February 4, 2012

Smith School of Enterprise and the Environment

Green Army: Research and Development


Executive Summary

  • Strong decisive steps are needed from key governments to place a long-term, stable and appropriate price on greenhouse gas (GHG) emissions.
    This will signal to the corporate sector that climate change is to be dealt with seriously, and stimulate appropriate investment from that sector to produce market-facing solutions
  • Limiting emissions from deforestation is a key area in which incentives need to be put in place immediately
  • R&D spending on clean energy should be increased with the public sector using its limited funds to leverage private sector investment
  • The co-benefits between energy security, economic stimulus through energy efficiencies and innovation, and tackling climate change should be highlighted …

Equity is also critical to the climate change issue, and … a cap and trade system based on a per capita emissions target by mid-century is proposed here as a potential method of generating financial flows from developed nations to the least developed world, whilst creating incentives for local decision making.
(p 3)


Summary


Reducing GHG emissions and deforestation are now issues of the greatest urgency.
Defossilising national economies over the coming four or five decades is less of a technological issue … than a behavioural, social and political challenge. …

The Copenhagen Accord of December 2009 was a major turning point in action on climate change.
In an ideal world, the major global powers … would have provided leadership to the UNFCCC process, and a global deal would have been achievable.
In the absence of this, the challenge is now being met through unilateral commitments, initiated prior to Copenhagen but massively extended through the Accord, and now integrated into the UNFCCC process in Cancun.
The UNFCCC process will continue to … verify and legitimise the actions of individual nations, and is an important sounding board, where the voices of small nations and of less developed nations can be heard. …

The potential profitability of moving to a green economy cannot be stressed enough, but it does need a price on the emission of GHGs to stimulate action in the market place.

Global equity is central to the debate.
A cap and trade system based on a per capita emissions target by mid-century is a potential way of generating financial flows from developed nations to the least developed world, creating incentives for local decision making.
(p 41)


Contents


The Scope of the Study

The International Climate Change Negotiations

Copenhagen and Cancun

Learning from the Negotiation Process

Next Steps

Parallel Processes

Summary

Would you like to know more?


SMITH SCHOOL ENTERPRISE AND THE ENVIRONMENT


University of Oxford.

  • International climate change negotiations: Key lessons and next steps, July 2011.
    DOI: 10.4210/ssee.pbs.2011.0003.
    David King, Kenneth Richards and Sally Tyldesley.

    THE SCOPE OF THE STUDY


    Introduction


    The US National Oceanic and Atmospheric Administration conclude from separate data that June 2010 was the hottest on record.
    In 2010, record high temperatures were reported in 17 countries, including 53.5 °C in Pakistan.
    Temperatures in Moscow in the summer of 2010 were 20 °C above normal.
    Global temperatures reached a record high for 2010, as predicted by climate modellers.

    By contrast, solar activity this decade is reported to be at an unusually low level. …

    The Conference of Parties (COP) rounds of the United Nations Framework Convention on Climate Change (UNFCCC) in 2010 in Cancun concluded with the ‘Cancun Agreements’ which represents the best outcome possible under the circumstances. …
    However … action is still a long way from what is necessary to ensure global warming does not continue to dangerous levels. …

    Here we provide an appraisal of the UNFCCC process and an analysis of the variety of action plans, at national, regional and international levels, that will now be required to ensure the emissions reductions so urgently needed.
    (p 5)


    THE INTERNATIONAL CLIMATE CHANGE NEGOTIATIONS


    History of the Negotiations


    Initially, climate negotiations acted to establish a framework of governance. This took the form of the UNFCCC which was adopted in 1992 …

    Following this, negotiations proceeded to set up the Kyoto Protocol [which, in 2001,] set up emissions reduction targets for 37 developed countries and the European community, this group of countries being referred to under the Kyoto Protocol as Annex B countries (Annex I under the FCCC).
    The individual emissions targets were intended to reduce emissions by developed countries by 5% against the 1990 levels over the 5-year period of 2008-2012.
    No targets were set for developing countries.

    Currently the negotiations are in the third stage:
    the formation of policy for the post-2012 period when the Kyoto Protocol’s first commitment period ends.

