Environmental Law ReSource : Environmental Lawyer & Attorney : Reed Smith Law Firm : Climate Change, Sustainability

Specifically, the Copenhagen Accord offers a statement of purpose, which is to meet the “objective of the UN Framework Convention on Climate Change to stabilize GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system”; that is, to keep global warming to 2˚C. It offers $30 billion a year in financial support to poor countries with “balanced allocation between mitigation and adaptation,” growing to $100 billion by 2020, as the Copenhagen Green Climate Fund. The Accord includes key U.S. requirements such as international oversight of emissions reductions (transparency) for both Annex I and (more importantly) non-Annex I countries. The Accord also doesn’t address certain issues. Missing was hard-core MRV (monitoring, reporting and verification) for non-Annex I countries - the Accord only commits signatories to domestic MRV with “provisions for international consultation and analysis ... that will ensure that national sovereignty is respected” for non-Annex I countries. In other words, China will not open its books to verification by the West but will allow “clearly defined guidelines” for international consultation with regard to its domestic MRV. Missing also was any firm commitment to fund the promised $100 billion a year by 2020. A commitment (as requested by Africa and other vulnerable countries) for deeper emission cuts to hold the global temperature rise to 1.5˚C this century was not accepted. More of a surprise, missing was any 2050 goal of reducing global CO2 emissions by 80 percent - something that had been steadily included in discussion drafts up to that point. No overall targets for emission reduction for 2020 were specified, although individual parties are welcome to volunteer what they will reduce. Perhaps most tellingly, missing was any pledge to formalize the Accord as a binding treaty in Mexico City next year. In the end, it seems to be a short-term cash deal with a “to each his own” voluntary reduction pledge - but with non-Kyoto parties at the table.

Some countries criticized the side discussions that led to the Accord as a “back room” deal. In the language of the formal proceedings, the COP only “took note” of the presence of the Copenhagen Accord, and made it an attachment to the proceedings. Despite the informality of how it was developed, other countries were invited to join the Accord, and so far 27, including Australia and the European Union, have signed on with their own pledges. It is indeed a daunting task to try to get 193 countries to agree on anything, let alone something as complicated as addressing climate change, but Maldives President Mohamed Nasheed predicted Saturday that about 120 nations are already engaged in the overall international negotiation process and would sign up with reduction pledges before a 31 January 2010 deadline under the Accord to turn in pledges. If this “back room” approach proves successful, it raises questions as to whether the UN is the most effective forum to address international agreement on climate-change issues.

As we stated in the Day 1 post, the original goal of COP-15 had been an update to the Kyoto Protocol, and development of a Long-Term Cooperative Agreement, and in that it is a half-empty outcome. Negotiating the details of the two prime agreements still needs time, and many issues couldn’t be decided by party negotiators, but needed political decisions at the minister (or higher) level. But when the ministers arrived in Copenhagen, the gaps were too large and the time remaining too short to come to resolution. However, on the half-full side, there were originally four overriding issues that needed to be resolved: (1) How much will Annex I countries reduce their emissions of greenhouse gases? (2) How much will major developing countries such as China and India limit the growth of their emissions? (3) What is financial aid offered by Annex I countries to developing countries to engage in reducing their emissions and adapting to the impacts of climate change? (4) How is that money going to be managed? Looking at these four overriding issues, the Accord addresses but fails to completely resolve all of them. In that, COP-15 was a limited success. Clearly, there is still work to do this year and at the COP next year in Mexico City.

Beyond the COP, others have focused on how to reduce carbon dioxide emissions throughout the globe. The International Energy Agency (IEA) is one of the groups focused on this issue. The IEA is an intergovernmental organization that acts as an energy policy advisor to countries in their effort to ensure reliable, affordable and clean energy for citizens. After attending the IEA side event, it is obvious that much of what is going on at COP-15 is based on the work of the IEA. They have an incredible amount of real information in their data base and have prepared several roadmaps to advance innovative energy technology. The technology roadmaps identify gaps in financing, research and development, and the needed “revolution” in technology to reduce GHG emissions.

