By Simon Maxwell, Executive Chairman, CDKN

This year’s Chatham House climate change conference was on the theme ‘Climate Action in the New Global Economic Order’. Day 1 had three sessions, dealing respectively with national climate strategies, climate action in developing countries, and the UN process. Day 2 (half a day) focused on energy.

As usual, this was a well-designed and well-managed event, for which all credit to Chatham House, and Bernice Lee and her team. Speakers included Christiana Figueres from UNFCC, Rachel Kyte (VP for sustainable development at the World Bank), the Mexican Minister of Environment, and various others, who cannot be named, apparently, under the Chatham House rule. I spoke in session 2 on the first day: my presentation (audio and powerpoint is highlighted on the CDKN website here) and can be seen at http://vimeo.com/30328236.

Key take-away messages, structured thematically and with relevant detail, were as follows:

1. There was quite a debate about Durban. Expectations are low, despite Christiana Figueres’ description of the success of the preparatory conference in Panama. The political moment is not right, and the focus is on sustaining the credibility of the process until the next breakthrough moment, which many say will probably not be before 2015. Some (including Figueres) argued that civil society pressure should be stepped up urgently to accelerate progress. Others disagreed, arguing that ‘powder should be kept dry’ (civil society campaign efforts should be restrained) until the circumstances are more propitious.

2. In that context, Durban is likely to deliver three main things: (i) a way forward on the Green Fund, with the arrangements (not the money) ‘almost there’; (ii) a Technology Mechanism, with agreement on the policy side and some progress on implementation; and (iii) bringing order on strategies to deal with adaptation. That is a pretty modest package. Those NGOs who spoke were worried it will be too much focused on mitigation (especially energy), not enough on adaptation.

3. Christiana Figueres said that the post-Cancun package is much more difficult, with major questions about long-term finance and about post-Kyoto commitments. On life after the Kyoto Protocol expires, the most likely outcome is not a single framework, but what Ms Figueres described as a three-cornered hat: (a) agreement in principle to a second commitment period, but (b) dependent on the countries which have announced they are quitting (Russia, Canada, Japan, US) being gathered together into a separate ‘container’, along with the pledges they have already made, and (c) a ‘declaration’ or ‘letter of intent’ to move towards a comprehensive agreement.

4. The long-term finance issue is said to be urgent, because the $US 30bn fast-start funding will formally run out in 2012: there is likely to be a hiatus between expiry and any new sources of funding being agreed. There were several expressions of regret at how the negotiations have become hostage to finance, with the mantra being ‘no cash, no deal’. Would it be better, have been better, someone asked, to focus less on financing and more on innovation?

5. As much as $US 200bn was committed around the world in stimulus funding following the global financial crisis. This is gradually being spent, but will run out, adding to short-term worries about funding. The current slow-down also hampers investment.

6. Existing financing (including in developed countries) has been delivering results - there were some good contributions on financing energy, for example. The renewable industry is now worth some $US 250 bn a year (2010), and has been growing at 30% a year. Globally, investment in renewables is now about the same as in fossil fuels. Prices are coming down as a result: for solar, every doubling in volume reduces cost by a factor of 2. With wind, doubling reduces cost by 10%. If cost comparisons are made on a no-subsidy basis, renewables should soon be competitive with fossil fuels as far as residential uses are concerned, by 2015 in a range of countries including France, Spain, Japan, Germany, Denmark and maybe the UK. The economics are even more attractive in countries without a developed grid infrastructure.

7. On the aid side, financing is overly complicated, with too many different funds, and delivered disproportionately to middle income countries. There is also a simmering debate, covered in the recent IDS Bulletin on climate change, which I have reviewed, on whether funding should be channelled through the World Bank or the UN/UNFCCC. Ministers of Environment tend to prefer the latter, Ministers of Finance the former. Donors side with Ministers of Finance and vote with their feet.

8. A recurrent question, and the theme of my intervention, was about what can be done in the absence of an international deal, and of an international carbon price at the right level. Not everything seems to be the answer, but quite a lot, often for reasons that have little to do with climate change (pollution control, energy security, jobs), but sometimes for reasons that do. There was a long list of things the US is doing despite Congressional deadlock (e.g. tightening  vehicle emissions standards, cutting fuel subsidies, investing in renewables). I cited closing coal-fired power stations in Toronto, renewables policy in South Africa, energy security in Japan and Rwanda,  and environmental concerns in China, among others. The Mexican Minister described ambitious CO2 targets in his country, and measures being taken to meet the target. China (is this good news?) has 27 nuclear plants under construction. An interesting point, though: someone pointed out that national enthusiasm depends partly on the credibility of an international process.

9. There are some things that are attractive even without a deal. The Mexican GHG abatement cost curve, for example, has a long sweep below zero cost, meaning that there are investments that are profitable even without a carbon price: improved energy efficiency in domestic appliances, low energy light bulbs, local methane generation, and reduced deforestation all fell into this category. Note, however, that one seasoned observer of UK policy said that these so-called ‘easy’, win-win options were often not taken up because in practice they were not so easy: retro-fitting buildings in the UK was cited as an example.
10. As far as the EU is concerned, there was good progress to report on overall reductions and on renewable. Efficiency targets were way behind, however, mainly because retro-fitting was difficult. Deep regulatory reform was being undertaken, and road maps to 2050 were being prepared by DG Clima and DG Energy. The next big drivers would probably be vehicle emission standards. The incorporation of airline emissions into the European Emissions Trading Scheme (ETS) was also celebrated. On the other hand, some back-sliding was also noted, for example on support for renewable in Spain. Regulatory uncertainty pushes up cost significantly.

11. The private sector is doing some interesting things. Shell has an internal price for carbon of $US 40/tonne, which they say affects investment decisions and encourages mitigation options. Total claim to have something similar. Both are investing in renewables, although the standard oil company line seems to be that, with energy demand set to double by 2050, a mixture of all sources, renewable and non-renewable will be needed. Of course, much can be done on the demand side, but carbon capture and storage, shale oil, and nuclear power all featured in presentations.

12.  My presentation might have been a bit different had I heard all these presentations, first, but is broadly consistent. I offered a six-point programme towards achieving progress on climate compatible development even without an international agreement.

Finally, the slow-down did rather hang over the discussion, certainly for European and North American participants. Climate has become a harder sell. But perhaps there is a silver lining. One experienced climate analyst and campaigner said that it was high time that climate people engaged more with the broader growth and development agenda. Quite right. As I keep saying, everything we do on climate compatible development has to recognise that climate change and the measures we take to deal with it will be disruptive, in the sense of the word that the economist Schumpeter might have used. All climate work, in developed and developing countries, needs a strong story about growth, jobs and well-being.