Counter to popular wisdom, a well-executed Canadian energy strategy also has the potential to bring growth, prosperity and sustainability.
Energy and climate change are two sides of the same have strong views about the costs and opportunities. After two coin, inextricably linked. Today we are facing generational challenges in our domestic energy systems, seeking to expand outlets for our energy in global markets and engaging in the redesign of an international climate change agreement. Some people want leaders to design future systems of energy and ignore the imperatives of climate change; others want to design future energy systems by stopping production of fossil fuels in Canada, ignoring the economics. Neither of these two paths will lead Canada to an energy future that enhances either our competitiveness or our sustainability. An integrated path would accomplish both. However, we would need to embrace new models for “the coming transformation,” a phrase coined at the World Economic Forum’s Davos meeting last month, one that is applicable well beyond energy or climate change.
Over the last few months, the energy debate has been heating up in Canada. Prime Minister Stephen Harper has taken strong public positions on Canada’s economic interest in opening new Asian markets for energy and he has supported the Keystone pipeline to the US. Natural Resources Minister Joe Oliver wants the review process to be streamlined for the Northern Gateway pipeline to the West Coast. First Nations, environmentalists, communities, businesses and citizens also years of energy dialogues across the country, political interest has grown, with several premiers, including the western premiers together, calling for an integrated and pan-Canadian energy strategy. As Alberta Finance Minister Ron Liepert said when he was energy minister, even Hugo Chavez has an energy strategy, why not Canada?
Internationally, climate change has drawn a lot of attention, with countries working to design the next UN treaty to succeed the Kyoto Protocol. After the breakdown in Copenhagen and moderate steps in Cancun, another round of progress was made in Durban in December. Canada played a minor role in the negotiations, most notably drawing fire for its withdrawal from Kyoto. The Durban meeting established important new institutions and set a platform or framework for negotiations between now and 2015, when a new legally binding treaty is expected. But 20 years after the first Earth Summit and the original calls for climate action, it is important to look back, to understand where we’ve been but also to keep our eyes open on what challenges and opportunities exist today and what may lie ahead.
With differing levels of progress and controversy around both issues, we should ask ourselves, what would put Canada on the road to integrated solutions that are in our national and international interests?
Some people want leaders to design future systems of energy and ignore the imperatives of climate change; others want to design future energy systems by stopping production of fossil fuels in Canada, ignoring the economics. Neither of these two paths will lead Canada to an energy future that enhances either our competitiveness or our sustainability.
In 1963, President John F. Kennedy described a world that was increasingly interdependent, and cautioned his allies that “time and the world do not stand still. Change is the law of life. And those who look only to the past or the present are certain to miss the future.” This comment is apt 50 years later, as we are reminded regularly of our global interdependence in the fragile state of the world economy, and in the pace and poignancy of change in our social, democratic and natural ecosystems. Today we see how change and uncertainty elsewhere in the world can affect us at home, how the sovereign actions of one nation can have far reaching international consequences.
As the federal government prepares for the budget, we know that an economic collapse in the European Union would have an immediate effect here, forcing us to respond, even though our economy and our banking system are the strongest in the OECD. In Davos a few years ago, Prime Minister Harper described the need for “enlightened sovereignty,” suggesting that all nations needed to be willing to change their policies for the global good, in areas from regulating banks to reducing trade restrictions to improving the health of children. In 2010, the Conservative government delivered a round of stimulus that may not have seemed a natural political choice for them, but it was designed to shore up the global economy.
It seems that, in general, we understand the concept of interdependence. We are adapting to an increasingly globalized economy, seeing the benefits and opportunities of the diasporas that link us to the world, and connecting through virtual networks and social media. However, we are not adapting well to change in all areas. In Canada, we have proven particularly poor at adjusting to the pace and scope of change in energy and climate change, here at home and internationally.
Climate change is the mother of all horizontal policy files, and its implications touch energy, infrastructure, industrial processes, buildings, biodiversity, food supply, forestry and many other aspects of our lives. It is complicated by the fact that the atmosphere is agnostic about the point of origin of GHG emissions. A tonne of carbon is a tonne of carbon, emitted anywhere in the world, it accumulates in the atmosphere.
