governance between different levels of government over which has ultimate responsibility for climate change law and policy.Footnote 79
Regional Greenhouse Gas Initiative
The RGGI was the first regional cap-and-trade scheme in the US covering the New England states of the north-east, including New York and Massachusetts. The scheme operates within several transmission and electricity trading regimes. Relatively modest standards seek to contain emissions at 2009 levels across the 2009–14 period, and thereafter to reduce carbon emissions by 2.5% annually to achieve a 10% reduction in emissions by 2018.Footnote 80 The scheme operates upon a system of three-year control periods, at the end of which allowances must be submitted. The allocation of allowances is at the discretion of the participating states. Most states auction close to all their allowances,Footnote 81 and the scheme is designed to ensure that ultimately 100% of allowances are auctioned. Auction proceeds are invested into consumer programmes to improve energy efficiency and accelerate the deployment of renewable energy obligations.Footnote 82
Limitations of the model are the restricted range of emissions that are covered and its focus on electricity generating units over 25 megawatts, which excludes major electricity consumption in industry and transport sectors. The use of offsets, while allowed, is restricted to ensure that the wider GHG reduction objectives of the scheme are not undermined. Eligible offset projects include methane reduction from landfill and agricultural manure, reductions in emissions of sulphur-hexafluoride from electricity transmission and distribution, carbon sequestration through afforestation, and end-use energy efficiency in buildings.Footnote 83
Overall, as the RGGI introduces only modest compliance costs, it is expected to drive some structural change in the power sector without introducing any significant carbon leakage issues.Footnote 84 The RGGI scheme was designed in contemplation of national cap-and-trade legislation being on the horizon (the Lieberman-Warner Climate Change Bill)Footnote 85 but the chances of legislation of this type materializing now seem remote. Despite the lack of federal take-up of an ETS, the RGGI model has stimulated interest in regional ETS, with two further regional schemes – the Midwestern Accord,Footnote 86 covering six US states in the mid-west and one Canadian province, and the Western Climate Initiative (WCI) cap-and-trade scheme,Footnote 87 covering seven western US States and four Canadian provinces – expected to commence shortly. Building upon the RGGI experience, the larger WCI scheme will adopt a more ambitious emissions reduction target (15% reduction below 2005 levels by 2020) and have a broader coverage (encompassing nearly 90% of economy-wide emissions in the region).Footnote 88 The State of California – alone responsible for 1.4% of global GHG emissions – is also finalizing regulations for a cap-and-trade scheme, which is due to commence in January 2013.Footnote 89
In contrast, federal legislators have looked to other regulatory instruments, including energy efficiency measuresFootnote 90 and potential direct regulation via pollution control standards,Footnote 91 to address GHG emissions reductions. The combination of regional ETS and complementary federal measures suggests the emergence of the building blocks of a multi-level governance model for climate change in the US – and, indeed, beyond – if suitable linkage arrangements can be developed to allow importation of credits from other ETS.
New Zealand ETS
Many factors leading to a proliferation of regulatory approaches in the context of multi-national and regional emissions trading schemes are replicated for national schemes. The New Zealand model is pertinent here as it was an ‘early mover’ in introducing an ETS, which commenced in 2008.Footnote 92 Adoption of the ETS in New Zealand was predicated upon a general political consensus that an ETS should be a fundamental part of the policy mix for addressing climate change. The New Zealand scheme, although implemented in stages, does have a relatively broad sectoral coverage in its design, encompassing forestry, stationary energy (including coal mining), transport fuels, electricity production, industrial processes, synthetic gases, waste and agriculture.Footnote 93 Disputes remain over the entry points for various economic sectors, and the length of transitional phases for some industries, but so far it has survived as a largely sector-wide scheme regulating a wide spectrum of GHG emissions with the potential for linkages to an international emissions trading market.Footnote 94 The ETS, albeit in a much weakened form as a result of a series of amendments to its operation in recent years, remains the principal policy response in New Zealand, although a range of energy efficiency and sustainability measures have been instituted.Footnote 95
The New Zealand climate change regulatory context is atypical in many ways, illustrating the influence of local factors. While New Zealand has committed to Kyoto Protocol-related emissions reductions, much of the power generation in the country already comes from renewable energy sources, such as wind and geothermal. Accordingly, there has not been the same need for deep structural change that characterizes many other developed countries that are heavily fossil fuel-based economies. Indeed, unlike many other Annex I developed countries, a substantial proportion of GHG emissions in New Zealand are derived from agriculture. It is this sector that has proven difficult to integrate into the ETS framework (agriculture is projected for inclusion in 2015).Footnote 96 The New Zealand ETS has not met with the entrenched resistance of the energy and power sectors that has been evident in jurisdictions such as the US, Canada and Australia.
