Beyond Kyoto: seeking a new climate deal

Yvo de Boer has a tough job: help the world’s governments move beyond the Kyoto deal to cut greenhouse gas emissions and tackle global warming. Time is short. The details of a new agreement must be in place by 2009, says De Boer, Executive Secretary of the United Nations Framework Convention on Climate Change. While most countries accept that urgent measures are needed, disagreement remains about how to share the burden. Coaxing governments to set aside rivalries and agree a new action plan is painstaking work. De Boer talks with Shell World about the compromises he thinks are necessary to find a way through the maze.

Q How important is it to take action sooner rather than later to address climate change? What are the costs of inaction?

A If you take urgent action now in line with the most ambitious scenarios of the UN’s Intergovernmental Panel on Climate Change (IPCC) and halt the increase of global emissions of harmful greenhouse gases (GHGs) by 2020 and dramatically cut them back by 50% by 2050 you will probably avoid temperature increases of more than two degrees Celsius (3.6 degrees Fahrenheit). You will avoid a rate of temperature increase that is severely harmful to ecosystems. And you will limit the probable rise in sea levels to 50 centimetres (20 inches).

Taking action later will lead to temperature rises of three, four, or five degrees Celsius. You will always have the opportunity to take action to avoid things getting worse. But there is a limit, of course, when you get to the real tipping points. When you see the ice caps disappearing, sea levels rising by seven metres, the Gulf Stream ceasing to function, an ice age in Northern Europe – by then probably it’s too late.

Q When setting targets to reduce greenhouse gases, what is the correct balance between being challenging without being unrealistic?

A I think that credible and realistic are subjective terms. If you say today that we must introduce car-free Sundays to tackle climate change, that would not be realistic. People wouldn’t believe it’s necessary. But the notion of introducing car-free Sundays after the oil crises in the 1970s was perfectly acceptable. So I think the sense of urgency is one of the factors that determines acceptability and credibility.

The other factor is how intelligently you design the regime. If you implement a climate change policy that kills energy-intensive industry in one part of the world but sees it develop in another, then that’s not an effective policy. If I raised the cost of a haircut to 100 euros ($154) in the town where you live but nowhere else, you would get in your car and get a haircut in the next town. But if it cost 100 euros everywhere you will accept that as a level playing field and accept the cost.

Q You have challenged Shell for cautioning against over-ambitious targets that might not be achievable. Why?

A Leadership by developed countries is crucial to fight climate change. Without that leadership, developing countries don’t have a lot to follow. According to the IPCC scenario I referred to earlier, industrialised countries together should reduce their emissions in a range of 25-40% in 2020. However, currently I see some pushback from leaders in certain rich countries. In Europe, some industries and companies – including Shell – are warning against “overstretched targets”, even though Shell has always showed a strong leadership role on the issue of climate change.

This is not the time to cut back ambition levels. On the contrary, oil companies should turn themselves into modern energy companies. By 2030, approximately $20 trillion will be invested to meet the world’s demand for energy, half of which will be spent in developing countries. And much of that will come from multinationals such as Shell.

If climate change is not taken into account, worldwide emissions will rise by 50%. Science tells us emissions need to decline 50% by 2050 to avoid the most dramatic impacts of climate change. The world needs an energy technology revolution and oil companies like Shell will have to play an important role in that. This calls for bold decisions today. Incrementalism is the worst enemy of technological breakthroughs.

Q The first period of the Kyoto Protocol that set binding emission-reduction targets for developed countries expires in 2012. Can a new deal be reached to replace it by then?

A The Kyoto Protocol was a first step. The amount of emissions it reduces is clearly not enough. But it put in place an incredibly valuable architecture, including the carbon market that puts a price on carbon and uses market mechanisms to seek out the cheapest options for reducing emissions.

The next step is to build on that architecture and make it more ambitious. It is imperative that work concludes in 2009 at the UNFCCC conference on climate change in Copenhagen in time to get the next phase in place. This will be the last conference to get the details right before the first commitment period of the Kyoto Protocol expires at the end of 2012. If we fail to get that work done by 2009 the risk is that we would get a highly fragmented and I believe highly inefficient approach to climate change.

Q What in your view are the key elements of the post-2012 deal?

A The first is for industrialised countries to make ambitious commitments and to provide financial and technological resources to enable developing countries to tackle climate change. Without that it will be impossible to get major developing countries to engage in the process. Of course, the participation of developing countries is in turn politically essential for industrialised nations like the United States, Australia, New Zealand, Canada, Japan and others to sign up. To what extent major developing countries are willing to engage depends on rich nations showing leadership. So how much rich nation leadership do you need to get how much further engagement from developing countries? That is a political debate.

The challenge for participants at the Copenhagen meeting will be to fix technical issues and use the convention to create financial incentives for low emissions investments, climate-friendly innovation and green growth all around the globe, especially in developing countries. One important way of doing this is by putting a price on carbon. We already have emissions trading. The clean development mechanism under the convention helps companies in rich industrialised nations reduce emissions by financing projects in developing countries.

You also need to look at other measures beyond the convention. For example, what tax breaks are needed to encourage exports of clean or environmentally sound technologies? How can export credit agencies help ensure those technologies get to market? And how can you improve the investment climate in developing countries to attract the investments they’re looking for?

Q Isn’t the real stumbling block how to share the costs and burdens of a deal? Is compromise possible between industrialised and developing countries?

