The outcome of the Copenhagen conference disappointed everyone, but the work continues to reach a universal climate agreement

By Eric Marx in Copenhagen

A weak climate deal was agreed in Copenhagen after two weeks of contentious north-south negotiations. It underscored an unworkable UN process and the rise of individual state action outside of an international regulatory framework.

The Copenhagen accord sets a target of limiting global warming to a maximum 2C over pre-industrial times. This is seen as a threshold for dangerous changes such as rising seas and droughts. But the agreement establishes no targets for reducing emissions and it fails to say how emissions reductions would be achieved. Crucially, the thin 12-paragraph document sets no goal for concluding a binding international treaty, thus weakening the Kyoto protocol and undercutting the European Union’s nascent emissions trading scheme.

Environmentalists, policymakers and the business community all expressed disappointment at the outcome. As it now stands, the combined pledges are nowhere near enough to keep atmospheric concentrations of carbon dioxide from rising above dangerous levels.

At best it is an interim deal giving nations more time to work out their disputes in the run-up to the next round of climate talks scheduled for November in Mexico. But even the first deadline, at the end of January, for countries to submit national targets was not met.

Clean energy aid

Yet glimmers of a new political and economic framework are evident in a developing monitoring and verification system, which will include for the first time both developed and developing countries. The agreement also provides a formidable offer of $100bn in aid from industrialised nations to lesser-developed countries to help them move to clean sources of energy and to deal with drought and other consequences of warming.

Ed Miliband, the British secretary of state for climate and energy, says: “The success of this process has been the fact that it has concentrated minds and has made all the major players put numbers on the table.”

Any future international climate agreement is expected to be worked out among a smaller grouping of roughly 30 countries responsible for 90% of climate change emissions. This forecast reflects a breakdown of the UN process as played out in backroom deal-making sessions in the final day at Copenhagen, when leaders from China, India, Brazil and South Africa – the so-called Basic bloc – forged a united front against the US and other developed countries.

Some are predicting a greater role for alternative bodies such as the G20 and the Major Economies Forum on matters of technology sharing and the merging of carbon trading markets.

Yet without a legally binding treaty, it now falls to individual nations to fulfil their commitments. That means they must act on their own to pass domestic legislation while having confidence other major emitting countries will do the same.

Brazil’s passage of a climate law fulfilling its 2020 greenhouse gas emissions targets is a big step in that direction. Those targets will be quantifiable and verifiable. China’s commitment to carbon intensity reductions, by contrast, is less clear given its insistence that “national sovereignty is respected”.

Under the Copenhagen accord, China and other emerging economies must monitor their efforts and report the results to the United Nations every two years, with some international checks to meet western transparency concerns.

“This has more political than economic relevance,” says Donald Pols, climate programme leader at WWF-Netherlands. “They have not signed on in a way that enables their CO2 to be integrated in a global trade system.”

US scheme still key

Passage of a US cap-and-trade scheme would do most to advance the global carbon market. Japan and Australia would follow, say analysts, and regional markets driven by domestic legislation could conceivably link up within a single scheme in as little as 10 years’ time.

To do that Barack Obama first has to get his stalled climate legislation through the obstructionist US Senate – a body filled with oppositional Republicans and skittish Democrats reticent to pass a bill with teeth in the current economic downturn.

Some analysts see the modest Copenhagen deal as boosting those chances. US legislation will not be in the shadow of strong international targets – thus providing cover to some Republican senators who favour a scaled-back unilateral market. However, the recent Republican US Senate victory in Massachusetts may make agreement more remote.

But Stephen Eule of the US Chamber of Commerce sees it differently. “We always said this is a global solution – that we need India, China and Brazil involved,” he says.

“How do you guarantee the integrity of offsets when lacking a binding international agreement?” Eule asks. He also highlights scant provisions dealing with technology transfer and attendant issues of intellectual property rights.

The Kyoto protocol never received US ratification because it did not set mandatory limits for those emerging economies, Pols says. It was perceived to be harmful to American workers. But now China’s voluntary pledge and the beginnings of an enforcement mechanism might just be enough to shift the balance towards agreement.

Europe and the UK

In the UK and elsewhere in Europe, the response from business has been to look first at existing domestic regulations and incentives.

“There is already a strong UK regulatory framework with the Climate Change Act, the Carbon Reduction Commitment and five-year carbon budgets,” says Mike Barry, head of sustainability at Marks & Spencer. “As a predominantly UK company we operate within a strong framework and this has not been weakened.”

In the first days after Copenhagen carbon prices fell as much as 8.7% on the European Climate Exchange in London. This prompted power companies to express apprehension over investment certainty, while generally renewing their existing clean-tech commitments.

