Delivery destinations and changing markets for liquefied natural gas

 

Liquefied natural gas (LNG) markets are going through a rapid and fundamental change. Where the previous era for LNG deliveries was marked by point to point sales from an exporting country to an end-destination importing country, todays LNG world looks very different. 

The number of end-destination buyers and sellers has grown significantly: For long-term contract deliveries the markets have moved from six importing countries and three exporting countries in 1971 to 11 importing countries and 12 exporting countries in 2000 and in 2017 markets had reached 40 importing countries and 19 exporting countries. 

The growth of spot market players have grown in a similar fashion: from eight importers and six exporting countries in 2000 to 33 end markets and 29 exporting countries (including re-exports) in 2017. The market share of non-long-term deliveries (meaning spot and short-term contract deliveries) was 30% in 2017. While new long-term contracts are still signed, for new projects in particular, this share of non-long-term deliveries is rising. 

New types of market players have also emerged. In addition to the traditional sellers and end-destination buyers, various types of portfolio players have emerged. Also re-exportation has become more economical. Both the growth of trading parties as well as non-user sellers have contributed to the growing liquidity of the markets. 

These changes in the markets have put pressure on the traditional LNG sale and purchase agreements. Some of the changes seen in the markets include the agreements’ shortening duration; more frequent price revisions; moves away from oil price indexation of natural gas prices and increasing flexibility. 

These changes are primarily being driven by markets but for some are also influenced by  regulatory push. This includes the move away from destination clauses and other diversion clauses as well as profit-sharing mechanisms.  In this respect, the efforts by European Commission and Japanese Fair Trade Commission are particularly important. 

EU competition law investigations by European Commission focusing on various pipeline and LNG contracts and practices in early and mid-2000’s, and the more recent antitrust report by the Japan Fair Trade Commission (“JFTC”) in 2017 focusing on international LNG trade have reached partially similar conclusions. While the concerns of EU Commission were primarily related to liquidity of the EU internal gas markets and while the JFTC focused on free trade in LNG and liquidity of international LNG markets, it is possible to identify common elements and common concerns. 

In order to provide clarity and certainty for LNG market participants, a working group supported in the context of an ongoing projectinitiated by European Commission and Japanese Ministry for Economy, Trade and Industry, created a model diversion clause. The present author drafted the model clause, assisted by the other members of the expert group. The group believes that the model clause can meet the antitrust requirements of both Japan and European Union. 

The model clause presented and explained in this document is free for contractual parties to adapt as a part of their LNG SPA. While I and other members of the working group believe that this clause complies with antitrust requirements of EU and Japan today, care must be taken to ensure that future developments do not change the interpretation of these laws in a way that has an impact on this compliance. 

The model diversion clause and guidance note to accompany the model clause are available at: https://www.ogel.org/legal-and-regulatory-detail.asp?key=21040.

An academic article explaining the background is available at: 

https://www.ogel.org/journal-advance-publication-article.asp?key=575.

 

Kim Talus 

Professor and McCulloch Chair in Energy Law
Director of Tulane Center for Energy Law
Tulane University

Professor of European Economic and Energy Law
UEF Law School
Co-Director for Center for Climate, Energy and Environmental Law
University of Eastern Finland (UEF)

Professor of Energy Law
University of Helsinki

Editor-in-Chief for OGEL (www.ogel.org)

 

LNG: Developing the Demand

Andrei Belyi

The International Maritime Organization (IMO) has introduced positive changes for LNG by cutting the amount of sulphur in marine transport from 2020. LNG will be the most logical fuel to replace high-sulphur fuel oil (HSFO): it will cut carbon dioxide emissions significantly.

From now on, the question is about commitment and compliance to these norms. The main caveat here is that ships are required to use lower sulphur fuels but refiners are not restrained by any regulation to supply heavier-but-cheaper solutions. Hence, ships will still have access to heavier fuels.

Adding to that, even though we have observed a number of ferry operators who have declared a shift to LNG, bunkering in the Mediterranean and Baltics appears to be moving more slowly than initially expected. Particularly, shipping and bunkering companies are concerned about LNG supplies and prices, whereas LNG suppliers would like to be sure of the mid-term demand for marine transport. There needs to be a faster rate of growth in the maritime transport sector in order to attract competitive LNG supplies. However, analysts remain divided about such prospects. A study recently produced by the Oxford Institute of Energy Studies points out that overall LNG demand in the maritime sector should not be overestimated. The shipping industry is not really rushing to switch over to LNG, even though we hear some announcements about companies switching to LNG for short-distance shipping: for example, liners in the Gulf of Finland.

Overall, I would believe that a further regulatory and legislative support at both national and European level might be needed to ensure the proper development of LNG markets, supplies and bunkering. Recently, Spain introduced a law obliging ship-owners to switch away from HSFO: it could be the right way to do for the other countries as well.

Adding to that, questions persist about methane. Methane actually constitutes a significant greenhouse gas emission produced during liquefaction and regasification, although the primary focus is often on the dioxide emitted by the final consumers – such as shipping companies. In this respect, a debate about “greening” the LNG will increasingly gain a place within policy communities. Mixing LNG with biogas-based liquefied gas would become one of the tangible solutions to the issue. Once again, technological mechanisms exist but a without the right regulations this development will be slow to come.

LNG shipment via containers has been increasing in recent years. Most innovative T75 Containers can for example be also used for short-term storage as the gas remains a liquid for 110 days and they can be used to ship LNG to filling stations. Rising use of compressed and liquefied natural gas in road transport certainly contributes to small-scale shipment of gas by containers.

It might be worth noting that LNG and CNG demand in inland transport seems to grow despite all the competition from electric vehicles. Across northern Europe, companies are increasingly investing in gas filling stations: in this regard, the latest news came from Gasum, announcing a plan to install up to 50 filling stations across Finland.

This text is an excerpt from Natural Gas World (https://www.naturalgasworld.com/ngw-magazine-lng-developing-the-demand-64692#snews)

It’s the Politics, Stupid! How to Make Fossil Fuel Subsidy Reform Happen

 

                  
Harro van Asselt  & Jakob Skovgaard

Harro van Asselt, PhD (VU University Amsterdam, cum laude), is a Professor of Climate Law and Policy with the University of Eastern Finland Law School, and a Senior Research Fellow with the Stockholm Environment Institute.

 

Fossil fuel subsidies strain public budgets and contribute to climate change and local air pollution. But despite widespread agreement about the benefits of reforming fossil fuel subsidies, repeated international commitments to eliminate them, and valiant reform efforts by some countries, they persist.

The scale of global subsidies is vast. For 2015, the International Monetary Fund (IMF) puts them at US$5.3 trillion. The International Energy Agency (IEA), following a more conservative definition of subsidies, estimates them at US$325 billion, still a substantial amount. Their sheer size means that reforming subsidies can lead to significant savings for the public purse.

Subsidy reform can also create important environmental and social benefits. A conservative estimate finds that a quarter of the Paris Agreement pledges can be met by phasing out fossil fuel subsidies. Moreover the re-purposing of fossil fuel subsidies, which are often socially regressive because they benefit the richer segments of society, can help the poor while reducing local air pollution and promoting renewable energy. Fossil fuel reform can thus contribute to achieving multiple Sustainable Development Goals (SDGs).

While some countries, such as India and Mexico, have undertaken successful reform, subsidies in other countries, such as Nigeria, have been rolled back due to public protests. Many other countries have not even attempted reform at all. Internationally, although SDG 12.c (on fossil fuel subsidy reform) and forums such as the G20 and the Asia-Pacific Economic Cooperation (APEC) have begun to offer platforms to address fossil fuel subsidies, other institutions such the UN Framework Convention on Climate Change (UNFCCC) and the World Trade Organization (WTO) have been conspicuously inactive.

What explains this discrepancy? In our new open access edited book titled ‘The Politics of Fossil Fuel Subsidies and Their Reform,’ we highlight the need to better understand the political dimensions of fossil fuel subsidies. Although economic factors such as fluctuating fossil fuel prices undoubtedly matter, they alone cannot explain why some countries have put in place fossil fuel subsidies, why they are maintained, and why in some cases they are successfully reformed. The prospects for fossil fuel subsidy reform are political, and the relevant actors, interests and cultures that inform these dynamics differ from country to country.

By studying fossil fuel subsidies as political phenomena, we can shed light on the factors that make reform work and identify how international institutions can help promote reform.

  • First, our work underscores the importance of clearly defining fossil fuel subsidies. Internationally, the IMF estimate of global subsidies is 16 times higher than that of the IEA because the Fund includes social and environmental externalities in its definition. From Trinidad and Tobago to the United Kingdom, the confusion about defining fossil fuel subsidies has allowed actors opposed to reform to argue that their country does not subsidize the consumption or production of fossil fuels.
  • Second, an analysis of the political dynamics reveals the role of wider power structures in enabling fossil fuel subsidy lock-in. In South Africa, for instance, subsidies to coal production have remained in place in the post-apartheid era due to their benefits for the powerful ‘minerals-energy complex’ of government, state-owned enterprises and industry.
  • Third, a focus on the politics of fossil fuel subsidies points to the critical role of framing. While, internationally, fossil fuel subsidies are considered primarily an environmental problem, national governments tend to implement fossil fuel subsidy reform for economic and fiscal reasons. Thus, if international institutions target fossil fuel subsidies solely as an environmental problem, they may miss many opportunities to mobilize domestic actors in favor of reform.
  • Fourth, timing is crucial. A better understanding of the politics can allow reform advocates to better identify political windows of opportunity. For example, in Egypt, President El-Sisi used the ‘honeymoon period’ following his 2014 landslide election to push through reform.

SDG 12.c has placed fossil fuel subsidy reform firmly on the global agenda, while rightly linking this commitment to broader environmental, development, economic and health considerations. To translate this imperative into action we need to improve our understanding of the political barriers to reform – and how they can be overcome.

 

This article was first published on the SDG Knowledge Hub:
 http://sdg.iisd.org/commentary/guest-articles/its-the-politics-stupid-how-to-make-fossil-fuel-subsidy-reform-happen/

Environmental Cooperation under CETA: Bold New Linkages, Bolder Risks

 

Dr Sabaa A. Khan is Senior Researcher at CCEEL / UEF Law School. Her areas of expertise include regional trade agreements and she serves on the Joint Public Advisory Committee of the Commission for Environmental Cooperation, under an appointment by Canada’s Minister of Environment and Climate Change. 

Dr Kati Kulovesi is Co-Director of CCEEL and Professor of International Law at the UEF Law School. She specializes in climate change law and holds a PhD in international economic law from the London School of Economics and Political Science.

 

The EU and Canada highlight climate change and the Paris Agreement in context of the CETA

In the same week as Canada, Mexico and the United States signed a new regional trade agreement that makes absolutely no mention of climate change, Canada and the EU made new efforts to formalize the climate change and trade linkage within the Canada-EU Comprehensive Economic and Trade Agreement (CETA). Representatives of the EU and Canada convened in Montréal for the inaugural meeting of the CETA Joint Committee, mandated to oversee and facilitate the implementation of all aspects of trade and investment under the CETA. 

The meeting’s outcomes included a recommendation on ‘trade, climate action and the Paris Agreement’, reiterating the Parties’ shared commitment to the international climate change regime and Article 24.12(1)(e) of the CETA that specifically addresses climate change. The recommendation further signals the Parties’ intention to “step up the role of the Paris Agreement in their bilateral cooperation”. 

This can be seen as a promising signal that the international climate change regime will play a salient role in shaping mega-regional trade flows. It is worth noting, however, that the increased trade in merchandise that has taken place under the first year of the CETA’s provisional application appears to be in sectors that are energy-intensive, and closely linked to the high-emissions extractive industries.

Source: Government of Canada

Moreover, the Joint Committee’s reaffirmation of the Paris Agreement at this point in time is an environmental moment worth modest celebration in light of ongoing concerns regarding the potentially massive environmental implications of the CETA investment protection provisions and the legally-ambiguous investment tribunal established under Art. 8.27.

