Authors: Sabrina Chesterman & Nyla Sarwar.

As the climate talks gain pace in Bonn, progress is being made on a new text, designed to resurrect chances of a global agreement in Cancun in December. Many, including outgoing UNFCCC Executive Secretary, Yvo de Boer, are still hesitant about Cancun being able to achieve a deal, which was originally supposed to have been reached at Copenhagen last December. One of the Mexican negotiators, Luis Alfonso de Albo, has used the coverage at Bonn to try and instill confidence in what may be achieved there, stating a climate deal is still ‘positive’.

The Bonn meetings have brought together key negotiating groups, including;

(I)              AWG-KP – to focus on further commitments by Annex I parties, based on text prepared by the Chair

(II)            AWG-LCA – to focus on preparation of an outcome to be presented to at COP 16, based on a new text by the Chair

(III)           Subsidiary Body for Implementation (SBI) – which will consider issues including national communications and reporting, the financial mechanism and capacity building.

(IV)          Subsidiary Body for Scientific and Technological Advice (SBSTA) – which will consider methodological issues, technology transfer and the Nairobi Work Programme on impacts, vulnerability and adaptation to climate change.

The Bonn discussions have entered their second week with many fundamental questions still remaining regarding the legality of the proposed agreement, emission levels and temperature goals.  The big white elephant in Hotel Maritim where the discussions are being held, lingering from Copenhagen, centres on the scale of commitments by developed and developing countries. The new text aims to ameliorate the huge bridge that exist between these groups and integrate the Copenhagen Accord with the 2009 versions of the AWG-LCA and AWG-KP texts.

In regards to finance, the new text states that that all finance will be new, additional, adequate and predictable. Whilst developed countries have committed to a goal of mobilising USD$100bn/pa by 2020, there is still uncertainty about which countries will contribute towards this and how much. Discussions regarding the generation of private funds have seen suggestions of a potential international cap-and-trade system with auctioned permits. There have also been references to the creation of a Finance Board within the UNFCCC to manage the operators of the agency’s financial mechanisms (i.e the GEF and the Climate Fund), including the Copenhagen Green Climate Fund (CGCF). Disillusionment regarding funding is also created due to the texts reference to the Copenhagen Adaptation Framework (CAF), implemented through international collaboration. The CAF aims to undertake 11 activities (e.g. planning, vulnerability assessments, strengthening institutional capacities, building resilience, disaster risk reduction etc.) all of which require extensive funding.  Worryingly the text remains sparse on new market mechanisms, likely to be critical to galvanise funding, especially from private and public sector partnerships.  In addition, as the EU Commissioner for Climate Change, Connie Hedegaard, made clear last week discussing the monetary agreements in lieu of the destabilised Euro does not come at an easy time, especially with money having to be drawn from the public purse.  Therefore funding remains a sensitive yet pivotal topic, especially if alliances are to be bridged between different negotiating groups.

Some aspects of the text being prepared at Bonn remain unchanged from the text prepared at Copenhagen. An example includes the issues surrounding REDD and REDD+, which was hailed as one of Copenhagen’s successes. In addition, the text regarding technology transfer remains unchanged from last year, and this section is considered to deliver a major outcome. The text suggests that establishment of a Climate Technology Centre and Network – the mechanism to support and organise the transfer of technology, encourage collaborative innovation, and skills development for developing countries. It is expected to be funded by the overarching funding mechanism and could begin as early as January 2011. Leading on from technology transfer, discussions so far at Bonn regarding capacity building have been largely inconclusive with additional brackets added to the text, and wide disagreement concerning its funding, delivery mechanism and reporting. With key uncertainties remaining, negotiators at Bonn have a lot of talking to do this week if success is to be achieved in any of these areas and a clear path to Cancun is to be laid.

It’s been almost a month since the UK’s newly elected, and historic, Coalition Government was formed, introducing an interesting partnership between the Liberal Democrat and Conservative parties. With over 22 bills announced in last week’s Queen’s speech, the Coalition certainly has its work cut out over the next 18 months.

