It has now been two weeks since we found out that just 55 countries (many of these EU countries) have signed up to the Copenhagen Accord - the political deal that was struck in the dying moments of the UN climate talks in a snowy Copenhagen. The dust has settled but the impact of Copenhagen on British manufacturing is little clearer for it. 

Let’s recap on the Accord. Unfortunately it is a vague document. It establishes a commitment to attempt to restrict temperature increases to 2°C. It sets monitoring and reporting requirements for all countries. And it provides initial funding of $30 billion over a three year period to assist developing countries in mitigating and adapting to climate change, rising to $100 billion a year by 2020. But it is the last two pages of the document which hold the most interest. They contain two annexes. One records the emission reduction commitments of developed countries. The other lists the actions pledged by developing countries. 

The pledges fall far short of the cuts scientists say must occur in order to get anywhere near the 2°C goal. However, that 55 countries have submitted pledges is not to be sniffed at. Although many of these countries are based in the EU, the US, China, India and Brazil have for internationalised pledges for the first time. A year ago this would have been inconceivable. Together those making pledges account for around 80% of the world’s emissions. Sounds pretty impressive.  Certainly Joan Ruddock, Minister for Climate Change, thought so when we met her recently to discuss the fall out from Copenhagen. 

However it must not be forgotten that this document has no legal recognition. Until it is enshrined in domestic law, we have just the promises of politicians. I’m not a gambling woman but I would not like to hedge any bets on Obama’s ability to pass his plans on climate change through a Senate which is ultra sensitive to the current state of the economy. And China’s targets, while avoiding emissions that would have been generated on a business as usual scenario, will still allow growth to continue unabated. 

So what does this mean for us? Well, it means we are still exposed to the risk of carbon leakage for one - where market share, investment decisions or production is driven into other economies to avoid the costs and limits imposed by the regulation of greenhouse gases. And so we definitely don’t think now is the time to impose even stricter regulation without real thought about how to protect our vulnerable industries. 

Instead, we think government’s focus must be on helping industry cut energy costs and emissions through focussed and easily accessible funding for research, development and deployment. This could generate green technologies and help to secure jobs. And if government is serious about cutting substantial amounts of greenhouse gas, now is the time to step up diplomacy with countries like China, India, Brazil and the US. Rather than burdening UK manufacturers more, let’s try and get others to adopt comparable regulation and financial constraints.  

You can read more about what happened in Copenhagen here, along with our messages to government on what we think the next steps should . 

It was chaotic last night. Up until 11pm six different versions of the Copenhagen Accord were circulating, no one knew which followed which, if the deal was getting weaker or stronger. Then a press conference was announced by the European Commission, and then it was cancelled as it become apparent that the world would not necessarily support the document. Hours and hours of debate stretched into the night. But somehow, at around 10am today, a political deal was finally struck.

And here it is. For those of you who do not have an inclination to read it here are its main points of interest:

• Global temperature increases should be kept below 2 degrees C and deep but unspecified cuts in global emissions are required to achieve this. Emissions should peak "as soon as possible", though no time period is specified.
• Developed countries should file their emission reduction pledges for 2020 by the end of January 2010. How much is up to them.
• Developing countries should also take action to reduce emissions.
• The document discusses "various approaches, including opportunities to use markets" to promote cost-effective emission reductions. That keeps the door open for carbon trading, including taxes or cap and trade schemes for international aviation and shipping.
• There are promises of big new flows of money from rich to poor countries to help them adapt to climate change and reduce their emissions. There will, it says, be new and additional fast track funding "approaching" $30 bn over the period 2010-12. In the longer term, developed countries "commit to a goal of mobilizing jointly $100 bn a year by 2020 to address the [climate change related] needs of developing countries." But this funding depends on those developing countries taking "meaningful" actions to reduce their emissions, and "transparency on implementation" - i.e. showing that they are delivering these reductions.
• A new 'Technology Mechanism' will accelerate technology development and transfer from developed to developing nations, to help them adapt to climate change and reduce emissions. Very little is said about either the fund or the mechanism.
• There will be a review of the implementation of the accord in 2015. This will include considering strengthening the long-term goal of the accord and the convention: preventing a dangerous rise in global temperatures "including in relation to temperature rises of 1.5 degrees C."
• Tables at the end of the document list emission reduction pledges made by developed countries and those made by developing countries.

It will take time to really understand what this means for business. The Copenhagen Accord is accompanied by the outcome papers from the Kyoto Protocol work stream and the long-term cooperative work stream and tens of other documents which will need to be studied in order to really assess in detail what happened in those frantic last days of the talks.

