Climate Change 2007: The Critical Year Ahead

Climate change has now moved to the center of national and global politics, mostly in response to the undeniable and potentially devastating signal being sent by the climate itself. The latest assessment of the scientific evidence released by the Intergovernmental Panel on Climate Change (IPCC) shows that the warming of the climate system is unequivocal and accelerating, with the world facing an average temperature rise of around 3°C this century, if greenhouse gas emissions continue to rise at their current pace and are allowed to double from their pre-industrial level. It also states that warming during the last 100 years was 0.74°C, with most of the warming occurring during the past 50 years. The warming for the next 20 years is projected to be 0.2°C per decade. 

That all the governments have agreed to these conclusions dispels any notion that we do not know enough to act, and decisive action is needed now. The Stern Review on the economics of climate change clearly showed that the costs of inaction, such as permanent displacement of millions of people, would be much higher than the cost of action. The Review, issued last year by the UK government, also predicts that an average temperature rise of 3°C would translate into severe water shortages and lower crop yields worldwide. Without effective action on climate change, the world could be facing economic damage on a par with that of the world wars and the Great Depression.

The world urgently needs a new international agreement on stronger targets for industrialized countries, incentives for developing countries to limit their emissions, and support for robust adaptation measures. I have called on governments to provide the necessary leadership and to move forward the negotiations under the auspices of the United Nations. With the current sea change in political will underway, a strong global agreement to follow the end of the Kyoto Protocol’s first commitment period in 2012 now stands a good chance of being agreed. 

Rapid Evolution of the Political Climate

Around the world, debates on climate change are moving with a new sense of urgency and openness. In the United States, leading senators and representatives submitted new climate change bills in early 2007, leading many commentators to conclude that domestic cap-and-trade legislation will be enacted in the next two years. The Speaker of the House intends to create a select committee studying climate change and energy. California recently passed landmark climate change legislation, and, along with four other states has agreed to develop a regional target for reducing emissions, similar to the Northeastern and Mid-Atlantic States Regional Greenhouse Gas Initiative. Industry is also undergoing an evolution, as evidenced by the recent call from ten leading US businesses to enact strong national legislation.

European Union ministers recently announced ambitious targets to unilaterally cut emissions by at least 20 percent below 1990 levels by 2020. They also are willing to commit to a reduction of 30 percent as their contribution to a global and comprehensive agreement for the period beyond 2012, provided that other developed countries commit themselves to comparable efforts. Prime Minister Tony Blair, who put climate change at the top of the diplomatic agenda during the UK presidency of the G-8 in 2005, is pushing for a breakthrough this year,* while German Chancellor Angela Merkel, presiding over Germany’s presidencies of the G-8 and the European Union, has made climate change a priority item on both agendas. Strong calls for action also have been made by leaders of several countries, including Japan, China and South Africa.

In addition to discussions in capitals, public interest in climate change is reaching new heights. Media all over the world are covering climate change on a daily basis. In particular, they are focusing on the impacts already occurring, such as the increasing numbers and severity of storms, melting glaciers, decreasing sea ice coverage, sea water intrusion, less snow fall in mountain areas, less rainwater in spring, droughts and increasingly fewer crops. Internet searches on climate change reportedly hit an all-time high in early 2007, with the volume rising 173 percent from last year.

Negotiations on the Future Regime: New Impetus

Under the United Nations Framework Convention on Climate Change and its Kyoto Protocol, governments put in place an ambitious system of commitments, institutions, national reporting and scientific analysis, along with modest financial resources to support developing countries to address climate change. However, global emissions are still rising and impacts are being increasingly felt. Significant additional action is needed to reduce emissions and support adaptation to climate change. Although the urgency is now universally recognized, insufficient progress is being made to develop an agreement on the policy post-2012, when the first commitment period of the Kyoto Protocol ends.

