Mereja

Author: Jon D. Sohn

  • Spill Baby Spill or Blow Man Blow?

    This week we are seeing two starkly different uses of offshore natural resources playing out on a national stage.  In the context of emerging climate and energy legislation, its worth taking another look at the risks and costs of both as Congress and the Obama Administration deliberate on policy incentives for offshore wind and oil that are pursued through legislation or Executive Branch action.

    In Louisiana, an estimated 5,000 barrels of oil a day are leaking from BP’s Macondo well in the Gulf of Mexico after Transocean Ltd.’s Deepwater Horizon rig exploded a few days ago.  Reports are that people in Louisiana can already smell the oil.  BP is working to stop the flow of oil and experts suggest BP will need to drill a “relief well” to halt the leak.  Such a mitigation process can take upwards of 3 months.  BP is reportedly spending $6 million a day in this effort and preparation of two relief wells will cost an estimated $200 million.  (Adding in US Government support costs, Evolution Securities suggests that the “net cost to BP of the cleanup operation so far plus the drilling of two relief wells would be around $845 million.”  This figure does not necessarily address harm some experts anticipate to Louisiana coastal communities and their ecosystem services, and potential punitive damages that could emerge. The punitive damage figure for ExxonMobil as a result of the Valdez spill in Alaska was approximately $507.5 million after the Supreme Court struck down the original figure of $2.5 billion as excessive.) 

    Meanwhile, off the coast of Nantucket, the drawn out battle over the reported 420 MW offshore Cape Wind project took a positive step forward when Department of Interior Secretary Ken Salazar announced federal approval.  Reports are that the project will cost approximately $900 million to build, a remarkably similar figure to the costs of direct mitigation for BP’s Louisiana debacle noted above.  Cape Wind will also reduce annual US greenhouse gas emissions by approximately 734,000 tons and replace 113 million gallons of foreign oil; both figures on an annual basis.  According to the Massachusetts Energy Facility Siting Board, Cape Wind will help stabilize and lower consumer electricity costs in the region.  A recent report by Charles River Associates indicates that Cape Wind will reduce the wholesale price of power in New England by an annual average of $185 million, resulting in an aggregate savings of $4.6 billion over 25 years.

    It is ironic that two key offshore energy projects are in the spotlight at the same time and just as the Senate debate on climate and energy legislation heats up with consensus to pass a bill based on the right balance of incentives for fossil fuels and renewable energy.  A quick comparison of the two projects suggests it might be a better investment and policy direction to develop incentives to blow instead of drill off the coasts of the United States.  But will there be enough votes in the Senate to pass a climate bill if offshore drilling is scaled back?  Stay tuned.

  • Jobs or Litigation?

    It is now well-documented that Senator Graham has pulled back from co-sponsorship of a climate and energy bill.  Whether Senator Graham gets assurances regarding sequencing of climate and energy before an immigration bill going to the Senate floor, and comes back into the fold over the next few days remains to be seen.  But its fairly clear that a tough political hurdle to climb is now even more difficult than ever as a bipartisan vote that brings a few more Republicans on board becomes problematic without the Senator from South Carolina working his colleagues on that side of the aisle.  If this is not turned around, the promise of green jobs in the US will make way to a season of litigation.

    Based on best estimates of E & E, if one subtracts Senator Graham’s vote, there are at best 38 Democratic votes in favor of a climate/energy bill in the Senate.  If one assumes a strictly partisan vote there are 19 Democratic “fence sitters.”  If every single one of those Democrats actually voted for the bill that would result in 57 votes in favor of the bill, not the 60 necessary to overcome a Republican filibuster.  There are only two other Democrats remaining after that 57, Evan Bayh (Indiana) and Blanche Lincoln (Arkansas).  While Senator Bayh might be persuaded to vote for the bill given he is retiring after this session, Senator Lincoln is doubtful. 

    There are many tripwires on the way to this supposed 58 votes with offshore oil drilling provisions and a stripping of EPA regulatory authority under the Clean Air Act the most contentious issues for some potential Democratic votes.  So even under the best of scenarios, a few Republicans led by Senator Graham are necessary to get this bill through the Senate.