    These negotiations have proceeded along two tracks.
    The first track, known as the Ad hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP), is intended to negotiate improvements in the Kyoto Protocol and a second set of emissions targets.
    This track covers only the developed countries signed up to the first commitment period of the Kyoto Protocol (not the US).

    The second track was launched by the Bali Action Plan to work on an ‘agreed outcome’ under the UNFCCC and is known as the Ad hoc Working Group on Long-Term Cooperative Action (AWG-LCA).
    This includes negotiations on mitigation actions for developed countries, nationally appropriate mitigation actions (NAMAs) by developing countries, financial arrangements, adaptation, technology transfer and a system for monitoring, reporting and verification.

    There has been much debate about the form of the agreement for the post-2012 period, principally, whether or not it should take the form of a single instrument that would replace the Kyoto Protocol or two instruments, one to extend the Kyoto protocol and the other under the UNFCCC [— developed] countries generally preferring a single instrument and developing countries favouring two instruments.
    (p 7)

    So far the current phase of the negotiations has been unsuccessful in its aim to produce a new legal instrument for the period beyond 2012. …

    In a very important sense, the Kyoto process can be deemed a failure.
    The original objective, for the developed (Annex 1) nations to reduce emissions by 5% below 1990 levels by 2012, although far too modest to halt global warming, will not be met without the use of the compliance system. …

    Arguably, however, more progress has been made since 2000 outside the UNFCCC process.

    The British Government took a leading role in 2003, unilaterally declaring its intention to reduce CO2 emissions by 60% by 2050, and introducing its internal ETS in 2004.
    (p 8)

    This was followed by the European Union’s adoption of an ETS in 2005. …

    The future risk to the Chinese economy from a combination of fluvial flooding down the Yangtze river and rising sea levels highlighted the critical threat of climate change to China’s future prosperity.
    The Chinese politburo clearly took a decision in 2006 to reduce China’s dependence on fossil fuels and to push hard in international negotiations for global action.
    Their particular concern was the obstructive position of the Bush administration.

    With the European ETS inaugurated in 2005, a new factor emerged. …
    The CEOs of many major international companies became champions of the need for action on climate change.
    (p 9)


    COPENHAGEN AND CANCUN


    The Cancun Outcomes in Context


    Prior to the Copenhagen negotiations, expectations in the media were raised to an impossibly high level. Copenhagen was therefore perceived by many as a failure.
    Curiously, many people (outside the media) could see clearly in advance of the meeting that a fully-formed legal agreement would be unrealistic, the negotiations having failed to progress at the rate necessary to produce any decisive agreement.

    But the media built up false expectations not in any way dampened by the absence of a much-needed sense of realism from the UNFCCC, or from the Danish Government. …

    [The] Copenhagen conference produced the Copenhagen Accord, a political agreement which was negotiated by 28 countries in the final days of the conference. …
    When the Accord was revealed to the COP for adoption a small number of states blocked consensus.
    As a result, the legal status and future of the Copenhagen Accord within the UNFCCC process was unclear.
    (p 11)


    The Cancun Agreements


    The Cancun Agreement, by incorporating many of the key points of the Accord into the official UNFCCC process, has clarified this.
    The Cancun Agreement, by incorporating many of the key points of the Accord into the official UNFCCC process, has clarified this. …

    The Cancun Agreement integrates and elaborates on all of the main parts of the Copenhagen Accord, including:


    Agreed Limit to Temperature Increase – Shared Vision

    Room was left for a change in this limit of 2 °C to a lower limit of 1.5 °C … in a large part in deference to the Maldives and other small island states …


    Mitigation

    The Copenhagen Accord established a bottom-up pledge-and-review process that allowed each country, both developed and developing, to define its own mitigation actions, including developed country emissions targets. …
    76 countries, including all Annex I and 39 non-Annex I countries, submitted targets or actions to the Secretariat [together representing] 85% of global emissions. …

    A registry for developing countries to list [Nationally Appropriate Mitigation Actions (NAMAs)] for which international support is sought … was set up by the Cancun Agreement.
    These supported NAMAs will then be subject to international consultation and analysis (ICA).