Given the broad nature of the problem, the debate on climate change policy has “outgrown” the environmental domain to which it has been traditionally referred.  Climate change policy is strongly linked to the issues of energy security, technology, economic policy and trade, which lie outside of the portfolios of environmental ministers—the primary decision makers in the international negotiations on climate change. These link-ages offer new opportunities for policy synergies, but require leadership at the highest level to move forward.

I have outlined the following five principles which could guide negotiations on next steps in the international approach to climate change:

• Addressing climate change requires a long-term global response in line with the latest scientific findings and compatible with long-term investment planning strategies of business;
• Industrialized countries must continue to take the lead and reduce their emissions substantially given their historic responsibility and economic power/ capabilities;
• The problem cannot be solved without further engagement of developing countries (in particular China, India, Brazil, Mexico, South Korea);
• However, this requires that developing countries receive incentives to limit their emissions and assistance to adapt to the impacts of climate change while safeguarding socio-economic development and poverty eradication; and, for this,
• Full flexibility in the carbon market should be allowed, to ensure the most cost-effective implementation and to mobilize the resources needed to provide the incentives to developing countries.

Agreement on these guiding principles at the highest level will send a strong signal to the negotiators at the UN Climate Change Conference in Bali later this year, who will then need to reach agreement on a wide range of issues that set the stage for future action.  For example, industrialized countries need to take the lead, in particular to assure the business community on the continuity for the carbon market beyond 2012. The carbon market, established by the Kyoto Protocol, has seen significant growth over the past two years.  The Clean Development Mechanism (CDM), which provides a vehicle to finance sustainable development projects while reducing emissions in developing countries, has grown exponentially. Since 2005, the estimated potential of emission reductions to be delivered by the CDM pipeline has grown twelve-fold to more than 1.5 billion tons— equivalent to the combined emissions of Australia, Canada and the Netherlands in a single year. There would be a significant risk for the value of carbon beyond 2012 without a long-term provision for the carbon market. 

In addition, enhanced engagement by major developing countries such as China, India and Brazil, will also be crucial to global efforts to cut emissions of greenhouse gases.  They have recently shown clear indications that they would be willing to take further action on climate change beyond their actions already being implemented. For this they need international help, particularly in light of their need for energy for development. A key precondition to progress in Bali will be progress on establishing incentives for mitigation action within developing countries.

Other key elements of a new agreement may include additional steps aimed at addressing adaptation to the adverse impacts of climate change, which may involve ways and means to mobilize additional financial flows to help vulnerable countries build their capacity to cope. In addition, decreasing the growth in emissions will require a substantial acceleration in the application of clean technology and the greening of economic growth.  A future agreement may need to develop mechanisms and policies aimed at making technology solutions available in the context of clean development. 

The Road to Bali and Beyond

Concluding a strong global agreement—one that will set a path for decades to come—by 2010 presents a formidable challenge but a reasonable timetable is possible. By the end of 2007, negotiations should begin on a regime for the years after 2012. Basic principles should be established during 2008, and by 2009, the world community, including the largest emitters, should be ready to make a serious deal, which should be concluded by 2010 and ratified by 2012.

The current negotiations require a strong political signal; therefore, governments are holding discussions at the highest levels throughout 2007. Key meetings outside the UN process may provide an opportunity to build and reinforce momentum. In particular, the G-8 Environment Ministers meeting in March, which includes the “plus five” countries of Brazil, China, India, Mexico and South Africa, will address climate and energy policy and could provide an important early signal of the political possibilities. All eyes will then turn to the G-8 Summit in June, led by Chancellor Merkel, which must provide the high-level leadership and political impetus needed for success at the Bali Climate Change Conference.

The Bali Conference in December will mark a critical point in the inter-governmental process. The coming year must be used to promote political consensus that results in a mandate to launch new negotiations. It is also imperative that any work launched in Bali build on the progress already made under the UN process on a future climate change regime in order to deliver the needed results in the shortest time possible.  Expectations for the Bali Conference will be extremely high, but as the IPCC assessment makes clear, the long-term stakes the world faces are far higher still.