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The elements of an ambitious agreement in Copenhagen

The elements of an ambitious agreement in Copenhagen
Jennifer L. Morgan
The Ecological Council Conference
Copenhagen, 10 April 2008

Ladies and Gentlemen,

Thank you for the invitation to come to Copenhagen. As I arrived last night in the airport I thought about how many trips I and others will be making here in the next two years to try to bring the world together around the massive challenge of climate change. Denmark has taken on a massive task indeed.

The world has never had to tackle a challenge like climate change, one so all encompassing and complex from both an economic and political perspective, one where a group of countries both developed and developing have to change their own actions dramatically, collectively and one where so much is at stake, in some cases an island’s very existence, for many countries around the world. There are some days, I am sure, when climate experts get up in the morning and think – this is impossible, we cannot do this, it is too hard, let’s just adapt – and yet, we must do this. There is no longer a choice. The Intergovernmental Panel on Climate Change has made this clear. The earth is approaching a very dangerous state, one that will move into instability and insecurity if we do not change things radically now. The Copenhagen Conference is thus the key moment for the global community – to decide – are we really going to tackle this or are we just going to do a bit of incremental change where a nice agreement occurs on paper but no real change in the real economy occurs.

What will the signals be if Copenhagen creates real change? And what is Europe’s and Denmark’s role in ensuring that change is historic and not incremental? It is on these areas where I will focus my comments this afternoon.

The Copenhagen Agreement must send clear signals to investors, businesses and the public alike that the future from now on is low carbon. Low carbon development should become the norm, propelling society into a new innovation phase where countries and companies are competing to corner the market on development and deployment of low carbon technologies that both tackle the climate challenge and move us towards a more energy secure system.

To do so, a very unambiguous and deep target must be taken on by all industrialized countries. The IPCC is quite clear on this point. Developed countries must commit to reducing their emissions 25 to 40% below 1990 by 2020, hopefully on the higher end of that range. The higher the number, the higher the probability that we will avoid the worst impacts of climate change and the tipping points that are so petrifying. These targets must be unequivocal and not subject to manipulation through additional negotiations over forestry or agricultural rules. In addition, national targets should include aviation and maritime emissions in the future. We cannot afford for these emissions to be left out in the post-2012 agreement. This should put us on track to meet the 80% reduction needed in 2050.

Europe has taken the first step of leadership towards making this range more possible. It must, however, carry through both in rule making and in implementation. By the end of this year, the EU Climate Package must be agreed and agreed in a similar form to what the Commission presented in January. We have learned quite a lot in the last few years of implementation in Europe, particularly that 100% of the permits in the emissions trading system should be auctioned, not given away to the power sector. Europe’s power sector must modernize now if we are to have a zero emission power sector in the next two to three decades. What does this mean in practice? Efficiency of course. A massive scale-up in renewables of course.

But it also means a ban on building new conventional coal fired power stations. As James Hansen, the prominent NASA scientist has pointed out, there is no longer room in the atmosphere to be building conventional coal plants that will remain in operation for the next forty years. If a utility wants to build coal, it should be zero emission coal. If it does yet know if that will function, that company should invest in demonstration plants to learn and bring down the cost. If carbon capture and storage does not work, then better to know now so we can invest in other technologies. This is an area where government regulation is required as the carbon price alone will not send adequate signals to transform our power sector. I am very worried that many countries in the EU such as Germany and the UK are planning to build new conventional coal plants without CCS and that Denmark has lifted its coal ban. This does not bode well for Copenhagen or beyond.

If this rapid transformation has to happen in developed countries, then it is obvious that we need a transformation, one could say, a revolution, in the way developing countries are going through their industrialisation. The Copenhagen Agreement has to include ambitious new actions by the middle income countries to meet their development goals in a lower carbon fashion and reduce their emissions off of business as usual. The literature shows that if we are to have a chance of staying below 2 degrees C, these countries – China, Mexico, Brazil, South Africa – will have to peak and reduce their emissions by 2020-2025.

This will require these countries to do something no other has ever done – industrialize and grow their economies by 8, 9, 10% while decarbonising at the same time. If they do not believe this is possible and do not have enough incentives to do so, it won’t work. The risks that short-term instability through higher food prices, poverty demands and health crises will remain much higher on the political and domestic agenda than tackling climate and energy security.

Of course, many of these countries are already doing quite a lot to reduce emissions. China has very ambitious fuel economy standards, renewable energy targets and is trying to decouple economic growth from energy intensity. Brazil is proud of its ethanol program. South Africa just introduced a carbon tax. But we know this is not enough. Matching these action against the roar of their economies and their demand for natural resources, we all know that if these countries do not commit to much more, the game is over.

Expansion of the carbon market to sectors and programmes is one part of the answer. But more is needed.

