Climate Deal Decades Away as ‘Dysfunctional’ U.S. Delays Cap

Photographer: Zach Boyden-Holmes/Getty Images

President Barack Obama visits the DeSoto Next Generation Solar Energy Center in Arcadia, Florida. Close

President Barack Obama visits the DeSoto Next Generation Solar Energy Center in Arcadia, Florida.

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Photographer: Zach Boyden-Holmes/Getty Images

President Barack Obama visits the DeSoto Next Generation Solar Energy Center in Arcadia, Florida.

Delegates at the United Nations climate talks stayed up two nights in a row last week to agree on a proposal to slow global warming. Next year’s negotiations may be even tougher.

The plan approved on Dec. 11 creates a climate fund to channel as much as $100 billion a year in aid to developing nations by 2020, protects forests and outlines methods to verify cuts in fossil fuel emissions. No new targets for curbing greenhouse gases were set, and debate on the future of the Kyoto Protocol, which limits emissions by developed countries until 2012, was put off until the next meeting in Durban, South Africa, in December 2011.

With President Barack Obama struggling to salvage his energy agenda and richer and poorer nations in conflict over extending Kyoto’s emission limits, a new worldwide climate treaty may be 20 years away, said Tim Wirth, who in 1997 led the U.S. delegation in Kyoto, Japan. Such a delay endangers the future of $2.7 billion a year in pollution credits sold under a UN program based on the Kyoto agreement.

“We have a dysfunctional Congress and an administration without policy,” Wirth, a former Democratic senator from Colorado, said in an interview during two weeks of UN climate talks in Cancun, Mexico. “The U.S. doesn’t have an energy strategy. You can’t sign up to an international treaty unless you know what you are going to do at home.”

A dispute over extending emission cuts beyond 2012 under the Kyoto plan, which called for a 5.2 percent reduction from 1990 levels among industrial nations, nearly derailed this year’s UN conference.

China vs. Japan

China, India, Brazil and South Africa pressed developed countries to make bigger cuts. Japan, Russia and Canada all said they don’t want to extend Kyoto unless the two biggest emitters, China and the U.S., are brought into the pact.

Delegates papered over the rift by keeping alive the prospect of extending Kyoto while not setting new targets for polluters. Bolivia was the lone voice among the 193 nations present objecting to that decision, saying it wasn’t ambitious enough. Bolivia’s objection was overridden.

“The collapse of the Kyoto Protocol, particularly with the U.S. being so many years away from even having a serious discussion, would really take the wind out of climate change negotiations,” Kevin Conrad, Papua New Guinea’s envoy to the talks, said in an interview.

Obama, who ran for president on a pledge to push for a U.S. cap-and-trade system to cut emissions and fight climate change, failed to get legislation through the Senate this year. Then Republicans -- including those who disagree with the notion of man-made climate change -- won control of the House of Representatives and gained seats in the Senate in November elections.

Legislative Delay

Obama now says climate legislation probably can’t win congressional approval until 2013 at the earliest. That means Kyoto’s emission limits will expire before the U.S. sets legislation to back up its commitments on cutting emissions, making it unlikely developing countries will pledge cuts of their own.

“The U.S. does have to take a lead because, if the U.S. sits there and does nothing, then the world will not react, especially the developing world,” Dow Chemical Co. Chief Executive Officer Andrew Liveris said in an interview in Cancun, where he joined other CEOs lobbying countries to take action.

U.S. delegation chief Todd Stern in Cancun reaffirmed Obama’s pledge to cut emissions about 17 percent by 2020, a promise contingent on having domestic laws to back it up.

Kyoto spurred the development of the world’s largest carbon market, the European Union Emissions Trading System, and its second biggest, the UN Clean Development Mechanism, to help companies meet greenhouse gas goals.

Carbon Market

The market in credits for carbon dioxide emissions may decline 3.9 percent to $122 billion dollars this year from $127 billion last partly because of uncertainty about the next round of emissions reductions, Bloomberg New Energy Finance estimates.

“The reality is the talks will struggle unless and until the U.S. can bring something more substantial to the negotiation table,” said Mark Lewis, a carbon market analyst based in Paris for Deutsche Bank AG.

Inertia on stimulating low carbon technology and clean energy may hobble U.S. companies, said Jennifer Haverkamp, managing director of international policy at the Environmental Defense Fund.

“They see that they’re falling behind because they don’t have the price signal to innovate and be part of the economy of the future,” she said. “Other countries are taking serious action. One of these days the Senate is going to wake up and instead of quaking in their boots being afraid to go first, they’ll realize they’re last.”

China’s ‘Warp Speed’

Some executives say China’s emergence as a competitive force should change the mood in Washington and prompt Obama to act on the environment more quickly. China is gaining an edge on the U.S. in clean technologies, said Duke Energy Corp. Chief Executive Officer Jim Rogers.

“What they are doing is leading the world in solar and wind, they are building 24 nuclear plants,” Rogers said in an interview in Cancun. “They are very much moving in that direction at warp speed, ahead of the U.S.”

China plans to raise installed electricity-generating capacity to 90 gigawatts of wind power and 5 gigawatts of solar power by 2015. A nuclear reactor by comparison has a capacity of about 1.6 gigawatts.

Competition from China’s clean energy companies, such as Yingli Green Energy Holding Co. and Trina Solar Ltd., is narrowing profit margins for U.S. wind and solar companies including First Solar Inc. and General Electric Co.’s wind turbine business.

‘Turned on its Head’

“The whole concern about China has been turned on its head,” said Elliot Diringer, vice president for international strategies at the Pew Center on Global Climate Change in Arlington, Virginia.

“For years the line was we shouldn’t do anything because China isn’t doing anything. Now the worry is that, ‘Oh my God: China is getting ahead of us in the clean technology race. We better catch up.’”

This year’s UN talks pledged to keep global temperature increases to 2 degrees Celsius (3.6 degrees Fahrenheit). The emissions reductions currently pledged may lead to increases of 5 degrees by 2100, the UN Environment Program said Nov. 23.

That leaves islanders from nations such as Kiribati in the south Pacific, northeast of Australia worrying for their future. Homes already are being washed away, roads eroded and communities displaced because of rising sea levels linked to climate change, President Anote Tong said in an interview.

“The negotiating process will carry on for the next few decades,” Tong said. “Do we wait for everything to be resolved before we implement what’s needed? It’s going to be too late for many countries. It’s about the survival of people.”

To contact the reporters on this story: Alex Morales in Cancun, Mexico, at amorales2@bloomberg.net; Kim Chipman in Cancun, Mexico at kchipman@bloomberg.net; Jim Efstathiou Jr. in Cancun, Mexico at jefstathiou@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg in Cancun, Mexico at landberg@bloomberg.net

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