Unraveling the global warming regime complex: competitive entrophy in the regulation of the global public good.

• Author: Bluemel, Erik B.

With the earth's temperature on the rise, ecosystems are faltering, economies are suffering, and human health is deteriorating. The global community has accepted its responsibility for global warming and the immediate need to reduce the anthropogenic greenhouse gas (GHG) emissions to prevent further global warming. As a means to reduce their greenhouse footprints, many national and state governments have pinned their hopes on GHG emissions trading regimes. Such regimes, however, seek to reduce GHG emissions through differing liability rules and mechanisms. This Article analyzes these rules and mechanisms in the context of regulating the global public good of climate stability. It concludes that the network of partially overlapping GHG emissions trading regimes, often with differing rules, forms a global warming regime complex and gives rise to interregime competition and forum shopping. While beneficial to some trading entities, ultimately, these outcomes may undermine the Kyoto Protocol and climate protection. Recognizing the inherent difficulty in preventing a proliferation of competitive regimes, this Article calls for the creation of a clean development fund as a means to maximize compliance despite strategic behavior facilitated by the regime complex.

INTRODUCTION 1983 I. THE WARMING GLOBE 1986 II. THE KYOTO PROTOCOL: MOTHER OF THE GHG TRADING REGIME COMPLEX 1991 A. The Kyoto Protocol Comes into Force 1993 1. Article 17 Trading 1996 a. Seller Liability 1998 b. Commitment Period Reserve: Surplus Trading and Annual Retirement 2001 2. Clean Development Mechanism 2004 a. Ex Ante v. Ex Post Certification 2005 b. Buyer Liability 2007 3. Joint Implementation 2011 B. Kyoto Gives Birth: The Rise of Elemental Regional Trading Regimes 2015 1. The European Union Emissions Trading Scheme as a Nested Elemental Regime 2016 2. The United Kingdom Emissions Trading Scheme as a Partially Nested Elemental Regime 2021 III. COMPETING AGAINST THE GLOBE: COMMON BUT DIFFERENTIATED LIABILITY AND COMPETITIVE ENTROPY 2025 A. Creating Multiple, Differentiated Regimes To Achieve a Common Goal 2025 B. Regime Complexes and Competitive Entropy 2028 C. Regime Complexes and the Regulation of the Public Good 2033 D. Competitive Entropy in the Global Warming Regime Complex 2036 1. Liability 2037 2. Procedural Mechanisms 2040 3. Enforcement 2041 IV. MINIMIZING COMPETITIVE ENTROPY IN THE GLOBAL WARMING REGIME COMPLEX 2042 A. Harmonizing the Regime Complex Cacophony 2042 B. The Clean Development Fund: A Way Forward 2045 INTRODUCTION

2005 was the earth's hottest year on record, (1) and 2006 was the hottest in the continental United States. (2) Scientists across the globe have reached a consensus that global warming is occurring at a rapid pace. (3) Indeed, "[e]leven of the last twelve years (1995-2006) rank among the twelve warmest years in the instrumental record of global surface temperature (since 1850)." (4) Absent prompt reductions in greenhouse gas (GHG) emissions--the leading contributor to global warming-global temperatures may rise as much as 6.4 [degrees] C by the end of the cen tury. (5) If significant reductions of GHG emissions are not achieved over the next ten years, global warming may be irreversible. (6) Even a 3 [degrees] C degree rise in global average temperature would devastate the global environment, place human survival in grave danger, and risk the collapse of the world economy.

Recognizing that global warming presents a serious risk to the survival and health of the planet, policymakers worldwide have called for the reduction of GHG emissions and have embraced emissions trading programs to achieve this reduction. The international community has banded together to create the Kyoto Protocol, a regulatory regime designed to stabilize the escalating atmospheric concentrations of CHGs.

Drawing upon successful national and regional experiments with pollution cap-and-trade programs, (7) the Kyoto Protocol and other international and regional emissions trading regimes have emerged in the hopes of achieving similar success. Although achieving emissions reductions sufficient to slow the current global warming trend will not come without sacrifice, the burden borne by countries need not be as onerous as one might initially think. Emissions trading--the ability to offset excess emissions in one area for emissions reductions achieved elsewhere at lower cost--presents the possibility of stabilizing global GHG emissions with a minimal societal cost.

