The French government is working towards implementation of a direct carbon tax by July 2010. France’s Constitutional Council struck down the first version of the carbon tax bill last 29 December. On 21 January 2010, the government proposed a number of amendments to the original legislation, which is aimed at encouraging French consumers to be more energy efficient and conscious of their energy decisions.

The first version of the bill was meant to take effect on 1 January; halting its inception has been greatly embarrassing to Prime Minister, Nicolas Sarkozy. The legislation was deemed unconstitutional due to a large number of sectoral exceptions. The new version of the bill will maintain the originally proposed 17 EUR per tonne of carbon dioxide with compensation for households. There has been a reduction in the number of exemptions. Though, certain “sensitive and energy-intensive sectors” will still receive special exemptions. Farming and fisheries will pay just one-quarter of the normal rate; road transport and shipping, will only pay 65 percent.

French Environment Minister, Jean-Louis Borloo, has begun a series of consultations with companies, trade unions, and environmental non-governmental organizations concerning the specifics of the legislation. “The goal is to develop a new draft, which will be sent to Parliament for approval by spring,” spokesman Luc Chatel told a press conference after the weekly cabinet meeting.

Under the new proposal, the tax level remains at 17 EUR per metric tonne of CO₂ at over 1,000 of the most polluting sites. The main innovation of the amended bill is the inclusion of previously excluded sectors, such as power stations, oil refineries, and cement works. These plants were exempted in the first version of the bill because they are scheduled to be subject to a European Union quota system to be implemented in 2013. EU regulation calls for emissions in those sectors to be reduced by 21% by 2020.

In late January, a poll released by ViaVoice showed 51 % of the French public thought the government should abandon the tax proposal. “The carbon tax should not be an umpteenth tax used for filling up the state coffers,” small business union CGPME said in a statement. The French government is addressing this concern. It continues to stress that for businesses of all sizes, combined with the reform of local business taxes, the carbon tax will merely serve to transfer taxation away from work and investment. Yet, the debate continues to focus on how to compensate low income households,; due to inefficiency, the tend to use relatively more fuel and many work at night before public transport is running.

“The best would be for it to be ready in 2010 but it’s true that all these details … are complicated,” Michel Rocard, a former Socialist prime minister, said in an appearance on Europe 1 radio. “I don’t know if we will be ready in 2010.”

Last July, Rocard headed a review report of the potential tax for the government. At that time, the burden of the tax was presented as being divided roughly equally between households and businesses. There is no clear indication of how this division will change under the most recent tax proposal.

After a first round of consultations, the French government has unveiled two options for introducing the tax system into industrial sectors already subject to the European emissions quota system.

The first option would levy the carbon tax on all industries, but the introduction would be at reduced rates for companies most exposed to international competition, as well as for those that are the largest consumers of energy. A series of quantitative criteria (yet to be fully unveiled) will be used in order determine the particular rate of tax.

Additionally, under this plan, companies would be entitled to receive a tax credit on investments aimed to reduce both energy consumption and emissions and to prevent industrial risks.

The second option for the tax would construct a bonus-penalty system. All industrial installations would be subject to the tax of of 17 EUR per tonne of carbon dioxide emitted. Under this second plan, each business would receive a lump sum tax credit, dependant upon its efforts made to reduce emissions.

“This is the beginning of a wider process of reflection and consultation,” Economy Minister Christine Lagarde said after the report was presented.

While most politicians agree emissions must be cut to fight global warming, a key part of the debate is on how to compensate poorer households, workers in certain sectors and those who need to drive because they work at night or live in rural areas.

France aims for an 80% reduction in CO₂ emissions by 2050.

France would be the largest economy to apply a direct carbon tax, mirroring existent measures in Denmark, Sweden, and Finland.

Canada has slightly adjusted its mid-term climate mitigation targets to match US pledges. Canada’s Environment Minister, Jim Prentice, recently announced that Canada has changed its mitigation goals in an effort to harmonize with the Obama administration.

