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Nitin Desai: Momentum from Durban

Players in the energy market are looking further ahead than governments

Nitin Desai 

Yet another has ended with the world community taking a few hesitant steps on a road that it needs to run down to reach its destination in time. The outcome of is a compromise, where everyone can be happy with what they got and unhappy about what they failed to get or stop. But, on the whole, it represents some forward movement.

The most significant movement is in the agreement on developing a new “protocol, another legal instrument or an agreed outcome with legal force” — the last phrase being added at India’s insistence. This is to be negotiated by 2015, to come into force in 2020. There is a clear recognition that the current 2020 mitigation pledges are not on-target for containing the likely temperature increase to 1.5-2°C. So, even if the new obligations only kick in after 2020, expect some continuing pressure to live up to, or do better than, promises in the country-review process.

The new post-2020 instrument will involve binding obligations for all countries, developed and developing. But this does not rule out the application of the “common but differentiated responsibility” (CBDR) principle since the decisions at Durban, read as a package, recognise the importance of equity and space for development as elements that need to be taken into account. In fact, it may enshrine this more firmly in international law and also allow for binding obligations on finance and technology transfer. That is why the Indian delegation’s dogged resistance to the idea of a legal obligation seems a little difficult to understand.

Another welcome outcome is the agreement on a second commitment period for the Kyoto protocol, though expect some snags as the in Brussels raises questions about its compatibility with its own legislation. This means that the Kyoto-related “clean development mechanism” (CDM) market in carbon credits will continue till 2017. In fact, it may work more smoothly, because the meeting cleared a lot of methodological issues relating to the CDM. There is also a reference to a new trading mechanism in the context of the successor arrangements to Kyoto; this new mechanism has yet to be worked out.

These are welcome developments for India because they reaffirm the differentiation of obligations between developed and developing countries, and ensure the continuation of the lucrative carbon credit market from which many Indian companies benefit. But, in practice, the will only cover about one-third of the emissions from the developed countries — since the US is not in it, and Japan, Russia and Canada have opted out of the second commitment period. That is why the post-2020 instrument is so important for enforcing the principle; it will bring the remaining two-thirds of developed country emissions into a legal framework.

How should the principles of equity and space for development be spelt out for the post-2020 instrument? In the past, we have relied on the notion of historical responsibility, enshrined in the Framework Convention that provides the constitutional basis for legislation on this matter. We have tended to focus on the cumulative emissions of the developed world which have pre-empted the space available for carbon emissions from the developing world, given the goal of containing ambient carbon to a level consistent with the 1.5-2°C temperature rise.

The more extreme version of this focus is to argue that the developed world must compensate the developing world with cash for this occupation of available environmental space, an argument akin to the one that demands compensation for slavery. But there is no ethical basis for insisting that children are responsible for the sins of their fathers. In any case, this approach generates cash, but not space for emissions for the developing countries. Another version that creates space demands that the developed world roll back not just to zero net emissions but negative emissions through establishing sinks that absorb carbon. This is a bit like asking the people of European origin to vacate Australia, New Zealand, Canada and the US in order to provide space for Indians and Chinese to migrate there in millions.

The principle of equity will have to be formulated in terms that stand some chance of being accepted, and not just as clever statements in a college debate. The key point is the need for space for development and meeting the energy needs of people who are moving out of poverty. Fairness and justice require that such people should not have to bear the costs of adjustment. A certain base level of emissions per capita should be treated as a prior charge on available environmental space; what is shared out should only be what remains. The principles for apportioning this could be based on a fair sharing of the costs of adjustment. But these are early days, and there is much room for dialogue on how best equity and the need for space for development can be taken into account.

These climate negotiations are important. But they are not the only game in town. A bigger game is the green technology race. The main players right now are the US and China, who have invested $54 billion and $34 billion, respectively, in low-carbon technology in 2010 according to the Pew Environment Group. This was also the year when, according to Bloomberg data, the $187-billion investment in renewable energy (excluding large hydro) exceeded the $157-billion investment in new coal/oil/gas-based power (excluding replacements). This is also the most promising space for action in India, judging by the response to incentives for wind and solar energy.

It would appear that the players in the energy market are looking further ahead than governments, perhaps because of expectations of how public policies will evolve over the lifespan of new energy investments. That, in fact, is the connection between the global negotiating process and the market. Clear signals about goals and time-frames reduce the uncertainty attached to low-carbon investments. This signalling, as also the smooth functioning of the carbon credit market – which exists only because of government-set emission caps – may be the most substantial contribution of the climate negotiations.

Global negotiations are important. But the real locus of action is national and local for the energy transitions that we need, which require huge changes in lifestyle, business models and energy governance.

First Published: Thu, December 15 2011. 00:55 IST