Personally, on the basis of the content of the Accord, part of me is disappointed. Over the course of the two weeks those of us at the talks have seen clarity gradually slipping away as time has progressed. The final Accord provides little in the way of certainty and this will hamper the Government’s plans for a transition to a low-carbon economy. Manufacturers provide, and will provide, many of the low-carbon solutions that a low-carbon economy will need in order to flourish. A legally binding deal would have given industry the certainty to invest in low-carbon technology.

More worryingly, the Accord still leaves British industry still exposed to the risk of carbon leakage. The European Commissions is now due to review the EU Emissions Trading System in light of the outcome of Copenhagen. It is vital that the EU continues to recognise that the threat of carbon leakage has not diminished following Copenhagen. There simply is not enough evidence of comparable effort elsewhere in the world to impose even stricter targets upon industry.

But there is an additional angle. The expectations on Obama were great, but the truth is he had very little room for manoeuvre.  In 1997 when the Kyoto Agreement was first forged then US president Bill Clinton failed to get it ratified through the Senate. In fact it lost by a vote 95-0 against. It was never going to approve anything which limited US productivity while China could grow unabated. Today, Obama is fighting to get his Bill through the Senate. It needs 60 votes to get through and it has about 42 at present. Obama was sticking his neck out to pledge even a 17% cut. And now he now has a document to show the Senate which says, look China is committing to action too.

The document signals that the major actors are now engaged on this agenda. India and China while not curtailing their growth have agreed to take steps to moderate its associated emissions. The US for the first time has attempted in some way to internationalise a commitment to reduce its greenhouse gas emissions.  The UN is now aiming to transform the Copenhagen Accord into a legally-binding instrument at the next Conference of the Parties in Mexico in the latter half of next year. Whether you believe the science or not (or believe that the UN will be successful this its Mexico aim) the outcome from Copenhagen shows the agenda is far from dead.

While for 14 hours yesterday heads of state, presidents and prime ministers have been making grand speeches about the urgency of addressing climate change, their negotiators have been obfuscating.

Yesterday new groups were formed in an attempt to resolve some of the continuing crunch issues. They are the same crunch issues from the first day of the talks. The same crunch issues from the meetings leading up to Copenhagen. It was all starting to feel like Groundhog Day.

As these groups debated the thorny issues of finance, emission cuts, the role of developing countries and the like deep into the night, rumours were swirling around the snow-clad Bella Centre: Obama was not coming; the G20 had met in secret; a deal had already been negotiated amongst the big emitters. Perhaps the biggest (concrete) news of the night was the announcement by Hilary Clinton that the US would offer $100 billion a year in climate aid by 2020 providing that the developing countries make firm climate policy promises and for these to be transparent. China, who had previously vehemently opposed international scrutiny of their policy delivery, appeared to soften its position somewhat. The press said this signalled that a deal was close to being brokered.

But unsurprisingly when negotiators reconvened at 8pm they reported that while some progress had been made some intractable issues needed political guidance and others required more time. Some of these hold ups are technical issues. On the Kyoto Protocol, for example, these methodological issues include which base years to use, the length and number of commitment periods and whether to add new gases. The Chair suggested the use of a UN device, known as Friends of the Chair, where a small number of senior negotiators try to identify ways through the impasse. After some resistance by a number of developing countries, eventually it was agreed this should be the way forward. They were meant to reconvene at midnight. This was delayed until 3am. When they did meet they agreed that they had gone as far as they could go without political input.

It now rests in the hands of the worlds leaders. I’m not a betting woman but if I was I wouldn’t like to place any money on the outcome. Still so much is uncertain.  It will be difficult to track the talks over today – particularly as observer organisations have been pushed to the fringes of the talks*. Even ministerial press conferences (the life and blood of most ministers) have been cancelled this morning so more time can be devoted to the negotiations.

EU environment commissioner Stavros Dimas was reported saying that the EU was ready to go to a 30% emissions reduction target (it has current has committed to 20%) if the US is ready to do more than they have announced. Sources say that the Commission was last night asking EU member states how far they were prepared to go by 2020 – Germany offered 42% by all accounts. All eyes are on Obama today.

* NGOs are furious about this lack of access. Businesses too. I spoke to one chap from a European trade association who had queued for nine hours on Monday in the biting cold only to be told to return tomorrow. On returning, he was told he had no chance of getting in what so ever. He left deflated. Another Australian lady at the daily business meeting earlier this week was in tears as her CEO was flying in from down under and had no chance whatsoever of stepping foot inside the Bella Centre, let alone honour the appointments and speaking engagements he had committed to.

