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COP16: A Stepping-Stone to Real Climate Action

With the disappointment of Copenhagen firmly fixed in the minds of many, the expectations as to what may be achieved from Cancun in 2010 seem to be more realistic (if not a little pessimistic). With the international climate change negotiations taking place later this month, we look at some of the areas where progress could be made and ultimately needs to be made.

The plethora of communication with regards to the Conference of the Parties 16 (COP 16) has had a tone of cautious realism, but the main objective during these discussions is clear – to cultivate and lay the ground for successful climate change negotiations in South Africa at the end of 2011. With many people simply discounting Cancun, does this actually mean that there will be little progress? Hopefully not!

Pre-Cancun negotiations so far have seen various negotiators from international countries using terminology such as the 'Cancun Road Map' to describe potential outcomes from proceedings. The use of such terminology potentially indicates that Cancun could deliver something that goes some way further than the pledges in the Copenhagen Accord, but falls someway short of being a final all-encompassing international agreement on climate change. It may well transpire that there is enough movement from negotiating parties to enable key pillars of text to be laid down for a final treaty to be subsequently agreed in South Africa.

COP16 Coverage at is fair to conclude, at this stage of the negotiations, that it is pretty unlikely that parties will agree on targets for greenhouse gas (GHG) emissions cuts for industrialized countries (which would include the US). The US is not in a position to agree to binding cuts, largely as a result of the absence of any clear policy signals from Washington. Similarly developing countries with larger economies are also likely to be reluctant to commit to undertake significant obligations to monitor and report their domestic emissions. This could be a huge stumbling block as it is a key requirement of the industrialized countries and would likely result in a deadlock between industrial and industrializing countries if no movement from either side on these issues could be obtained.

Smaller developing countries (with economies in transition), which represent more than 130 signatory countries under the UNFCCC and are only responsible for around 15 percent of global greenhouse gas emissions, are likely to want to see significant progress during Cancun in relation to finance. Given the bold finance pledges from the industrialized countries in Copenhagen, these countries will not want to be disappointed and will be looking for further clarity as to how these finance pledges are going to materialize.

In the pre-COP conference in Tianjin there was broad agreement as to how the monies that were pledged by industrialized countries in Copenhagen could be found. The proposed solution was to utilize the current infrastructure of multilateral financial institutions and global funds, such as the World Bank and the Global Environmental Fund. Responsibility for oversight could come in the form of the UN Framework Convention on Climate Change (UNFCCC), which would help to ensure that the voices of the recipients of these funds were appropriately represented.

The negotiations will also focus on market mechanisms, alongside other means of incentivizing the necessary flow of private sector capital that will be needed to meet the $250–380 billion by 2030 needed to address climate change (according to the UNFCCC). So far, over the next 3–5 years only $30 billion of financing has been pledged, which is a small drop in the ocean of what potentially will be needed. How private sector capital can fill the financing gap and be mobilized at scale will be an important issue for negotiators to consider. The business community/private sector urgently needs regulatory clarity and certainty in this area before substantial monies will begin to flow. Given that 2010 is likely to see GHG emissions rise (from 2009 levels), time is definitely of the essence.

The private sector is seen as an important source for this additional finance as it represents almost 90% of all investment flows. However, if the international community really wants this capital to be mobilised then Cancun will need to deliver further regulatory clarity and progress on new market mechanisms, market-based instruments to facilitate technology transfer from developed countries to developing countries, National Appropriate Mitigation Actions (NAMAs), and visible progress on reforming the Clean Development Mechanism (CDM) to allow for further up-scaling and efficiency improvements. These instruments have been discussed ever since Bali and Poznan, and their importance has been reiterated in the Copenhagen Accord.

Visible progress will need to be made on national and international policy during Cancun, especially in terms of developing an appropriate regulatory framework and associated instruments. These policy developments need to provide a clear signal to the private sector as to what the likely architecture of any forthcoming market mechanisms may be. Only at this point will the business community be confident enough to start developing innovative climate change solutions and also to start and deploy private sector capital.

Failure to provide this clarity with regards to the architecture for any forthcoming market mechanisms during Cancun is likely to see the private sector continue to "tread water" and stall on making any significant climate change investments for at least another year. The well documented result in delaying significant climate change investment is that the overall cost for undertaking mitigation and adaptation activities dramatically increases.

Cancun could prove to be an important stepping stone in achieving a broader international agreement on climate change in 2011. However, in the interest of climate change, Cancun is strategically important and must make progress in key areas if we really are to mitigate the effects of catastrophic climate change.

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