Australian carbon pricing mechanism
After a tortuous political process, which saw the fall of leaders of both major parties and the jettisoning of a proposed Carbon Pollution Reduction Scheme (CPRS)Footnote 97 in November 2011, the Australian government subsequently passed a legislative package introducing a ‘carbon pricing mechanism’, as well as foreshadowing a range of complementary regulatory measures.Footnote 98 Unlike the previous CPRS proposal, framed in expectation of the emergence of an international agreement at Copenhagen, the current carbon pricing scheme has been introduced despite acknowledgement of the uncertainty over future multilateral action. This pursues the logic of what the government’s principal climate policy adviser, Ross Garnaut, describes as the need for ‘concerted unilateral action’.Footnote 99
As a country whose economic health is closely tied to emissions-intensive forms of energy generation and exports of coal and other fossil fuels,Footnote 100 the first best approach to climate change regulation from an Australian perspective is a comprehensive international agreement that incorporates all major emitters (including developing countries such as India, China and Indonesia).Footnote 101 Thus one might expect that any national ETS adopted in Australia would be modest and heavily circumscribed in its scope and coverage. However, a strange confluence of domestic political factors, which has positioned the Greens party as a key player in the federal parliament, saw a more far-reaching and ambitious approach taken. This included the national carbon pricing mechanism that will apply to a range of major carbon polluters in the stationary energy, waste, rail, domestic aviation and shipping, mining and industrial processes sectors from 1 July 2012. The carbon pricing mechanism will initially have a fixed price period of three years (with a starting carbon price of $23 per tonne), transitioning to a fully flexible ETS from that point onwards. While the default emissions reduction target for the scheme is extremely modest – 5% below 2000 levels by 2020 – there is capacity for the emissions cap to be set during the fully flexible period in light of international developments, including more ambitious action on climate change mitigation at the global level or in other countries and regions.Footnote 102 An important element of the package is the establishment of an independent Climate Change Authority – modelled on the Committee on Climate Change established under the United Kingdom (UK) Climate Change Act 2008 – to advise the government on appropriate settings for the scheme’s pollution caps.
Another significant aspect of the Clean Energy Act 2011 is that it envisages that a high proportion of Australia’s reductions in GHG emissions ultimately will be met through ‘liable entities’ purchasing offset credits in the international market. The carbon pricing mechanism therefore has been designed with a view to ensuring transnational linkages with ‘eligible international emissions units’. Yet the scheme also seeks to hedge against the volatility of a developing and imperfect global carbon market by allowing for activation of a carbon price floor.Footnote 103 International credits will also face an international unit surrender charge in the first three years of the flexible price period of the Australian ETS.Footnote 104 Evident in these arrangements are the intricacies of ensuring that transnational linkages are facilitated, along with the potential for Australia to be part of any global carbon market as it further develops, while at the same time addressing domestic carbon price volatility. These finely tuned balancing exercises will need to be considered by many policy-makers in the context of existent and emerging regional and national carbon trading schemes, which will need to operate in the hope of a fully global carbon market but also in the reality of a currently fragmented trading regime. The picture is further complicated by the establishment of the so-called ‘voluntary’ carbon offset markets.
3.3. Voluntary Carbon Markets
In addition to mandatory emissions reduction schemes, an important element of the emerging global carbon market is the proliferating number of voluntary carbon markets. Compared with mandatory ETS, where governments are the primary actors shaping governance and regulatory arrangements, voluntary markets illustrate the important role played by non-state actors in the multi-level governance framework for carbon trading. Voluntary carbon markets provide a means for individuals, businesses and other organizations to purchase carbon credits to offset emissions directly from their activities voluntarily, rather than for purposes of legal compliance. While the volume of trade in the voluntary carbon markets is relatively small (representing less than 0.3% of the total global carbon market), it is nonetheless increasing.Footnote 105
Examples of voluntary carbon markets include the Chicago Climate Exchange,Footnote 106 the Japanese voluntary ETS,Footnote 107 and voluntary environmental exchanges operating in China, the principal ones being the China Beijing Environmental Exchange (CBEEX), the Tianjin Climate Exchange and the Shanghai Environment Energy Exchange.Footnote 108
The Chinese voluntary exchanges are a particularly interesting example of the hybrid public–private, multi-level nature of governance arrangements emerging in the climate change field. The exchanges were established in 2008 through private sector collaborations with approval from municipal governments. They are intended as pilot schemes to test domestic emissions trading as a tool to support China’s climate change mitigation strategy even though, at this stage, they do not involve the central government. The expectation is that local efforts piloting different forms of carbon markets (for instance, CBEEX provides a market platform for trading in carbon dioxide (CO2) and other environmental commodities, whereas the Tianjin scheme focuses on energy efficiency) will evolve into a national emissions trading market for China through linkage or integration of independent schemes.Footnote 109
4. forest and land-based sink arrangements
Developing arrangements for forest and other land-based sinks are an active demonstration of a multi-level approach to climate change mitigation. There is a proliferation of activities at different levels across a wide range of decision-making centres, including those recognized under international agreements and regional or national trading schemes, other policy mechanisms and voluntary market arrangements. This is creating considerable challenges for international bodies, governments and investors in comparing different types of activities, baseline options and measurement and verification standards.
4.1. Activities Under the Kyoto Protocol
Forest-based sinks are an integral component of the Kyoto Protocol. Annex I parties have been able to use provisions under Articles 3(3) and 3(4) to include carbon uptake in new forests and increased sequestration through other forest and land management activities to meet emissions commitments. The measurement and verification standards for these activities are based on the Marrakesh Accords,Footnote 110 and guidelines of the Intergovernmental Panel on Climate Change (IPCC).Footnote 111
Also part of the Kyoto Protocol arrangements, the Clean Development Mechanism (CDM) has provided for investment by developed countries in emissions reduction projects in developing countries.Footnote 112 CDM emissions reduction units are accounted for and verified under a set of rules and a registry managed by the CDM Board.Footnote 113 Forest and land-based activities under the CDM are restricted to afforestation and reforestation. Concerns about impacts on local communities, biodiversity and other values resulted in a cap on project size and the need to demonstrate contribution to sustainable development.Footnote 114 These restrictions have proved to be a considerable barrier to project development and the investment in forest-related projects has been limited. Such projects form only 0.14% of the total credits traded in CDM projects.Footnote 115 This has been a source of frustration to many African countries, where forest and land-based projects represented the greatest potential for CDM funding.