    Finance

    In the Copenhagen Accord it was established that developed countries would collectively commit to providing new and additional resources approaching US$30 billion in ‘fast start’ money for the 2010-12 period, to be balanced between adaptation and mitigation for least developed nations.
    This amount is set to increase towards US$100 billion per year by 2020. …

    As established in the Cancun Agreement, the [Green Climate Fund] will be managed by a board of 24 members, split between developed and developing countries, and will be administered for the first three years by the World Bank.
    At the time of writing, [pledges of adaptation and mitigation finance amounted] to a total of US$27.9 billion.


    Forestry

    [A] framework for reducing emissions from deforestation and forest degradation as well as halting and reversing forest loss (REDD+) was established.


    Adaptation

    The Cancun Agreement [established] a Technology Mechanism to facilitate technology development and transfer.
    (p 12)

    This Technology Mechanism is made up of two parts, one of which is operational immediately;
    the Technology Executive Committee.
    The second part, the Climate Technology Centre and Network, requires further negotiations before work can begin.


    Monitoring, Reporting and Verification (MRV)

    [All] major economies are to report on progress in meeting their national climate targets and actions on a more frequent basis. …
    In addition developed countries are to enhance their reporting of any support given to developing countries.
    Developing countries’ reporting on their mitigation actions was also strengthened with supported national actions being subject to ICA.


    Legal Form

    The Cancun Agreement, like the Copenhagen Accord, does not cover the issue of the legal form of the post-2012 climate regime.


    Implications of the Negotiations


    The Copenhagen Accord and Cancun Agreement mark the first … time that the emerging economy countries, such as the BASIC countries (Brazil, South Africa, China and India), agreed to any international consultation or analysis concerning their emissions reduction actions.
    India was particularly progressive on this issue at the Cancun negotiations. …

    With regard to the funding pledged by developed countries for adaptation and mitigation measures in developing countries [experience] from the past makes it clear that it is not politically feasible to transfer such large sums of taxpayers’ money to the developing world.
    It is even more unlikely at present with developed countries feeling impoverished due to the recession.
    (p 13)

    At the present time sovereign debt in some developed countries has returned to the post Second World War level of around 120% of GDP, which makes a cash flow of this magnitude very unlikely.

    A much higher level of public engagement with the issue of climate change and a greater awareness of the risks posed will be needed for governments to be able to commit to such amounts.


    Analysis of Current National Targets and Actions


    At present it has been estimated that the current pledges equate to a greater than 50% chance that warming will exceed 3 °C by 2100. …
    The Annex I pledges together will, if implemented, result in a reduction in emissions from developed countries by 2020 of 12-19% below 1990 levels.
    This falls short of the range of emissions reductions (25 to 40%) that the IPCC states would be necessary to keep within the 2 °C temperature increase range.
    Japan and Norway are the only two developed countries to make sufficient pledges:
    of 25% and 30-40% below 1990, respectively. …

    Canada … is the only country to weaken its ambitions by increasing its emissions allowances relative to those it agreed to in the Kyoto Protocol.

    Indonesia was the first non-Annex I country to pledge its commitments.
    Indonesia has pledged emissions cuts of 26% from current levels by 2020 increasing to 41% with assistance.
    China and India have pledged emission intensity reductions of 40-45% and 20-25% relative to 2005 by 2020, respectively. …

    [These pledges] mark a significant step forward.

    [The] Montreal Protocol of 1987, requiring countries to reduce CFC emissions to manage the destruction of ozone in the stratosphere, was quantitatively insufficient for the intended purpose.
    Subsequently the CFC emissions reduction programme was very substantially improved, and the ozone reduction problem has been managed.
    As new low CO2, energy efficient economically viable processes and technologies are developed and dispersed, and the economic risks attached to climate change become more apparent, there is good reason to believe that the same will happen with CO2 emissions.


    Assessment of Key Pledges


    China

    As the largest emitter of CO2 in the world … China has pledged to reduce its CO2 emissions per unit of GDP (‘emissions intensity’) by 40 to 45% by 2020 compared to 2005.
    This target ensures that emissions are limited without constraining economic growth.