Without doubt, the biggest concern of this Government is the reduction of the national deficit, which stands at a colossal 12% of GDP. However, the newly elected PM, David Cameron, and his Liberal Democrat deputy, Nick Clegg, have pledged that the urgent need to develop a low-carbon economy will remain a key issue and focus amidst deficit reduction plans. To affirm his commitment, one of Cameron’s earliest announcements included a target to reduce central government carbon emissions by 10% within next 12 months. In the same vein, the PM has also committed to push the EU to demonstrate leadership in tackling international climate change, including by supporting an increase in the EU emission reduction target to 30% by 2020.

The Energy Security and Green Economy bill announced in the Queen’s speech last week is expected to deliver some of the pledges made in the Coalition Government’s manifesto (see below). The Bill will focus on maximising energy efficiencies and renewable energy generation through a range of innovative policy measures, including ‘green loans’ for buildings and businesses, designed to increase investment in green technologies and efficiency measures across the UK. Importantly the loans are associated with the building or business and not the individual, enabling owners to transfer payments to new owners if the property/businesses are sold.

However, this Green Deal is the only part of the government’s low-carbon agenda that is currently certain to make it into the final version of the Bill after DECC announced that a host of other legislative measures “may” be included in the legislation. The Department is still finalising proposals for legislation to regulate emissions from coal-fired power stations (with uncertainty around the baseline for performance), provide a framework to govern the rollout of smart grid technologies, lay the foundations for a green investment bank, reform energy markets to enhance security of supply and competition between operators and ensure North Sea infrastructure is open to companies operating in smaller oil and gas fields. Whilst the latter option remains controversial, the Government has made suggestions that it will seek to maximise opportunities for the continued extraction of fossil fuels and opencast mining, ironically exhausting carbon intensive energy resources to build the ‘foundations’ of a renewable and low carbon economy. This has dismayed some environmentalists, who remain skeptical about how this Coalition will set itself apart from the previous Labour Government.

However, the proposals put forward will have to contend with the £6.25bn of public spending cuts also announced last week by George Osborne. Whilst the Department for Energy & Climate Change (DECC) won’t suffer as much as some other Government departments, it is set to lose £85M from its budget, with DEFRA losing as much as £162M. In what he has described as the “fastest and most collegiate spending review in recent history” Osbourne plans to recover the remaining savings in £20.2M cuts to the department’s delivery bodies and a further £26m from other efficiencies, including £6M by targeting lower impact spend in the Regional Development Agencies. In addition, £34M will be cut from business support programmes including moving forward the closure of the Low Carbon Buildings Programme (LCBP), which provides grants to households and businesses installing renewable energy technologies. A new feed in tariff incentive, launched in April 2010 is expected to replace the LCBP and provide incentives for microgeneration of renewable technologies, however with the launch of the Renewable Heat Incentive (RHI) not expected until next year, there are concerns that some parts of the market are exposed to a lack of policy clarity or incentive.

Leonnie Greene of the Renewable Energy Association said producers of biomass systems, ground source heat pumps and other renewable heat technologies now urgently needed clarity on when the proposed Renewable Heat Incentive (RHI) scheme will be introduced.

Whilst many of these cuts are likely to deliver emissions reductions, the Government is faced with the risk of stifling long term green investments, which would inevitably deliver economy wide savings in the future.

Interestingly, two of the government’s most controversial environmental policies – its proposal to enforce a floor price for carbon and reform renewable energy incentives by extending the feed-in tariff – were noticeably absent from the list of measures to be included in the final bill. Whilst the Government has demonstrated some ‘fresh thinking’ on this agenda, there is a sense that there is much thinking still to be done. Inevitably the next 12 months will be critical, and comprehensive consultation, speedy implementation, and strong political direction will determine how well Cameron guides the UK through its worst debt crisis, and critical energy reforms to better position the nation in a future low carbon economy.