Canada’s new emissions reduction target for 2020 is a cut of 17% on 2005 levels. Heading into the Copenhagen meeting this past December Canada’s mid-term target was a 20% reduction on 2006 levels by 2020. This adjustment comes as countries report their national targets to the UNFCCC as outlined in the Copenhagen Accord. The new Canadian commitment has been labeled by environmental groups as being slightly less stringent than the previous target, and well outside the range of targets proposed by the European Union (20% cuts from 1990 levels by 2020, with the possibility of going up to 30%).

On the face of things, Canada’s adjusted target is just another step towards an apparent harmonization between the Canadian and US positions on climate change, something that Minister Prentice has been calling for since taking over the portfolio.

However, differences clearly remain on policy direction and actions for addressing climate change. While Canada will now follow US pledges for 2020, it is not clear if Canada will adjust its long term targets to match those included in legislation before the US Senate.  A climate bill passed by the House proposed a sharp cut of 80% on 2005 emissions levels by 2050, a target that the Canadian government does not seem to be considering.

Additionally, as previously reported on Climatico here, there is a big difference in stimulus spending on green initiatives on either side of the 49th parallel. Reports by the Pembina Institute have suggested that the U.S. is vastly outspending Canada on a per capita basis on renewable energy infrastructure.

In a recent speech in Calgary to oil executives, Minister Prentice indicated that any Canadian action on climate change was contingent on American actions. Critics have argued that this matching of American policy may result in indefinite delays as climate legislation faces an uphill battle in the US Congress.  This position has also resulted in furthering internal political divisions within Canada, as Quebec Premier Jean Charest came out strongly against the federal government policy.

If Canada is to wait for certainty in the American position it could be some time before Canada implements a comprehensive program to reduce emissions, either through a cap-and-trade scheme or through regulation.

While the Obama administration is making moves towards regulating carbon emissions through the Environmental Protection Agency it is unclear how far along Canada’s plans are to similarly regulate industry north of the border.  A plan to regulate emissions from heavy industry in Canada was due to be released last year (a deadline already shifted numerous times) but will now likely be stalled indefinitely.

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…

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.

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After APECs confirmation of what had increasingly seemed inevitable - that the Copenhagen summit wouldn’t be the major breakthrough it was heralded to be - the chances of swift and effective action on climate change seem to have faded. But Europe has not been the leader on this issue its rhetoric would suggest. And the German example exemplifies this trend.

First, take Angela Merkel: she likes to point to Germany’s record as a leader on environmental technology and climate change policy; indeed, climate change featured prominently in her speech to the US Congress. Yet, at the same time Merkel seemed to constitute the major block against concrete EU-pledges of financial aid for climate change adaptation to developing countries at the EU summit at the end of October; and that even though the head of the German federal environmental agency (Bundesumweltamts) argues that Germany will need to spend €5 billion a year in adaptation funding to developing countries.

Another telling sign of ambiguity was her stance about attending the Copenhagen summit in person. Faced with opinion polls that show 90 percent of Germans in favour of her attending the summit, Merkel first announced she was going to attend the summit, only to have her press spokesman relativise this statement the next day, stating Merkel would only attend the summit if there were ‘chances for a significant breakthrough‘. As of this morning Merkel was once again set to attend the summit. A good sign, surely, but a week of changes to her decision can hardly be seen as a sign of unwavering commitment and belief.

The ambiguity about how much a priority climate change should be politically does not stop with Merkel. Dirk Niebel, development minister and member of the CDU’s liberal coalition partner FDP, drew widespread criticism by suggesting as early as last week that he thought a binding agreement at Copenhagen was unlikely to materialise - and placing any possible blame for this on large transitional economies like India, Brazil and Mexico. In retrospect Niebel’s perception of likely failure has been realistic, but statements like this always have a certain quality of political self-fulfillment. It certainly did not help Norbert Röttgen’s dramatic rhetorical attempts to convince other countries and the German public that ‘failure in Copenhagen is not an option‘. A new government always needs some time to speak with a unified voice and define priorities. But given the danger of outright failure in Copenhagen, Germany has certainly not played the proactive role that it could have. But it is definitely not alone in this failure.

