On Friday, it still looked like the only progress at Durban would be on the CDM mechanisms and the Green Climate Fund.  However, Connie Hedegaard, the Commission Climate Minister and previously one of the youngest politicians to enter parliament in Denmark, has secured a landmark victory at the 11^th hour. 

Even at the end of last week, China and India were firmly standing their ground to say that they should not be legally bound to reduce their emissions.  Hedegaard, equally stood her ground arguing that the definition of these countries as developing nations has changed significantly since the signing of the Kyoto Protocol in 1997.

The negotiations boiled down to a head to head with Hedegaard and the Chinese and Indian Ministers on Sunday morning.  Hedegaard calling for a deal whilst the Indian Minister countering that India would not sign up to a deal without knowing the details and what she described as ‘writing a blank cheque’ and accused developed nations of trying to shift the blame to developing countries.

It finally came down to agreeing text on the legality of the document, India insisting on it being ‘legally binding’; finally though, after a two hour huddle, ‘an agreed outcome with legal force’ was agreed by all.

So what has been agreed?  The documents are not yet published, and after such intensive discussions we expect them to be available tomorrow.  However, we do know that Durban ended with a commitment by all countries to accept binding emission cuts by 2020. As part of the package of measures agreed, a new climate fund will be set up, carbon markets will be expanded and countries will be able to earn money by protecting forests.

As part of this deal, Europe has signed up to a second commitment period under Kyoto, however, without Japan, Russia and Canada, and of course the US, who were never part of the discussions.  What this means is unclear, but we suspect for Europe it means a move to -30% by 2020.

As we await the announcement of what targets countries will implement, the question about whether what has been agreed in Durban is enough to match the science to keep the world below 2C rise in temperature still hangs in the air. 

One thing for certain is that this is a landmark shift in the negotiations, one that will hopefully put Europe on a more level-playing field with the other significant emitters now recognising their role in carbon abatement.

Will provide more details of the deal once we have more information.

As we have already blogged during Durban, whilst a globally binding deal on climate is not likely at Durban, there has been, as predicted, progress on the Green Climate Fund and now Carbon Capture and Storage (CCS).

At the Cancun climate talks (COP 16) last year, it was proposed that CCS should be included as one of the CDM mechanisms.  Saudi Arabia has been the main protagonist in getting CCS on board. 

This breakthrough is welcomed by many, and particularly energy intensive industries for which CCS has the potential to provide significant carbon savings.

Although the decision has been made to include CCS projects as part of CDM, the final text has not been agreed with a number of issues still remaining, but expected by the close of the conference today.

Looking at the draft text available currently, some of the rules will likely be that CCS projects can only be held in countries where there is specific domestic legislation on CCS.

A key issue is liability and who should bear responsibility for the stored CO2 (and any subsequent leakages in the life time of the project).  This seems to have now been resolved with agreement that the developers will be liable during the creation period of the project, and after 20 years, liability will be transferred to the host country.  This agreement closely mirrors the rules in the EU’s CCS Directive 2009.

The issue of potential leakage could be addressed by a reserve of credits for all projects, which could be saved for any loss, but questions still remain about how many credits should be reserved.  There are currently three options on the negotiating table:  For 2% of Carbon Emission Reduction certificates (CERs) issued to be reserved, others are calling for a much higher 20%, others still are calling for this to be decided at a later date.

Financing has been another thorny issue in the negotiations with wide ranging cost estimates for the price of carbon – between $50-100/tonne CO2 for current-generation CCS projects.  There is a risk of the need for external financial support, i.e. governments, to get these projects up and running.

Whilst none of the details are clear yet.  This is certainly a step forward for getting CCS to scale and a viable technology for industry to reduce their carbon emissions significantly.  This should provide a clear signal to the UK government of the importance of this technology in the low-carbon mix.

Whilst last week, there were concerns about getting the Green Climate Fund (GCF) operational, this week has seen great progress.  After a slow start last week with the US trying to clock the agreement with their concerns about the need for greater separation for the Fund from the COP.

The Fund was agreed at COP 16 in Cancun, Mexico last year. It requires developed countries to provide 100 billion dollars to poorer countries by 2020 to help them cope with carbon emissions and adapt to climate change. 