    Senator Graham has stuck his neck out on this climate and energy bill.  But immigration reform will do more for the Democrats in turning out a base in the fall election and keeping their margins in Congress.  The White House and Senator Reid face a tough decision in the next few days if they want to keep the climate and energy bill alive.  Immigration is no doubt a hugely important issue and a political hot button.  But if we fail to move forward now, the clean energy jobs of tomorrow will be in China while the US will be embroiled in endless climate litigation that will do nothing to reduce greenhouse gas emissions.

  • Clean Energy Standard and Canadian Hydro1

    Senator Graham has floated a “Clean Energy Standard” in place of a national “Renewable Energy Standard,” as part of his bipartisan effort to pass comprehensive climate and energy legislation with Senators Kerry and Lieberman.  The provisions would create significant demand for increased use of natural gas, nuclear and carbon capture & storage alongside renewable energy.  However, forgotten in this proposed standard is the role that Canadian hydropower plays in the US transition to a low carbon economy.

    Hydropower produces 90 times fewer greenhouse gases than coal-fired plants and over 40 times fewer than the least carbon intensive of the thermal generation options, the natural gas combined cycle.  Electricity from the Canadian province of Québec alone has contributed to reduce emissions in the Northeast region of the US by approximately 30 Mt of CO2 equivalent, from 2001 to 2008.  Canada has plans to bring on significant new sources of hydropower.  This energy in large part will be exported to the US utilities.  All sources of hydropower energy sold in or to the United States, where such facilities are certified by regulatory authorities to have complied stringent environmental laws should qualify for clean energy standards.  There is no doubt that large hydropower has its share of risks, but so do other sources of energy proposed for a clean energy standard and without the same climate benefits and Canadian hydro should not be put at a disadvantage by pending legislation.

    Below are some recent statements by public officials on the issue of Canadian hydro.

    Energy Secretary Steven Chu
    June 30, 2009

    "There’s no one solution to the energy crisis, but hydropower is clearly part of the solution and represents a major opportunity to create more clean energy jobs."

    Phillip Moeller; FERC Commissioner
    July 29, 2009

    "The world won’t get to where it wants to go on carbon emissions without hydropower.  (…) I think this is the most exciting but also critical time in energy policy in our lifetime.  (…) If hydropower isn’t recognized, we’ll regret it for decades.  The time is now."

    Central Vermont Power Service (CVPS) President Bob Young and Green Mountain Power (GMP) President Mary Powell
    March 11, 2010

    "This agreement (between CVPS, GMP and HQ Energy Services [US]) sets the stage for a new contract that will help us maintain what is arguably the cleanest power supply in the nation, while ensuring a relatively stable and affordable future for our customers."

    1 McKenna Long & Aldridge LLP represents Canadian Hydropower interests.

  • Another Go At Climate Consensus in the United States Senate

    The much anticipated energy and climate bill from Senators Graham (R-SC), Kerry (D-MA) and Lieberman (I-CT) appears close to a public unveiling.  So far there is an 8-page outline of the legislation that was reportedly provided to captains of industry such as the US Chamber of Commerce in a recent closed-door meeting, but this document has not as of yet been made public.  A bill should be released to the public within days.  There are a wide variety of issues that will make or break this bill in terms of achieving enough votes to pass the Senate.  Here are 3 key issues to watch while assessing political feasibility:

    1.  A Cap Here, A Tax There

    All reports indicate that the bill will take a sector-by-sector approach to the energy and climate challenge.  The sector approach is a departure from the House bill passed last year that set an economy-wide cap on emissions.  Electric utilities and the manufacturing sectors will undoubtedly still fall under some revised version carbon emissions limits.  The political challenge will be ensuring that the emission caps are indeed hard caps while providing ample incentives to ensure industry buy-in.  Other sectors will face different strategies to reduce emissions.  Recognizing complaints from oil & gas constituents with a cap and trade approach, a carbon tax on transportation fuels is the likely alternative for this greenhouse gas intensive sector.  A key political challenge will be finding the right approach for setting the price of such a tax based on factors including price of carbon in other sectors and carbon content of fuel.  It is safe to say that a sector approach may bring on more votes.  However, the corresponding environmental integrity of the US approach to reducing carbon emissions will be under close watch.