Will the CETA’s Investment Chapter Have a Negative Impact on Environmental Protection in the Finnish Mining Sector?

While Canada and the EU continually underscore the immense mutual benefit that the CETA brings to businesses and communities and its environmentally progressive nature, it is difficult to ignore that the greatest environmental impact of the CETA is likely to be determined by its Investment Chapter, not the Trade & Environment Chapter that is explicitly dedicated to environmental issues. 

The basic idea underlying the CETA’s Investment Chapter is to ensure that investors are treated equally and fairly, and that there is no discrimination between domestic and foreign investors. One of the mechanisms it includes for foreign investment protection is the possibility for investors to take legal action against governments through a new Investment Court System.  A critical apprehension in this respect is that the prospect of costly legal challenges and damage to a country’s reputation in hosting investment might discourage governments from taking legitimate and necessary regulatory and administrative actions to protect environmental and public interests. 

Even though the Investment Chapter reaffirms Parties’ regulatory right with regard to achieving legitimate policy objectives, including the protection of public health and the environment (Article 8.9), the provision on what constitutes a breach of fair and equitable treatment of investors (Article 8.10.4) leaves open the possibility for an investor to challenge governmental measures based on “legitimate expectations.”  In light of these provisions, there are valid concerns that the CETA’s profitable implications for Canadian and EU investors come at the expense of the Parties’ willingness to regulate in the public interest and according to the principle of sustainable development. 

In the context of the mining industry in particular – a key Canadian sector expected to benefit from the trade agreement - it is difficult to set aside the potential environmental and public health risks for EU Member states that are linked to the CETA’s investment protection rules and dispute settlement architecture. With over 50% of publicly-listed global exploration and mining companies headquartered in Canada, the CETA has not only opened up EU market access to a lucrative and globally powerful group of corporations, it has empowered them through the investment protection chapter to challenge public policy measures that interfere with their natural resource development projects. 

In Finland, the mining sector has been one of the key concerns in the context of the CETA. Past negative experiences, including from the Talvivaara mine, have increased the public’s awareness of the sector’s potential environmental impact. When approving the CETA, the Parliament requested the government to evaluate the need to reform the Finnish mining legislation in consideration of the CETA. In response, the government commissioned an expert report, which saw no need for reform.  The report’s key message is that the Finnish legal system already contains adequate protection to ensure investors’ fair and equitable treatment.  

This finding and the report have, however, generated controversy, not least because the report was commissioned from a law firm known for representing the interests of the mining sector and multinational mining companies.  One of the questions is whether the legal analysis in the report is objective enough to constitute a response to the Parliament’s request. 

Looking at the report commissioned by the Finnish government, it contains comprehensive and well-informed analysis of the Finnish national legislation. However, the international law dimension would have merited more attention. This would have included analyzing relevant case law to understand what kind of government actions have been challenged through investor-state dispute settlement. Such analysis should have studied at least case law involving the mining sector and Canadian mining companies.  

Looking at investor-state dispute settlement, Canadian mining companies already have an extensive track record in seeking financial compensation from governments through arbitral disputes. The request for arbitration filed at the International Center for Settlement of Investment Disputes (ICSID) by Toronto-listed Gabriel Resources against Romania, seeking $4.4 billion for alleged losses in its halted gold-mining project, and the dispute between Vancouver-based Eldorado Gold and Greece (ruled in favor of Eldorado Gold) over the environmental impacts of mine development in the northern region of Halkidiki, are reflective of the kind of mining disputes that could proliferate under the CETA.

In the Gabriel Resources vs. Romania case, the mining company is basing its claimon “unjustified delays in the administrative permitting process, imposing shifting and non-transparent legal requirements,politicizing applicable legal and administrative processes, and ultimately abdicating the responsibility to make decisions on the permitting of the Project in contravention of the applicable legal framework.” In Eldorado Gold vs Greece the claimant’s argument also concerned, inter alia, delays over issuing environmental permits. 

A quick glance at the relevant case law thus shows that legal arguments made in the actual proceedings tend to be more complex than those studied in the expert report commissioned by the Finnish government.  It would therefore have been useful to also study the actual case law and consider its relevance in the Finnish context. Whether this would have affected the overall conclusion remains unknown without comprehensive analysis. 

Overall, the concern remains over the CETA’s Investment Chapter risking to immobilize EU Member states’ from regulating in the interest of public and environmental health protection. Of course, Canada could face similar challenges brought on by EU investment in Canada-based mining operations. Since the Investment Chapter has not been implemented under the provisional application, and the CETA itself has yet to be fully ratified, there is still space for EU Member states to bring in mining legislation reforms to counteract the possible financial, environmental and public health risks associated with the expansion of Canadian mining interests in the EU. 

Doughnut Law – Environmental Law for the Anthropocene?

Niko Soininen

Niko Soininen currently works as a Postdoctoral Researcher in Ocean Governance Law at University of Gothenburg and Senior Lecturer in Environmental law and Jurisprudence at UEF Law School/CCEEL. In the fall of 2018, Soininen will start as an Assistant Professor (sustainable law, governance and regulation) at University of Helsinki.

Anthropocene is the scientific term for a geological time-period acknowledging the fundamental human impact on the Earth’s ecosystems. With global impact come questions of planetary boundaries: How much human impact is too much human impact? The Stockholm Resilience Centre’s study on planetary boundaries shows that we are currently well beyond safe nitrogen and phosphorus output levels. Also, biosphere integrity, especially the loss of genetic diversity, poses a high risk for humanity. Climate change and land-use are currently reported as causing increasing risks. At present, freshwater use lacks a quantified planetary boundary but freshwaters are heavily impacted by the above environmental changes. This is a bleak picture, but not all is lost. I spent four months in the spring of 2018 at the University of Maryland Socio-Environmental Synthesis Center as an ASLA-Fulbright visiting scholar studying adaptive governance. In the following, I’ll recap some of the most salient lessons from the adaptive governance scholarship seeking to design effective and legitimate environmental governance for the Anthropocene.

FROM DOUGHNUT ECONOMICS TO DOUGHNUT LAW

With the global economic system being a major driver in pushing the planetary boundaries, Kate Raworth presents an interesting theory for rethinking economics (Doughnut Economics. Seven Ways to Think Like a 21st Century Economist. Chelsea Green Publishing 2017). She makes a compelling argument for moving away from antiquated pictures of steadily climbing economic growth toward doughnut shape economics. The economic doughnut builds on “a pair of concentric rings”. The inner ring depicts the social foundation of human well-being and the outer ring the ecological boundaries of our planet. All human activity must remain within the doughnut’s two rings. With this picture in mind, Raworth asks us to consider “what economic mindset will give us the best chance of getting there?”

The question of getting the economic system to nourish social well-being while respecting planetary boundaries is not only important for economics, but also for law. In a legal context, the question reads: what legal mindset will give us the best chance of getting there? Applying Raworth’s question to law, we enter a familiar territory for adaptive law and governance scholarship. What does doughnut law and governance look like? What kind of law and governance is needed to stay within safe operating space for humanity? Analogically to the doughnut economy questioning existing economic theories, the adaptive law and governance theories question existing legal theories.

FOUR DOUGHNUT-LESSONS FOR LAW

The first doughnut lesson for law and governance in the Anthropocene is to regulate the use and protection of ecosystems at a systemic level (see a good overview, Benson & Craig 2017; Garmestani & Benson 2013). Traditionally, law has turned a blind eye to regulating cumulative human impacts on ecosystems. This is visible, among others, in the fragmentation of environmental management authority into several sectors at all levels of governance (energy, transportation, food production, natural resources, nature conservation etc.). The limitations of sectoral competence are often aggravated by management and regulatory authorities having limited geographical, and often artificial (non-ecosystem-based), competences. Staying within the doughnut, however, requires law and governance that is equipped with competence equivalent to the nature of the environmental problem at hand. Wicked problems such as climate change, nutrient run-offs and biodiversity loss require a systemic cross-sectoral and multi-level approach to law and governance.

The second doughnut lesson is to recognise that managing (what do we do?) and governing (what do we want?) the use and protection of ecosystems needs to be adaptive. As Craig & Ruhl (2014) and Cosens et al. (2017) have repeatedly observed, procedural and substantive rules need to facilitate the consideration of changing social-ecological circumstances. Traditionally, law has often been used to establish predictable rules that operate acontextually and do not allow consideration of changed ecological, social, economic, technological and cultural circumstances. In Finland, this approach is well illustrated in government issued hydropower licenses that are legally protected against revocation, and in certain instances the law does not even allow changes to existing licenses. This picture of the law as guaranteeing predictability and finality faces significant challenges in the Anthropocene as ecosystems and social systems dependent on them are dynamic entities (complex adaptive systems) with immensely complicated functions, feed-back loops and non-linear tipping-points. For this reason, law needs to allow adaptive and experimental management of social ecological systems and be able to adapt its own rules for maintaining human activity within the doughnut.

The third doughnut lesson is based on an understanding that people and companies do not like to be regulated. They may, however, still wish to advance accepted societal goals and may be very well-equipped to do so. The wrong picture is to think that law is the only policy instrument that really works. If we look at climate change mitigation, this is certainly not true. A study done by Vandenberg & Gilligan (2017) shows that companies like Walmart hold significant power to push environmental policy goals through their subcontractor networks. Law (or public governance in general) is not always the most effective way to steer human activities within the doughnut.

The fourth and final doughnut lesson is that law and governance need to be science based (see e.g. Benson & Craig 2017; Saunders et al. 2017). We need constant monitoring of social and ecological systems to understand how they function, have functioned and will be likely to function. Systemic governance is not possible without science, nor is adaptive management or governance.

With the above four lessons in mind, environmental law and governance will be much more equipped to stay within the social-ecological doughnut than ever before. The million-dollar question is, however, whether the international community, regional actors such as the EU and states have the courage and the political will to move towards more adaptive law and governance. While some encouraging regulatory examples are visible on all governance levels, the push-back of antiquated legal mindsets still linger in the air.

Boosting the EU’s circular economy plans by addressing links between chemicals, products and waste legislation

Topi Turunen

Topi Turunen is a PhD researcher in environmental law at CCEEL / UEF Law School and a Researcher at the Finnish Environment Institute. 

The European Union (EU) is seeking to make the European economy more sustainable through its Circular Economy Action Plan. The interface between chemical, products and waste legislation presents some complex challenges for the objectives of the circular economy package. In January 2018, the European Commission published a communication and staff working document on options to address linkages between three key pieces of EU law, namely the Waste Framework Directive, Regulation on Classification, Labelling and Packaging of Substances (CLP) and the REACH regulation.

Four key challenges

There are four key challenges in the interface between chemicals, products and waste legislation that the communication seeks to address. The first is that waste management operators often do not have adequate information on the presence of substances of concern. This makes controlling the life-cycle of certain chemicals complicated. Information on the composition of materials is available in the supply chain in accordance with chemicals legislation. However, when a material becomes waste, waste treatment operators are not considered to be a part of the supply chain and the information on the material’s composition is therefore not made available to them. Under chemicals regulation, operators recovering chemicals from waste are considered as manufacturers and as starting a new supply chain for the substance in question. The recovered substances will have to be either registered as any new substances; or registered as UVCB substances (i.e. substances of Unknown or Variable Composition, Complex Reaction Products and Biological Material); or the composition of the material has to be identified through the safety data dossier of similar substance that has already been registered in the case of recovery exemption. Hence the identification of the composition of the waste-based materials according to REACH cannot be by-passed in recovery although REACH explicitly does not apply to material when they are still considered ‘waste’. The administrative costs to fulfill obligations of REACH can be high and it has been pointed out that the supervision of recovery exemptions tends to have loopholes.

