London, 27 November 2011
The morale of carbon traders, already hammered by record low prices, could take a further battering next week as the world’s top emitting nations look unlikely to agree a future for the Kyoto protocol ahead of the pact’s expiry at the end of 2012. Delegates from more than 190 nations will gather for UN climate talks in the South African coastal city of Durban from Monday, but expectations are slipping as lawmakers now see 2020 as the deadline for an operational global climate pact to succeed the Kyoto Protocol.
This is in sharp contrast to the urgency shown by the world’s policymakers ahead of a similar summit in Copenhagen two years ago, and reflects just how far climate change has fallen down the public agenda since the first bout of global economic turmoil in 2008.
The European Union, leading those countries attempting to forge a new legally-binding climate pact, this week said that it would seek a “roadmap” in Durban towards a global agreement by 2015, to be ratified by governments and put into practice by the end of the decade.
The 27-nation bloc has pledged to sign up to a second Kyoto Protocol commitment period until 2020, a measure which would extend the lives of the Clean Development Mechanism and Joint Implementation, carbon offset schemes that have been placed in jeopardy by the Kyoto’s 2012 expiry.
In turn, this would ease the concerns of investors that have ploughed billions of dollars of investment into emissions reduction projects in poor countries, and ensure that carbon offsets continue to flow into markets including the EU Emissions Trading Scheme, the world’s largest.
But the EU’s caveat for signing up to ‘Kyoto 2’ is that the rest of the world’s largest economies take on legally-binding targets, something that is being vehemently resisted by Japan, Canada and Russia, signatories to the initial 1997 treaty.
And with the U.S. reiterating the opposition to the Protocol expressed since it declined to ratify it in 2001, it appears even less likely that Europe’s requirements will be met.
“Most countries see us in a period to 2020 where you have Kyoto for those who signed up for it and Cancun (pledges) for everybody else,” said lead U.S. negotiator Todd Stern, adding any new agreement must demand mandatory action from all major emitters, including China.
But observers played down the significance of continued refusal anticipated from the U.S. in Durban.
“We would prefer Washington to move ahead (with emissions cuts) , but we no longer see that as seriously pulling back the move towards trading throughout much of the rest of the world,” said Henry Derwent, head of the International Emissions Trading Association (IETA), a carbon market lobby group.
Countries meeting at last year’s Cancun summit agreed to hold an increase in global average temperature to below 2 degrees Celsius and enshrined emissions cut vows made in Copenhagen in a formal UN agreement.
They also formalised a “quick-start” fund of $30 billion before 2013 to help the world’s poorest countries adapt to climate change, and agreed to increase it to $100 billion a year by 2020.
But IETA said there is virtually “no chance” of meeting these targets unless better ways are found to attract private funding, something that requires a price be put on carbon.
This, the lobby group argues, will not happen unless countries sign up to binding emissions targets under a new treaty, the timeline and framework of which should be laid in Durban.
“We are hopeful, but not too hopeful, that we will see some small steps forward,” said Derwent, adding that the world is now approaching a period where few countries would be bound by emissions targets.
“We hope some progress will be made in Durban that could make the next (summit) a bit more effective in at least achieving a timetable towards a global agreement that puts more force behind multinational and regional targets,” Derwent said.
‘FOR THE BOLD AND DARING’
The Durban summit comes as more countries, including China and Australia, make progress towards launching their own emissions trading schemes, a trend which the EU wants anchored in international law to help firm up targetss and consolidate the struggling $142 billion global carbon market.
“We’ve been in a phase like this before, where there’s a lot of useful work going on around the world that will undoubtedly be feeding into the negotiations process,” said Dirk Forrister, principal at Forrister Advisory and former managing director at CDM project developer Natsource.
“But I’m doubtful that anything happens in Durban that makes it a clearly attractive investment proposition for companies … It’s going to be for the bold and daring as opposed to being simple and easy to use for compliance entities.”
EU and UN carbon prices hit all-time lows this week amid panic selling by traders and developers as supply swelled, the euro zone debt crisis worsened and the global economic outlook grew bleaker.
However, EU Climate Action Commissioner Connie Hedegaard said the bloc will push in Durban for new sector-based market mechanisms for energy intensive industries in nations like China and India, which could help replenish investment.
But IETA was sceptical that the effort would lead to anything substantial.
“There hasn’t been enough discussion to assume that we could get anything other than a generic decision in favour of pursuing the idea,” Derwent said, referring to sectoral targets.
Hedegaard said the EU will also press the shipping sector, through the UN’s International Maritime Organisation, to commit a global emissions target.
Observers note a change in negotiating approaches, saying a quiet consensus has emerged amongst developed nation delegations to allow developing world emissions rise to per capita levels similar to those countries saddled with targets under the Kyoto protocol.
This contrast with efforts in 2009 to reverse developed country emissions and slow those from emerging economies, and it means that, at current growth rates, top emitter China’s per capita emissions could exceed those of the EU later this decade.
China, which in common with other developing countries does not have emission targets under the Protocol, also supports a Kyoto extension, as does a group of 77 of the world’s poorest countries (G77).
But China, the biggest beneficiary in CDM investment to date, could be snubbed by its long-time negotiating partners after the G77 agreed to join with other groups representing Africa and least developed nations to form a 100-nation strong bloc.
The move would likely be welcomed by the EU, which has said China has hidden behind poorer nations in previous rounds of climate talks.
The G77 argues that, even without binding emissions targets, many of its members are taking stronger action to cut emissions than rich nations.
“Developing countries are carrying out their actions to the point that, at the current pace, the emission reductions by a power such as China would nearly double those of U.S.,” said G77 chair Jorge Arguello, Argentina’s ambassador to the UN.
He added: “The combined pledges of China, India, South Africa and Brazil would exceed those of the seven most developed (economies) … and the reductions achieved by all developing countries would triple the commitments of the EU, all this by 2020.”
“The planet has no other sustainable alternative than to ensure the continuity of the Kyoto Protocol.”
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