Thoughts from Copenhagen

Business was looking for more from Copenhagen.

After all the problems of the last two weeks, it's a great relief to get a deal at all out of Copenhagen. It's clearly not the deal that would have been hoped for when we set out on the road to Copenhagen in Bali, or even two weeks ago when we arrived at the COP, full of ambition.

But it's a clear statement of political commitment which will underpin policy and regulation in the major economies which are central to climate action. It doesn't seem that the EU was at the table when this deal was done, but they weren't a roadblock to a deal. The fact that China, India and South Africa have put their names to the Accord is very important.

Business was looking for more. Major capital investments in low carbon infrastructure require long and loud regulatory signals and long term carbon price visibility. We aren't there yet, so we aren't going to see the scale OR SPEED of investment required to accelerate the transition to a low carbon economy.

That said, businesses haven't been waiting for the outcome of Copenhagen to take action on climate change. Many that we have spoken to, including energy companies, retailers and chemicals companies, are taking steps to improve energy efficiency and reduce carbon emissions. It's simply a matter of good housekeeping. At a time when businesses are struggling with low margins, energy management is becoming more critical. Big energy users in particular are investing in carbon and energy management systems which are integrated in their operations rather than being an annual number crunching exercise. But the long term move to a low carbon economy requires massive investment and that's why ambition in this deal was required.

The final day at Copenhagen

With one day to go before world leaders leave Copenhagen, there is still real uncertainty over the outcome of the negotiations and even the prospect that governments will fail here. The barriers to success are as much about process as form. Developing countries are looking to extend the Kyoto Protocol (which is the only legally binding treaty in town, and only places commitments on developed countries); the US will never ratify Kyoto (which is considered by some in the States to be a four letter word); and Europe doesn't want to commit to emissions reductions under Kyoto unless there is comparable action in the US and major developing countries.

In addition to discussions on the future of Kyoto, is a potential deal on Long-term Cooperative Action which includes all major economies. At the moment the negotiations are still going down these two tracks: LCA and KP. But with the outcome so uncertain the finger-pointing has already started.

Blame game
The Danes, as COP hosts, have tried to produce compromise texts which bring the two negotiating tracks together, but these efforts have been rejected repeatedly by developing countries. China has already criticised the Danish Presidency for mishandling the process and attempting to reach a compromise around a single agreement.

Several days of negotiating time in Copenhagen were lost on process and after two years of negotiations the Chairs of the two groups have been unable to generate coherent documents with a limited number of clearly defined alternatives for the heads of state to discuss. So it is not surprising that the Danes have come up with a Plan B, a Plan C and so on. But behind China's criticism is concern that a single agreement might mean the end of the Kyoto Protocol and the line that it draws between developed and developing countries.

Bring on the Seventh Cavalry (with a checkbook)
One of the few business observers allowed into the Bella Centre was pessimistic and suspects that some parties just don't want an agreement and are simply obstructing the process. But there has been some progress. In a statement today, Hillary Clinton said "In the context of a strong accord in which all major economies pledge meaningful mitigation actions and provide full transparency as to those actions, the US is prepared to work with other countries towards a goal of mobilising $100bn a year to address the needs of developing countries."

The US position is that the actions taken by major economies (i.e. China) are transparent - in other words measurable and verifiable. They won't be impressed by business as usual improvements in emissions. Although the Chinese have long resisted international verification, there was discussion in the corridors that they were starting to show flexibility on this issue. Many are now waiting for the arrival of Obama. Although he may not be able to shift much from the -17% emissions reduction target pledged last month, he might bridge the gaps between the US and China.

Do no harm
Speaking to a government delegate about the prospect for the final day, he said tomorrow's going to be tough. It's down to China and the US. But we now know the price of a deal: it is $100bn in 2020. With that much on the table, developing countries might be persuaded to accept the deal.

At this stage, it is unlikely that the deal at COP15 will be as robust as many in the business community had called for during the build up. But, perhaps the most important outcome at Copenhagen is that it does no harm. It is essential that the agreement here does not undermine the political process in the US or the passage of climate legislation through Congress. And with further commitments by China, COP15 may still support the development of robust climate policies in the US. At the end of it all, the real measure of success at Copenhagen will be how fast China, the US and other major economies shift to a low carbon economy over the next decade.

