Grayling Insights

Grayling Belgium Update on the UN 15th Conference of the Parties on Climate Change - 7-18 December 2009, Copenhagen

Posted by Russell Patten

Executive Summary

• The Copenhagen ‘accord’ is non-binding and does not set any emission reduction target, mitigation measure, or timetable;
• The accord recognises the need to limit global warming to 2°C above which climate change might have unpredictable and irreversible impacts;
• Developed countries have agreed to support developing countries with adaptation and mitigation measures through financial aid up to $30 billion for the period 2010-2012 with a view of reaching a yearly $100 billion financial aid by 2020;
• The Copenhagen Summit is generally considered as a failure. Many countries have pointed their fingers at China and the United States and have accused them of being responsible for the failure to reach a binding agreement with targets, measures and timetable.
• World leaders will be looking to reach a legally binding agreement at the CoP 16 in Mexico from 29 November to 10 December 2010.

Reactions From Main Stakeholders

• Barack Obama, President of the United States - "This progress is not enough. We have come a long way, but we have much further to go. "

• Jos Delbeke, Director-General of European Commission’s DG Environment – “The implementation of the EU's climate and energy package will proceed as foreseen, and the emissions trading scheme will remain in place till 2020 and beyond.”

• Federation of German Industries (BDI) - There is now an "acute danger that emissions and jobs will be shifted to countries with lower climate protection burdens."

• Nnimmo Bassey, chair of Friends of the Earth International - "Instead of committing to deep cuts in emissions and putting new, public money on the table to help solve the climate crisis, rich countries have bullied developing nations to accept far less."

I. Content Of The Copenhagen Agreement

Though expectations were high to reach a legally binding post-Kyoto agreement with clear emission reduction targets, clear mitigation measures, a clear timetable, and clear financial aid for developing countries, the “Copenhagen accord” does not reflect these ambitions.

Instead of the ambitious and legally binding agreement that most of them were looking to reach, world leaders came up with a short 3-page non-binding political declaration. This declaration, therefore, preserves the Kyoto Protocol for the time being.

Essentially, the deal was brokered by a small group of countries who took the lead in the negotiations and which includes the main contributors such as China, South Africa, India, Brazil and the United States. The text, however, could not be adopted by the Conference as such due to the lack of consensus and will only be valid for the countries which sign it (by 31 January 2010). This is why the first page mentions that “the Conference of the Parties takes note of the Copenhagen Accord”.

The major points of the agreement include the need to limit global warming to 2° Celsius; possible voluntary commitments from all countries to reduce greenhouse gas emissions; and the commitment to raise financial aid for developing countries to a level of $100 billion a year by 2020.

A. Limiting Climate Change to 2°C

The accord achieves international acceptance that global warming has to be limited to a maximum increase of 2 degrees Celsius. This limit of 2° C is exactly in line with the official EU objective although several African and other vulnerable countries wanted commitment to hold global temperature rise to 1.5°C.

This two degree target is also in line with the conclusions of the Intergovernmental Panel on Climate Change (IPCC) which recommended to keep the concentration of carbon dioxide in the atmosphere below 450 ppm (parts per million) – a limit above which temperature might have unforeseeable impacts on ecosystems according to the NASA.

According to the text, global emissions should peak and then fall "as soon as possible", though no date is specified. The text also foresees a possible review of the accord by 2015 to check whether emission reductions are on track to keep the temperature increase below 2°C. At the time of this review it will also consider a possible strengthening to a 1.5°C limit.

B. Voluntary reduction targets

Though the accord recognises that deep cuts in global emissions are required, it does not mention any emission reduction targets and, as a consequence, no measure/action and no timetable to reduce greenhouse gas emissions and to maintain global warming below the 2°C limit.

In June 2009, the G8 countries recognised that global greenhouse gas emissions need to be slashed by 50% by 2050 compared to 1990 levels (with a specific 80% target for industrialised countries). This previous agreement was however not reflected in the final agreement.

However, voluntary commitments to reduce emissions are encouraged and the agreement contains two ‘Appendixes’ in which the countries that sign will need to declare their national emissions targets. Industrialised countries signing Appendix I will commit to implement ‘economy-wide emissions targets for 2020’. Developing countries signing Appendix II will commit to ‘nationally appropriate mitigation actions’.

These targets have to be submitted by 31 January 2010 and will be subject to international consultations, but if a country falls short this will have no consequences as the accord is not legally binding.

C. Financial aid for developing countries

Financial aid for developing countries appeared to be one of the most important issues of the Conference. Developing countries have threatened to leave the conference if they did not obtain sufficient guarantees that they would receive funding to support adaptation to the adverse effects of climate change and the costs impacts of response measures.