Underlying the IEA’s technology roadmaps is a model with two scenarios that predicts the necessary changes in world energy use to achieve GHG emissions reduction goals. One scenario is based on limiting GHG concentrations in the atmosphere at 450 ppm of CO2 equivalent (the current atmospheric concentration is about 385 ppm). This is called their 450 scenario and is equivalent to a 2 degree temperature increase. They also have a 550 scenario. When asked why they did not create a 350 ppm scenario, the IEA responded that they could not find one that would work.

Here are some key conclusions from their 450 scenario:

• a fifty dollar per ton carbon price is needed to “decarbonize” the energy sector in order to meet 2020 goals;
• a fifty percent cut in world-wide CO2 emissions is needed by 2050;
• current COP-15 pledges will not be enough to meet the 450 goal;
• major tools for achieving the 450 goal include (a) implementation of IEA energy efficiency recommendations, (b) decommissioning most of the world’s coal fired power plants, and (c) limiting use of gasoline to fifty percent of world’s transportation fleet; and
• natural gas will remain a large part of the energy sector with growth of gas production from shale (interesting news for my home state of Pennsylvania).

According to the IEA’s Richard Baron, it is also exploring the proposition that the carbon market should be brought to developing countries because the Clean Development Mechanism has not brought the type of emission reductions needed in those countries. The proposal is that new carbon mechanisms could cost-effectively support larger scale projects in developing countries. The objective is to move away from small projects to ones which can affect the developing countries’ own baseline. 

The IEA underscored that an energy technology revolution will involve a portfolio of solutions: greater energy efficiency, increased renewable energies and nuclear energy, and the near-decarbonization of fossil fuel-based power generation. It has identified carbon capture and storage (CCS) as the only technology available to mitigate GHG emissions from large-scale fossil fuel usage in fuel transformation, industry and power generation.

Tom Kerr, who is with the IEA’s Energy Technology Policy Division, reported there were currently only five CCS projects in existence in the world and none of them involved power plants. The IEA estimates that one hundred CCS projects will be needed by 2020 and three thousand by 2050 in order to meet the 450 scenario. The IEA believes CCS is required not just for new coal-fired power plants but natural gas and oil fired plants as well as for various manufacturing sectors of the world economy. The IEA is projecting more than enough capacity exists for CO2 storage under its 450 scenario. 

By the way, in support of the IEA’s carbon capture and storage efforts, Dave Wagner of Reed Smith is part of an IEA working group that will draft a model legal framework for carbon capture and storage that would be used to assist governments in the development of national legal and regulatory frameworks around the world.

But that doesn’t mean that things outside of the Bella Centre are not productive. In addition to the high level talks there are a number of important and informative side meetings going on here. For example, the International Emissions Trading Association alone has brought together panels on 105 different topics ranging from the September 2009 agreement of the G-20 leaders in Pittsburgh “to phase out subsidies for fossil fuel over the medium term” to a session involving the smart green grid industry in the United States.

One side event entitled, “The Environment: A Core Corporate Strategy” featured a discussion by a vice president at Applied Materials (makers of hardware for the computer and solar industry) who discussed the fact that “sustainability” had moved out of the traditional role of the environmental department in the corporate structure to the core of business management. He discussed changes by management that included going from two plants to one, adding onsite energy production and making dietary changes in the cafeteria. At the same event, a vice president from PG&E discussed why they resigned from the US Chamber of Commerce and how they had integrated climate issues into their businesses.

