Climate mitigation strategies and export controls: The case for a coal export safeguard regime

Climate mitigation strategies and

export Controls:the Case for a Coal export safeguard regime

aran martin

La Trobe UniversiTy CenTre for DiaLogUe Working PaPer 2012/3

Centre for Dialogue The Centre for Dialogue is an interdisciplinary, research-based, educationally minded, policy-driven, network-oriented, and community focused centre, established by La Trobe University. It specialises in the theory and practice of dialogue in all its cultural, religious, political and economic dimensions. The Centre aims to explore the differences and similarities between cultures, religions, civilisations and philosophical and political systems, and the constructive ways in which both difference and common ground can be channelled to enhance the prospects of humane governance. Working Papers Series The Centre’s Working Paper Series, established in 2006, is intended to provide scholars, students, the research community more widely, policy-makers, journalists and community leaders with an opportunity to contribute to an on-going and wide-ranging debate. The series examines the deeper roots of (cultural, religious and political) conflict and the contribution which the philosophy and method of dialogue can make to the resolution of conflict. Authors are invited to explore the dynamics of conflict (whether intra-state, inter-state, or trans-state), with a view to identifying ways in which inter-cultural or inter-civilisational dialogue has in the past contributed to coexistence, co-operation and mutual enrichment or might do so in the future. Submitted papers can focus on individual case studies, comparative analysis, or more systemic approaches. Papers that are entirely theoretical or philosophical in their approach are equally welcome. Feedback All feedback should be conveyed directly to the authors. Working papers – as the title suggests – should not necessarily be taken as a completed work or final formulation of the argument, but as work in progress. The series will, among other things, provide authors with the opportunity to circulate research before it appears in final form in an academic journal or book. Since much of the research is ongoing, the authors welcome comments from readers. Submissions The Editorial Committee is made up of Michális S. Michael and Sven A. Schottmann. All submissions are examined and constructive comments passed on to the author. Unsolicited submissions that deal with the issues outlined above are welcome. They will be subject to review prior to publication by members of the editorial team and outside readers.

All submissions and inquires send to: Dr Sven A. Schottmann Editor, Working Paper Series Centre for Dialogue, La Trobe University, Victoria 3086, Australia email: [email protected]

Working papers may be quoted provided appropriate acknowledgement is given. Reference to Working Papers should use the following citation as a guide:

John Doe. ‘The Principles of Civilisation Dialogue’, Centre for Dialogue Working Paper Series, No. 2006/1, La Trobe University, Melbourne, 2006.

Previous Issues

Working Paper 2012/2 Michael T. Seigel ‘Consensus Building Revisited: The Experience and Approach of Toshio Kuwako’

Working Paper 2012/1 Michális S. Michael ‘Developing a Regional Interfaith/Intercultural Network in Melbourne’s Northern Suburbs’

Working Paper 2011/1 Les Dalton ‘Politics of the Australian Peace Movement: 1930s to 1960s’

Working Paper 2010/1 Hans Köchler ‘The Philosophy and Politics of Dialogue’

Working Paper 2008/3 Justice Michael Kirby ‘People of the Book: Reconciling Religious Fundamentals with Universal Human Rights’

Working Paper 2008/2 George Myconos ‘Intercultural and Interfaith Dialogue in Education: A Case Study’

Working Paper 2008/1 Patrick Dodson ‘Reconciliation: Two Centuries on, is Dialogue Enough?’

Working Paper 2007/3 Kevin J O’Toole ‘The Muslim Man, the Western Man: Conviction of Being Greek’

Working Paper 2007/2 Judge C.G. Weeramantry ‘The Dialogue of Cultures, Religious and Legal Systems: An Imperative need of our Times’

Working Paper 2007/1 Rita Camilleri ‘The Malaysia – A Tale of Two Conflicts: Non-Muslim Neighbours and Muslim Minorities’

Working Paper 2006/3 David L. Johnston ‘Chandra Muzaffar’s Islamic Critique of Globalization: A Malaysian Contribution to a Global Ethic’

Working Paper 2006/2 Akira Kawasaki ‘Disarmament and Conflict Prevention: A Civil Society Perspective’

Working Paper 2006/1 Michális S. Michael ‘The Cyprus Peace Talks: a Critical Appraisal’

Climate mitigation strategies and export Controls: the Case for a Coal export safeguard regime

ArAn MArtin

La Trobe UniversiTy CenTre for DiaLogUe

Working PaPer 2012/3

Aran Martin, ‘The case for a coal export safeguard regime’ 1

Profile Aran Martin is a project officer for the Centre for Dialogue’s Australia-China High-Level

Talks project and Editor of the international, refereed journal Global Change, Peace & Security

(Routledge), published in association with the Centre for Dialogue. He has experience in

community mediation, documentary filmmaking and capacity building projects. His research

interests include mediation in intrastate conflicts and water disputes, resource politics and

export controls in the context of climate change (with a focus on coal and uranium), and the

international relations of China.

For further information, contact the author via email: [email protected]


Climate mitigation strategies and export controls:

The case for a coal export safeguard regime

Aran Martin

Abstract

This Centre for Dialogue working paper explores a framework for states to account for end

use risks associated with coal exports in the form of their contribution to greenhouse gas

emissions. The paper proposes that such risks can be managed through a suitably designed

coal export safeguard regime modelled on existing uranium export safeguard regimes. Such a

framework could only be implemented with close cooperation and input from national and

international civil society and intergovernmental organisations, along with the coal industry.

National regulation of coal exports also calls for an intensive international dialogue between

both coal exporting states, and between coal exporters and coal importers. This working

paper is presented here as an initial basis for discussion. It is hoped that the suggested

framework for managing climate impacts of coal exports will be of particular interest to state,

civil society and business communities in Australia and Indonesia – neighbouring countries

which account for a combined total of 52 per cent of the world total hard coal trade.


