Archive for December, 2011

A Tweet to change the world

Anyone who followed COP 17 in Durban would have noticed that the UNFCCC and its Executive Secretary, Christiana Figueres, are active Tweeters. But one Tweet in particular opens up a key issue facing the UNFCCC – what exactly is its remit? The Tweet in question came during COP17 and said:

Global business plan has to have 3 bottom lines: adaptation, mitigation and eradication of poverty. Only way to develop that is sustainable.

This comes close to formalizing a trend that has been an undercurrent of the UNFCCC process for some years now, i.e. dealing with the issue of access to energy (and therefore poverty). There is no doubt that this is a critical global issue and in many instances is a key part of the poverty trap that numerous communities and even nations find themselves in. Access to affordable water, food, shelter and energy are the drivers of development and well-being, with energy often being the lynchpin component. The issue is also linked to the UNFCCC via the adaptation challenge.

The question at hand is not whether access to energy and poverty  should be priorities to act on, but how (or even whether) they should be part of the UNFCCC process. As an issue, poverty seems to have grown under the UNFCCC as mitigation has become increasingly challenging and developing country emissions have grown. In the latter case, the need to use energy and therefore emit CO2 has come with rapid development, which in itself is the most effective way to shift populations out of poverty.

But does all this mean that the eradication of poverty should become a core pillar of the UNFCCC, which seems to be what is happening?

There is little direct justification for such a step in the Convention itself. The words “eradication of poverty” are mentioned, but not as a goal. Rather, for certain countries, poverty acts more as a valid exemption to the requirement for mitigation action. The two instances are:

Affirming that responses to climate change should be coordinated with social and economic development in an integrated manner with a view to avoiding adverse impacts on the latter, taking into full account the legitimate priority needs of developing countries for the achievement of sustained economic growth and the eradication of poverty,

The extent to which developing country Parties will effectively implement their commitments under the Convention will depend on the effective implementation by developed country Parties of their commitments under the Convention related to financial resources and transfer of technology and will take fully into account that economic and social development and poverty eradication are the first and overriding priorities of the developing country Parties.

Just as a reminder, the objective of the Convention is stated as follows:

The ultimate objective of this Convention and any related legal instruments that the Conference of the Parties may adopt is to achieve, in accordance with the relevant provisions of the Convention, stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. Such a level should be achieved within a time-frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner.

Based on the above, it could be argued that the eradication of poverty is a necessary precursor to action on climate change. After all, with so many nations claiming “exemption status”, mitigation action is and might remain insufficient to make real progress on lowering global emissions. But given that global energy emissions now stand at some 30 billion tonnes per annum and are rising rapidly, waiting for the eradication of poverty is a questionable strategy.

Given the above “ultimate objective”, a blank sheet of paper and the world in its current state, what should the starting point for action be? Should it be the eradication of poverty?

Harsh though it may sound, the answer is likely to be no. Dealing with poverty should be a global priority, but it probably shouldn’t be so intertwined with the need to reduce emissions and stabilize the concentration of CO2 in the atmosphere. From another perspective, the two issues could be argued as being largely unrelated. Africa is the poorest continent, yet if it undertook rapid development over the next 40 years with no mitigation action at all and emissions grew at 5% p.a. (well above current rates and comparable to China over the past 40 years), its cumulative emissions over that time would amount to only a tenth of the remaining atmospheric stock for CO2 that equates to a 2°C temperature rise. Meanwhile, the cumulative emissions for everyone else would have more than exceeded the stock limit remaining. In other words, the difficulties faced by Africa could be dealt with using current energy sources and the impact on the mitigation challenge would be minimal. Of course it would be better if Africa grew on a low emissions pathway, but if that remains the global focus we might win the battle and lose the war.

Crafting effective action by those who can both afford it and are relatively high emitters is no easy task, as successive COPs have demonstrated. But introducing “eradication of poverty” as a mainstream theme is unlikely to make the process any easier and quite possibly it could become a major distraction from the real task at hand – stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. By introducing poverty eradication into the core mix of UNFCCC, there is also the risk that much needed funding for emission reduction and adaptation projects is diluted. Clear lines of financial support for mitigation and adaptation under the UNFCCC and poverty eradication through other bespoke channels also helps ensure that funding is truly additional rather than being double counted.

Both challenges are extremely important and the world must address them simultaneously – but putting poverty as a core UNFCCC pillar potentially reduces the effectiveness of the one global body specifically designed to focus on climate change.

After two busy weeks, the Durban COP was extended by a full day and then went well into a second, with long nights of negotiation along the way. Eventually a deal emerged which has polarized both the media and blogsphere between being the salvation of mankind or the quick route to runaway warming. In reality it is neither, but if that is the case then where are we?

