5. Where Will Things Go Internationally?
Coming out of the United Nations Conference of the Parties (COP) in Copenhagen, the role of the COP in international climate negotiations is in flux. Some issues will be negotiated in this forum, yet other issues may move out of this forum. The role of the Copenhagen Accord is uncertain. It remains to be seen what new governance structures will emerge and where different countries will place their political priorities. Relatedly, enhanced China-US bilateral cooperation on reducing emissions and sharing technology promises to be an important prong of the Obama Administration in 2010.
Business Concern: Private sector interests from both climate change risk and opportunity perspectives will need to monitor and understand the direction of international negotiations and cooperation particularly as related to climate finance and post-2012 carbon market design.
4. Fast Action Alternatives & Gigaton Gaps
While both US domestic and international policy direction for “cap & trade” approaches greenhouse gas emissions remains uncertain, other options to reduce emissions are likely to gain increased prominence. Examples of feasible alternative options to reduce carbon in the global atmosphere include:
- Scaled-up deployment of biochar in the agriculture and forestry sectors;
- Reducing emissions in aviation and shipping industries; and
- Replacement of high “Global Warming Potential” fluorochemicals with less greenhouse gas intensive options.
Business Concern: The strategies necessary to move on these and other fast-action alternatives will likely move outside traditional fora for climate policy and regulation, requiring impacted business sectors to shift some of their focus.
3. Fossil Fuel Subsidies and the G20 in Toronto
At the September 2009 Group of 20 summit, global leaders agreed to phase out “inefficient” fossil fuel subsidies over time. The statement reads: “We commit to rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption….(t)his reform will not apply to our support for clean energy, renewables and technologies that dramatically reduce greenhouse gas emissions." The agreement expects energy and finance ministers to produce "strategies and timeframes" for eliminating the subsidies and report back this Fall at the next summit to be held in Toronto, Canada.
Business Concern: It can be anticipated that the definitions and timetables for this pledged phase-out will be politically contentious with a view to the US 2010 mid-term elections. It was the Obama Administration that pushed for this language in the previous G20. Key terms such as what is “clean energy” and what is an “inefficient” subsidy will require careful monitoring as phase-out pledges are deliberated upon in domestic budget and policy priorities in Congress.
2. Focusing on the Hard Questions for Renewable Energy
While there rightly tends to be high level focus on setting Federal and State renewable energy portfolio standards/targets, the challenges of scaling up renewable energy are much more complex. Transmission lines in sensitive areas, siting of off-shore wind power, determining the future role of hydro and nuclear sectors, scaling up production and distribution of solar, coordinated federal and state permitting processes, and more stable tax and investment incentives for renewables are just a few of the issues that will be center stage in 2010.
Business Concern: First, at-scale investment in a low carbon economy requires policies that create a long-term, stable and certain regulatory plan. As investors stated at the recent UN Investors Summit on Climate Risk, “What investors need most…is transparency, longevity and certainty.”
1. What Direction on US Climate and Energy Policy?
Reading the tea leaves of what could happen in the US Senate, as opposed to working on implementation of actual results, remains a core function of climate and energy policy analysis. The EPA intends to move forward on the regulation of greenhouse gas emissions from both mobile and stationary sources, but Senator Murkowski (R-AK) is moving to block these actions. “Cap & Trade” legislation appears in dire straits in early 2010, but whether Senators Graham (R-SC), Kerry (D-MA) and Lieberman (I-CT) can put together a bipartisan coalition in the face of other political priorities and a mid-term election remains to be seen. Other alternatives in play include passing an energy & jobs bill that punts on the greenhouse gas emission piece for another day.
Business Concern: Sophisticated and multi-pronged corporate planning will be required in 2010. While many leading companies facing climate regulatory exposure have planned for cap & trade, they must now ensure that they have adequate capacity and attention to engage in looming EPA regulatory and rulemaking approaches under the Clean Air Act.
In summary 2010, promises to be more of a “Rocky Road” and the private sector must stay alert and engaged to maintain a competitive advantage.