According to the text, $30 billion a year will be given to developing countries to adapt to climate change in the period 2010-2012 (3 years). The amount of this aid is expected to grow progressively with the objective of reaching $100 billion a year by 2020 with balanced allocation between funding for adaptation and mitigation. Substantial part of the financial aid will be used to reduce emissions from deforestation and forest degradation, to ensure adaptation and to enhance technology development and transfer.

The agreement does not give any details on how this aid should be financed, how fast this increase of the financial envelope should happen and how the financial burden would be shared amongst the Parties. It is clear however that the aid will not only come from public funding but will also come from private funding and could be bilateral or multilateral. A High Level Panel will be set up to look for all possible sources of funding – such as market-based instruments (e.g. taxes on maritime or air transport). It is estimated that €22-50bn would come from public sources, the rest from alternative financing sources.

The European Union committed to give $3.6 billion (€2.4 billion) a year until 2012 which makes some $10.6 billion for the period 2010-2012. The United States have promised $1-1.3 billion a year until 2012. Japan has announced a contribution of approximately $15 billion for the period 2010-2012.

One of the shortcoming of the agreement is that it does not clarify whether this financial aid for developing countries should come in addition to the already existing development aid.

D. Monitoring emission cuts

The issue of monitoring commitments on emission cuts has also been at the core of the debate and the opposition between developed and developing countries. While the richest countries (US, EU, Japan) have agreed to offer financial support to developing countries for adaptation and mitigation measures they would take, they have asked to set up a control system to ensure the money given is correctly spent. Though China initially stood firmly against this idea, arguing that this control mechanism was a threat to national sovereignty, the principle of international control was included in the final agreement.

Richer countries have therefore obtained that mitigation actions in developing countries seeking international financing will be recorded in a registry along with relevant technology, finance and capacity building support and that they will be subject to international measurement, reporting and verification.

II. Analysis Of A Failure

The Copenhagen accord is clearly seen as a failure from the perspective of EU leaders and a majority of leaders around the globe as well as environmental organizations due to the fact that it did not lead to a binding agreement with clear emission reduction objectives, timetable and mitigation measures.

What were the main reasons for failing to reach a binding agreement?

A. Developed VS developing countries

The main obstacle remains the disagreement between industrialised and developing countries, with the latter opposing to sign up to any deal that would make the Kyoto protocol obsolete and that would not maintain the principle of “common but differentiated responsibilities”.

It clearly appeared that China’s main concern was to block any agreement that would threaten its economic growth and opposed any legally binding emission cuts, defending China’s ‘right’ to continue an economic growth without barriers. India, Brazil and South Africa also dig their heels on legally binding emission cuts or long-term goals, but Beijing has emerged as the stumbling block to a legal agreement and to a proposal for 50% cut in emissions by 2050. Indeed, apart from China no country celebrated the outcome as a victory.

Disagreement on burden sharing between industrialized and emerging countries encapsulate further disagreements within the two camps, which added additional obstacles to a positive outcome of the negotiations. The EU and its key Member States (France, Germany, the UK) were strongly disappointed by the lack of ambition of the United States in terms of reduction targets. EU leaders also felt extremely disappointed by the fact that none of them was invited to take part in the last hours of negotiations that saw the US, China, India, Brazil and South Africa work on the final agreement. The group of less developed countries felt also snubbed by this group of countries as they felt their demands (claimed as “essential for their survey”) were being traded against the interests of big developing countries.

These shortcomings have led to extremely strong reactions from several countries and groups of countries which have highlighted the imperfections of the current unanimity system of the UN Framework Convention on Climate Change. It became clear for many leaders that reaching a unanimous agreement on climate change with 192 Parties having such different interests and specificities would be almost impossible. This led each Party to accuse the other of having hijacked the negotiations as to quote UK’s climate secretary Ed Miliband who indeed accused a few countries, including China, Sudan, Venezuela, Bolivia, Nicaragua and Cuba, to nearly block the deal.

What will be the impact on the industry?

The lack of a comprehensive agreement on emission reduction could be seen as good and bad news for industry. Although it gives more time to adapt production towards lower emissions, the Copenhagen accord fails to provide a framework of binding rules and clear timetable. This means that the industry still has no clear perspective of the emission reduction efforts that are likely to be asked in the future, bringing uncertainty in terms of the investments needed to move production towards low-carbon standards.

For the moment, nothing changes within the European legislative framework and the EU targets of decreasing greenhouse gas emissions by 20% by 2020 compared to 1990 levels remains as this is a voluntary commitment. The outcome of Copenhagen is not sufficiently ambitious for the EU to strengthen its emission reductions target to a 30% cut, as foreseen if similar targets are set under a binding international climate agreement. The EU is likely to reiterate this offer in future negotiations, but fears are growing within Europe that production plants (and jobs) would therefore move to countries with more flexible climate legislation.