The second challenge relates to the question of whether the recovery of so-called ‘legacy substances’ (substances that are commonly present in products but that have been prohibited or restricted in new products) should be promoted in order to increase the overall recovery of wastes. Waste streams containing legacy substances can be huge in volume and their recovery can therefore have a substantial impact on the achievement of circular economy objective for more efficient material circulation. Nevertheless, it remains unclear whether the risks of using such wastes can be balanced through the positive environmental impacts of their recovery from the waste stream.

The third challenge is that the regulation of End-of-Waste criteria is not fully harmonised within the EU and it is therefore not always clear when a product or substance ceases to be waste. The Commission is therefore proposing a more harmonized EU-wide regulation of different waste streams ceasing to be waste and more uniform rules for the End-of-Waste schemes in the EU Member States.

The fourth key challenge relates to some discrepancies in waste and chemicals regulation: hazardous waste is not always considered hazardous as a chemical according to the CLP Regulation after it has gone through a recovery process and ceased to be waste. Moreover, hazardous chemicals are not necessarily considered hazardous waste after being discarded.

Thoughts on the way forward

Solving the four key challenges will be complicated. What will be required is either new legislation or significant amendments to the existing legal framework. Possible measures include abolishing the recovery exemptions system, redefining the scope of supply chains and expanding the scope of extended producer responsibility schemes. The downside of abolishing the recovery exemptions system would be increased administrative burdens that risks creating a disincentive for recovery. On the positive side, this would result in safer material cycles and reduce the possible negative impacts of wastes by improving the monitoring of chemical substances in waste recovery. Redefining the supply chains and strengthening the extended producer responsibility both emphasise the crucial role of manufacturers and importers: the life-cycle of the product and its properties have to be taken into account in order to reach the objective of effective and safe material cycles. The distinction between waste and products could also be clarified with more harmonized EU-wide End-of-Waste regulations and clearer criteria for when an object or substance ceases to be waste. Finland has taken initial steps towards improving the quality of its End-of-Waste regulation by starting to draft national end-of-waste legislation and a guidance to support case-by-case decision-making.

Once waste ceases to be waste, it will be subject to the same regulatory framework as similar non-waste products. Therefore the acceptance of legacy substances in recovered materials seems unlikely and it seems more likely that their use in products will remain unlawful. A further argument in support for the proposed approach is that the evaluation of trade-offs between the positive impacts of recovery and the negative impacts of using legacy substances would most likely prove to be extremely complicated and expensive.

Coming back to the Commission’s recent proposal, a final aspect worth noting is that the proposal does not create any obligations for stakeholders. The Commission however proclaims that it will start multiple research projects and aims to work with relevant stakeholders and European Chemicals Agency (ECHA) in order to solve the above-mentioned problems. This process should be well under way by the time the current Commission’s term comes to a close at the end of 2019.

This blog post is based on the following article, published in the Finnish Journal of Environmental Law:

Turunen, Topi: Kemikaali-, tuote- ja jätesääntelyn rajapinnan ongelmakohdat – kommentteja komission tiedonannosta keskinäisistä yhteyksistä. Ympäristöjuridiikka 1/2018, pp. 44–60.

The role of law in securing resilience of water, energy and food systems

     

Kaisa Huhta, Antti Belinskij and Niko Soininen*

Climate change, population growth and economic and technological development are significant challenges for natural resources management. Governing limited resources requires that the interlinkages between natural resource sectors are adequately acknowledged and addressed.

Such interlinkages are particularly clear between the water, energy and food sectors. Agriculture is the largest consumer of global freshwater. Water is also needed, for example, in the production of hydropower and biofuels and in the operation of solar panels. Energy is needed to ensure food production and water services, but some forms of energy production may also decrease land available for agriculture. Hence, decisions concerning one of these sectors do impact the functioning of others.

Resilience refers to the ability of a system to adequately prepare for, and to recover from, shocks without losing its capacity to function.[1] It is particularly important for sectors such as water, energy and food. This is because, first, the uninterrupted availability of and access to these resources is irreplaceable to any society. Second, the potential butterfly effects between these sectors further emphasise the importance of safeguarding the functioning of water, energy and food systems.

Resilience has a legal dimension. Law can either improve or impede the ability of a system to withstand disturbances and shocks. So how do we recognise a legal framework that improves the resilience of the water-energy-food nexus? First and foremost, the legal framework should adequately acknowledge the vulnerabilities of water, energy and food systems. Secondly, it should recognise interlinkages between these sectors in such a way that prevents a shock in one sector from paralysing the functioning of the others. Finally, a functional and effective legal framework should tackle the different time scales on which the water-energy-food security nexus operates. This means that a legal framework should be equipped to respond to sudden short-term disturbances as well as facilitate the long-term security in these sectors.

What is also needed is an adequate institutional and jurisdictional setup for co-operation and co-management of the sectors. For example, law governing electricity supply should acknowledge that a disruption will eventually affect food and water supply as well. Furthermore, law should not only facilitate responses to sudden shocks but also include tools to prevent such shocks in the longer term. In the water sector, for example, this would mean clear obligations concerning the investments needed to maintain functioning infrastructures.

The role of law in establishing and maintaining resilient water, energy and food systems is important but challenging. In an ideal situation, law supports and enhances the resilience of these sectors. However, law can also have the opposite effect if it emphasises predictability in a way that hinders adaptive reactions in shock situations. For example, rigid and static procedural rules may impede flexible and fast reactions to shock situations even if these rules are generally favourable to ensuring legal predictability and non-discriminatory practices. Furthermore, the societal, technical, economic and scientific uncertainties relating to the interlinkages between water, energy and food sectors make it challenging to balance predictability on the one hand and resilience of water, food and energy systems on the other. Nevertheless, the ability of law to maintain the resilience of these systems is a central element in safeguarding the water, energy and food security.

* The blog post is based on two recent articles supported by the Strategic Research Council’s Winland project (No 303628). The articles are:

  • Antti Belinskij, Niko Soininen and Kaisa Huhta, ‘Vesi-, ruoka- ja energiaturvallisuuden oikeudellinen resilienssi’ Ympäristöpolitiikan ja -oikeuden vuosikirja (2017)
  • Antti Belinskij, Kaisa Huhta, Outi Ratamäki and Marko Keskinen, ’International Law and the Water-Energy-Food Security Nexus’ in Peter Saundry (ed.) Food-Energy-Water Nexus (forthcoming 2018).

[1] Walker, Brian, Gunderson, Lance, Kinzig, Ann, Folke, Carl, Carpenter, Steve and Schultz, Lisen, ‘A Handful of Heuristics and Some Propositions for Understanding Resilience in Social-Ecological Systems’, 11 Ecology & Society (2006), p. 14.

Why multilateralism matters

Moritz Wüstenberg

Junior Researcher, Energy Law

Liberal trade has faced growing resentment from several directions in recent years. The decision by the United Kingdom to withdraw from the European Union following a 2016 referendum has affected both businesses and individuals. On the other side of the Atlantic, the 2016 election of President Trump was built on a campaign of protectionism and threats to multilateral trading rules. Disrupting the international trading system in order to realise an “America first” policy or to cast of the shackles of the European Union raise concerns and questions. In addition to creating economic benefits, trade on multilateral terms has for centuries been recognized as a key tool for maintaining peaceful relations between nations. If multilateralism fails, how will this impact geopolitics? Some exceptions, such as those allowing for closer cooperation without infringing on the multilateral rights, are sanctioned by the multilateral rules of the WTO and their use is on the rise. Is an increase in the use of exceptions to multilateralism a cause for concern?

The reduction of tariffs has been achieved through several rounds of negotiations under auspices of the General Agreement on Tariffs and Trade (GATT) in the wake of the Second World War. The outcome these means that trade in goods today is nearly tariff free. A key ingredient for the success of the GATT negotiations was the Most-Favoured Nation (MFN) clause, through which tariff concessions negotiated between some Members were multilateralized to all on a non-discriminator basis. In tandem with trade liberalization the global economy witnessed rapid growth of income, creating wealth for those taking part in the process. The driver of this growth has been argued to have been the virtuous cycle in which tariff cuts led to increased trade, which in turn led to more income which yet again enabled tariff cuts. Today, the MFN clause remains a cornerstone of the World Trade Organization Agreements (WTO) with only few exceptions to it.

Preferential Trade Agreements, such as the European Union, NAFTA or the CETA, that offer deeper liberalization to its Members, but do not raise tariffs or other barriers to trade vis-à-vis those WTO Members that are not part of the pact, form the most important exception to the MFN obligation. In general, the preconditions for deviations from the MFN principle are threefold: transparency (the requirement to notify), commitment to regional trade liberalization (the requirement that PTA´s cover all trade between parties) and neutrality in relation to non-parties. The number of PTA´s has grown rapidly in the past decades, leading to concerns on the erosion of multilateralism. This echoes also the broader discussion on the fragmentation of international law, ongoing for more than a century.

The positive economic effects that can be achieved through liberal trading policies have been evident in both Great Britain in the 19th century as well as the United State in the 20th century. The repeal of the Corn Laws in 1846 ended a period of mercantilism in place since 1815 and pushed Great Britain into prosperity by embracing free trade, even on unilateral terms. The underlying theory was and remains that gains can be made by specializing in the production of certain products and then exchanging these for products that others produced efficiently. Free trade would eventually lead to an efficient outcome as nations produced those goods which they could produce most efficiently. With its bet on free trade, Great Britain would be the leading economic power of the 19th century.

Successful post-war settlements, at least since the 1648 Peace of Westphalia, have specifically recognized the relevance liberal trade has for the maintenance of peaceful relations. Are the mostly peaceful relations since the Second World War under threat from the rattling of trade sabres? While it is unlikely that neither the protectionist policies of the United States or the withdrawal of the United Kingdom from the EU will have any imminent effect on peaceful relations between nations, the stakes are high. Throughout recent history, liberal trade has functioned as an assurance against armed conflict and, conversely protectionism has preluded conflict.

A recent investigation on the effect of aluminium and steel imports (Section 232 investigation) on the US economy concluded that these have a negative effect on the National Security and can therefore be “adjusted”. Against a backdrop of several options to protect the domestic industries, President Trump chose to raise duties on imports from all countries including Canada and the European Union. Calls for retaliation were immediate, reflecting the conception that the measures of the United States are unjustified.

National Security exceptions are found in most trade agreements, including the WTO agreements. The US seems to have prepared to make use of this exception by broadening the traditional interpretation of national security beyond national defence to include also economic security in the aluminium and steel investigation. The apparent reason behind this interpretation is an attempt to rely on a little used MFN exception of the GATT (Article XXI) that allows WTO Members to take `any action which it considers necessary for the protection of its essential security interests`. While there are qualifications for the use of Article XXI, it is in effect self-judging it suffices that the measures taken are considered necessary by the state taking them. Invoking this article without due cause could be the straw that breaks the camel´s back, undermining the effectiveness of the multilateral framework and causing other nations to retaliate by also invoking Article XXI to justify their trade restrictive measures.

The “political trilemma” is how the economist Dani Rodrik has described the problem facing international economic integration. Nations have to make a choice between two of three lines of policy: international economic integration, the nation-state and mass politics. Should international economic integration be maintained, either the nation-state or mass politics have to be sacrificed. With both America and the United Kingdom choosing the nation-state and mass politics over integration, only time will tell if history will repeat itself with trade protectionism flowing into geopolitical tensions.

Deeper commitment to free trade without diminishing the rights of WTO Members is at the core of the Preferential Trade Agreement exceptions to MFN treatment. Negotiation with fewer nations enables faster decision making and makes it possible to overcome the foot-dragger effect which the consensus based rules of the WTO can have. Consequently, PTA can be seen as a building block as opposed to a stumbling block for multilateralism. Moves toward unilateralism as witnessed in the US aluminium and steel investigation, on the other hand can be considered conflicting with multilateralism. It remains to be seen if trade-politics convert to geo-politics and, more ominously, trade wars morph into real wars.

