Speaking at the start of the second week of the UN climate change summit in Lima, Peru, Professor Stern said governments should not insist on an internationally legally binding post-2020 treaty at the Paris summit next December.

It is one of the key questions to be resolved over the next year. Australia’s climate change ambassador, Justin Lee, told an October forum of the Carbon Market Institute he remained open on the issue.

“There is a philosophical debate around does an international legally binding target deliver more action or not. If you look back at various countries’ performances you can make different judgements on that, and there are real advantages in being able to ratchet it up without having to re-ratify every time,” he said.

It is not a binary yes/no answer as there are options beyond the full court press. One previously advocated by Australia is for a legally binding framework agreement that leaves targets in a separate schedule that can be raised over time without needing to renegotiate the core agreement.

Professor Stern comes down firmly on the side of flexibility in his new report, ‘Growth, climate and collaboration: towards agreement in Paris 2015’.

“International agreements on climate change should be structured so as to facilitate the kind of collaboration needed to achieve mutual confidence and equitable access to sustainable development. They should be dynamic in the sense that countries’ ambitions for emissions reductions can be encouraged by, and captured in, international processes and in ways that promote increased ambition over time,” he said.

“Some may fear that commitments that are not internationally legally binding may lack credibility. That, in my view, is a serious mistake. The sanctions available under the Kyoto Protocol, for example, were notionally legally binding but were simply not credible and failed to guarantee domestic implementation of commitments.”

Further, Australia did not ratify its Kyoto target of limiting emissions to 108% of 1990 levels, but achieved it anyway.

The case for flexibility is strong, including the pace of technological development, " the profound global structural transformation in urbanisation, energy systems and land use" and growing understanding of co-benefits from climate change action around health, energy security, ecosystems and more.

"I now see the story of alternative low-carbon paths as still more exciting and full of opportunity, given the coming together of phenomenal technical progress and the structural transformations of the world economy. Thus I would place still more emphasis on a Schumpeterian interpretation of learning, rapid technological change and radical change in structure. This embodies a still more dynamic and structural approach to growth and development than in [2006] The Stern Review," he writes in the report.

KEY NEGOTIATION QUESTIONS

Professor Stern suggested the discussions between governments should be founded on an understanding of four key elements, which should be built into the Paris agreement.

“The Paris agreement should explicitly acknowledge that the risks from unmanaged climate change are potentially immense and delay is dangerous. It should also recognize that the path to a low-carbon economy can be highly attractive, embodying strong and high-quality growth, investment and innovation, in the context of rapid global structural transformation. The agreement should be based on a shared commitment to creating equitable access to sustainable development. And it should be structured to facilitate dynamic and collaborative interactions between countries,” he said.

Lee listed specific issues to be tackled in the lead up to Paris, a key one being the “balance between mitigation, adaptation and finance”.

“There will a level of political parity between them. The inclusion of adaptation and finance contributions is potentially difficult for a lot of countries in that it is something that has not been done previously [in binding fashion],” he said.

There are also questions over whether is to make it a five or 10 year agreement and how to differentiate between the expectations of developing and developed countries. Countries currently determine their commitment according to their own assessment of circumstances.

“The real concern with such a bottom-up or voluntary, nationally-determined approach is whether it delivers the level of ambition required to keep the world on the low 2 degree track. There is also a concept of no backsliding being talked about, whereby countries would be asked to do at least what they have done in the past… But that in itself needs more clarification.”

Professor Stern was buoyed by the join US-China announcement in November and the European Council’s climate and energy package (40% reduction from 1990-2030), which combined cover about half of annual global emissions of greenhouse gases.

“However, taken together, they do not add up to being on track for an emissions path that would mean a reasonable chance of avoiding dangerous global warming of more than 2 centigrade degrees above pre-industrial level. All involved are now discussing the possibility of raising ambition on emissions reductions. That is a task of great importance,” he said.

The report was published by the Grantham Research Institute on Climate Change and the Environment and the ESRC Centre for Climate Change Economics and Policy at London School of Economics and Political Science.