Geopolitics and the economic downturn are making a big dent in the prospects of a post-2012 climate change agreement

Maybe it was the weather, but the mood among delegates at December’s climate negotiations in Poznan, Poland, was sullen at best.

Outside the conference, a few locals waiting in the drizzle at a tram stop inadvertently captured the gist of the talks inside. “We burn a lot of coal and we don’t have the money to change,” said one man. A group of girls was sure what was happening in the conference centre – only that the Hollywood-megastar-cum-Californian-governor Arnold Schwarzenegger had failed to turn up.

Having established the roadmap on climate change last year in Bali, international negotiators should have been using Poznan to get ready for finalising a deal to replace the existing Kyoto protocol in Copenhagen at the end of 2009. But instead the general consensus at the conference was that, while Copenhagen would see an advancement of the climate talks, it would provide no overall deal.

The global economic downturn was on everyone’s mind. Some were more hopeful than others that a green energy revolution could spark new jobs and an economic boom. The Federation of German Industries was one of the main proponents of this argument, with the chief executive of Siemens leading the federation’s charge.

But, as an analyst from the Polish environment ministry was keen to point out, you have to spend money to make money. “The first step is to make very expensive investments in infrastructure,” he said, adding: “As far as EU funding [for Poland] is concerned, there is a lack of money for renewable energy.”

Meanwhile, Japan – one of the nations struggling to meet their Kyoto emissions targets – put words into action by promising to reinstall its microgeneration subsidies for householders, in turn driving its domestic industry in solar panel production.

The European Union’s position at the talks was marred by a lack of political consensus over its own climate plans. Europe was only able to confirm its greenhouse gas emissions reduction target of 20% by 2020 during the last days of the Poznan talks. This was a big step for the EU, but the 20% pledge was still on the meeker side of the original 20%-40% reduction by developed countries proposed by the EU during the Bali talks a year earlier.

US to lead?

Despite US senator John Kerry’s declaration that the US is set to lead the world to a successful outcome in Copenhagen, the lack of a Barack Obama climate team was a significant loss to Poznan. Much rests on whether the new US president lives up to his promise to create green jobs this year. If he does, then the negotiations in Copenhagen may be less a case of “If you’re not prepared to be the leader then get out of the way”, which was famously put to the US by one delegate last year, and more of a battle for climate leadership between the US and Europe.

This will only be possible if each gets its own house in order, however. Unless the internal political wrangling over climate change is sorted out within the EU and the US Congress this year, more dithering is in store at the next negotiations. Experts say it will take Obama at least until 2010 to reach an agreement on a US emissions cap-and-trade scheme.

In climate policy terms, 2008 was the year of the climate target. Targets were bandied about by the G8 (50% cut by 2050), the EU (20% cut by 2020) and countries such as the UK, which has established a legal national target of an 80% emissions cut by 2050. Obama also joined the target game in 2008, promising an 80% cut in emissions by 2050. While these targets were commendable in their own right, they seemed to send mixed messages to the global debate at Poznan.

Indian officials complained that developed countries’ emissions targets were being brought into negotiations as bait. The US delegation said it would establish climate targets on the condition that China and India also agreed to set targets, while the EU talked about moving its targets upwards from 20% in the event of a global post-2012 agreement.

Carbon markets

The financial mechanisms being used to fund green technology deployment are in serious need of attention. Carbon project developers say the Clean Development Mechanism (CDM), used to finance carbon reduction projects in the developing world, is too complicated.

Ways to make the CDM more effective, according to Miles Austin, head of European regulatory affairs at project developer EcoSecurities, include “reducing the delays in the decisions around project registration and issuance”. Some progress was made towards this goal during the Poznan talks.

In the longer term, Austin emphasises the importance of “producing a definition of additionality that is both clearly workable and that all stakeholders from government, to industry to NGOs are comfortable with”. Additionality – proof that the project would not have gone ahead without additional CDM funding from the carbon markets – remains a moot point in climate talks.

It’s not just a problem of getting credible carbon credits out quick enough; there is also a need to broaden the market for carbon credits. Forestry credits, which many advocates tout as the next step from carbon credits, face serious challenges. This is partly because the EU decided it was not going to allow them into the EU emissions trading scheme, but also because Brazil, the world’s biggest player in forestry resources, is opposing forestry carbon credits being sold as offsets.

And campaigner Greenpeace warns that a vast oversupply of forestry offset credits into the UN-backed carbon market could depress the price of carbon. Greenpeace estimates that the potential supply of forestry offset credits – which could be traded under the Reducing Emissions from Deforestation and Degradation (Redd) mechanism – is between 5.8bn and 7.2bn (each one representing a tonne of abated CO2 equivalent). Yet potential demand for Redd offset credits from carbon markets in the US would be just 867m offset credits, and just 261m in the EU, if these countries offset 15% of their emissions to meet climate targets, warns Greenpeace.

In general, the offset market will remain niche as long as it makes up a small part of emissions trading scheme compliance. After 2012, countries that have bought up CDM credits until now to meet their Kyoto targets could also stop buying them, threatening to reduce the market further.

The way forward for reducing emissions in developing countries, according to the International Energy Agency, is to bring emerging economies into a cap-and-trade scheme by 2020. According to the International Energy Agency, current climate policies are leading us to climate disaster. Climate scenarios based on current legislation, the organisation says, will still lead to enough greenhouse gases being pumped into the atmosphere by 2030 to bring about a 6C rise in the global average temperature, mainly due to growing emissions from emerging economies.

Avoiding stalemate

China and India will become critical players in the run-up to a post-2012 agreement. They have made it clear they are prepared to go low carbon as long as the move encourages sustained economic growth at home.

One thing is for sure: the “we will cut emissions if you do” argument is not working on them. There was some interest among Asian delegates in Poznan in expanding an emissions trading scheme into Asia as long as it would not affect the competitiveness of the region’s industry, though a deal on cap-and-trade is still a long way off.

Green technology transfer remains highest on emerging markets’ climate agenda, as a way to bring clean development and new economic growth. Intellectual property remains an issue, says Preeti Malhotra, India director at the Climate Group. Until green technology is put into the hands of local producers, she argues, it will never be deployed en masse.

Ultimately it is targeted money and access to technology that developing countries need, and quickly, if they are going to develop in the right direction to halt climate change.

Overall, the difference between Kyoto and the post-2012 deal is the scale of the challenge. Under Kyoto, industrialised countries agreed to reduce their collective greenhouse gas emissions by 5.2% compared with 1990. This time around industrialised countries and emerging economies have to make much bigger commitments to avoid dangerous climate change.

Unless there are radical changes of approach at Copenhagen it may be that an eventual deal proves to be too little, too late.

Mixed results for offsets

  • 1,231 carbon offset projects were registered under the Clean Development Mechanism by November 2008. They should generate 2.9bn certified emission reduction credits (tonnes of abated CO2 equivalent) by 2012.
  • December 2009 futures in CERs, the carbon emission reduction credits, were trading at about €12 on the European Climate Exchange in January, down from €23 in July 2008.
  • 2% of the carbon credits issued under the CDM are being set aside to generate cash for a climate change adaptation fund for developing countries.

Sources: United Nations Framework Convention on Climate Change, European Climate Exchange

No time to wait

  • The Intergovernmental Panel on Climate Change estimates that there will be 150 million environmental refugees by 2050.
  • At least $50bn a year is needed to help poor people face the impacts of a changing climate, according to Oxfam.

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