    2.  Avoiding Fears of “The Big Short”

    The cap and trade approach found in the Waxman-Markey bill allowed for limited but generally unfettered trading of carbon allowances and offsets in the capital markets.  Given the current economic crisis precipitated in large part by unregulated Wall Street derivatives trading, there is angst in the Senate with unwieldy carbon markets.  At the same time, the flexible carbon market approach would allow regulated entities an efficient cost-containment strategy.  It will be a challenge to thread this needle in a manner that meets both concerns and maintains environmental integrity.  It is anticipated that limited carbon market trading will be part of the bill but that elements of the “cap and dividend” model put forward by Senators Cantwell (D-WA) and Collins (R-ME) will also be incorporated.  Under “cap and dividend,” only regulated entities (not Wall Street traders or speculators) are allowed to participate in the auctioning of allowances, and a certain percentage of the auction revenue goes directly to consumers in the form or rebates. 

    3.  Clean Energy: Eye of the Beholder

    There will be separate sections/titles in the bill that advance an energy security agenda for the United States.  These sections will include coal, renewable energy, nuclear energy, offshore and onshore oil & gas drilling, agriculture and oil refining.  Some of the real tough political challenges will fall into this part of the bill.  Vastly increasing offshore oil drilling may bring on board some Senators, but will certainly alienate others with environmental constituents.  Likewise setting renewable energy targets might set the United States on a lower carbon path, but if the bill avoids adequate complementary incentives for natural gas, nuclear and carbon capture & storage, it will undoubtedly face regional opposition from Southeast and the Midwest Senators.  As an example, Senator Graham has floated a “Clean Energy Standard” in place of a national “Renewable Energy Standard,” but it remains to be seen where the trio of Senators land on this issue.

  • Top 5 Climate & Energy Issues for US Business in 2010: Rocky Road or French Silk?

    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.

  • Memo to Senator Murkowski: Legislate for Logical Solution

    Sen. Lisa Murkowski (R-Alaska) has a point.  There are many, if not a vast majority of policymakers, who agree with the senator that reducing greenhouse gas emissions is best left to thoughtful Congressional legislation, not EPA regulation under the Clean Air Act.  Thus her looming threats to introduce amendments or resolutions or other procedural maneuverings to “take a time out,” slowing down EPA rulemaking procedures aimed at addressing climate change.

    But failing to seize her moment in the spotlight and put forward a specific legislative solution is where her logic falls apart and observers note the senator’s ear to certain greenhouse-gas-intensive industries that oppose action on climate change.  This leaves me to believe that if we take climate change seriously, then perhaps EPA action is in fact better than no action at all.

    Sen. Murkowski says that she doesn’t want a “gun to the Senate’s head” and claims that choosing between Waxman-Markey or Kerry-Boxer bills and EPA regulation is a “false choice.”  While she acknowledges the science of climate change and notes the impacts in Alaska, the senator’s stated intent is to ensure that EPA regulations don’t come into place prior to Congress finishing its deliberations because she fears significant economic hardship from an EPA approach to the climate challenge.

    The senator emphasizes that Congress must pass a bill to reduce greenhouse gas emissions — she’s on record as being in favor of passing legislation to reduce emissions.  Her position that the Senate needs to pass legislation based on sound policy that takes into account environmental integrity, economic impacts and job creation is absolutely appropriate.

    What is lacking, however, from Sen. Murkowski’s foray into the fire, are a sense of urgency and a positive solution.  Urgency is a scientific and economic necessity.  Peer-reviewed science notes that the Intergovernmental Panel on Climate Change’s worst-case scenario forecasts are increasingly likely without immediate action, which is why so many are eager to see the EPA move forward.