There was snippets of good news today, including more money from the US for example. There's still real concern that the differences are so big between the developing and developed nations, even the reported differences between US and China. There is room for compromise, but then everyone's playing their cards close to their chest.

The rumours about Obama not turning up did matter. While Hillary Clinton can play all the cards for the US, the signal it would give to the wider business community and indeed to the wider US people about the commitment of the US administration would be very negative.

From a business perspective, if there is no agreement on Friday, it will hold back investment in low carbon technology and create major uncertainly in the carbon markets. Even in Europe, where they are established in law, the consequences would be very negative. There is also concern that even if there is a deal, if it is a weak deal, or there is a lack of political momentum to complete the process, we won't have an environment of business confidence that's required to drive investment and drive change.

NEGOTIATING TEXT
The latest texts are littered with brackets - a shorthand for disagreements in many cases - and too long for most ministers to make sense of.

It may be more sensible to park the existing texts and work with the compromise documents produced by the Danes or Chinese, which were leaked last week. But this would require significant goodwill on the part of the least developed countries, who are adamant about sticking with Kyoto until there is any alternative legally binding deal on the table.

PLEDGES TO DATE
More ambition on emission reduction pledges is still needed: our estimates already show the numbers of the basic pledges mean we'll overshoot a global carbon budget by 50 GtCO2e in 2020 - the equivalent of a full year's emissions. "The EU has a further 10% to offer, but will be looking for more action from the more advanced developing nations. However looking for more from the US could be self-defeating - getting domestic agreement to the 17% promised by the White House is probably more important.

BUSINESS
The implications for business of a political deal are less clear. Business has been pushing for clarity on long term policy, to underpin the scale of investment required - which IEA estimates put at $430bn in 2020 over and above business as usual investments. Political commitments could go some way towards providing this, but ultimately business needs to see these pledges translated into a legal agreement and into national legislation.

This could happen earlier in Europe. A move to -30% would require a change of gear on EU ETS, new nuclear, energy efficiency regulation and standards and automotive emission standards. In the US, policy certainty will take longer with the Obama administration already considering a plan B through the Environment Protection Agency. For business quick start funding could give an added impetus to restart the global economy, driving investment in green tech solutions as well as action on climate change.

FINANCING
There have been more positive steps on financing. The Danish Text proposed interim financing of $10bn per year for the 3 years 2010-12 for developing countries most at risk of severe climate change impacts, and this now looks in reach. Japan and the EU have both now pledged USD 10bn over the three years. "If Obama arrives with his chequebook, the short term financing package might convince developing countries that developed countries are serious. Compromise here may offer the prospect of a more robust political deal.

FORESTRY
A deal for Reducing Emissions from Deforestation and Degradation (REDD) is expected to emerge from the conference even if an overall climate agreement is not reached. In a meeting that went into the early hours on Tuesday, key sticking points are reportedly close to being resolved, although any deal will only be announced at the end of the week. Accounting details, such as how the baselines are used and set, will be key issues that need to feature in a REDD deal - but it is not clear at this point whether agreement has been made.

It is reassuring that trains sometimes run late here too, when there is snow on the line, but today the excuse for late running is the wrong sort of demonstrators on the tracks. Breaking with tradition as the train waits stationary in a tunnel, I chatted to my fellow passengers. They are going to the Bella Centre too, but in their case to storm it, when the heads of state start to arrive. Unless the police can clear the line soon, we may all be very late.

The basic pledges of key economies would leave us some considerable way short of the low carbon pathway - we estimate a cumulative overspend on the global carbon budget of around 50 Gt CO2e by 2020, which is roughly equivalent to the aggregate emissions for the entire world for a year.

Intense political activity is expected to continue throughout the week, but at the end of it all, in the early hours of Saturday 19th December, we expect the politicians to emerge from the final plenary session of COP15 and declare that this is a great day for the global environment. Then the easy part will be over. In the New Year, the priority will be translating this into a legal agreement and delivering on the pledges.

Read the rest of the briefing by following this link.

