Most media coverage on the outcome of COP15 in Copenhagen has been very negative. The ‘Copenhagen Accord’ was only ‘noted’ and not ‘adopted’ by the meeting. No decisions were concluded on the numerous issues covered by the Ad Hoc Working Groups on Long-Term Cooperative Actions and on the Kyoto Protocol – the mandates for those two groups to continue negotiating were extended to COP16, but no specific schedule for their discussions in the coming year was elaborated. It is easy to see why some seem to consider COP15 to have been an abject ‘failure’.
However, it is important to realize that the COP currently operates under a unanimity rule and the failure to adopt the Copenhagen Accord was due to only a handful of countries. The main opponents being Venezuela, Bolivia, Cuba and Nicaragua.
Some reports have referred to the Copenhagen Accord as a “Five Nations” agreement, because of the key countries that led its negotiation. This includes the US, China, Brazil, India and South Africa. In fact, 25 nations were directly involved in its creation, 11 developed and 14 developing countries.
The formal adoption by COP15 of the Copenhagen Accord by this group was supported by the vast majority of Parties, including the Alliance of Small Island States, the African Group, the African Union, and the Group of Least Developed Countries, as well as the European Union and the Umbrella Group. In fact, the Copenhagen Accord appeared to have an operational consensus of over 180 Parties out of the 192 present, but not unanimous consent.
If one steps back from the media swarm and the unhappy exclusion of most NGOs from the High-Level Segment of the COP15 Conference – fortunately ERM was amongst the last 300 present - it is actually a positive outcome to see an Accord achieve the support of almost every Party present.
Over a decade of “you go first”, no “you go first” and “it’s your fault”, no “it’s your fault” had perpetuated a stalemate that many thought was insurmountable. It is no minor feat that the Copenhagen Accord DID overcome this long-standing and almost intractable stalemate to produce a text that ALL the major greenhouse gas emitters and ALL the various groups of Parties could support, albeit some with limited enthusiasm because commitments have yet to be specified and the document is not legally binding.
The Copenhagen Accord succeeds in bringing every key Party inside a process that is an actual basis for moving forward. The “who goes first” problem could well be solved by the Copenhagen Accord, IF countries do report their domestic GHG mitigation commitments to the UNFCCC by 31 January 2010, as indicated, and then adopt in Mexico City in December 2010 as an agreed basis for monitoring, reporting and verifying their actions. This is in addition to adopting detailed aspects required to take forward financing for developing countries, technology transfer, market mechanisms and CDM, REDD (forestry) and the many other issues put forward to COP16.
The basis of an international agreement to act on climate change post-2012 is contained in the Copenhagen Accord. The formula for success may be at hand, given that the largest emitters have all signed on to it, but success will depend on completing a lot more work in the next year.
The main disappointment for business in the outcome of COP15 is the absence of a legally binding accord to provide a long-term signal to investors and markets about the total volume and scope of emissions reductions that will be called for and where, how and when they must occur.
It is a new concept for business and investors to evaluate the implications of a ‘pledge and review’ approach, whereby countries each report their domestic intentions and the UNFCCC simply compiles their pledges in a single place – as called for by the Copenhagen Accord.
How real will such national pledges be in practice and how will they be measured and verified?
What will be the form and extent of project-based offsets to be available from CDM post-2012?
Currently, experts analyze national emission reduction commitments against expected economic growth and carbon intensity, tempered by expectations of compliance, abatement opportunities and ‘leakage’ with due consideration to offsets available from non-capped countries. Such analysis leads to estimates of total demand for emissions reduction and determines a price for carbon in the marketplace. A low carbon price is expected if total reduction requirements are not tough and/or the marginal cost of reductions not so high, while a higher carbon price is expected if commitments are seen as tough and marginal costs to achieve them not so low.
There is simply not enough specificity emerging from COP15 for analysts to estimate the boundaries and dynamics of the price of carbon post-2012. In the absence of adequate specificity, business can not incorporate with confidence a cost of carbon post-2012 in investments, nor can it evaluate the economic potential for investing now in low/lower carbon technologies or methods.
The cost of carbon post-2012 is not any more certain today than it was before COP15, and we know another year must go by before we have the chance to bolster our expectations on the basis of an agreed multi-lateral approach to act on climate change from 2013 onwards.
For business to obtain the signals it needs to invest prudently in the face of growing climate change impacts, enough detail must be agreed and adopted to allow robust estimates of a cost of carbon post-2012 – that means countries adopting a program of reductions going forward that investors can have confidence in based on the firmness of commitments and their measurement.
The importance of getting all major emitters, from both developed and developing countries, to agree on a framework in Copenhagen should not be overlooked in the midst of media backlash to COP15. At the same time, the very positive prospect that the framework in the Copenhagen Accord will succeed as the basis for agreed international action can not be taken for granted and many complex and sensitive issues, and all the details behind them, must still be resolved.
It’s clearly in the best interest of business, society and the environment to see these issues resolved and a post-2012 international agreement adopted in Mexico City in late 2010, building upon the near-consensus in Copenhagen that appears to have overcome the prior stalemate amongst the world’s largest greenhouse gas emitters.