    The Senate is tied up in its predictably partisan politics all with an eye toward mid-term elections.  Meanwhile, EPA is following its mandate and the law, and is trying to urgently tackle the problem.  As logical as Sen. Murkowski may be in her desire to find a congressional solution to climate change, so is EPA Administrator Lisa Jackson in her intent to urgently solve a problem that economist Sir Nicholas Stern has called “the greatest market failure the world has ever seen.”

    The senator from Alaska has made her point and has everyone’s attention.  But now is the moment for real leadership and putting forward a concise legislative option that places a science-based cap on greenhouse gas emissions.  Otherwise, Sen. Murkowski is open to critiques of just playing politics.

    Washington

    Published in The Hill (January 19, 2010).

  • Copenhagen Outcomes: Lots of Bark, But The Bite Needs Work

    Heading into Copenhagen, I provided a “Fab 5” of necessary outcomes for COP-15 to be a success.  The Copenhagen Accord took a number of pragmatic steps on finance, accountability and endorsing market-based approaches to tackling the challenge of global climate change.  The Accord will likely play well in the US Senate with a view to getting more support for domestic action through cap-and-trade legislation as it brings China, India, Brazil and South Africa along in bending the curve of business-as-usual emissions.  It also establishes accountability procedures for developing countries to report on those obligations through the Conference of the Parties.  Additionally, the next commitment period of the Kyoto Protocol, never popular in domestic politics, appears dubious at best.  So these issues play well domestically.

    However, in the trade-off for these pragmatic steps, the United Nations Conference of the Parties process was left in tatters.  While most countries signed on to the Copenhagen Accord, it was done so with a disdain for the process and skepticism for the result.  It will be difficult to regain the level of political momentum and multilateral engagement that was achieved in the lead up to Copenhagen through the UN.  Science-based targets to reduce emissions backed by a legally binding UN treaty to fulfill all commitments were lost, for now, in that effort. 

    President Obama is taking a lot of heat for the outcome.  Success for the Obama Administration now lies in proving it can actually deliver real action on 1. domestic mitigation, 2. international finance and 3. working positively with China and other emerging economies on real results, thus justifying their tough negotiating position in Copenhagen.  Otherwise, the Copenhagen Accord will be seen as all bark and no bite as many critics are already claiming.  Whether the bite is real depends on a mixture of Presidential leadership, domestic politics and international pressure.

    Global efforts to reduce greenhouse gas emissions are in a fundamentally different place than they were before Copenhagen.  Pledges to reduce or curb emissions are now a global endeavor, not one just for developed nations.  At the end of the day, however, the Copenhagen Accord is a bunch of words on paper.  Emerging governance structures and actions to ensure fulfillment of the Accord will determine real success.  Perhaps, Michael Levi of the Council on Foreign Relations assessed the wake of Copenhagen best: "The climate-treaty process isn’t going to die, but the real work of coordinating international efforts to reduce emissions will primarily occur elsewhere."  The level of importance for the next COP in Mexico City remains to be seen.

    Below the “Fab 5” goals are repeated with accompanying analysis of how they line up with language from the Copenhagen Accord.

    1. Aggressive Emission Reduction Goals

    Developed countries will need to agree upon on ambitious greenhouse gas (GHG) emission reduction targets.  The IPCC suggests that this implies a mid-term goal for 25-40 percent GHG cuts by 2020 based on a 1990 level baseline and 80 percent by 2050.  Collective action will need to be supplemented by individual national commitments such as those put forward by the United States and United Kingdom in recent days.  Likewise, developing countries will need to agree to taking GHG mitigation actions that are appropriate in their national development contexts ranging from shifting to low carbon power strategies to reducing rates of deforestation.  Some observers see a collective goal that recognizes the scientific view that the increase in global average temperature above pre-industrial levels should not exceed two degrees Celsius as a more politically feasible outcome than the target cuts noted above.

    Copenhagen Accord: “We agree that deep cuts in global emissions are required according to science, and as documented by the IPCC Fourth Assessment Report with a view to reduce global emissions so as to hold the increase in global temperature below 2 degrees Celsius, and take action to meet this objective consistent with science and on the basis of equity.”