Introduction

Coal exporting states face a policy dilemma in regulating trade of a commodity which is one

of the primary contributors to global greenhouse gas emissions. Unlike traded commodities

such as uranium or chlorofluorocarbons (CFCs), the risks associated with the end use of coal

are not currently accounted for in any national or international strategic commodity export

regime. This article explores what an effective policy response to mitigating the risks

associated with this end use of coal exports might look like. It proposes that a coal export

safeguard regime, correctly designed and applied by coal exporting states in conjunction with

international organisations and civil society, represents a promising policy approach with

strong precedent in the nuclear safeguards regime and the specific mechanisms within the

regime regulating the export of uranium.

The article seeks to answer the primary question: What might a normative framework for the

export of coal look like, and how might it operate? At the same time, it explores related

questions such as: which entities would be disadvantaged are advantaged under the proposed

framework? What systems of dialogue are required to legitimate any possible regulatory

framework? How effective is the proposed framework likely to be in mitigating global

greenhouse gas emissions while maintaining continued international leverage and national

profitability in key coal exporting economies?

While the specific dimensions of the proposed international coal export safeguard regime

may be challenged, the article argues that a correctly designed and targeted regime accounting

for the end use climate impacts of coal exports has clear parallels with existing uranium

export safeguard regimes. Such a safeguard regime is possible despite international and

domestic barriers to its implementation and effectiveness, and is a possible complementary

addition to the complex and developing international climate regime.

Coal exports and end use risk

As one of the primary fuels for global base load electricity production, by 2010, coal

consumption contributed 39 percent of total global CO2 emissions.1 Current estimates

predict global coal demand to rise by 65 percent from 2007 levels by 2030.2 As one of the

largest sources of global CO2 emissions, the projected growth in coal use over the next

decade is depressingly at odds with the need to reduce global carbon emissions by at least 20

1 MIT, The Future of Coal: Options for a carbon-constrained world, Cambridge, MA: MIT, 2007, p. 5. 2 IEA, World Energy Outlook 2009, OECD/IEA, 2009, p. 74.


percent below 2000 levels by the year 2050 to stand even moderate odds of minimising

global temperature rises from climate change to 2 degrees Celsius by 2100. Temperature rises

in excess of these targets are projected to have severe implications for human communities

around the world.3

To avoid some of the most devastating effects of climate change, coal consumption, or the

carbon emissions from it, must be dramatically reduced. Yet, between 1980 and 2006, carbon

dioxide emissions from coal consumption has almost doubled, from 6,727 to 12,065 million

metric tons, and is projected to rise even further.4 In this context, coal exports which

contribute to an increase in the worldwide consumption of coal also increase the risk of

dangerous climate change with direct consequences for the security of coal exporting states.

To date, scholarly debate regarding leveraging the export of coal in a strategy to reduce the

risk of climate change has been limited.5 Environmental activists, citing the dangers of

greenhouse gas emissions from coal usage, have called for an immediate halt to any new coal

fired power stations, for a rapid transition away from coal based electricity production, and

have predicted that coal exports will slow as world coal consumption is placed under an

international regime aimed at cutting greenhouse gas emissions.6 Directly leveraging coal

exports to achieve some of these objectives has not been considered.

This is partly because rapidly reducing reliance on coal burning and export may be harmful

to economies dependent on these activities in the short term, and would almost certainly

result in increased global energy insecurity at a time of lingering global economic instability.7

Accounting for end use risk in commodity exports does not however automatically entail

severe economic consequences. More generally, regulation of commodity exports on the

basis of their end use is a widely accepted principle. As one example, states accept limited

3 O’Neill, Brian C., Keywan Riahi, and Ilkka Keppo, ‘Mitigation implications of midcentury targets that preserve long-term climate policy options’, Proceedings of the National Academy of Sciences of the United States of America, Vol. 107, No. 3, January 2010, p. 1011; R. K. Pachauri, and A. Reisinger (eds.), Intergovernmental Panel on Climate Change, Climate Change 2007: Synthesis Report, Contribution of Working Groups I, II and III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, IPCC, Geneva, Switzerland, 2007, p. 72; Joseph Camilleri and Jim Falk, Worlds in Transition: Evolving Governance Across a Stressed Planet, Cheltenham, UK, Edward Elgar, 2009, pp. 236-237. 4 EIA, ‘H.4co2, World Carbon Dioxide Emissions from the Consumption of Coal (Million Metric Tons of Carbon Dioxide), 1980-2006’, World Coal Data, International Energy Annual 2006, June-December 2008, www.eia.doe.gov, accessed 20 Feb 2011. 5 Mark Diesendorf, ‘Strategies for radical climate mitigation’, Journal of Australian Political Economy, December, Vol. 66, pp. 98-117. 6 Ben Pearson, ‘The time to move on from coal is now’, Greenpeace Australia Pacific, News and Events, www.greenpeace.org, accessed 20 Feb 2011. 7 Alicia Pearce and Frank Stilwell, ‘‘Green-collar’ jobs: employment impacts of climate change policies’, Journal of Australian Political Economy, Vol. 62, December 2008.


responsibility to monitor and regulate the conditions of animal treatment and slaughter in

destination countries in the live cattle export trade.8 Similarly, since 1990 there have been

many attempts to regulate and bring more transparency vis-à-vis the export of small arms

and conventional arms in general. The Arms Trade Treaty process, in regards to the

contribution of the trade to violent acts in destination countries, is the most vibrant

initiative.9 In the area of atmospheric pollutants, CFC-producing goods with negative

impacts on the ozone layer have long been the subject of export controls under the Montreal

Protocol on Substances that Deplete the Ozone Layer (1987) which regulates their use. The

Montreal Protocol set targets for the reduction of CFC usage, and includes “clauses

restricting trade with non-signatories in these substances and products that contained

them”10 in a similar manner to that of the proposed coal export safeguard regime.

In all these areas, state, market and civil society actors have developed norms and regulatory

regimes surrounding the export of commodities in order to minimise the risk that exports

will contribute to a harmful or unethical outcome in the end use of the commodity. There is

no reason to exclude coal from this list of commodities given its role contributing to climate

change risks. This line of reasoning has only recently begun to emerge in public discourse

within coal exporting states, albeit in an embryonic form.11

What is a regime?

This article proposes that an international coal export safeguard regime provides a viable

mechanism for coal exporting states in collaboration with international organisations and

civil society to minimise the end use risks associated with coal exports. To shed further light

on this position, the following section explores what an international regime is, and how

international regime theory could help inform the development of an effective coal export

safeguard regime.

