Current Savers Blog

An enormous white globe dangled in Copenhagen’s Bella Centre, the location of the world’s largest ever leaders’ summit on climate change, could be an unintended yet chilling sign of things to come.

An observant attendee made it clear by scribbling on the giant model of the earth that its designers forgot to paint on small, low-lying Pacific island nations like Tuvalu and the Cook Islands.

Scientists say rising global temperatures are melting the world’s polar icecaps and this will lead to higher sea levels by the end of the century. The Association of Small Island States (AOSIS) is pressing rich countries, mostly responsible for higher atmospheric levels of climate-warming carbon dioxide, for financial aid in mitigating and adapting to global warming.

Antarctica was also missing from the colossal sphere, indicating that it was probably a simple oversight since the southern continent is not expected to be completely submerged by rising oceans.

Still, as island nations pleaded for major economies like China and the United States to agree a new climate agreement over the 12-day talks, was this an embarrassing mistake on the part of the organisers?

A key component of a prospective climate deal coming into Copenhagen has been the targets for cuts in greenhouse gas emissions.

Targets would help put a “price” on carbon emissions that could then be bought and sold under a cap and trade scheme. (Click here for a related article.)

Proponents of the potentially lucrative market say it provides clear incentives to reach targets or even overshoot them, while opponents say the system would give big polluters a way around any targets.

That leads to our question of the day: What role should carbon trading play in a new U.N. climate deal?

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Knut Alfsen, Head Research Director, CICERO

At one level the climate problem is really easy. All it requires is the development and implementation of “clean” or “climate friendly” technologies on a massive scale.

Now, the implementation bit is again “easy”. Just make the right (i.e. climate friendly) choice the cheapest.

This will happen if we put a high enough price on greenhouse gas emissions, either by directly taxing the emissions, or by giving emission rights a price by introducing a cap and trade system.

So far the choice under the U.N. climate convention and the Kyoto protocol has been a cap and trade system.

Thus, carbon (or greenhouse gas) trading is essential for implementing the climate friendly solutions, and hence should play a large role in any climate treaty.

However, implementing existing climate-friendly solutions is not enough. We also need to develop through research and demonstration projects, new climate-friendly options.

Unfortunately, a cap and trade system alone is unlikely to deliver the necessary technological development. Thus, we need something in addition to the cap and trade mechanism.

This could be the introduction of standards or other regulations, or it could be direct public support (money!) for research and development activities.

As mentioned, the main focus of the climate negotiations has so far been on emission regulations via a cap and trade system.

It is high time that the other half of the solution is being addressed.

My belief is that this will also mitigate the confrontational stance we have seen between developed and developing countries so far, and foster a more cooperative spirit around the task of developing new technologies.

In conclusion, carbon trade is an important bit of any climate treaty, but should not be as dominating as it has been till now.

(Photo: People watch an illuminated so-called CO2 cube in the water of St Jorgens Lake in front of Tycho Brahe Planetarium in Copenhagen, December 7, 2009. The cube visually shows the amount of carbon dioxide produced by an average person in one month. REUTERS/Pawel Kopczynski)

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While UN climate talks involving world leaders descended into chaos and farce in the rooms and corridors of this immediately forgettable Copenhagen exhibition centre, a parallel world flourished in its main conference hall.

Meetings of world leaders and environment ministers through Thursday night and Friday yielded a series of draft climate texts, each more toothless and lacking in ambition than the last. NGOs despaired. The assembled media veered between disbelief and boredom. And outside in the snow the vegans, climate activists and other protest groups kept up a steady drumbeat of protest in the snow.

But inside the main conference hall, bureaucrats continued the deliberations they started two years ago to negotiate a successor to the Kyoto Protocol. Unfazed by the chaos around them they worked their way laboriously and methodically through articles, sub-sections and clauses. All beamed live in to the press room but incomprehensible to the media.

At times of crisis people cling to certainty. Human nature is predictable. Will they still be running through the protocols when the first Pacific island sinks?

The talks were supposed to be over, “family photo” taken, and slaps on the back given all round.

So all the 193 countries and many RINGOS, BINGOS, YOUNGOS, banks and others who had set up temporary Copenhagen offices had been told to have them packed up by Friday evening.

The rest of the plan has fallen apart, with world leaders crammed into conference rooms desperately trying to salvage something from two weeks of fruitless talks.

