A proposal for the renewal of sectoral approaches building on the Cement Sustainability Initiative

Abstract

The prospect of an international agreement within the United Nations Framework Convention on Climate Change (UNFCCC) resulting in a common response to carbon pricing, such as a global cap-and-trade scheme, can for now only be seen as a long-term goal. In the meantime, it is realistic to operate within a world of unilateral climate policies, which are eventually loosely coordinated among a limited number of countries. Two key considerations need be addressed in the design of these policies: equity for emerging countries according to the principle of ‘common but differentiated responsibilities’, and competitiveness within carbon-intensive, internationally traded sectors. The need to address both concerns has generated a renewed interest in the use of sectoral approaches. This article proposes a new sectoral framework approach using the case of the cement industry, within which equity and efficiency requirements are addressed. The proposed approach combines basic components put forward by industry, such as the use of absolute caps for industrialized countries and intensity targets for emerging countries, the introduction of a border carbon adjustment (BCA) on imports from those countries that do not adopt the sectoral approach, and the use of financial transfers collected through CO2 revenues in industrialized countries. Notwithstanding the political and legal challenges associated with implementing a BCA, how such an approach would involve ‘sticks’ as well as ‘carrots’ incentivizing participation within the proposed scheme is described, and some key implementation issues are discussed.