A global response to a global problem was what world leaders agreed on in 1992 at the Earth Summit in Rio de Janeiro, when they created the widely supported but nonbinding United Nations Framework Convention on Climate Change (UNFCCC). That was the beginning of the odyssey that brought 194 countries, back together in Durban last December to negotiate a new global agreement for reducing greenhouse gas (GHG) emissions (mitigation) and adapting to the impacts in various ecosystems today (adaptation).
Since 1992, countries have agreed to a series of international mandates, action plans and accords aimed at reducing global GHG emissions, all decided in a unique and highly complex international process. The most significant was the 1997 Kyoto Protocol, designed to reduce global GHG emissions by an average of 5.2 percent from 1990 levels between 2008 and 2012. Only 37 developed countries signed on for binding targets under the Kyoto Protocol, and the US never ratified the treaty. Today we are nearing the end of the first 20-year phase of international climate change, and Durban was another step on the path to shape what follows. To recap, we started in 1992, then it took five years to negotiate the Kyoto Protocol, another eight years for countries to ratify the treaty (2005), with the commitments only starting three years later, and then covering a four year window (2008-12).
After the setback in Copenhagen, some are discounting the relevance of the international climate change process. We should remember that the timelines to create and implement international treaties are generally long and sometimes controversial. For example, the UN Convention on the Law of the Sea took more than 40 years to negotiate and once created, it took another 12 years bring into force (1982-94). The US has not signed that treaty either, however, the negotiations have changed the way nearly all countries in the world now manage their territorial waters.
Though it is difficult to discern from our Canadian vantage point, a similar kind of decadal shift has been happening in how the world is dealing with climate change and energy. There are signs we are taking tentative steps toward an integrated approach. Last year, the International Energy Agency’s (IEA) World Energy Outlook looked at threats and opportunities facing the global energy system and said that “we cannot afford to delay action further to tackle climate change,” acknowledging that 80 percent of the planet’s GHG emissions are “locked-in” by existing capital stock. Their report suggests that without new policies, “we are on an even more dangerous track” for higher temperature increases. While some continue to question the science of climate change, global energy trends cannot be ignored, particularly by an energy-rich country like Canada.
When this all started in 1992, climate change was something for the Earth Summit, an environmental issue. The Kyoto Protocol created a topdown system that applied to industrialized countries to reduce their GHG emissions, largely through regulations and in some instances through market tools. In the process of developing domestic responses, countries have learned a great deal about their unique domestic challenges, the costs of taking serious action, the limitations of existing energy infrastructure, and the opportunities of new technologies. The last 20 years have also seen a significant shift from a pure mitigation response (trying to stop growth of GHG emissions) to one that includes adaptation or planning responses to the affects of climate change. The impacts are with us today, so depending on geography, multi-year plans are being developed for coastal areas, agriculture, forestry, infrastructure, or, in Canada’s case, the impact that climate change will have on our Arctic and Northern communities. We also understand much more about the human and social costs of climate change than we did two decades ago.
Our experiences have also taught us that our climate change responses are interdependent and affect our respective and collective economies. The majority of countries now see that, no matter which policy choices they make, GHG emissions reduction actions have costs associated with them, and that there are potential risks to acting alone. Many, many jurisdictions are experimenting, and some have been first-movers — British Columbia with a carbon tax, Alberta with a GHG regulatory system, various US states with regional programs and the EU with a regional emissions trading system. However, we are reaching a point where governments are starting to question the wisdom of moving first on the regulatory front. In a system of worldwide trade, globalized supply chains and a fragile economic recovery, jurisdictions at all levels realize that the only way forward on climate change is together, in lockstep. This is part of the reason for Canada’s decision to move in tandem with the US on GHG regulations.
There are thousands of companies around the world, hundreds of them Canadian, participating in today’s $1 trillion global market for clean technology, a sector that has grown despite the recession.