But the packing at least is still going according to schedule, with everything from suitcases to floorboards being rolled out as anxious journalists and harried delegates look on.

At such a critical point in the negotiations, you would expect the Bella Center to be overflowing. Non-governmental organizations were all but banished earlier in the week just as the high-level talks were about to start, and now the office-space for delegates resembles a ghost town.

If the meetings go on past Friday, as the United Nations has apparently suggested to some delegates, the already gloomy negotiating teams may be meeting in stripped down rooms that will hardly add to their cheer.

You go for walks, maybe stretch out on an open couch, perhaps stand in long lines for a luke-warm bite to eat. You make numerous trips to the vending machines, munch on biscuits, chat with colleagues. Life in the fast lane of the COP15 Climate Conference in Copenhagen has slowed down to a crawl, and the waiting is most certainly the hardest part.

On the final day of the conference, the media — and everyone else — is looking forward to an outcome, any outcome of a two-week marathon that was supposed to lead to cuts in greenhouse gas emisions and a 2010 deadline for a legally binding treaty.

The world leaders gathered here and their negotiators are still working on the cuts, but that deadline is now out in the cold. What kind of deal will finally emerge? No one here, not the media at least, has an answer to that yet.

In the meantime, we work the phones, we watch twitter chatter, we hope for word and the prospect of finally putting this behind us.

In the Bella Center, site of the two-week session, a quieter tone has set in.

It’s quite the contrast to the earlier days when NGOs and environmental activists made their presence known with staged protests, costume stunts and undoubtedly the most popular event during the proceedings: the awarding of the Fossil of the Day, given to the country that did the least to help along the talks (or the most to hamper them). The grand winner was Canada, but we all knew that was coming after a near unbroken string of “victories” during the two weeks.

That all ended when the organizers decided to kick out the NGOs after days of chaos as 45,000 registered delegates tried to gain access to a venue that holds 15,000. Frustration and anger were the tones for those days when lineups for badges stretched and snaked from the entrance to the train station hundreds of feet away, often five or six people wide.

It’s easier to get in now, but it’s not nearly as entertaining.

And it’s a more serious tone, now, too. Media and the remaining party delegates are camped out. Waiting.

President Obama is here, for a little longer anyway. Russian President Medvedev has gone home. The Japan premier is on his way out tonight.

Obama’s much-anticipated arrival was anti-climactic at best. And the reviews of his speech to the conference were far from glowing.

Even on twitter, the popular president came in for some harsh criticism.

“As a person from Malawi, a poor African nation, I had too much hope in Obama. … His speech, however, has killed my spirit and COP15,” wrote bvutoB.

I could reprint dozens more just like that.

But the real emotion will come when a deal — or no deal — is announced. That may be soon. Or it may not.

– John Kemp is a Reuters columnist. The views expressed are his own –

How much are U.S. households prepared to pay to avert the threat of climate change? According to the latest polling data published by the Washington Post, the answer is not very much, probably not much more than $25 per month or $300 per year.

Most respondents (65 percent) believe the federal government should regulate greenhouse gases from sources like power plants, cars and factories, including those who believe this strongly (50 percent) or somewhat (15 percent). Only a minority think the government should not regulate them (29 percent).

While the margin favoring regulation has narrowed since the middle of the year (when it was 75 percent to 22 percent), probably in response to a vigorous opposition campaign, there is still a clear majority in favor of taking some action on climate change.

The problem is that, when respondents are confronted with a range of cost estimates, support starts to fall away rapidly.

When asked if they would be prepared to pay for a scheme that cut emissions significantly but raised monthly energy bills by $10, the 65-29 percent margin in favor of regulation shrank to just 60-37 percent. If the cost was $25 per month, the margin was just 55-42 percent.

The poll did not ask respondents about higher charges beyond $300 per year. But if support continues to fall away at this rate, survey respondents would probably not be prepared to pay more than $400 a year in total.

POLARIZATION ABOUT SCIENTISTS

Nor are voters reassured about the truthfulness of political leaders and scientists advocating the need for tough, early action. Sections of the public are becoming much more wary about what they are being told.

The proportion of respondents who trust what scientists are saying, either completely or a lot, has remained fairly constant around 30 percent over the past three years.