4.2. Forestry Offsets and Voluntary Carbon Markets
As highlighted above, voluntary carbon markets are an important element of the fragmented global carbon market. Voluntary markets are active and generally increasing (131.2 million metric tons of CO2 equivalent (Mt CO2e) was traded in 2010 up from 98.0 Mt CO2e traded in 2009) with most transactions being ‘over-the-counter’ rather than exchange-based trades.Footnote 116 Renewable energy projects have generated the bulk of offsets in voluntary carbon markets. These projects are typically more expensive to undertake but have a particular appeal for voluntary market buyers. Forest-related projects lost market share from 2004 onwards but have rebounded recently as a result of a greater consensus around measurement standards and increased political support for REDD+ arrangements (discussed further below).Footnote 117 Another important factor has been the potential for forestry offsets to be taken up in regulated carbon markets: for instance, demand for REDD credits increased by 500% from 2009, which the World Bank largely attributes to the recognition such offsets are due to receive in the Californian ETS.Footnote 118
Voluntary markets are supported by standards designed to ensure accurate and comprehensive project-level accounting and reporting to create internationally traded emissions offset units. The most common international standards – all designed and administered by not-for-profit private sector organizations – are the Voluntary Carbon Standard (VCS), CarbonFix and Plan Vivo. These standards vary in their accounting and auditing approaches, additionality tests, permanence rules and leakage assessments.Footnote 119 The Ecologica Institute’s SocialCarbon standard, together with that of the Climate, Community and Biodiversity Alliance (a partnership of international non-governmental organizations (NGOs) and research institutes) are implemented jointly with these to provide additional assurances regarding social and environmental benefits of carbon offset projects, including forest and other land-based activities. Voluntary projects are generally restricted to afforestation activities consistent with the Kyoto Protocol and CDM but there are emerging REDD+ projects. ‘Gold level’ certification is available for projects that include climate change adaptation and exceptional community and biodiversity benefits.Footnote 120
4.3. Addressing Deforestation: REDD+
Deforestation in tropical developing countries currently contributes an estimated 12% of global emissions.Footnote 121 A group of developing countries (the Coalition of Rainforest Nations) has built support for inclusion of reduced deforestation and degradation in future cooperative action. This was one of the few areas on which widespread agreement was possible at the Copenhagen and Cancún COPs. This general support was further reinforced at Durban.
The Copenhagen Accord recognized the crucial role of REDD+ and the need to provide positive incentives through the immediate establishment of a mechanism to mobilize financial resources from developed countries.Footnote 122 Forest sinks were also explicitly recognized in China’s ‘autonomous domestic mitigation actions’ under the Accord, through inclusion of a commitment substantially to increase forest coverage and forest stock volume by 1.3 billion cubic metres by 2020 from 2005 levels.
At Cancún, the outcomes reached by the Ad Hoc Working Group on Long-Term Cooperative Action under the Convention affirmed these activities.Footnote 123 Developing country parties aiming to undertake REDD+ activities were encouraged to develop a national strategy or action plan, national forest reference emission levels, and a robust and transparent national forest monitoring system for the monitoring and reporting of activities, as well as a system for providing information on how various safeguards are being addressed. The parties agreed on a staged approach, beginning with policies and measures, moving on to demonstration and capacity-building, and evolving into results-based actions that should be fully measured, reported and verified. The Working Group was asked to explore financing options for the full implementation of the results-based actions.
At Durban, negotiations focused on addressing ‘safeguards’ for involvement and approval by local people and protection of biodiversity, providing methodological guidance for accounting and discussion of possible financing,Footnote 124 but the meeting failed to reach a definitive conclusion on the latter.Footnote 125 Also subject to ongoing negotiations are questions of whether REDD+ should be implemented using only market-based mechanisms, and the extent to which these are linked to offsetting in developed countries, or whether non-market-based alternatives remain the primary source of funds.Footnote 126
Much has been written on questions of REDD+ implementation.Footnote 127 Three broad options have emerged for funding, which adopt different governance configurations:
(i) carbon market-based approaches in which companies or countries with emissions reduction commitments purchase offsets through mechanisms such as the CDM;
(ii) market-linked approaches in which some portion of revenue from the sale of emission permits under cap-and-trade systems in developed countries is used to purchase reduced deforestation emissions, but these are not used to offset emissions directly in the developed country; or
(iii) voluntary funds are contributed by countries or commercial entities that seek to invest in REDD+.
A key difference between options (i) and (ii) is that under option (ii) – favoured by a number of developing countries – emissions reductions achieved through REDD+ will be additional to developed country emissions reductions under any applicable cap-and-trade system. All three options can operate simultaneously. Boucher et al. suggest that a voluntary ‘funds-based’ approach is likely to be the major source of funds for REDD+ support in the short term but that market-related funding will increase as these markets expand and emission caps decrease.Footnote 128
Most investment into REDD+ so far has been for ‘readiness’ activities: the analysis of policy mechanisms; tenure and trading arrangements; assessment of historical levels of deforestation emissions, and the development of monitoring, reporting and verification (MRV) systems to account accurately for changing levels of carbon in different forms of land cover under different uses. Three major sources of funding are emerging: bilateral funding arrangements (for example, partnerships between Australia and Indonesia, and Norway and Indonesia); multilateral arrangements (being managed through the UN-REDD Programme and the World Bank);Footnote 129 and ‘many-to-one’ funds to support forest conservation in particular regions.
