POSTED BY PEN GOODALE (director research @ eq-cap)
January 18, 2010
Notes from eco-securities “Copenhagen COP15 – The Outcomes & Implications for Business in 2010 and Beyond”
http://www.2degreesnetwork.com/networks/carbon-management/resources/webinar/
(You need to register on the site to access this & other good webinars – registration is free.)
[Pen] Good webinar on COP15. The five speakers talked about disappointments and insufficient outcomes across the board, especially in terms of cap & trade pricing signals.
But there also was discussion of some of the positive outcomes – transparency, recognizing the significant role of developing nations, the U.S. taking a leadership role to make sure the 2020 component was there, the Clean Development Mechanism (CDM) guidance text, … The accord is non-binding and needs more clarity, but it’s a start.
It’s unclear if COP15 will have much impact on the Senate or House in the U.S. – cap & trade is beyond reach, with very high hurdles to getting legislation passed. But there are encouraging signs outside of DC. “In the U.S., states and agencies are leading the way – playing a key role for moving forward.” Several speakers talked about the potential for energy efficiency, clean technology and renewable energy at the state & local level. These comments underscored the importance of EqRM’s innovative eePPA model to harvest & monetize the “negawatt.”
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Chair/Moderator:
Mike Austin, Director, Carbon Markets Investor Association (CMIA)
Panelists:
Paul Kelly, CEO, EcoSecurities
Kenneth Markowitz, Senior Climate Change Consultant, Akin Gump & President Earthpace
Lisa Jacobson, Executive Director, Business Council for Sustainable Energy (BCSE)
Ben Vitale, President, The Climate Trust.
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Webinar Summary
- 1997 – Kyoto Protocol was initially adopted on 12/11/1997.
- 2005 – Kyoto commitments began in February 2005 & will expire in 2012.
- 2007 – The Bali COP took place in December 2007. The Bali Road Map included 5 pillars:
1) Mitigation
2) Adaptation
3) Technology
4) Financing mechanism (how to leverage public & private investments)
5) Shared vision (i.e., how developed & developing countries will come together)
- COP15 positive outcomes
w “The accord between 20 countries is not officially approved & needs more clarity, but it’s a start.”
w “It’s a big shift. If the potential is realized, perhaps there may be annex emission reduction pledges in the 2020 timeframe for many nations. What’s new is that it recognizes the significant role of emerging, developing nations. The U.S. played an important role as a leader to make sure the 2020 component was there. 2050 is more challenging, but 2020 is what really counts for driving investments.”
w “The comprehensive set of pledges for financial commitments was better than expected – short-term $10B by 2012 & $100B by 2020.” (Note: ½ private sector)
w “Transparency – a significant shift, especially for China & India who have been historically reluctant.”
w “It was a mixed bag. There was a glimmer of hope with something salvaged at the 11th hour.”
w “Preservation of markets going forward – how carbon offsets will be overseen & a more transparent, open system that governs billions of assets.”
w “Developing countries, such as Brazil, are setting goals & taking action. That was a key achievement & effected COP15. There is more interest in sharing with other countries.”
- COP15 disappointments
w “Insufficient outcomes across the board.”
w “With political timelines in the U.S., we knew the ability to conclude complex U.S. legislation before COP15 would be a challenge.”
w “If no underlying legislation, how do you a % out there? It was a near impossibility this year in the U.S.”
w “Lack of U.N. leadership to pull things together. When negotiations were working at a rapid pace, the U.N. process didn’t work. There were many mismanagement & logistical nightmares.”
w “Fairly closed session — U.S., China, Brazil, India & South Africa.”
- What were the business expectations for COP15?
- “It depends on what point in time. Two years ago, there was lots of optimism and hope for clear price signals. As we got closer, business expectations were significantly dampened – binding agreements were less likely. We are looking for very clear price signals, which we can invest into.
There were some positive things about COP15, but they won’t drive investment dollars. Until there is additional clarity, it’s not doing the market any particular favors.”
- “There also were block & tackle goals, e.g., how governments will be reviewing technology & financing opportunities. Below cap & price signals, there is interest in trade issues.”
- What significant is COP15 for business?
- “It’s a baby step – non-binding. We lost some momentum, especially in the U.S. But there are still plenty of actions, which can be taken. In the West and Northeast there is some early action (CA, OR, MA, NY) – appetite in the 2010/2010 timeframe. We need to find pockets where actions are clear. In the U.S., action is in cities, farms & states – not just in DC.”
