What next on Climate Change talks and Low Carbon Recovery?

April 9, 2009

     By Duncan Green     

Even while they ignored climate change at the G20 London Summit, the gulf between rich and poor countries was widening in Bonn, in the last round of talks (ending last week) before a negotiation text is drafted for the big UN conference in Copenhagen in December. For an Oxfam update on the talks see here. No progress was made on mitigation (emission reduction) targets for rich countries, but developing countries are becoming increasingly assertive in demanding cuts. Apologies for the blizzard of numbers, but targets for emissions reductions lie at the heart of the response to climate change and sort out who is serious and who isn’t, so bear with me.

The G77 group of developing countries, including China, have put forward a proposal for rich industrialised countries to cut their emissions by at least 40 per cent on 1990 levels by 2020. Saudi Arabia and other oil producing states have split with the group over fears that a decline in demand for oil will affect their economy. South Africa, supported by most G77 countries, has tabled a proposal for allocating emissions reductions based on the level of cuts the science says is needed according to principles of responsibility (a country’s current and historical per capita emissions) and capability (a country’s ability to make emissions reductions based on its wealth). This model concludes that the US should cut its emissions by 52 percent from 1990 levels by 2022; Germany by  54 per cent; Australia by 49 percent; UK by 75 per cent and Canada by 47 percent. The Philippines has tabled a similar proposal, which envisages even greater emissions reductions.

In contrast to these figures, the EU, which has one of the most ambitious targets of rich (Annex 1) countries, has committed to emissions reductions of 30 percent on 1990 levels by 2020 if other industrialised countries follow suit. To date, public statements by the US talk about a stabilisation of emissions at 1990 levels by 2020 (i.e zero reductions).  Other countries are even further behind – Canada’s commitment equates to a 24 percent increase in total emissions by 2020.   

Meanwhile, on the need to deliver a low carbon recovery. A paper from Nick Mabey at environmental thinktank E3G neatly summarizes the arguments:

‘In order to prevent catastrophic climate change, global carbon emissions need to peak by 2015 and then reduce by 5% per year. This is a radical change from business-as-usual, which foresees emissions rising at 2-3% per year. Put simply, the world needs to move to a virtually zero carbon energy system by 2050, and in developed countries well before this.’ [John Ashton, the UK Climate Czar, said at a Nick Stern lecture last week that ‘by 2050 we will need to have a zero emission economy, with the exception of land use.’]

‘Current stimulus packages will amount to 3.25% of global GDP over 2008-2010, with two thirds in direct government spending. The IMF expects this total to increase as more countries finalise their policies for 2010-2011. On a generous assessment around $436bn, or 23% of the total stimulus, has been allocated to low carbon investment. However, if investment with uncertain carbon reduction gains (e.g. infrastructure) is excluded, direct spending on improved efficiency, low carbon energy, transport and R&D is only $140bn or 8% of the total. This is almost half of the $272bn allocated to road-building in the same stimulus packages.’

‘These averages also mask strong differences between countries. South Korea has dedicated 80% of its stimulus spending on low carbon investments. China also ranks highly (37%), dedicating around $200bn to low carbon investments – although a substantial amount of this is committed to rail and grid infrastructure with uncertain climate benefits. Amongst developed countries only the US, France and Germany have allocated over 10% of their stimulus to low carbon investment.’

‘Global renewable energy investment grew by 60% annually from 2004-2007. Given current financing problems, sustaining scale-up of production in these sectors in the coming years may require short term industrial support (e.g. loans, tax holidays) perhaps clustered in Low Carbon Innovation Zones. Additional finance can be generated using innovative mechanisms such as green bonds backed by public or private funds, and can be distributed through low carbon infrastructure facilities which leverage private finance.’

‘The IEA estimates that … there is a need for $1,680bn of low carbon investment over the next two years… If countries devoted 50% of their stimulus packages to low carbon areas this would deliver $911 – $1,215bn of low carbon investment under different stimulus scenarios.’

In the UK, some pretty mainstream players are also getting increasingly frustrated with the lack of leadership on the shift to a low carbon economy, for example the head of the employers federation, the CBI, this week said that if the government didn’t act, green investment would go elsewhere and the UK economy would risk being left behind.