A trillion reasons why climate talks may still fail

LIMA: In a military compound known in Lima as the Little Pentagon, climate change talks resumed today with the most positive atmosphere since, well, Copenhagen. This time round, however, there are no starry eyes about what can be accomplished.

All eyes are on the climate change conference in Paris in 2015, but Lima is a critical step. It will be here that a text on a new treaty will be drafted, where the commitments to be made by individual countries will be defined, and which will make the critical decision on climate finance and adaptation measures that will help prevent Paris becoming the road-crash that defined Copenhagen.

It won’t be easy. Some delegations expect it to be fiery, the last genuine opportunity for interested parties to declare their grievances. The Chinese delegate chief last week said: ”I think the Lima meeting will see a lot of disputes. And every country will try to inject its opinion in the draft agreement.”

But over-riding the inevitable caution about corralling 194 different countries – and their vested interests – into a single agreement is the wave of optimism that has been kindled by the ground-breaking agreement last month between the US and China.

That does not come anywhere near what these two countries, and the world as whole, needs to achieve to meet the 2C target agreed in Paris. But it shows that the two biggest economies and the two biggest emitters will no longer be the roadblock they once were.

“There is a good atmosphere, and there are good signals, “ said the Peru Minister of Environment, Manual Pulgar-Vidal, who as the representative of the host country is chairing the talks.

Not that it will be clear sailing. As Christiana Figueres, the secretary of the UNFCCC, said there are 194 countries that have unique political, economic or resource issues, all of whom had to come to an agreement.

“That is quite an undertaking,” she said. “Getting there is not easy, because we have had a development model that has done exactly the opposite over the last 150 years.”

And therein lies the problem, and the potential, of these talks. Over much of the past few decades, it has been the protection of that development model, and the vested interests that gained from it, that has been the principal roadblock. The fossil fuel industry has succeeded in dominating not just global geopolitics, but the politics of climate change as well.

That is now changing. The US-China deal, according to some analysis, is likely to slash $4.5 trillion off the revenues of the oil and coal industries between now and 2030. And it is but a scratch on the surface.

And that’s because if the stated target of 2C is to be met, then the world needs to abide by a “carbon budget” of one trillion tonnes. To meet that budget it will need to leave two thirds of known fossil fuel reserves in the ground – according to the United Nations Environment Program – the UN science body to which Australia has just slashed its funding by 80 per cent.

If that occurs, according to estimates from the International Energy Agency, when comparing the output of fossil fuels in the 450 scenario compared to business as usual, that amounts of $1 trillion a year in lost revenue by 2050 for Big Oil and Big Coal.

Which means, every year that action can be delayed is a trillion dollars saved. As the Australian mining lobby so gleefully found in the mining tax debate, that can justify a mighty big lobbying budget.

Right now it seems that the talks are delicately balanced. Figueres said it was clear that the 2C “emission gap” – the difference between what the world says it will do and the actions it has agreed to take – would not be met by Paris next year.

That’s because because it will take a few years for the mix of the bottom up initiatives (known as INDCs or intended nationally determined contributions) and top down judgement (peer pressure) to took effect.

But they intend to get close, Figueres said. And while there would be no “environmental police” running around ensuring countries met targets, it was not becoming clear to many that de-carbonsation was the obvious choice.

“It going to be an art rather than a science. There will be no environmental police going around making sure they are doing the right thing. As more countries realise that decarbonisation is in their long term interests, then the gap will reduce.”

One of the big issues hanging over the talks is the current fall in the oil price. There are various views of how this might impact negotiations. Some, such as Kepler Chevreux analyst Mark Lewis, says it underlines why Big Oil needs to re-invent itself: the cost of extracting oil can no longer be justified by its plunging price, and renewables are now competing. The shale oil boom in the US is becoming something of a mirage, or a one hit wonder. The capital flows will soon change quickly.

Figueres appears to agree. She cited the huge volatility in oil prices as one of the main reasons to justify the move to renewables – because it had a predictable fuel cost. And that, of course, was zero.

She noted the move by E.ON to divest its fossil fuel business, and the move by the Rockefeller foundation to do the same, which she put in the same “basket of good news” as the climate agreement between the US and China, and the emission reduction targets (40 per cent by 2030) set by the EU.

“You know the world has changed when the Rockefeller family decides to divest,” she said.

“We are seeing a turning point , on the part of large foundations realising that investment in fossil fuel is getting more and more risky. Both exploration and exportation of oil is getting more expensive, and renewable technologies are getting cheaper.

“Just from the financial and business perspective, we are getting a stronger case for renewables, and a weaker case for fossil fuels. We will see more of that when we see company boards see that they have a fiduciary duty to act.”

But apart from the Middle East, where the oil industry is state owned and indisputably in the national interest, only one other country is seen to act as a spokesman for the fossil fuel industry. That country is Australia, whose prime minister Tony Abbott told the G20 meeting that he would “stand up for coal”. But if no one else is, what’s the point?