8 J. S. Lightfoot, ‘Welfare of cattle transported from Australia to Egypt’, Australian Veterinary Journal, Vol. 81, No. 7, 2003; J. Carol Petherick, ‘Animal welfare issues associated with extensive livestock production’, Applied animal behaviour science, Vol. 92, No. 3, 2005. 9 See United Nations Conference on the Illicit Trade in Small Arms and Light Weapons in All Its Aspects, Programme of Action to Prevent, Combat and Eradicate the Illicit Trade in Small Arms and Light Weapons in All its Aspects, UN Document A/CONF.192/1, July 2001. See also, Denise Garcia, Disarmament Diplomacy and Human Security: Regimes, norms and moral progress in international relations, London: Routledge, 2011. The author would like to thank an anonymous reviewer for improvements to this point. 10 Camilleri and Falk, World in Transition, p. 255. 11 ABC News, ‘Flannery named Climate Commissioner’, Lateline, Transcript, 10/2/2011, www.abc.net.au, accessed 10 June 2011.


An international regime is defined as “the sets of rules, norms, and procedures that regulate

behaviour and control its effects in international affairs.”12 Regimes are imperfect and vary in

adherence, but can be measured through their influence and constraints on international

behaviour.

The nuclear non-proliferation regime – with particular reference to mechanisms regulating

the export of uranium - provides a good example of what an international regime is, with

direct applicability to the export of coal. The regime is composed of various instruments

including the Nuclear Non-proliferation Treaty (NPT), the International Atomic Energy

Agency, and supporting UN resolutions. The objective of the regime is to regulate nuclear

weapons, material and technology in order to manage the risks of horizontal and vertical

nuclear proliferation. While it is neither universally effective nor universally adhered to, “the

large majority of states adhere to at least part”13 of the set of norms embodied in the regime.

Within this regime, if we take Australia as an illustrative example, uranium exports are

constrained by a strict policy that limits the sale of uranium for peaceful purposes, only to

states who are signatories to the Nuclear non-Proliferation Treaty (NPT) and its additional

protocol, and who have signed a bilateral safeguards agreement with Australia.14 These

specific controls on the export of uranium are located within a broader regime embodied by

the NPT, the Zangger Committee and the Nuclear Suppliers Group which act in concert to

list and control the export of all nuclear materials, equipment and technology.

The formation of the nuclear materials export regime provides valuable insight into

principles that might shape any successful coal export safeguard regime. For instance, the

non-proliferation regime was founded on incentives by nuclear weapons states (largely the

US) to non nuclear weapons states in the form of assistance for peaceful development of

nuclear energy.15 In regards to coal consumers, this means that an important element of any

coal export safeguard regime might usefully incorporate incentives in the form of developing

carbon sequestration and renewable energy technology in order that “[t]echnology […] be

used as an inducement for the building of institutions.”16

12 Joseph S. Nye, ‘Maintaining a non-proliferation regime’, International Organization, Vol. 35, No. 1, Winter 1981, p. 16. 13 ibid. 14 Uranium Industry Framework Steering Group (UIFSG), Report of the Uranium Industry Framework Steering Group, Canberra: Commonwealth of Australia, September, 2006, p. 5. 15 ibid., p. 17. 16 ibid.


The non-proliferation safeguard system also works by states agreeing to file detailed reports

on activity which use the technology/commodity, and allowing inspectors to verify these

reports. This is clearly translatable in the area of carbon emissions and coal use through the

adoption of internationally accepted carbon accounting and monitoring systems, as currently

applied to Annex I states under the United Nations Framework Convention on Climate

Change (UNFCCC).

The NPT is also identified as a part of the broader non-proliferation regime, not

coterminous to it, and has worked by “establishing a normative presumption against

proliferation and by creating procedures for verifying intentions,”17 This indicates that any

coal export safeguard regime should be located carefully within the broader international

climate regime, and attempt, by its implementation and operation, to establish a norm of

international behaviour surrounding the end use of coal exports as a central objective.

The non-proliferation regime largely operated on the basis of regulating technology transfers,

rather than uranium. However, within the regime, the Nuclear Suppliers group provides an

interesting model for any coal export safeguard regime. The Nuclear Suppliers group

included the major suppliers of nuclear technology who “came together to discuss guidelines

for nuclear commerce that would prevent commercial competition from undercutting

safeguards obligations.”18 A similar group of coal suppliers could conceivably come together

in the 21st century to prevent coal exports from contributing to global carbon emissions,

however the experience of the Nuclear Suppliers group indicates that any effective regime

managing exports needs to address the issue of continued profitability and management of

international competition.

Legitimacy is also an aspect of a regime’s strength, indicated by “the extent to which states

have agreed on the priority assigned to various principles in the formulation of norms, rules,

and decision-making procedures.”19 Building legitimacy in the context of regulating coal

exports need not be so comprehensive as to gain agreement between every coal exporter and

every coal importer regarding the legitimacy of a safeguards regime, but basic aspects of

legitimacy such as establishing a principle within international organisations that states have

the right to restrict coal exports on the basis of the commodity’s intended end use would

likely be an important aspect of an effective regime, and one in which civil society actors may

17 ibid., p. 18. 18 ibid., p. 21. 19 Mark W. Zacher, ‘Trade gaps, analytical gaps: regime analysis and international commodity trade regulation’, International Organization, Vol. 41, No. 2, 1987, p. 177.


play a very important role. Establishing general principles by linking the emerging norms in

the international climate change regime with the standards of practice in international

commodity trade also fundamentally transforms our understanding of the ethical dimensions

relating to coal exports and helps to redefine existing interests and power relations.20

Scholars indicate that high compliance costs are a major barrier for actors to join a regime.21

This is a formidable, but not insurmountable, obstacle for the formation of any coal export

safeguard regime. For example, Australian coal exports accounted for 15 percent of total

national exports by value in 2010, second only to iron ore,22 while Indonesian coal exports

accounted for 12 percent of Indonesia’s total commodity trade by value in 2009 and was the

leading commodity export (2010 data unavailable).23 An effective coal export safeguard

regime would need to be sensitive to maintaining the profitability of export industries over

the short term in order that compliance costs to enforce a prospective regime do not deter

its formation.