    [From] 1990 to 2005 the carbon intensity of its economy improved by 36% without any international commitments.
    (p 14)

    When other nation’s pledges are converted to a similar measure, ie intensity … China’s target is comparable to that of developed countries such as the US and the EU.

    China’s pledge also [includes increasing] the share of non-fossil fuels in primary energy consumption to around 15% by 2020 …
    China is currently leading the race in green technology.
    In 2009 China had the greatest aggregate investment in clean energy, with investment levels of US$34.6 billion.
    This is in comparison with an investment of US$18.6 billion from the US who ranked number two.
    It has the world’s largest manufacturing capacity for solar collectors and solar cells and is likely to soon reach the same status for wind turbines.

    The Loess plateau project, initiated some 12 years ago, has resulted in the greening and reforestation of an area the size of Belgium.
    … President Hu Jintao [has] committed China to completing the task by 2020: this will correspond to an area the size of France …
    China has pledged to increase forest coverage by 40 million hectares and forest stock volume by 1.3 billion cubic meters by 2020 from 2005 levels. …

    The energy efficiency and renewable energy being developed mean that the electricity networks in China will have to be modernised to be able to integrate these intermittent energy sources.
    (p 15)


    The EU

    The EU has pledged a target of 20% GHG emission reductions by 2020 compared with 1990 levels, which will be increased to 30% if other major economies commit to significant reductions.

    [Because the] global economic recession has led to a significant fall in emissions … the move to the more ambitious target of 30% emissions reductions by 2020 is being considered irrespective of the actions of other countries. …

    The lower 20% target is [not] strong enough to mobilise investment and innovation in the low carbon economy.
    [A recent study indicated that if] a decisive move to a 30% target was made, combined with clear policies, a positive cycle of increased low-carbon investment, job creation and innovation could be triggered …
    • [increasing] the growth rate of the European economy by up to 0.6% per year,
    • [creating] up to 6 million additional jobs,
    • [increasing] European investments from 18% to 22% of GDP in 2020 and
    • [increasing] European GDP in 2020 by $842 bn (2004 value).

    The US

    The US pledged an emissions reductions target of 17% by 2020 relative to 2005 levels.
    This amount equates to a 3% decrease by 2020 compared to 1990 levels.
    This is less than the total 5% target of the developed countries in the Kyoto agreement.
    The biggest downside of the US pledge, however, was that the proposal stated that it was based upon anticipated US legislation, which did not materialise. …

    The passage of climate and energy bills in the US will be key to the development of climate negotiations at the international level. …
    The US position in the process therefore gives continued cause for concern.
    (p 16)


    LEARNING FROM THE NEGOTIATION PROCESS


    Negotiations Forum


    The failure of the Copenhagen negotiations to reach agreement threw doubt on the ability of the UNFCCC process to produce viable results …
    [By contrast, progress at] COP16 in Cancun to salvage an Agreement has restored hopes. …
    The G20, G8 and Major Economies Forum (MEF) are [other] possible forums for climate change progress.

    The G20 countries make up around 75% of global emissions [so any emissions reduction] deal made in this forum [would] be of enormous significance …

    The UNFCCC COP is the only forum in which the very poor developing nations can … express their views.
    [Their input has] stimulated progress [in] ensuring that adaptation is properly considered.
    [Decisions] are made outside the UNFCCC process … are likely to [have] consequences for the coherence of the regime.

    [Negotiations] in smaller groups could lead to … immediate GHG emissions reductions [provided they] don’t include obstructionist countries such as OPEC (Organisation of the Petroleum Exporting Countries) and the ALBA (Bolivarian Alliance for the Americas) groupings.

    [The] equal voting system [makes] the COP an excellent forum for [developing countries; however, for] complex problems like burden-sharing [the need for consensus can lead to stalemate].
    Smaller groups are very useful in getting details of an agreement in place [with the UNFCCC being] used to verify and legitimise actions and decisions taken in these other forums, and to act as a sounding board for all nations. (p 19)


    Legal Form


    The main [obstacles] to a global, legally-binding agreement [are China and the US with] its insistence on “symmetry” between developed and developing countries …

    [Developed] countries have expressed a preference for the replacement of the Kyoto Protocol by a single instrument that captures the market-friendly elements of the Accord.
    In deference to the US, the single instrument would have a flexible approach that is tailored to national circumstance and allows for domestic political constraints.