Equally important are the opportunities being created through innovation and technology, for products and services that accelerate the shift to low-carbon systems for energy, buildings and transportation. There are thousands of companies around the world, hundreds of them Canadian, participating in today’s $1 trillion global market for clean technology, a sector that has grown, despite the recession. This is also an area where countries like China, India, Korea, Germany and Japan are maximizing their economic and manufacturing strengths. They are using a wide variety of policy tools, such as international financial institutions, foreign aid and trade policy, to bolster domestic industries. If Canada needs to diversify its markets for traditional energy sources, it also needs to diversify access by Canadian clean technology leaders to similarly lucrative options. Expected to grow to $3 billion by 2020, the global clean technology industry is one future we do not want to miss.
Reviewing these trends, we can see that our approach to climate change and energy has evolved considerably over the past 20 years. We have made mistakes. We have learned and experimented and adjusted our approaches. In this context, countries have been struggling at the international table to redefine how we collectively reduce GHG emissions. The impending 2012 expiry of the Kyoto Protocol and its mechanisms; the historic and entrenched division between developed and developing countries’ responsibilities; and the changing economic and emissions profiles of the BASIC countries (Brazil, South Africa, India and China) account for the increased urgency and drama of the climate change conferences of the last few years.
As we all remember, the 2009 Copenhagen conference exposed the rift between those countries that expected a comprehensive, single, binding global treaty, based on the historic Kyoto principles and divisions; and those that wanted all countries, including the US and the major emerging economies, to commit to GHG reductions and reporting, understanding that something different would need to be designed. In the shadow of the economic crisis, a strong case was made that GHG emissions profiles had changed since 1997 (China had passed the US as the largest GHG emitter in 2006), that the Kyoto Protocol covered a declining proportion of global emissions, and that future economic competitiveness could be affected. The majority of developing countries felt passionately that the Kyoto Protocol needed to be preserved in its entirety, while the US made it clear that this was a political nonstarter, particularly following the unanimous 1997 Senate resolution rejecting US participation in the Kyoto Protocol.
There was a dramatic political showdown of world leaders that created the significant though little appreciated Copenhagen Accord, which expanded those countries making voluntary 2020 GHG reduction pledges. In an extended overnight negotiation, President Barack Obama gained political commitments from the BASIC country leaders that they would all be part of any future agreement, but some Latin countries blocked the final process. Canada moved to bring its target in line with that of the US, committing to a 17 percent reduction from 2005 levels by 2020. The majority of observers, for a range of reasons, were deeply disappointed in this outcome.
But Copenhagen was a necessary step leading to the Cancun Agreements in 2010. Following a conference that was well managed by Mexican Foreign Minister Patricia Espinosa, all but Bolivia agreed to voluntary targets covering 80 percent of country emissions, and to proposals for institutions that were seen as necessary pre-conditions for a future global deal, including a global technology centre, adaptation investments and a $100 billion green climate fund. There was much less drama in Cancun, and the outcomes were more practical and widely supported. It was also redemptive for the UN process, which continues to have its critics, but Cancun proved that it can make progress.
Through both Copenhagen and Cancun, a growing number of small island states and other vulnerable mountain and agriculture-dependent countries began to make a strong moral and technical case that, while voluntary agreements and incremental progress were positive, their people were dealing urgently with climate change impacts and needed two things — financial and technological support to adapt to climate change, and deeper emissions reductions to keep the global temperature rise to between 1.5 and 2 degrees Celsius. The voluntary pledges under the Cancun Agreements where not enough, even though they bring a higher number of countries into the tent.
In this broader context, it is important to look at the Durban outcome as part of a bridge, one that will be under construction for the next four to eight years. The figure shows the progression and interdependence of the Kyoto Protocol, the Cancun Agreements and now the Durban Platform.
For many countries at Durban, economic imperatives dominated, whether over the long-term effects of the global economic and sovereign debt crisis or the need for developing countries to sustain economic growth unconstrained by carbon limits.
Minimal progress was expected in Durban, although pressure was building through the latter part of the year, particularly from countries that wanted to sustain the international carbon units upon which the EU emissions trading system depends. The preparatory meetings for Durban had not gone well, and the gulfs between countries appeared to be widening.