If the EU decides to strengthen its climate targets to a 30% cut, compensatory measures such as import taxes or CO2 taxes on countries with lower CO2 emission targets could be considered to protect the industry sectors threatened by “carbon leakage”. France and Germany already hinted to the possibility of a border adjustment mechanism to protect the EU’s competitiveness if CO2 cuts were not agreed internationally.

Such taxation would, however, be very difficult to set up and could lead to a trade dispute ultimately damaging EU business. Indeed, the countries targeted by this CO2 tax would primarily be countries such as China or the US, which are among the EU’s biggest export destinations. Germany whose economy is very dependent on exports to the US has already indicated it would not support such taxation.

So far the status quo options prevail.

III. Next Steps

Although UN chief Ban Ki-Moon has said that the accord is immediately operational, it does not mean that it is binding and, ultimately, this is what most world leaders want.

The main objective for most governments is now to turn this non-binding accord into a legally-binding document with targets, measures and timetable, and the aim is for this to happen within a year. Everybody is indeed looking towards the 16th Conference of the Parties (the CoP16) which is scheduled to take place in Mexico at the end of 2010 from 29th November to 10th December 2010.

To be valid the current accord, however, has to be approved by the national parliaments of each country. The developed countries which have agreed to sign up to the accord will then have to declare their national emissions targets and other mitigation actions for the period up until 2020 by 31 January 2010, and developing countries will be asked to report their mitigation ambitions by the same date. It is unclear how many countries will sign up to the accord. The European Union, Japan, the African Union and the Alliance of Small Island States all urged delegates to adopt the plan, but many Latin American countries and Sudan are known to be vehemently against it.

Another crucial step will be the launch of the new Copenhagen Green Climate Fund which will be used to help developing countries deal with the effects of climate change. This fund is expected to already be fed with $10 billion within the next month.

In order to advance significantly towards a legally-binding agreement and clear commitments to limiting climate change, a major negotiating session is set to be held in Bonn in Germany (home of the UN climate change secretariat) from 31st May to 11 June 2010, in preparation for the next UN Climate Change Conference (CoP16) at the end of the year. It is hoped that this conference will produce a legally-binding document based on the agreement reached in Copenhagen although there is no guarantee that it will be any more successful than Copenhagen.

As many leaders and experts are questioning the ability of the UN system to deal with climate change, some believe that alternative forums need to be set up to look at tackling the problem in a new way. Gordon Brown for one has called for the establishment of an international body which will be able to police global environmental issues and help to prevent a repeat of last week’s chaotic negotiations.

South Africa has offered to host the following UN Climate Change Conference in December 2011.

IV. Main Reactions

Barack Obama, President of the United States - "This progress is not enough. We have come a long way, but we have much further to go."

Gordon Brown, UK Prime Minister - The agreement is a "vital first step". "This is the first step we are taking towards a green and low-carbon future for the world, steps we are taking together. But like all first steps, the steps are difficult and they are hard. I know what we really need is a legally binding treaty as quickly as possible."

Angela Merkel, German Chancellor – While expressing "mixed feelings", she said Copenhagen is "a first step towards a new world climate order. No more, but also no less".

Nicolas Sarkozy, French President – "It is not perfect, [but] it is the best possible agreement".

Yang Jiechi, China's Foreign Minister – The outcome of the conference is "significant and positive". "The Copenhagen accord protected the principle of 'common but differentiated responsibility'. It outlines the requirement for developed countries to set compulsory emission reduction targets and for developing nations to take voluntary mitigation actions,"

Lumumba Di-Aping, Sudanese chair of the G77 group of 130 poor countries - "[This] is asking Africa to sign a suicide pact, an incineration pact in order to maintain the economic dependence of a few countries. It's a solution based on values that funnelled six million people in Europe into furnaces."

Jairam Ramesh, India’s Environment Minister – The accord is "a good deal and satisfactory solution".

Dmitry Medvedev, President of the Russian Federation - The summit has achieved "quite modest" results.

Nnimmo Bassey, chair of Friends of the Earth International - "Instead of committing to deep cuts in emissions and putting new, public money on the table to help solve the climate crisis, rich countries have bullied developing nations to accept far less.”

Alden Meyer, the Union of Concerned Scientists - The accord “clearly falls well short of what the public around the world was expecting (…) it’s clearly not enough to keep temperatures on a track below two degrees”

BusinessEurope, European employers' association - "Companies need predictability to develop the new green solutions on which a future low carbon economy will depend."

Federation of German Industries (BDI) - There is now an "acute danger that emissions and jobs will be shifted to countries with lower climate protection burdens."

Jos Delbeke, Director-General of European Commission’s DG Environment - "The implementation of the EU's climate and energy package will proceed as foreseen, and the emissions trading scheme will remain in place till 2020 and beyond."