The proposed coal export safeguard regime does not, theoretically, require participation from

all coal exporters however. Even in the non proliferation regime non-participation has and

still does occur, and as long as some punishment for not participating is felt, the lack of

complete participation does not fundamentally undermine the regime.24 The level of

participation does however shape the costs of enforcing regimes. Regimes are usually

designed to be more inclusive if it is particularly costly for the principals to sanction non-

signatories. Sanctioners can then reduce the “reduce the pool of nonparticipants”25 by

signing in more countries.

If a coal export safeguard regime sanctioned all states who had failed to sign a binding

emissions reduction target and adopt some form of national carbon price or trading scheme

for example, the cost to participating coal exporting states of implementing a sanction would

be prohibitive. If, on the other hand, a significant but still relatively low bar for compliance

was established (a national carbon accounting system and the establishment of a binding

20 Zacher, ‘Trade gaps, analytical gaps’, p. 202. 21 Daniel Verdier, ‘Multilateralism, Bilateralism, and Exclusion in the Nuclear Proliferation Regime’, International Organization, Vol. 62, No. 3, 2008, p. 439. 22 DFAT, Australian government, Composition of Trade Australia 2010, Market Information and Research Section, DFAT, June 2011, p. 27. 23 UN Comtrade. 2011. ‘Indonesia’, http://comtrade.un.org/pb/FileFetch.aspx?docID=3481&type=country%20pages, accessed 15 September. 24 Verdier, ‘Multilateralism, Bilateralism, and Exclusion in the Nuclear Proliferation Regime’, p. 441. 25 ibid., p. 455.


carbon emission reduction target for example) the compliance cost would be lower, the

regime would be more inclusive, and it would be less costly for the principal agents of the

regime to sanction non-compliance. A relatively low level of monitoring and surveillance for

compliance in the formative stages of any coal export safeguard regime would also lower the

costs of the regime to coal exporting states.26

A coal export safeguard regime

Coal exports contribute to the risk of dangerous climate change. Yet, at the same time, coal

exports provide exporting states with limited strategic leverage over coal importers. In this

way, coal exports have the potential to be an asset to any regime which attempts to reshape

patterns of international coal consumption and the emissions associated with this

consumption.

To bolster efforts to reduce global carbon emissions, coal exports could be placed under a

national export licensing system where the commodity could only be sold to nations with

internationally approved carbon emission reporting schemes, and binding national emissions

reduction targets in place. After a phase-in period, export licenses could further restrict the

sale of coal only to coal fired stations possessing carbon sequestration methods or other

carbon emission reduction technologies of a satisfactory nature, and national carbon

emission reduction implementation measures (such as a carbon trading scheme) in place.

Given that such licensing over a limited time period would prove extremely challenging for

importers of coal, the model should allow for coal export to power stations which do not

have these safeguards in place to still be authorised; however such exceptions could be

subject to an additional export licensing fee which acts both as an economic incentive for the

adoption of emission safeguards, and profits from which could be used in the development

of carbon offsets and carbon capture and sequestration technology seen as essential for the

future of the coal export industry under any scenario.27

To work effectively, the export regime would ideally be implemented by a coalition of major

coal exporters, which include Australia, Indonesia, Canada, USA, Russia, and South Africa.

The likelihood of all these states participating in an export regime seems remote over the

near term. But, there is significant potential for state leadership in this area. Given that

26 ibid., p. 456. 27 Stuart Rosewarne, ‘Meeting the challenge of climate change: The poverty of the dominant economic narrative and market solutions as subterfuge’, Journal of Australian Political Economy, December, Vol. 66, 2010, p. 44.


Australia is both the largest coal exporter and a leading proponent of the uranium export

safeguard regime, it possesses a strong capacity to effectively lead regime formation. More

limited bilateral cooperation may also be quite viable. For instance a bilateral agreement on

coal export safeguards between Indonesia and Australia would account for 52 per cent of the

world total hard coal trade.28 Backed by support from an appropriate international

organisation and civil society campaign, even a small coalition of states adopting this regime

is likely to have real impact in spurring action to reduce carbon emissions as part of a

broader international climate change regime (the projected effect of a coal export safeguard

regime on global carbon emissions is discussed later in the article).

This is precisely the mechanism by which international norms and treaties regulating the

export and use of landmines were adopted. The movement to ban landmines progressed

from widespread civil society campaigns in the 1990s, gained support from a small group of

sympathetic states, and eventually built such momentum that 159 states are now parties to

the Convention on the Prohibition of the Use, Stockpiling, Production and Transfer of Anti-

Personnel Mines and on their Destruction (Ottawa Treaty).29

Of course, states could not exempt themselves from the high standards demanded of

countries which import coal. International coal emission standards would also have to be

applied domestically in order for a coal export safeguard regime to possess a degree of

international legitimacy. One option a coalition of coal exporters and international

organisations might consider, is to adopt a regime where the maximum standard of national

emission reduction policies adopted by all states in the coalition becomes the baseline

compliance standard for coal importers. In other words, to return to two of the largest coal

exporting states, if both Indonesia and Australia implement binding carbon emission targets

and a carbon accounting scheme, but Australia also establishes a national price on carbon,

the compliance scheme for coal exporting would be an emission target and a carbon

accounting scheme, but not a price on carbon emissions.

This proposition has some merit, as it would have the effect of pushing coal importing

countries to advance their national policies on carbon emissions at the same rate as coal

exporting countries. However, the proposition is also hazardous in that national policy

makers in coal exporting countries may have an incentive not to take domestic action on

28 IEA, Coal Information 2010, OECD/IEA, 2010, p. 29. 29 See Richard Price, ‘Reversing the Gun Sights: Transnational Civil Society Targets Land Mines’, International Organization, Vol. 52, No. 3, Summer 1998, pp. 613-644 and International Campaign to Ban Landmines, ‘Mine Ban Treaty’, www.icbl.org/index.php/icbl/treaty, accessed 21 April 2012.


climate change due to the additional impact and cost this may incur in regards to profit from

the coal export trade, resulting in a suboptimal outcome for all concerned.

