Who bears the load? Bali leaves big concessions needed on climate change

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It is a deal that, for all its flaws and limitations, just six months ago few had thought would come. For the next two years, government officials from 187 countries will meet regularly to hammer out an agreement intended to slash greenhouse gas emissions and curb global warming.

That pact would replace the current Kyoto protocol, which scientists say goes only a small way to produce the emission reductions needed to avert disastrous changes to the climate. Rich and poor countries are to work together to make the political, economic and technological changes needed to wean their economies from a dependence on fossil fuels. But if the United Nations-convened talks that ended in Bali at the weekend are anything to go by, the next two years will be fraught, fractious – and possibly fruitless.

A taste of the acrimonious discussions that seem likely came within hours of the finish of the talks, when the US began voicing reservations about the conclusions. A White House official told of “serious concerns” that the agreement had let developing countries off too lightly in their commitments to cut emissions. “Emissions reductions principally by the developed world will be insufficient to confront the global problem effectively,” the White House said.

The words astonish European officials, who say the US delegation was in near-continuous contact with Washington in the final hours of negotiations, even while agreeing to the wording of the text that described developing countries’ future obligations. “It’s extraordinary to try to go back on this,” says one.

The final hours of the two-week negotiations were full of such high drama. The talks were scheduled to finish on Friday, but by the early hours of Saturday morning delegates were told to snatch some sleep and reconvene at 8am, when a draft text would be considered. By the appointed time, however, it was clear that there would be no resolution and the Indonesian hosts met each of the key players in turn to find a compromise.

The main points of difference were over references to the depth of emissions cuts needed – the US opposed any reference to actual emissions targets – and over the role of developing countries in sharing the burden of making these cuts. Ban Ki-moon, the UN secretary-general, returned to the conference he had left days before and made an impassioned plea to delegates to come up with a deal.

But the US would not budge, insisting on stronger wording for the commitments to action to be made by developing countries, and received loud boos from other delegations. Kevin Conrad of Papua New Guinea addressed the US delegation, saying: “We ask for your leadership, we seek your leadership ... If you can’t give us what we want, please get out of the way.”

In the face of this mounting hostility, the Americans softened their stance, allowing the text to pass – a considerable step for a country that had never ratified the Kyoto protocol. Rachmat Witoelar, Indonesian environment minister and president of the Bali conference, brought down his gavel to loud cheers. At last, the world had agreed to talk again about the shape of a new international framework to avert dangerous climate change.

Until recently the US was implacably opposed to formal talks on what would replace the Kyoto protocol – the world’s only multinational treaty binding countries to cut their emissions – when its main provisions expire in 2012. Washington officials said talk of replacing the protocol was “premature”, despite the worries of Kyoto supporters that work must begin soon to allow time for national parliaments to ratify any agreement struck on the international stage.

Without the consent of the US – which despite withholding ratification is a signatory to Kyoto and to its parent treaty, the United Nations Framework Convention on Climate Change – the UN could not begin full talks on a possible successor pact.

Suddenly, in late May, US President George W. Bush announced ahead of the Group of Eight leading industrialised countries’ summit his own set of talks to encompass the world’s 16 biggest emitters of greenhouse gases. It was the first time that the US had agreed to talk about a post-2012 framework.

Initially, the US talks were designed to be independent of the UN process. This was badly received by other countries, which accused the White House of trying to subvert the UN. Under pressure at the G8, Mr Bush accepted that the talks should feed into the UN process – which made it possible for the UN to schedule comprehensive discussions on a post-2012 framework for the meeting in Bali.

In the past year, the debate on climate change has changed in character. The publication of the findings of the UN’s Intergovernmental Panel on Climate Change, in three parts between February and June, was a watershed. The panel, drawing on the work of more than 3,500 leading climate scientists, found that the evidence for climate change was “unequivocal”, that human actions in burning fossil fuels were to blame and that if the world were allowed to warm by 2 degrees Celsius above pre-industrial levels, some of the effects – droughts, floods, storms, sea level rises – would be “irreversible” and “catastrophic”. To prevent this, the IPCC warned that emissions would have to peak in the next 10-15 years and be drastically reduced thereafter.

For years, the Bush administration has carped at the IPCC process, calling it flawed. But this year, Washington seemed to accept its conclusions: Paula Dobriansky, US under-secretary of state, used her opening remarks to journalists in Bali to praise last week’s award of the Nobel peace prize to the panel (which won it jointly with Al Gore, former US vice-president).

