THE ROLE OF LAW IN RESPONDING TO CLIMATE CHANGE: EMERGING REGULATORY, LIABILITY AND MARKET APPROACHES NICOLA ANNA MAY DURRANT BSc (Env)/LLB (Hons)(GU); Grad DipLP (ANU) Thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy Faculty of Law/Institute for Sustainable Resources Queensland University of Technology Brisbane 2008 1 KEYWORDS Climate Change, Climate Law, Climate Liabilities, Carbon Trading, Environmental Governance, Environmental Law, Environmental Policy, International Law. 2 ABSTRACT Climate change presents as the archetypal environmental problem with short-term economic self-interest operating to the detriment of the long-term sustainability of our society. The scientific reports of the Intergovernmental Panel on Climate Change strongly assert that the stabilisation of emissions in the atmosphere, to avoid the adverse impacts of climate change, requires significant and rapid reductions in ‘business as usual’ global greenhouse gas emissions. The sheer magnitude of emissions reductions required, within this urgent timeframe, will necessitate an unprecedented level of international, multi-national and intra-national cooperation and will challenge conventional approaches to the creation and implementation of international and domestic legal regimes. To meet this challenge, existing international, national and local legal systems must harmoniously implement a strong international climate change regime through a portfolio of traditional and innovative legal mechanisms that swiftly transform current behavioural practices in emitting greenhouse gases. These include the imposition of strict duties to reduce emissions through the establishment of strong command and control regulation (the regulatory approach); mechanisms for the creation and distribution of liabilities for greenhouse gas emissions and climate- related harm (the liability approach) and the use of innovative regulatory tools in the form of the carbon trading scheme (the market approach). The legal relations between these various regulatory, liability and market approaches must be managed to achieve a consistent, compatible and optimally effective legal regime to respond to the threat of climate change. The purpose of this thesis is to analyse and evaluate the emerging legal rules and frameworks, both international and Australian, required for the effective regulation of greenhouse gas emissions to address climate change in the context of the urgent and deep emissions reductions required to minimise the adverse impacts of climate change. In doing so, this thesis will examine critically the existing and potential role of law in effectively responding to climate change and will provide recommendations on the necessary reforms to achieve a more effective legal response to this global phenomenon in the future. 3 TABLE OF CONTENTS KEYWORDS……………………………………………………………………………………….… 2 ABSTRACT…………………………………………………………………………………………...3 TABLE OF CONTENTS ............................................................................................................... 4 LIST OF FIGURES ...................................................................................................................... 10 TABLE OF CASES ...................................................................................................................... 11 TABLE OF LEGISLATION ........................................................................................................ 20 TABLE OF TREATIES AND INTERNATIONAL ..................................................................... 27 LIST OF ACRONYMS ................................................................................................................ 31 STATEMENT OF ORIGINAL AUTHORSHIP ......................................................................... 33 ACKNOWLEDGMENTS…………………………………………………………………………...34 CHAPTER ONE – INTRODUCTION ..................................................................................... 35 RESEARCH TOPIC .................................................................................................................... 35 REVIEW OF EXISTING LITERATURE ON LAW AND CLIMATE CHANGE .................... 40 A RELATIONSHIP OF RESEARCH TO EXISTING LITERATURE ..................................................... 40 B EXISTING LITERATURE ON LAW AND CLIMATE CHANGE ..................................................... 41 C IDENTIFIED GAP IN THE LITERATURE .................................................................................. 45 SCOPE OF THIS RESEARCH STUDY ...................................................................................... 46 STRUCTURE OF THIS THESIS ................................................................................................ 48 CHAPTER TWO – CLIMATE CHANGE IN CONTEXT :SCIENCE , ECONOMICS AND LAW .... 54 INTRODUCTION ........................................................................................................................ 54 THE PHENOMENON OF CLIMATE CHANGE....................................................................... 55 CLIMATE CHANGE IMPACT PREDICTIONS ....................................................................... 57 A THE FIRST IPCC ASSESSMENT REPORT .............................................................................. 59 B THE SECOND IPCC ASSESSMENT REPORT ........................................................................... 61 C THE THIRD IPCC ASSESSMENT REPORT ............................................................................. 61 D THE FOURTH IPCC ASSESSMENT REPORT .......................................................................... 63 E REGIONAL PROJECTIONS AND THE CLIMATE CHANGE IMPACTS FOR AUSTRALIA .................. 67 F THE IMPACTS OF CLIMATE CHANGE ON THE ECONOMY ....................................................... 71 INTERNATIONAL RESPONSES TO THE IMPACTS OF CLIMATE CHANGE .................. 73 A GENERAL OBLIGATIONS UNDER THE UNFCCC................................................................... 73 B SPECIFIC EMISSION REDUCTION OBLIGATIONS UNDER THE KYOTO PROTOCOL .................... 76 C THE CREATION OF FLEXIBILITY MECHANISMS : ENGAGING THE MARKET ............................. 78 COMPARATIVE MODELS OF ATMOSPHERIC REGULATION ......................................... 79 A THE INTERNATIONAL COMPLIANCE MODEL : PROTECTION OF THE ATMOSPHERIC COMMONS 79 B THE DOMESTIC MARKET MODEL : TRADEABLE EMISSION INSTRUMENTS AND ATMOSPHERIC POLLUTION ................................................................................................................................ 84 KEY PRINCIPLES FOR AN EFFECTIVE LEGAL REGIME ................................................. 89 A REGULATION ..................................................................................................................... 89 B LIABILITY ......................................................................................................................... 90 C MARKET MECHANISMS ...................................................................................................... 92 CONCLUDING COMMENTS .................................................................................................... 96 4 CHAPTER THREE - THE ARCHITECTURE OF THE CLIMATE CHANGE REGIME : AN ANALYSIS AND CRITIQUE OF THE INTERNATIONAL REGULATION OF GREENHOUSE GAS EMISSIONS ....................................................................................................................... 98 INTRODUCTION ........................................................................................................................ 98 THE OBJECTIVES OF THE REGIME: AVOIDING ADVERSE CLIMATE CHANGE ...... 101 THE REGULATORY APPROACH OF THE CLIMATE CHANGE REGIME ...................... 107 THE STRUCTURE OF THE CLIMATE CHANGE REGIME ................................................ 109 A JURISDICTIONAL SCOPE OF THE COP/MOP ....................................................................... 112 B DISCRETIONARY DEPTH OF THE COP/MOP ...................................................................... 114 C RULE MAKING DISCRETION OF THE COP/MOP ................................................................. 115 D SUBSIDIARY BODIES WITHIN THE CLIMATE CHANGE REGIME ............................................ 117 FRAGMENTED REGULATION OF THE FLEXIBILTY MECHANISMS............................ 119 A OPERATION OF THE CDM ................................................................................................. 119 B OPERATION OF THE JI MECHANISM ................................................................................... 123 C THE ROLE OF THE HOST COUNTRY ................................................................................... 127 D THE ROLE OF PRIVATE VERIFIERS .................................................................................... 129 E INTERNATIONAL REGULATION OF PRIVATE ENTITIES ........................................................ 130 F INTERNATIONAL TRADE IN EMISSION INSTRUMENTS ......................................................... 132 DEFICIENCIES IN THE MONITORING AND ENFORCEMENT OF THE INTERNATIONAL REGIME ................................................................................................... 135 A DUE PROCESS AND NON -COMPLIANT STATE PARTIES ....................................................... 143 B THE TREATMENT OF PRIVATE PARTICIPANTS .................................................................... 147 INTERNATIONAL STATE RESPONSIBILITY