Week 1 has witnessed some extraordinary developments. With little to gain from a weak deal, Tuvualu, small Pacific island nation, even managed to suspend the COP on procedural grounds, but the meetings on the side carried on regardless.

The real action is with the US and China, and how their pledges and demands will play out. A big question mark still hangs over the US cap and trade proposals. President Obama's decion to attend next week is very encouraging, but what will be bring, and can he deliver?

I spoke to Yvo de Boer at the Business Day on Friday. He was looking calm and confident. "That's just on the outside" he said. His message for the record turnout of business leaders was that we have made real progress in engaging with policymakers on national policy, but on the international stage we are still "talking to ourselves". He's right, of course, but you could level the same complaint at policymakers. Our work with the G20 Taskforce may help to address this.

The structure of the deal remains a really big issue. Do we extend Kyoto, replace it with a new global deal or follow a twin track? Whatever happens, monitoring and reporting is moving centre stage, as the world looks to hold politicians to account for their pledges. I moderated a CDP side event on these issues last night and we played to a packed house.

Much of the talk at side events is about new restrictions on access to the Bella Centre. To cope with record crowds, the UNFCCC are limiting the number of observers from each organisation that can access the Bella Centre at any one time. A secondary market in passes is emerging, though supply is constrained - UNFCCC have banned offsetting!

This evening there was a G20 taskforce get together and I told Mark Kenber of the Climate Group about our pledge-ometer. "You guys are sounding more and more like an NGO" he teased. "Next time I see you, you'll be dressed up in a polar bear costume!". With temperatures in Copenhagen at 1 degree C and falling, maybe that's not such a bad idea....

When you step off the Copenhagen Metro at the Bella centre, the heart of the COP 15 negotiations, one is overwhelmed by the noise of activists, their colourful banners and conflicting messages.

Standing in the queue waiting to pick up my delegate badge, Greenpeace is handing out coffees and badges that you can make flash if you disagree with how the discussions are going! 

A cold looking contingent from Australia is singing songs to highlight that a 5 percent target is not enough, supported by a few blow up kangaroos. Another group is handing out oak seeds from Poland to reforest the earth.

There are stands that promise wind powered coffee.  There is also a small contingent that is looking to highlight the 'hoax' of climate change, but they are few in number.

Setting out for Copenhagen on Monday morning, the slightly surreal experience hits you when you board the plane.

On one hand it appeared to be the usual packed flight that you have when you head for Europe. On the other hand instead of the usual families and hassled business executives, it was full of people looking to take part in and influence the COP 15 discussions.

There was a real buzz on the plane and I was surrounded by people having in-depth discussions about the effectiveness of carbon markets, the hurdles raised at preceding meetings and how these should be addressed. 

Little groups of people formed in the aisles. having debates about such things as the role of the individual, what to do about remaining fish stocks, and to cap it all, the cabin crew making announcements about what their airline was looking to do to reduce its global footprint.  In a way it felt like I hadn't left the team back in London at all.

On arrival at Copenhagen airport, it was clear that they were expecting hordes of people.  Lots of stands with COP15 logos and people in coloured jackets to provide advice and directions.

Today has been a long, but invigorating day.  I attended a side event, designed to provide negotiators and policy makers with background to issues impacting on or resulting from the negotiations.  The event I took part in was "Removing Barriers to Private Sector Investment In Climate Change Solutions", organised by The Energy and Resources Institute and the Asian Development Bank..

It was attended by private sector technology and insurance companies, the investor community, senior COP negotiators, research organisations all with interest in a smart grid and solar tech.  Issues up for discussion were:  how do we address policy, technology and financial barriers to large scale uptake of solar in Asia pacific? What are lessons learned elsewhere, proof of concept projects already underway that can be used to design a region wide plan?

The technology and know how exists, what is needed is the political will to create the regulatory and policy certainty that will support large scale investment. The technology companies and projects will then follow at scale delivering the needed reductions in CO2 and energy security.

Interesting words from Nitin Desai (The Energy and Resources Institute) and Harry Verhaar (Philips)

"The downside case justifies action now" said Nitin Desai

"We need to ensure that taking action is not linked to a sense of sacrifice." said Verhaar