The Coalition Government’s vision for decarbonising the UK

1. The establishment of a smart grid and the roll-out of smart meters;
2. The full establishment of feed-in tariff systems in electricity – as well as the maintenance of banded ROCs;
3. We will instruct Ofgem to establish a security guarantee of energy supplies.
4. Measures to promote a huge increase in energy from waste through anaerobic digestion;
5. The creation of a green investment bank to support low carbon projects to transform the economy. As part of the creation of a green investment bank, the Government intends to create green financial products to provide individuals with opportunities to invest in the infrastructure needed to support the new green economy.
6. The provision of home energy improvement paid for by the savings from lower energy bills;
7. Retention of energy performance certificates while scrapping HIPs;
8. Measures to encourage marine energy;
9. The establishment of an emissions performance standard that will prevent coal-fired power stations being built unless they are equipped with sufficient CCS to meet the emissions performance standard;
10. The establishment of a high-speed rail network;
11. The cancellation of the third runway at Heathrow and the refusal of additional runways at Gatwick and Stansted;
12. The replacement of the air passenger duty with a per-flight duty;
13. The provision of a floor price for carbon, as well as efforts to persuade the EU to move towards full auctioning of ETS permits;
14. Measures to make the import or possession of illegal timber a criminal offence;
15. Measures to promote green spaces and wildlife corridors in order to halt the loss of habitats and restore biodiversity;
16. Mandating a national recharging network for electric and plug-in hybrid vehicles;
17. Continuation of the present government’s proposals for public sector investment in CCS technology for four coal-fired power stations; and a specific commitment to reduce central government carbon emissions by 10% within 12 months.
18. Intention to seek an increase in the target for energy from renewable sources, subject to the advice of the climate change committee.

Ministerial Arrangements in the new Coalition Government

Chris Huhne MP has been appointed Secretary of State for Energy and Climate Change in the new coalition government.

Charles Hendry MP and Gregory Barker MP have been appointed as Ministers of State for Energy and Climate Change.

Lord Marland has been appointed as Parliamentary Under Secretary of State for Energy and Climate Change.

Australia’s cap and trade system, the Carbon Pollution Reduction Scheme (CPRS), is being reintroduced into Parliament this week, after two rejections in 2009 (see here and here). However, it is almost certain that it will fail again, following decreasing public support for the policy after the Copenhagen conference and Tony Abbott’s ascension to the opposition leadership.

To start with, public support for Prime minister Kevin Rudd’s flagship policy has dived 10 points from 66 to 56 per cent according to the latest Herald/Nielsen poll, while opposition to the trading scheme has risen 4 points from 25 to 29 per cent. While there has always been a high level of confusion in the electorate about climate change policy, and in particular about the CPRS, the failure of the Copenhagen conference shifted to a certain extent the public sentiment about climate change. In particular, extensive media coverage of a series of ‘scandals’ linked to the IPCC’s work has opened new windows for the numerous Australian and international climate sceptics (see for example Lord Monckton).

However the biggest challenge faced today by the government is without doubt the unexpected come back of the opposition (the Liberals) in the climate debate. The previous opposition leader, Malcolm Turnbull, is a supporter of the scheme, which had greatly divided his party over the climate issue, to the benefit of the government. Yet Turnbull has recently been ousted by Tony Abbott, a strong opponent of cap and trade and climate policy in general, not to say a climate sceptic. The change here is that Abbott has come forward with an alternative to the governmental policy. The Coalition’s (Liberals+Nationals) “Direct action plan on the environment and climate change” would create an AUS$2.5bn fund to provide incentives for industry and farmers to reduce emissions through measures such as storing carbon in soil. The plan also includes the planting of 20 million trees by 2020 and would provide $1000 rebates to home owners for solar cells. The plan has immediately been slashed by environmentalists, Greens and the Labour Party as been unable to lead the country to a minimum 5 per cent cut in emissions by 2020 compared to 2005 levels, as Australia pledged in Copenhagen. While Kevin Rudd has ridiculed the direct-action plan as “a climate con job”, most business groups have backed the plan, agreeing with the opposition Leader’s assertion it is “cheaper, simpler and more cost-effective” than Labour’s proposed carbon emissions trading scheme.