“While Copenhagen was a disappointment on many fronts, [our] strategy remains the same,” says Jesse Fahnestock, a climate policy adviser at Swedish utility giant Vattenfall. The company is still aiming for climate neutrality by 2050 using renewables – primarily wind, biomass and ocean energy – as well as nuclear power and fossil fuels with carbon capture and storage.

“Of course Copenhagen was a missed opportunity for politicians to send a strong signal about the speed of the transformation society is undertaking, and to lower risks and investment hurdles. But this was just one milestone in the process, and we will continue to stay engaged and push for better and more ambitious policy solutions that are in line with our strategy,” Fahnestock says.

Renewables push

Turbine maker Vestas Wind Systems expressed concern about what’s required in the next 10 years if CO2 emissions are to be levelled out by 2020.

“Now without a clear global signal, emphasis must be put on regional and national levels,” says Vestas senior vice-president Peter Brun. “Such measures have been established in the EU, and are under way in the US, Australia, South Korea, China – to mention the most prominent ones.”

BusinessEurope, representing both clean-tech and energy intensive companies, said it was disappointed the Copenhagen accord had not done more to brighten the prospect for a global level playing field. It warned of possible “carbon leakage”, where companies paying for their emissions under the EU emissions trading scheme relocate to countries in which greenhouse gas emissions are less regulated.

This sentiment is especially palpable among cement, steel and aluminium companies. “At the moment they are still OK because a lot of the CO2 allowances [in the EU scheme] are given for free to energy-intensive industries,” says Folker Franz, a senior adviser at BusinessEurope’s environmental affairs unit.

But, Franz says, this is likely to change in 2013, in the third phase of the EU ETS, when these companies will be required to start emissions reductions.

Clean development

There was also little progress on sectoral reform proposals for the UN clean development mechanism (CDM) – an international offset programme enabling energy-intense industry to meet compliance regulation through investment in clean technology projects in developing countries.

A sectoral approach involves determining potential emission reductions on an industry-by-industry, area-by-area basis that would then be tallied to create a national greenhouse gas target. A sector, if meeting or exceeding a target, would generate offsets for sale into international markets. The goal of a sectoral approach is to reduce emissions while avoiding competitiveness concerns across countries by applying the same rules throughout a particular sector, regardless of where a business operates.

Industry does have sector agreements in place. “They exist,” Franz says, pointing to the work of the Asia-Pacific Forum, “but in terms of sectoral agreements of global emission reductions, we are very far away.”

Steve Sawyer, secretary-general of the Global Wind Energy Council, acknowledges some progress made on reforming key CDM provisions relating to standardised baselines, executive board transparency and feed-in tariffs, but expresses dissatisfaction with the slow pace. He says: “We didn’t get what we needed but we got enough to live to fight another day.”

Sectoral agreements for shipping and aviation were also to have been worked out in Copenhagen. But deadlock prevented the sectors’ inclusion in the accord, a result that still grants the industries time to work out proposals, but also may lead to governments creating a patchwork of national solutions leading to market distortion.

Transport agreements

US airlines have threatened lawsuits if the EU proceeds with its plans to include aviation under its own cap-and-trade system, a decision that would take effect in January 2012 and would cover all flights to and from airports in member nations.

Two industry trade groups – the International Maritime Organisation and the International Civil Aviation Organisation – and a number of NGOs had worked on accounting mechanisms and carbon market access proposals in an effort to establish their own caps. But less-developed countries opposed any such controls. And both the US and EU have reportedly refused to consider funds from shipping and aviation as part of a global financing scheme to shift monies towards the $100bn a year proposal contained within the Copenhagen accord.

One of the more positive outcomes of Copenhagen is support for conservation of tropical forests through the Reducing Emissions from Deforestation and Degradation programme. Redd is premised on the idea of providing incentives to people who live in forests to preserve, rather than cut down, their habitat.

Deforestation accounts for roughly 20% of greenhouse gas emissions, and “avoiding deforestation” is considered one of the cheapest and quickest ways to limit atmospheric CO2 concentrations.

Six governments stepped up with pledges totalling $3.5bn over a three-year period to be spent on capacity-building. Environmental groups such as Global Witness applauded the inclusion of safeguards preventing agroforestry conversion and protections for the rights of forest-dependent peoples.

Of course, the negotiations on forestry reflected the overall situation. It is summed up by Patrick Alley, director of Global Witness. He blogs: “The negotiations didn’t reach an agreement on Redd, because they didn’t reach a legally binding agreement on anything. The talks will continue throughout 2010, with the hope of a final agreement at Mexico in November or December.”

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