A green world that could pay for itself

How would you measure progress so far? Things are now progressing well. Last year was used by the negotiating countries to develop a better understanding of what they wanted on the different aspects of the Bali action plan and negotiating agenda. These have been brought together in the next version of the negotiating documeånt which maps where there is convergence, divergence, and identifies the gaps that still need to be fleshed out if we are going to arrive at something coherent in Copenhagen at the end of this year.

What are the next steps that need to be taken? I see a great deal of convergence on matters of principle but divergence on the detail. That raises the question ‘which political questions need to be answered in Copenhagen in order to ensure that we have the basic components of an agreement that can be ratified?’ The answer, in my view, is that we need to deliver clarity on four key political essentials.

The first is clarity on ambitious, legally binding emission reduction targets by industrialised countries. Without these the international community will neither be taking the necessary action to address climate change nor providing the confidence developing countries need that there is a willingness on the part of industrialised countries to take the lead in solving a problem that they have caused. There are some positive signals in this direction. For example, the European Union has agreed to a climate and energy package with which it will be able to reach its target of a 20 per cent emission reduction over 1990 levels by 2020 — and minus 30 per cent if other industrialised countries follow suit. President Barack Obama has indicated his intention to achieve an 80 per cent reduction of greenhouse gas emissions by 2050 and to return his country’s emissions to 1990 levels by 2020. Other countries, such as Russia and Japan, will be announcing their mid-term targets in the course of this year.

The second essential for Copenhagen is that we get clarity on the extent to which major developing countries are willing and able to deviate their emissions below a business-as-usual emissions growth graph. China, India, Brazil, Mexico, South Africa and South Korea have already developed national climate change strategies or energy strategies. However, we will need a clear indication of how much further they believe they can go, providing international assistance is given. For many industrialised countries, particularly the US, it will be very difficult to conclude an agreement unless they can see that major developing countries are also willing to engage.

So, the third essential for Copenhagen relates to clarity on finance. The Bali action plan makes it very clear that further action on the part of developing countries is contingent on financial resources being provided by the international community. We need to get clarity on how significant financial resources will be generated to help developing countries both limit the growth of their emissions and adapt to the impacts of climate change; otherwise we will not get the developing country engagement, and without that there will be no agreement in the context of which industrialised countries will be willing to engage and show ambition.

The fourth political essential is a review of the governance structure under the convention. If significant financial resources are going to be generated for mitigation and adaptation and to drive technology into the market, then developing countries will want to have a representative say in how that money is to be allocated and spent. Therefore, we need to create new bodies, perhaps new committees, under the convention in which developing countries have a majority voice, to determine how resources are to be allocated. The existing Adaptation Fund Board, with its developing countries majority, is an excellent model for this.

Do you think financing will involve a mechanism that facilitates transfers of funds, or do you think that it is down to individual developed countries to make commitments?

Commitments by individual developed countries, on their own, will not provide sufficient confidence to the developing world. Their performance on overseas development aid and the level of funds that have already been created under the convention doesn’t present an encouraging track record. Industrialised countries are talking about auctioning emission rights and using part of the revenue for international co-operation — something that Germany is already doing and which features in the Liebermann-Warner legislation in the US; though that didn’t make it through Congress, it remains very much at the back of people’s minds. There’s also a Norwegian proposal which suggests that if industrialised countries receive an emissions budget, a portion would be set aside and monetised by turning it into carbon credits; that revenue could then be used for international co-operation. There are other ideas around, too.

And these ideas are sufficient to have the kind of credibility that developing countries would need?

That would have to be discussed and negotiated. At the end of the day, we’re going to need every avenue at our disposal — including through the World Bank, the regional development banks and bilateral donors — to generate enough resources in order to tackle this issue. However, it’s very much at the heart of the agreement in Bali that there should be stable, predictable and sufficient funding coming directly through the convention.

Clearly adaptation is an important area, particularly important for developing countries.

It is disappointing to hear smaller developing countries say that the adaptation agenda is the only relevant one for them. Economies grow and it would be in everyone’s interest for that growth to be clean rather than following the route that industrialised nations have taken. Nevertheless, adapting to the impacts of climate change is right at the top of the priority list of a huge number of developing countries; it’s an area where the markets have a less significant role than on mitigation, and where public money is much more important.

The current financial crisis is draining public funds and distracting policy makers from climate change. What do you think the ramifications might be for these negotiations?

The financial crisis is having a negative impact; investment capital is more difficult to come by, renewable energy projects are being delayed or put onto the back burner, and falling oil prices are a disincentive to saving energy. However, at the same time people are using this economic crisis as an opportunity to learn. Gordon Brown has said that the downturn should be an encouragement to change direction and to create green growth and jobs.

The Japanese economic recovery package is branded a ‘Green New Deal’ with the intention of creating a million green jobs. The US with its $150bn investment in the energy sector, including getting hybrids on the roads; in the EU you also see that green growth and green investment is at the heart of the economic recovery package. China has set aside as much as 25 per cent of its economic recovery package for sustainable growth; so while the financial crisis is having a short-term impact it is also a stimulus to change the direction of economic growth.

Clearly it is not the best time to go to a finance minister and request money for climate change. The challenge is to generate financial resources from within the climate change regime. An auction of emission rights, with the revenue raised used for international co-operation, would generate resources inside the regime. So would an expansion of the European idea of an airline tax.

We already have a levy within the Clean Development Mechanism; if this was extended to the other Kyoto mechanisms that would be another way of generating revenue within the regime. We need to move towards a climate regime that is almost self-financing. This is the territory that negotiations need to move on to over the next few months.