With a now clear opposition to the scheme, the government’s CPRS is very likely to be rejected by the Senate this week. The government would then again have the possibility to trigger an early election, though it would be very unlikely since the next general election will take place this year. In the most optimistic scenario, a cap and trade system would therefore not be voted for another year. Kevin Rudd’s approval rating is still way ahead from his potential challenger, though Abbott’s popularity is rising. But it is surprising that Rudd is not working to rally public opinion: he has not made a speech about climate change in the past weeks and is, instead, trying to change the subject. It is time now for Prime minister Rudd to start campaigning for his cap and trade scheme and explain to people why Australia should be moving when things look bleak internationally.

Following five weeks of intense negotiations between the Rudd government and the Opposition, the Australian Senate voted once more, by 41 to 33, against bills that would have established the Carbon Pollution Reduction Scheme (CPRS). The Greens, Independent Senator Nick Xenophon, and Family First Senator Steve Fielding joined the Opposition (Liberals + Nationals) in voting down the scheme (SMH 02/12/09).

 The Minerals Council of Australia and the Australian Chamber of Commerce and Industry welcomed the rejection, while WWF and the Climate Institute, called for a double dissolution and joint sitting of Parliament to get the original bills through (SMH 04/12/09).

 Under Australia’s bicameral parliamentary system, both houses must reach majority agreement on proposed legislation before it can go forward into law. Following a vote against a bill it may, however, subsequently be revived or presented again. That is what happened this autumn following a first rejection of the CPRS by the Australian Senate in August (see my previous post). The legislation had been put on the table again by the government in November, passing without surprise the House of Representative on the 17^th.

 The Senate no vote came after an extraordinary few weeks of drama, in which the Opposition reached a deal to support the legislation with big changes, and then reneged after its change of leadership. Indeed, on Monday, former Opposition leader Malcolm Turnbull (who was backing the passage of the Australian ETS) was challenged within its own party, and was ousted as Liberal party leader by right-wing climate skeptic Tony Abbott. The new Liberal leader, who has been portraying the scheme as Kevin Rudd’s “big new tax”, managed to convince most Liberal Senators who would have supported the CPRS to vote down the scheme (except for two who crossed to floor).

 Mr Abbott insists that he will have a credible climate change policy but is making it clear that his policy will not include an emissions trading scheme any time soon. In particular, he said it would be “folly” for Australia to establish an emissions trading scheme before the United States had settled on its model: “The right time for an emissions trading scheme is when the rest of the world is signed up for one.” (ABC 02/10/09). Abbott plans to fight a climate change election using land management and energy efficiency measures instead of an ETS, and would welcome a debate on nuclear power as an option.

 Despite the fact that Prime minister Rudd now has the option to call for a double dissolution election, which he would without a doubt win, he has played down prospects of pulling this trigger. The government has said that in the next Parliamentary sitting period commencing on 2 February 2010, it will introduce bills to establish the CPRS, inclusive of amendments incorporated following negotiations with the Opposition announced on 24 November 2009, to give Parliament a further opportunity to consider and pass legislation. Hopes to portray Australia as a world leader on the issue have now vanished, putting Kevin Rudd in an incomfortable position as a friend of the chair in Copenhagen next week.

©MIT Press

It is a long-held truth that China will inevitably stride on to the centre stage of world affairs as it grows in power and influence. China has no doubt become a major player in trade, development and the environment. More crucially for the topic at hand, China became the world’s largest emitter of carbon dioxide in 2007, overtaking the United States for the honour and in the last two years has only widened the gap. As one of the largest contributors to climate change Chinese consent is clearly crucial to any agreement (however limited) in Copenhagen and its now necessary successors. However, does this all add up to make China the linchpin of Copenhagen? In short, no.

