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by Alastair Newton & Robyn Nagioff

On 30 November, representatives of 196 nations, plus innumerable international organisations and other ‘interested parties’, will assemble in Paris for the United Nations Climate Change Confer-ence/21st Session of the Conference of the Parties (COP21). Their aim will be to achieve what the world collectively failed to achieve in Kyoto (1997) and Copenhagen (2009), ie a legally binding, global emissions reduction treaty.

COP21 (which is scheduled to end on 11 December) is seen by many climate change experts as being the ‘last best’ chance to avoid overshooting the two degrees Celsius average rise in global sur-face temperatures relative to the pre-industrial era which has already been agreed by governments. Assuming the science is correct (which we believe broadly to be the case), failure would therefore have potentially very serious consequences — especially as, politically, it would, we fear, be several years before the sort of momentum we have seen in the run-up to COP21 could be recreated, there-by consolidating the threat of a four degree warmer world. And even success would not guarantee a significant restraint on global warming but be no more than an important step in that direction, ie ‘the end of the beginning’.

In our assessment, there are good reasons to suppose that, this time, agreement will be reached. But it is by no means a given.

Who pays?

At the heart of the proposed treaty lie national commitments to emissions reduction (in other words, this is a ‘bottom up’ approach to reaching agreement rather than the ‘top down’ approach of previ-ous, unsuccessful COP rounds). These are known as ‘Intended Nationally Determined Contributions’ or INDCs. By the time of the UN deadline at the start of this month, 148 out of the 196 countries had submitted their INDC — which may not sound too impressive but collectively accounts for around 90% of greenhouse gas (GHG) emissions. According to the independent INDC-monitoring body, Climate Action Tracker (CAT), if fully implemented these contributions would put the world on track for a 2.7 degree temperature rise, higher than the two degree target but an improvement on CAT’s 3.1 degree forecast earlier this year when fewer INDCs had been submitted. According to the UN, the INDCs also increase the likelihood of agreement being reached in December on a strong global treaty.

However, the INDC’s have — unsurprisingly — revived the question of ‘who pays?’, which may be the biggest single threat to reaching a deal even though the optimists aver that the resurrection of the issue at this time amounts, helpfully, to the opening shots in the final negotiation process.

At the heart of this is a longstanding debate revolving around ‘stocks’ (ie GHGs already in the at-mosphere, for which the developed world is overwhelmingly responsible) and ‘flows’ (ie current and future emissions), with the developing world — not unreasonably, in our opinion — arguing that the developed world should bear the lion’s share of the financial burden associated with climate change-related damage mitigation, if not actual emissions reduction.

The last big emitter to publish its INDC, India, claims it will need US$2.5 trillion to reach its targets without giving any clear indication of how much of this money Delhi itself expects to be able to find. Compare this to the US$100bn by 2020 so far committed by developed countries to help developing ones meet the challenges ahead — even though the latest draft text of the proposed treaty (more on which below) specifically envisages that a proportion (unspecified) of what is generally referred to as ‘climate finance’ would come from the private sector.

Furthermore, the issue has been made even more contentious by the insistence of some developing countries, notably the Philippines, that implementation of their INDC is dependent upon receipt of financial compensation for climate change-related damage past and, presumably, to an extent future. This is a track down which developed countries are likely to remain very reluctant to go given the le-gal liability implications; but it is one which seems destined to feature very strongly at the Paris meet-ing and on which we believe some compromises will have to be made by both sides if an overall agreement is to be reached.

The text

In theory, one big step forward was the publication on 5 October of a draft treaty stripped down from 90 pages (with multiple ‘square brackets’, ie disputed text, and far too complex for there to be any real chance of reaching agreement on the basis of it in Paris) to 20. However, the so-called ‘core text’ is purely the work of officials, albeit at the behest of the parties, and it remains to be seen how it will be received when national delegates reassemble in Bonn on 19 October for the final five sched-uled days of pre-Paris negotiations.

(Note that two further meetings are scheduled outside the formal negotiation process which may have a bearing on prospects. First — and underlining, in our view, the determination of the hosting French government in particular to ensure success at COP21 — the EU and Morocco will co-host a meeting in Rabat on 12/13 October to assess the strength of the INDCs and (so we are told by the European Commission) ‘name and shame’ laggards. Second, the 15/16 November G20 summit, hosted by Turkey, will no doubt be drawn into the climate change debate despite myriad other items likely to feature on the agenda.)

Furthermore, the core text inevitably leaves still to be resolved all the really hard issues, including climate finance/“loss and damage” and how exactly in terms of emissions reduction the target of an average temperature rise of no more than two degrees Celsius (and preferably 1.5 degrees in this draft) should be met. The range of options in the current wording of the text on the latter gives some indication of how tricky the Paris sessions are likely to prove, ie:

“Parties aim to reach by [X date] [a peaking of global greenhouse gas emissions][zero net greenhouse gas emissions][a[n] X per cent reduction in global greenhouse gas emis-sions][global low-carbon transformation][global low-emission transformation][carbon neutrali-ty][climate neutrality].”