But the proportion who trust the scientists moderately has been squeezed from 40 percent to 30 percent, while those who believe scientists are lying or not telling the whole truth is up from 27 percent to 40 percent. Voters show increasing polarization on the issue.

Interestingly, growing distrust of the scientific argument is not being driven by an increasing belief that scientists cannot agree. The proportion thinking scientists agree with one another on global warming has remained constant at 35-40 percent for the last decade, while the percentage thinking scientists cannot agree is also static at 65 percent. Voters’ views on the cost of emissions reduction seem to be coloring their view of the science, rather than the other way around.

Political leaders do not fare any better. Survey respondents approve of the job President Barack Obama is doing on global warming, but only by the relatively narrow margin of 45 percent to 39 percent.

WILL PUBLIC SWALLOW CAP-AND-TRADE?
If voters are prepared to pay up to $300 or $400 per year, is that enough to implement an emissions reduction program?

The respected, non-partisan Congressional Budget Office (CBO) has estimated the net cost of the cap-and-trade provisions in the American Clean Energy and Security Act (HR 2454) approved earlier this year at just $22 billion per year by 2020, or $165 on average for U.S. households.

At first glance cap-and-trade appears politically feasible. But the low net figure conceals some large income transfers and may overstate the likely acceptability of the program.

The gross cost is much higher at $110 billion per year or $770 per household. Most of this represents the market value of the emissions allowances ($91 billion) plus some domestic and international offsets ($13 billion). These costs would be passed back to households in the form of higher prices for energy and energy-intensive items.

But payments for allowances would also create an income stream (for every buyer of an emissions permit there is a seller). Some 30 percent of this income ($28 billion) would be handed back directly to households via government-run rebates to low-income households ($14 billion), or free allowances given to gas and electricity distributors they would be required to pass on to their customers ($14 billion).

The rest would be received by banks and other businesses owning those permits, which would add to their net income and ultimately be returned to their shareholder-owners via dividends or rising share prices.
According to the CBO, almost all the cost of the permits would flow back to households in one form or another ($85 billion).

The only costs borne outright by U.S. households ($22 billion) which they would not recover through rebates or corporate income would be the cost of offsets purchased from abroad ($8 billion); the cost of producing domestic offsets ($3 billion); the cost of some retooling in energy and energy-intensive industries ($5 billion); and income leaking abroad because some permits are bought by foreigners (assumed around $6.5 billion).

INCOME RECYCLING

In theory, the $22 billion net cost ($165 per year) looks feasible. In practice households would be paying an extra $770 per year for energy and other items, though they would be getting most of it back through rebates from the government or their utility company, or through their ownership of equities.

So it depends crucially how the question is framed. If voters are asked whether they would be prepared to pay an extra $64 per month in higher energy bills and other prices, the answer is probably “no”. But if they are told that they will get most of it back in one form or another, and the net cost is only $13.75, the answer is probably “yes”.

This is why Democratic Senators Maria Cantwell (Washington) and Susan Collins (Maine) have introduced a new bill that would recycle revenues back to customers more directly, in a program they have rebranded “cap-and-dividend”.

VULNERABILITY TO PERMIT PRICES

But the idea that recycling will return most of the income on a fairly neutral basis that leaves most households with only small net losses (or gains) is sensitive to the assumptions made about the future cost of permits.

CBO estimates the gross costs of the program would range from $425 per year for households in the lowest income quintile to $1,380 for households in the highest (basically because high-income households drive more and have bigger homes and utility bills).

But households in the higher quintiles own more shares, so they will receive more of their gross payments back in the form of dividends. Households at the bottom of the income distribution are unlikely to receive relief from equity ownership, but will be compensated by utility rebates and targeted direct relief from the federal government. (See table here.)

This income-neutral recycling only works, however, if permit prices remain relatively low. CBO estimates prices will rise from $15 in 2011 to only $26 in 2019. If prices rise much more than this, gross costs will rise sharply. But while rich households should be compensated by their ownership of equities, poorer households will find their government rebates do not rise fast enough.

The political acceptability of cap-and-trade is really a gamble that households can be made to see costs in the round (including various rebates and offsets); and permit prices will not surge (because emissions reduction proves harder than expected or because speculative buying creates and artificial shortage). It is quite a risk.