The World Bank has been managing investment in forest-related carbon offsets for some time. The Biocarbon Fund, established in 2004, pioneered methodologies for GHG accounting and revealed technical obstacles to their application.Footnote 130 It initially focused on afforestation, with a second ‘window’ in 2007 designed to test how agriculture, forestry and other land use activities (including REDD+) might be used as climate mitigation options. The more recently established Forest Carbon Partnership Facility aims to build capacity for REDD+ and test performance-based incentive payments on a small scale in pilot countries.Footnote 131
A system of REDD+ governance is thus evolving, largely outside of the UNFCCC framework, but informed by those international discussions and past agreements. It is characterized by the diffusion of regulatory authority both vertically (with international and national-level involvement) and horizontally amongst a range of actors, including international organizations, global and regional banks, NGOs and local communities. In the process, as for voluntary projects, variations in implementation are occurring in baseline, additionality and leakage rules. Other factors that need to be considered are incorporating the effects of disturbances (such as fire or insect pests), successional dynamics and the longer-term impacts of historical and customary land use practices, and the inclusion of emissions that might have resulted from illegal activities in a baseline.
The rapidly evolving diversity of forest and land-related emissions reduction or offset activities, differing governance arrangements, trading systems and measurement and verification standards demonstrate both the potential benefits and drawbacks of a multi-level system of climate governance. On the positive side, the capacity to involve a diverse range of actors, including communities, financial institutions and inter-governmental organizations has given significant momentum to regulatory development. Non-state actors are playing a major role in facilitating investment in forest and other land-based sinks through developing voluntary markets and in promoting and supporting the implementation of REDD+. These groups often have other ‘co-benefits’, such as biodiversity conservation or poverty alleviation, as their primary motivation and are seeking to harness carbon offset-related investment for these purposes. As a consequence, the ‘efficiency’ of carbon offset investments may be compromised in order to achieve a broader suite of objectives, and the ultimate contribution of offset measures may be constrained (as has been the case with the CDM) by requirements for projects to provide co-benefits. The need to provide clearly for these ‘safeguards’ was reinforced in the COP decisions in 2010 at CancúnFootnote 132 and more recently in Durban.Footnote 133
In addition, there are many challenges for policy-makers, lawyers and those participating in the market in keeping abreast of the diversity of activities, establishing the fungibility of emissions reduction units generated by different activities, and managing financial or other risks (including corruption and rent-seeking by principal agents) associated with such a diverse market.
5. climate litigation
Litigation is often thought of as a forum for enforcement of the law, rather than as a site of potential regulatory development. In the climate context, however, litigation has often been used in a strategic fashion as a response to inadequate law-making activity by government and to prompt wider policy change.Footnote 134 Navraj Ghaleigh has classified litigation of this kind as ‘promotive’, where ‘applicants are seeking to deploy more general legal norms which have no necessary climate-change characteristics in ways that can promote positive environmental outcomes by way of regulatory intervention sanctioned or even required by courts’.Footnote 135 A characteristic of ‘promotive’ climate litigation of this kind is the involvement of many diverse actors, including state governments, NGOs, corporations, community groups and individuals.
While ‘promotive’ climate change litigation is taking place in several jurisdictions (including internationally and in national jurisdictions)Footnote 136 under different applicable legal regimes, there are nonetheless a number of common issues or challenges faced by plaintiffs. These include problems of causation and proof of harm, of dealing with the indirect and cumulative impacts of industrial activities on the climate, and of establishing that a particular activity makes a significant contribution to global warming justifying imposition of responsibility for reducing emissions.Footnote 137 The rulings issued by courts in such cases, across various jurisdictions and at different territorial levels of governance (sub-national, national, and international) can thus be seen to play an important role in articulating forms of ‘transnational climate change regulation’.Footnote 138
5.1. Litigation and Climate Governance
Litigation seeking climate change mitigation or adaptation has been initiated in local, state, national and international courts and tribunals around the world, and encompasses a broad range of legal forms.Footnote 139 Action has been taken both against corporations emitting large amounts of GHGs, and against governments for their failure to factor climate change adequately into planning and development decision-making. The US and Australia have experienced the greatest upsurge in climate litigation in recent years, reflecting the lack of progress (at least until recently in Australia) of national governments in adopting strong, centralized policies to deal with GHG emissions and associated climate change.Footnote 140 In seminal decisions, such as the case of Massachusetts v. EPA in the US,Footnote 141 the courts have tackled key regulatory and policy questions, including whether a single polluting facility or industry sector can be held responsible for contributing to global climate change, the relevance of cumulative and indirect (or downstream) effects in evaluating a project’s climate change implications, and what is necessary to demonstrate a causal link between GHG emissions from a particular development and specific, localized impacts.