    [Developing countries prefer] the continuation of the Kyoto Protocol [and] oppose the single instrument as they fear [this] would alter the balance of responsibilities in the climate regime.
    Given the difficulties within the US in joining any internationally defined binding agreement, it is questionable as to whether these compromises … will make [and] difference to its participation. …

    The reluctance of nations to join a legally-binding agreement unless they know that they can meet its stipulations does signal that the concept is taken seriously.
    But in order to ensure that countries do keep to their targets, it is probably necessary to have some form of enforcement mechanism. …

    Greece is officially recognised … as non-compliant with national system requirements and Canada is also set to be non-compliant with its emissions targets …

    One feasible enforcement mechanism is a ‘name and shame’ process linked to pledge and review and independent monitoring and verification.
    (p 20)

    It remains unlikely that anything other than a severely weakened legally binding agreement would be signed by the major emitters of CO2. …

    [Negotiations should instead] focus on areas where progress has been made [eg] deforestation, technology, finance and adaptation.


    Pledge-and-Review


    The pledge-and-review process adopted by the Copenhagen Accord marked a move towards national-based action in mitigating and adapting to climate change. …
    This shift away from the top-down action … stimulated discussion about the relative merits of top-down versus bottom-up approaches [however] both bottom-up and top-down policies are compatible and necessary.

    In developed and emerging countries the bottom-up approach is the only feasible way of ensuring participation.
    The pledge-and-review process [also] enables China and the US to participate. …

    [At the instigation of the Indian Environment Minister] progress was made [at Cancun] in the area of monitoring and verification. …
    The publication of the pledges raises the level of ambition in the commitments as well as increasing pressure on all nations to meet them. …

    A registry for developing countries to set out [Nationally Appropriate Mitigation Actions was established allowing them to specify] plans for action so that investors know where the money will be going …
    [This] could stimulate increased funding [and preempts] developed countries using this as a line of defence over lack of financial support.


    Temperature and Emissions Targets


    An important step was made with the agreement on the target to limit anthropogenic warming to 2 °C.
    (p 21)

    [The] total amount of fossil fuel … that would generate an estimated mean temperature rise of 2 °C … is 1 trillion tonnes of carbon, with a standard uncertainty of 1.6 to 2.6 °C.
    Over half of this amount has already been emitted. …

    [Global] emissions should be reduced to 18 bn tonnes by 2050, ie a 50% decrease.
    Taking 18 billion tonnes per annum as averaged across the expected population of 9 billion by mid-century yields 2 tonnes per person.

    Based on this figure, the UK Government revised its commitment of a 60% reduction by 2050 made in 2003 to a reduction of 80%, made in 2007.
    Currently UK emissions are at 10 tonnes per person per annum, so the British commitment equates to a reduction to 2 tonnes by 2050.

    This unilateral commitment, followed now by the EU … suggests that the emissions target per country by mid-century could be determined by population size, and not by development status [providing] a potentially equitable way forward
    (p 22)


    Corporate Sector Actions


    [A] significant proportion of the corporate sector has indicated a desire to [move] towards a low carbon economy [eg] the Carbon Disclosure Project … holds the world’s largest database on corporate actions and information on climate change. …

    There is evidence to suggest that a switch to a green economy could be very profitable for many nations, sectors, industries and firms.
    The total value of the carbon market grew 6% to US$144 billion by the end of last year despite global GDP falling by 0.6% and developed countries GDP falling by 3.2%.

    The … Stern Review projected that [action] to limit temperature increase to 2°C [would] cost between −2% and +5% of global GDP by 2050 [—] commonly expressed as +1% …

    [A] study of the cost of German climate change policy … to reduce … emissions by 40% under 1990 levels by 2020 … using a systems dynamics model … found that [this] would create at least 500 000 jobs and add at least 2-3% (EURO 70 billion) to the German GDP by 2020.