References:

(1) “The Estimated Costs to Households from the Cap-and-Trade Provisions of HR 2454″, CBO, Jun 2009:

(2) “The Distribution of Revenues from a Cap-and-Trade Program for CO2 Emissions”, CBO, May 2009:

(3) “HR 2454 American Clean Energy and Security Act 2009 - Cost Estimate“, CBO, Jun 2009:

After one and a half days of mostly uninspired and often irrelevant speeches by world leaders, French President Nicolas Sarkozy walked to the podium at UN climate talks in Copenhagen and produced a seven minute rallying cry - focused, energetic and packed with more punch than the rest put together.

Jabbing his finger, he berated leaders from Africa, Asia, Europe and the United States to own up to their responsibilities and make compromises. Point by point he delivered his challenges, each starting with: ‘Who would dare..’ (implied answer, no one)

Who in the developed world would deny his historic responsibility for global warming (a reference to the United States?), who in Africa would venture to tear up a deal that seeks to benefit African states (a reference to those who want more financing), who would have the nerve to reject the notion that emissions cuts must be transparent (a reference to China?).

He finished by telling leaders to sit down and negotiate hard over the next 24 hours. “We need to change track or we are heading for disaster,” he said, then strode from the stage.

Some of Sarkozy’s energy is finally permeating these talks. Leaders and ministers are talking hard, most likely they will continue to talk late in to the night in the hope there will be something to sign on Friday.

By Ray Colitt

Copenhagen summit attendees may be wondering why Brazil’s delegation to the U.N. climate meeting is being led not by its environment minister but by the president’s chief of staff. The answer is: elections next year in Brazil.

Chief of Staff Dilma Rousseff is the government’s likely candidate in next October’s general election and wants to boost her environmental credentials. She was nudged into action after internationally-renowned Amazon defender Marina Silva joined the presidential race and pledged to put the environment on the campaign agenda.

Ironically, it was Environment Minister Carlos Minc who saw the chance for Brazil to take a leadership position in global climate talks and Rousseff who was one of the more reticent members of government to accept aggressive emissions targets.

Still, in Copenhagen Rousseff has made sure everyone knows she is in charge by publicly correcting Minc’s statement on Brazil’s demand for climate mitigation funds.

 “The isolation of Environment Minister Carlos Minc is raising eyebrows here in Copenhagen,” said Senator Marina Silva, Minc’s predecessor.

Photo: Reuters/Roberto Jayme

After one and a half days of mostly uninspired and often irrelevant speeches by world leaders, French President Nicolas Sarkozy walked to the podium at UN climate talks in Copenhagen and produced a seven minute rallying cry - focused, energetic and packed with more punch than the rest put together.

Jabbing his finger, he berated leaders from Africa, Asia, Europe and the United States to own up to their responsibilities and make compromises. Point by point he delivered his challenges, each starting with: ‘Who would dare..’ (implied answer, no one)

Who in the developed world would deny his historic responsibility for global warming (a reference to the United States?), who in Africa would venture to tear up a deal that seeks to benefit African states (a reference to those who want more financing), who would have the nerve to reject the notion that emissions cuts must be transparent (a reference to China?).

He finished by telling leaders to sit down and negotiate hard over the next 24 hours. “We need to change track or we are heading for disaster,” he said, then strode from the stage.

Some of Sarkozy’s energy is finally permeating these talks. Leaders and ministers are talking hard, most likely they will continue to talk late in to the night in the hope there will be something to sign on Friday.

By Ray Colitt

Copenhagen summit attendees may be wondering why Brazil’s delegation to the U.N. climate meeting is being led not by its environment minister but by the president’s chief of staff. The answer is: elections next year in Brazil.

Chief of Staff Dilma Rousseff is the government’s likely candidate in next October’s general election and wants to boost her environmental credentials. She was nudged into action after internationally-renowned Amazon defender Marina Silva joined the presidential race and pledged to put the environment on the campaign agenda.

Ironically, it was Environment Minister Carlos Minc who saw the chance for Brazil to take a leadership position in global climate talks and Rousseff who was one of the more reticent members of government to accept aggressive emissions targets.

Still, in Copenhagen Rousseff has made sure everyone knows she is in charge by publicly correcting Minc’s statement on Brazil’s demand for climate mitigation funds.

 “The isolation of Environment Minister Carlos Minc is raising eyebrows here in Copenhagen,” said Senator Marina Silva, Minc’s predecessor.

Photo: Reuters/Roberto Jayme