At another side event called, “Managing Carbon as a Currency”, a panel discussed how and why companies had to treat carbon reductions like currency, i.e., how GHG assets and liabilities should be determined and valued. The panel discussed efforts to identify and standardize different GHG trading instruments and various accounting and tax issues associated with a carbon asset as well as futures trading. Yvonne McIntyre, vice president at Calpine (a wholesale electric generator using only natural gas and geothermal sources to generate electricity) talked about the medium term opportunities for her company as it moved to replace coal as coal becomes more expensive. She stated that they “are already factoring the cost of carbon in our new long term contracts”. She also announced the permitting of a new large plant in California which had gone through the best available control technology process for carbon dioxide. 

Are businesses ready for climate change? A recent analysis of the 300 largest global companies by market capitalization reveals a high level of unmitigated climate-change risk, despite some improvements during the past year. Of the 1,000 largest U.S. companies by market cap, only 8.4 percent have stated environmental policies that address emissions of greenhouse gases. Recognizing this, the COP is trying to bring in business and share knowledge and viewpoints. Over the weekend, Jennifer Smokelin of Reed Smith attended the “Bright Green Expo” at the Copenhagen Forum – a showcase and information sharing opportunity of European (with some US) companies’ leadership on clean energy, with ceremonies being opened by statements from the Danish Prime minister and US Secretary of Commerce. And free Segue rides. 

One day before, the International Chamber of Commerce (ICC) - World Business Council for Sustainable Development (WBCSD) hosted a Business Day event at the Copenhagen Climate Conference, which was very well attended with executives of multinational corporations including Coca-Cola and Unilever.   Yvo de Boer, Executive Secretariat of the UNFCCC, told a meeting of corporate CEOs that the international climate change discussion was currently carried out between governments, with little involvement from the business world. He said the challenge for corporate leaders was to “make yourself relevant” to what happens at the U.N. climate conference, where negotiators from 192 countries are hammering out the details of a global warming pact. However, the business community points back at government today, calling for leadership. In an interview today, the Secretary General of the International Chamber of Commerce, the world business association, Jean Rozwadowski said “At one point, there were many that thought that the economic crisis would push climate issues down on the global agenda. However, there are many indications that this is not the case. The need for global leadership after the crisis is enormous. And a global climate agreement is a way for the world’s governments to demonstrate such leadership,” (as reported by the Danish business newspaper Børsen.). One thing is clear: If there is a framework agreed to at the COP, businesses will have to get ready, fast – with help of expertise from people in the “know”. And these events (like the one Reed Smith attended) help share the knowledge and make connections.

In today’s AWG-LCA briefing to non-governmental groups, Chair Michael Zammit Cutajar (Malta) strongly stated that the press had “misrepresented” some issues and clarified that the Kyoto Protocol does not expire in 2012. He stressed that the objective of the AWG-LCA and the larger COP-15 is not to “kill” the Kyoto Protocol. To be sure, the Kyoto Protocol will not expire in 2012. In 2012, Annex I countries must have fulfilled their obligations of reduction of greenhouse gases emissions established for the first commitment period (2008-2012) listed in Annex B of the Protocol. The target agreed upon was an average reduction of 5.2% from 1990 levels by the year 2012.

Under the Bali Action Plan, which mandates an “agreed outcome” in Copenhagen, the AWG-LCA Chair predictably stated his “hope” for COP-15 was a “strong substantive outcome” related to the long term goals of the climate convention. 

Over at the AWG-KP briefing to NGOs, Chair John Ashe (Antigua and Barbuda) stated that his group’s job was to revise Annex B (revisions to target and timetables for emission reduction commitments) to the Kyoto Protocol.   Curiously, this would include revised commitments without the United States since the United States has not ratified and has evidenced no intention of ratifying the Kyoto Protocol. 

What does this mean? If both groups accomplish these stated goals, then what would come out of Copenhagen is the Kyoto Protocol with revised commitments in Annex B, a “strong substantive agreement” on long term goals, and no greenhouse gas emission limits for the United States. So what does this really mean? Well, tune in tomorrow after negotiators talk in the corridors, meet informally with each other, and discuss negotiations with BINGOs, ENGOs, RINGOs and the other acronym-heavy constituencies.