    [cf the study mentioned on p 16 indicating that an increase from a 20% to a 30% EU emissions target could lead to additional growth of 0.6% per year and create up to 6 million additional jobs in the European economy by 2020]

    While moving to a green economy is likely to generate a net benefit to economies, there will be losses from some sectors, such as the fossil fuel sector. …
    Last year in the US the lobby seeking to undermine climate change science spent around US$170 million on lobbying against climate change science, while only US$22 million was spent in support of all environmental causes.
    (p 23)


    Global Fossil Fuel Supply Capability


    A survey of reliable conventional oil reserve data found that the public reserve figures should be reduced from 1150–1350 Gb to 850–900 Gb. …
    Oil discoveries have been decreasing in the past few decades, with the discovery rate peaking in the early 1960s. …
    Of 430 giant oil fields that are in production 261 are in decline.
    In 2007, out of 20 of the top producing oil fields, representing 27% of global oil supply, 16 were in terminal decline. …

    Unconventional oils [Canadian tar sands and deep-sea drilling] currently make up just over 2% of total oil production.
    The extraction of unconventional oil is both environmentally damaging and energy and water intensive.

    [Demand] for oil will continue to increase over the coming years [and] may induce a global recession, determined by an unaffordably high oil price. …
    [Estimates] of future oil prices are … increasing [over time ie] the World Energy Outlook (WEO) of 2008 estimate of [the] oil price [in 2030] is $135 higher [than it's 2007] estimate of $65 per barrel. …
    The International Energy Agency (IEA) [has concluded] that over the period 2002 to 2006 increases in oil prices lowered world GDP growth by an average of 0.3 percentage points per year.
    High oil prices [likely contributed to] the global economic downturn in 2008, acting to increase the vulnerability of the economies of all oil importing countries. …

    The UK … has an existing energy production infrastructure that will need to be renewed within the next ten years …
    [This] energy infrastructure [could] be replaced by a combination of indigenous renewable energy, nuclear energy, dispersed microgeneration energy sources, and a smart grid, while initiating the switch of road transport onto the grid through hybrid and electric vehicles.
    [This would lessen the UK's] dependence on oil … and stimulate the economy — finance that would previously have gone straight to oil producing countries will remain in the country and jobs will be generated from the switch.

    [There] appear to be vast reserves of very cheap coal remaining and discoveries of natural gas continue apace.
    Developments in gas extraction technology have enabled access to large amounts of natural gas [ie fracking].
    (p 24)


    NEXT STEPS


    Pricing Carbon


    [Pricing] environmental externalities … sends a signal to the marketplace that … incentivises reductions in emissions, and draws attention to the cost-effectiveness of investment in low carbon infrastructure.
    [A] high price incentivises the research, innovation, wealth creation chain, developing new energy efficient and low carbon technologies for the market.
    Setting a global price on CO2 emissions would clearly prevent carbon leakage.

    There are three main ways of pricing CO2:
    • CO2 taxes,
    • CO2 trading, and
    • implicit pricing via regulations and standards.

    Regulation and Standards-Based Policies

    These include efficiency standards for various goods, vehicle fuel-economy standards and best-available control technology standards. …
    [If] standards are [applied only to new equipment emission reductions are] dependent on the rate of capital stock turnover.
    [Increasing] the cost of new stock without affecting that of the existing stock [incentivises continued use of] the old, higher CO2-emitting stock, thereby delaying emissions reductions.

    [In] terms of cost-effectiveness, standards and regulatory approaches cannot compete with CO2 trading.


    CO2 Taxes and Trading

    Taxes and trading in the economists’ idealised world [produce] the same results …

    Taxes will fix the CO2 price but leave the quantity of emissions uncertain and trading fixes quantity but leaves price uncertain.
    Setting taxes too low would lead emissions to overshoot their target. …

    … CO2 trading can lead to much more price uncertainty and volatility than taxes [whereas] businesses prefer clear and stable signals for decision-making and investment …
    [If] the CO2 caps for the trading process are insufficient, the CO2 trading price will be too low to induce effective action …
    [The UK Government] has decided to introduce a floor to the CO2 price.
    (p 27)

    CO2 trading schemes have become the dominant form of pricing since the Kyoto Protocol introduced market mechanisms …
    In 2008, the CO2 trading markets were worth around US$120 billion [and] could reach US$1 trillion [within a decade ie comparable to commodities] trading in … oil, gas and gold.