China has a lot to gain from any potential agreement that will be reached. While Chinese emissions are clearly of enormous damage to the global environment they are no less deleterious to the Chinese themselves. Plenty of statistics are available that illustrate just how much of a problem this is for China. A 2007 paper (free summary) found that the loss in GDP due to losses in national health were 1.8% in 1997 with thousands dying prematurely each year. The paper further argued that pollution controls could actually raise China’s growth rate. While a more up to date World Bank report in conjunction with the Chinese SEPA (State Environmental Protection Agency) found that water and air pollution in China has cost the country 3.5%-3.8% of its GDP in public health costs and premature deaths.

China’s own independent attempt to measure the damage caused was also a shock for its leadership. ‘Green GDP’ was first calculated for 2004 and was an attempt to include environmental damage in growth rates. That damage was estimated to be in excess of $510 billion Yuan (or 3% of China’s economy). So damaging were these estimates that in 2007 the entire project was scrapped for lowering growth rates to levels considered politically unacceptable by the Chinese government.

All of this paints a clear picture of a tremendous cost to China in its quest for growth, costs that it has found increasingly difficult to ignore, taking some, though generally tentative, steps toward addressing. Copenhagen represents a potential boon for China; the perceived necessity for the developed world to pay the developing world would give China the chance to be at least partly compensated for steps that it increasingly acknowledges it must take. The biggest hurdle is exactly how much that final sum of money will be and how much China will have to cut its emissions by to get it. But at the same time, the cut in pollution for China, while costly, will also have a beneficial effect on its citizen’s health and its own growth rate.

Looking to Copenhagen and beyond, the ball is very much in the court of the developed world. China wants an agreement and very much needs to start cutting its emissions for its own sake and benefit. While the developed world certainly has its own motivations to ensure cuts in world emissions, most justifications tend to look some way into the future and the dangers of a temperature rise beyond two degrees. China’s environmental costs are very much in the here and now for it to tackle.

The clock is ticking. The UNFCCC’s Copenhagen summit is just 7 days away, and recent reports have been encouraging. Shortly after China and the US made announcements on commitments to reduce their GHGS, Commonwealth leaders backed a $10bn Climate Change fund. Proposed by UK PM Gordon Brown, and French President Nicolas Sarkozy, the fund seeks to provide immediate financial support to those States most vulnerable to the impacts of climate change.

UK PM Gordon Brown said on Friday that half of the fund should be aimed at helping the most vulnerable states to adapt to climate change, whilst the other half should be targeted at measures to reduce GHGs in the least developed countries.

The first funding would be made available early next year, before any international agreement could take effect, whilst there are suggestions that funds for the most vulnerable small island states would be fast-tracked and made available immediately.

This agreement by the Commonwealth demonstrates how climate change can unite different countries – small/large, rich or poor to find a resolution; and delivers some promise for next week’s summit.

The Commonwealth leaders also agreed to seek a legally binding international agreement, though it is widely believed that “a full legally binding outcome” might have to wait to 2010.

The Indian Prime Minister Manmohan Singh, added that any commitments they would announce would be “ambitious”, though it is highly likely that will be subject to significant commitments by other influential nations too.  This prisoner’s dilemma characterises the negotiations, and also represents the biggest threat to a global deal.  However, the recent flurry of announcements for GHG reduction commitments from many of the key players has sparked hope that all is not lost yet.

The countdown begins. I will attend the final week of negotiations with a focus on proposals from the developed nations.

 EU leaders failed to agree on a financing proposal for developing countries after their two-day summit this week, leaving the EU’s negotiating position on the issue open-ended.

A Kenyan riverbed: developing countries are expected to bear the brunt of climate change because of their geography and their lack of capacity to adapt to change (Image: Matt & Kim Rudge @Flickr)

In a set of conclusions that were long on rhetorical concern about accelerating climate change but short on any new commitments for the EU, the European Council effectively endorsed the views set forth in the Commission communication on funding that I discussed a few weeks ago. This means that the 27 Member states have agreed a common view of the amount of funding required for adaptation and mitigation in developing countries – €100bn annually by 2020 – but not over how much of this should come from the EU and its members.