These trading regimes come together to form part of the global warming regime complex--a network of overlapping regimes with different rules and parties--designed to achieve the common goal of reducing atmospheric concentrations of GHGs. (8) Within this regime complex, the Kyoto Protocol is the largest and most comprehensive regime establishing emissions-reduction targets for the international community. Other regimes within the complex may be designed to implement the emissions-reduction targets established by the Protocol or may operate independently from the Protocol and its rules. Each regime within the complex employs different procedural regulations to define and credit emissions trades, enforcement mechanisms to encourage compliance, and liability rules in the event a country does not meet its emissions-reduction targets under the regime.

The global warming regime complex, while sharing features with the United States' cooperative federalist system of governance, has some unique features that cause regime differences to result not in positive experimentalism, but in destabilizing entropy. The regime complex, like the federalist system, has a superregime, the Kyoto Protocol, which establishes generally applicable rules and emissions limits, and elemental regimes, which are designed to implement the generally applicable rules of the Protocol. (9) The regime complex departs from typical federalism in three significant respects: first, elemental regimes within a regime complex may link together to jointly regulate transactions; second, the regime complex and international law generally lack rules to resolve conflicts across regimes; and third, interregime competition relates to the validation and security of traded emissions, which can be moved to another regime at low cost. These differences between the regime complex and the federalist system have important consequences for a regime complex, especially one regulating a global public good. This Article concludes that interregime competition within a regime complex regulating a global public good can have entropic effects on the regime complex and its goals.

This Article analyzes how interregime competition arises within the global warming regime complex and what entropic effects such competition might have on the complex. It focuses on differences in liability rules across regimes to explain the phenomenon of competitive entropy. (10) In the emissions trading context, liability rules allocate responsibility among trading entities to ensure that emissions targets are achieved. This Article identifies the different trading liability rules and mechanisms of the Kyoto Protocol, the European Union Emissions Trading Scheme, and the United Kingdom Trading Scheme, and analyzes how the differing rules and mechanisms interact and result in competitive entropy.

After concluding that interregime competition within the global warming regime complex increases the rate of both intentional and accidental noncompliance under the Kyoto Protocol, this Article proposes a way out of the regime complex morass. Regime complexes reduce trading transparency make monitoring of country compliance more difficult, and create questions of which rules apply to a transaction. When regime complexes regulate a public good, these regime effects enable shirking and create the likelihood of greater intentional and accidental noncompliance. Such noncompliance is inherent within the global warming regime complex and necessitates a liability mechanism that allows countries found noncompliant under the Protocol to achieve eleventh-hour compliance with the Protocol's emissions targets. Given the precarious political alliance keeping the Protocol intact, this Article argues for the creation of a Clean Development Fund, in conjunction with a largely harmonized regime complex, to permit countries to fund emissions-reducing projects when they would otherwise be in noncompliance under the Protocol.

Part I of this Article proceeds with a discussion of the potential implications of global warming on the environment, human health, and the economy. Part II then analyzes the Kyoto Protocol and some of the major elemental regimes within the global warming regime complex, discussing the liability rules employed by the different regimes. Part III develops the notion of competitive entropy, analyzing how different liability rules within the regime complex serve to undermine the goals of the complex. Finally, Part IV concludes with a proposal to incorporate a Clean Development Fund into the Kyoto Protocol to maximize country compliance with Protocol emissions targets and to reduce global warming.

1. THE WARMING GLOBE

   There is a global scientific consensus that anthropogenic emissions of GHGs are warming the earth and causing environmental damage. (11) According to the Intergovernmental Panel on Climate Change (IPCC), over the last century, the global average temperature has risen approximately 1[degrees]F, (12) and the global relative sea level has risen 0.1 to 0.2 meters. (13) While these figures may not seem particularly alarming, even small changes in the global average temperature can have a significant impact on existing ecosystems. For instance, a two-degree rise in global temperature will cause coral reefs to become bleached and die. (14) Fish populations dependent on coral reefs for survival will dwindle or become extinct, and the global marine food chain will be sent...