The Lost Deal

The Copenhagen summit failed to achieve anything substantial - and sent out the wrong message to businesses around the world. Danny Stevens looks at what went wrong at COP15 - and the economic consequences of failure

The Copenhagen UN Climate Change Conference ended amid recrimination, claim and counter-claim. For all the speeches delivered and articles written before the event, nothing substantial was achieved.

Now the dust has settled, we’ve had a chance to consider what went wrong. Politicians in Europe lambasted the US and the Chinese in particular for recalcitrance at best, and sabotage at worst. The Copenhagen Accord “recognises” the scientific case for keeping temperature rises to no more than 2oC, but does not include any long-term commitments to emissions reductions to actually achieve that target.

Instead “parties commit to implement, individually or jointly, quantified economy-wide emissions targets for 2020”, proposals for which they had to submit to the UN by the end of January. For the US, this is currently a weak 14-17% reduction on 2005 levels; for the EU a 20-30% reduction on 1990 levels; for Japan, 25% and Russia 15-25% on 1990 levels.

The Accord also commits to $30B of funding between 2010-12 from developed countries to support developing countries efforts to tackle climate change “with a balanced allocation between adaptation and mitigation”. Longer term, a far larger sum of $100B a year by 2020 will be committed to a Copenhagen Green Climate Fund “to address needs of developing countries”. While it is these funding streams that are likely to have sealed the deal in Copenhagen, the Accord still leaves open the questions of where the money will come from, and how it will be used.

Brokered by China, South Africa, India, Brazil and the US in parallel to the formal negotiations of the Conference of the Parties – the “supreme body” of the United Nations Framework Convention on Climate Change and an association of all the countries that are Parties to the Convention – the final decision of the 193-nation Conference of the Parties was to simply “take note of the Copenhagen Accord”. The lack of any timescale to turn “take note” into legally binding climate change agreement is a glaring omission from the final agreement.

In the past six months we have moved from a position of ‘Copenhagen is the last chance to save the world and nothing less than a legally binding agreement will do’ to one where we are just ‘taking note’ of the need to do something about climate change. The fear is that we now risk endless deadlock, as negotiations take a not too dissimilar path to the stalled Doha round on world trade talks.

And we’ve been here before. In 1992 a total of 192 ratified the United Nations Framework Convention on Climate Change. The Convention did not include any binding targets but set an overall framework for tackling climate change, including a commitment to gather and share information on greenhouse gas emissions, national policies and best practices and launch national strategies for addressing greenhouse gas emissions. It was not until 1997 that the Kyoto Protocol was agreed, and it didn’t come into force until 2005. If we apply the same timescales to the Copenhagen Accord, we could have to wait until 2022 for a legally binding agreement to come into force.

President Obama described this as “a meaningful and unprecedented breakthrough”. Gordon Brown described the deal as a “vital first step”. Is this how we leave the world to the next generation? Communiques expressing insufficient commitment and spin doctors telling us a non-committal agreement that shows scant regard for science is a “breakthrough”. And was it not the Bali “roadmap” that provided the “vital first step” over two years ago?

The Bali “roadmap” agreed by the Conference of the Parties started the journey to Copenhagen. It included a commitment to complete by 2009 negotiations on a new international climate change agreement that would replace the Kyoto Protocol when it expires 2012.

So what are the consequences of failure in Copenhagen? We can consider its implications for future international negotiations, particularly when five countries can seemingly draft their own agreement behind closed doors, only to thrust it on the other 188 countries who have a choice of rejecting it and, therefore, risking complete failure – turning the trickle of climate change funding into a drought – or to “take note” of the deal at the very last minute.

Equally telling is the economic consequences of failure. Over the past 15 years the Environmental Industries Commission, the largest trade organisation in Europe for the environmental technologies and services (ETS) sector, has led the call for a shift towards an economic model that puts sustainability at the heart of growth, one that bases economic wellbeing and competitiveness on protecting the environment, not destroying it. Embedding low carbon, sustainability and resource efficiency into the fabric of the economy is vital. Not only to safeguard the future of our planet but to secure international competitiveness in the global low-carbon economy of the future.

This is not only the defining challenge of the coming decade, but the defining business opportunity. Those industries that develop the innovative green technologies that will guide the transition to a low-carbon, resource-efficient economy will soon be in a position to lead the environmental marketplace worth over $3T and growing rapidly at 5% a year.

Climate change is the product of the greatest and widest-ranging market failure ever seen. When we emit greenhouse gases, or our vehicles emit air pollutants, or our factories discharge pollutants to our rivers and seas, the market does not bear the true cost of the damage caused. The economic value of the eco-systems on which our economy depends is far greater than the cost of protecting it. By valuing our environment at zero the market has effectively allowed the exploitation of the environment to such an extent that our future economic growth is now at risk.

The only way to correct a market failure is to adopt policies that ensure environmental damage is translated into immediate price signals. EIC believes that the most appropriate way to do this is through active government intervention in the economy. By providing a strong policy framework that embraces low-carbon and sustainable growth and puts an appropriate price on pollution, the Government can harness the power of markets to find effective, efficient and equitable responses to the environmental challenges we face. Furthermore, environmentally friendly goods and services take time and money to research, develop and invest in. Businesses will only put in that time and money if they are confident that there will be a place for these products in the market. If governments are to provide this confidence, they need to put in place a long-term, ambitious environmental policy framework across the economy.

With all of this in mind, consider the message that the events in Copenhagen send out to the rest of the world: to the businesses that need to invest in future climate change technologies, the inventors and manufacturers that need to produce them and the consumers that need to purchase them. That achieving a truly global, binding climate change agreement is too difficult to achieve? The best-case scenario is that Copenhagen is the “vital first step” towards a legally binding global agreement. In which case we need to take the next steps quickly. Moreover they’ll need to be more like giant strides if we are ever going to create a truly low carbon global economy.

Behind the smoke and mirrors of Copenhagen, however, the UK and Europe still have a convincing case to make for being the global leaders in tackling climate change.

The UK has moved faster than any other country in establishing a strong policy framework for tackling climate change. The recognition that environmental protection yields significant economic benefits as well as ecological gains has also driven important initiatives such as the Low Carbon Industrial Strategy. The EU too has a range of ambitious targets that demonstrate a real commitment to low-carbon growth across the bloc.

We may have only been staring through the window as the US and China tripped the draft Copenhagen Communiqué of any meaningful commitments, however by putting in place this domestic framework before anybody else we will gain an early mover advantage in developing the technologies that will guide the transition to a low-carbon, resource efficient economy.

When the rest of the world wakes up to the fact that you cannot tackle climate change by simply “recognising” science from a backroom in a Copenhagen conference centre, the UK and EU will have established a strong low-carbon goods and services sector that it can export right across the world.

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