The UK’s energy security prospects are once again making the headlines, as Ed Milliband this week announced the top 10 suitable sites for the next generation of nuclear power plants, describing nuclear power as a “proven, reliable source of low carbon energy”.

The announcement comes amidst heightened concerns surrounding the peak oil debate, with the UK ERC claiming that conventionally extracted global oil production could ‘peak’ and go into terminal decline before 2020.

However, the environmentalists have criticised the decision, warning of the “deadly legacy” of radioactive waste, and argued that investment should be focused on renewables instead. Interestingly, one of the oldest and most efficient windfarms in Britain will be dismantled at Kirksanton to make way for the nuclear plant, to the dismay of some locals.

Faced with the prospect of depleting supplies from the North Sea, the UK is now paying the price for its ‘dash for gas’, following the closure of the coal mines in the 1980s. To support the development of this next generation of energy infrastructure, the UK Government has announced a host of measures to reduce the planning constraints that are likely to hamper such large infrastructure projects, and hopes to have the first new nuclear plant operating by 2018.

Professor Barry Brook at the University of Adelaide has welcomed the announcements from the UK government, and encouraged the Australian government to take heed. He highlights that unlike the situation for uranium power, the electricity price is strongly tied to the fuel price for gas and therefore fluctuations in gas prices lead to price spikes in power prices.

Cheap uranium energy, on the other hand, provides a much more secure proposition to meet both energy security and climate change goals; and he adds that

“…there is enough uranium to provide the whole world with zero-carbon power for millions of years.”

Nuclear power is the only proven electricity generation technology that can simultaneously meet reliable baseload demand, anywhere, and yet emit no carbon dioxide when operating. Along with hydropower from dams, it is the only clean energy technology that has been shown to be scalable.

France is a case in point. It derives nearly 80% of its electricity from 59 nuclear plants and is the world’s biggest electricity exporter. It has the cheapest power rates in Europe, and has the lowest carbon footprint per person.

However, the significance of radioactive wastes and contamination threats should not be underestimated if we really want to promote sustainable development that considers the intergenerational impact and legacy of such technologies. In this vein, it might be argued that the significant funds for these large infrastructure projects would, in fact, be better targeted at scale-up and capacity building for renewable technologies such as wind, solar, tidal and others, which don’t generate such controversial by-products.  For now, the pressure is on in the UK to streamline the planning process to enable the speedy construction required to bridge the expected energy gap.

It started the previous Friday, when President Obama paid a visit to MIT and gave a speech on clean energy and climate change. Without going into policy details, Obama emphasized the innovation needed to respond to the climate challenge (which was very appropriate to the location) and reminded how such innovation is part of what helped shape the United States and how it can place the US back in a leadership position. He also attacked those who appose any attempts to move towards a low carbon economy, saying that “There are those who will suggest that moving toward clean energy will destroy our economy — when it’s the system we currently have that endangers our prosperity and prevents us from creating millions of new jobs.”

As if to prove that last point about creating new jobs, Vice President Biden went to Delaware on Tuesday to announce the reopening of a former General Motors factory by Fisker Automotive. Only now the factory will produce plug-in hybrid vehicles. Like other members of the administration, the vice president noted the importance of such projects to the American economy as a whole - “we’re on our way to helping America’s auto industry reclaim its top position in the global market.”

That very same day, Obama was in Florida where he announced an investment of $3.4 billion of Recovery Act funds in projects aimed to start the transition to a smart energy grid. Out of the three this is by far the biggest development – not only is it the largest single energy grid modernization investment in U.S. history, it is also a huge push towards making America more energy efficient and more reliant on alternative energy. And of course, another opportunity for new jobs. This is a very important point when garnering support for climate action within the US, alongside direct economic benefits to the public, which is why Obama once more emphasized that “Such an investment won’t just create new pathways for energy — it’s expected to create tens of thousands of new jobs all across America… It’s expected to save consumers more than $20 billion over the next decade on their utility bills.”

These are just the most public and high-level of the administration’s involvements this past week in supporting a clean energy future. There were also the testimonies of several cabinet members and the head of the EPA in front of the Senate’s Environment and Public Works committee (which held three days of hearings on the Kerry-Boxer climate bill – the bill’s markup is expected to start today, assuming the Republican boycott of the meeting won’t prevent it from happening) and Energy Secretary Chu published a piece about weatherisation and energy efficiency in the Huffington Post.

