The Durban Deal was done, but what next?

James Murray runs down the scenarios businesses face as a result of Durban Agreement

20 Dec 2011, 00:10

More than a week has passed since the dramatic conclusion of the Durban Summit, and still there appears to be little in the way of a consensus on whether the platform for action agreed in the early hours represents an historic breakthrough or yet another disastrous delay.

But the debate between the small band of obsessives who closely observe every twist and turn in the tortuously complex UN negotiating process (and yes, I do count myself amongst them) is little more than an intriguing sideshow to those businesses that will ultimately have to deliver the emission reductions and clean tech investments promised in Durban. All that business leaders, analysts, and sustainability executives want to know now is what will the Durban deal practically deliver over the next five to 10 years, and what is the liklihood of its various promises being realised.

Taking just one example, aviation and shipping firms will be desparate to try and ascertain the probability of them facing a global fuel or emissions levy within the next nine years. If the probability is high, and I'd argue that it is, then it is in their interest to invest in more fuel efficient and low carbon technologies as quickly as possible. If the probability remains low, then environmentally progressive firms need to invest more in pushing politicians to deliver the global emission reduction regime that would eradicate the trade distortions that may result from regional schemes such as the EU's inclusion of aviation in its emissions trading scheme. Sadly, less progressive firms may also respond to any suggestion that a global regime may not be realised this decade by stepping up lobbying to oppose such a plan.

The problem is that assessing the various probabilities Durban throws up is maddeningly complex and reliant on a huge number of external factors. We are dealing not just with climate science and clean technologies, but also geo-politics and global economics. A lot can change very quickly.

However, what is certain following the outcome of the Durban Summit is that for the first time we have a global climate change plan that stretches through to end of the decade. It is a pretty sketchy plan, but it is a plan, and importantly it is a plan that all of the world's major economies have signed up to.

As has been widely reported all nations have agreed to deliver a legal treaty by 2015 that will then be enacted by 2020. It now seems pretty certain the EU will be virtually alone in extending the Kyoto Protocol, signing up to legally binding targets through to 2020 that will almost certainly remain the same as the legal targets already agreed amongst the bloc.

Meanwhile, other nations will remain wedded to the voluntary action plans submitted after the Cancun Summit.

However, while the make up of the eventual treaty remains the subject of speculation, it is possible for business analysts to map out various scenarios that should help inform their green strategies and investments.

The first scenario, or plan A, would see the talks continue along the lines that virtually all the parties claim they want to see. Four years of undoubtedly tough negotiations would culminate in all parties upping their ambition and agreeing to significantly more demanding emission reduction targets and action plans.

Under a global and legally-binding monitoring and verification regime all major economies would agree to deliver deep cuts in greenhouse emissions, albeit at different rates with the emerging powerhouses of the BASIC economies given a bit more leeway while still being required to cut emissions. The US and EU, meanwhile, would agree to even deeper cuts and pledge to deliver billions of dollars of investment to help the poorest nations cut emissions and adapt to inevitable climate change. This new regime would be supported by a global carbon offsetting market and an ambitious forest protection scheme, as well as a Green Climate Fund reliant on global aviation and shipping levies and other green taxes.

Most significantly, the targets would be realised through a series of clean technology breakthroughs that would deliver renewable energy and zero emission transport at a lower cost than current technologies.

This optimistic scenario will only be realised if the second plasuible scenario is avoided. Should President Obama lose next year's election then the Qatar climate summit would be condemned to failure before it has even begun. It is easy to imagine a President Gingrich or Romney turning their back on the entire UN process as one of their first actions once taking office, just as it is easy to envisage a second term Obama without control of Congress agreeing to a global UN climate treaty but finding himself unable to get it ratified.

Equally, the collapse of the Eurozone could force the EU to relinquish its leadership position on climate change as populist governments turn inwards and push the low carbon economy down the political agenda. Or alternatively rapid growth in India, China or Brazil could force their governments to temporarily shelve their climate change rhetoric in pursuit of yet more coal-fuelled expansion.

Against this backdrop it would be extremely easy for those countries that so wished to sabotage the four year negotiating period up to 2015 by refusing to compromise or demanding excessive concessions from other nations. The net result would be either the collapse of the talks or the cobbling together of a weak, face-saving agreement barely worth the paper it is written on.

Either way, you'd almost certainly see those countries that are fully committed to the development of a low carbon economy forging bi-lateral agreements with their peers and erecting trade barriers to protect them from unfair competition from carbon intensive economies. Clean technologies would continue to progress, but at a slower rate with protectionism increasingly the norm. Attention would inevitably shift to climate adaptation as it became increasingly apparent that keeping temperature increases below two degrees could not be realised.

Both these extreme scenarios are plausible, but as with most attempts at crystal ball gazing the most likely outcome lies somewhere in between.

I'd argue that the continuing increase in low carbon investment and the unrelenting improvement in clean technologies means that on balance we are likely to get some form of global climate treaty agreed by 2015 that will either be enacted by all countries, or all countries bar the US, depending on the outcome of the next two presidential elections.
The precise nature of this agreement is impossible to guess, while Canada's exit from the Kyoto Protocol provides a vivid reminder that securing a "legal" treaty offers no guarantee it will not be flouted.

However, there are some intriguing clues. It was informative that the Durban Summit saw a relatively early agreement on the structure of the Green Climate Fund and the emergence of a general consensus around the merits of emissions levies on aviation and shipping. Businesses should be planning for the emergence of such levies and the funnelling of hundreds of billions of dollars to clean energy and climate adaptation projects in poorer nations, creating huge commercial opportunities in the process.

Similarly, the future of carbon trading mechanisms and forest protection schemes looks pretty assured and companies looking for a growth market should be playing close attention as these schemes mature ahead of the agreement of a treaty that would give them a further boost.

On a less positive note, while it is plausible that a legal treaty will be agreed it is far less plausible that it will feature sufficiently ambitious emission reduction commitments and robust enforcement mechanisms. Barring a remarkable series of concessions, the gap between the US, EU, India, and China visible at Durban looks too big to bridge anytime soon. Over the next four years we will see ever more fractious rows over historical responsibility for climate change, levels of climate funding, levels of ambition, and the bleak future faced by poorer nations. None of them will be resolved easily.

As such, businesses will have to plan for an increased focus on climate adaptation and resilience over the coming decades. Meanwhile, we will all have to hope that technologists can deliver a breakthrough that can remove carbon emissions from the atmosphere. This is not to say we will need to see mad scientists embarking on reckless geo-engineering projects, more that so-called "carbon negative" proposals that promise to soak up and then store carbon dioxide will have an important role to play even if we see an international climate treaty agreed in 2015.

Business leaders need to be aware of each of these potential scenarios and step up green investments accordingly, as it is only once one of these scenarios has been realised that we will know whether Durban represented a success or a failure.

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Previously known as the BusinessGreen Blog, James' Blog features musings, observations and occasional rants from BusinessGreen editor James Murray

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