The so-called “high-level” segment of the climate talks began today. The next 48 hours represent a crucial stage of the talks.

You can feel this in the air at the Bella Centre; the atmosphere is charged, if a little weary. Numbers in the corridors have shrunk as observers are increasingly being denied access as government parties swell in advance of head of state attendance at the end of the week. Outside however numbers are growing, as more and more demonstrators and activists arrive with each passing hour (and some are removed, hundreds have reportedly been arrested). Some members of government parties have been left out in the cold and are struggling to get in amid the chaos.

Inside, ministers are now leading “informal” consultations on crunch issues: finance, developing countries role in cutting emissions and other issues such as trade issues and proposals for a levy on bunker fuels. I hear rumours that two parties of 25 ministers have been convened to tackle the issue of emission reduction targets.

COP president Connie Hedegaards strategy is to force political discussions in order to pave the way for a more comprehensible deal for heads of states to agree later this week. And they are a long way from that at the moment. What has emerged so far remains heavily bracketed – yet to be decided.

It is hard to get an overall sense of how things are developing as meetings retreat behind closed doors, but here’s how I see things standing on some of the key business issues:

Outcome from Copenhagen: Ms Hedegaard is aiming to broker one package by Friday with agreements on long-term cooperative action and the Kyoto Protocol, underpinned with a range of other agreements on issues such as capacity building and technology transfer. She also wants agreement on an overaching text which would demonstrate the political will to commit to emission reductions and finance. If agreement is reached on these elements they will likely be political in nature, with an aim to make it a legally binding agreement by 2010. But there are constant challenges to this plan and what will emerge remains subject to intense debate.

Numbers: Work to agree emission reductions targets have failed to be completed before today’s deadline, in part because of the numerous delays and suspensions in work in the last five days. These followed accusations that developed countries were dragging their heels in order to try and secure a new treaty whch contained commitments from China and India to control some of their spiralling emissions - not just developed countries. As a result, the current proposals are marked by gaps and blank spaces where there should be numbers.

Sectoral approaches: As I reported yesterday, attempts to agree some general text on sectoral approaches has failed after being blocked by developing countries. It is only being pursued for agriculture. As a result it is dropping off the agenda. I think this represents a real missed opportunity. If designed correctly, this could have offered a real way to tackle emissions from industry on an equal basis regardless of location.

Levies on aviation and marine bunker fuels: A proposal is to place a levy on bunker fuels – which the UN think would generate $12 billion a year on a steady and predictable basis - is being blocked by China, India, Saudi Arabia and the Bahamas. The blocking countries argue that the levy should only be applied in developed countries. 

Technology transfer: Technology and carbon-saving products and their global deployment is key to reducing emissions. Developing countries however argue that intellectual property rights are presenting a huge barrier. This has led to heated debate.s As it stands a decision to relax IPR is bracketed. But cooperative action on technology does look certain and there is a commitment to increase private and public energy-related R&D - doubling existing R&D by 2012 and increasing it to four times its current level by 2020. Watch this space for more detailed analysis of technology proposals.

Reform of the Clean Development Mechanism:  The EU has been advocating a shift to sectoral approaches in advanced developing countries to avoid the pitfalls of the project-based CDM (the mechanism which generates the credits to allow "carbon offsetting" in developed countries). Under the EU's plan a baseline for business-as-usual emissions in a particular sector would be set, and a county would start earning credits (which could then be sold to developed countries) once its emissions fall below the reference levels by an agreed amount.  The concern for us is the incentive used to stimulate action by the private sector in countries involved in such a scheme. We cannot allow a situation where companies in Europe effectively subsidise their competitors.

But as one of the leading negotiators said yesterday: "Nothing is agreed until everything is agreed." And very little has been agreed yet. The overriding request I hear from the manufacturing community in respect to climate change is that there is clarity in the direction of policy and that efforts are made to ensure that competitors face similar carbon constraints and costs, regardless of where in the world they are situated. At this stage we are as far from that as is possible. 
 

It was on, then it was off, now it is back on again. Talks have ressumed here in Copenhagen, but there is still a great deal of mistrust between the developed and developing world.

And a small comment made today in one of the negotiations could spell trouble for some of our most energy intensive industries. Attempts to develop a framework for developing "sectoral approaches" are failing. Negotiators have failed to agree upon even a general text on the matter.

