Despite Financial Crisis, Climate Change Concerns Continue

“This year’s climate change agenda has, if nothing else, highlighted that next year will be hard going for those wishing to set global agreement for action against climate change,” states a recent article on Lloyd’s web site (www.lloyds.com).

The article points out that, even though the global economic downturn weighs heavily across the globe, “nearly 200 countries have underlined their determination to agree a target for a new treaty to combat global warming by the end of 2009.”

At the Climate Change conference, held in Poznan, Poland, over two weeks in early December, “representatives of 192 countries involved in the United Nations climate talks confirmed their commitment to reductions in global greenhouse gas emissions, blamed by most scientists for global warming,” said Lloyd’s. “The cuts should be between 25 and 40 percent by 2020 (from 1990 levels).

“The UN’s climate change meeting was a chance to take stock and narrow differences one year after agreeing in Bali, Indonesia, on the 2009 goal for a new pact to replace the expiring Kyoto Treaty.”

As reported on the web site of the United Nations Framework Convention on Climate Change (http://unfccc.int), the parties, represented by “over eleven thousand participants,” agreed that the first draft of a concrete negotiating text would be available at a UNFCCC gathering in Bonn in June of 2009. This is ahead of the December 2009 meeting in Copenhagen, which will be pivotal for global action on climate change by setting pathways to meet global targets.

Lloyd’s noted, however, that the “UNFCCC ended up postponing thorny issues, including whether tropical forest management should be included in a climate pact. Forests soak up heat-trapping carbon dioxide as they grow and their destruction through deforestation is held to be responsible for some 20 percent of the rise in greenhouse gases.”

Not just environmental activists are concerned. Lloyd’s pointed out that the business community is taking an active role in trying to handle deforestation. “The Poznan Communiqué on Climate Change 2008, issued by the Corporate Leaders’ Group on Climate Change at the conference, illustrates this when it calls for ‘…substantial, predictable, results-based and long term financial flows to developing countries that achieve measurable and verifiable reductions in emissions from deforestation and forest degradation,””said the article. “The task facing countries and parties is agreeing on a suitable plan which will preserve local economies as well as forests and the biodiversity they contain.”

The UN conference in Copenhagen in 2009 will have to find ways to resolve that issue. It won’t be easy. “Even where countries agreed action, such as the launching of a long-promised Adaptation Fund for developing nations, it has deepened divisions between rich and poor states,” said Lloyd’s.

Rich states agreed to pay $80 million a year into the fund, which will finance developing country action to adapt to the impact of climate change, such as by improving flood defences. But it is well below the $300 million initially expected and far short of the billions of dollars that experts say will be required.

Yvo de Boer, head of the UN Climate Change Secretariat, expressed concern at the tensions that surfaced towards the end of the meeting, particularly over the fund. “It’s a worrying sign that people are taking up positions for a hard negotiation,” he told Reuters news agency.

“In terms of the calendar, Poznan was half-way, but the most difficult stretch of the road is still ahead of us,” stated Richard Klein of the Stockholm Environment Institute clearly looking to Copenhagen 2009.

“However,” said Lloyd’s, “falling when it did—particularly when the US is effectively between presidents—the Poznan conference was perhaps never going to do much more than mark time.”

Lloyd’s article continued as follows:

European Union climate action

At the same time, the European Union, which prides itself on taking the lead on global warming, was focused on setting targets in a summit in Brussels on 11 and 12 December. Climate change policy was on the agenda. The summit agreed to maintain the 27-state bloc’s so-called 20-20-20 targets.

These say that by 2020 Europe should cut carbon dioxide emissions by 20 percent from 1990 levels, increase energy efficiency by the same percentage and also source 20 percent of power from renewable energy such as wind or solar.

But even as the EU conference came to an end, Stavros Dimas, the EU’s environment commissioner, called for a 30 percent reduction. On his blog, he says: “It is increasingly clear that our current ambitions may not be enough, and that we will probably need to revise our level of ambition upwards.”

Once again, business is in broad agreement with high targets and effective reductions. Indeed, the Poznan Communiqué draws from the Fourth Assessment report of the Intergovernmental Panel on Climate Change (IPCC) which calls for a 50-80 percent reduction in global emissions (based on an immediate peak in global emissions) by 2050.

Environmentalists call foul

French President Nicolas Sarkozy, whose country held the revolving EU presidency, dubbed the summit ‘historic’. But environmentalists called foul, saying that the 27 had watered down the requirements on industry to ‘go clean’ so raising doubts about how the targets were to be achieved.

With the exception of the power industry, most companies will no longer have to pay for the carbon emission permits, which allow them to pollute.