    Analysis: As predicted, the tougher decisions about collective commitments to reduce emissions by the above noted 2020 and 2050 targets were left for another day, in favor of a 2 degrees Celsius approach.  It is difficult to reconcile the scientific reality with the necessary policy goals set in the Copenhagen Accord.  There is now a February 2010 deadline for countries to sign up their individual commitments in an Annex to the Copenhagen Accord.  For the first time, both developing and developed countries will put forward such commitments, yet there is doubt they will add up to either the IPCC figures or the 2 degrees goal. 

    2. Climate Finance Commitments

    Countries need to agree upon climate finance mechanisms that will provide “fast start” funds of approximately $10-$12 to developing countries from 2010 to 2012.  This is viewed as a down payment of good faith towards future actions by developing countries.  The architecture for longer-term, predictable funding for climate adaptation and mitigation – including forestry and technology support will also need to be put into place.  However, it is less feasible for specific dollar amounts, governance regimes and sources of funding to be agreed upon in Copenhagen with respect to longer-term climate finance.

    Copenhagen Accord: “The collective commitment by developed countries is to provide new and additional resources, including forestry and investments through international institutions, approaching USD 30 billion for the period 2010-2012 with balanced allocation between adaptation and mitigation.”

    “In the context of meaningful mitigation actions and transparency on implementation, developed countries commit to a goal of mobilizing jointly USD 100 billion dollars a year by 2020 to address the needs of developing countries.”

    “We decide that the Copenhagen Green Climate Fund shall be established as an operating entity of the financial mechanism of the Convention to support projects, programme, policies and other activities in developing countries related to mitigation including REDD-plus, adaptation, capacity building, technology development and transfer.”

    Analysis: The Accord went further than I anticipated in terms of setting a 2020 target for $100 billion annually, and came in on target in terms of the “fast start” funds.  The challenge will be ensuring that these funds are truly “new and additional,” and words are followed by actions in the implementation of these measures.  The Green Fund concept provides an overarching framework and governance structure but will need significant negotiation on the road to a binding legal treaty.

    3. Accountability for Commitments

    Measurable, Reportable and Verifiable (MRV) national commitments and actions agreed at Copenhagen are a lynchpin of success.  If a global agreement will be more than rhetoric, there simply needs to be a standardized methodology to “trust but verify” with a view to equitable burden sharing in the transformation to a global low carbon economy.  Countries need to establish common international methodologies to track and report emissions and subsequent measures to reduce emissions.

    Copenhagen Agreement: Developed countries: “Delivery of reductions and financing by developed countries will be measured, reported and verified in accordance with existing and any further guidelines adopted by the Conference of the Parties, and will ensure that accounting of such targets and finance is rigorous, robust and transparent.”

    Developing countries: Mitigation actions will be subject to “provisions for international consultations and analysis.”  Mitigation actions that seek international support will be “record in a registry along with relevant technology, finance and capacity building support” and “subject to international measurement, reporting and verification in accordance with guidelines adopted by the Conference of the Parties.”

    Analysis: The fundamental goal of moving towards a more transparent and accountable system for reporting and verifying emission reductions was achieved.  The language brings both developed and developing countries along.  Through a US political lens, getting China and other emerging economies to agree to this language will assist in efforts to persuade the Senate that all Parties will move towards reductions and thus lessen perceptions of competitive disadvantage.

    4. Signals for a Global Carbon Market

    Private capital needs to see signals that a process of linking nations in post-Kyoto Protocol market-mechanism efforts that reduce emissions will continue.  In order for private capital to continue the evolution of a liquid, cost-effective mitigation market begun under the Clean Development Mechanism and Emissions Trading systems, political signals of this approach must be provided in Copenhagen.  This will allow the evolution of so-called flexible mechanisms towards at scale reductions in the most cost-effective manner possible.

    Copenhagen Agreement: “We decide to pursue various approaches, including opportunities to use markets, to enhance the cost-effectiveness of, and to promote mitigation actions. Developing countries, especially those with low emitting economies should be provided incentives to continue to develop on a low emission pathway.”