First the good news. After years of discussion, stalling and negotiation the Clean Development Mechanism (CDM) is now able to accept Carbon Capture and Storage (CCS) projects. This important technology now has the opportunity for global use under a clear set of rules that all countries have sanctioned. Of course there remains the ongoing issue of the low price of CERs, largely driven by the weakness of the EU-ETS, but at least the CDM will continue to exist thanks to a Durban agreement on the continuation of the Kyoto Protocol, albeit with a limited set of players. If nothing else, the “CCS in CDM” agreement puts CCS properly on the radar and hopefully paves the way for implementation through other means, such as via the Green Climate Fund. 

In addition to the move on CCS, the Green Climate Fund and Technology Mechanism both made useful progress. In comparison to expectations going into Durban, the COP could be regarded as something of a success. But these are small steps to take for a two week conference which attracts some 10,000 people (including observers). Of course the real objective is to make a major step forward and agree a way for all parties to begin rapidly reducing emissions.

What then of the agreement in Durban to negotiate a new protocol (or another legal instrument or a legal outcome) by 2015 at the latest, for implementation by 2020? From the perspective of large scale mitigation action involving all the major emitters, this is good news, but given the reality of the rate of increase in the level of CO2 in the atmosphere, the story is really very different.

In a 2009 posting, I discussed the issue of a 2°C objective on the basis of CO2 behaving like a stock pollutant in the atmosphere (Allen et al, Nature, April 2009). For a 50% chance of limiting the global temperature rise to 2°C, the stock of CO2 should not rise above 1 trillion tonnes of carbon (or 3.667 trillion tonnes of CO2). This provides a useful way of assessing the impact of the “Durban Platform for Enhanced Action”. Consider four cases;

  1. The “do nothing” base case which sees emissions continue to rise at the rate of 2% per annum (global emissions increased by 2.5% p.a. over the period 2000 to 2009 – IEA) and accumulate in the atmosphere. This sees the trillionth tonne emitted in 2044 with continued rapid accumulation in the decades following.
  2. A dramatic (but of course hypothetical) deal in Durban which sees global emissions peak immediately and begin to fall at 1.7% p.a., the same rate of decline as currently built into the EU ETS. In this case the trillionth tonne is emitted just after 2100, but emissions are very low by this time and still falling, so the 2°C limit is effectively met.
  3. Business as usual continues until 2020, but the “Durban Platform” acts aggressively on global emissions post-2020, with emissions peaking in that year and then falling. To achieve the same outcome as Case 2 the annual rate of decline must now be 3% p.a.
  4. Business as usual continues until 2020, with the “Durban Platform” resulting in a global plateau in emissions from 2020 to 2030, then falling after that. Now the rate of decline must be over 4.5% p.a. to achieve the same outcome as Case 2. 

While the agreement to start negotiating again with a view towards implementation of a global plan from 2015/2020 must be seen as a positive development, the time lag now built into the process must equally be a cause for concern. There is nothing easy about emissions and the future, but starting the job today is an essential requirement for meeting the 2°C goal – this was also the clear message from the IEA (International Energy Agency) going into COP 17. A theoretical global decline of 1.7% p.a. is at least still within the bounds of technical (but clearly not political)plausibility, although only just, but arguably a reduction rate of 3% or 4.5% is beyond an achievable outcome. Even the financial crisis only managed to deliver a 1.4% reduction from 2008 to 2009 before emissions bounced back in 2010. A 3% p.a. decline from 2020 requires more than a billion tonnes per annum of reduction – or the startup of at least 130 very large CCS facilities that year and then each year after that. A 4.5% p.a. decline is considerably more difficult to achieve.

The above cases 3 and 4 which both represent a robust deal coming from the “Durban Platform” are also very optimistic given the track record of the UNFCCC negotiations and perhaps of greater concern, the track record of national implementation of agreements made.

Nevertheless, Durban may well be seen as a landmark COP and it may just mark the point at which attitudes change, but the shape of the outcome also makes the challenge ahead that much greater.

A “Catch 22” to be delivered from Durban?

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One of the key potential deliverables from Durban is an operational Green Climate Fund (GCF). This is one of the important components of the pledge to channel up to $100 billion per annum by 2020 to developing countries for mitigation and adaptation projects. But whether the final decision is made here or at a future UNFCCC session, the current proposals may represent an investment Catch 22 that results in little or no direct use of the fund by the private sector. At a roundtable I attended in Durban over the weekend, GCF national negotiators discussed aspects of the proposed fund with the private sector. The fund does have a means for direct private sector access, which is good news, but therein lies the Catch 22. The issue that was discussed at the roundtable was the question of incentive for the private sector to actually use this instrument.

5.3.2 Private Sector
41. The Fund will have a private sector facility that enables it to directly and indirectly finance private sector mitigation and adaptation activities at the national, regional and international levels.