This blog is based on the author’s recent publication ´Back to the future: MFN treatment in an era of protectionism´ in the Nordic Journal of International Law. This publication reviews the development of the Most-Favoured Nation clause in light of historical events and analyses its importance in trading relations today.

 

 

 

 

Is Glyphosate safe? We have the right to know

  

Emilia Korkea-aho and Päivi Leino

Korkea-Aho is Associate Professor of European Law and Legislative Studies (1.1.2018 onwards) and Leino is Professor of International and European Law at UEF Law School.

In November 2017, after a great deal of political maneuvering, the EU Member States decided to extend authorization for glyphosate, the world’s best-selling herbicide, for a period of five years. Eighteen Member States voted in favour of the extension, nine voted against and one abstained. The decision came following a lengthy and combative process, which focused on the question of whether glyphosate is carcinogenic, something that the World Health Organization declared in 2015 as probable. The public debate surrounding the decision has been exceptional, resulting in a ‘Ban Glyphosate’ European Citizens’ Initiative and a pending Court case relating to the publicity of the scientific reports regarding the use of glyphosate and its effects on humans.

The pending Court case involves a request by four Green Members of the European Parliament addressed to the European Food Safety Agency, which after lengthy correspondence agreed to disclose parts of the reports but refused to hand out their most sensitive parts, including the summaries of scientific findings. The correspondence can be found in full on the AskThe EU – website under “Is glyphosate safe? We have the right to know!”. The debate illustrates how the role of agencies has been gradually changing in the EU. While their creation was initially justified by reference to the need to delegate technical issues to bodies operating largely outside politics, it seems that many agencies (such as the European Chemicals Agency (ECHA), the European Food Safety Agency (EFSA), and the European Medicines Agency (EMA)) today deal with issues that are politically “hot stuff”.

A tension between confidentiality and transparency has become particularly evident in the framework of regulatory procedures concerning chemical substances, food, and medicinal products. In these procedures, applicants must provide EU agencies with commercially sensitive information to trigger the scientific and technical evaluation needed for marketing authorization or approval, and legally, these companies “own” the data that they provide. In the case of glyphosate, EFSA refused four MEPS access to the scientific studies on the grounds that the information is commercially sensitive. While the rules on public access to documents should certainly not allow competitors to access the business secrets of others, they exist to safeguard a key function of democratic society: enabling broad and enlightened debate about issues that concern society at large. That the possible health risks caused by glyphosate belong to these matters is something that few would disagree on.

In recent Agency practice, a new “ownership” paradigm seems to have evolved with the potential to develop into a novel kind of originator control. Originator control, which has been used in the context of sharing information with other governments or international organizations, makes re-dissemination of information conditional on the originator’s approval, and is unknown to EU public access legislation, which requires consultation procedures for third party documents. Disclosure decisions must be taken in appreciation of the potential harm caused to commercial interests, including intellectual property rights, which is to be weighed against public interest in disclosure.

Copyright and public access regulation are a poor match, with disparate and competing policy objectives that are not easily balanced or reconciled. Many agencies have in practice relied on companies to propose and justify redactions and non-disclosure decisions. Agency disclosure decisions have also been accompanied by a statement intended to limit the subsequent use of information by the applicant. It is clear that when an application for access is based on Regulation 1049/2001, there should be no legal grounds for limiting its re-use. However, when agencies disclose information with the disclaimer that the use of released documents may lead to copyright infringement, they shift the legal risk and liability to the applicant; a risk that should be with the public authority deciding on public access.

Current legislation and case law provide limited guidance in helping to settle the balance. According to rumours, the European Commission is now planning to adopt a legislative proposal that would force pesticide companies to make public all scientific studies on the safety of their products in an attempt to eliminate claims that industry holds too much influence over authorizations. At best, the proposal would enable independent assessment of the way in which agencies evaluate scientific studies. It would, however, offer limited guidance for the new situation in which agencies increasingly find themselves. The fact that EU agencies deal with issues that are politically “hot stuff” also means that they engage directly with the general public, and it remains to be seen whether this new role of agencies is foreseen in the proposal.

This blog post is based on findings from Emilia Korkea-aho and Päivi Leino, ‘Who owns the information held by EU agencies?: Weed killers, commercially sensitive information and transparent and participatory governance, 54(4) Common Market Law Review (2017) 1059-1092. The blog post has originally been published here.

The Bonn Climate Conference 2017: Progress on the implementation of the Paris Agreement and higher ambition?

Kati Kulovesi

Professor of International Law & Co-Director of the Centre for Climate, Energy and Environmental Law

The latest round of United Nations climate negotiations concluded on 18 November 2017 in Bonn, Germany. What is the state of international climate policy after the meeting and what lies ahead for 2018 and beyond?

The negotiations in Bonn were intended to have a mainly technical focus. Major outcomes were neither expected nor achieved. Still, the negotiating agenda was packed with issues ranging from agriculture and gender to indigenous peoples and loss and damage caused by climate change. Also high on the agenda were the main building blocks of the UN climate regime, namely mitigation, adaptation, finance, technology and capacity building.

 

Photo by IISD/Earth Negotiations Bulletin (http://enb.iisd.org/climate/cop23/enb/images/17nov/3K1A6733.jpg)

 

One of the main issues in Bonn related to the development of detailed rules for implementing the 2015 Paris Agreement. The deadline for concluding these important negotiations is in December 2018. While progress was achieved on some issues, long-standing controversies also surfaced and largely stalled negotiations on the crucial issue of mitigation.

The Paris Agreement’s key achievements include that its basic mitigation regime applies to all Parties; the Agreement does not refer to the outdated categories of developed and developing countries in the 1992 UN Framework Convention on Climate Change and gives more consideration to countries' national circumstances.  However, during negotiations on guidance on Nationally Determined Contributions (NDCs), China, India and their allies in the Like-minded Developing Countries group called for returning to a bifurcated system where different rules apply to developed and developing countries respectively. For many, such a system would constitute a major step backwards and the proposal met strong opposition especially from developed countries. Ultimately, countries forwarded 180 pages of text on mitigation to the next negotiating session in May. The text leaves all the highly divergent options on the table, including by reproducing word-by-word submissions from several countries and coalitions. 

Hopefully the question of bifurcation will not distract the negotiators too much next year. For the question that urgently should take the centre stage in 2018 and beyond is that of ambition. The UN Environment's 2017 Emissions Gap report indicates that the gap between the emission reductions needed to meet the Paris Agreement’s objectives, including the 2°C 1.5°C targets, and the existing NDCs is “alarmingly high” and “more ambitious NDCs will be necessary by 2020.”

The Paris Agreement relies on global stocktakes at five-year intervals from 2023 onwards to increase collective ambition. A similar exercise, a facilitative dialogue, was agreed in Paris for 2018. Now known as the Talanoa Dialogue -inspired by traditions of COP 23 President Fiji – this exercise will be an important opportunity to test the Paris Agreement’s largely procedural approach to mitigation.

The Talanoa Dialogue will be informed by the Intergovernmental Panel on Climate Change’s Special Report on the 1.5°C target, scheduled for October 2018. Given that countries should submit new or updated NDCs in 2020, the hope is that the IPCC report along with the Talanoa Dialogue will lead to a stronger response to climate science and to more ambitious NDCs.

Divided into preparatory and political phases, the Talanoa Dialogue will take place from January to December 2018. It will focus on three main questions: where are we; where do we want to go; and how do we get there. Positive elements in the Dialogue’s design include its comprehensive and participatory nature. Parties, stakeholders and expert institutions are invited to provide analytical and policy-relevant input. They are also invited to organize local, national, regional and global events in support of the Dialogue.

A problematic feature of the Talanoa Dialogue’s design is that there is no clear path forward from the Dialogue towards more ambitious NDCs. The Dialogue’s outputs will include summaries and reports of the discussions. The outcome is also “expected to capture the political momentum, and help Parties to inform the preparation of nationally determined contributions.” However, there seems to be nothing in the design to ensure that ambition will indeed be increased following the Dialogue.

 

Photo by IISD/Earth Negotiations Bulletin. (http://enb.iisd.org/climate/cop23/enb/images/9nov/3K1A2815.jpg)

 

How, then, to start building the momentum for more ambitious climate action?  An obvious challenge for the political climate is that President Trump has announced intentions to withdraw from the Paris Agreement in 2020 and the US federal government is no longer providing global climate leadership like it did during the negotiations for the Paris Agreement, especially through bilateral cooperation with China.

Several procedural steps have already been identified both within inside and outside the UN climate negotiations for the next couple of years. These include:

While important, these steps are not by themselves enough to guarantee that ambition will be increased in 2020. Stakeholders within EU countries and elsewhere should therefore take advantage of the participatory nature of the Talanoa Dialogue and build pressure on politicians to take stronger action both nationally and internationally. An encouraging example of going beyond the official government position is the ‘alternative’ US represented through individual states, cities and other stakeholders. The ‘alternative’ US was highly visible in Bonn and plans to remain active in global climate policy despite the backward position on climate change by the Trump Administration.

The Paris Agreement’s legal structure is interesting and innovative in that it includes opportunities to bring various actors at various levels of global governance closer together, including when preparing NDCs and evaluating collective progress through global stocktakes. The Talanoa Dialogue will provide the first important opportunity to test this design and hopefully show that it can actually work in increasing collective mitigation ambition. 

Time for a holistic approach to climate change and air pollution in international law

Dr Yulia Yamineva

Yamineva works as a senior researcher at CCEEL.

The urgent challenges of climate change and air pollution could benefit from more integrated consideration under international law. As this blog post explains, climate change and air pollution are currently mostly addressed through separate international legal instruments and regimes. The blog post therefore identifies ways to build stronger links and synergies between policy measures to address these issues through international law.[1]

 

A view from the venue of the Biennial Conference of the Asian Society of International Law in Seoul, August 2017

A view from the venue of the Biennial Conference of the Asian Society of International Law in Seoul, August 2017

 

WHY INTEGRATE CLIMATE AND AIR QUALITY GOALS?

Policies to address climate change and air pollution include potential for win-win solutions. Some pollutants, especially black carbon, have both a detrimental effect on air quality and a warming impact on the climate. However, other air pollutants have a cooling effect and reducing their emissions could lead to an overall warming result. Furthermore, policy choices in one domain can have harmful effects on the other: for instance, the EU policies, aimed at developing diesel technology in the car industry in order to meet carbon dioxide reduction targets led to an increase in nitrogen oxides and particulate matter pollution in urban areas.[2]

There are clear benefits from a harmonised approach to tackling air pollution and climate change where mitigation measures are assessed for their potential impact on climate, air quality, human health and ecosystems. The key example relates to reducing emissions of short-lived climate pollutants (SLCPs).  Due to their short lifetime in the atmosphere, SLCP emission reductions, especially those of methane and black carbon, could slow the rate of global warming by 0.5°C by 2040. In addition to their warming effect, black carbon and methane have a negative effect on air quality and the environment: reducing these emissions could avoid 2.4 million premature deaths globally by 2030 and have positive impacts on agriculture and ecosystems. Focusing on mitigating SLCP emissions is therefore an attractive option to slow down global and regional warming in the short term, while at the same time improving local air quality.

 

TWO DIFFERENT WORLDS OF INTERNATIONAL LAW

International law largely treats the two policy goals – slowing down climate change and improving air quality – through separate instruments. This is unsurprising as climate change has traditionally been framed as a global problem, while air pollution has been understood by policy makers as a local or at best a transboundary issue. These different framings have implied that climate change should be addressed through legal instruments of global coverage, whereas air pollution can be effectively mitigated through regional and national/local measures. More recently, however, it has become apparent that the impact of air pollution goes beyond local or regional areas: this includes not only the impact on the climate referred to above but also worsening air quality due to atmospheric transport of air pollution from distant sources. Therefore, the problem of air pollution also requires global approaches.