    Analysis: Market mechanisms to reduce emissions and contain costs remained alive through the Copenhagen Accord.  However, the value of such mechanisms is only as good as the demand created by aggressive emission reduction targets and the rules that ensure environmental integrity of such approaches.  Copenhagen did not advance these goals and such mechanisms will largely fall to national approaches and a future legal treaty.

    5. Political Agreement With a View to Legal Agreement

    There is broad consensus that a political agreement is the likely outcome from Copenhagen but ultimately enforcement requires a legal agreement.  Towards this goal, it is anticipated the countries will politically commit to finalizing a more legally binding agreement in 2010.  In the US context, this approach allows the Obama Administration to sequence working collaboratively with the Senate on a final energy and climate legislative package prior to promising what cannot be delivered at the international level.

    Copenhagen Agreement: “We call for an assessment of the implementation of this Accord to be completed by 2015, including in light of the Convention’s ultimate objective.  This would include consideration of strengthening the long-term goal referencing various matters presented by the science, including in relation to temperature rises of 1.5 degrees Celsius.”

    Analysis: There is no commitment to move towards a legally binding agreement in 2010, but rather just an assessment of the effectiveness of the Accord in 2015.  While nothing prevents the Parties from moving towards a legal treaty by the next COP in Mexico City, it is by no means a certainty.

  • COP-15 Day 11: Snow, Money, Gore and More!!!

    It seems as though the moods of optimism and pessimism with respect to reaching a deal in Copenhagen change by the hour.  Last evening, there was supreme doubt a deal could get done with many observers beginning to retrench to old positions of blaming US intransigence.  The US, familiar to the villain role in climate proceedings, was viewed as having a weak target with little assurance it can deliver on anything back in the Senate, yet strong demands of developing countries particularly of China and little finance to provide poorer countries as promised in the Bali Action Plan.

    Yet when I awoke before dawn, a fresh blanket of snow had covered the streets of Copenhagen and a new sense of optimism was in the air.  I had an early morning breakfast with a senior member of the US delegation who promised big news in just a few hours.  When I emerged from speaking on a panel at a side event on climate finance, the “big news” had emerged.  Upon her arrival at the Bella Center, Secretary of State Hillary Clinton announced that the US now supports a $100 billion annual climate finance fund for developing countries by 2020.  This proposal mirrors one previously put forward by the UK Prime Minister Brown and then endorsed in a breakthrough moment by the Prime Minister of Ethiopia on behalf of the African Union yesterday as reported in this blog yesterday.  The spin today is that this new proposal from the US, which is subject to reaching the broader political agreement, reflects a new level of good faith in the negotiations.  Climate finance is a lynchpin of these negotiations.

    With Bella Center access now denied to most due to security, there are more people on the streets and impromptu meetings around town today.  I trudged through the snow to the old Imperial Theatre and was lucky to get into a packed audience of mostly Danish citizens to see none other than Al Gore.  The Vice President was fresh from the negotiation halls to both promote his new book “Our Choice” and to reflect on the importance of the Copenhagen negotiations.  The crowd was electric and Gore delivered a substantive and passionate overview of the climate challenge.

    Vice President Gore provided the following insight on the key issues for resolution:

    • Significant progress in last 3-4 hours in the negotiations.
       
    • US-Africa-EU convergence on the $100 billion annual fund by 2020 is a big breakthrough.
       
    • Resolution on the role of Kyoto Protocol going forward remains a sticking point.
       
    • Agreement by China and other developing countries to submit to international accountability measures on their intensity target commitments and national mitigation action plans remains another sticking point.
       
    • Reducing forest emissions will need to be part of the final agreement.
       
    • Notably he did not mention US emission reduction targets as a key sticking point.
       
    • Whatever outcome here in Copenhagen, the next step will be quick momentum towards a binding treaty.
       
    • The US domestic goal should be to deliver legislation out of the Senate and on President Obama’s desk by Earth Day 2010 (April 22nd)
       
    • The timing of COP-16 in Mexico next fall and mid-terms in November is a formula for diminished expectations.  Gore would like to see the Mexico meeting moved up to next July in Mexico, the week after the football World Cup in South Africa.

