Hope, havoc back again?

The Pak Banker - - Editorial - Dr Ben­jamin Warr

busi­ness and so­ci­ety. But for many com­pa­nies and sev­eral 23 De­cem­ber 2010 It's hard to find a more com­plex and dy­namic is­sue than cli­mate change, ar­guably the most press­ing chal­lenge fac­ing nation states 'Green is the new mantra' and the tran­si­tion to a low-car­bon econ­omy rep­re­sents an enor­mous op­por­tu­nity, one which they are mov­ing fast to cap­i­talise on.

By de­sign­ing new prod­ucts and ser­vices they hope to meet grow­ing de­mand in a re­source con­strained world. For these 'hope­fuls' the dy­namic points to the growth of new mar­kets with sig­nif­i­cant po­ten­tial for fu­ture wealth cre­ation. So why then are cli­mate change and press­ing con­cerns about the state of the bio­sphere such a thorny is­sue, if by cross­ing the Ru­bi­con we can ex­pect to find such re­wards on the other side?

The de­mon is, of course, un­cer­tainty. The nec­es­sary in­vest­ments in in­no­va­tion, in en­ergy per­for­mance and in­fra­struc­ture are costly. They can only be made in con­fi­dence if re­li­able es­ti­mates of the costs (and ben­e­fits) can be ob­tained. Lack­ing con­fi­dence, cap­i­tal re­treats to short-term and more cer­tain prospects. As long as car­bon prices fluc­tu­ate with each new ne­go­ti­a­tion and reg­u­la­tory and mar­ket­based frame­works re­main short-lived and limited in ge­o­graph­i­cal scope, busi­ness and economies will suf­fer as their abil­ity to make ef­fec­tive in­vest­ment de­ci­sions is per­turbed. And this is why reach­ing agree­ment on a long-term sta­ble and con­sis­tent global frame­work for re­duc­ing car­bon emis­sions is so im­por­tant and why so much rests on the suc­cess of the yearly meet­ing of the par­ties to the Ky­oto Pro­to­col.

In 2009, the lead up to Copen­hagen was per­haps best sum­marised by one word - 'Hope' with Hopen­hagen, writ in 10ft high cap­i­tals in nu­mer­ous lo­ca­tions across the city. The at­ten­tion of the world, of govern­ment, busi­ness and civil so­ci­ety was fo­cused to an un­prece­dented level on these ne­go­ti­a­tions. Not so the re­cent talks in Can­cun. Copen­hagen was a huge dis­ap­point­ment, but it seems that de­spite the lack­lus­tre build-up that many have new hope post-Can­cun. But should they? Let's first look at why Copen­hagen failed to match ex­pec­ta­tions. What held back progress there? Why was Can­cun any dif­fer­ent, and what does this mean for the global econ­omy and en­vi­ron­ment and specif­i­cally the UAE? Putting aside the poor man­age­ment of the event and the ques­tion­able de­ci­sions made by the host Chair, Copen­hagen was scut­tled from the out­set by its own am­bi­tions and the pres­sure to per­form. With the Ky­oto Pro­to­col due to end in 2012, the quest was on to get ma­jor emit­ters like the US, China, Rus­sia and In­dia to sign up to legally bind­ing agree­ments for emis­sions re­duc­tions, agree on a ver­i­fi­ca­tion process and rein­vig­o­rate the frame­work for the com­ing decades. This was not to hap­pen. Talks stalled on nearly ev­ery is­sue as rig­or­ous ver­i­fi­ca­tion and the threat of puni­tive con­se­quences for fail­ure to meet tar­gets were un­ac­cept­able to the ma­jor emit­ters par­tic­u­larly China and the US.

Can­cun was quite dif­fer­ent, ex­pec­ta­tions were low. Gone was any be­lief that a ma­jor agree­ment would be reached, rather the fo­cus was on what could re­al­is­ti­cally be achieved and which dis­cus­sions should be avoided to en­able this. In­stead of seek­ing global, legally bind­ing agree­ments, ne­go­tia­tors set to pre­pare the ground for next years talks in Dur­ban, South Africa, where the pres­sure to re­solve the big­ger Ky­oto Pro­to­col is­sues would be un­avoid­able. In this re­spect avoid­ing de­cep­tion was per­haps the main goal of the talks.

At Can­cun some progress was made. A green fi­nanc­ing fund, the Green Cli­mate Fund was cre­ated to de­liver fi­nanc­ing for mit­i­ga­tion and adap­ta­tion for those coun­tries, mostly in Africa, who are un­able to ben­e­fit from the Clean Devel­op­ment Mech­a­nism (CDM) be­cause of lack of in­dus­trial car­bon re­duc­tion projects. Agree­ments to ad­vance the ini­tia­tive on trop­i­cal for­est pro­tec­tion moved ahead, de­spite con­cerns of be­ing over com­plex and of com­modi­tis­ing the forests. Prom­ises were made to stim­u­late clean technology trans­fer through the cre­ation of a Technology Cen­ter and Net­work, work that re­mains to be done. And fi­nally, per­haps most no­tably the stum­bling block of ver­i­fi­ca­tion was low­ered. China ac­cepted in prin­ci­ple the need for trans­parency, thanks to a lit­tle push from In­dia, and ac­cepted that mon­i­tor­ing and ver­i­fi­ca­tion were es­sen­tial, al­beit us­ing 'home­grown' meth­ods.

So re­ally, what were the break­throughs? The sum to­tal of pledges to re­duce emis­sions has not changed. Promised emis­sions re­duc­tions will not be suf­fi­cient to main­tain tem­per­a­ture in­creases be­low the tar­get 2deg C. The Ky­oto Pro­to­col has not been re­newed. No ef­forts were made to re­duce car­bon price volatil­ity by set­ting lower lim­its and thereby help in­vestors. While new funds have been promised, it is un­clear whether they will be forth­com­ing. In short, scant ef­fort was di­rected to ad­dress­ing the cen­tral is­sues. Nonethe­less, there seems to be a slight in­crease in hope fol­low­ing Can­cun that con­struc­tive di­a­logue will take the place of fin­ger-point­ing and in­ac­tion that seemed to dom­i­nate the scene be­fore and af­ter Copen­hagen.

And what does all this mean for the GCC? Well GCC coun­tries are non-An­nex 1 coun­tries un­der the Ky­oto Pro­to­col and could al­ready there­fore lever­age car­bon re­duc­tion in­vest­ments through CDM car­bon cred­its. Some progress was made at Can­cun in mak­ing the CDM ap­pli­ca­tion process some­what more ef­fi­cient.

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