Critically, the text also commits to ongoing review of INDCs and to further communication of emis-sions goals every five years, which is widely seen as an essential element in implementation. How-ever, the NGO community in particular remains concerned over whether targets will be legally bind-ing (ie the subject of national legislation) and what sanctions may exist against countries which fail to meet their commitments (following Canada’s — unsanctioned — withdrawal in 2011 from the Kyoto Protocol and the failure of a legal case subsequently brought against the Canadian government by Friends of the Earth).

The potential spoilers

Reaching agreement requires unanimity. So, in theory, any one of the parties could torpedo the talks. However, among the bigger emitters:

China (mindful that environmental issues remain the biggest single source of domestic civil un-rest) and the United States (as President Barack Obama considers his legacy) have come to-gether (unusually) to find common ground in the past 12 months towards reaching agreement in Paris — although (recalling that the US failed to ratify the Kyoto Protocol, to which China was not a party) it should be noted that, based in part on statements made by leading candidates to date, doubts persist over the willingness of Republican presidential candidates to abide by the COP21 outcome in the event that one or other is elected;

• The European Union too has made a significant commitment to emissions reduction, ie cutting emissions by 2030 by 40% relative to 1990 levels;

Latin America, more or less as a whole and no doubt further encouraged by the strong leader-ship of Pope Francis on this issue, shows every sign of setting the pace among developing countries;

• The expectation is that Australia, seen as a potential obstacle under the premiership of Tony Abbott, will show greater willingness to compromise now that Malcolm Turnbull is in the prime minister’s office;

• As for Canada, much may depend on the outcome of the 19 October general election which remains far from clear at the time of writing;

Russia — which, in 2012, followed Canada in pulling out of the Kyoto Protocol — could prove to be a spoiler; but it does appear that President Vladimir Putin is currently looking to put his coun-try back at the top table generally which should, we think, ensure greater willingness to com-promise;

• All of which leads us to conclude that, as was the case with the failed Doha Round of interna-tional trade talks, much may hinge India and its leadership among emerging markets — which takes us back to the thorny question of climate finance and the developed world’s collective will-ingness to be significantly more forthcoming than has been the case to date.

Candid Carney and ‘stranded assets’

Much has already been written about the consequences of a successful outcome (and of failure) at COP21 and it is not the aim of this article to go over such ground again. However, there is one re-cent issue on which we feel obliged to comment, ie the recent public row over ‘stranded assets’.

Bank of England Governor and the G20’s Financial Stability Board (FSB) Chairman Mark Carney attracted considerable criticism for a speech he made at Lloyds of London on 29 September. A full reading of the text (which can be found on the Bank of England website) makes it clear, in our view, that at least some of the claims made of it were somewhat questionable. At the heart of his speech, which offered a wide-ranging assessment of the financial risks posed by global warming (ie well with-in the remit of both his roles) was a stark warning that action on climate change risks “potentially huge” losses for investors in coal, oil and gas which would become “literally unburnable”. In other words, that a move to alternative energy sources in an effort to reduce GHG emissions significantly risked these becoming ‘stranded assets’.

We certainly accept that one key means of matching commitments made in the INDCs will likely be an acceleration in a shift away from coal and oil to ‘cleaner’ gas, as some of his critics have claimed. But we do not believe that this in any way invalidates Mr Carney’s overall warning.

Furthermore, we think his warning is consistent with the prevailing view in the capital of the country with the world’s second largest known oil reserves, ie Saudi Arabia, at least to judge from its oil poli-cy for the past twelve months or so. In other words, we believe that Riyadh’s refusal to countenance cuts at the two most recent Opec meetings (and, most likely, at the next one due on 4 December, ie while COP21 is still under way), is closely tied to concern over a moment summed up in the memo-rable quote of Sheikh Ahmed Zaki Yamini, Saudi Arabia’s oil minister at the time: ‘The Stone Age didn’t end for lack of stone, and the oil age will end long before the world runs out of oil”.

None of which is to say that success at COP21 would mark the end of the oil age. But, to invert our title phrase, in policy terms relative to Saudi Arabia’s massive reserves of crude (ie a couple of dec-ades) it could mark ‘the beginning of the end’, ie a moment when the growth in demand for oil starts to slow. Better by far, from Riyadh’s perspective, to be holding the price down now to squeeze out higher cost producers and protect market share, thereby ultimately minimising the quantity of the Kingdom’s biggest liquid asset which may be left unwanted in the ground one day.

Alastair Newton is a former member of HM Diplomatic Service who subsequently spent ten years as a political analyst in the City. Now independent, he is co-founder and director of Alavan Business Advisory based in Livingstone, Zambia ( Robyn Nagioff is a politics student who will begin studying Politics and International Relations as her degree in September 2016.

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