The past week has marked Barack Obama’s first State of the Union address, where the president traditionally outlines his agenda and priorities for the coming year, as well as reporting on the condition of the United States. As far as climate change is concerned, Obama seems to be continuing the approach we have seen him taking in the past months – while it is probably important to him, there are apparently many other issues that are more pressing and deserve a larger share of his attention.

In fact, he did not even mention climate change per se, other than referring to the (energy and) climate bill that was passed in the House over the summer, and even that, only as it relates to clean energy. Clean energy by the way – as far as Obama is concerned – is apparently nuclear (Obama’s proposed budget for 2011, to be sent to Congress on Monday, contains a tripling of government loan guarantees for nuclear power), offshore oil and gas, biofuels and clean coal. There was no mention of solar nor of wind, and the word ‘renewable’ was never used throughout the 71 minutes speech.

Once again, Obama skirts around the issue of climate change, referring only to clean energy, energy security and jobs. High speed rail is not a matter of moving away from dirty fuels used in planes and cars, but rather a way to create jobs. And it does not seem to take higher priority than building new highways. Apparently the Recovery Act should be enough to prevent “Europe or China [from] hav[ing] the fastest trains” (it’s not), as there was no mention of continuing investing in rail infrastructure beyond the one off investment in the Act.

Obama continues not to show strong leadership when it comes to climate change. He says he is grateful to the House for passing its bill last summer and that he is eager to help advance the bipartisan effort in the Senate, yet he does not mention what he would like to see in such a bill, he does not use this rare platform to move the discussion forward.

This was not the case in other issues – he used the SOTU to give quite a talking to to Republicans, especially in the Senate, for being continually obstructive and for focusing only on the next election rather than on governing the country. He made a gentle veto threat “if the [financial reform] bill that ends up on my desk does not meet the test of real reform”. Why then didn’t Obama even mention what a good climate bill should contain in his opinion? Why is there no mention of cap-and-trade or some other mechanism to reduce carbon emissions? Pandering to wavering Democrats and potential Republican allies is all very well, but what about showing the way? What about using this opportunity to outline his plans and his vision, as he has done with financial reform or Afghanistan?

Already, in the aftermath of the SOTU, business leaders such as Tom Donahue, President of the U.S. Chamber of Commerce and a well known antagonist to the House climate bill, and John Rice, a vice chairman of General Electric Co. pointed to the fact that America has a lot on its plate, and therefore a cap and trade bill is not likely to be passed in the coming year.

This is how momentum is brought to a halt…

(Image by: bslmmrs)

Founded in 1919, Société Générale de Surveillance, commonly known as SGS, are now potentially the world leading Designated Operational Entity (DOE) working within the remit of the United Nation’s Clean Development Mechanism (CDM).

But did they become so well established through raw business acumen, taking the ‘first mover’ advantage in a fledgling industry, or being at the right place at the right time with the right connections?

Experience Always Helps

SGS were fortunate to be in a position to possess all of the above.

The responsibilities of the DOEs are extensive: verifying the emission reductions of projects and ultimately ensuring that this verification leads to the all-important Certified Emissions Reduction (CER) issuance.

In many cases, CER issuance will be the principal income stream during a project’s lifetime, so the choice of DOE is an important one.  Historically however, this decision has been somewhat restricted, with the market taking on a distinct oligopolistic structure.

The most recent CDM performance data, supplied from the UNEP Risø centre, reveals that 93% of issued CERs came from five DOEs – from over 365 million CERs in total since 2005.  Interestingly, and rather poignantly, 49% of all issuances were verified by SGS, with the next largest holding only 23%.

The dominant share that SGS accounts for in terms of issuance volume can be partially explained by the fact that it holds most of the large industrial gas projects in the CDM as clients.  These sectors deliver around 75% of the total CER volume, and do so with relative frequency, i.e. once every 2-3 months.

Delving further into the CDM pipeline shows that SGS has projects operating in more countries than any other DOE.  Importantly, these are predominantly projects located in China and India, the two most productive locations in the CDM.