While plaintiffs in climate litigation have often been motivated by the failures of governments to introduce robust emissions controls, the case law serves more than a gap-filling role. Focusing primarily on the US case law, Hari Osofsky argues that ‘these cases shape large and small-scale governmental decision-making, pressure corporations to take action, and reconfigure the public discourse’.Footnote 142 The prominent Massachusetts v. EPA decision of the US Supreme Court – which held that the federal Environmental Protection Agency (EPA) has a responsibility under the Clean Air Act to regulate GHG emissions from motor vehicles as a threat to public health and welfare – offers a good example. Following the Court’s ruling, the EPA finalized an ‘endangerment finding’ that carbon dioxide, along with five other GHGs, is an air pollutant that threatens public health and welfare.Footnote 143 This finding paved the way for federal regulation of GHG emissions from sources such as automobiles, which has served as an alternative mechanism for federal climate change regulation in the face of unsuccessful efforts to introduce a national ETS. In this way, litigation has opened up possibilities for climate change regulation at the federal level of governance in the US, operating alongside state-based initiatives such as the regional ETS discussed in Section 3.
5.2. Transnational Liability Principles
The US Supreme Court findings in Massachusetts v. EPA and other prominent climate change cases potentially may have a broader transnational influence on climate change regulation, by giving a judicial imprimatur to particular positions regarding the allocation of responsibility for the effects of GHG emissions. These include notions that:
• a ‘meaningful contribution’ by a facility or industry to GHG concentrations and associated global warming is sufficient to establish causal connection;Footnote 144
• reduction in domestic emissions slows the pace of global emissions increases, no matter whether action is taken in other countries;Footnote 145 and
• ‘residual uncertainty’ surrounding aspects of climate change does not undermine the otherwise well-established link between anthropocentric GHG emissions and global warming.Footnote 146
Although issued before the Supreme Court’s decision, judicial reasoning in the Australian case of Anvil Hill reflects commonalities with the Supreme Court majority.Footnote 147 The Anvil Hill case concerned a challenge to the environmental assessment prepared for a proposed coal mine in the State of New South Wales as a result of the failure to include an assessment of ‘Scope 3 emissions’ (GHG emissions arising from the burning of the mined coal, generally at an overseas power station). Even following the introduction of the Australian carbon pricing legislation, responsibility for the downstream emissions from coal mining remains a live issue given that Scope 3 emissions are not covered under the ETS. In terms similar to those of the Supreme Court majority, Justice Pain of the New South Wales Land and Environment Court held:
Climate change/global warming is widely recognised as a significant environmental impact to which there are many contributors worldwide but the extent of the change is not yet certain and is a matter of dispute. The fact that there are many contributors globally does not mean the contribution from a single large source such as the Anvil Hill Project in the context of NSW should be ignored in the environmental assessment process. The coal intended to be mined is clearly a potential major single contributor to GHG emissions deriving from NSW given the large size of the proposed mine. That the impact from burning the coal will be experienced globally as well as in NSW, but in a way that is currently not able to be accurately measured, does not suggest that the link to causation of an environmental impact is insufficient.Footnote 148
The scope for judicial borrowing to forge transnational rules of climate liability is increased by the practice of courts in common law countries to look to precedents from other common law jurisdictions when faced with gaps or ambiguities in domestic law.Footnote 149 In addition, courts have shown awareness in their judgments of the global context of their rulings in addressing the challenge of reducing emissions. While, in some cases, this has led judges to find that a particular development (a coal mine, for example) has little impact on climate change when projected emissions are compared with existing global levels,Footnote 150 in other cases, including Massachusetts v. EPA, courts have stressed the need for the consideration of domestic impacts of GHG emissions and the imperative for domestic action regardless of regulatory inaction in other countries.
Although courts (particularly in common law countries) are often criticized for decisions with policy implications on the basis that such decisions should be taken by governments, it is generally the case that governments remain free to override judicial rulings or introduce new regulatory provisions in response. In this sense, the function of courts can be seen as one of highlighting the necessity for regulatory change to address a pressing issue that might otherwise be neglected in the busy agendas of legislatures. Judicial decisions – with their focus on the particular facts pertaining to local situations – tend to speak most directly to local levels of governance such as municipalities, provincial and national governments.
5.3. Setting the Appropriate Scale of Regulation
Although the emission of GHGs gives rise to global environmental effects, it does not necessarily follow that the only scale for assessment of impacts and regulation of the problem is a global one. Climate change has local, and more widespread, effects. Thus, as Osofsky has argued, climate change is a ‘multi-scalar’ regulatory problem, capable of simultaneously engaging more than one level of governance (local, state, national, regional, international).Footnote 151 In turn, climate litigation has become a site for contestation over the appropriate scale of regulation with:
antiregulatory parties attempt[ing] to scale up the problem with variations on arguments that climate change is an international problem happening over too long a time period, while those wanting greater regulation try to scale the problem of climate change back down to state or local levels and the present time.Footnote 152
A decision by a court or tribunal about what activities are appropriate at a given level of governance helps to shape the scale at which regulation occurs. For example, in the Anvil Hill decision, Justice Pain found a ‘sufficiently proximate link’ between the proposed coal mine, GHG emissions from burning the harvested coal and consequent impacts on the local environment.Footnote 153 The effect of this decision was to recast climate change from an ‘international’ problem to a domestic problem, paving the way for a requirement for the coal mine concerned to assess the impacts of its downstream emissions. Such rescaling of climate change issues by courts serves an important function in combating the argument that the only effective regulatory response to climate change is one taken at the global level, thereby legitimizing more locally focused action.