    So we are heading towards the final 24 hours.  There are swings in expectations by the hour and still much bracketed text.  The US bottom-line demand is clearly transparency and accountability from China on their commitments.  The question is will China and others trust President Obama to deliver his own reduction targets from the Senate, enough to sign on the dotted line. It is a tough sell in both directions.

  • COP-15 Day 10: Copenhagen – Moving from Rhetoric to Reality?

    As heads of state begin to arrive, the mood remains quite anxious in Copenhagen.  Significant amounts of negotiating text still remain in brackets and unresolved.  Clearly political level help is necessary.  Information suggests that in fact high level talks began in the past few days from respective capitals.  There will be little time for informal negotiations once all key heads of state arrive, so ministerial negotiations will need to continue in parallel as it is unrealistic to expect all nuances of climate policy text to be taken care of at the highest level.  Heads of state will only be asked to address the bigger picture issues: targets & timetables for reductions, finance and a timeline for achieving a legally binding agreement.

    Connie Hedegaard, the Danish President in charge of the UN meeting, resigned as a procedural matter today and will be replaced by Danish Prime Lars Loekke Rasmussen who will be responsible for shepherding heads of state towards a political agreement.  There is confusion on the way forward as once again a higher level political text is emerging from the Danes with a lack of clarity on how it links the working group negotiations text.  It was a similar move by the Danes last week with the now infamous "Danish Leaked Text" that halted negotiations for a full day.  The G77 and China are vocal today with their displeasure on any delinking of negotiating text processes from a political agreement text.  But time is short and there is no threat to suspend negotiations as of this moment.

    Environmental non-governmental organizations under the umbrella of the Climate Action Network believe three key things must occur for the high level portion of the COP to succeed:

    • The US is too focused on legal wrangling.  Secretary of State Clinton and President Obama must take the negotiations out of this defensive stance.
       
    • China needs to step up, and become part of the international response not just provide a pledge to do things domestically.
       
    • The EU needs to increase its level of ambition, going to 30 percent reductions below 1990 levels in the medium-term and put forward a long-term financing proposals.

    In plenary today, heads of state have begun to make a series of speeches to set the stage for final negotiations.  While most have stayed with generalities, the most constructive engagement came on the issue of finance from the Prime Minister Meles Zenawi of Ethiopia, speaking on behalf of the African Union.  Zenawi set a positive tone stating “we are not here to take moral high ground but to negotiate.”  For many observers this represents an important change in tone that could help repair the North-South divide that has poisoned the Copenhagen negotiations at times.  Likewise the White House confirmed President Obama spoke with Zenawi just a few days ago.  Prime Minister Zenawi presented a concrete way forward on the contentious issue of climate finance for developing countries:

    • A fast action fund of at least $10 billion 2010-2012, placed in a trust fund composed of an equal number of donors and recipients.  40 percent earmarked for Africa.  The African earmarks should be managed by the African Development Bank and the fund should launch no later than mid-2010.
       
    • Longer-term financing should start by 2013 and reach $100 billion annually by 2020 and include creative mechanisms to raise funds including Special Drawing Rights from the International Monetary Fund.

    Zenawi said that Africa’s scaled back expectations are designed to achieve reliable funding and a seat at the table in the final days of negotiation.  Yet he also warned that this more flexible position should not be confused with desperation as “Africa will not accept a political agreement that is empty words.”  Whether one agrees with the positions put forward by the Prime Minister or not, they do represent a sign of practicality, compromise and specificity that will be required to get a deal done.

  • COP-15 Day 9: Political Horses are Coming to Water

    The UN climate negotiations are getting more tense by the day.  Executive Secretary of the UNFCCC Yvo De Boer, reflecting on his work today, noted that “you can lead a horse to water but you can’t make it drink” in reference to the Heads of State who will be arriving over the next 48 hours with a view to a political agreement being reached.