Looking at international climate law, the 2015 Paris Agreement does not define what specific greenhouse gases or other warming substances it covers and in this sense does not address specifically methane or black carbon. One caveat to this is that the rulebook for the implementation of the Agreement is still under negotiation. The Agreement also contains no references to air pollution, although the connection may be implied from multiple mentions of sustainable development.

At the same time, methane has traditionally been within the scope of the UN Framework Convention on Climate Change (UNFCCC) regime: it is part of national reporting and covered by the Kyoto Protocol’s emissions reduction targets. It has received somewhat less attention though as the main discussion thus far has been on a long-term response to climate change and therefore on reducing carbon dioxide emissions. Black carbon, which is an aerosol and not a greenhouse gas, has not been covered by the UNFCCC regime.

Unlike international climate law, which centres on the UNFCCC regime, international law on air pollution is heavily fragmented. This issue is regulated in an ad hoc fashion through a patchwork of legal instruments covering specific regions, activities and substances. There is no single legal framework with a global reach and prospects for developing one are at present low. Lack of comprehensive and holistic treatment of air pollution in international law results in gaps in geographic, pollutant and pollution source coverage.

Looking across international air pollution frameworks, it can be concluded that these are rarely sensitised against climate impacts of air pollution measures. Air pollution treaties typically refer to transboundary effects of pollution but not to global effects, including climate change. There is for example no comprehensive global coverage of black carbon emissions. A regional exception is the Gothenburg Protocol to the Convention on Long-range Transboundary Air Pollution which was amended in 2012 to include emissions reduction targets for fine particulate matter. Although the black carbon component of these targets is not specified, the parties are encouraged to focus their mitigation action on black carbon rich sectors. The Gothenburg Protocol is thus the only multilateral environmental agreement to include black carbon in its scope. However, the amendment has not entered into force pending ratification by two-thirds of its parties and the geographic scope of the Protocol is in any case limited to Europe and North America.

 

OPPORTUNITIES TO BRIDGE THE GAP

There are multiple synergies between these two domains of international law which can be advanced for a more coherent approach to climate change and air pollution.

Scientific cooperation and collaboration in inventory development and reporting is one of the key areas. Data and scientific analyses are a fundamental step in developing sound environmental policies, and emission inventories are particularly important for developing national mitigation measures. For instance, scientists say that the best way to maximise climate and air quality benefits is to focus on sources with a high black carbon component rather than on those with a high component of cooling substances.

There are clear synergies between international climate change law and air pollution instruments in terms of inventories. The UNFCCC already has in place a well-developed global reporting framework for methane which air pollution frameworks could capitalise on. For black carbon, current reporting frameworks are fragmented, incomplete and mostly confined to the Northern hemisphere. More generally, global data on air quality as well as particulate matter and black carbon emissions are scarce or unavailable. The problem is especially acute in many developing countries which have poor capacity and systems to monitor air quality. This makes capacity-building activities at the global level crucial.

Another important direction is raising awareness about linkages, co-benefits and trade-offs between climate change and air pollution policies, including with respect to black carbon and methane. In this context, the Climate and Clean Air Coalition (CCAC), which is a public-private partnership led by governments, has already played an important role through scientific assessments and communication of SLCP impacts and potential mitigation actions. 

Although the Paris Agreement does not per se integrate air quality concerns, the country-driven approach to mitigation action implies that diverse mitigation efforts can be accommodated under its framework. Potentially any substances, including methane and black carbon, can be incorporated into nationally determined contributions. In fact, many countries have already included methane, several have mentioned SLCPs, and some, such as Mexico and Chile, have specifically mentioned black carbon in their intended nationally determined contributions.

The situation is more complex regarding integrating climate change concerns into air pollution frameworks due to the number of related instruments and their incomprehensive coverage. This for instance means that there is no one single interface on air pollution at the global level which makes institutional cooperation between the policy worlds on climate change and air pollution more difficult. However, several fora have the potential to advance such cooperation, including the abovementioned CCAC as well as international organisations such as the UN Environment, the World Health Organisation and the World Meteorological Organisation.  

In conclusion, there are many interlinkages between international law on climate change and on air pollution which should be explored.  Greater coherence between climate change and air pollution policies provides an attractive opportunity to link global, regional and local environmental agendas in a mutually beneficial way.

 

[1] The blog post is based on the author’s conference paper ‘Climate Change and Air Pollution in International Law: Apart or Together? Short-lived Climate Pollutants in Asia’, which was presented at the Biennial Conference of the Asian Society of International Law in Seoul, August 2017, as well as: Yulia Yamineva and Seita Romppanen, ‘Is Law Failing to Address Air Pollution? Reflections on International and EU Developments’ [Forthcoming in 2017] Review of European, Comparative & International Environmental Law, 26 (3); Yulia Yamineva and Kati Kulovesi, ‘Keeping the Arctic White: The Legal and Governance Landscape for Reducing Short-lived Climate Pollutants in the Arctic Region and Opportunities for Its Future Development’, in review.
[2] See Aleksandra Cavoski, ‘The Unintended Consequences of EU Law and Policy on Air Pollution’, [Forthcoming in 2017] Review of European, Comparative & International Environmental Law, 26 (3).

CONTROVERSY OVER EU’s LULUCF ACCOUNTING RULES

Seita Romppanen

Romppanen works at the UEF Law School as a Senior Lecturer in international environmental law.

In July 2016, the European Commission issued a legislative proposal on how to include the land use, land-use change and forestry (LULUCF) sector in the EU’s climate and energy framework for the 2021-2030 period. The EU’s overall goal for the period is to reduce greenhouse gas emissions by 40% from 1990 levels. The proposal is based on a ‘no debit’ approach, meaning that land-use emissions must be entirely compensated by removals, with some flexibilities between the LULUCF sector and the effort-sharing and EU emissions trading sectors.

Notably, the Commission’s proposal would introduce binding mitigation targets in the LULUCF sector for all EU Member States. Moreover, emissions from bioenergy are also to be included in the new framework. However, regulating LULUCF sector’s climate impacts is tricky as forests call for different perspectives in different contexts in the global environmental agenda. Issues such as the forest carbon cycle, biodiversity, conservation and the increasing need for forest biomass for energy call into play strong yet conflicting perspectives on how forests should best be exploited and regulated.

 

 

THE DEBATED FINNISH FORESTS

Especially in Finland, the Commission’s LULUCF proposal has been highly contentious. One of the key controversies relates to the proposed forest management reference levels and associated accounting rules for LULUCF. The reference level essentially compares the change in the carbon sink to an earlier point in time. The projected harvest intensity (e.g. forest biomass use) is compared with the past forest harvest intensity. Depending on the reference level, increasing the use of the forest will decrease the sink (i.e. cause emissions) and the debit needs to be compensated for by emissions reductions in other sectors.

If a Member State exceeds the reference level (i.e. removal of emissions), it can take advantage of the excess for flexibilities in other sectors. In Finland, bioenergy plays a strong role in the current government’s programme. The government is committed to increasing the use of renewables by up to 50% in the 2020s. This increase will be, in principal, achieved through ‘growth in the supply of bioenergy’ and in especially, ‘the greatest opportunities’ will be achieved through increasing the production of liquid biofuels. In concrete terms, Finland plans to increase wood harvesting from the current 66 million cubic meters annually to 80 million by 2030. Through these extensive targets, Finland aspires to become the world’s pioneer in bioeconomy.

As the Commission’s LULUCF proposal links the use of forest biomass for bioenergy to the LULUCF sector’s emissions, it has lead to a heated debate in Finland on GHG emission savings that could be achieved through the use of bioenergy. The Commission has proposed to set the years 1990–2009 as the baseline against which the reference level should be calculated. Last July, the European Parliament voted in favor of stronger LULUCF accounting rules and proposed a new baseline of 2000–2012. The Finnish government  considered these proposals as unfair for Finland as the proposed reference level would cover years that were particularly difficult in the forestry sector and thus, create a negative gap between historical and projected forest harvest intensity. Put bluntly, the reference level proposed by the Parliament would not allow for the planned increase of forest biomass use without compensatory (and costly) action elsewhere.

 

 

LULUCF IS A PERFECT ILLUSTRATION OF A COMPLEX AND SYSTEMIC ENVIRONMENTAL PROBLEM THAT CHALLENGES POLICYMAKERS AND REGULATORS

The Finnish government argues that through sustainable forest management it is possible to increase forest harvest intensity while also increasing Finland’s carbon sink. Yesterday, the Parliament’s plenary voted to support this view, and the previously ambitious approach was weakened. Among other amendments, an amendment that would give the Commission the possibility to ‘grant a derogation’ from the baseline upon ‘reasoned request by a Member State’ was accepted by the Parliament.

However, the Finland’s official views have been challenged both internationally and domestically by a large group of researchers from leading research institutes, including the Finnish Climate Change Panel. Indeed, strict reference levels are backed up by science: from a climate perspective, a reduction in the forest sink leads to more CO₂ emissions – even if forests are managed sustainably. In addition, increased harvesting is also detrimental to forest biodiversity and ecosystems. However, there is a clear conflict between the EU’s LULUCF proposal and Finland’s plans for bioeconomy – plans that were partly built to respond to EU’s targets pushing for increased use of bioenergy and biofuels. Now, we are already turning back from the biofuels path, and sustainable use of forest biomass does not encourage using wood for energy. Regulating the delicate interface between science and policy is difficult, and the polarised and inflammatory debate between the two camps does not facilitate the regulators’ task in finding a climate-positive and both economically and environmentally sustainable compromise. In EU, the legislative procedure is still open and thus comprehensive conclusions of the new regulatory architecture on LULUCF are yet not possible.

If we wish to ensure that our climate action keeps to a fair and sustainable path, and that it complies with the legal requirements to which we are subject, Finnish bioeconomy plans must be based on, and amended by reference to, the best available science. This includes the fact that our government accepts the fact that the policy has changed, and that the change is justified by science. If we as one of the wealthiest and most educated countries in world cannot cut our emissions, who can? However, and very centrally, this does not mean that we will not be able to exploit our forest resources in the future – this is not what the EU is saying – but it does mean that we should reorient, diversify and adapt our public policy in relation to forests to respond to today’s climate reality. Thus, the need to revise our strategies could be treated as an apt opportunity to innovate alternative and new uses of forest biomass. Finland is already known for its sustainable wood products as well as novel wood construction solutions – should we not build on these innovations instead of emitting them as CO₂ up in the atmosphere?

Ecological Futurists at Work: Moving Forward on Global Ocean Governance

Dr. Sabaa A. Khan, Postdoctoral Researcher

The UN Ocean Conference took place from 5 to 9 June 2017 at the UN Headquaters in New York. The historic Conference closed just a few weeks prior to the fourth session of the Preparatory Committee established by UN General Assembly Resolution 69/292 on development of a new legally-binding instrument under the UN Law of the Sea Convention (UNCLOS) to address the conservation and sustainable use of marine biological diversity of areas beyond national jurisdiction (ABN).

Taken together, these developments point towards an emerging extension of international law into the high seas, conceptualised as a common resource that belongs to all of humanity. As the oceanic sights of international law have risen, so has the hope for the potential geographical influence of legal rules on the horizon to regulate activities on the high seas.
 


The main outcome of the UN Ocean Conference was a Call for Action. While this outcome is by no means a binding instrument, its contents echo the ambitions of international environmental law in regards climate change, human health and environmental protection. The Call for Action also looks to future law, reaffirming the ambitions of ongoing legal negotiations under the auspices of UNCLOS (mentioned above), as well as multilateral negotiations under the WTO on disciplining harmful fisheries subsidies.

Moreover, the Call for Action brings to the forefront an area of international environmental law that often receives minimal political attention at all levels of governance – the regulation of chemicals and waste. In this respect, the outcome text of the UN Ocean Conference obliges the global community to not only look forward to the creation of new legal agreements targeting our common marine spaces and resources, but to reflect upon the shortcomings of the existing international legal landscape in regards abating the immense global marine pollution that is linked to the production, use and disposal of toxic chemicals and waste.