As Osofsky points out, in multi-level climate governance litigation plays a critical role by providing ‘a mechanism for fluid multi-level interests to interact among relatively fixed legal structures’.Footnote 154 This kind of regulatory dialogue, mediated by the courts, is particularly important where strong, coherent governmental measures to address climate change are absent, lacking in ambition or poorly implemented. However, the capacity of climate litigation to contribute to effective climate governance should not be overstated, particularly as many cases have become bogged down in procedural questions over standing, jurisdiction or the scope of permissible review. The ad hoc nature of legal change achieved through the courts also suggests that climate litigation will need to be accompanied by a range of other policy and legislative interventions to achieve broader goals of emissions reduction and adaptation.
6. climate change adaptation
Adaptation in human society involves anticipating or monitoring change, undertaking actions to address the consequences, and taking advantage of opportunities from that change. The UNFCCC has defined adaptation as ‘actions taken to help communities and ecosystems cope with changing climate conditions’Footnote 155 while the IPCC considers adaptation as ‘adjustment in natural or human systems in response to actual or expected climatic stimuli or their effects, which moderates harm or exploits beneficial opportunities’.Footnote 156 Although adaptation to the unavoidable effects of climate change is a problem of global dimensions, adaptive responses are necessarily very locally or regionally focused, given the need to address the particular risks posed by climate change in specific environments. In addition, the success of adaptation will often depend upon action by a wide variety of actors – not just governments, but also businesses, communities and individuals.
While adaptation has been part of international climate change law and policy since concerns about the impacts of human-induced climate change were first raised, only minimal references occur in the UNFCCC and Kyoto Protocol. It has been argued that adaptation was picked up late in the development of the Kyoto Protocol,Footnote 157 with adaptation initially seen as a ‘way out’ of addressing the core task of mitigating climate change. However, regulators have gradually embraced the need to invest in adaptation as action on mitigation has become more challenging, lags in the climate system are better understood and the potential impacts of climate change are more apparent. Even with successful mitigation efforts there will still be considerable consequences resulting from current and likely future levels of GHGs in the atmosphere.Footnote 158 In addition, there is increasing vulnerability to climate-related impacts regardless of the extent of future climate change.Footnote 159
In international climate change negotiations, developing countries have become increasingly vocal on adaptation investment. This has taken on an ethical dimension, given that those likely to bear the greatest costs of climate change have made a relatively limited contribution to the problem in terms of historical emissions and currently have poor capacity to deal with the impacts.Footnote 160 Consequently, investment in adaptation has become an essential part of the balanced package of outcomes from any international climate agreement.
Both the Copenhagen Accord and the outcomes of the Cancún and Durban COPs devote significant attention to questions of adaptation financing, including the necessary institutional and technical infrastructure to support developing countries in establishing adaptation policies.Footnote 161 In Durban the focus was on support to least developed countries (LDCs), implementation of the Nairobi Work Programme and enhanced action on adaptation through the establishment of an Adaptation Committee reporting directly to the COP. While it was agreed that this new body would engage and develop linkages with all adaptation-related work programmes, the way in which the work of these different bodies and processes will be managed is unclear.
6.1. Adaptation Governance
The nature and extent of climate change impacts vary in space and time, with regions and parts of the community being differentially impacted. There are also significant barriers to adaptation that vary between regions, including the relative ability of natural systems to adapt, as well as technological, financial, cognitive, behavioural, social and cultural constraints.Footnote 162
The roles and responsibilities of different levels of government and different sectors in society in relation to adaptation are not clearly defined and there is a varying understanding of the needs, priorities and mechanisms for adaptation in different parts of government, across industry sectors and within the broader community. Many feel that policy to support climate change mitigation is primarily a task for national governments and international agreements and processes, whereas responsibility for supporting adaptation is seen to fall to sub-national and local governments.Footnote 163 On the other hand, Pielke et al. have argued that the absence of a high-profile international vehicle focused on adaptation has seen it neglected, and that giving more urgent consideration to broader adaptation policies will enhance societal resilience.Footnote 164 At the Cancún and Durban COPs steps were taken towards enhancing coordinated action on adaptation under the auspices of the newly established Adaptation Committee. However, until adaptation is fully institutionalized at the international level and resourced appropriately, climate impacts will continue to mount unabated, regardless of even the most effective cuts in GHG emissions.
Governments have sometimes presented their role in adaptation governance as primarily to provide information on potential climate change impacts, handing responsibility for response to individuals or firms. Indeed, Garnaut has argued that centralized governments are likely to lack the agility and required information to orchestrate a differentiated response with the necessary precision to address local needs.Footnote 165 However, simply improving information and understanding tends to ignore significant cultural and social barriers to adaptation,Footnote 166 and the lack of connection between increasing knowledge and behavioural change.Footnote 167
Mitigation and adaptation regulatory measures are also more intimately coupled than current policy and research suggest. Thus, we should consider policy responses and climate change regulatory actions in ways that clearly recognize this linkage.Footnote 168 However, such synergies are not always clear-cut and there may be significant trade-offs to meet both mitigation and adaptation objectives, both in international agreements and at more local levels of governance.Footnote 169
6.2. Implications of Multi-Level Adaptation Governance
The varying timeframes, requirements and approaches for adaptation in different settings means that adaptation governance, like mitigation, is occurring at many levels with multiple policy responses by varying actors. As Hobbs suggests, an array of different approaches may be the best way of building resilience if rapid environmental change becomes the norm.Footnote 170 Planning systems and laws will need to become more dynamic as the boundaries of what were previously seen as fixed control factors (such as 1-in-a-100-year flood events, delineated ecosystems or defined habitats of threatened species) become much more dynamic.Footnote 171 Regulatory measures will also need to reflect that human societies are not simply entities being ‘acted on’ by the climate but are actively interacting with it, in significant, but often poorly understood, ways. On the other hand, it is also clear that adaptation should ideally occur under an overarching and institutionalized regulatory response at the international level that provides a clear mandate for funding and resource allocation in developing countries that are most in need of adaptation resources.