The Executive Secretary of the UNFCCC, Christiana Figueres, comes from a political family (her father was president of Costa Rica twice and her brother once). A long-time negotiator, she knows the substance and how to manage expectations in a multi-dimensional process. She also understands how to shrewdly assess the political field of play. She has consistently explained that parties and stakeholders should not expect a “big bang” comprehensive treaty to magically appear, emphasizing that the role of all is to work systematically through issues. She is firmly in the “Rome was not built in a day” camp.
Over the two weeks of the Durban conference, it was understood that any successful outcome required progress on three interdependent elements — operationalizing the Green Climate Fund promised in Cancun, determining the future for the Kyoto Protocol, and formalizing the 2020 emissions reduction targets and the shape of the longer-term path. There are many layers of substance, complexity, nuance and detail in the individual positions of the negotiating blocs that are impossible to explain here. Suffice it to say that the individual elements were more important to some countries than others, and very few parties seemed to want all three. So while the shadowy outlines of a deal might be seen, the path to get to a balanced and politically supported package was not.
The developing world’s priorities were the Green Fund and the Kyoto Protocol extension. African countries, particularly the hosts, were determined that South Africa would not become the burial ground of Kyoto.
Although the event was smoothly run, the South Africans have been criticized for the loose way they managed the process before and during the conference. Some would argue that there was an inherent African wisdom in the many listening sessions, while others wanted them to more forcefully take the lead. In the end, they were helped by the fact that many of the negotiators had been working together for the last three to five years, and some for decades, and had established a level of trust that is essential in complex negotiations. These relationships allowed parties to begin mapping out middle ground by the beginning of the second week and to understand where the red lines were that could not be crossed.
For many countries at the Durban conference, economic imperatives dominated, whether over the long-term effects of the global economic and sovereign debt crisis or the need for developing countries to sustain economic growth unconstrained by carbon limits. Adding to the challenges, Canada, Russia and Japan withdrew support for a second Kyoto commitment period, and through a leaked report it became known that Canada would also withdraw from the first Kyoto commitment period. Canada denied the rumour during the negotiations, drawing headlines at home, but it was little more than a distraction in Durban since Canada was not viewed as critical to the deal. However, when Canada did formally withdraw immediately following the conference, strong criticisms came from many domestic and international voices.
In addition to highly technical and specialized sessions, the negotiations followed an ever-narrowing set of concentric political circles. The negotiations started in full plenaries of 194 countries, which spoke for themselves as well as in the traditional and new voting blocs. The G77/China bloc continued to erode and reconfigure, as the BASIC countries spoke with a single voice for the first time. The pace picked up as ministers arrived in the second week, and a table of 50+ countries started meeting into the night to further emphasize their positions, sometimes making the possibility of a deal seem more distant.
The EU roadmap shifted the momentum by creating an alliance with the most vulnerable and least developed countries in support of extending the Kyoto Protocol and getting countries to consider deeper GHG emissions reductions before 2020.
The EU played a critical role in the second week by proposing a “roadmap” to govern the period from 2013 to 2020. If agreed upon, this eight-year period had to cover a seemingly irreconcilable list of competing demands: a second commitment period for targets under Kyoto, a system to manage the 2020 voluntary targets agreed in Cancun, the negotiation of a new binding treaty for post-2020, a new global financing tool, and, most important for vulnerable island and mountain states, an agreement to negotiate deeper emissions reductions to limit temperature rise to 1.5 or 2 degrees Celsius. In contrast with Copenhagen, at the Durban conference China and the US did not dominate the discussions, although everyone knew that without their agreeing to binding targets, transparency and financing, there would be no deal.
The EU roadmap shifted the momentum by creating an alliance between the EU and the most vulnerable and least developed countries in support of extending the Kyoto Protocol and getting countries to consider deeper GHG emissions reductions before 2020. The EU had agreed to a second Kyoto commitment period in Copenhagen, promising to increase their emissions reduction target from 20 to 30 percent, but not alone. This served three purposes: to save the Kyoto mechanisms that were important to developing countries and critical to the European emissions trading system; to increase participation to 100 percent by getting these smaller countries to commit to emissions reduction targets; and to pressure the economically strong BASIC countries within the G77-China voting bloc. This changed the political geometry of the negotiations, forcing China and India to step forward, though they were unwilling to commit to binding targets before 2020.
