How to avoid a climate cliff

Doha: keeping options open

The run-up to the Doha climate negotiations (26 November to 7 December) is a good time to take stock of both policy aspirations and market realities. On the positive side, important steps are still being taken to implement the commitments made in the run-up to the Copenhagen Summit in 2009, notably in the realm of energy efficiency and carbon pricing. On the downside, weak economic growth means that there is little appetite to raise ambition levels.

In this context, Doha’s task is threefold: 1) agree a second commitment period to the Kyoto Protocol; 2) give clarity on climate finance flows from 2013; and 3) lay out the roadmap to get a global deal in 2015, the year in which global greenhouse gas emissions need to peak to hold warming to around 2ºC.

Expectations are low and a package that keeps options open is a reasonable outcome. But tempers could still flare in the Gulf particularly if industrialised countries are seen to be watering down their efforts.

The four horsemen of hope

We believe there are four trends that suggest the road to a low-carbon economy is not yet closed:

– Coal: A package of factors is slowing or cutting coal consumption in China, the US, the EU and India.

– Efficiency: The energy efficiency rate needs to double – and China and the EU are starting to change course.

– Impacts: This year’s extreme events are signals of climate change, and public opinion is changing as a result.

– Pricing: Carbon taxing is re-emerging as an efficient tool for fiscal rebalancing, particularly in the US.

These trends don’t guarantee success but suggest that if sustained, then a turning point in sentiment could be close.

Nick Robins is Head of HSBC’s Climate Change Centre. This article is an edited version of a report from the HSBC Global Research Media Team. Reproduced with permission.