Copenhagen’s lack of detail is a blow for low- carbon business

JUST over two months since the final all-night negotiations which went into finalising the Copenhagen Accord, viewpoints on the outcome of the Copenhagen climate change conference (COP15) have been extremely mixed. On the positive side, the Copenhagen Accord has been described as an “important political tool”, “vital first step”, or in the words of President Obama, a “meaningful and unprecedented breakthrough”. On the negative side, however, the descriptions have ranged from “climate change scepticism in action”, “fiasco”, “death warrant” or more graphically, a “colossal pile of fudge”.

Regardless of which side of the fence you stand on, most people would agree that the outcome of Copenhagen did not live up to expectations.

Many leading businesses had called for an ambitious and robust global deal from COP15. Their wish list included: (1) a binding agreement on emissions levels; (2) major emerging economies agreeing to take actions to reduce greenhouse gas production; (3) public finance to be provided to developing countries to boost finance from the carbon markets and domestic investment; (4) a mechanism to address deforestation; and (5) a scaled-up international carbon market.

Though many of these wishes are addressed in the accord, it nonetheless disappointed the business community. Contrary to the first item on the wish list, the accord is devoid of any legal obligation to deliver. The most COP15 could agree to do, in the absence of consensus, was to “take note” of the Copenhagen accord.

Target-wise, parties to the accord agreed to reduce global emissions so as to hold the increase in global temperature below 2 degrees Celsius. This is less ambitious than the 1.5 degrees many called for. Moreover, research on countries’ targets and actions which have been added to the appendices of the accord indicates that collectively they are only likely to limit temperature increase to three degrees above pre-industrial levels by 2100.

Further, many of the countries which have submitted targets or actions have made targets subject to a future legally binding treaty – such as New Zealand, Sierra Leone, the EU and Australia. Others, such as China and India, specifically failed to make reference to the accord itself.

Many of the developing countries are committed to actions subject to the provision of financial resources, technological transfer and capacity building by developed nations. Individual countries
are also free to determine which base year to use when stating their CO2 reduction targets.

These qualifications significantly reduce the effectiveness of the submitted targets and the accord. Though the accord notes the need to peak global emissions as soon as possible, no firm date is provided.

Regarding point five on the list, little clarity was provided in respect of new market mechanisms post-2012, when the first commitment period of the Kyoto Protocol expires. The accord recorded a decision to pursue various approaches, including the use of markets, to reduce CO2 emissions. But it didn’t clearly explain how a scaled-up international carbon market would work.

The accord promises big things when it comes to richer countries paying for the needs of developing countries. The collective commitment by developed countries is to provide new and additional resources approaching $30bn for the period 2010-2012, with a further goal of jointly mobilizing $100bn a year by 2020.

This facilitates the establishment of the Copenhagen Green Climate Fund, which is to support projects, programmes, policies and other activities related to reducing CO2 in developing countries. A significant portion of the funding should flow through the fund. Again, however, these promises are not legally binding.

To combat the problem of deforestation, parties to the accord agree on the immediate establishment of a REDD (Reducing Emissions from Deforestation and Degradation) mechanism, to enable the mobilisation of financial resources from developed countries.

However, the absence of agreement during detailed negotiations means that it is very unclear exactly how this mechanism would work. There is mention of a technology mechanism to accelerate the development and transfer of technology to support CO2 reduction, which will be “guided by a country-driven approach” and “based on national circumstances and priorities”. But again there is little clarity about this.

Above all, the accord did not deliver the business certainty in relation to investment decisions that was hoped for. So where do we go from here? A number of alternative approaches to the international climate change negotiations are being rolled out, as well as additional meetings being scheduled during 2010. Might COP16 in Mexico in November/December 2010 prove to be a carbon fairy godmother? The road ahead remains uncertain.

Tim Baines is a climate change and clean energy lawyer at Norton Rose LLP.