The World After 2012

Ricardo Lagos

The Global Leadership for Climate Action (GLCA) has drawn a possible roadmap to face the issue of climate change.

In the Global Leadership for Climate Action (GLCA) report, four major issues that need to be addressed to confront climate change are identified as:

  1. The split between developed and developing nations is no longer valid — there are countries that are developed, countries that are rapidly developing, and those that are least developed;

  2. Putting a price on carbon — preferably through taxes;

  3. Spurring a global technology revolution; and

  4. Financing technology, development, mitigation and adaptation.

Given the scale of the response required, the GLCA recommends a comprehensive, long-term, post-2012 agreement under the auspices of the United Nations Framework Convention on Climate Change (UNFCCC). This will send a clear signal to the market and offer countries the flexibility to implement emissions reduction strategies that are most appropriate to their national circumstances. In addition to setting a timetable for negotiating a comprehensive post-2012 agreement, the Parties should agree on four pathways for negotiation that address mitigation, adaptation, technology and finance.

However, first we need to agree on a long-term global target. We recommended that all countries commit to reduce collectively global emissions by at least 60% by 2050. This is more ambitious than the 50% target suggested by Canada, the EU, and Japan.

Developed countries would commit to reduce their collective emissions by 30% by 2020, while rapidly industrializing countries should initially reduce their energy intensity by 30% by 2020 (an average of 4% per year) and agree to emissions reduction targets afterwards. Reducing energy intensity would moderate growth in emissions while enabling developing countries to continue to pursue their sustainable development objectives. China has set a goal of reducing energy consumption per unit of GDP by 20% between 2006 and 2010, which amounts to an average annual rate of 4%. Other developing countries should commit to energy intensity targets differentiated by their responsibilities and capabilities.

Finally, our framework recognizes that all emissions sources and sinks are relevant to the solution and must be included in a future agreement; as it is mentioned in the Stern Review: “Establishing a carbon price, through tax, trading or regulation, is an essential foundation for climate-change policy.” [Sir Nicholas Stern, former chief Economist of the World Bank, compiled a report on the economics of climate change for the UK government in 2006] The preferable mechanism is a system of harmonized, universal carbon taxes.

Carbon taxes could reduce emissions and generate financial resources that could be used for developing clean energy sources and for adapting to climate change. Carbon taxes are relatively easy to implement and are economically efficient.

Cap-and-trade schemes are generally welcomed by the industry, as they tend to reduce the cost of complying with targets. If a cap-and-trade approach is adopted, emissions allowances should be auctioned to generate revenues that can be used for other purposes.

The poor in developing countries are the most vulnerable and the least able to adapt. Strong mitigation measures are needed to minimize the cost of adaptation; without them, adaptation may be impossible in some countries.

Adaptation should be anchored in poverty reduction strategies. Because financing will be required to advance these plans, we recommend development of a climate fund.

Traditional official development assistance (ODA) also has a role to play since climate change will impede development efforts, frustrate poverty alleviation programmes, and exacerbate migrations from waterlogged, water-scarce or food-scarce regions. We make the case for increasing ODA to finance adaptation measures.

New technologies are also required for adaptation. Future cropping systems, for example, will have to be more resilient to a variety of stresses to cope with the direct and indirect consequences of climate change. New centres should be established to address adaptation in agriculture in developing countries, especially by the Consultative Group on International Agricultural Research (CGIAR) in Africa.

If the world continues on its current energy path, dominated by fossil fuels, energy-related CO2 emissions in 2050 will be two and a half times their current levels. When fully commercialized, existing clean energy technologies can help stabilize emissions. However, reducing global emissions by at least 60% at acceptable costs will require a technology revolution, akin to those in the space and telecommunication sectors.

Unfortunately, investments in both public- and private-sector energy research and development programmes have been declining for the last two decades. We recommend doubling the aggregate amount of public funds devoted to energy research and development (R&D) to about US$20 billion per year. This is line with the recommendations of the Stern Review.

The formation of a Consultative Group on Clean Energy Research (CGCR), as suggested by the International Task Force on Global Public Goods, could facilitate international collaboration on the development of a new generation of cleaner, more efficient, and lower-cost technologies and the exchange of information about these technologies.

It is important to all countries that clean energy technologies are made as widely available as possible. It may be beneficial to conduct research and demonstrate technologies in the South. A CGCER could support such research and pay for patents or licensing fees to enable cleaner technologies to be deployed in the South.

The existing funding sources [for example, the Global Environment Facility (GEF) and the multilateral development banks] are too small for the scale of assistance required. They should be strengthened and their resources enhanced.

The costs of adequately addressing the risk of climate change, according to the Stern Review, are of the order of 1% of annual gross world product. Some of that investment will come from redirecting existing flows, and some will be additional. Funds will be required for increased assistance to developing countries for the adoption of energy efficiency and clean energy technologies, and for avoided deforestation. Funds will also be required for greening power sectors, for adaptation, and for increased R&D and deployment in all countries.

The average net public financial flows from all developed countries (including loans) were US$58 billion per year between 1996 and 2005, or about 0.23% of GDP, of which about US$7 billion per year was for energy.

We recommend a climate fund and estimate that about US$50 billion per year will be needed for activities in developing countries in support of a comprehensive climate change agreement. The first phase of such funding could initially be about US$10 billion per year. The CDM has encountered administrative and technical hurdles. Initial projects have been limited to a few countries and a few gases and have been plagued by bureaucratic procedures, and with little contribution to sustainable development. These weaknesses derive from the fact that the CDM was created as a project-based instrument. However, the Executive Board recently approved the inclusion of ‘programmes of activities’ in the CDM.

In order to promote policy reform, underwrite technology development and stimulate investment flows at a scale that is truly transformational, an additional market mechanism must take a sectorial approach.

With its limited time frame, participation and inadequate provisions for monitoring, the Kyoto Protocol was never seen as a solution to the climate problem. It was meant to be a first step. As we embark upon a more comprehensive and inclusive agreement, we need to build on the experience gained from Kyoto, particularly in international emissions trading.

Above all, we need to build trust between countries at all levels of development and establish an equitable basis and new modalities for genuine international cooperation to address the linked challenges of energy and climate security.

We also need to build on the experience of cities, states, communities, businesses, and individuals who have voluntarily undertaken important steps to address climate change. They have shown that determined action presents substantial opportunities for economic growth and job creation, based on the development and deployment of clean energy technology.

Ricardo Lagos is President of the Club of Madrid and co-Chairman of the GLCA. This article is based on a speech delivered at the G-8+5’s Gleneagles Dialogue on Climate Change that took place in Berlin in September 2007. Website: www.clubmadrid.org