There are two aspects to the fund which are important in this regard. The first which was mentioned by one of the roundtable participants was that the project must be additional. This means it is a project that wouldn’t have occurred anyway, in other words it is dependent on access to the GCF for it to happen. For climate mitigation projects this implies that the project actually requires a price on carbon emissions, such as in a project under the Clean Development Mechanism (CDM) of the Kyoto Protocol. A second issue is that, at least in the case of direct private sector access, the GCF is unlikely to operate as a grant instrument but more probably as a source of loans for the project, perhaps underwriting performance aspects such as country risk. This was also discussed at the roundtable.

The problem here is that a project in a developing country which claims additionality effectively needs a grant of the carbon price. This is how the CDM works. Although there is no “grant” in the traditional sense, the fact that the CERs are awarded / granted to the project and can be monetized in a carbon market such as the EU-ETS in effect grants money to the project, albeit after the project has commenced operation rather than before. But if a grant to the private sector is unlikely, then only non-additional projects will be put forward, which in turn aren’t eligible to use the GCF.

Wikipedia defines a Catch 22 as follows:

A logical paradox arising from a situation in which an individual needs something that can only be acquired with an action that will lead him to that very situation he is already in; therefore, the acquisition of this thing becomes logically impossible.

The paradox here comes about if I have the opportunity to pursue an emissions mitigation project in a developing country. The only approach left standing which offers any scale is the GCF (CDM is rapidly being marginalized), but as it may not function as a grant mechanism for the private sector, I can’t actually monetize the carbon emissions to underpin the project economics. If I attempt the project in a way that doesn’t need carbon price monetization then it won’t be additional, in which case it isn’t applicable under the GCF, so I am left without any course of action to take forward even though the GCF has been set up with a private sector facility for me to use. It means that a CCS project, for example, would never be done under the GCF, at least not as a pure private sector project. This isn’t the complete end of the story. A private entity may be able to work in partnership with government to access the GCF in grant form.

This may not be quite a pure Catch 22, but it’s pretty close, at least based on the conversations heard over the weekend. There is still much water to pass under the bridge before the GCF is finalized, so hopefully these early bugs will be ironed out as time passes.

As delegates start negotiations in Durban, the major issues of the Kyoto Protocol and a “Roadmap to 2020” are dominating the news wires. The big picture story is very important, but in the meantime nations need to use this meeting to make real progress in a number of smaller but important areas. Despite the rhetoric, an alternative global framework is slowly emerging from the process, albeit one that won’t immediately deliver the sharp reductions that we know are needed, but nevertheless one that has the prospect of engaging the business community and catalyzing significant project activity in many countries. In particular, the developing country emission reduction pledges which emerged from Copenhagen and Cancun in response to the agreed 2°C global ambition are being progressively distilled into a series of Nationally Appropriate Mitigation Actions (NAMAs), or bottom-up national/sector policies and commitments.

There still remain very substantial gaps to fill. Recently, through its Vision 2050 project, the World Business Council for Sustainable Development (WBCSD) called again for the development of “a carbon price and a network of linked emissions trading frameworks . . . “ in combination with technology development policies as the principal systematic and lowest cost approaches to reducing emissions. Although such a comprehensive approach remains distant, the issues of technology and financing are being dealt with to some extent through the development of the UNFCCC Technology Mechanism and the Green Climate Fund. These mechanisms, in combination with the development of NAMA programmes in key countries can make a real difference, but a number of essential steps should be taken in Durban to fully activate this process;

  1.  Full business involvement is critical to getting the large scale investment needed. As business we need to better understand and even contribute to the development of proposals through an open consultation process and stakeholder meetings. Then, as countries begin defining and implementing NAMAs, partnerships with business should be established through which proposals can be developed and therefore attract the necessary investment.
  2. The Green Climate Fund needs to begin operating, with a particular focus on large scale emission reduction opportunities in power generation and transport in emerging economies. It’s also important that the fund is available to a broad range of emission reduction technologies.
  3. Delegates must recognize the long term importance of a carbon market and therefore ensure that the Clean Development Mechanism (CDM), the one existing mechanism able to project a carbon price into the entire developing world, has a clear way forward independent of a global agreement on targets. The opportunity to confirm the acceptability of Carbon Capture and Storage projects under this mechanism should not be lost.
  4. Finally, the COP should seek to establish a means by which the Technology Mechanism can support and fund the creation of local and regional technology platforms tied to NAMA delivery.

These are modest steps, somewhat esoteric in nature for the layman, but essential for real progress. We recognize that the meeting in Durban can only deliver so much, but the above is not outside the grasp of a single meeting.  A recent Shell document that I have worked on gives more detail on what is needed from Durban.

To download the document, click here -> Structural Approaches (Durban).