The Copenhagen climate talks - Filthy lucre fouls the air

Dec 10th 2009 COPENHAGENFrom The Economist print edition
Arguments over money dampened the euphoria at the start of the Copenhagen climate talks
DESPITE the gloomy talk that preceded the UN climate conference, the opening was upbeat. Most big countries had vowed to cut or limit emissions during the previous few weeks. As delegates arrived, America’s Environmental Protection Agency announced that carbon-dioxide emissions were an “endangerment” to health. This allows Barack Obama to regulate them, whatever Congress does.
The happiness did not last. On December 8th a draft agreement which had been discussed some weeks ago was leaked to the Guardian, a British newspaper. It caused a furore. The “Danish text” had been circulated by the hosts, but not to all parties; and it seems to confirm the futility of moves towards the legally binding treaty that many still want.
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It also seems to link any rich-to-poor transfers of money to specific actions taken by developing countries to curb emissions. Embarrassed Danes said the text was one of several unofficial papers that had been floated, not a basis for real bargaining. The lead negotiator for the “G77 plus China” group of developing countries, Lumumba Di-Aping, was unsoothed. “This text…is a major violation that threatens the success of the Copenhagen negotiations,” he fumed, saying two years’ work had been swept aside.
Can there still be a deal? The main obstacle may not be emissions cuts, which will not change much, but the closely linked issues of the shape of a deal and how much money it involves.
Everyone agrees that poorer countries, including India and China, need cash for climate “mitigation”—adopting green technology and new approaches to land use and forest conservation—and for “adaptation”: coping with the anticipated effects of climate change, some of which (like a degree of sea level rise) look unavoidable. America has joined the list of countries accepting such transfers, saying it will pay its “fair share”. Rich countries have talked of a “quick start” fund. The leaked Danish text has it starting in 2010-12 at a value to be determined; the UN has suggested $10 billion. To poor countries, this sounds paltry: responses range from “bribery” to “it will not even pay for the coffins”. Instead, the G77 has asked for 0.5% to 1% of the rich countries’ GDPs. That implies hundreds of billions of dollars on top of existing development aid. The idea that rich countries will hand over 1.2% to 1.7% of their wealth in perpetuity is not going to fly.
Some transfers occur already. Rich states meet emissions targets by paying poor countries to do the cutting, under Kyoto’s Clean Development Mechanism. This system is under fire in Copenhagen for being too choosy or too arbitrary in the projects it backs. It is also too small: it abates only 330m tonnes of carbon dioxide per year, and billions of tonnes must be cut.
On Thursday, George Soros, a philanthropist, proposed turning on a much bigger tap: he wants a new use of Special Drawing Rights, effectively the IMF’s in-house gold-backed “currency”, mainly held by the rich countries. The IMF extended an extra $153 billion to rich countries last year to help them with the financial crisis. Most of it was unused. Mr Soros wants rich countries to lend $100 billion-worth to poor ones, creating a “green fund” to jump-start mitigation. The IMF’s gold reserves could pay the (small) interest amounts that poor countries would otherwise owe.
Other proposals abound. The REDD initiative on forestry should move lots of money to countries which avoid felling trees. If emissions from ships and aircraft are cut, using a tax or an emissions market, that could provide cash. Less promisingly, France wants a levy on financial transactions. And the European Climate Foundation, a think-tank, says more could be taken from existing carbon markets: cash could be winkled from traders who arbitrage the price difference between green projects in poor places and the “allocation” paid by rich-world emitters.
The question of who gets paid what, and how, feeds back into the main issue in these and inevitable future talks: to what extent will obligations under the Kyoto protocol be extended beyond the developed countries to developing ones? Rich countries account for most of the past emissions that now fill the air, but less than half the world’s current emissions.
Settling this question will mean some differentiation between developing countries, a term that includes both industrial giants and hapless victims, whose interests are very different. Some people think this was the reason for the leaking of the Danish text. Those most offended by it are the smallest, weakest countries, which are vulnerable and emit very little. They are more interested in strong action than in who pays for it or who has to make the cuts. The calculus is different for the larger, more industrialised emerging markets, at least four of which—Brazil, India, South Africa and China—saw the text before it was leaked. They have more to gain from keeping the onus of action and payment on the developed world alone.
These countries have produced their own draft document, which would absorb any new agreement into the existing Kyoto framework. If the leak serves to firm up resistance to a deal that spreads the duties of reduction wider, China and other large developing states may be the gainers