    US Special Envoy Todd Stern spent a good portion of his day informally negotiating with his Chinese counterpart Xie Zhenhua, Vice Chairman of China’s National Development and Reform Commission (NDRC).  The US is in a continual position of defending President Obama’s mitigation targets of 17 percent below 2005 levels by 2020 when IPCC data suggests deeper cuts (25-40 percent) and from a different baseline level (1990).  US officials put on a full court press today putting out the word that there are “different pathways” to reach the same scientific goals and their targets are as ambitious as any brought to Copenhagen.  When pressed on the issue of whether Obama’s announced negotiating position is indeed a final position, Stern stated that he is “not anticipating any further changes to mitigation reduction targets but there are other programs in the Congressional bills beyond the direct targets that would reduce emissions significantly further.”  I spoke with a colleague at the World Resources Institute, (the former employer of Jonathan Pershing, a key negotiator for the State Department) on this matter who notes a study finding that additional potential emission reduction programs under the Waxman-Markey bill (from which the current 17 percent position originates) beyond the stated cap target could actually get the US 33 percent below 2005 levels by 2020.  National Renewable Energy Portfolio standards are an example of an additional policy measure that can achieve further reductions.

    China on the other hand, is under pressure to “put pen to paper” in the international compliance context.  The China mitigation pledge is to reduce "carbon intensity" by 40-45 percent by the year 2020, compared with 2005 levels.  Carbon intensity, China’s preferred measurement, is the amount of carbon dioxide emitted for each unit of GDP.  By and large that target appears to be a satisfying starting point for the US and others, although there is certainly pressure for more.  More relevant to the informal negotiations today, the US wants some measure of international review and auditing processes and agreed upon methodologies for commitments by all countries.  China and the US are not yet there on a political deal that encompasses a shared vision of monitoring, verification and reporting.

    Thrown into the mix are the continued G77 demands on climate finance and setting a deadline for a legally binding agreement in 2010 to firm up the political deal anticipated here in Copenhagen.  President Obama’s calls to some African leaders yesterday and their return to the negotiating table appear to signal that piece of the puzzle can come together at the end of the day.  The negotiations are now focused on taking the various negotiation text pieces as far as possible with a deadline for working groups to report to the Plenary by tomorrow morning with results.  At that point, the horses will begin trotting into town….and there is plenty of water (and now snow!) in Copenhagen.  Stay tuned.

  • COP-15 Day 8: Chaos in Copenhagen

    The Bella Center is hot, crowded and beyond its capacity.  Lines are hours long to even enter the building.  Security is tightening up.  Around the city, Copenhagen is ground zero for climate change this week as there are countless business events, protests, and conferences all day and night.

    Negotiations were suspended as G77 nations, led by African delegates in this instance, walked out.  Their desire is a continuation of the Kyoto Protocol and pushing developed countries for bigger carbon cuts and international climate finance.  Speculation is that this action is about negotiation theatrics to raise the stakes in Week 2 and they will come back to the table soon.  Informal negotiations took place over the weekend in an upscale warehouse district of Copenhagen that were reported to be positive, so the latest G77 action caught some delegates by surprise.

    The Chair’s text was released to set the stage for the final week of negotiations.  This proposed text is supposed to be the basis for negotiations this week. 

    The negotiations appear to be heading towards the following elements:

    1. Political agreement, not a legal agreement.  From a US perspective, this allows President Obama to continue to work for political support domestically, and not get too far out ahead of the Senate. 
       
    2. The new agreement would bring all countries into the fold (unlike Kyoto where several large emitters were left out).  Developed countries will need to set mid-term targets for 2020.  Larger developing countries will need to agree on deviations from business as usual in their own emissions.
       
    3. A fast action fund for 2010 to 2012 in the 10 billion to 12 billion range for mitigation (technology and REDD) and adaptation.  There is some discussion of a fund out to 2030 being agreed upon here but it remains to be seen where the US, EU and other key players are on that issue.  The fund to 2020 or 2030 for $30-$40 billion is being advanced by Mexico and Norway. 
       
    4. A sticking point will be agreement upon a framework ensuring that commitments made by all sides are easily monitored, verified and reported.  Again, in a US context, it will be difficult for the Administration to sell a deal to the Senate if it lacks mechanisms to force transparency on Chinese actions to reduce carbon.