Hence major challenges in governing adaptation policy and regulation are twofold. The first is the need to link effectively across different levels, both horizontally and vertically, from individual or local actor responses to national laws and international treaties. The second is to structure effectively the relationship between adaptation and mitigation regulatory measures, and between these climate measures and other related policy arrangements.
7. trend towards decentralized regulation
Adaptation measures provide an apt illustration of the emergence of a multi-level system of climate change regulation and governance. In the adaptation context, the trend towards decentralized regulation has been justified as a response to the localized nature of adaptation challenges.Footnote 172 However, even in the context of climate change mitigation, which has conventionally been conceived as a global task requiring a collective international effort, moves towards a more decentralized approach are evident. Sub-national ETS, such the WCI and RGGI schemes discussed in Section 3, are an example of regional approaches forging rules for emissions trading. The EU ETS, albeit adopting increasingly harmonized rules and procedures governing emissions trading from the start of Phase 3 in 2013, also leaves room for the adoption of more stringent standards by Member States.Footnote 173
7.1. Action at the Sub-National Level in Federal Polities
In federal countries that have been slow to take national action to address climate change, such as the US, particular states have taken the lead in developing climate change law and policy. California is a good example, with its legislative commitment to ambitious emissions reduction and renewable energy targets and efforts to develop an integrated regulatory approach, which could serve as a model for other jurisdictions.Footnote 174 The California Global Warming Solutions Act, AB32, enacted in August 2006, places a cap on the emissions of all GHGs in the state and requires that the total GHG emissions from all sources be reduced by January 2020 back to their 1990 levels, a reduction of 25–30% compared with the level when AB32 was passed. A cap-and-trade scheme has been finalized as part of the regulatory package to achieve these targets.Footnote 175 However, in a difference from other jurisdictions, cap-and-trade is viewed as a supplement to direct regulatory measures, mostly targeting energy efficiency, which are estimated to accomplish about 80% of the required emissions reduction.Footnote 176
In Australia, where a federal governance system operates with environmental powers shared between the central Commonwealth government and state governments,Footnote 177 state governments were also early movers in adopting progressive climate change mitigation measures in the face of the slow progress of central government efforts. As early as 2003, the State of New South Wales introduced its own Greenhouse Gas Abatement Scheme, applying to state-based electricity generators.Footnote 178 More recently a number of other Australian states and territories have introduced a raft of climate change-related laws, including specific climate change legislation.Footnote 179 Interestingly, a side effect of the introduction of a national ETS in Australia may be that many sub-national initiatives face ‘roll back’ on the basis that the federal scheme is putatively designed to ‘cover the field’.Footnote 180 This situation highlights the perennial difficulties of achieving concerted environmental governance in federal jurisdictions and emphasizes that centralization of climate action on a national basis may, in effect, stifle more proactive sub-national legislation.
The Victorian Climate Change Act of 2010 is one such example of proactive action on climate change taken at the sub-national level of governance in Australia. The preamble of the Act recognizes the ‘overwhelming scientific consensus’ regarding climate change and posits the need to act at the state level to address this challenge, despite the arguments that might be made that a national or international level of governance is more appropriate. In a similar way to the UK Climate Change Act 2008, on which the Victorian legislation is modelled, the Act sets a GHG emissions reduction target for Victoria of 20% below 2000 levels by 2020.Footnote 181 Although this target falls well short of the UK’s 2020 target (34% reduction below the 1990 baseline),Footnote 182 it is significantly more ambitious than the default Australian national target of 5% below 2000 emissions levels by 2020.Footnote 183 Other similarities of the Victorian Act to the UK legislation include provision for reporting on emissions data and progress towards meeting emissions reduction targets,Footnote 184 and a requirement for preparation of a climate change adaptation plan and programmes.Footnote 185 These similarities illustrate how, in a multi-level governance context, cues for regulatory development and learning may be taken from other comparative jurisdictions rather than simply as a result of national or international top-down imperatives.
As with other aspects of multi-level climate governance discussed in previous sections, a key issue raised by the development of decentralized responses to climate change mitigation and adaptation is how they will fit together with other policy measures taken at more aggregated levels of governance. For instance, questions have arisen over the relationship between Victoria’s emissions reduction target and that at the national level, especially in the event of the federal government introducing a carbon pollution cap under its ETS based on lower emissions reduction targets.Footnote 186 Thus the question of effective integration looms once again as a critical dimension of a multi-level climate governance model.
8. evaluating multi-level climate governance
The current landscape of climate regulation, as highlighted in the previous sections of this article, is now very diverse. Governing authority has been dispersed from centralized bodies, such as the UNFCCC, along a number of dimensions. This includes vertical differentiation (with climate governance undertaken by governments located at both global and sub-global levels), horizontal differentiation (with a greater involvement of non-state actors), as well as what we might term functional differentiation as the climate change issue is fragmented into smaller parts dealt with in independent centres of decision-making.
