Representatives from the 190+ nations signed up to the United Nations Framework Convention on Climate Change meet in Doha, Qatar at the end of November for COP18, two weeks of climate negotiations. Jonathan Shopley explores the implications for business.

The Doha hour-glass

When the Qatari sands run out at end of the forthcoming Doha meeting, we should not expect meaningful gains for the climate nor for business.  So far, the  actions of regulators and policy-makers to reduce global GHG emissions are fragmented, confused, ineffective, and weighed down by past mistakes.  The chances of governments taking effective action is bleak, so business needs to continue to lead the way – and champion the message that the path to a low carbon economy lies in strategic market investment, not simply in reducing emissions within their own boundaries.  

We should not lose heart – progress is being made, and important lessons are being learnt and applied. However, everything points to the fact that until 2020 at earliest, business will be picking up the slack in the system.  Do that job well, and business has the opportunity to influence the structure and efficacy of any global agreement that may replace the Kyoto Protocol.   To understand the implications for business, let’s start by looking at where we got to at the last COP in Durban in December 2011 and what’s on the agenda for Doha.

The Durban legacy

Durban solved the big challenge of what to do about the Kyoto protocol by kicking the can down the road to 2020, with lots of work to do to before 2015 to define a successor agreement to the Kyoto Protocol.  The Kyoto Protocol remains as a much reduced legally binding pillar of the international climate regime – totally inadequate to the task to reducing global emissions in line with scientific guidance.

COP17 kept some momentum with ‘The Durban Platform for Enhanced Action’, which:

  • Committed all countries within the UNFCCC to be legally bound to cut their emissions of seven greenhouse gases starting no later than 2020 in a new agreement to replace the Kyoto Protocol, provisions of which to be finalised by 2015.  The real triumph was that the successor agreement will drop the Kyoto Protocol’s separate treatment of developing and developed countries and will include all major emitting nations. In the mean time, the EU and nine other countries were committed to an extension to 2017 or 2020 – although China, Japan and Russia promptly announced their withdrawal joined later by New Zealand. 

  • Agreed the operating principles and governance, but not yet the source of funds, for the $100bn a year Green Climate Fund (GCF) to reassure developing economies that climate change mitigation will not be used to suppress their development aspirations and to secure their support for the successor agreement.

  • Recognised that the CDM would become constrained as all nations take on targets, and called for new market mechanisms, leaving details to be worked out later.  

  • Adopted rules that opened the door for a market mechanism that will allow private investors to finance projects that stop deforestation.  

The Doha to-do list

Three big tasks are on the to-do list for the 190+ country negotiators when they gather in Doha.

  • 1. - Finalise the extension of the Kyoto Protocol, including agreeing targets for remaining participants and decide what to do with the 13 billion tonnes of surplus allowances from the first compliance period. 
    • - As the rules currently stand, they can be carried forward bringing all the problems of the first compliance period into the extension period.
  • 2. - Secure the funding required for the Green Climate Fund.  Now that the governance structure for the GCF has been put in place and a home has been found for it in Incheon City, South Korea the really hard task of sourcing its $100bn/year funding begins.  

  • 3. - Agree the work plan to develop the successor agreement to the Kyoto Protocol.  Effectively, this means starting all over again in the task of developing an international agreement – learning from and correcting past mistakes, keeping the parts that work, and filling the yawning gaps that made the Kyoto Protocol a flawed first attempt.  We shouldn’t under-estimate the difficulty of this task, especially as it will need to factor in calls for a review of the UNFCCC’s 2oC target.  Small Island States, already experiencing the threats of rising sea-levels, are calling for a lower target of 1.5oC.  

Re-entering uncharted territory

These issues will need to be negotiated under circumstances very different to those when the UNFCCC first began its work in 1994.  Then it was the world of ‘common but differentiated responsibilities’ as wealthy developed economies sought to engage the developing economies in a global solution.  Now, the world’s most developed economies, specifically the US and EU, are battling the impacts of recession, high rates of unemployment, and colossal fiscal deficits.  Developing economies including China, India, Brazil, Nigeria and South Africa have their problems, but rapid growth in both population and consumption is not one of them.  

In the 1990s market-based capitalism was winning out; now financial crises have made many nations deeply suspicious of markets, let alone market-based solutions to climate change.  

There are so many past issues to fix, changing circumstances to adjust to and conflicting agendas to accommodate that we should not expect COP18 to deliver much for business or the climate.

All is not lost, and there is reason for optimism

Business should not misread the current situation, specifically:

  • Any modest GHG reductions reported by nations are as a result of economic slow-down, not progress on decarbonising our economy – so they will increase as growth returns.

  • The drivers for action on climate risks are strengthening because physical evidence is changing the perceptions of a wider proportion of civic society. That will bolster political will to act... given time.

  • The fact that the UNFCCC’s Kyoto Protocol and the EU ETS are suffering from design faults hasn’t stopped states like California and Quebec and countries including Brazil, China, India, Korea, Mexico, and Vietnam from embracing market based approaches. They are doing a better job too, as they can design their systems anew using lessons learned from the pioneers.

  • The fact that the UN will not have a replacement agreement in place before 2020 at the earliest doesn’t mean that climate change isn’t an issue of concern to business right now.

Markets provide a means for business to fund projects that deliver low carbon development, by replacing fossil fuels with renewables and restocking critical carbon sinks. Business needs to remind policy makers that internal reductions and energy efficiency are important, but alone are not going to have the required level of impact.

The private sector must stay the course despite confusion and disappointment around the progress being made on international policy and agreements and what may look like the ‘collapse’ of carbon markets.  Businesses, many of which already see GHG emissions as a strategic issue and therefore act ahead of compliance, must continue to step in where governments have failed to act. Leaving governments to muddle on is dangerous and will leave business exposed to climate risks, unfair competition, and rising costs of abatement.

So, if that is how businesses should view the Doha talks, how should they act through these uncertain times?  The CarbonNeutral Company’s clients are those companies which have chosen not to wait and do nothing.  They have raised their ambitions to reassure customers and investors that they can be part of the solution not the problem; to engage staff on issues that are increasingly important to them in their daily lives; to de-risk supply chains; and to future proof their business strategies for a time when climate policies will have bite.  

I applaud and commend their proactivity, because without it, we really could get bogged down in the oil rich desert sands of Qatar.

I’d be pleased to hear your reactions to these views, answer questions and respond to comments.  Follow me on @JonathanShopley for tweets from COP18 in Doha. I will summarise the outcomes in a blog in mid-December.