Several states, including Germany and Italy, have warned against imposing fresh economic burdens on companies struggling to survive in an increasingly threatening economic environment.

In a letter to the Financial Times published on 10 December, the CBI and 16 companies pressed for a global agreement to replace Kyoto and for the UK government to take a strong stand.

“The economic downturn is no excuse,” the letter says. “Without early action we will actually be worsening the long-term outlook for Europe’s economy. British business will play its part. We are pro-environment and pro-growth and reject the idea that the two are in conflict.” While it’s plain, then, that business wants adequate climate change targets it is the method of achieving the goals that remains unclear.

Incentives and economic competitiveness

Eurofer, the trade group of European steel makers, supports the EU targets but is worried about economic competitiveness. In a statement on the proposal for the revision of the EU Emissions Trading System,

Eurofer pleads for adequate provisions to “allow the steel sector to remain internationally competitive through the continued allocation of free allowances as long as no international or global sectoral agreement which provide for equal footing of industrial competitors are in place.”

Exempting companies from having to buy permits reduces the incentive to use energy more efficiently, environmentalists say. It also means that there will be a smaller pot of money available to fund cleaner energy projects in poorer EU states and in developing countries, which are to receive part of the funds from the permit system.

The EU should have little difficulty in meeting its commitment under Kyoto to cut emissions by 8 percent by 2012. Emissions are already down some 5 percent on their 1990 level and look certain to fall sharply in 2009 because of the economic slowdown. The challenge for the UNFCCC’s Copenhagen meeting will be to bring business into line without penalising economically weakened industries.

The Obama effect

Meanwhile, US President-elect Barack Obama says that addressing climate change will also create jobs and help pull the US economy out of recession.

His stance contrasts sharply with that of President George W. Bush, who for much of his time in office denied that climate change could be blamed on human activity. Bush rejected the Kyoto Protocol and his policies would have let US emissions keep rising until 2025.

The President-elect has promised to take an active part in global negotiations and has offered to cut US emissions, now running 17 percent above 1990 levels, and peg them back to the level of 18 years ago by 2020.

But cuts proposed by the EU and the US under Obama still fall short of the 25-40 percent seen as necessary by the UNFCCC. Without a strong commitment from these two economic powerhouses, there seems little reason to expect that the likes of India and China will be ready to make significant concessions.

Insurers call for action

Unsurprisingly given the impact that climate change has—and will have—on the industry, insurers are keen to see more concrete action emerge in 2009. Insurers have signed up to the ClimateWise principles which advocate that current negotiations for a new climate change treaty commit all governments to taking steps to adapt their countries to the growing threat of climate change.

“It’s time to act,” says Dr. Joachim Faber, CEO, Allianz Global Investors and Member of the Board of Management, Allianz SE (Germany). “We support the United Nations to establish a framework for global emissions’ reduction that will also help to generate more investments in low-carbon technologies. In the meantime let’s ensure some quicker wins – stop tropical deforestation and save energy with measures, every company and everyone of us as a citizen and customer can start with today”.

Allianz signed up to the Poznan communiqué and is a ClimateWise member.

Climate change is big business

Meanwhile, business leaders are in no doubt that they must contribute to the effort. “We believe that decisive action on climate change will help stimulate global economic activity. Our industry is working hard to reduce its carbon emissions and enable reductions across the economy as a whole,” said Crawford Beveridge, Executive Vice President & Chairman (Europe, Middle East & Africa) for Sun Microsystems.

Indeed, global businesses as diverse as Roche, Yahoo!, Diageo, Unilever and Shell are now making their views on tackling climate change clearly known by signing the Poznan Communiqué during the UN’s climate change conference.

They look forward to the Copenhagen meeting where they will be campaigning for a “long-term global emissions reduction pathway” that’s based on scientific fact rather than political and economic concessions. They call for a concerted approach between governments, civil society and business working together to solve a global problem.

Background

A new climate change treaty is needed because the Kyoto Protocol, which came into force in 2005, will expire in 2012. In addition, the world’s two largest polluters, China and the United States, which between them account from some 45 percent of global greenhouse gas emissions, are not Kyoto members.

Global emissions of greenhouse gases have surged about 50 percent since 1970 and under current trends could rise by almost half again by 2030.

The UN Intergovernmental Panel on Climate Change (IPCC), which brings together top scientists, warns that global warming, much of it generated from burning fossil fuels, will cause more floods, droughts, heat waves and rising sea levels.

Around 70 percent of natural disasters is climate-related – up from around 50 percent two decades ago. Environmental damage could be extreme if average temperatures rise over the current century exceeds 2 degrees Celsius, the climate panel says.

Source: Lloyd’s

Topics USA Excess Surplus Europe Climate Change Lloyd's