Creating an international Climate Agreement

21 January 2015

Financial giants the United States, China and the EU are currently preparing for international negotiations on cutting greenhouse gas emissions.

The EU member states already made their decision when they agreed on the 2030 climate and energy package in October. Their goal is to reduce greenhouse gas emissions by 40% from the level in 1990 by 2030. This ambitious goal is domestic – international carbon credits can no longer be used.

Europe’s share of global emissions is around 10%. China’s share has increased to 26% while the share of the US is 14%.

The parties will not be able to resolve the emission problem on their own – they will need an international climate agreement where the largest countries show the way to the rest of the world. Negotiations for the United Nations Framework Convention on Climate Change will continue in Lima, Peru in December. The goal is to actually sign the Convention in Paris, France in December 2015.

Motivation for clean production needed

Eija-Riitta Korhola
Eija-Riitta Korhola

Eija-Riitta Korhola, a European legislator and researcher of international climate policy, says that the level of global emissions has continued its steady increase despite the Kyoto Protocol. If imported goods and consumption are taken into account, emissions in the EU have actually increased.

“The best climate policy for Europe would be improving the business preconditions of European industry and adding incentives that would motivate businesses into investing in clean production technologies. The climate goals cannot be achieved if the competitive edge of European industries is driven down by adding to the financial burden of the businesses,” she says.

Korhola points out that the EU originally thought that it would set an example to others so that they would start doing their share for the climate too.

“That is not what happened; in fact, I believe that the EU is currently putting the international climate agreement at risk by trying to force its own binding emission restrictions on the other parties. The EU should enter the negotiations with an open mind and pay close attention to the issues in which the others are willing to commit.”

Climate policy from a national viewpoint

The key parties of the agreement, China and the US, are implementing their climate policies based on their own starting points. For example, China’s attitude towards climate change has changed over the past few years because of the country’s major problems with air pollution.

Recently China and the US announced climate goals agreed in private bilateral talks that could also accelerate progress at the UN climate negotiations for transition to low-carbon economies and setting the global temperature goal of 2℃.

China increases non-fossil fuel consumption

Shin We Ng
Shin We Ng

China intends to achieve the peaking of CO2 emissions and increase the share of non-fossil fuels in primary energy consumption to around 20% by 2030.

Analyst Shin We Ng of the international environmental organisation E3G says that China is investing in zero emission energy production, nuclear power, renewable energy sources and gas while also building new coal-fired power plants.

“I don’t believe that China is ready to formally commit to the international process; instead, it focuses on trying to stop the pollution of its own waterways, soil and air. China’s internal status also plays a role in the process: China started a major financial reform last year. If the process goes as planned, China’s input in the international climate negotiations may be more significant.”

Shale gas reduces the use of coal in the US

The status in the US has also experienced a major change. The utilisation of shale gas, in particular, will reduce the need to use coal, which will in turn reduce greenhouse gas emissions. The US announced in the agreement with China to intend to achieve an economy-wide target of reducing its emissions by 26%–28% below its 2005 level in 2025.

“There are still several legislative barriers to ratification of the Climate Convention in the US. However, several countries have become more favourable towards the agreement since the Copenhagen meeting, which is why I believe that the Paris meeting will be a turning point for the international climate agreement,” says Liz Gallagher, EG3’s climate diplomacy expert.

Improved EU legislation

Marco Mensink
“We want to make the EU legislation more easily foreseeable, because if companies are unable to make new investments, they will not reach the emission reductions needed to meet the political goals. National economies will not grow either if they are not attractive enough to businesses.” – Marco Mensink

The key tools of the 2030 climate and energy package that has been ratified by the EU are the emission trading system, the 27% renewable energy source objective and increasing energy efficiency.

Marco Mensink, Director General of CEPI, the Confederation of European Paper Industries, says that the new package better takes into account the concerns of European industries regarding the impact of climate policy on their competitive edge.

“The agreement includes a clause that continues free emission allowances to energy-intensive industries to prevent carbon leakage until the other leading economies start to apply similar systems to their own companies.”

European industries need to stay attractive

Mensink says that this is a very important clause in terms of future investments. European politicians must make sure that industries will manage with the increased costs brought on by climate policy in the short term so that they will be able to reach goals in the long term.

“We want to make the EU legislation more easily foreseeable, because if companies are unable to make new investments, they will not reach the emission reductions needed to meet the political goals. National economies will not grow either if they are not attractive enough to businesses. Emissions trading will in addition to bringing carbon costs to industry also increase electricity prices. The European Commission has made a list of carbon and electricity-intensive sectors that are susceptible to carbon leakage so that they can be compensated at the national level. The list includes the manufacture of paper, paperboard, cardboard and mechanical wood pulp, for example.”

landscapeInnovations are necessary

Mensink points out that emissions cannot be reduced by using the currently available methods only. New kinds of solutions and technologies that are currently not in use are needed.

“CEPI has been promoting new innovation funds for a long time. The funds are to support breakthrough technologies that will be more effective in reducing emissions than the current methods. This issue was recently added to the EU climate and energy package.”

When ratifying the 2030 package, the EU agreed on the NER400 fund that is meant to support innovations and investments which aim at reducing emissions. In order to create the fund, the European Investment Bank will sell 400 million emission allowances and allocate the funds to projects to be supported. The supported projects will be selected based on applications.

New to the agreement is that the fund will specifically aim to support the industries covered by the emission trading system.
Text Vesa Puoskari

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