    CO2 trading has been adopted instead of carbon taxes largely [for political reasons].

    Current trading schemes start by distributing allocations free of charge and move to auctions over time. …
    [Free] allocations based on historical emissions [can] have significant drawbacks [ie:}
    • [rewarding] high emitters [with] significant ‘windfall profits’ …
    • [incentivising] increases in emissions in order to gain more permits
    • [giving] competitive advantages to incumbent firms … thereby reducing competition [and]
    • [creating or reinforcing] power monopolies
    These objections indicate strong advantages of moving to auctioning of permits or to other forms of permit distribution, such as on a per capita basis …


    Funding for Mitigation and Adaptation in Developing Countries


    In 2008, investment in sustainable energy in developing countries reached US$36.6 billion [of which] Africa received less than 1%.

    [Investment is being] concentrated in the countries with emerging economies within developing regions.
    [In] Asia and Oceania, China and India together accounted for 80%.
    [In] South America, Brazil accounted for 88%.
    (p 28)

    The current international approach to [financing] lacks a functioning and permanent system for resource transfer to developing countries. …

    The Cancun Agreements [and the Durban Platform set] out funding … approaching US$30 billion for 2010-12 and moving to US$100 billion by 2020.
    (p 29)

    The developed world does not have a good track record when it comes to delivering on money promised. …

    [There is a risk that funds] may be diverted or relabelled ‘development aid’. …
    These programs for health, poverty alleviation and promoting the rights of women and children also act to make communities more resilient to climate change.

    In terms of the distribution issues, there [is scientific uncertainty as to] what risks and losses are additional due to climate change.
    [If vulnerability] is defined biophysically then low-lying land such as islands and deltas, drought zones and areas fed by glaciers would be most deserving …
    [Whereas, if it is] defined using social factors then the funds would be distributed to the poorest or most densely populated regions. …

    [Reformed] CO2 markets … are a feasible [alternative or complimentary method of] delivering the financial flows to the developing world on the scale required. …

    [Global] energy demand is predicted to grow by 55% by 2030 [of which just] over 90% … is projected to come from non-OECD countries.
    [This will cost] up to US$26 trillion, with around half of this required in developing countries.
    [If this investment is not made in] climate-friendly technologies, emissions will increase by 50% by 2050.
    (p 30)


    Our Proposal


    [This variation of the] global cap-and trade concept [originates from the] contract and convergence principle … proposed by the Global Commons Institute in the early 1990s.
    [The] overall emission level is reduced over time whilst the per capita emissions rates of different countries converge on a low value aimed at meeting the 2°C objective [— currently 2 tonnes of CO2 per capita by 2050].
    (p 31)

    Since many least developed countries have emissions per capita today that fall well below this amount, they could … sell off their unused share to developed countries …
    [This] would encourage [LDCs] to develop low-carbon economies in order to sustain the in-flow of money.
    (Additional regulations may [be needed to] discentivise population growth, and other potential negative consequences.) …

    This solution is seen by many as being equitable [given that] industrialised countries are responsible for around 55% of the stock of GHGs in the atmosphere [— which now precludes the rest of the world from industrialising along traditional pathways.]

    {[The main issue] with implementing such a scheme [is the] current lack of political will …}


    Funding for Research, Development and Demonstration (RD&D)


    The proportion spent on RD&D in [the global energy] sector is notoriously low, and by far the largest part of that is spent [on] oil discovery and production. …
    (p 32)

    With the privatisation of the energy sector in the 1980s, Europe’s largest gas and electricity RD&D centres, based in the UK, were broken up and shared out between the emerging utility companies, and then closed down.
    [Funding levels] had therefore collapsed to a very low level. …

    [The Energy Technologies Institute] is a £1 billion investment over 10 years, half the funds being raised from the private sector. …
    The private sector has to be incentivised to invest optimally in RD&D given “knowledge spillovers” that imply they cannot capture all of the returns …

    A recent study of energy RD&D programs found that [many] of them produced positive net economic gains as well as both environmental and security benefits.
    There is, however, a tendency for companies to make short-sighted investments in order to maximise profit immediately.
    Government policy should [aimed at encouraging] long-term planning …

    Globally, coal reserves are abundant and low cost [therefore] one area with a large potential for emissions reductions [is] CCS …
    [Other areas of study] include direct solar, hydrogen power and storage, nuclear power, solar photovoltaics … wave and tidal power [and] energy efficiency …
    (p 33)


    Forestry Carbon Sequestration


    Recent estimates suggest that forestry could contribute an average 6.7 billion tons of emissions reductions annually, with over two-thirds of this potential coming from tropical nations.

