Countdown to Copenhagen: Lines of Global Climate Agreement Appear as Political Leaders Arrive for Final Act

With over a week of negotiations completed and three full days to run, the outcome of the climate change summit in Copenhagen (Denmark) remains uncertain, amid some firming parameters for action amongst the key players and encouraging concessions and creative thinking on major issues, which provide much to be positive about as climate negotiations enter their next phase.

From a 200-page text only three months ago, the first of the two main negotiating groups—the Long Term Cooperative Action (LCA) working group— governed by the 1992 UN Framework Convention on Climate Change has whittled down its negotiating text to a mere seven pages, while the Kyoto Protocol working group, which does not include the United States, has a 27-page document. Both host a number of gaps concerning interim emissions cuts for 2020 and climate finance, the topics that have dominated discussions this week.

Already clear from unilateral and provisional commitments so far, however, is that there will be some form of co-ordinated action on emissions cuts for 2012 onwards, with a 14–18% reduction on 1990 levels by 2020 on the table from the developed-country side. The European Union (EU) remains the front-runner with its provisional 30% offer, with Japan at 25%, and the United States at "around 17%". A notable change on previous climate summits has been the movement from major developing countries, who have separated from the G77 pack of 130 developing nations. India and China have come up with carbon intensity reductions (the latter the topic of a current spat with the United States over verification), while other developing countries, South Africa, Indonesia and Brazil amongst them, have come up with emissions cuts on business-as-usual levels, in order to leave room for economic growth.

This movement has largely put the negotiating onus on developed countries in the seven days of negotiations so far, with the scope of a final settlement this week now essentially restricted to upgrades on their side—perhaps with a few face-saving measures on hand from the leading developing states.

Finance

A deal on finance remains one of the most elusive points, and carries with it particular sensitivities given the need for transfers to the developing world, questions about how it will be spent, and concerns that climate finance will cannibalise other development spending already pledged by the Organisation for Economic Co-operation and Development (OECD) states—even if there are some apparent overlaps in objectives.

The issue of the architecture to govern transfers is further ahead—after the Danish draft text last week caused such controversy—with broad support now for an independent body under UN auspices, though the developed countries remain drawn to some role for the World Bank in funding, alongside other institutions. The likelihood remains of a multi-faceted and varied financing architecture rather than the single consolidated fund demanded by G77 states, perhaps with some central co-ordination under UN auspices in line with the Mexican/Norwegian and U.K. non-paper issued last week.

Headway has also been made in ideas for raising funds outside state-to-state transfers and existing Kyoto mechanisms including carbon trade. The latest ideas include variations on Norway's proposal for a percentage on globally auctioned carbon permits and a so-called Tobin tax on financial transactions—as well as taxes on aviation and shipping, as proposed by Ethiopian prime minister Meles Zenawi and supported by U.K. prime minister Gordon Brown and French president Nicholas Sarkozy, who along with the Norwegians have been front-runners on the finance side from the developed-country perspective.

Outside this, a number of smaller agreements have been made, led by the 2010–12 fast-track fund of 5–7 billion euro (US$7.3–10.2 billion), for which the EU has pledged 2.4 billion euro per year. Some of this will be geared towards funding the technical and research support for developing countries to come up with low carbon growth strategies—itself a supportive measure in raising global action for 2020. In the longer term, the EU is offering 2–15 billion euro per year from the 50 billion euro required in transfers and total 100-billion-euro spending for 2020—not much further forward than its position in November. The United States, always a laggard on the finance side, has pledged a US$85–350-million multinational fund for renewable energy and energy efficiency technologies.

Meanwhile, the likelihood is of an extension to some existing mechanisms to lower the cost of carbon mitigation beyond 2012, notably the Kyoto Clean Development Mechanism (CDM) managing the transfer of finance for offset projects in the developing world. This is likely to be reformed to fast-track some low end-projects for efficiency measures and small-scale renewable power generation, enabling new countries who had found entry costs and red tape too difficult to navigate in its current form to take advantage of the mechanism. New technologies including carbon capture and sequestration, which are supported by oil producer countries, also have a chance of acceptance, as they are put into the Kyoto Ministerial group this week after three years at technical committee level, with Brazil and India key holdouts, but support from the Gulf states and the EU. Progress on emissions from Deforestation and Degradation (REDD) has also been noted, with some points of consensus here that can be built on in the coming year.

Outlook and Implications

With world leaders arriving in town the focus will inevitably move from the details to top-line issues, with some hope that key leaders are holding the best for last in these important negotiations, in an attempt to gain credit for having brokered a settlement and broken the so-called "deadlock". Even without this, however, a progressive political deal seems more than possible by drawing together current varied commitments into one package, which can be built on and harmonised next year in the run-up to a binding agreement, which the UN hopes to ink some six months from now. Headway is also possible in that interim six-month period for post-2012 action—as long as key players remain politically committed to progress following the summit.

Put together, these existing offers and commitments are set to create a broad and common framework for differentiated action towards the same end—which in the energy space is overwhelmingly supportive to greater renewables uptake for electricity provision and likely to create new incentives for efficiency in wider energy use, bringing demand growth down on business-as-usual scenarios. These multiple and reinforcing measures, when adopted simultaneously across many countries, are likely to accelerate the take-up and technical evolution of lower-carbon technologies, bringing down the costs where these are not already competitive with fossil fuels and encouraging further take-up, potentially setting in place a virtuous and self-sustaining circle for action amongst investors—if the necessary regulatory follow-through is achieved.