With less than 24 hours left in the formal session, the negotiating circle narrowed again to 26 ministers from the key negotiating blocs. They locked themselves into a room and stayed well past the deadline to hammer out the final details as delegates, observers and television cameras waited in the hallways. Canada was not in the room. What emerged was the Durban Platform for Enhanced Action, coupled with a series of other formal decisions that will ultimately streamline the UNFCCC process and bring results on a number of important adaptation, forests and technology files.
In the longest climate change conference in its history, there was to be one final moment of drama as the Durban Platform, negotiated by the smallest circle, was brought back to the full plenary of 194 countries for endorsement. Everyone remembered that Copenhagen had unravelled at a similar point and knew that the deal was not yet assured. In the wee hours of Sunday, key countries gave impassioned speeches, including several African countries that saw the flaws in the final package but urged countries to proceed with another historic step in the process. India’s foreign minister fiercely objected to the legal language for a binding treaty, cautioning that it would be too restrictive for those in her country living in poverty. Seeking to avert another failure, the EU offered to compromise, and a huddle of ministers, negotiators and lawyers gathered in the middle of the room to find acceptable language. In the end, it was agreed that countries would design, not later than 2015, a “protocol, legal instrument or agreed outcome with legal force” that would come into effect starting in 2020.
Starting now, countries will begin to map out strategies for the months leading up to the next climate change negotiations in the Middle East, when Qatar will host in December 2012. Also host to the 2022 FIFA World Cup, Qatar has large proven reserves of oil and natural gas and the highest GDP per capita in the world, and it has developed a 2030 strategy to focus on sustainable energy and growth.
The bridge built in Durban marks a significant shift in both climate change politics and implementation.
For the first time, all countries agreed to formally commit to reduce GHG emissions and report their results to the UNFCCC. This “bottom-up” approach allows countries to decide their own domestic strategies (important for the US, China, India and many other countries). Ever since Copenhagen, the system of accounting and reporting these pledges has been getting progressively stronger, though it is still not legally binding.
The concern with voluntary commitments is that they fall short of the emissions reductions required to limit temperature rise to 1.5 or 2 degrees Celsius, creating what researchers have called the gigatonne gap. This leads to another building block promised in Copenhagen and confirmed in Durban, that a review would take place between 2013 and 2015, to see whether countries must do more collectively to lower GHG emissions through deeper targets. The EU has already indicated that they are willing to move from 20 to 30 percent reductions, but not alone.
Second, the Kyoto Protocol and its mechanisms will continue for a second commitment period starting January 1, 2013, and ending either in 2017 or 2020. The extension is critical to ensure the pieces of the emissions trading system and the carbon units created under the protocol. As one investment banker put it, “the decision will be like Viagra” for carbon markets. Third, the Durban meeting established tools to address three key implementation challenges for climate change: a) expanding adaptation and mitigation efforts; b) ensuring more collaboration between developed and developing countries; and c) creating the linkages between energy and climate change. These institutions are now in place, and they include the Green Climate Fund, the Adaptation Committee, and a global climate technology centre and network to facilitate the exchange of best practices. The Green Climate Fund creates a permanent mechanism for the $100 billion per annum envisaged by 2020 to support mitigation and adaptation efforts in developing countries, although the source of the funds is still uncertain.
And finally, the Durban Platform launched the difficult political process of formalizing the next generation legal agreement to enshrine emissions reduction commitments by 2015, to enter into force not later than 2020. How the political gaps between the 194 countries will be closed is not clear.
For Canada, the outcome of the Durban meeting means that the government will continue to work toward the voluntary pledge made in Copenhagen. The drama around withdrawal from the Kyoto Protocol does not change the target, and Environment Minister Peter Kent expressed his support for the process. Canada is also taking adaptation efforts more seriously at home and abroad through investments in developing countries and research into black carbon, a particularly damaging form of CO2 that disproportionately affects the Arctic.