In the relatively short CDM lifetime, SGS picked up a wealth of experience in the right areas: sectorally and geographically.  It was a primary business aim to quickly establish themselves as the DOE of choice for any project in any location.  SGS were performing well and leaving many in their wake.

Does Experience Always = Best?

In September 2009 however, the legitimacy of the CDM suffered a severe shock following the CDM Executive Board’s decision to suspend SGS for three months, after it was unable to prove its staff had adhered to inspection rules or that they were qualified to do so in the first place.

During this time, SGS was not permitted to upload any further project reports to the UNFCCC website, or submit any further requests for issuances.  Despite this, it was only until 12 January 2010, after the suspension had finished, that issuances from SGS-verified projects ceased; such was the volume of their future issuance pipeline.

But this was not the first time that a large project auditor has been found failing to follow Executive Board procedures.  SGS was the second such company to be suspended.  Norwegian-based Det Norske Veritas (DNV) was found wanting during a spot check in November 2008 for comparable reasons as the above, and was similarly suspended for approximately three months also.

With a reputation comes a pressure to sustain business demand.  During this suspension, a ‘gentlemen’s’ agreement was installed to help prevent other DOEs from poaching clients from DNV.

It is credible to assume that this approach was also adopted during the suspension of SGS, much to the relief of the company shareholders.  Any delay in CER issuances as a result, particularly involving large volumes, would likely test the patience of sizeable project owners and their clients, who may not be as forgiving should it happen again.

As such, critics were quick to conclude that the suspension only further highlights the inadequacies of the CDM, and that such actions do nothing to allay any fears that the CDM is a risky venture.  After all, project proponents already have many risks to deal with that span political, regulatory and eligibility boundaries.

Conversely, supporters of the flexible mechanisms suggest that these suspensions emphasize that the processes installed are working and that the credibility of the CDM is upheld because of it.  Contracting is a required part of the project process and goes some of the way to safeguard CER buyers and in some certain circumstances, sellers.

In any case, until competition in the DOE market begins to show signs of improvement, it appears that SGS may yet hold onto their place as the most experienced of the CDM verifiers.  And with project developers holding onto their mantra of ‘experience experience experience’, who can blame them?

Climatico has just released its latest report entitled, “Copenhagen De-briefing: An Analysis of COP15 for Long-term Cooperation”

This report analyses key issues under discussion in Copenhagen including: finance, technology transfer, REDD+, CDM and JI, as well as the ongoing conflicts between Annex I and Non Annex I countries. The Copenhagen Accord is also discussed along with its potential effect on future negotiations.

Download the report

With the dust barely settled from the Copenhagen talks, critics within Canada have been scathing of its approach to the talks. They note Canada’s failure to take any leadership, its humiliation at the hands of the Yes Men (although there, Canada is hardly alone) in recent times, as well as the recipient of a fossil award, for lack of leadership as an industrialized country. When leaders came out of Copenhagen with an underwhelming accord, many in Canada were quick to point the finger at their own government’s failure.

Continue reading…

Guest Author: Bettina Wittneben

The Copenhagen Accord is a beautifully written document and full of good intentions. I encourage everyone to read it. It can be found on the UNFCCC website, is quite short and touches on many of the contentious issues in climate change policy. Unfortunately, it is almost entirely lacking of any consequence or even content. Today, this document is literally empty: it contains two tables that are intentionally blank. Let’s have a closer look.

The WHAT

This is the first UN document that mentions the 2 degree target. This aim of keeping the temperature rise below 2 degrees from pre-industrial times has been championed by the EU and others for a while but was never formally adopted. Over the past year, however, voices have become stronger that temperature rise should really be kept below 1.5 degrees rather than 2 degrees to save human lives and many species from extinction. This challenge of the initial magic 2 degrees target might actually have made it acceptable for mainstream politics to acknowledge a 2 degree target rather than going with the more stringent 1.5 degree target. How we can prevent temperatures from rising above 2 degrees globally and what that means in terms of limiting greenhouse gas emissions today remains unresolved. It is a comfortable goal for policy makers, because it remains fairly vague. That is, of course, not according to the IPCC report which prescribes a radical reduction of emissions urgently to stay below 2 degrees. But who will be held liable when temperatures surge beyond 2 degrees? Will the signatories to the Copenhagen Accord be dragged in front of an environmental court? Right now, we are already at a one degree temperature increase. It is almost a farce that the agreement states to review a 1.5 degree goal in 2015. By then, given that we are not lowering emissions, it is difficult to imagine that we would be able to keep temperature rise below 1.5 degrees.