One of the reported reasons for the failure to reach an agreement is reported to be, as usual, down to differences between the richer and poorer members of the EU. A coalition of East European countries allegedly resisted specific commitments due to concern over their ability to afford the proposals. But the BBC also reported differences over negotiating strategy as a cause for the ambiguity of the Council’s position. Germany, it is suggested, believed that providing an explicit figure would provide less of an incentive for other developed countries to make similar commitments.

How much the EU is really willing to pay for climate change mitigation and adaptation in developing countries, then, remains to be seen. But the failure of EU leaders to establish a common position underlines the political difficulty associated with large transfers of wealth to countries whose citizens don’t vote in European elections.

This month, the European Commission published development roadmaps for seven key low carbon technologies. Thy relate to wind, solar, bioenergy, CCS, nuclear technologies, as well as smart grids and energy efficiency, for the period 2010 and 2020. 

There is a long-standing policy debate over how best to spur innovation in low-carbon technologies. One option is to let markets ‘pull’ technology development along. According to this reasoning, if governments ensure there is a credible price for CO₂ and other greenhouse gases, then companies will start to develop new technologies with lower emissions in response to this market signal. The other possibility is for governments to use a policy ‘push’ and pay directly for early-stage R&D into new and promising technologies.

The roadmaps follow the publication of a EU Strategic Energy Technology Plan in 2007. It outlined a vision where the EU enjoyed global leadership in a range of low-carbon technologies. Each roadmap has been developed by the Commission in consultation with the relevant industries, and attempts to describe, step by step, how each technology should develop over the next decade in order to fulfil the vision of the SET Plan. Development in each of the technology areas is backed by an European Industrial Initiative, which is a public-private partnership working in each of the low-carbon technology areas.

In practice, governments usually opt for a combination of the two. The SET Plan was the EU’s policy push for low technologies, accompanying the market pull of the carbon and renewable energy targets included in the Climate and Energy Package it unveiled in the same year.

While the Climate and Energy Package and its 20/20/20 targets have successfully made it into EU law, the SET Plan has arguably been somewhat neglected by comparison. The Commission’s new communication implicitly acknowledges this by speaking of the need for the SET Plan now to be ‘taken forward to implementation’.

But implementation costs money and, critically, the Commission’s new roadmaps don’t come with any new funding plans attached. The Commission calls on Member States to dig deeper into their own pockets to fund energy R&D – a recommendation that is unlikely to receive a warm welcome from treasuries across Europe as they seek to recover their battered public finances – and proposes to use the European Investment Bank’s lending power to fund research in promising areas.

The communication also refers to the role of other countries in developing low-carbon technologies. As with other areas of international climate negotiations, there are large inequalities in the distribution of low-carbon innovation. While the EU can justifiably point to its global climate leadership committing early to substantial emission reductions (at least, compared to other developed countries), the US is leading the pack in terms of its expenditure on developing low-carbon technologies, from biofuels to smart grids. A number of international negotiations are in progress to improve coordination between developed countries and sure that they all pull their weight when it comes to energy R&D; another set of negotiations again are discussing how developing countries can access these new technologies.

As reported by EurActiv, it is not only global cooperation that lies behind the SET Plan: there is something of a technology race occurring between different developed countries, with potentially large future gains available to countries who lead the development of new low-carbon technologies. The IEA this week released its technology road map for CCS that envisages an investment of US$6 trillion by 2050. Companies who are successful in developing CCS technologies now will be able to profit from this economic activity in future. Similar arguments apply to other low-carbon technologies like renewable generation and low-emissions vehicles.

There is no question that low-carbon technologies will be vital during the twnty-first century: without them mitigating climate change will be intolerably expensive. How many of those technologies will be European in origin depends in no small part on whether the Commission succeeds in finding R&D funding at a scale that matches its R&D vision.