European industry interest in sector approaches has been high in the run up to Copenhagen, particularly in those sectors at risk of carbon leakage - where the risks are high that production or investment will shift to unregulated regimes to avoid "carbon costs" or where EU-based industries lose market share to competitors based in countries where growth can continue unabated. For such sectors, concern about enhanced risks from carbon leakage in a post-Copenhagen world has been acute.

And figures from the OECD this September support these fears. It estimated that if the EU acted alone to reduce greenhouse gas emissions by 50 per cent by 2050, almost 12 per cent of their emissions reductions would be offset by emission increases in other countries. However if all industralised countries acted together, this would be reduced to below 2 per cent.

By targeting key sectors on a global basis competitive concerns could have started to be addressed in a rational way (and maybe satisfy a few US senators in the process, perhaps?). It would have also underpinned an effective agreement by helping to broaden participation in global emission reductions - there are after all extremely developed sectors in developing countries.

But as it stands the current proposal refers only to cooperative sectoral approaches and sector-specific actions in agriculture.

It reflects a real missed opportunity. Some sectoral mechanisms may be delivered through developing countries NAMAs (nationally appropriate mitigation actions) - but this could never deliver the scale of coverage needed to address competitiveness concerns.

The spectre of a future of greater protectionism is looming ever larger.

The Bella Centre, the vast halls where the world governments have come together to broker a new deal on climate change, is awash with rumours that negotiations on emission reduction targets broke down this morning.

The targets were being discussed at a meeting to update the Kyoto Protocol, the so-called "numbers group". Under the Kyoto Protocol, developed countries committed to a range of emission reduction targets. The negotiations this morning were to update the Protocol. However, Australia called for the meeting to be delayed because some developing countries are refusing to negotiate in other key talks here in Copenhagen. Later, news filtered through the Centre that the African delegation have walked over the issue.

It follows threats by South Africa on Saturday that if swifter progress on the Kyoto Protocol was not made it would refuse to work on "long-term cooperative action" - the other of the twin-tracks of work being discussed at the climate talks which is aiming to create an umbrella of (currently voluntary) commitments and actions by both the developed and developing world.

South Africa and her allies want developed countries to commit to a second-round of emissions cuts under the Protocol. It has argued that lack of progress in establishing these demonstrates a lack of political will by the developed world. Indeed, many developed countries (such as the US) have made no secret of the fact they want a new agreement to brokered to replace the Kyoto Protocol - a move we would support if it meant that competitors in developing countries were subject to the same carbon constraints (and costs) as we are subject to here in the UK.

While some developing countries such as India urged for negotiations to continue, China remained silent during the meeting. In the end, the meeting was disbanded until there was more clarity in what was going on. I think we would all appreciate that.

This represents a stand off on the outcome of these talks: whether to continue with the twin-track approach including commitments from industralised countries under a strengthened Kyoto Protocol, or whether the Kyoto Protocol should be superseded by a new agreement.

As a fellow blogger reported today, it will take all the diplomatic skill of the experienced chairs of the AWG KP (the committee operating under the Kyoto Protocol) & LCA (the committee operating under the Protocol's parent convention) to bring about this reconciliation of these two tracks of work - either in a single text or in two linked texts

The impact of today's break down is rippling out to other crucial meetings. A session convened by the president of the conference to discuss all the major issues that require political guidance has been delayed by three hours. Clearly the agenda is rapidly expanding.

The EU has dismissed a key draft text that surfaced yesterday saying it was not acceptable in its current form as it failed to provide any certainty that it would lead to real emission reductions.

The draft text was circulated yesterday morning by Michael Michael Zammit Cutajar, chair of the Ad-hoc Working Group on Long-Term Cooperative Action, the group tasked to set the future direction for collective action on climate change. It is one of two tracks of work at COP 15, the other is focusing on updating the Kyoto Protocol.

Developed countries, most vocally the EU and Norway, are not happy with the emission reduction proposals. The EU was blunt at this morning’s second meeting of the Conference of the Parties in saying that the framework for action by developing countries was too loose. It also condemned unequal obligations upon developed countries. The US seemed to agree. It said the document "doesn't work in its overall direction."

However most countries did agree that the document provides a useful reference point for future discussions. Indeed, the US commended the working group responsible for the paper for its "heroic work" in producing a "narrowly defined" paper which made "substantive progress" in reflecting the convergence of opinion in certain key areas - on adaptation, technology transfer and deforestation.

But the question of the legal architecture of any potential agreement is still uncertain and seems to be creating a rift. Most countries, including many developing countries want to strengthen the existing Kyoto Protocol. But the US, along with some other developed countries, want a new agreement to replace it. This is delaying work on updating the Kyoto Protocol. Developing countries today warned however that if progress isn't made swiftly on the Protocol they may walk away from talks on long-term cooperative action.