In addition, the cost of enforcing the regime should not be so onerous as to destroy the

profitability of the coal export trade under current trading structures (and therefore

undermining the very sources of potential influence on the end use of coal). The implicit and

explicit principles relating to the restriction of coal exports on the basis of their end use risk

would also likely need to be the subject of extensive dialogue and be widely accepted in

public discourse (internationally and within coal exporting nations) prior to a coal export

safeguard regime being accepted as a viable policy mechanism within the international

climate change regime.

Interaction with the emerging international climate change regime

A new system of restraints on coal exports is one possible mechanism supporting the

emerging international climate regime. How would a coal export safeguard regime affect this

broader international climate regime?

The international climate regime is composed of a number of international treaties and

instruments, the most important of which is the UNFCCC adopted in 1992. Within the

convention, UN member states sought to “mitigate climate change by implementing a

comprehensive global monitoring system of national CO2 emissions.”30 Within the

UNFCCC, the Kyoto protocol introduced binding targets for the reduction of greenhouse

gas emissions for many industrialised nations, along with a number of mechanisms whereby

states, businesses and individuals could attempt to meet these reduction targets in efficient

ways, such as emissions trading, clean development mechanisms, and joint implementation

mechanisms. International scientific bodies such as the Intergovernmental Panel on Climate

Change (IPCC) are also crucial components of the climate regime, providing a scientific basis

for action on climate change mitigation, adaptation and further regime development.31

Although the development of the still embryonic international climate regime has progressed

at a rapid pace since 1994, the regime has to date failed to succeed in its central objective of

mitigating climate change in light of the daunting environmental, economic, political and

30 Delf Rothe, ‘Managing Climate Risks or Risking a Managerial Climate: State, Security and Governance in the International Climate Regime’, International Relations, Vol. 25, No. 3, 2011, p. 337. 31 ibid. and UNFCCC, ‘Kyoto Protocol’, http://unfccc.int/kyoto_protocol/items/2830.php, accessed 19 September 2011.


social transformations that reducing global carbon emissions entails. The Conference of the

Parties (COP) of the UNFCCC held at Copenhagen in December 2009 was billed as a ‘make

or break’ event for states to agree on an effective set of carbon reduction targets bridging the

developed and developing world amidst “an apparent global consensus on the severity and

urgency of the climate change threat,”32 but was widely assessed as a political disaster and

“cipher for the inability of the international community to cooperate to save the world from

the impacts of ‘catastrophic’ climate change”33 in the ensuing lack of agreement and failure

to implement a new mechanism for international carbon reduction. The subsequent COP 16

and COP 17 held in Cancun and Durban have given some reason for optimism, but have

widely been met with disappointment.34

In the study of international regimes, scholars find that regimes often fail to expand their

membership when the principal instigators lose capacity to sanction non-participants.35 The

current insufficient pace of any global accord on carbon emission reductions may be

attributable, not just to a domestic reluctance to alter energy systems currently underpinning

economic activity, but also to an uneven balance of perceived costs and benefits in joining an

effective international climate regime. A system of carefully designed and applied export

safeguards which raise the cost of coal imports for non-complying states may provide greater

impetus for rapid accession to a new and effective global carbon emission reduction

mechanism by arming the broader international climate regime with a new sanctioning

instrument.

More broadly, scholars such as Hoffmann have highlighted that the slow pace of what he

terms the ‘megamultilateral’ approach to addressing climate change has in recent years

resulted in the emergence of a diverse range of climate governance experiments which hold

great promise, although with as yet unproven effectiveness. These experiments are

undertaken by a range of actors, including “cities, countries, provinces, regions, civil society,

and corporations” in a process “only loosely connected to, the “official” UN-sponsored

negotiations and treaties.”36 The proposed coal export safeguard regime should be viewed as

one of these diverse experiments in climate governance.

32 Rothe, ‘Managing Climate Risks or Risking a Managerial Climate’, p. 331. 33 ibid. 34 See Business and the Environment, ‘Last Minute Agreements Salvage COP 17’, Vol. xxiii, no. 1, January 2012, p. 1 and Lesley Masters, ‘Sustaining the African common position on climate change: international organisations, Africa and COP17’, South African Journal of International Affairs, Vol. 18, No. 2, 2011, p. 259. 35 Verdier, ‘Multilateralism, Bilateralism, and Exclusion in the Nuclear Proliferation Regime’, p. 461. 36 Matthew J. Hoffman, Climate Governance at the Crossroads, Oxford: Oxford University Press, 2011, p. 5.


Carbon emissions, leverage, and the structure of world coal

production and trade

Central to the case for a coal export safeguard regime is the proposition that intervention by

exporting states has the potential to raise the price of coal for non-complying states and

ultimately reduce carbon emissions through incentives to participate in the broader

international climate regime. The section below first examines the structure of global coal

production and trade and the potential price impacts of a coal export safeguard regime,

before exploring the effect of this price impact on the end goal of mitigating global carbon

emissions.

The question of potential leverage for states and international actors within the coal trade is a

serious challenge to the effectiveness of a coal export safeguard regime. The market position

of even the largest single exporting state is probably insufficient to influence supply and

pricing conditions on a scale large enough to bring about policy changes in consumer

nations. An obvious parallel is the Organization for Petroleum Exporting Countries (OPEC),

which for most of the organisation’s life was unable to effectively manipulate international

oil markets (despite some high profile and notable short term successes) even though they

possessed a far greater market share in the export of oil than Australia does in the export of

coal. The attempt in the 1970s to influence the international market price of uranium

through participation in a uranium cartel composed of Australia, Brazil and South Africa and

led by the Canadian trade department – in this case for motives of profit rather than any

political objective - was also later found to be mostly ineffective in altering the price paid by

uranium consumers over the lifetime of its operation.37 Nye also contends that in regards to

nuclear non-proliferation, the proposed idea of a coalition of the US, Canada and Australia,

together possessing a large share of the uranium market was considered but found to be

inadequate to coerce other suppliers and consumers into accepting non-proliferation

norms.38

Theories of economic statecraft also provide a mixed assessment of whether a coal export

safeguard regime would be effective in providing an incentive for other states to reduce

carbon emissions or agree to a more effective international climate regime. Influence

stemming from the export of a commodity to another state usually hinges upon the ‘urgent’

need for the good exported by another state or region, and difficulties for the importing state

37 Debora L. Spar, The Cooperative Edge: The Internal Politics of International Cartels, London: Cornell University Press, 1994. 38 Nye, ‘Maintaining a non-proliferation regime’, p. 22.


of dispensing entirely with the trade,39 which certainly in the case of rapidly industrialising

coal importing countries such as China and India would lend support to major coal exporters

such as Australia or Indonesia holding an instrument of leverage in the form of coal exports.

