Financial Times: Heating Up

FT:
Analysis from one of my colleagues:

Yesterday and today, the FT published a comprehensive analysis, "Heating Up," and two lengthy editorials on the science and politics of climate change -- all told, 3500 words.

The lengthy call to "Follow the science on climate change" is nothing new, except for an explicit swipe at geo-engineering and a shout-out to Marty Weitzman and the importance of fat tails.

The second editorial, on "The deal we need from Copenhagen," is slightly naïve on the politics. But it does make three points very much in line with our thinking:

(1) the editorial explicitly calls cap-and-trade the best solution, "in the actual world". That's a major editorial shift for the FT.
(2) it makes the explicit CLEAR argument for us: a lesser obligation by developing countries "is a case for more generous quotas, not an excuse from signing up to a global emissions target" -- i.e. absolute caps for everyone, some more generous than others.
(3) it emphasizes carbon markets as the major way to generate international finance

Heating up

By Fiona Harvey

Published: November 3 2009 02:00 | Last updated: November 3 2009 02:00

Fresh off flights to Barcelona from their various capitals, a group of weary public servants yesterday lugged their bulging briefcases into yet another air-conditioned conference centre for one more round of negotiations on climate change. They know each other well, having met every few months since December 2007. Their mission: to draft a pact that would forge a new global framework to tackle global warming, intended to be agreed at a Copenhagen summit next month.

Campaigners are badging the talks as the last 45 days in which to save the world. But the urgent tenor belies the numbing reality of combing through a draft text nearly 200 pages long and bristling with more than 1,000 square brackets denoting clauses and sub-clauses that must be accepted or expunged after hours of argument, sometimes over matters as trivial as the placing of a comma.

If the talks fail, the world will have no plan for cutting greenhouse gas emissions, a state of affairs that leading scientists warn would lead to a disastrous future of storms, floods, droughts and heatwaves - wild weather that could trigger mass migrations and conflict. If a deal is struck, it will require the transformation of nearly all sectors of the global economy and will determine the world's response to the threat of climate change for decades to come.

"We have to get a political agreement," says Yvo de Boer, the United Nations' top official on climate change and the man charged with bringing the talks to a successful conclusion - and a deal appears tantalisingly close.

In any long-running talks, however - and these have been running in various forms for two decades - there are dozens of ups and downs before an accord is reached, as the negotiators know all too well. Indeed, the Dutchman's own demeanour is usually a good indicator of where the climate talks are on the rollercoaster. At a low point at the Bali conference of two years ago, when the US under George W. Bush was refusing to compromise until finally shamed into it by boos from developing countries, he appeared to weep on the platform.

But ahead of Barcelona - the last formal session ahead of the gathering in the Danish capital - Mr de Boer looks chipper, though cautious. "It can be done," he says, though warning: "It's important not to overreach at Copenhagen - to try to get more than is politically achievable, and end up with nothing."

Progress on some issues has been followed by setbacks on others, while arguments that looked to have been put to rest have been resurrected by governments at the 11th hour. "The result is hanging in the balance," admits Ed Miliband, the UK's usually jaunty energy secretary, in a sombre moment. "We are not there yet."

Exasperation in recent months has centred on the US, where the congressional fate of healthcare legislation left little room for progress on the climate. As the administration of President Barack Obama has had no time to seal a so-called cap-and-trade bill on carbon, the US has been left without clear domestic commitments on its emissions targets, or on the money it will offer to poor countries to help them combat climate change.

The point of the talks is to ensure that global temperatures rise by no more than 2°C compared with preindustrial levels. Scientists brought together by the Intergovernmental Panel on Climate Change, a United Nations offshoot, say this is the limit of safety, beyond which climate change is likely to become catastrophic and irreversible.

To stay within that limit, according to Mr de Boer, governments must agree on four main areas. First, developed countries need to take on emission-cutting targets for the medium term, generally defined as 2020. Second, emerging economies must commit to certain actions to limit the growth of their emissions. Third, a financial infrastructure has to be put in place that ensures a flow of funds from rich to poor nations, to help the latter curb emissions and adapt to the effects of warming. Fourth, institutions should be set up to oversee the governance of these commitments.

On all of these, progress has been made. Nearly all developed countries have set out targets to slash their emissions by 2020 - they fall short of what developing countries are demanding but could be acceptable.

The second requirement is even closer to resolution, though on the surface it may not appear so. Jairam Ramesh, India's environment minister, has vociferously opposed taking on targets to cut emissions, accusing the west of trying to halt development, and Beijing has frequently echoed him. But this belies a more doveish reality. No developing nations have been asked to take on absolute reductions - instead, they should agree to curb their future emissions growth. While protesting against cuts, in reality China, India and several other rapidly emerging economies have committed themselves to do so, through actions including investments in renewable energy and efficiency. That will almost certainly be enough to satisfy the rich world, if the countries make these legally binding.

That leaves two pressing problems, and both pivot around the US. Mr Obama was hailed last year as the man to save the world at Copenhagen, a stark contrast with his predecessor, who blocked all agreement on climate change. Indeed, some suspect his Nobel peace prize - to be awarded in Oslo while the Copenhagen talks go on - is intended as an inducement to hop across the Skagerrak strait to chivvy the talks along.

The US political system has now become the clearest obstacle to a deal. A cap-and-trade bill, with a target for emissions cuts and provisions allowing US companies to offset their own emissions by investments in poorer countries, has passed the House of Representatives and a slightly different one is in committee in the Senate. But there is almost certainly too little time left to clear the remaining legislative hurdles before Copenhagen. For its part, the Obama administration is unlikely to push too hard for victory, as a defeat would be disastrous for its stance at the summit.