These factors combined to make this year’s conference different from the annual meetings on the Kyoto protocol that had been held since 1997. Indonesia’s Mr Witoelar said of the conclusions: “This is a real breakthrough . . . Parties have recognised the urgency of action on climate change and have now provided the political response to what scientists have been telling us is needed.”

During the conference, debate centred on two questions: explicit emissions reduction targets for developed nations and what sort of obligations poor countries should take on in the future.

The setting of clear and binding emissions targets was not thought to be a serious prospect before the conference began, as the US made it clear that it would not accept them. Yvo de Boer, executive secretary of the UNFCCC, said at the outset that the three aims were to launch negotiations on a post-2012 framework, to set a deadline of 2012 for their conclusion and to ensure that the agenda for the negotiations was “ambitious”.

Even the EU, which has set its own target of cutting emissions by 20 per cent by 2020 and went to the conference asking for the IPCC’s conclusion that the world should try to limit warming to 2°C, admitted privately that it would be happy with a form of words that left the question of future targets open. One official told the Financial Times at the end of the first week of the talks: “We can leave it implicit in the text that there should be targets in the future – that’s fine.”

But the early days progressed so favourably, with a newly compliant US delegation, that the EU was emboldened to insist its preferred targets – that rich countries should slash emissions by 25-40 per cent by 2020 – were central to the talks. The failure of this late call did not surprise most attendees. The issue was a “red line” that the White House would not cross. Harlan Watson, chief US negotiator, reiterated: “Setting targets is something you do at the end of the process, not the beginning. We do not want to prejudge the negotiations.”

Still, the US had come far in the past six months, moving from hostility to the UN process to agree to talks on its outcome. Elliot Diringer, director of international strategies at the US Pew Center on Global Climate Change, says the road map laid out in Bali “puts no one on the hook right now for emission reductions. What’s important, though, is that it lets no one off the hook either. It challenges all governments to confront the tough issues ahead and opens the way for the first time to a comprehensive negotiation of post- 2012 commitments.”

Environmental campaigners slam the conference for not having produced clear emissions reduction commitments. Tony Juniper, director of Friends of the Earth, says the meagre reference to climate change science in the final text agreed by the US will allow carbon dioxide concentrations in the atmosphere to rise to 750 parts per million from the current level of around 380ppm: “That’s the end of life on earth.”

What actions should be undertaken by developing countries proved even more contentious. There was no question of developing countries conceding the need for them to make absolute cuts in their emissions: instead, they were asked only to take “actions” to curb emissions that were “measurable, reportable and verifiable” and were variable according to national circumstances. But debate swirled over the wording, such as whether the term “contributions” should be preferred to “actions”.

It turned into a trial of strength between the US and the Group of 77, a 130-strong bloc of developing nations. The G77 won after the US was booed for refusing to accept the minor changes to the text the G77 wanted. Perhaps stung by Papua New Guinea’s admonition, the US caved in and was cheered.

One last shock was to come. On Saturday afternoon the EU gained an unexpected victory. Canada, Russia and Japan had been set against dictating clear emissions targets during the talks but, in a set of discussions including the developed-country Kyoto parties but excluding the US, the three countries changed their minds and signed up to cut their emissions by 25-40 per cent of 1990 levels by 2020. This goes much further than the original protocol, which asked for 5 per cent cuts by 2012.

What upsets may still be in store? The White House’s complaints about the agreement the day after its conclusion gave an inkling. But Canada, Japan and Russia also have reservations about the role of developing nations, while poor countries themselves are anxious that they should not have absolute emissions cuts, rather than simply limiting the growth of their emissions, and that they should receive financial aid to do so.

Lengthy and exhausting as the Bali bickering was, it may yet come to seem harmonious. The UNFCCC’s Mr de Boer, who left the talks close to tears after harsh criticism near the end, acknowledges with understatement: “Finalising the negotiations in 2009 will be a lot more difficult than what we have been doing in the past two weeks.”

Business seeks targets to build a market in carbon

Ban Ki-moon hailed the dawn of a “green economy” in Bali last week, presenting climate change as a business opportunity as well as a threat.

The United Nations secretary-general’s words were welcomed by many in business, particularly the more than 1,000 carbon traders and investors who turned up to the talks.

Abyd Karmali, global head of carbon emissions at Merrill Lynch, said: “The talks were bruising but necessarily so given the pivotal nature of this COP [conference of the parties], the diversity of views among the heavyweights and the inter-linkages among issues. From a financial sector perspective, there have been some positive outcomes, particularly the agreement on a financial mechanism for avoided deforestation, a recognition of the need to enhance the CDM [Clean Development Mechanism], and a realisation that to sustain the carbon market post-2012, Copenhagen must be the destination at the end of the roadmap in 2009 rather than simply a rest stop along the way.”