    [Under the Kyoto Protocol] Annex I nations may generate carbon removal credits from certain land use, land use change and forestry (LULUCF) activities [while in] the developing world, the [Clean Development Mechanism] rewards certain afforestation and reforestation projects … emissions credits that can be sold to Annex I nations. …

    {[The proposed] international program for reductions in emissions from deforestation and degradation (REDD)} [seeks to address] the massive amounts of carbon lost to tropical deforestation in the developing world.
    {The Agreement developed at Cancun is based around a REDD+ scheme} [also includes] carbon sequestration via forest planting and management.

    [The] Smith School for Enterprise and the Environment [has proposed] the Forest Program for Inventories in National Carbon (PINC) that applies to all forest carbon sequestration activities in Annex 1 and non-Annex 1 countries alike.

    The CO2 market could provide an incentive that would motivate the private sector to contribute to scale.
    The establishment of … new market mechanisms will be a point of discussion next year at COP17 in South Africa.

    There is a general trend … towards a focus on national accomplishments rather than on project-by-project assessments. …
    The challenge for national governments [is to design] a program that reliably induces landowners to protect and expand their forest carbon inventories — whether through regulations, subsidies, information campaigns, tax policy, or other mechanisms — and to take steps that will conserve and expand forest carbon stocks. …
    Careful design of domestic programs for both private and public lands will be key to the success of the international forest carbon sequestration initiatives.
    (p 34)


    PARALLEL PROCESSES


    At the time of writing, the political will of major emitters such as the US and China is simply not behind a comprehensive global agreement [and] other nations, namely Japan and Russia, are becoming increasingly vocal in their resistance of a second commitment phase to the Kyoto Protocol. …
    [However, the] problem of an absence of internationally agreed emissions reductions targets has largely been overcome by the domestic pledges now officially recognised by the UNFCCC process. …

    China is now considering a domestic CO2 trading program for its Five-Year Plan from 2011 to 2015.
    In the EU, the ETS is the main driver behind the 20 20 20 plan for emissions reductions across the 27 constituent nations.
    In the future … the EU ETS [could] be linked to other …. CO2 trading schemes [in]
    • Japan,
    • Canada (Western Climate Initiative),
    • Australia (NSW Greenhouse Gas Abatement Scheme),
    • New Zealand and the
    • US (Regional Greenhouse Gas Initiative).
    (p 37)

    Linkage of these systems would open up new opportunities for mitigation and increase market liquidity for participating companies. …

    Mexico is in the process of setting up a voluntary program for GHG accounting and reporting which at present covers 21% of national emissions but which is to be expanded to cover 80%. …
    In Brazil, the introduction of a domestic cap and trade scheme is being considered. …
    Inclusion of developing nations in CO2 trading agreements would create internal incentives to engage in climate change mitigation and adaptation. …
    Incentivising those countries to grow their economies with low carbon dioxide intensity through internal democratic decision making in this way should be a priority. …

    [If] some large countries … impose no financial disincentive on CO2 emissions [this will] encourage the high CO2 emitting manufacturing sectors to move their operations into these countries or zones. …
    [This] {carbon leakage problem could be managed} [by the] imposition of CO2 border tariffs on goods entering the CO2 trading zone. …

    [Countries] that have a large portion of the world’s forests, such as many of the nations of South America, may group together … to collectively reduce deforestation [with the support of] the REDD+ scheme, which offers significant incentives for avoided deforestation and reforestation.
    The declaration by the Government of Brazil at Poznan to terminate all deforestation by 2025 [is] a precursor to such action.
    (p 38)

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