The design document has been agreed on by all parties, whilst it is acknowledged it is not perfect, all agreed that the fund must be made operational.  There are still concerns about the rules for investment from the private sector; with developing countries calling for tighter rules and the US calling for looser rules. 

BASIC countries re-affirmed their commitment to the Fund in a press briefing this week, stating this was a key concern of theirs and for China a pre-condition to any further negotiations of an international deal.  

One remaining issue to be resolved is how to fill the fund.  The aim of the fund is to get $30bn start up and $100bn annually to 2020.  Developing countries are concerned the Fund could end up an empty shell without clear commitments on financing.

Connie Hedegaard has promised that developed countries will make clear their pledges for the Fund by the end of the conference but that only when the fund is set up would countries know how much they can put in.  The success of the GCF very much depends on these pledges.

Today DECC has published the UK economy’s progress on meeting its carbon budgets.  The carbon budgets, set by DECC, put the UK on a trajectory to meet its legally binding commitment to reduce GHG emissions by 80% by 2050 from 1990 levels.  

DECC has announced that emissions have already been cut by more than 25% from 1990 levels, that the current climate change policies put the UK on track to exceed its 34% reduction set for the first 15 years under the Climate Change Act – which we would apparently still achieve even without the recession, and that meeting the 50% reduction by the 2020’s will not have any further additional cost during this Parliament (but will going into the 2020’s).

Huhne then goes on to state that ‘…rebalancing of our economy away from carbon is achievable and, in the long run, highly desirable.’ Yes this is certainly true and something EEF are calling for in our Green and Growth Campaign. 

We welcome the recognition in the carbon plan today that manufacturing is at the heart of such rebalancing and the promise of assistance in maintaining the competitiveness of strategically important sectors.  This is evidenced in the recent announcement of the package of measures for the electro-intensive industry.

We see this as a significant shift in thinking in government, one that now recognises role of such industries in the emerging green economy and as such a move to policies that will tackle the emissions intensity of production, rather than policy measures that place an absolute reduction in emissions from these critical industries – and therefore a reduction in production. 

However, this is only a first step and government needs to go further a look at climate change policy in the round and provide policies that support investment in the UK.  In addition, only a diverse range of technologies can deliver innovation and cost reduction in becoming more emissions-efficient.  Therefore government must not favour one technology over another and let the market decide.  However, a question mark remains about where the funding for this shift will come from in the next decade, when we feel that the current costs are already too high.

This month, we will be publishing a set of recommendations for government to deliver on both the green and the growth agendas and put manufacturing on the trajectory to fulfil its potential for delivering low carbon products and services.  We encourage government to work with the manufacturing industry to achieve this.

Whilst the negotiations on an international agreement might be up in the air at the moment, there seems to be some progress in other forum.

The International Chamber of Shipping (ICS) has proposed international sector agreements for shipping.  Recognising that shipping accounts for around 3% global emissions, there is a lot that can be done in reducing emissions in this sector.  However, at the same time acknowledging that without a global sector agreement, there is a great risk of carbon leakage.

The ICS is calling on governments to recognise the benefits of such an approach in avoiding dangerous climate change and fully support the implementation of a shipping sector agreement.

EEF has long argued, and most recently in our position paper on Durban, that sector agreements for certain sectors is an equitable and fair way to reduce emissions at the global level.  Taking the steel sector as an example, there would be great benefits to coming to such an agreement.  As we heard yesterday when EEF gave evidence to the DECC Select Committee, when many of the variables in production are the same, this gives a level playing field.  The issue for manufacturing in the UK and Europe however, is that these variables are skewed in part by the price increases caused by our climate change policies.  This risks pushing production out of these regions to less environmentally regulated regions, thus doing nothing to abate emissions at the global level.

In the absence of an imminent deal on climate change post-Kyoto, global sector agreements for certain sectors starts to make a lot more sense; allowing regional circumstances to be more easily taken into account whilst certain regions continue to develop.  It also has the potential draw wider participation from developed and developing nations and tackle emissions in more comparable way.