W ithout a bill, the US could still in theory sign up to targets on emissions and funding at Copenhagen. "Not a single country that signed the Kyoto protocol had in place a legislative package to meet its commitments," Mr de Boer recalls.

But American negotiators are acutely aware of the pitfalls of making commitments on the international stage that are still in doubt at home. Todd Stern, US special envoy for climate change, is a veteran of the Clinton administration, which signed up to Kyoto in 1997 only to be rebuffed by Congress. The US never ratified the protocol, sealing its failure. On taking office, Mr Stern vowed he would sign no deal that would be "dead on arrival" in Congress. Nor will other countries repeat the mistakes of 12 years ago - they are determined that a deal cannot exclude the US.

On financing, the European Union has come up with a proposal that rich countries should commit €22bn ($33bn, £20bn) to €50bn a year to the poor world by 2020, of which the EU's share at the top end of that range would be about €15bn. But other countries have yet to come up with sums, giving rise to a war of words between the US and Europe.

Mr Stern brushes aside the contention that Washington is holding up the talks. He says the US has made clear the possible range of targets it will accept, at 14-20 per cent below 2005 levels, adding: "There is no huge mystery about what our number will be." He also points to estimates for financial flows contained in the bills.

Other countries, though, want the US to confirm its emissions and finance commitments before they will be drawn into a deal. "Sometimes the greatest deliberative body in the world [the Senate] acts as though it is the only deliberative body in the world," John Bruton, EU ambassador, railed recently. "The world cannot wait on the Senate's timetable." An exasperated Mr Stern snapped back: "It may be that some people on the other side of the pond don't understand the system that well, but that's the way our system works, and we're pushing ahead."

If the US cannot agree firm targets at Copenhagen or find a way to finesse the negotiations, the talks could go into next year. For some, that would be preferable to a poor deal. Sir David King, the UK's former chief scientific adviser, says: "If it does not look like we can get the strong deal that we need, there should be a moratorium on the talks for 12 months and then we come back."

But as the negotiators battle through their forest of brackets, the prospect of carrying on for another year looks distinctly unappealing. A spectre haunts these talks: that of the Doha round of trade negotiations, which have run on for eight years with little prospect of a breakthrough. "The world doesn't want Copenhagen to come to mean another Doha," says Kim Carstensen of WWF, the green campaigning group.

That is why both the UN and the Danish hosts are adamant Copenhagen is a real deadline. "There is no plan B," insists Connie Hedegaard, the Danish climate minister. "Deadlines concentrate minds. We have to agree at Copenhagen." As Mr de Boer remarks, carrying on beyond December would not improve the prospects: "I don't think it's going to get any easier if we go into next year. I can only see it getting more difficult."

The Obama effect

Will Barack Obama, US president, go to Copenhagen? Will it make any difference? The White House is tight-lipped on travel plans. Although the timing of a possible trip to Oslo to collect the Nobel peace prize seems auspicious - bang in the middle of the summit - it falls before ministers have arrived. What leaders tell their negotiators is more important than their mere presence, says Connie Hedegaard, who as Danish environment minister will host the talks. "Only leaders can give their negotiating teams new instructions."

Coal and voter wariness capture senators' attention

For US senators such as Ben Nelson, climate change is not simply a matter of party politics. It strikes at the core of his heartland state of Nebraska. "[We rely] heavily on coal-fired electricity generation so we would be disproportionately hit by the trade part of this," says the Democrat, referring to the cap-and-trade proposal before the Senate that would make large polluters buy permits to emit greenhouse gases. "We don't have to destroy the economy to save the environment."

Winning over Democrats from farming and coal states like Mr Nelson, Blanche Lincoln of Arkansas, Mary Landrieu of Louisiana and Evan Bayh of Indiana will be crucial if the Senate is to pass a climate change bill.

The upper chamber is still at the beginning of the legislative process. Its energy committee passed a bill in the summer and the influential environment and public works committee last week began discussing a proposal that aims to cut US emissions by 20 per cent by 2020. Analysts say it would take a miracle for the Senate to pass a bill - let alone reconcile it with the version already passed by the House of Representatives - in time for the Copenhagen summit next month.

The White House and the Democratic leadership, already facing an uphill battle over President Barack Obama's domestic priority - healthcare - have little political capital to spend on pushing through a climate change deal.

"There are so many Democrats from energy-producing states who are just not going to vote for it," says Patrick Michaels of the Cato Institute, a free-market think-tank. "What legislator wouldn't like to wash their hands of this, given the negative reaction of their communities to cap and trade?"

Still, Barbara Boxer of California and John Kerry of Massachusetts pressed ahead last week with their bill for a cap-and-trade system. While broadly similar to the bill already passed by the House, they are more ambitious on emissions reductions targets, aiming for a 20 per cent cut by 2020 compared with 17 per cent in the House version.

Initially, companies would receive billions of dollars of free permits. But the bill would require most of the money be returned to consumers and would entitle coal-fired plants that capture and store carbon emissions to bonus credits. It would also encourage investment in green technologies and nuclear power.

Still, it poses a challenge for many senators on the committee. "When I hear concerns about jobs and higher costs for consumers, I'm very much concerned," says Arlen Specter, a moderate Democrat facing a tough re-election in the coal and steel state of Pennsylvania next year. Most Democrats from coal states want a reduction of only 14 per cent to give industry time to adapt.

The overarching concern among resistant Democrats is the cost. "I don't see the logic of spending money to get a permit to emit. They should be spending money on R&D, not on permits," says Mr Nelson.

Others such as Ms Lincoln, who was recently elected chairwoman of the agriculture committee, argue that existing "tremendously good, bipartisan" legislation that promotes renewables, conservation and energy efficiency already offers the tools to curb emissions.