It seems then, that now that the climate bill is being discussed in the Senate, the administration is publicly showing its support for climate action, something that was sorely lacking during discussions in the House (though behind the scene the White House did apply pressure on Democrats to support the bill). And though the main target is domestic, this is probably also suppose to serve as a demonstration of the administration’s commitment in the international arena in the run up to Copenhagen.

With hopes fading for a comprehensive climate treaty as the clock ticks down to Copenhagen, increasing focus will be placed on interim measures and incremental agreements that can be formalised at Copenhagen.  Coming just six weeks before the summit, the United Nations Environment Program Finance Initiative (UNEP FI) is hosting its Global Roundtable in Cape Town.  The first time the event has been hosted in Africa, the Roundtable, which opens this evening, aims to partner environmental groups under the umbrella of UNEP with representatives of the financial sector and provide a forum for discussing and setting new agendas for sustainable finance.

 The summits focus, ‘Financing Change, Changing Finance’ is timely, especially in lieu of flagging momentum for a comprehensive agreement at Copenhagen. Governments and political momentum has illustrated its weakness this year in overcoming major barriers to enacting an agreement at Copenhagen, for example Congress’s inability to implement and legislate binding targets on emissions has resulted in many feeling Copenhagen might be a wasted opportunity before it has begun. This does however mean focus may now shift more in favour of the private sector, which has an opportunity to show what collaborative and innovative financing architecture can achieve. 

The volatility of the finance and evolving capital markets means there is no simple step to implementing sustainable financing mechanism, especially with regards to ecosystem services where there is not a fixed or easily measurable metric or asset. However the planetary implications of climate change and global ecosystem loss mean there is momentum to get discussions on the table and integrate climate, poverty and social dimensions into financing mechanisms.

The Roundtable will have wide representation from major financial institutions including Peter Blom, CEO of Triodos, the Financial Times Sustainable Bank of the Year as well as a host of South African and international private banks, financial analyst firms, global players in the insurance business and suite of the leading global environmental NGOs like the WWF. The event is unique in bringing together top calibre financing institutions and venture capitalists with the leading brains behind innovations in environmental finance like Pavan Sukhdev, the ‘Stern’ of ecosystem services, as study leader for The Economics of Ecosystems and Biodiversity (TEEB).

The timing of the event and amalgamation of speakers and attendees means there is an opportunity to deliver some hope before Copenhagen in working towards incremental financing mechanisms. One hopes the ‘butterfly effect’ of changing finance can inspire the existing political barriers in building momentum before Copenhagen.

Speaking at the recent Conservative party Conference in Manchester, held on 5-8^th October, shadow energy and climate change secretary Greg Clark claimed that the UK needed an ‘emergency plan to rescue our energy policy’ within days of a general election.

The current UK energy policy from a glance appears to contain many strong ‘green’ policies, but in some cases, and a certain level of financial commitment to funding these policies.  But unfortunately the impact of these policies is simply too early to tell.   It may be argued that the Labour Party have made several large strides in leading the way forward to the global talks in Copenhagen, by being the first country to call a UN Security Council meeting on climate change, and by being the first country to introduce a Climate Change Bill with the aim to reduce CO2 emissions by at least 20% by 2020.

Despite the above strides, the Conservative’s argue that UK is in a ‘dire position’ and is in absolute need for a new ‘Green Deal’ which aims to; 

• Provide £6,500 to every household to upgrade the energy efficiency of their home
• Improve the carbon footprint of the least efficient homes and save 9.4 million tonnes of CO2
• Create around 70,000 jobs, including 3,500 apprenticeships
• Open up a market worth £2.5 billion a year
• Authorise five GW of clean coal capacity fitted with carbon capture and storage
• Immediate publication of the planning needed for new nuclear power stations
• Give the right for every community to host wind farms and keep the revenue from business rates generated for 6 years
• Make the national grid extend its network offshore
• Build Marine energy parks
• Lastly, scrap Labour centralised, target led approach to house building

Over the past 12 years the UK government has seen 15 Energy Ministers tackle the climate change agenda.  The most recent drive from government, led by Ed Milliband in concentrated in the delivery if the Low Carbon Transition Plan and more widely known, the UK’s Climate Change Action Plan.