As predicted, another draft text has surfaced - this one has been drafted by the UN itself.

Michael Zammit Cutajar, chair of the Ad-hoc Working Group on Long-Term Cooperative Action, this morning released a UN draft text for COP15. This is particularly significant as the group has been tasked to set the future direction for collective action on climate change. Here's the text, which has already been published by the Washington Post. It has condensed "the brick" - the 180 pages of negotiating text - to a much more focused six page document. It is one of two tracks of work, with the other focusing on updating the Kyoto Protocol.  

Unsurprisingly, the Cutajar text contains lots of brackets - things still to be decided. Should global average temperatures be kept to 2 degrees centigrade or 1.5? Should the aim be to cut emissions by 50 percent by 2050 or 85 or even as much as 95 percent? And how much of this should the developed countries shoulder?

In its current guise, it encourages developing countries to also take collective action to cut their own emissions - by at least 25-40 percent by 2050. But this is significantly less than then 75-95 percent reduction developed countries are expected to cut emissions by in the same time period. For both the developed and developing world, the current targets that have been pledged fall short on the proposals set out in Cutajar's paper.

It also foresees a significant future role for market mechanisms, cooperative sector approaches and measures to reduce emissions from aviation and shipping activities - but the text suggests that the detail of this will be worked out after Copenhagen has concluded.

The final key negotiating bloc - the small islands - also published their proposals this morning. The group have proved to be extremely vocal proponents of a strong treaty in the opening week of the talks and are pushing for deep cuts in emissions by both the developed world and major emerging economies.

Both Yvo de Boer, UNFCCC Executive Secretary, and Connie Hedegaard, COP president, have cancelled public meetings today. Some veteran observers say this suggests things are hotting up.

A rival draft compromise text prepared by China, Brazil and India has been leaked and published by the French daily Le Monde. (You can download what looks like a hastily scanned version of the document, here) It follows the publication of a Danish text earlier in the week.

Whereas the Danish text at least attempts to get some developing countries to internationalise pledges to take action to reduce emissions (not unreasonable when you look at how much countries like China and Brazil are emitting and are projected to emit in future and the sophistication of much of their industry) the Chinese text firmly puts the burden on the developed world to cut emissions.

It says developing countries should only take action “on the basis of their specific national circumstances.” The text also rules out the future use of “fiscal and non-fiscal border measures” on the grounds of climate change – a dig at the US and the French who have threatened to put in place border adjustment measures if a weak agreement is reached here in Copenhagen. 

The texts have been drafted to help provide some structure to discussions between heads of state and ministers when they seek to strike a high-level political deal next week. Rumours are a further two in preparation. One delegate remarked next week would descend into beauty contest of potential compromise texts.

Responses here have been cautious and those connected with the text were playing down its significance at this stage referring to it as a “working draft” with “limited status.”

A key debate discussing whether the Kyoto Protocol should continue, whether it should be supplemented by an additional agreement and which, if any, amendments should be made to it should it continue has dissolved in to deadlock.

The debate is centring on proposals submitted by the small Pacific island state of Tuvalu for a “Copenhagen Protocol”, to complement the Kyoto Protocol. It aims to limit temperature increases by forcing other advanced developing countries to also make emission reductions cuts – not just richer, developed countries. It has been supported by small island states and some of the least economically developed countries.

It would need three quarters of the world’s government to support it to go through. But unsurprisingly it has been opposed by China, Saudi Arabia, India, Brazil and South Africa who argue that the debate is undermining the chances of success in Copenhagen. They argue that the Kyoto Protocol is the only legal instrument that is needed and want developed countries to commit to ambitious future cuts.

The rift has led to hold ups. In an unusual move, the meeting was suspended by 10 minutes so a resolution could be negotiated between the main proponents: a David and Goliath battle between China on the one hand, and the tiny island state of Tuvalu on the other. But still no consensus was reached. The meeting has been suspended for the second day running so informal consultations can take place.

The rift is significant – it has effectively carved up developing countries, previously a stable bloc of 130 countries, into two key groups: the least developed and most vulnerable island states, and advanced developing countries. It is signalling, no less, a welcome challenge to the existing interpretation of the principle of "common but differentiated responsibilities." As the principle is currently applied the economically more advanced developing countries such as China and Brazil are not forced to internationalise pledges to reduce their emissions - despite now emitting vast amounts of greenhouse gases. If the climate scientists are right, this is clearly not an acceptable position for these countries to take.