But he warns that there also “two big negatives”: a possible resurgence of protectionism that uses environmental justifications to erect trade barriers, and the lack of emissions reduction targets. He notes: “It seems some policymakers still fail to understand that the incremental annual investment flows of roughly $200bn [£99bn, €139bn] required in 2030 will only materialise with an explicit policy framework that reduces investment risks and which results in a robust carbon market . . . Capital is not scarce but where returns are equivalent, it tends to migrate to less risky investment opportunities.”

James Cameron of Climate Change Capital, a boutique investment bank specialising in carbon, says: “From an investment point of view this agreement sends out the right signals – that all the developed world is prepared to sign up to a new set of mandatory emissions targets post-2012. Now the hard part begins, which is to ensure that these targets do enough. But let’s be positive. Everyone must realise that real negotiations attached to a serious commitment to reduce emissions will engage business and release creativity amongst entrepreneurs – economic value will be created in helping solve the climate change problem.”

Angel Gurría, secretary-general of the Organisation for Economic Co-operation and Development, told the conference that market-based instruments such as taxes or a global cap-and-trade system were necessary to share the burden in ways that took into account nations’ differing levels of economic development.

He said: “By agreeing more ambitious caps, in the context of a global trading system, developed countries could carry a relatively greater financial responsibility than developing countries. And enabling trading in emission permits would encourage mitigation action to take place where it is cheapest and so keep the global costs low.”

He said an OECD analysis showed that the costs of limiting climate change are manageable: the cost of cutting greenhouse gas emissions significantly by 2050 to reach the more ambitious targets being discussed internationally would be equivalent to global growth slowing by 0.1 percentage points a year through to 2050.

A path pitted by decades of difficulties

The history of climate change negotiations is not glorious. As Al Gore, former US vice-president, noted in his Nobel peace prize acceptance speech last week, the problem was the subject of research in the 1960s and before, but began to be taken seriously by scientists in the 1980s. By 1988, concern had grown so much that the United Nations set up a committee of scientists, the International Panel on Climate Change, to review the evidence.

The report was finished in 1992 and an “Earth Summit” arranged in Rio de Janeiro to discuss the world’s response. Amid a euphoric atmosphere, the UN Framework Convention on Climate Change was written, binding countries to do whatever necessary to “avoid dangerous climate change”. George H.W. Bush, father of the current US president, flew in to sign.

Governments went away to draw up a protocol to the treaty that would set out how this aim of averting global warming should be achieved. But those negotiations ran into deep difficulties as countries squabbled over the depth of emission cuts each should be required to make, the extent of and means by which rich countries should help poor countries in the process and whether the most economic way to ensure such cuts was through taxation or a system called “cap-and-trade” for greenhouse gases. It took five years for the Kyoto protocol to emerge.

What followed still dogs climate change talks: the US never ratified the Kyoto protocol because of the depth of feeling against it in Congress. American politicians felt the treaty unfairly burdened them with emissions cuts, while developing countries were given no obligation to cut theirs. This would sacrifice American jobs to a scientific hypothesis that was still unproved, many said.

With the world’s biggest emitter left out of the treaty, it seemed to have little prospect of success. Russia also held out. But Kyoto’s proponents – the EU, Japan, Canada and many developing countries – spent seven years in diplomatic wrangling to persuade Russia to ratify. They succeeded in late 2004 and in February 2005 the treaty finally came into effect – 13 years after the Rio summit and only seven years before the carbon-cutting provisions of the protocol were due to expire. It looked a victory more symbolic than anything else.

This tortuous history, along with the events at Bali and their immediate aftermath, give a clue to the scale of the task facing negotiators in the next two years.

What was decided

● “The Bali roadmap” sets out an agenda for two years of talks, with a 2009 deadline, on a new agreement to cut emissions and prevent dangerous climate change

● Pilot projects were agreed that would measure emissions reduction from forestry projects, as a first step towards including reforestation, afforestation and avoided deforestation in a future deal

● The conference agreed to launch a United Nations fund to help poor countries adapt to the effects of climate change, such as droughts and flooding

● The roadmap says more money will be needed for poor countries to gain access to green technologies, but not how this will be provided

What was not

● No firm targets on emissions reductions were set, although mention was made in the text of the need for “deep cuts”

● No decision was made on how developed and developing countries should share the burden of curbing emissions

● No agreement was reached on whether carbon capture and storage projects should qualify for carbon credits.

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