However, potential influence is limited when importing states are able to shift trade to other

countries – which would certainly be the case if even the largest coal exporter (Australia)

undertook unilateral action, and is also restricted by the creation of vested interests and ties

between existing power groups and the trade in the exporting country40 – which is clearly the

case in terms of the domestic coal industry’s importance within Australian politics.

This suggests that within the structure of world coal production and trade, a coal export

safeguard regime would need to account for a large share of coal exports, that the states

targeted for non-compliance should have an urgent need of coal imports which cannot be

easily substituted at low cost, and that the regime should not be based entirely, or even

primarily, on coercion, in order that coal producers or exporters outside of the regime are

not encouraged to undermine the regime’s function through concerted action. How does this

fit with the existing patterns of production, consumption and trade of coal internationally?

Tables 1.1 and 1.2 over show the top 20 countries in the world production and consumption

of hard coal, which includes coking and steam coal) in 2009.

39 Albert O. Hirschman, National Power and the Structure of Foreign Trade, Berkeley and Los Angeles: University of California Press, 1969, p. 24. 40 ibid., pp. 34-35.


Tables 1.1 and 1.2

Table 1.1: World Hard Coal Production 2009 (thousand tonnes) – top 20 countries

Table 1.2: World Hard Coal Consumption 2009 (thousand tonnes) – top 20 countries

State 2009 State 2009

PR of China 2,971,413 PR of China 3,085,576

United States 918,716 United States 856,248

India 526,145 India 591,718

Australia 335,242 South Africa 180,593

Indonesia 263,336 Japan 164,780

South Africa 247,297 Russian Federation 135,913

Russian Federation 228,602 Korea 106,101

Kazakhstan 96,246 Poland 75,949

Poland 78,035 Kazakhstan 73,795

Colombia 72,903 Australia 71,780

Ukraine 54,809 Chinese Taipei 60,278

Vietnam 42,143 Ukraine 57,391

DPR of Korea 28,552 Germany 53,525

Canada 27,961 United Kingdom 49,322

United Kingdom 18,374 Indonesia 33,785

Germany 14,971 DPR of Korea 25,637

Czech Republic 11,001 Turkey 22,246

Mexico 10,548 Spain 20,047

Spain 6,953 Italy 19,117

New Zealand 4,303 Vietnam 17,331

World total 5,989,537 World total 5,924,292

(Source data: International Energy Agency (IEA) Coal Information 2010, OECD/IEA, 2010)

The tables indicate that the top three coal consuming countries – China, the United States

and India – are also the top three coal producing countries. However, China and India

consume more coal than is accounted for through domestic production. Tables 2.1 and 2.2

show the top 13 hard coal exporting and importing countries in 2009.


Tables 2.1 and 2.2

Table 2.1: World Hard Coal Exports 2009 (thousand tonnes) – selected countries

Table 2.2: World Hard Coal Imports 2009 (thousand tonnes) – selected countries

State 2009 State 2009

Australia 261,745 Japan 164,780

Indonesia 229,658 PR of China 136,957

Russian Fed. 116,203 Korea 102,981

Colombia 69,454 India 67,744

South Africa 66,921 Chinese Taipei 60,278

USA 53,380 Germany 38,475

Canada 28,326 UK 38,223

PR of China 22,794 Russian Fed. 23,514

Kazakhstan 22,718 USA 20,408

Poland 8,373 Spain 17,038

Ukraine 5,291 France 14,445

Venezuela 3,627 Canada 8,212

India 2,171 Belgium 7,321

(Source data: International Energy Agency (IEA) Coal Information 2010, OECD/IEA, 2010)

These trade statistics indicate that in 2009 Japan, Korea, Taiwan, Germany, Spain, France

and Belgium appeared particularly vulnerable to coal export price pressures due to their

reliance on imported coal, while India and China were vulnerable to a lesser extent due to the

gap between domestic production and consumption, with China continuing to export large

amounts of coal despite this situation. The US was both a major importer and a major

exporter of coal, meaning that it appeared relatively insulated from price pressures under any

proposed coal export safeguard regime. The dominance of Australia as an exporter of hard

coal is also driven by pricing factors, with Australian coking coal available in Japan at a price

of US$193 per tonne during 2009, $20 to $30 cheaper than equivalent imports from the US

or Canada and beaten only by Russian coal at $189.24 per tonne, giving Australia a strong

competitive advantage in Asian markets relative to competitors.41

This indicates that any coal export safeguard regime which relied on Australian and

Indonesian agreement alone but which raised the cost of exports to consumers which did

not comply to the regime by US$20 or more per tonne would quickly be undermined by the

price competitiveness of coal exports from Canada, the United States and Russia. To avoid

41 IEA, Coal Information 2010, pp. III.43.


this situation a broad coalition of the leading coal exporters would be required, or a suitably

low cost of non-compliance to the coal export safeguard regime established – undermining

the overall effectiveness of the regime in punishing non-compliance.

The table below lists the 10 largest greenhouse gas emitting countries from the use of fossil

fuels in 2008.