Despite the complexity, cynicism, doubts, science skepticism and frustration with the pace of progress, a few things remain true after Durban. The Durban Platform is another step in a 20-year international process to do what all countries agreed on at the Earth Summit — create a global response to a global problem. There is a set of solution-oriented global institutions focused on technology, financing and adaptation that will facilitate a more equitable conversation between the northern and southern countries, developed and developing worlds. All countries understand that there are financial costs to taking on emissions reductions targets and paying for adaptation. They also understand that there are potential opportunities in developing the products, services and infrastructure for a low-carbon economy. There is a recognition that business and civil society have a constructive role to play — possibly even together, and that governments cannot respond alone. There is agreement in principle that 100 percent of the world’s countries will take action on both mitigation and adaptation. For the first time, we’re in the same canoe, rowing in more or less the same direction.
We now live in a world where there is a price on carbon — whether or not our own government sets the price or the policy. In addition to BC, China and Japan are looking at implementing a carbon tax, and the EU, Australia and other countries are putting a price on carbon through emissions trading systems.
There are, of course, many difficult, perhaps irreconcilable questions ahead. Is there the political will to negotiate a new global treaty, and what form will it take? Will the actions be enough to stop or slow temperature rise? How will the economic, financing and trade questions be addressed? If a legally binding agreement can be reached, will countries like the US, China and India ratify it and live up to their commitments? We will have to answer each of these questions over the next three years.
It’s time for a little political pragmatism too. It took 15 years for the UNFCCC process and some developing countries to accept that the political red line for the US was drawn when the Senate rejected Kyoto by a 95-0 vote in 1997. There will be no US participation until all countries are in. Period. Now that the world is moving to something beyond the Kyoto Protocol, this moves the US ratification of a future global climate change treaty “from the impossible to the very hard,” as the US negotiator commerted.
Today, China and India are saying that they will not limit their sovereign right to manage the internal response to climate change or the effect that targets might have on the millions living in economic and energy poverty inside their borders. They will not be forced to limit the opportunities of millions of their citizens by restricting economic expansion. This is politically unacceptable to their governments and, if the next treaty is to include their legally binding commitment, the model that embeds high carbon emissions in economic growth will need to be replaced. This is true for other countries as well, since there are more than 1.6 billion people living in energy poverty, 80 percent of them in South Asia and sub-Saharan Africa. This helps explain why the theme for the RIO +20 Earth Summit in June is “sustainable energy for all” as part of defining the future we want.
To get to that future, the Durban Platform relies on the principle that countries will set national targets and meet them, while reporting their results in an international system of monitoring and verification, thus creating transparency and environmental integrity. This will rely on a “bottomup” approach and the enlightened sovereignty that Prime Minister Harper endorsed. However, we have a challenge, in that very few people believe that a voluntary system will bring results, and it is certainly not urgent enough; thus, there will be pressure to move to a new legally binding agreement. This tension and mistrust will hang over the next rounds of negotiations. The benefit of the bottom up system is that each country will set up their own domestic policies — and worry about fitting them together later. Canada will need to complete its own work to meet its 2020 target since we are now only a quarter of the way there.
As Canada looks forward to its role in the next round of international climate negotiations, we need to understand that the negotiations have moved well past the old paradigm created in Kyoto. When countries come to negotiate, they have designed their negotiating positions to gain advantage for their economic development, trade, technology transfer, forestry, agriculture and, yes, energy. Canada has tended to treat the negotiations as a sideshow, something to be survived. If we are to move past Kyoto, we must also leave behind our old federal vs. provincial and industry vs. the environment scars from the acrimonious domestic Kyoto debate of the 1990s, which was seen by Western Canada as an extension of the despised National Energy Program. The world has certainly changed since then, and today our response on carbon is as critical to our national interests as market diversification. Some premiers support this broader approach, most recently Alberta Premier Alison Redford.
Somewhere between the urgent calls from small countries that are losing whole islands as a result of rising sea levels, and the patience my grandmother always told me was a virtue, is the heart of our challenge. If we’re going to take collaborative global action, and not just talk about it, we need new models and new kinds of intergenerational leadership that embrace both urgency and wise patience, climate change and energy. We’re going to need momentum for change. The next rounds of international negotiations and the growing political desire for a sophisticated and forward-looking energy strategy give us an opportunity to redefine where Canada’s national and economic interests are in an interdependent future.