Indeed, taking the example of aviation, perhaps for some sectors, this is the only way to achieve reductions without a universal global commitment.  Europe is still pursuing including aviation in the EU ETS, but this has come up against very strong opposition from around the world, with concerns about equity and trade barriers.  Imposing regulations on countries outside of Europe are effectively poorly disguised trade barriers and as America argues against international law.  As Kuni Shimada, special adviser to the Japanese Environment Minister Goshi Hosono rightly put it:

“Domestic law shouldn't be applied to somebody who is not subscribing to that law.  It's ok for the 27 EU members to comply with it, but not for us, because we didn't decide it.”

This issue also raises issues about driving activity outside of Europe as it continues to plough blindly with a policy that no one else is following and is increasingly leaving the EU isolated.

Tensions are running so high in this sector that a Chinese airline is filing a law suit against the EU by the end of this year.  Perhaps it is time for Europe to look beyond their beloved cap and trade?

So if talks about a globally binding agreement are already off the table at Durban, will anything else be achieved?

A likely area of progress will be the Climate Fund and Technology Mechanism.  The Climate Fund aims to provide $100bn per year by 2020.  These funds will be used for climate adaptation and mitigations projects in developing nations.There is however no agreement yet on where this funding should come from.  Obviously the first port of call is developed nations, but how should this divided and what about the role of rapidly developing economies that by 2020 could be considered developed nations?

In the short term the $10bn already pledged at Copenhagen in 2009 is plagued by controversy as developing nations argue that very little of this is additional to funds already provided.

Nonetheless, at Durban, there is hope for real and concrete progress to be made on agreeing a framework and managing the fund in the future.

The other mechanism that is likely to make progress at Durban, once the Climate Fund is made operational, is the Technology Mechanism.  This mechanism, agreed at COP 16 Cancun, will facilitate action on technological developments and transfer.  It will have access to the finance, which will be provided by the Climate Fund, to start projects such as capacity building and National Adaptation Funds.

The hope for progress and support for making these mechanisms operational bodes well for the continuance of the Kyoto mechanisms, even when the commitment period ends in December next year.

Today is the first day of the Conference of the Parties talks in Durban. These two-weeks of intensive international talks, which are attempting to strike a global deal on climate change, are the 17^th to be run by the United Nations Framework Convention on Climate Change. We will be covering the talks daily with live updates on the progress of the talks and what this means for manufacturing in the UK.

In the run up to the talks, many countries put forward their positions.  Russia and Japan stated they would not support second Kyoto Protocol commitment period, which would see new legally-binding reduction targets placed on developed nations; the so-called BASIC countries (Brazil, South Africa, India and China) on the other hand (and maybe not surprisingly) welcomed it.

However, now that the talks have just begun, India, China and Brazil seem to now be on the same page as Russia, Japan, Canada and the US and are calling for any negotiations for a second Kyoto commitment period to be delayed until 2015.  The call for a delay by Japan and Russia is because they feel rapidly developing nations should have more of a role in an agreement and should not be treated as developing nations (and therefore have no commitment target) any longer.  China, India and Brazil however feel there should be ‘reflective phase’ and ‘scientific period’ from 2012-2015 to understand better what targets need to be set. 

Once again we are already starting to see quite a divide in positions – as Europe and developing nations (notably the small island countries) are calling for a new international agreement to be in place by 2015 that includes both developing and rapidly-developing nations.

At EEF we argue that there should only be an agreement that involves all countries in an equitable way.  This means rapidly developing nations need to be considered in a new group, one that recognises their increasing contribution to global emissions.  China is now the world’s biggest emitter.  However, we also understand there is a set window for action; alternative approaches to reducing emissions at the global scale must be explored as this impasse is only getting worse.

This will make for some tense talks over the coming fortnight – one that is not necessarily hopeful.

A report published by the Carbon Disclosure Project (CDP) has highlighted the issue of carbon leakage as a barrier to reducing emissions.  The report found that scope 1 emissions in Europe had fallen from 2010-11, but risen in every other region of the world.

The CDP put this down to ‘significant offshoring’, with them recognising the emissions reduction targets in Europe are creating a competitive disadvantage and pushing production outside of Europe to less regulated countries.