- “Politically, we are moving in the right direction. It’s good to have some accord at the heads of state level. But it’s problematic that there is not more clarity for private markets to move forward. COP15 doesn’t help businesses to make decisions about investment capital. There are various pieces, e.g., technology & forestation with some positive signals, but there will not be a lot of investment until there is more clarity.”
- “There still is not enough there. There is a concern that if the U.S. puts a number out there, that we can’t hit it. There is some positive movement in carbon services (e.g., lawyers, professional services, low carbon energy.”
- “There is some investment, but not the type or the amount that we need.”
- What were the shortfalls? What does the private sector need to see in the future, for example at Mexico COP16 at the end of the year?
- “The U.S. has not been comfortable historically with a top-down process.”
- “What is needed at the international level? Do we buy into the pledge & review model? It’s not going smoothly. What’s the role for the U.N. in the process? It’s not an effective place for all to negotiate. We won’t get 115 leaders to come together again for a while.”
- “There’s a lot of room for bilateral & multi-lateral agreement. There has been tremendous movement in China & Brazil recently. The U.S. has not; a lot of work has to be done in the U.S. “
- “In the U.S., states and agencies are leading the way – playing a key role for moving forward.”
- “When you agree to a particular target, there is a huge accounting problem. You need a way to verify. Working through the accounting & logistics will be a huge challenge” — underscores the importance of measurement & verification.
- What do you think of the outcome of the Clean Development Mechanism (CDM) guidance text?
- “This is a real win – the first real reform in 2 years with transparency, an appeals process & communication requests. I am cautiously optimistic. The reason for the guidance was quite clear last year.”
- “Progress was really made, but it goes back to the question – is the U.N. process working? There are many good ideas, but they don’t resonate for political reasons.”
- “We need further overarching rules of governance for the private sector & clear delineation of duties for the Board. There are big reforms to go – e.g., conflict of interest, need for more transparency, …”
- “I loudly agree – decouple the political process from the delivery process. It’s a governance issue. Private capital has to be able to move through without a political agenda.”
- “Standardized baselines are very important, e.g., in the building sectors. Professionalism of the CDM Board didn’t move forward. It’s hard to have self-regulation. We have recommendations, but they are not operationalized yet. But the fact that it got done is a victory. It has taken years.”
- “There needs to be a further emphasis on the role of the private sector & markets.”
- “An emphasis on speeding up the process & transaction states is really important – pushing on efficiencies, standardized baselines, …”
- “I would have liked to have seen decoupling the political from the execution process. This is the major bottleneck for commercialization now. Money & expertise aren’t the major bottlenecks now.”
Side note: “It’s been hard to see any meaningful movement in forestry.”
- What are the next steps? How is it being perceived in the United States?
- “I don’t know if COP15 has had much impact on the Senate or House. The government applauds Obama’s effort to work a deal, but with the lack of commitments, it’s hard to move forward. The Senate is overwhelmed with Health Care; Climate is second. There is some fracturing in the House; Peterson said he would not support a Senate/House compromise. Does it still have life in the House? That’s unclear. There aren’t enough votes in the Senate to move forward.”
- “Still there is potential for Energy Efficiency, Clean Technology & Renewable Energy standards, but Cap & Trade is beyond reach.”
- “If it doesn’t happen by June, it will be very difficult to move forward. Some in the Senate are trying to strip the EPA of some of their powers under the Clean Air Act. It’s not a good picture for Cap & Trade; it’s in great jeopardy.”
- “The unknown is the ability & will of the White House. But first they have to get the Health Care & Job legislation through. There is a lot on the table.”
- If we don’t see legislation in 2010, when?
- “Given the retirements in the Senate, we likely are going to lose some votes in the next election.”
- “It doesn’t get any easier, but if there are a few more moderate Republicans elected, that could help.”
- “There could be more costly, less flexible EPA regulation.”
- “For EcoSecurities, hunker down & wait it out for carbon trading.”
- “Short term, alternative energy & technologies can help fill in some of the gaps & move the ball a little.”
-“State actions are making private business models work.”
- “Providing incentives to the private sector even in the current stimulus package – take short-term action.”
- “The one wild card is if Obama takes a leadership position.”
Posted in cap and trade, equilibrium capital, funding & capital markets innovations
Tags: carbon cap and trade, carbon credits, carbon offset, climate change, COP15, copenhagen, eco-securities
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