A We need to get beyond the rhetoric and analyse what’s true and what’s not. First, we mustn’t forget that Europe outsourced its energy-intensive industry to developing countries because the wages were lower. That’s the reason why those sectors are in developing countries in the first place. And many of those factories are still owned by foreign companies: 60% of China’s export earnings come through foreign owned companies, for example.

Secondly I think that it is important to be precise. I’ve heard people say that aggressive unilateral European action on climate change that places extra costs on production in Europe will destroy the European chemical industry because it’s exposed to fierce international competition. There are about 20,000 chemicals on the European market but if you dig a little deeper and look at how many of them are actually seriously exposed to international competition, it’s probably just a handful of feedstocks.

So let’s be realistic. If you’ve got the context right and fully understood the specifics, then I think you can begin to get everyone to act on climate change without creating competitive distortions and without subsidising the competition to take jobs away from you. That’s not going to be easy, of course.

One more thing: it’s worth mentioning that the goal of developing countries is not to have the most inefficient industries for as long as possible. Issues like energy security, energy prices and air quality are driving every economy in the world to begin to act.

Q The European emissions trading scheme (ETS) is the first of its kind and suffered some setbacks along the way. What’s the future role of emissions trading?

A The advantage of emissions trading and the clean development mechanism is that it helps you to find the cheapest solutions to reduce emissions in a global market. Trading schemes are essential because they improve efficiency and lower cost. But they only work if you create scarcity in the number of emission allowances that are distributed to emitters of greenhouse gases. That’s where the ETS went wrong for a little while. It also inadvertently produced windfall profits for power generators.

My hope now would be that rather than developing a number of different schemes in different places – an inefficient way of doing things – we could jump straight to an international trading scheme that works according to harmonised standards, reporting measurements and verification methodologies. That way we can design a system that doesn’t simply result in emissions being moved from country A to country B, but that really lowers them overall.

Q Changes in land use, deforestation and farming are also responsible for greenhouse gases. What action is required to address these?

A Deforestation is an issue that we have to come to grips with. It accounts for about 20% of global man-made emissions. Land use is a very interesting field, but we need to be able to analyse, measure and certify impacts better and understand how to bring these into a trading system without destabilising it. If you award carbon credits for avoided deforestation and introduce them into a market-based mechanism, what will happen to the price in the market? But overall I think the goal at Copenhagen will be to expand the areas in which action is taken on GHG emissions in a credible and measured way.

Q What role do you think carbon capture and storage (CCS) technology will play in helping reduce emissions?

A Well, if I look at projected world economic growth and the related growth of energy demand, then I think fossil fuels are an indispensable part of the future. You cannot supply the energy to grow the global economy for the next 30 to 50 years without a very significant role for fossil fuels. And all of the scenarios project that there is going to be a huge increase in the use of coal. So the question is, how can you use fossil fuels and tackle climate change? I think that carbon capture and storage is an essential part of the solution.

Having said that, carbon capture and storage doesn’t work everywhere. It isn’t equally affordable everywhere – for instance, it depends on how close the storage location is to the source of emissions. And I think that we will have to satisfy a significant constituency that it is safe. It’s a challenge that we will have to come to grips with. Otherwise I don’t see how we can have our cake and eat it in terms of seeing increased fossil fuel demand and addressing the climate change challenge as well.

Q Will CCS be available soon enough?

A There are some encouraging signs. There is a European Union pilot project with China. OPEC (the Organisation of Petroleum Exporting Countries) has established a carbon capture and storage fund. There are European efforts to facilitate it through EU legislation needed before this technology can be used. And there are a number of pilot projects going on that are critical to come to grips with the sceptics out there and to lower the costs of this technology.

I think the real challenge is to look at this issue in an integrated way. CCS has a broad potential role to de-carbonise power production and help support the creation of a hydrogen economy. It produces hydrogen, which can be used to power hydrogen fuel cell vehicles. This changes the economic and financial context of CCS too. So we need to stop seeing this as something industry alone needs to develop and start looking at it in a longer-term perspective. Start looking at how investments will help us get where we need to be in 2050 or 2100, instead of thinking in terms of short-term investments and where we’ll be in 2020.

Q At the last UN climate conference in Bali in 2007, you famously shed tears of frustration at the pace of negotiations. Are you fighting a battle that can be won?

A I’m fighting a battle that I know can be won. The question is, am I fighting a battle that will be won?

One thing that frustrates me is that the very clear public and political understanding that we need to advance urgently on this issue – and all take on our responsibilities – does not always translate into the same urgency in negotiations. It’s a process of ups and downs. The G8 meeting last year was very euphoric and the EU announced their goal of cutting GHG emissions by up to 30% by 2020. And four successive reports from the IPCC pointed to the sense of urgency.

But if you look at where we are now, Canada is saying it cannot meet its Kyoto obligations, in a recent speech [delivered April 16, 2008 at the White House Rose Garden] President Bush basically announced US emissions would continue to grow until 2025, and Russia is asking why she should limit emissions if others are not doing so. So that sense of urgency needs to be injected in an almost daily basis to ensure that you keep enough tempo in the negotiations.

Q So, what needs to be done in the next 18 months to keep that momentum going?

A We have an incredibly tough time ahead of us. We’re going to have to pull out all the stops within those 18 months to design a climate change regime that measures up to expectations. We have to roll our sleeves up, sit down and start putting concrete ideas on the table that could make it into the Copenhagen deal.

The task of drafting a Copenhagen text that delivers on the challenge that the IPCC has posed means mobilising all of the intelligence that’s available. All efforts now have to focus on getting the negotiations on the climate change deal off the ground to be ready by 2009.

* Yvo de Boer spoke to James Schofield.

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