Table 3: 2008 ranking of countries by total CO2 emission from fossil fuel burning

Rank Nation CO2 Total*

1 China (Mainland) 1,917,621

2 United States of America 1,546,903

3 India 475,238

4 Russian Federation 465,954

5 Japan 329,469

6 Germany 214,524

7 Canada 148,375

8 Islamic Republic of Iran 146,824

9 United Kingdom 142,584

10 Republic of Korea 138,852

* Thousand metric tons of carbon

(Source: Boden, Tom, Gregg Marland, and Bob Andres, Carbon Dioxide Information Analysis Center, Oak Ridge National Laboratory, http://cdiac.ornl.gov/trends/emis/top2008.tot , accessed 20 September 2011)

Of these states, Russia, Canada and the United States are unlikely to be influenced on

national climate change policies through any interventions using coal exports due to their

strong domestic production of coal. China and India, as mentioned before, will likely feel the

effects of a price increase due to restrictions on coal exports, but hold large domestic coal

reserves and the ability to source coal imports from a variety of countries – although the

sheer scale of their import needs indicates a coal export safeguard regime may hold some

degree of leverage over national policies.

Japan, Germany, the UK and Korea on the other hand are particularly dependent on coal

imports to support domestic coal consumption, and would be the most likely states affected

by a coal export safeguard regime should they be categorised as not complying with its

principles. These countries are in general reasonably proactive in regard to climate change

issues (with Germany and the UK operating within the EU’s carbon trading scheme and


Korea and Japan sporting well advanced plans to implement similar national schemes). This

is positive for the regime in indicating that many of the major coal importing countries

would be unlikely to be sanctioned in any coal export safeguard regime, lessening the cost of

sanctioning non-compliance for participating coal exporters. It is also a negative feature in

that of the top four carbon emitting states due to fossil fuel use in 2008 only China and India

have the potential to be influenced by a coal export safeguard regime, and only to a minimal

degree due to existing price structures and domestic production capacities. What does this

mean for the proposed structure and effectiveness of a coal export safeguard regime? Table 4

below outlines the national climate policies of the top 13 coal importing states to determine

to what degree these states would be in compliance with the categories outlined for possible

regime compliance: a UNFCCC approved national carbon emissions reporting and

monitoring scheme, a binding emissions reduction target, and a national carbon price or

emissions trading scheme.

Table 4: National carbon emission policy – top 13 coal importers (2009)

State

UNFCCC national carbon reporting and monitoring system?

Emissions reductions target?

Implementation measures (national carbon price/trading scheme)?

Japan Yes Yes No

PR of China No non binding No

Korea No non binding No

India No non binding No

Taiwan No non binding No

Germany Yes Yes Yes

UK Yes Yes Yes

Russian Fed. Yes Yes No

USA Yes Yes No

Spain Yes Yes Yes

France Yes Yes Yes

Canada Yes Yes No

Belgium Yes Yes Yes

(Source data: UNFCCC, ‘Copenhagen Accord’, http://unfccc.int/meetings/cop_15/copenhagen_accord/items/5262.php, accessed 20 September 2011; UNFCCC, ‘Fact sheet: UNFCCC Emissions Reporting’, June 2009, http://unfccc.int/files/press/backgrounders/application/pdf/fact_sheet_unfccc_emissions_reporting.pdf, accessed 20 September 2011; UNFCCC, Kyoto Protocol Reference Manual: On accounting of emissions and assigned amount, UNFCCC, November 2008 and SBS World News Australia, ‘Factbox: Carbon taxes around the world’, 13 July 2011, http://www.sbs.com.au/news/article/1492651/factbox-carbon-taxes-around-the-world, accessed 20 September 2011).


This brief survey indicates that a coal export safeguard regime would sanction China, India,

Korea and Taiwan for non-compliance with the first two categories – an approved carbon

reporting scheme and a binding national emissions reduction target. These countries are all

non-annex I parties under existing UNFCCC agreements, meaning any application of the

coal export safeguard regime would likely be controversial within the existing international

politics of climate change negotiations between the developed and developing world. As

indicated in the earlier analysis of the international coal market, all four non complying

countries are, to lesser and greater degrees, vulnerable to a price impact through coal exports

and therefore provided with an incentive to adhere to a carefully designed and implemented

coal export safeguard regime. On its own, compliance with these minimum standards of

reporting and target setting for national carbon emissions is likely to have only a minor

impact on reducing carbon emissions. Within the larger international climate regime

however, the coal export safeguard regime, by setting a new cost to non-compliance, is likely

to have significant long term effects as possible new standards and norms are introduced by

coal exporters to sanction states falling behind international standards of climate change

mitigation.

Barriers to regime formation

There are a number of barriers to implementing the proposed coal export safeguard regime,

including gaining the participation of a suitable coalition of major coal exporters. To work

effectively, a regime would ideally include participation by Australia, Indonesia, Russia,

Colombia, South Africa, the US and Canada. This grouping of states holds very different

positions within international climate negotiations however, with Indonesia and Colombia in

particular aligning with many of the interests of non-Annex I parties such as China and

Korea which would likely be found to breach the conditions of compliance for the coal

export safeguard regime model proposed in this article.

In addition, there are major domestic barriers to such states adopting policies which

potentially threaten the profitability and market share of national coal export industries. For

instance, coal is one of Australia’s largest export commodities.42 Due to the likely cost to the

coal industry, and therefore Australia’s economy, of any export restrictions, the export

regime would be fiercely opposed by national industry and political groups. This opposition

would be comparable to the considerable industry opposition against the introduction of the

42 ABARE, Energy in Australia 2010, p. 2.


federal government’s Mineral Resources Rent Tax (MRRT), or the proposed carbon pricing

mechanism, and be politically difficult to overcome. In comparison, it was far easier to

impose safeguards on the fledgling Australian uranium export industry given its limited

economic importance to Australia at the time.43

Economic interdependence is also a serious barrier to trade based interventions in pursuit of

climate mitigation goals.44 The economic dependence of coal exporting states such as

Australia and Indonesia upon consumers of raw material exports such as China, Japan and

India targeted by a coal export safeguard regime may already have resulted in a situation

where political considerations from these countries precludes action to regulate coal exports.

The question this poses is: do exporting states want to be held hostage to the export of a

strategically dangerous raw material in order to maintain their current level of export

earnings? In regards to uranium, Australia ultimately decided a compromise could be reached

striking a balance between restricting exports and enabling the profitability of the industry.

