It will be a while for the dust to settle after Durban. In the dying hours of the conference a surprising amount of decisions were made, despite the sceptics (myself included) thinking that little progress was likely to be made.
Our paper sets out some of the key issues affecting manufacturing, their political implications and what this means for manufacturing.
In summary, there were some important developments. Some have been well covered in the media – the continuation of the Kyoto Protocol, the agreement to work towards a new global deal on climate change and the establishment of a new fund to finance low-carbon action in developing countries. Some decisions have received less coverage in the media. This includes important decisions on technology, sector approaches and the carbon markets. But what does this mean for manufacturing?
- The future of the Kyoto Protocol - With just 16% of the world's emission captured in the extension of the Kyoto Protocol, there is nothing new on the table that would justify a reduction in the EU's 2020 target to reduce emissions by -20%. However, next year we can expect the UK and the Danish Presidency of the EU to push for a -30% target. The agreement, at least, means that carbon markets will not be disrupted in the short-term.
- The Durban Platform for Enhanced Action: a future international agreement - Work on a new deal will begin next year, be concluded in 2020 and become operational in 2015. While there is a glimmer of hope that a level playing field can be restored in the medium to long term there is no guarantee. Many important issues have been rolled over to the next meeting and there are some lingering doubts about how secure an “agreement to agree” will be in producing an outcome by 2015, and about whether the last-minute weakening of the EU's proposed 2020 “legal framework” to “an agreed outcome with legal force” may cause problems. The emerging economies are likely to stick to their entrenched positions and US agreement at the talks does not necessarily mean this will pass through Congress and into domestic law.
- The Green Climate Fund: raising funds for climate aid - While the framework of the fund has been agreed, how the fund will be financed remains a mystery. A few of the options being discussed to raise capital include a levy on shipping fuel or aviation emissions or a tax on financial transactions. The US however has immediately blocked discussions on a tax on transactions and this is now thought to be a “non-runner.” A bunker fuel tax appears to be the most favoured current option. This could mean increased shipping and aviation costs in future.
- Technology transfer: facilitating global deployment of low-carbon technology - The conclusion of the talks kick-started the search for a host for the Climate Technology Centre (CTC) to promote technology transfer between developed and developing countries. The CTC's work will be guided by the Technology Executive Committee - a global hub of expertise on technology. The Committee should prove a powerful voice in getting barriers to market addressed for those technologies which could reduce emissions of greenhouse gases. But it is likely to be lobbied hard by developing countries on Intellectual Property Rights, who argue these hinder the transfer of low-carbon technologies. While IPR remains protected, it could be under threat in the medium to long term.
- The Carbon Market - Decisions at Durban mean that the Clean Development Mechanism will continue and that Carbon Capture and Storage can be included as one of the tools. The CDM allows for carbon offsets to be generated through carbon-reduction projects in developing countries to be sold in developed countries. This could help scale and demonstrate the viability of the technology for industry and provide the political impetus for the UK to get back on track with its stalled demonstration projects. A process to allow the development of new market mechanisms was also agreed. The design of these will need to be monitored carefully to ensure that it does not create any competitive distortions.
- Emissions from specific sectors: aviation and maritime emissions - Much of the discussion around international sectoral agreements focussed on two sectors at Durban: aviation and shipping. On maritime emissions, the IMO has confirmed that it will continue to explore options this year so a decision can be rapidly agreed on. The EU, under pressure from the US, China and India regarding aviations inclusion in the EU ETS, will be pushing for a global deal on these emissions. Again, this means increased shipping and aviation costs in the medium term. The text provides some a glimmer of hope for other sectors – such as steel and cement – to develop their own sectoral agreements to help level the playing field for these internationally traded goods
Early in 2012, we will be working on a new policy paper to make recommendations to government on the way forward post-Durban. Your views can help shape our position. If you would like to be involved please email me at email@example.com by January 4 2012.