Monday, December 3, 2007

Cheat sheet for the Bali meeting, via Business Green: ...Representatives of over 180 nations, not to mention the world's most influential non-governmental groups and businesses, will be holed up in the Nusa Dua resort in Bali for the COP 13 Summit to discuss what on Earth the world does about the IPCC's most recent scientific report claiming climate change is our fault and poses a catastrophic threat to human civilisation.

No pressure then.

Indeed. Bali represents the culmination of a 12-month period when climate change finally broke through into the political and business mainstream. There is real pressure on the delegates to make progress – and not just from the weirdy-beardy environmentalists this time. With former Aussie PM John Howard shuffling off to the dole queue, pretty much every government present bar the US has now signalled it agrees with binding emission cuts in principle. And even long-time climate change sceptic President Bush has said he accepts man-made climate change exists and understands the need for action. Meanwhile, 150 of the world's biggest companies – including BA, Tesco and Coca-Cola – last week called for binding emissions targets and clear global framework for combating global warming. If there is a consensus in Bali, it is in favour of tough action being taken sooner rather than later.

So what can we expect?

This is where people are likely to be disappointed. There will be talks about a new fund for climate change adaptation, plans for halting deforestation and how to iron out problems in the UN's carbon trading mechanisms, but the main crux of the meeting is to agree a roadmap for negotiations on the successor to the Kyoto Protocol when it expires in 2012.

We're going to have negotiations about negotiations?

Such is the nature of UN conferences. Barring a major surprise, Bali marks the beginning rather than the end of the process. According to the UN, a new deal needs to be in place by 2009 to allow enough time for ratification, and the aim of the conference is to put a timetable in place to achieve that. However, this roadmap should give us a clear indication of what the post-Kyoto agreement is likely to look like.

And what will it look like?

That is the $64 trillion question. At one end of the spectrum we could see the US take China and India up on their recent offer to consider binding emission cuts if the Americans do likewise. Such a move would see all the world's major polluters committed to cutting emissions in line with UN imposed targets. From there it is a short step to the global regulatory framework and carbon market that many business leaders and environmental groups have been calling for as the best means of driving the transition to a low-carbon economy. The only sticking point would be the not insignificant task of agreeing the scale of any emissions cuts and how they should be divided up between different nations.

And at the other end of the spectrum?

Well, despite growing business and public pressure, the collapse of the talks is not completely beyond the realms of possibility. The US never ratified the first Kyoto and its successor is bound to be far more demanding, both in terms of the scale of the emission cuts required and the penalties for non-compliance. Many US States want to sign up and have been developing their own climate lows and carbon trading schemes, but there are influential apparatchiks within the US administration who still regard the idea of UN-enforced binding emission targets as anathema. In this light, it is still difficult to see a demanding post-Kyoto Treaty being agreed at this point.

Where does that leave us then?

The smart money will be on a schedule for future negotiations being agreed along with yet another statement on the seriousness of climate change, the urgent need for action and recognition that developed economies must lead the way. However, you would still get long odds on hard and fast commitments over what the post-Kyoto treaty will entail being agreed at Bali. Some progress on how best to protect tropical rainforests is likely, as are various modifications to the UN's carbon trading mechanism, but a commitment to binding emission cuts may represent a bridge too far at this stage. Although, having said that the US lead negotiator has said the US ius not planning to act as "a roadblock" and there there is still the possibility we may be surprised.

What does it all mean for businesses?

The tenor of the debate will be as important as the nature of any agreements reached. If, as expected, a genuine consensus builds in favour of binding emission cuts, more green regulation and taxes, expanded carbon trading, and greater investment in clean technology, then sensible firms will be preparing for a stringent post-Kyoto regulatory framework right now. The political and economic momentum is in favour of a global price on carbon and greater investment in low-carbon technologies and business models – Bali should confirm that. Even if the worst case scenario comes to pass and the US opposes any roadmap put forward at Bali, the UN will remain hopeful of an agreement being reached on the grounds that by the time the post-Kyoto Treaty comes to being ratified, there will be a new resident in the White House.

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