[Ed. Note: RiskMetrics analyst Mario Lopez-Alcala is attending the Copenhagen summit as an official observer.]
As the Copenhagen climate summit draws to a close, many are disappointed by the lack of progress being made here. The biggest announcement is likely to be a plan to compensate countries that preserve forests and other natural landscapes that store carbon dioxide, the main greenhouse gas tied to global warming.
While other agreements could be reached to place carbon regulations on aviation and shipping, other goals to curb industrial emissions of greenhouse gases and set new financing mechanisms to help developing countries mitigate and adapt to climate change remain elusive. Now the hope is to reach a legally binding agreement sometime next year.
Different World From a Year Ago
Still, as US Deputy Special Envoy for Climate Change Jonathan Pershing observed at Copenhagen's Bella Center last week, today's world is very different from the one we lived in a year ago when it comes to climate politics.
The Copenhagen summit has brought developing countries to the fore, with progressive proposals on mitigation, adaptation, and finance. The United States has also undergone a sharp policy reversal, with President Barack Obama here to underscore the US administration's commitment to tackling climate change. This sets the stage for a changing global regulatory environment that will benefit low-carbon investments.
The road ahead will be bumpy, however. In Copenhagen there have been heated debates on the legal outcome of two parallel negotiating paths: one under the Framework Convention on Climate Change, in which the US is a party; and one under the Kyoto Protocol, in which the US is an observer.
A bloc of Small Islands States led by Tuvalu has proposed developing a new negotiating group to work toward a binding treaty to succeed the Kyoto Protocol with even more ambitious targets. The U.S. regards this extension of Kyoto as a non-starter. Another proposal forged by the Mexican and Norwegian delegations would substantially increase the amount of predictable funding available for climate change actions in developing countries. However, beyond a commitment by the European Union to provide $10 billion annually in such funding as a down payment toward larger giving, the pledges have been few.
Significant Forest Protection Program
In any event, the forest protection program expected at Copenhagen (formally known as Reducing Emissions from Deforestation and Forest Degradation, or REDD) should not be overlooked for its significance.
Rainforest destruction and land conversion are responsible for about 20 percent of annual emissions that contribute to global warming. The REDD program puts financial incentives in place for developing countries to preserve these natural habitats effectively as a carbon-storing bank. Industrial countries would be able to purchase credits from this bank to offset emissions that exceed their own reduction targets.
The current U.S. legislative proposal as passed by the House of Representatives would allow up to one-quarter of the nation's emissions to be offset by such credits from international providers. REDD would help assure that a large bank of credits would be available at affordable prices, easing the pressure on domestic industries to achieve emissions cuts from their own operations.
REDD also could be a shot in the arm for the Clean Development Mechanism (CDM), a project-based source of carbon credits that can be used in emissions trading schemes established under the Kyoto Protocol. So far, the CDM has suffered from heavy bureaucratic oversight and limited geographic scope. However, new measures potentially could arise from talks seeking ways to lessen these drawbacks for CDM projects.
By virtue of the location of the world's rainforests, REDD could help disperse funding assistance across Asia, Latin America and Africa. Some representatives at Copenhagen are even lobbying to extend REDD's provisions to northern boreal forests, which also provide a substantial sink for carbon.
However the REDD program works out, it will be a while before the aid starts flowing. Details that remain to be worked out include setting exact targets and timetables for emissions reductions, and what systems should be used to measure and verify carbon storage of various habitats.
Climate Clock Keeps Ticking
Meanwhile, the climate clock keeps ticking. Scientists presenting at Copenhagen stressed the importance of bringing global emissions to a peak within the next decade and then starting a fast decline, led by a 25- to 40-percent reduction by industrial countries from 1990 levels by 2020. Each year of delay heightens the pace at which emissions reductions must be achieved thereafter.
United Nations Secretary General Ban Ki-moon admonished Copenhagen delegates in an address on Dec. 15 as they moved into their final days of negotiations. "We do not have another year to deliberate," he reminded them. "Nature does not negotiate."
Mario Lopez-Alcala is a member of RiskMetrics Group's Climate Risk Management team.