In the area of deforestation, the challenge is no different. Twenty percent of global emissions come from deforestation thus making it a key to a successful post-2012 agreement. Tropical forest countries such as Indonesia, Brazil, Papua New Guineau and others must commit to reducing emissions from deforestation and match that commitment with the necessary structural and economic changes needed to meet such goals. This will not be easy. In order to facilitate this transition, funding will be required. Instead of bringing deforestation into the carbon trading system directly, as many have advocated, which would crash the price, I would tackle this issue differently. Every industrialized country should have to meet part of its own reduction target through deforestation reductions. Instead of receiving that part of its national target for free, or grandfathered, that percentage of its target would be auctioned and the funds invested into a Deforestation Fund. This would generate the needed revenue without risking the carbon market functionality.

The task thus for Europe, if it wants to be a leader going into Copenhagen, is two-fold. Beyond showing that it can be done, as I referenced above, Europe must put forward a credible proposition to developing countries on finance, technology cooperation and adaptation. This proposition must include enough incentives that developing countries have the confidence that they can meet their national development goals, at the same time as committing to more climate action.

Let me now take these one by one.

On finance, the recent UNFCCC Secretariat paper on “Investment and Financial Flows to Address Climate Change” estimates that “global additional investment and financial flows of USD 200 – 210 billion will be necessary in 2030 to return global greenhouse gas (GHG) emissions to current levels.” Of course, by 2030, we need to be well below such levels, so even greater sums will almost certainly be required.

It is clear that the bulk of these resources will have to come from the private sector, including through the continued expansion of the carbon markets in the post-2012 period, but public sector financing of various forms is essential to generate an enabling environment and to leverage private sources.

There is also a huge gap between adaptation financing needs and resources available. Estimates by UNEP, Oxfam, the World Bank, and others of the costs of adaptation range upwards of $50 to 85 billion per year.

How are we going to do this? Again I look to Europe to show the way forward. Deep industrialized country targets coupled with developing country commitments to include sectors in the carbon market is one way to drive finance, but the carbon price has to stay high. It is obvious that new and additional revenue will be required. There are a range of proposals out there but the most obvious is to use the auction revenue of the EU emissions trading system to fund both technology cooperation and adaptation in developing countries. Auctioning of emission trading permits could generate significant additional public funds. Initial estimates suggest in the EU up to 2020, 10% auctioning could give $17-33bn annually and 30% auctioning could give $50-$100bn annually.

As those revenues are generated because of climate change, it would make sense to use as many of them as possible to both tackle the problem and deal with the impacts. Germany is using all of its auction revenue in this phase for climate change action and adaptation. Europe needs to send a signal to the global community that as a whole it will do so as part of the Copenhagen Agreement. This will both build confidence and trust with developing countries and build pressure on other industrialised countries to do the same.

In the area of technology transfer, I believe we need a new technology innovation and cooperation framework that drives innovation across the economy and utilises the right tools in the right places, both country-wise and technology-wise. This means market creation mechanisms such as dynamic standards and public sector purchasing, a global fund for low carbon technology development and deployment and a new framework on intellectual property rights and technology licensing.

While all of these elements are crucial, we also know that the Copenhagen Agreement must bring about a step change in adaptation, both in the funding for adaptation and working together to enhance existing mechanisms for disaster prevention and response.

These are the elements of an ambitious Copenhagen Agreement. Are the political conditions currently present for such a deal? I fear not. We, and particularly the Danish Presidency, have a good amount of work to do both to change the political conditions in key countries and to build the needed trust to come to an agreement. The new US President will certainly bring a different position than the current one but will it be ambitious enough? Europe and particularly Denmark should be engaging now with the incoming President and not expend any energy on the current. All three candidates support mandatory cap and trade, all three support deep 2050 targets, but moving the United States into the position where it can agree the elements of a Copenhagen Agreement by the end of 2009 is a monumental task, one that we must succeed in if China is to be asked to be ambitious as well.

So Ladies and Gentlemen, we are privileged to be working on this issue during the decisive time period. Europe has the opportunity to play a historical role during a historical time. I am convinced that this role is not only beneficial to Europe’s domestic economic welfare but also is fundamental to Europe’s national interests – stability and security in an ever globalising world. In the next six months, before a new US President takes office, Europe has the chance to position itself as a true leader on this fundamental issue of our time, a time when future generations will look back on and either say WOW they did it or What were they thinking? Let’s make it the WOW.

Thank you very much.

This intense phase of the climate negotiations occurs during a turbulent time. The wider international context for the negotiations is not favorable: looming recession in the US and other big economies; stalemate in global trade talks; high oil prices; growing tensions between the West and Russia; and increasing criticism of China’s crackdown in Tibet in the run-up to the Beijing Olympics. Strong political leadership will be required to navigate through this but cannot be taken for granted: the EU will be preoccupied with elections and institutional changes including a new Commission; national elections may be held during 2009 in six of the top 15 emitters.

Yet, for all these challenges, the climate negotiations are also a vital opportunity to rebuild confidence in the multilateral system. There is a good chance that the next US President will make climate change a priority as part of a wider effort to reach out to the world. This in turn could transform the politics in countries such as Japan, India and Canada. However, a new President will only invest political capital in negotiating an ambitious Agreement if s(he) believes Congress will ratify it and commit funds. This in turn depends on finding the right arguments to convince the US public – including underlining the benefits of reduced dependence on fossil fuels not only for climate security but also for energy security.


     

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