The Call for Action could not be clearer in that the sound management of chemicals and waste lies at the centre of global ocean health. At the global level, a number of international chemicals and waste regimes exist to protect our marine ecosystems from the global circulation and disposal of toxics. However, their coverage is extremely narrow in scope and their controls are sporadic, limited to specific points of the chemical lifecycle. We have yet to arrive at regulatory frameworks that encapsulate the entire lifecycle of hazardous substances in global use and define, clearly, stakeholder responsibilities at each and every lifecycle phase.

Evidently, our inability to see transparently through our globalized commodity chains gravely limits our capacity to ensure the protection of human and ecosystem health, including the oceans, from toxic commercial substances and waste. The visibility that is required to effectively protect our global communities and common resources from the toxic hazards of chemicals and waste must cut across entire global chains of production and consumption. In this respect, the launch of the Tuna 2020 Traceability Declaration at the UN Ocean Conference should serve inspiration to stakeholders in the broader global commodities and chemicals market, as an example of the product lifecycle and supply chain commitments necessary to follow through on bold environmental, oceanic and human health objectives embodied in our international environmental laws.
 


It is certain that the health and resilience of our oceans will depend critically on the further development of international law, notably on fisheries subsidies, on chemicals and waste trading and evidently, on the protection of marine biodiversity in ABNJ. However, also noteworthy is that the UN Ocean Conference Registry of voluntary commitments received 1328 submissions upon the Conference’s closure. This demonstrates that where intergovernmental legal texts fall short in their capacity to “save our ocean”, transnational stakeholders rise to challenge. The Registry itself creates a self-imposed and public standard for all those who have contributed to it, and should be used as such, to incite a global culture of transparency, governmental and corporate accountability and civil society mobilization. The Registry exemplifies an inclusive ecological futurism at work, a seedling for strengthened global ocean governance, from the bottom up.

More Time for an Energy Revolution? Seizing the Opportunity to Slow Down Climate Change by Cutting Emissions of Short-lived Climate Pollutants

      

Kati Kulovesi, Yulia Yamineva and Veera Jerkku

View of the South of Delhi by Jean-Etienne Minh-Duy Poirrier (Under Creative Commons License)

There is an important ‘ambition gap’ between the climate change mitigation policies pledged by countries in context of the Paris Agreement and those needed to avoid dangerous climate change. Discussions on ways to step up climate change mitigation efforts commonly focus on ways to reduce carbon dioxide (CO2) emissions. These indeed play a crucial role in long-term climate change mitigation. However, achieving radical cuts in CO2 emissions also requires a fundamental economic and energy transformation that is proving time-consuming to achieve.

Our argument is that short-lived climate pollutants (SLCPs) provide an attractive option that could ‘buy’ more time to cut CO2 emissions. The United Nations Environment Programme has estimated that reducing SLCP emissions, especially methane and black carbon, could slow the rate of global warming by 0.4-0.5°C by 2040 (UNEP, 2011). This is an important contribution given that the existing climate policies have been estimated to limit the global average temperature increase only between 2.9°C and 3.4°C by the end of the century (UNEP, 2016)., thus falling short of the 2°C target in the Paris Agreement.

SLCPs include methane, some hydrofluorocarbons (HFCs), tropospheric ozone and black carbon. What unites them is a significant short-term warming effect on the climate. Methane, tropospheric ozone and black carbon cause local air pollution, thereby adversely affecting human health and ecosystems, including by reducing crop yields.

At the CCEEL, we have recently launched a new five-year research project known as ClimaSlow (Slowing Down Climate Change: Combining Climate Law and Climate Science to Identify the Best Options to Reduce Emissions of Short-Lived Climate Forcers in Developing Countries). The project is led by Professor Kati Kulovesi and funded through an European Research Council (ERC) Starting Grant for 2017-2021. Other CCEEL members involved in the project are Dr Yulia Yamineva  (Senior Researcher) and Veera Jerkku (PhD candidate).  The project also involves participation by the UEF Aerosol Physics group.

One of the factors driving our interest in SLCPs is that we see them as an interesting opportunity to merge the global climate change agenda with the local health and environmental agendas. Air pollution poses a considerable risk to human health worldwide. It leads to heart and lung failures and cancer, causing approximately 6.5 million deaths each year (WHO, 2016). Through aggressive reductions in black carbon emissions, it would be possible to avoid 2.4 million premature deaths annually by 2030 as a result of reduced exposure to fine particulate matter (UNEP, 2011).

The growth in SLCP emissions over the next decades is expected to be driven by developing countries. Therefore, in addition to the focus on international and transnational cooperation, the ClimaSlow project looks at three national case studies: China, India and Nepal.

China and India are among the world’s key sources of black carbon and methane emissions and their emissions of HFCs are also set to rise. Air pollution is also an acute problem in all three countries damaging both public health and the economy. In China, for instance, air pollution is implicated as a leading cause of mortality (UNEP, 2015).  The project will look at the policies and regulations in place in the case study countries, and seek to identify ways to strengthen them through both national and global action. It will also try to identify opportunities for others to learn from the experiences of the three case study countries.

One of the project’s motivations is that the legal and regulatory options to strengthen global action on SLCPs have not been studied comprehensively, and the climate impacts of such options are not yet adequately understood. The ClimaSlow project seeks to fill the vacuum by undertaking an analysis of the fragmented and multi-layered global legal and regulatory framework for SLCPs.

Furthermore, the ClimaSlow project breaks disciplinary boundaries through combining climate law and climate science. An analysis of legal and regulatory options is complemented by climate modelling work to determine their climate impacts and hence identify the most effective ways to achieve deep reductions in the emissions of SLCPs.

The project will seek to maintain an iterative dialogue and share its interim and final findings with a variety of stakeholders including scientists, NGOs and policy-makers both internationally and in the case study countries. This will for instance be done through organising workshops, developing policy briefs and participating in relevant events. The project will also culminate in an interdisciplinary scientific conference in 2022.

You can stay up to date with project developments through the CCEEL website and Twitter account (@uefcceel), as well as the project’s own Twitter account @ClimaSlowERC.

The Evolving International Gas Industry: A Brief Comment on Decarbonisation and Matters Arising

Tade Oyewunmi, Doctoral Researcher, oyetade.oyewunmi@uef.fi

In a forthcoming paper on the topic- ‘Examining the Instrumental Role of Regulation in the Development of Gas Supply Markets: Highlights from the US and EU’ (2017)[1] I considered the effectiveness of regulation in the path towards restructuring and the development of competitive gas markets in which parallel policy objectives such as security of supply and sustainability are being pursued.

In a climate change and decarbonisation context, debates relating to the effectiveness and implications of market-based mechanisms like carbon tax and emissions trading scheme (ETS) as opposed to standard-setting or rule-making conventional approaches to regulation have gained significant attention recently.[2] Pollution resulting from operations in the energy and petroleum industry are often considered as a major cause of greenhouse gas (GHG) emissions and climate change.[3] In an increasingly international gas industry which is now ever more interconnected with electricity markets in major industrialized economies, the disposition of the major energy-related GHG emitting countries such as the US, Russia, and China becomes highly relevant.

The North American shale gas revolution over the past eight years undeniably positions the US as the leading oil and gas producing country globally.[4] It is therefore not surprising to see several legal disputes between environmental protection groups against energy firms who are seeking to take advantage of the boom in unconventional hydrocarbon production to obtain approvals for gas commercialisation and LNG projects. Recently, in Earthreports, Inc., et al. vs. Federal Energy Regulatory Commission, Dominion Cove Point LNG, et al. (2016).[5] a US Court of Appeal for the DC Circuit rejected the claims of such environmental groups who contested the Federal Energy Regulatory Commission (FERC)’s conditional authorization of the conversion of the Cove Point LNG facility from an import maritime terminal to a mixed-use, import-and-export terminal. The environmentalists had argued that the FERC failed to consider the indirect environmental impacts that the Cove Point LNG conversion into a gas export facility might have, and therefore failed to satisfy its obligations under the National Environmental Policy Act (NEPA) of 1969. The Court held that under NEPA, the FERC is not required to consider indirect effects of increased natural gas exports through the Cove Point facility, including potential climate impacts.[6] Assuming this decision indicates the current disposition in the US to gas utilisation and commercialisation, it may be argued that conventional and prescriptive standard-setting or rule-making regulatory approaches may not necessarily hinder the shale gas production and commercialisation boom. However, as with any conventional regulation approach, it does create additional compliance and monitoring costs. Another important issue in the scheme of things is the possibility of the US pulling out of the 2016 Paris Agreement following the recent elections and subsequent change in government.[7]   

Conventional Regulation vs. Market-based Pricing of Carbon Emissions

Advocates of market-based mechanisms like the ETS and carbon tax contend that placing a strong and predictable price or charge on carbon emissions is the most cost-effective and efficient path to GHG emissions reductions.[8] It is noted that the ETS framework seem to have come under stronger criticisms, while carbon tax proponents seem to be gathering more support.[9] Arguably, there are justifiable concerns about the de facto effectiveness of the ETS and its ‘cap and trade’ mechanism.[10] Such concerns relate to whether it actually limits GHG emissions or it is just another theoretical economic construct which in reality depends on perfect markets and effective balancing of demand and supply of trading allowances and permits. Another problem with carbon pricing, especially carbon tax is the socio-political challenge of curtailing pass-through costs on final energy (gas and electricity) consumers. Hence the question- who eventually pays for the ‘charge’ on carbon? According to the International Energy Agency (IEA), the main reasons for low carbon prices generally includes: (i) economic downturn which led to lower-than-anticipated emissions, resulting in a surplus of emissions allowances; (ii) the socio-political challenge of setting tight emissions cap or high carbon prices vis-à-vis industrial competitiveness and rising consumer electricity prices; (iii) flattening or falling electricity demand (resulting in reduced demand for ETS allowances) due to the positive effects of energy efficiency policies in many jurisdictions.[11]

In comparing carbon tax with subsidies as plausible market-based mechanisms for the US, it has been posited that: “A carbon tax is superior to subsidies for carbon-free energy sources [e.g. renewables] in two important respects. First, it has the opposite effect on the budget deficit. While subsidies increase the deficit, a carbon tax would decrease the deficit. Second, it is much easier to design and to implement. To be effective, a carbon tax need only deter consumption of hydrocarbons. Consumers are left with complete discretion with respect to the ways in which they reduce their consumption of hydrocarbons. For example, by increasing the efficiency of their use of energy or by substituting for hydrocarbons some mix of carbon-free fuels like wind power, solar power, or nuclear power.”.[12]

Notably, in most market and developed economies, who also happen to be the leading GHG emitting countries seemingly due to high energy utilisation and industrialisation, there has been a general disenchantment with the interventionist and seeming highhandedness of traditional regulatory forms. Consequently, there has been a preference for more deregulation and to adopt alternative regulatory approaches which encourages the desired behaviour by economic and financial incentives rather than by legal compulsion or sanctions. In this regard, such incentives can be: (i) negative i.e. the conduct is legally unconstrained unless the a firm chooses to act in an undesired way, then it must pay a charge e.g. carbon price; or (ii) positive i.e. if a firm chooses to act in a desired way it is awarded a subsidy or allowed a more cost-efficient tariff such as feed-in tariffs for renewables or energy conservation.

The apparent flexibility of market-based instruments should incentivize innovation and technological development. What it, however, does not guarantee ipso facto is accountability and trust unless such factors are built into the market structure and framework. It has also been argued that while the conventional command-based regulatory approaches may lead to more uncertainties about the apprehension, prosecution, and level of sanctions; market and economic instruments, on the other hand, could provide more a definite and predictable level of compliance motivating charges and payments. As far as developed market economies are concerned, it appears there is strong argument in favour of placing a price or a charge on energy-related GHG emissions. Although the main caveat or pragmatic concern is the credibility of the carbon emissions market, and whether such approaches will effectively curtail negative environmental and climatic impacts without imposing avoidable costs on operators and energy consumers. Also, as inquired earlier, who pays for the price of carbon emissions in an increasingly international gas supply and energy context?   