A multi-level governance system of this kind could be deliberately designed with the goal of instituting a normatively superior form of climate change regulation. In her work advocating a ‘polycentric’ model for climate change governance, Ostrom argues that this approach recognizes differences in production functions and scale effects in supplying different types of public goods or services, that policy preferences are more homogeneous, and that there is more trust and willingness to comply within smaller units.Footnote 187 There may also be efficiencies if citizens are served by multiple jurisdictions, with a greater choice of options available and the chance to learn more about the performance and problems of different approaches, with competition leading to innovation, wider experimentation and multiple strategies.Footnote 188
Certain aspects of developing climate regulatory arrangements are providing some of these putative benefits of a multi-level governance model. There is some evidence – particularly in the carbon trading sector – that sub-global levels of governance offer the potential for more ambitious policies to be implemented. For example, national and sub-national ETS are able to reflect local emissions profiles and seem to be generating increased willingness to ‘buy-in’ to climate change regulation by local parties. Another example is the competition in providing land-based emissions offsets in the voluntary markets, giving offset purchasers a choice of alternative approaches with different types of benefit. However, at the same time there is little direct competition between suppliers in different emissions trading markets or overlapping coverage in climate legislation or policy in multiple jurisdictions. Accordingly, whether these developing multi-level arrangements may provide a more effective contribution to climate change regulation than a top-down, globally led process is still an open question.
The different aspects of emerging multi-level climate governance discussed in the article remain relatively discrete, reflecting the lack of clear interconnections between different regulatory areas and an absence of strong integration within the multi-level framework. Although there is some degree of cross-referencing – for example, between ETS and arrangements for generating carbon credits in the forestry sector – in general, developments are occurring in different sectors largely independent of one another. This is a consequence of the fact that multi-level climate governance has emerged by default rather than by design, with the consequence that strategies are often adopted in a piecemeal fashion. While this has allowed greater progress to be achieved on some issues (e.g. REDD+), it is also generating a confusing array of disparate objectives, measurement standards and implementation strategies that makes evaluation of the overall effectiveness of the multi-level governance system difficult. In addition, opportunities that greater integration might allow (for example, for enhancing synergies between mitigation and adaptation polices) have not been realized.
The emergence of forms of climate change regulation at multiple levels of governance beyond the conventional international law/national implementation paradigm also raises important issues as to the consequences for the centralized global policy processes of the UNFCCC. A key question that arises concerns the role to be played by the UNFCCC, and the international climate change regime more broadly, in multi-level climate governance. This issue has by no means been solved by the agreements reached at the Durban COP. While the multilateral process remains alive through the extension of the Kyoto Protocol and the launch of new negotiations under the Durban Platform, the parameters of future international action on climate change are highly uncertain. In addition, many in the scientific and NGO community argue that any global action agreed for 2020 onwards will come too late to avoid dangerous global warming.
Even so, from the various climate regulatory measures surveyed in this article, it is clear that multi-level governance will not be a panacea for the difficulties that have been encountered in international climate change negotiations. As we have highlighted, multi-level regulatory measures generate their own set of complex issues around linkage, measurement and compatibility, including most critically whether disparate efforts in different sectors collectively add up to something that will ensure adequate climate change mitigation and adaptation. We are already seeing, with the bottom-up mode of target-setting first endorsed by the Copenhagen Accord, a disparate array of emissions reduction pledges that fall significantly short of what is needed to ensure even a 50:50 chance of avoiding dangerous global warming.
It is for this reason that many observers (including the present authors) envisage a continuing role for interventions at the international level, particularly under the auspices of the UNFCCC, albeit while seeking to avoid the kind of ‘centralizing and hyperbolic multilateralism’Footnote 189 that critics have highlighted in the past. Unlike issue-specific international environmental agreements, such as the Montreal Ozone ProtocolFootnote 190 or the Persistent Organic Pollutants Convention,Footnote 191 the UNFCCC was explicitly established as a ‘framework’ treaty that articulates key principles and general obligations, such as inter- and intragenerational equity and differentiated responsibilities, and establishes institutional architecture, but does not attempt to devise a binding, comprehensive global ‘solution’ to climate change. An important contribution made by the UNFCCC to climate law and governance is providing a principled basis for climate policy and a source of international legitimacy for efforts undertaken at multiple levels that seek to implement its broad objectives.
Under such a framework it is perhaps inevitable that the form of climate change governance that has emerged is kaleidoscopic in nature. Moreover, climate change itself is not an issue that is easily captured by a single overarching definition but rather is one that comprises many interacting parts. A multi-level approach in this context allows policy and regulatory focus on particular aspects of the climate change problem at multiple scales with the potential to achieve more effective outcomes in specific sectors.
At the same time, if the desire is to ensure effective linkage between the component policy parts and to realize the co-benefits of such policy integration, there will continue to be a need for some level of coordination and oversight at the global level. The UNFCCC provides a potential vehicle for such integration and oversight. Over the past 20 years the Convention has proved to be relatively robust in the face of competing political trends advocating holistic versus more reductionist approaches to the problem of climate change, and has exerted a unifying effect over the various emerging strands of climate law. However, if the UNFCCC is to continue to play an effective role in the emerging multi-level system of governance, expectations will need to shift, at least in the short term, from seeing it in the conventional top-down manner as a centralized site for decision-making on emissions targets and implementation. Instead, the UNFCCC could be more of an umbrella institution that sets principles, establishes methodologies and institutes review and verification systems to guide policy-making within the diverse, multi-level climate governance framework.
