Department of Climate Change and COP15

Last night, Andrew and I attended an Austrade function promoting investment in clean technologies in Australia. The event was well attended and Minister Wong provided support through a keynote address. Most interestingly though was the consensus in the room that while an international agreement is important for providing business certainty, domestic policy certainty is even more important.

The Department of Climate Change Secretary, Martin Parkinson, provided a very good and succinct summary of the key 4 domestic policy measures being developed by the Government:

- A cap and trade emissions trading scheme (CPRS);

- The deployment of new technologies (the expanded Renewable Energy Target);

- The development of emerging technologies (Clean Energy Initiative - Solar Flagships, CCS)

- The deployment of energy efficiency through national energy efficiency initiative (Smary Grids, new standards which require ratings for commercial buildings when bought and sold, national insulation program, the Australian Carbon Trust).

Again, the take out for business is clear – domestic policy is likely to drive transformational change to the energy industry. It is better to prepare earlier than later to maximise value in this environment.

Emission Reduction Range for Developed Countries

Further to Tim’s post earlier today,  this morning at the conference we were able to pick up copies of the AWG-KP (Kyoto Protocol) draft texts and the Chair’s Proposed Draft Text on the outcome of the AWG-LCA (Long term cooperative action) under the Convention.  These represent the current proposed position for negotiation under the two tracks.

Having had a quick flick through this morning between events the AWG-KP has a table for Annex B countries (signatories to the protocol) which will be filled in next week with emission reduction commitments for specific countries, but includes an insertion of a paragraph that overall emissions be reduced by “[30-45] per cent below 1990 levels in the commitment period [2013 to 2018][2013 to 2020]” (square brackets means to be decided).  The AWG-LCA draft highlights that the range for developed country parties for reducing collective emissions is “at least [25-40] [in the order of 30] [40][45] per cent by 1990 levels by 2020”.

In terms of the Australian Government’s emission reduction target range of 5-25% it would appear that the pressure of developing countries will mean that the Australian delegation could return home with a commitment at the top level of their range.  This could be used to revive support for the CPRS in the Senate.  Well see……..

End of First Week of Negotiations Summary

It has been an interesting first week of negotiations. The major take out for Australian business is that domestic policy action is only going to become more stringent to give effect to emission reduction obligations agreed to by the Australian delegation. I think it is important to note there are two ways in which this conference will be reported:

- Status of a legally binding agreement between countries. The fact that all countries except the US signed and ratified the Kyoto Protocol is quite extraordinary when one considers the detail. The Protocol mandates the tracking of all developed country emissions (Annex 1) and provides for emissions trading between countries (but not companies) through the allocation of Assigned Amount units. In my view, over the past week, there has been little progress around moving beyond 2012 under this framework. This is largely due to some countries not wanting this ‘national trading’ type framework adopted (e.g Venezueala).

- Status of a political agreement to reduce emissions domestically. The fact that so many world leaders are arriving next week (apparently it is the biggest meeting of world leaders in the planet’s history) means that a political agreement is inevitable. All of the major emitting nations are going to be present. With such significant political pressure, the more likely outcome of this summit is agreement on high level medium (2020) and long-term (2050) emission reduction cuts for each country. The significant progress towards the new architecture of a new treaty would then be completed in 2010.

I have been to a number of meetings with the Minister and Australian negotiation delegation in the first week and it would be fair to say that all present expect that it is entirely possible that a strong outcome across all the major players can be negotiated.

So what does that mean for Australian business….Well, Australia is likely to come back from Copenhagen with a more certain 2020 emission reduction obligation. Domestic policies (e.g. CPRS, RET) will no doubt then be implemented or reinforced to allow this obligation to be achieved. It is my view that we are a long way of a global emissions trading scheme but domestic policy measures will continue to be strengthened as more ambitious targets are adopted. Long story short, minimising risk in this environment means identifying emission reduction opportunities and strategies now so that they can be implemented as soon as required.

Draft text to breathe life into negotiations

The Chairs of the AWG-KP (Kyoto Protocol) and the AWG-LCA (Long term cooperative Action) have released draft texts of a proposed agreement under each track.  Talking with people around the conference, many with a lot more experience of these type of processes, this is seen as an attempt to drive action on the two tracks after they have been slowed down with proposals from a number of member countries.

We’ve heard rumours of a plenary session this afternoon to start discussion around elements of the draft text, but there are also mutterings of other approaches to working through the detail….

The draft texts are broadly seen as a positive move. A senior official at the COP when asked about progress on negotiations commented that it is “absolutely possible that a strong agreement will be reached”.

Registered for COP15: Have Arrived in Copenhagen

Today, Andrew and I registered for the Conference of the Parties at the Bella Centre in Copenhagen. It would be fair to say that the number of people here make the event almost overwhelming in its scope and scale. Over the next week, we will endeavour to keep you up to date with the latest developments as they happen. However, rather than just provide reports, we will try and make the developments relevant for Australian business by outlining the implications for the Carbon Pollution Reduction Scheme, the expanded Renewable Energy Target, energy efficiency and Australian energy markets. If you have questions, you would like us to follow up on while here, please ask them by commenting on any post.