Supported by the establishment of the Department of Climate Change, another Labour initiative, a number of policy commitments are designed to create a low carbon economy, these include;

• Introduction of the Renewables Obligation
• Climate Change Levy (see rates through the HMRC link)
• Carbon Reduction Commitment
• Implementation of long-term legal Frameworks e.g. Committee for Climate Change to measure these changes
• Zero carbon homes target setting by 2016
• Development of a £100m blueprint for renewable energy - to target supply
• Adoption of a Waste Strategy aimed to deliver 9.3 million tonnes of savings of CO2 per year by 2020
• Water and air is recordable cleaner than 1997 levels and waste recycling has quadrupled

So how much of these green pledges are just talk?  The government has pledged big targets to reduce CO2 in the UK, but many of the Party members are aware of the small details on how they will be delivered.  For example, according to a study carried out by ComRes research of 150 MPs, it revealed that 72% were unaware of the government’s target for all new housing to be zero carbon from 2016.  The study further identified that members of the All-Party Parliamentary Group were unaware that a quarter of MPs didn’t know that more than a quarter of UK emissions came from Housing. 

Perhaps the green campaigns from both parties need to target their members, as well as communicating plans to its voters.  There are many successes attributed to the policies employed by the Labour Party to date, however, it is also clear of the recent challenges in delivery, for example, the Part-L planning consultation, the nuclear debate, and the changes to the Carbon Reduction Commitment timescales for its implementation. 

Once a policy is made, does it stand up strongly to meet the realistic outcomes, to time and budget, or simply sound good to the voters in Britain - you can decide, its your vote!

The Committee on Climate Change released its latest report today highlighting the devastating impact the economic recession has had on carbon trading schemes and investment for low carbon technologies. The report emphasises the vast investment needed in efficiency through green housing, power and transport in Britain, to service the goal of meeting the commitments in the Climate Change Act.

The Committee has called for ‘dramatic improvements’ in efficiencies across the economy, suggesting that more ‘forceful’ policies may be required to increase annual cuts in emissions by four-fold.

The Committee also recommends

- The introduction of 1.7m electric cars, with 3.9m drivers trained in fuel-efficient techniques, by 2020

- Building 8,000 new wind turbines, alongside four new coal power stations fitted with carbon capture technology and three new nuclear power plants, to slash emissions from the power sector by 50% by 2020.

The Government’s largest proposed clean coal plant to be fitted with CCS was shelved by E.ON last week, also reportedly as a result of the recession. However, the announced delay in the Kingsnorth project, which had become the focus of protests against climate change, heavily targeted by climate camp activists and the media; leaves politicians wondering how they might fill the expected energy supply gap in 2016.

The recession has also had a significant impact on the world’s emissions trading schemes - expected to be pivotal in driving market signals for low carbon investment. The drop in energy consumption, which led to the shelving of the Kingsnorth project in the UK, has also led to a drop in emissions in Europe, resulting in a surplus of carbon credits in the EU ETS. It is feared that this might result in a carbon price of just €20 a tonne in 2020, rather than the €50 a tonne used for its previous analysis.

The Committee has suggested that options to strengthen the carbon price, including the government underwriting a minimum price or intervening in the electricity market, should be “seriously considered”. On Friday, a report from Ofgem suggesting domestic energy bills could rise 14-60% by 2020 was seen by energy industry experts as an acceptance that the market-driven system has failed and the government needs to be more interventionist.

So the recession has played its role in dampening the prospects of the low carbon investment opportunities, and strong leadership will be essential to deliver the ‘radical’ and ‘dramatic’ improvements that the Committee has demanded. With Ed Milliband’s small budget, and uncertainties over changes in government next year, the UK needs to dig deep to create green opportunities that rescue the nation from the dire straits, courtesy of the economic recession.