D Day plus 1

Well we now have a Copenhagen Accord:

http://unfccc.int/resource/docs/2009/cop15/eng/l07.pdf

What it means, how it was arrived at and what happens next are all questions that remain hanging in the air to some extent. We will need the dust to settle a little first before we understand the true implications of this. However, let me try to give an early read.

 
 
  What does it mean? In bare bones the Accord:

• Contains no reference to a legally binding agreement
• Contains no deadline for turning itself into a legally binding agreement (although at the closing press conference Yvo de Boer talked of the challenge to make it legally binding by the Mexico COP16 in twelve months time)
• Was recognised, but not endorsed by the 193 parties to theUnited Nations Framework Convention on Climate Change UNFCCC as there was not unanimous support for it. This makes its position as a formal UN agreement unclear
• “Recognises the scientific view” of the need to limit global temperature rise to no more than 2 degrees Celsius, but does not set this as a formal target
• Does not set a year by which global carbon emissions must peak
• Does not lay out a global target for emissions cuts by 2020 or a long term goal for 2050 (a global 50% reduction by 2050 was in the text until last night, according to UK Minister for Energy and Climate Ed Milliband, but then it was removed),
• Asks countries to submit their greenhouse gas reduction targets by January 31 2010
• Does not suggest emissions reductions should be legally binding
• Asks countries to submit a report on progress on emissions reductions every two years through a national inventory report, on the basis of guidelines that are yet to be developed
• Creates provisions for “international consultations and analysis” on developing country reports on emissions reductions “under clearly defined guidelines that will ensure that national sovereignty is respected” (read a political solution to the US-China impasse on monitoring of emissions reductions)
• Sets out a collective commitment from developing countries to establish a fund approaching US$30 billion a year 2010-2012 and a goal to raise US$100 billion a year by 2020 to help developing countries
• Says developing countries will fill the fund with public and private, bilateral and multilateral finance and through alternative financing sources
• Sets up a Copenhagen Green Fund to operate through the UNFCCC through which to channel “a significant portion” of this money to help developing countries
• Establishes a High Level Panel on Finance that reports to the COP meetings which is to come up with a plan on how to meet the US$100 billion a year target
• Recognises the importance of establishing UN REDD-plus to attract finance from developed countries into forested nations
• Establishes a Technology Mechanism to accelerate technology development (in) and transfer (to) developing countries
• Calls for an assessment of the Accord in 2015, including potentially “strengthening the long-term goal referencing various matters presented by the science, including in relation to temperature rises of 1.5 degrees Celsius.”
• Makes no reference to a global framework for carbon markets

What does it mean politically?

These are clearly early thoughts, but the Accord could change the geometry of the international climate architecture, which was progressively being built as a top-down framework by the UN, notably through the Kyoto Protocol. The new Accord has moved back from this top-down approach and created space for a more nationally-focused "pledge and review", bottom-up style process to tackle climate change.

The way the Accord was brokered (a US-led discussion with the BASIC nations -Brazil, South Africa, India and China- which was then put back to the plenary) has also challenged the wider UNFCCC process. While the UN Secretary General Ban Ki-Moon called it a start, a quote from the Venezuelan delegate Claudia Salerno Caldera summed up the feeling for many delegations: “I ask whether – under the eye of the UN secretary general – you are going to endorse this coup d'etat against the authority of the United Nations?”

Will major economy parties attach so much significance to another large UNFCCC COP meeting in Mexico as a decision-making venue, considering the nature and style of the outcome in Copenhagen? One senior commentator I spoke to today likened the UNFCCC and its processes to now being not dead or dying, but in a "vegetative state" as a result of this outcome.

What does it mean for business, especially multinational companies?

I am not sure this is a clear market-based outcome for the international business community.

The outcome seems to sets back the creation of a legally binding framework of emissions targets, within which Cap and Trade schemes can be established and slowly made to link together. This makes the emergence of a deep and liquid intertnational carbon market seem to be more distant now, especially so given the lack of notice to the role of carbon markets in the Accord. The various business-led calls for long term policy certainty, universal rules and international price signals on carbon do not seem to have been met. The role and price certainty of the Emissions Trading System ETS is also now rather unclear, as there is no pathway yet in place for a second commitment period of Kyoto, 2012 onward. This has implications for the Clean Development Mechanism CDM and Joint Implementation JI market too (and consequent implications for offsets into REDD+).

On the other hand, many leaders in the multinational business space may find renewed appetite among governments who support the Accord to push forward on practical “bottom up” projects and transformative public-private programs to help them meet their emissions reduction pledges within the national and plurilateral domain.

How it was arrived at?

This was a US-brokered deal, involving the so called BASIC countries (Brazil, South Africa, India and China). It then gained the (disappointed) support of the EU and was offered to other Parties to the convention to support.

Jose Manuel Baroso, EU Commission President: “I will not hide my disappointment regarding the non-binding nature of the agreement here. In that respect the document falls far short of our expectations.”

Given the birth process of the Copenhagen Accord, the implications for how international agreements are developed could be quite profound.

What happens next?

This also seems slightly unclear. The Kyoto Protocol is far from dead. As Yvo de Boer said in his press conference today; “the vast majority of developing countries have no intention of letting go of the Kyoto Protocol as it is the only legally binding instrument we have to tackle climate change”.

See his press conference here

http://unfccc.int/2860.php and scroll down

Yet it is also clear that the Copenhagen Accord, when seen as a political agreement, is much better than nothing as it bring the United States, India and China into a clearer contract for reducing their emissions (recall the Kyoto Protocol didn’t require developing countries to make any emissions reduction commitments and the US never ratified Kyoto). So, it may be only a start, and a political start at that, but at least it’s a start.

Nicolas Sarkozy: “The text we have is not perfect… If we had no deal, that would mean that two countries as important as India and China would be freed from any type of contract… the United States, which is not in Kyoto, would be free of any type of contract. That's why a contract is absolutely vital.”

The challenge of course, as I have mentioned, is that it is a start which has rather set back the UN process of building an interrnational legally binding agreement. And it’s a start which at this stage does not keep us within the 2 degree Celsius line, given what the commitments add up to. So 2010 will be an interesting time for international climate change politics: we still need a massive dimensional shift in capital investment in low-carbon infrastructure, but we now need to most likely make that happen within the context of national plans and plurilateral arrangements and not within the context of a clear global framework.

The only advertorial I would give you now that Copenhagen is over, is to read again the World Economic Forum’s Low Carbon Prosperity Task Force Report. Go to http://www.weforum.org/climate to find the PDFs; the summary is good enough.

Why? Well, its outcomes pre-empted the rise of this "bottom up" dimension in international climate policy, which the Copenhagen Accord seems to be promoting. The set of plurilateral public-private initiatives that the Low Carbon Prosperity Task Force developed during 2009 (on mobilising financial flows into developing countries, accelerating energy efficiency uptake, catalysing carbon capture and sequestration CCS and smart grid demonstration projects, creating a platform for building REDD+ projects and policies etc) are exactly the sorts of substantive bottom-up vehicles that we will now need to help drive forward (and exceed) the emissions reductions that the Copenhagen Accord will set out come February 1, whilst still linking these actions to the ongoing UNFCCC process.

At the World Economic Forum, this means we will now be thinking hard about how best to give prominence to this potential platform of very practical work at our Annual Meeting in Davos-Klosters in January. We will likely place these various discussions for business, government and NGO leaders, fresh from COP 15, within the frame of “Copenhagen: What Next, Practically?”

Thanks