The deadlock in Durban raises the prospect of a two tier response to climate change
It is, as the old joke goes, déjà vu all over again.
Hopes remain that a dramatic eleventh hour breakthrough can be engineered, but thus far the Durban Summit appears to be following the same pattern as previous UN climate change conferences. Namely, several days of diplomatic brinkmanship, followed by frantic attempts to cobble together some sort of deal and spin incremental progress as a major breakthrough.
Optimists can point to the fact that we are now closer to a deal than ever before with all countries broadly agreed on the urgent need to cut emissions, genuine progress being made on issues such as climate aid, carbon trading reforms, and emissions reporting and verification, and discussions continuing on a potentially workable EU roadmap that could end the stand off over the future of the Kyoto Protocol by tying its extension to the signing of a parallel treaty.
However, these silver linings are all but obscured by some staggeringly gloomy clouds.
Firstly, the progress being made on technical issues such as forestry protection and inclusion of carbon capture and storage in the carbon offset market is pretty marginal, and even if agreements are reached before the first phase of the Kyoto Protocol finishes at their end of next year their future rests on the resolution of the Gordian Knot that continues to define the overarching treaty negotiations.
Secondly, the crucial issue of climate aid and the promised $100bn green fund remains highly contentious, and even if ministers can reach an agreement it remains to be seen whether they can take the deal home and sell it to electorates who are currently not in a particularly munificent frame of mind. The US stalling of an agreement on how to raise the $100bn a year necessary is pretty unedifying, but can you imagine the Obama administration getting such a proposal past Congress or running an election campaign where opponents accuse him of giving US money to countries battling to cope with climate change threats they don't think exist?
Thirdly, and most importantly, the EU's roadmap towards a new global treaty that would be agreed by 2015 and enacted by 2020 might look workable on paper, but it is apparently not playing that well in the crucial meetings between the world's largest economies.
The poorest nations may now be willing to snatch at any deal they can get, but India and China are continuing to insist Kyoto must be extended before talks on a parallel treaty for those countries without Kyoto obligations can begin, Canada, Japan and Russia are still ruling out any extension of the Kyoto Protocol, and the US is not helping matters by suggesting it is not particularly interested in any sort of binding treaty.
This Reservoir Dogs style three-way stand off on the future road map needs resolving before you can get onto the even more complex and challenging issue of what a new parallel treaty would look like and what targets industrialised countries would agree to under a second Kyoto commitment period. Given the US pledge to cut emissions 17 per cent against 2005 levels by 2020 is an absolute abnegation of its historical responsibilities and Chinese and Indian commitments to cut their carbon intensity would in fact result in a continued increase in overall emissions it almost unimaginable nations will agree to the scale of binding emission reduction targets scientists insist are needed.
As green NGOs have noted, optimism is being pinned on a hypothetical treaty that would come into effect after we have passed the point at which scientists fear it will become impossible to hold average temperature increases below two degrees Centigrade. We are heading towards legally binding targets to deliver a world that is four to six degrees hotter.
All of which must leave those businesses calling for a comprehensive and ambitious global treaty wringing their hands with frustration, if not despair.
However, given despair is a psychologically difficult position to maintain indefinitely it seems inevitable the Durban Summit could finally force political and business leaders to look to the plan B that should have been pursued long ago. Because while the Durban Summit might look like a retread of previous summit's the looming and immovable deadline of 2012 means resolution of one kind or another is on the horizon.
The clock is ticking and at a technical level ministers are going to have to work out pretty soon how they plan to maintain initiatives such as the Clean Development Mechanism, the REDD forest credit scheme, and national emissions reporting requirements when the first Kyoto commitment period lapses.
More significantly, they are going to have to work out what happens if no one blinks and the current stand-off continues into next year. Will the EU sign up to an extension of Kyoto if just one or two large polluters refuse to agree to similarly binding emissions reductions goals? What happens to the voluntary commitments through to 2020 if no one signs up to an extension of Kyoto and countries start to walk away from the talks in anger and disgust? What pressure can be brought to bear on recalcitrant countries to reignite the negotiations and ensure a treaty is agreed by 2015? Most interestingly, what happens if a critical mass of countries agree a deal, but a few powerful countries (the US, India, Saudi Arabia?) refuse to sign up? Can you have a global climate deal that is not global?
The reason governments, NGOs, and businesses have always favoured a genuinely global deal is that without one there is a huge risk that carbon intensive industries just locate to those countries without climate change obligations. You could argue this is precisely what has happened with the Kyoto Protocol with the EU meeting its emissions reductions targets in large part because heavy industry has relocated to China.
However, while Kyoto has undoubtedly failed as a means of reducing global emissions it has succeeded in some respects. It did provide the trigger the EU needed to mobilise huge investment in low carbon technology and decouple GDP growth and domestic emissions. Yes, it effectively exported a huge chunk of its emissions to China, but China is now seeking to use many of the low carbon technologies and models established in Europe to curb its own emissions.
If the US, India and others refuse to sign on to any form of global treaty, if President Gingrich pulls the US from the entire UN process in 2013, can a multilateral deal between the low carbon pioneers still work? Is it possible to envisage the EU and the world's poorest countries extending Kyoto, while China, Brazil, South Africa and maybe Japan sign on to an alternative parallel treaty?
Countries would only agree to such a two track approach if tariffs and other protectionist measures were deployed to address carbon leakage fears and block unfair competition from the carbon intensive countries operating outside any agreement.
But if Europe, China and others are as serious as they say they are about building low carbon economies and tackling climate change then there is a chance they will decide they are better off working together under a binding or semi-binding multilateral treaty or a series of interlocking bilateral treaties, rather than going it alone with national plans. The implications for the business community in general and the green business community in particular would be immense.
Alternatively, everyone could walk away, drawing a line under a negotiating process that is no longer fit for purpose and clearing the way for a new approach (neatly summarised last week by Bloomberg New Energy Finance's Michael Liebreich) based on action plans from the 20 largest polluters to further accelerate rapidly increasing clean tech investment levels, an international commitment to help poor countries adapt to inevitable climate change, and mechanisms to halt deforestation.
Businesses need to be aware of, but not obsessed by, the urgent debates underway in Durban and the myriad possibilities they present, not least because some sort of significant semi-global deal remains possible.
But at the risk of more déjà vu it is also important to trot out an argument we've outlined many times in the past. Ultimately, technical policy details don't matter all that much. Climate change risks, energy insecurity, resource scarcity, population pressures, and the immense opportunities presented clean technologies means green business makes complete sense, regardless of whether or not our politicians and diplomats ever learn from their mistakes.
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