Coal represents a decision of a far greater economic scale however, and whether politicians

and the publics of major coal exporting states would countenance restricting a significant

component of the economy of their own volition is questionable.

The immediacy of the threat of coal exports due to their associated carbon emissions is also

an issue in considering export restrictions. The threat of a nuclear disaster or use of a nuclear

weapon was and is an imminent danger, making the end use risks of uranium exports

foreseeable in very short time spans. In contrast end use risks from coal export build over

multiple years, and it is far easier to make the case that short term economic gains are

foremost in this context. However, shifting debate within coal exporting states to the

available international levers they possess through consideration of a coal export safeguard

regime does allow political actors to incorporate more aggressive narratives into their

discourse which may be more appealing to the public than the softer appeal of leading

through example on climate issues.

Given the barriers to regime formation surveyed above, which actors could lead the

formation of a coal export safeguard regime?

43 Larry R. Stewart, ‘Canada's Role in the International Uranium Cartel’, International Organization, Vol. 35, No. 4, 1981, p. 670. 44 Klaus Knorr, ‘Economic Interdependence and National Security’ in Klaus Knorr and Frank N. Trager (eds.), Economic Issues and National Security, Kansas: Regents Press of Kansas, 1977, p. 5.


Agency and impetus for regime formation

Discussion in the section above regarding the diverse positions on climate mitigation efforts

within major coal exporters and the potential costs to principle regime actors of

implementing a coal export safeguard regime points to the immense difficulties of single

states taking unilateral or limited bilateral action to leverage coal exports for international

climate mitigation goals.

Fortunately, the international system is not composed solely of states and their interests. It is

proposed here that a coal export safeguard regime could only be driven by a leading coal

exporter in conjunction with an international organisation such as the UN. This in turn could

be aided by the formation of a number of norms concerning the responsibility of states in

accounting for the end use of their commodity exports driven by an international and

national civil society campaign. Such campaigns have featured in other issue areas, including

nuclear, human rights, and corporate social responsibility, and have affected genuine change

despite the apparent tight control of states over the institutions of global governance.45

There is no reason to think that a suitably designed coal export safeguard regime advocated

by international civil society organisations and adopted in principle by an international

organisation could not bridge the divides and interests of major coal exporters given the

increasing urgency of action on climate change mitigation and the scientific consensus on its

causes.46

In addition, the world’s largest coal exporter is also the obvious candidate state to lead

regime formation in this area. Introducing a coal export safeguard regime based on the

commodity’s inherently dangerous qualities as a source of greenhouse gas emissions is logical

under any strategy for Australia to reduce the risk of dangerous climate change, given the

large contribution of Australian coal exports to global carbon emissions in comparison to its

limited net domestic emissions, and has a firm precedent in the restriction of uranium

exports due to its role in the proliferation of nuclear weapons, a system which has been

championed by Australia internationally for decades.

45 Camilleri and Falk, Worlds in Transition. 46 Diesendorf, ‘Strategies for radical climate mitigation’.


Conclusion

Introducing a coal export safeguard regime based on the commodity’s end use risks as a

source of greenhouse gas emissions has firm precedent in the restriction of uranium exports

due to its role in the proliferation of nuclear weapons.

Multilateral action to reduce carbon emissions, despite slow progress, has so far failed to

deliver results sufficient to lower the risk of damaging outcomes under the existing

international climate regime. Innovative policy options are called for to address this situation,

and to date political and scholarly debate has not considered an obvious lever of

international influence: coal. The willingness of states to use their key export commodities in

a suitably designed coal export safeguard regime holds the potential to spur domestic and

international action to reduce greenhouse gas emissions and provide the international climate

regime with an effective sanctioning mechanism to complement existing multilateral

negotiation strategies.

While the structure of global coal production, consumption and trade limits the application

of leverage for a coal export safeguard regime to all major coal consumers, a broad based

coalition of coal exporters supported by international organisations and civil society

possesses significant potential influence over the price which many of the largest coal

importing states pay. Raising the price of coal imports in this way provides an incentive for

states to adopt climate mitigation strategies in line with emerging international norms in

much the same way as a national carbon price or trading scheme functions for energy

intensive industries on a domestic level.

The model for compliance with a coal export safeguard regime put forward in this article

largely sanctions non-annex I states under existing UNFCCC climate change agreements, and

is therefore controversial within the international politics of climate negotiations.47 Further

research would be useful to examine whether a system of safeguards could be more

intelligently designed to cut across these negotiation lines and provide a basis for regime

formation appealing to major coal exporters such as Australia and Indonesia, which possess

differing levels of industrialisation and international climate negotiation strategies. Also

beyond the scope of this article is a more detailed analysis of the direction of trade and

pricing structure in the international coal export market. Such research would identify the

47 Although as Masters points out, the lead up to the Durban COP 17 illustrated that negotiating positions within non-annex I states is increasingly diverse. See Masters, ‘Sustaining the African common position on climate change’, pp. 264-265.


scope and limitation of leverage for individual coal exporters over coal importing states to

determine with more accuracy the minimum coalitions of coal exporters required to

influence coal importers found in non-compliance with the proposed regime.

The coal export safeguard regime model presented in this article can be challenged on a

range of economic, political and technical grounds in assessing its viability and prospects for

implementation. As a general principle however, coal has now been widely accepted as a

commodity which embodies an end use risk in the form of carbon emissions. Regulatory

regimes managing end use risks in the exports of other commodities such as uranium, small

arms and goods containing CFCs have been developed with sensitivity to the continued

profitability and market position of those industries, and there exist few grounds to exclude

debate on similar mechanisms within the climate mitigation strategies of coal exporting

states, and by international actors, including civil society, more broadly. A coal export

safeguard regime, applied nationally and coordinated internationally, offers one promising

policy mechanism addressing the complex task of reducing global carbon emissions which

transforms the coal trade from one of the greatest contributors to the problem into a

potential asset in international climate mitigation efforts, and should be seriously considered

within the research and policy community.

Climate mitigation strategies and export controls: The case for a coal export safeguard regime

Documents

Transcript of Climate mitigation strategies and export controls: The case for a coal export safeguard regime