UN Framework Convention on Climate Change

The United Nations Framework Convention on Climate Change (UNFCCC) is an environmental treaty that entered into force on March 21, 1994, and has been updated a number of times since. The UNFCCC itself is a declaration of intent, set up to allow for the creation of specific mandatory emission limits through the adoption of subsequent updates; thus, signing the UNFCCC does not bind the signatory nation to specific actions the way signing and ratifying those updates does. The most recent update, the Kyoto Protocol, has eclipsed the UNFCCC in fame and recognition in part because of Presidents Bill Clinton and George W. Bush's decisions not to forward it to the U.S. Senate to be ratified (thus retaining the United States as a signatory of the protocol, but one that is not bound by it) because of economic impact concerns. The UNFCCC is primarily concerned with greenhouse gas levels in the atmosphere and the effects on the climate and the world's population.

The UNFCCC was negotiated in 1992 at the United Nations Conference on Environment and Development, better known as the Earth Summit, and was one of the two legally binding agreements drafted at the conference. (The other was the Convention on Biological Diversity, which was also signed but not ratified by the United States.) The operations of the UNFCCC are overseen by a United Nations secretariat, the executive secretary of which is Yvo de Boer (b. 1954), the Austrian-born son of a Dutch diplomat. De Boer has been criticized throughout the green community for his pro-U.S. statements, despite the United States' effective nonparticipation in the UNFCCC.

There are three categories of membership in the UNFCCC: the developed country groups of Annex I and Annex II, and the developing countries. Annex I countries are obligated to reduce greenhouse gas emissions below specific levels set by the protocols and can exceed those levels only by purchasing emission allowances or otherwise offsetting them through means agreed to by the UNFCCC. Annex II countries are a subset of the Annex I and are expected to help pay the costs of developing countries. Developing countries are expected to work toward emissions reductions as is feasible without interfering with their development and may voluntarily join Annex I, but no requirements are placed on them—a fact that some critics oppose, as long-term environmental reform requires all countries to reduce their greenhouse gas emissions. At the moment, however, the mechanism of reducing emissions does have an undeniable economic impact—perhaps short term, perhaps not so short—a justification for avoiding requiring these emissions used both by the UNFCCC with respect to developing nations and by former president George W. Bush with respect to the highly developed United States.

Purchasing emissions allowances under the authority of the UNFCCC works much as it does within a country (or political union, as with the European Union Emission Trading Scheme): A particular entity that has been assigned a cap on its emission levels (a business, when the overseeing body is a government; a country as represented by its government, when the overseeing body is the UNFCCC) wishes to exceed that cap, and so purchases allowances from other entities working under the same system. The total amount of allowances—the total maximum level of emissions—thus remains the same. It is somewhat analogous to sports teams' trading their draft picks; there is a system that determines the initial allotment, but once allowances have been allotted, they may be traded within the system. In theory this provides the potential for a significant emissions allowance market, if reducing emissions is cheaper in one country than in another, such that both profit from the trade. This market would not have significantly long-term [Page 419]potential, as the long-term goal is for all countries to reduce emissions substantially, which means reducing the number of allowances, eventually to such a small level that too few entities will have “slack” available for trade. (By extension, it seems reasonable to assume that if no significant progress is made toward that long-term goal as of some medium-term point in time, the allowances system will be abandoned as ineffectual and the market for them will cease to exist.) Overly active emissions allowance trade may indicate an overabundance of allowances.

...