We certainly welcome these findings as this is something that manufacturers have been highlighting for a while.  However, the report then goes on to state that, whilst ambitious emission reduction targets are set in the short term, in the long term companies need to be more ambitious.  The four highest emitting sectors apparently come out the worst with reductions ‘of not even one-half a percent of their cumulative emissions’ to 2030.

I think this shows a lack of understanding of these sectors.  When by the nature of the production processes, it is energy (and therefore carbon) intensive, there is only so far you can in reducing your emissions.  This is where the source of offshoring comes from; when you cap emissions absolutely you push these sectors out to less regulated regions.  Time and time again we have argued these industries are at the heart of the low carbon economy as they are the building blocks for renewable and low carbon technologies.

To take the steel sector as an example of a sector that, at present, will only see incremental efficiency savings until there are new technologies available. Significant research and funding is needed to enable further efficiencies to be made.  This will not happen over night but the steel sector is already taking steps to get there.  The European steel industry’s ultra-low carbon steelmaking (ULCOS) research programme has already invested £66m in the last six years to find ways to halve steel making’s carbon emissions. The cost of delivering these unproven technologies at scales will run into the billions.  Pilots and demonstrations, such as HIsarna (which replaces the traditional blast furnace with a combined melting cyclone), will take time, ten years in this case.  And the UK government has also proved the difficulty in making new technologies viable when trying to establish CCS demonstration projects.

Yes, everyone should be ambitious in reducing emissions but it must be recognised that some industries have already gone as far as they can without a significant shift in energy sources and massive investment in new technologies. At least Ministers in the UK are starting to recognise this.

Today developed nations have been accused of giving up on international climate change negotiations as world leaders admit that a future legally binding agreement will not likely be implemented until 2020, following a proposed 2016 agreement.  Whilst groups such as the Alliance of Small Island States have decried this as shutting the door on abating dangerous climate change, it must not be forgotten that in December 2012, the Kyoto Protocol will not completely die away and any progress made at international talks will have been in vain.

Yes, we may still be a long way off agreeing an international legally binding commitment on reducing GHG emissions, but so many nations do have national targets for reducing their emissions.  Indeed this was the main outcome of the talks in Copenhagen in 2009, where even the United States signed up to the ‘pledge and review’ system they put forward.  In addition the mechanisms put in place through the Kyoto Protocol will remain in place.

These leaders should not be criticised for being transparent about the state of the talks, it would be naïve to continue to believe that Durban will deliver this much needed agreement.  Instead this honesty might help to break some of the deadlock by setting out a clear roadmap (that Europe is calling for) to ensure that a fair and equitable agreement is implemented in the medium term.

In the short term, those who have already signed up to reducing their emissions will continue to do so, while negotiators should focus on agreeing something that all take part in.  This should look at a range of policy levers to reduce carbon emissions, such as carbon intensity targets, rather than the traditional cap and trade.  Carbon intensity targets have the potential to overcome the current impasse on a global agreement by not restricting growth, as many nations feel an absolute cap does.  Other potential policy levers, such as global sector agreements for certain sectors, such as steel or cement, could also deliver significant emissions reductions.

It might not the ambitious dialogue that we have heard in previous talks, but at least this is pragmatic and realistic.

Climate Change Minister Greg Barker last night called for a long term industrial strategy fit for the 21st century. Speaking at the All Party Parliamentary Group for Energy Intensive Industries, the Minister, provided a tantalising glimpse of the governments proposed energy intensive package, expected to be announced in late November. Barker began by stating that the government cannot have a monofocus on carbon targets and that the government recognises the importance of a strong manufacturing sector and the need for an effective transition to a low carbon economy. The government recognise that its not hard to meet UK carbon targets by offshoring our industries, the real challenge is to meet the targets while supporting growth in the sector.

It is clear that Greg Barker and his department have a good understanding of the impact of the UK’s unilateral climate policies on the competitiveness of UK manufactures. They are also committed to working with industry to overcome these barriers. However the minister gave the caveat that the approach will be cumulative, phased and delivered as and when the government can afford it.

The key concern is whether cabinet ministers agree with Greg Barker, the proof will be in the Chancellors announcement on 29th November.