[1] This paper will be published in a forthcoming 2017 issue of the Houston Journal of International Law.
[2] Brittany A Harris, 'Repeating the Failures of Carbon Trading' (2014) 23(3) Pac Rim L & Pol'y J 755 – 793; the International Energy Agency (IEA), ‘Energy, Climate Change and Environment 2016 Insights’ (IEA Publications, 2016) 1 – 133; Adam Whitmore, Can Emissions Trading Produce Adequate Carbon Prices? Energycollective, January 23, 2017.
[3] Energy industry related GHG emissions include CO2, methane (CH4) from natural gas production and nitrous oxide (N2O). These gases are quantified in terms of their global warming potential relative to CO2. For instance, gas flaring and venting is one of the main hydrocarbon exploration and production processes with environmental implications to the extent that CH4 is one of the main components of natural gas. Flaring is the controlled burning of natural gas produced in association with oil in the course of routine oil and gas production operations. Venting is the controlled release of unburned gases directly into the atmosphere. In addition, water management, including water usage during drilling and hydraulic fracturing, and the protection of surface and ground water during drilling, fracturing, production and disposal activities, is a central environmental issue for unconventional gas production. See the International Energy Agency (IEA), ‘Energy Policies of IEA Countries: The United States 2014 Review’ (IEA Publications, 2014) at 209 – 211; IEA, ‘Energy, Climate Change and Environment 2016 Insights’ (IEA Publications, 2016) 1 – 133.
[4] Proven gas reserves in the US has increased by almost three-quarters since 2000, up to 9.1 trillion cubic metres (or 323 trillion cubic feet) by end 2012, or the equivalent of more than 100 years of production at 2012 consumption rates. Natural gas production is projected to continue to increase over the period to 2040. Improvements in advanced crude oil production technologies, such as hydraulic fracturing, are widely expected to continue to lift domestic supply into the medium term. The renaissance that the oil industry is undergoing is largely the result of growth in light tight oil (LTO) production, a boom that is expected to continue until 2020 at least. According to Forbes, ‘The 25 Biggest Oil and Gas Companies in The World’30 March, 2016: “The U.S. has seven companies in the top 25, more than any other country” Other countries/companies in the list includes Russia’s Gazprom and Rosneft as well as China’s Petro China.
[5] Earthreports, Inc., et al. vs. Federal Energy Regulatory Commission, Dominion Cove Point LNG, et al, No. 15-1127 (D.C.  Cir., 2016)
[6] Ibid.
[7] The previous US government administration, signed and ratified the Paris Agreement on climate change on 22 April 2016. According to Platts, Fact Box: Global energy implications of Tillerson as top US diplomat, 1 February 2017 at <www.platts.com/latest-news/oil/washington/fact-box-global-energy-implications-of-tillerson-21766883> accessed 09/02/2017, it seems the new administration may be more favourably disposed to Carbon Tax and intends “to keep a seat at the table of global climate talks to understand the impacts on Americans and US competitiveness”.
[8] See IEA, ‘Energy, Climate Change and Environment 2016 Insights’ ibid. In the power sector, carbon prices can influence the economic choices of investors, technology developers and consumers. They can moderate energy demand, deter new high-carbon investment and encourage low-carbon instead, and curtail the operation of existing high-emitting assets. Carbon pricing also plays a role in shifting corporate behaviour: by making climate change a financial rather than environmental reporting issue, it directly engages top management.
[9] Tade Oyewunmi, 'Emissions trading scheme and gas flaring in the United Kingdom Continental Shelf: a comment' (2011)(5) International Energy Law Review 193-199; Adam Whitmore, Can Emissions Trading Produce Adequate Carbon Prices? Energycollective, January 23, 2017. In Brittany Harris, Repeating the Failures of Carbon Trading, (2014) 23(3) Pacific Rim Law & Policy Journal pp. 755 - 793. the author also points to the de facto ineffectiveness of the carbon trading mechanisms as applied in the pacific rim countries. See also Richard J. Pierce Jr., ‘The Past, Present, and Future of Energy Regulation’ (2011) 31(2) Utah Environmental Law Review pp. 291-308.
[10] Ibid.
[11] IEA, ‘Energy, Climate Change and Environment 2016 Insights’ note 3 supra.
[12] Pierce Jr., note 9 supra.

A Nudge Towards Low-Emission Mobility - A Glance at the AFI Directive’s Approach to End Oil Dependence in the European Transport Sector

Sara Kymenvaara, Researcher, Climate Change Law, LL.M.

A famous metaphor on climate change politics refers to people’s unrelenting driving of SUVs, disconnected from the threat of climate change they are contributing to. Although a lot has changed on the political arena with the entry into force of the Paris Agreement on 4 November 2016, the transport sector’s current state of play, in certain aspects, still corresponds to the metaphor’s dystopian features. The sector plays, however, an important role in achieving the Paris Agreement’s climate change mitigation objectives.

In the EU, transport is set to contribute to the overall emission reduction target of 30% by 2030 from 2005-levels. The Commission has also set out a specific goal for the transport sector to reduce greenhouse gas emissions by 60% from 1990-levels by the year 2050.

How to achieve these ambitious objectives?  Transport remains the only sector in EU where GHG emissions have risen since 1990. Emission reductions achieved by new motor vehicles’ improved energy efficiency as a result of the EU Regulations on passenger cars and vans are forecast to be offset by increased mobility demand. In fact, it seems that the 60% emission reduction target for the transport sector will require a “systemic change” in the transport system and sector as a whole.

One of the key measures to achieve the necessary systemic change is to end the transport sector’s heavy reliance on fossil fuels and start using cleaner vehicles and fuels. To this end, a key EU-level policy instrument is Directive 2014/94/EU on the deployment of alternative fuels infrastructure (the “AFI Directive”), a main legislative measure to implement the Commission’s alternative fuels strategy.

Alternative fuels include, for example, electricity, hydrogen, natural gas and sustainable biofuels, and the AFI Directive’s main objective is to promote the construction of the infrastructure needed for the vehicles running on these fuels. However, installing infrastructure for vehicles using alternative fuels should correspond to the amount and types of vehicles in use. Such vehicles are not currently sold in amounts large enough to develop sufficiently competitive prices. Thus, the combination of high prices and lack of infrastructure discourages consumers from buying them.

The AFI Directive aims to end this vicious circle by obliging EU Member States to promote the development of their national markets for alternative fuels and set objectives and targets for the related infrastructure. The AFI Directive contains, however, no binding targets for infrastructure and the Member States’ objectives can be revised at a later stage. Thus, the AFI Directive ‘nudges’ rather than obliges Member States to develop markets and infrastructure for low-emission fuels and vehicles.

Concerning electric mobility, for example, the EU Member States must ensure that an “appropriate” number of public charging points are installed for electric vehicles in densely populated areas by 2020. The “appropriate number” is determined largely by the Member States themselves in relation to their national estimates of, and objectives for, the number of electric vehicles to be registered by 2020.

Achieving the ambitious emission reduction goals in the transport sector also requires that policy incentives that counteract these objectives are identified and abolished. For long, the tax benefit to diesel fuels in many EU Member States has created such an incentive, let alone the failure to consider diesel’s external costs of air pollution on human health. Over half of all newly registered passenger cars in the EU run on diesel while alternative fuel vehicles currently only account for 4.9% of all passenger cars in use.

The figures indicate that EU currently is far from achieving the objective of a Low-emission Mobility. Interestingly, however, certain estimates, mainly concerning Norway, predict that electric vehicles are set to conquer the markets extensively in the near future. However, Norway seems to be an exception to the otherwise increasing share of diesel vehicles in the rest of Europe; Norway’s share of electric vehicles in new car sales currently is currently almost 30%, while the same figure is 1.5% for Western Europe. In addition, hardly no other European country has a state budget robust enough to afford the fiscal incentives for electric vehicles that have stimulated their surge in Norway.

Against this backdrop, the national objectives and policy measures of the EU Member States to implement the AFI Directive will be essential for cutting oil dependence in the transport sector. If these national policy frameworks are sufficiently ambitious, the AFI Directive’s adaptive strategy may indeed solve the deadlock concerning lack of infrastructure and alternative fuel vehicles’ market penetration – and thus contribute to the decarbonisation of the transport sector within the timeframes set out by the EU’s climate policy objectives.

Volatile relations: EU-Russia energy regulation

Moritz Wüstenberg, Junior Researcher, European Law

The World Trade Organization (WTO) is often seen as a curiosity generally associated with globalization. The WTO as we know it today has developed in its 70 year’s history from a provisionally applied interim agreement (the General Agreement on Tariffs and Trade or “GATT”) to become an independent organization, with nearly universal participation.

Following accession to the WTO in 2012, Russia has been eager to take its energy related grievances with the EU to be adjudicated at the WTO. Whilst transit has become a lesser problem in recent years, partly due to the direct connection from Russia to Germany via the Nord Stream 1 pipeline (Nord Stream 2 is on its way, see previous blog by K. Talus), the internal market liberalization of the EU has had effects on the European investments of Russia´s export monopoly Gazprom.

The case directly related to energy regulation brought by Russia to the Dispute Settlement Body (case DS476, Certain Measures Relating to the Energy Sector) of the WTO alleges, inter alia, that Russian goods and services are treated less favourably than third countries and less favourably than other EU goods and services (in violation of the Most Favoured Nation obligation and National Treatment obligation of the EU, respectively). The alleged violations are mainly related to limitations in access to infrastructure, including pipelines that connect Nordstream 1 to the wider European gas network, owned by Gazprom.

Two other cases brought by Russia against the EU (cases DS474 and DS494) are also related to energy, albeit indirectly. In anti-dumping determinations against energy intensive goods (in this case, steel from Russia), EU rules make it possible to replace the actual energy costs producers pay in Russia by a cost that is adjusted to reflect “market” prices. In effect this means that the anti-dumping margin paid on steel imports to the EU become higher.

The regulation of energy trade between the EU and Russia is vital for the EU to secure its energy supply and at the same time crucial for Russia, as some 50% of the federal budget is raised from the extraction and sale of energy goods. The disputes brought by Russia touch upon matters of trade that are sensitive due to their strategic nature, but are not regulated effectively by the rules of the WTO which were negotiated for more traditional areas of trade.

The Energy Charter Treaty, which Russia abandoned in 2009, has detailed rules for energy trade and would be more effective in regulating this area of trade. Russia withdrew from provisional application of the Energy Charter Treaty following the gas crisis of 2006 and 2009. The gas crisis were caused by transit disputes and resulted in many eastern and central European countries being undersupplied during the winter. Central stated reasons for the final withdrawal from the ECT were related to failures in the regulation of transit. Whether Russia will join the ECT seems uncertain, even though efforts to develop the regulation of transit continue at the Energy Charter.

The shortcomings of the regulatory framework of the WTO for energy trade have been discussed at the WTO as well as in academia. It is generally understood that there are a number of areas, export prohibitions through cartels (e.g. OPEC) and transit rules being prominent examples, which the rules of the WTO do not address effectively. Numerous suggestions for amendment or addition of rules have been made, but the debate remains open.

A neighbourhood trading relationship, such as the one between the EU and Russia, can be regulated by a number of WTO rule compliant means. One option would be the conclusion of a Preferential Trade Agreement (PTA) to regulate energy trade between the EU and Russia. This would be a fairly straightforward option which, as long as it complied with WTO requirements (mainly the obligation not to raise tariffs or other barriers to trade in relation to other WTO members), could be negotiated bilaterally and would effectively remain outside the multilateral framework of the WTO.