Further figures are in relation to funding adaptation and mitigation measures in developing countries. The sum of $30bn is to be provided within the period from 2010 to 2012. This money is to be new and additional and to be provided by industrialized countries. This figure is similar to what has been promised by the EU and the US earlier in the negotiations.  More significantly, the agreement promises developing countries $100bn per year starting in 2020. This money, however, is to “come from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance.” After the financial crisis the imagination is left to run wild on what alternative sources of finance could be. This latter money is to be managed through a newly established Copenhagen Green Climate Fund. Note here that the Adaptation Fund of the Kyoto Protocol took more than a decade to set up, even though its financial implications are not as wide reaching as this new fund.

The reporting requirements of the Copenhagen Accord are not very different from what the Convention set out 17 years ago. The frequency of reporting has increased since then  (from ‘periodically’ to ‘every two years’) but the content of national reports by rapidly industrialized countries do not require more stringent attention as emphasised by the US and exact guidelines are to be decided on within the Conference of Parties process.

The Copenhagen Accord also appeals to the forces of the market. “We decide to pursue various approaches, including opportunities to use markets, to enhance the cost-effectiveness of, and to promote mitigation actions.”  It is a very hollow commitment to the belief that the market will lower costs of mitigation action. After a decade of experimenting with market mechanisms and debating their flaws, falling for fraudulent behaviour and being exposed to years of arbitrage, this sentence seems to be a weak declaration that market approaches to climate action can still be seen as useful.

Surprisingly, the Kyoto Protocol is mentioned in the agreement. “Annex I Parties that are Party to the Kyoto Protocol will thereby further strengthen the emissions reductions initiated by the Kyoto Protocol.” Does that mean that somehow, miraculously, the emission reductions promises delivered for information purposes only to the Copenhagen Accord next month will transform into a second commitment period? It is not clear.

The WHO

Here, the writers of the Copenhagen Accord take a rain check: watch this space after 31 January 2010. Until then, countries have time to enlist (literally, sign up to the currently empty list) and express their intentions. Industrialized countries need to state their emission reduction goal for 2020 and the baseyear they calculate that on. Developing countries need to state their mitigation actions, including a wish list of actions that need financing from the wealthier nations.

The SO WHAT

• Countries still need to sign on.
• Emission targets still need to be set.
• Mitigation actions in developing countries still need to be declared.
• The finances still need to be sorted out.
• The extent of the market mechanisms still needs to be determined.
• The reporting still needs to be improved.
• The planet still needs to be saved.

The Copenhagen Accord does not go beyond the Kyoto Protocol. More ambitious targets including a broader group of countries, more stringent rules on the market mechanisms and limits to using credits as alternatives to reductions could have all been negotiated under a second commitment period. Was it really necessary to start with a new agreement from scratch?

The Bottom Line

All seemed lost in Copenhagen when the Copenhagen Accord was agreed on as a last ditch effort to come up with something that had the word ‘Copenhagen’ in it. Since many of my American colleagues already call the Kyoto Protocol the Kyoto Accord, this name seems most agreeable to an American public. Whether this document can be called a treaty is another matter. The climate summit in Copenhagen has been marred by poor organization, posturing and arrogance as well as the usual political divisions and struggles. After two years of almost continuous negotiating since Bali, we would have been left with nothing were it not for the Copenhagen Accord. The world leaders have saved the day – just not the planet. One thing is clear: there is a whole lot more work to do. Luckily. The climate conference caravan can now move on. We already have dates for the next COPs – see you in 2010 in Mexico and 2011 in South Africa. In the meantime, climate change will take its toll and irreversible climate chaos is becoming inevitable.