Plurilateral Agreements (PA´s), binding to those members that accede to them, have previously been adopted within the framework of the WTO (Annex 4 agreements). The main difference in relation to PTA´s is that PA´s function within the framework of the WTO. There are a number of advantages to regulating through a PA as opposed to a PTA, one being direct access to the dispute settlement system of the WTO. The main difficulty in adopting a PA on energy would be the need to achieve consensus among the WTO membership to add such an agreement to Annex 4. In effect this means that consensus has to be obtained also from members who do not intend to join a PA and consequently do not have rights or obligations arising from it.

Re-regulating energy trade between the EU and Russia may become necessary rather sooner or later. Even if a transition to renewable energies is on its way, natural gas will remain an important transition fuel until 2040 and later, even under the most ambitious climate targets. Russia has the world´s largest natural gas reserves and is connected by pipeline to the EU. Maintaining a well-regulated commercial relationship would therefore not only ensure energy security, but would also be advantageous to achieve climate policy targets.

 

Full articles on the above issues have been published recently as:

Moritz Wüstenberg, ´An Overview of the Dichotomy between EU Energy Market Liberalisation and the Multilateral Trading System: Case Review of WTO Case DS476 – Certain Measures Relating to the Energy Sector, International Trade Law & Regulation 22 (1) 2016

Moritz Wüstenberg, ´Reformation or Standstill? Re-Regulating Energy Trade between the EU and Russia, International Energy Law Review 34 (7) 2016

Reflections on Rhetoric: Discussing 'Sustainable Development' in Northern Regions at Arctic Circle Forum 2016

Dr. Sabaa A. Khan, Postdoctoral Researcher

The fourth Arctic Circle Forum took place in Canada from 11 to 13 December 2016, hosted by the Government of Quebec. The Forum compliments the larger Arctic Circle Assembly held in Reykjavik, Iceland, each year. Its objective is to convene international stakeholders to consider specialized issues pertaining to Arctic cooperation. Earlier forums hosted in Alaska, Singapore and Greenland addressed shipping and ports, as well as economic development.

In 2016, the Forum focused on Sustainable Development in Northern Regions: An Integrated and Partnership-based Approach and provided an opportunity for Quebec to share the Plan Nord. This is an ambitious mining, energy, forestry, wildlife and tourism development plan covering all of Quebec territory that lies north of the 49th degree of latitude. The Forum also included a special plenary session on Climate Change in Arctic and Northern Regions.

 

David Miller, President and CEO of WWF Canada draws attention to caribou survival in decline across Canada, at the Special Plenary Session on Climate Change.

 

The Forum’s opening session focused on what sustainable development means for the fragile northern regions of the globe. Philippe Couillard, Premier of Quebec, emphasized the importance of harnessing developmental opportunities in Quebec's vast untapped forests and mineral reserves, while Ólafur Ragnar Grímsson, Arctic Circle Chairman and former President of Iceland, acknowledged a group of protesters outside the Forum and reminded that citizens had to be brought along in the process of sustainable development as central participants.

Vittus Qujaukitsoq, Minister of Commerce, Employment, Trade, Energy and Foreign Affairs, Greenland addressed what is arguably the most important Arctic climate change issue: oil and gas exploration. Casting aside the issues of conservation and climate change, he expressed optimism for the US President-elect Donald Trump’s economic development plans in the Arctic region and stated his hope for a US Secretary of State appointment "with a comprehensive experience from the private sector." In light of the subsequent nomination of Exxon Mobil's chief executive Rex Tillerson as the US Secretary of State, Greenland's desire for enhanced regional cooperation on Arctic oil and gas development may very well become a reality.

This stands in stark contrast to the Canadian and outgoing US Administration's approach to sustainable development in the Arctic.  In fact, a week following the Arctic Circle Forum in Quebec, the US and Canada released a joint statement banning offshore oil and gas development in their respective Arctic waters. The US has imposed an indefinite ban on oil and gas leasing on the majority of US waters in the Chukchi and Beaufort Seas, while Canada imposed an indefinite ban on offshore oil and gas licensing in all Arctic Canadian waters, to be reviewed every five years through a lifecycle assessment based on climate and marine-science.

The issue of oil and gas development also arose in the Forum’s special plenary session on climate change. David Heurtel, Minister of Sustainable Development, Environment and the fight against Climate Change, Quebec, expressed the province's desire to move away from drilling. David Miller, President and CEO, World Wildlife Fund, Canada, emphasized the clarity of climate change science on the importance of eliminating fossil fuel dependence and of embracing renewable energy industries that do not negatively impact conservation of flora and fauna, especially the protection of wildlife habitats. His Serene Highness Albert II, Prince of Monaco insisted upon the "irreplaceable" role of scientific knowledge as the only "solid and incontestable basis" for Arctic development. Addressing hydrocarbon exploration in particular, he noted that we could not hope but for a limitation of these activities.

While clearly demonstrating there is no consensus between Arctic nations on halting oil and gas exploration in the Arctic as a measure to respond to the urgency of climate change, the Forum made it clear that Arctic development will not be left to federal authorities and top-down processes. Overall, the salient and most widely embraced idea affirmed at the Arctic Circle Quebec Forum was that sustainable development of the Arctic region has to be a broadly inclusive and science-driven process duly integrating the knowledge and participation of local communities.

The ‘Clean Energy for All Europeans’ package – Analysing the Commission’s proposed approach to capacity mechanisms

Kaisa Huhta

Doctoral Researcher (kaisa.huhta@uef.fi)

In November 2016, the European Commission published an extensive legislative proposal on energy. Known as ‘Clean Energy for All Europeanspackage, the proposal aims to address many of the challenges relating to structural changes the European energy markets have been experiencing during the past decades. These structural changes refer to a transition in which the centralized, fossil fuel-based and state-run energy markets are gradually merging into a competitive, single market where consumers play leading roles and electricity is increasingly produced from renewable sources.

In the context of the ongoing energy transition, EU Member States have become concerned about the long-term ability of the electricity markets to supply electricity to consumers. To address these resource adequacy concerns, Member States have introduced capacity mechanisms, which guarantee producers compensation simply for providing generation capacity (kW).

However, it is well-established that the ongoing, uncoordinated introduction of such mechanisms has distortive effects on EU decarbonisation efforts, cross-border trade, competition and EU-wide investment signals.

Among other issues, the Commission’s recent proposal seeks to address the uncoordinated development of capacity mechanisms. The provisions concerning resource adequacy are mostly included in the proposal for a regulation on the internal market in electricity. The proposal would introduce three key changes in relation to capacity mechanisms:

First, the proposal seeks to strengthen the approach on which the EU internal market in electricity is founded: a free, competitive market, where prices are determined by demand and supply, will generate the appropriate investments in generation capacity and ensure security of supply. This market-based approach would be enforced through an obligation for Member States to eliminate any identified regulatory distortions that have caused or contributed to the resource adequacy concerns. In other words, the Commission’s proposal emphasizes that capacity mechanisms should be treated as an exception and never the rule.

Second, the proposed legislation would establish common design principles for capacity mechanisms. These could be used in the event that the Member State is able to demonstrate that the market-based approach will not be able to ensure resource adequacy. The proposed principles emphasize the importance of proportionality and cooperation with neighbouring Member States.  They also include a maximum emissions threshold for capacity committing to a capacity mechanism. This threshold would effectively prevent the participation of coal-based capacity in a capacity mechanism.

Third, the proposed legislation would establish an obligation for Member States to design capacity mechanisms in a way that allows the participation of foreign capacity providers. Further, Member States would not be allowed to restrict capacity located in their territory from participating in capacity mechanisms of other Member States. These requirements aim to ensure that the introduction of capacity mechanisms would not undermine the efficiencies achieved through the integration of electricity markets.

From the point of view of capacity mechanisms, the substance and scope of the Commission’s proposal is largely in line with expectations. The proposed rules on capacity mechanisms reflect the Commission’s cautiousness and even reluctance to deviate from the market-based approach and risk further regulatory distortions. It is clear that the proposed rules would narrow the scope of situations in which it is acceptable for Member States to adopt capacity mechanisms. However, the proposed rules would not fully harmonize the introduction and design of capacity mechanisms. The intention is rather to establish a common threshold for the introduction of capacity mechanisms and to ensure that, if such interventions are introduced, their adverse effects on the internal market in electricity remain minimal.

A coordinated, European approach to capacity mechanisms is sorely needed. However, the proposal should be treated as the starting point for negotiations only and not as a final outcome of future legislation. This is because of two issues. Firstly, the proposal will not necessarily gain the support of all Member States. The proposed provisions would apply to both new and existing capacity mechanisms and would, therefore, require the adaptation or even removal of some capacity mechanisms. Secondly, the proposal has clearly been published in a hurry and is still in need of a thorough final revision. Both of these issues are likely to change the content of the proposed provisions before they can enter into force.  

Nord Stream 2 and EU Energy Law

Kim Talus
Professor of European Economic and Energy Law

The Nord Stream 2 project and its predecessor Nord Stream 1 are well-known international pipeline projects. Nord Stream 2 will, when completed, bring gas from Russia to Germany and the offshore section of the pipeline will extend over around 1200 kilometers across the seabed of the Baltic Sea. The route will largely follow that of Nord Stream 1 that become operational in 2011 (first stream) and 2012 (second stream). The 8 billion euro’s pipeline is expected to be operational at 2020.

Within the EU, the pipeline will cross the exclusive economic zones (EEZ) of Finland and Sweden as well as the EEZ and territorial waters of Denmark and Germany. For Finland, this means that the project requires certain permits and consents from the Finnish authorities. These include the following: (1) a consent pursuant to the Act on the Exclusive Economic Zone of Finland (1058/2004), and (2) a water permit pursuant to the Water Act (578/2011). Furthermore, an environmental impact assessment pursuant to the Environmental Impact Assessment Act (468/1994) must also be carried out.

In 2015, the Finnish Ministry for Foreign Affaires made a note that Energy Union and Commission interpretation of energy security aspects of the pipeline would somehow be relevant for Finnish permitting process. This is an interesting but incorrect claim.

First, as a forthcoming study examining the applicability of the EU Third Energy Package, adopted in 2009, to Nord Stream 2 will conclude, the rules laid down in the Third Energy Package, cannot be applied to Nord Stream 2. There are a number of different arguments that support this finding. These include (1) the intent of the EU legislator, (2) the actual content and wording of the law, and (3) current Member State and EU level practice in relation to past and future pipelines.

Second, the jurisdiction of a coastal State is limited by UNCLOS (United Nations Convention on the Law of the Sea). The Finnish EEZ is governed domestically by the Act on the Exclusive Economic Zone of Finland (1058/2004) (hereinafter the ‘Finnish EEZ Act’). Chapter 2 of the Finnish EEZ Act contains a list of Finnish laws that apply to the EEZ. This list does not include the Finnish Natural Gas Market Act (508/2000), which is therefore not applicable in the Finnish EEZ. Since this Act transposes the Gas Market Directive into Finnish law, it follows that the Gas Market Directive does not apply to pipeline projects within the Finnish EEZ. The situation seems to be similar under the Swedish EEZ Act (Lag (1992:1140) om Sveriges ekonomiska zon): the Swedish Natural Gas Act (Naturgaslag (2005:403) is not applicable in the Swedish EEZ. For Denmark, due to the existence of an upstream natural gas sector, the situation is not identical. However, the Danish Natural Gas Supply Act (Lov om naturgasforsyning, which implements relevant parts of TEP into the Danish legal system) provides that transmission networks in the territorial sea or the EEZ that are not connected to the Danish natural gas system are explicitly excluded from the scope of the Act.

(The full article will be published as Kim Talus, ‘Application of EU energy and certain national laws of Baltic Sea countries to Nord Stream 2 pipeline project’, Journal of World Energy Law & Business 10 (2017) 1), in February 2017.)

This post has also been published at "Oikeutta kohtuudella", the official blog of UEF Law School.

 

— 20 Merkintöjä per sivu
Näytetään tulokset 1 - 20 / 23