Obama Winning Climate Debate Opens China to Legal Accord

The U.S., long accused of blocking progress in international climate talks, is winning a two-decade old debate about how to curtail global warming.

The decision yesterday by China and India to move toward an agreement with the “legal force” to limit their fossil fuel emissions marked the first step toward treating developing nations the same as industrial ones when it comes to reducing pollution.

President Barack Obama, and George W. Bush before him, pushed for that parity after the Senate refused to ratify the Kyoto Protocol, which limits greenhouse gases for industrial nations. Developing nations such as China and India had no commitments under Kyoto.

“The U.S. saw an opportunity to push China into accepting the same rules as everyone else and took it,” said Andrew Light, coordinator of climate policy at the Center for American Progress, a research group in Washington with White House ties.

Benchmark carbon permits under the European Union’s emissions trading system, the world’s biggest cap-and-trade program, fell 1.2 percent to 7.75 euros a metric ton as of 12:35 p.m. in London, headed for the first loss in three days.

Obama’s envoy approved the accord yesterday at United Nations climate talks in Durban, South Africa. Bringing developing countries into the system is important because Kyoto regulates only a third of greenhouse gas emissions, and China and India have become two of the world’s three biggest polluters since the pact was approved in 1997.

Rich and Poor

“The Durban climate talks have brought us to an important moment where all nations will be covered in the same roadmap toward a long-term solution for the climate crisis -- the greatest challenge facing our planet,” House Democratic leader Nancy Pelosi said in a statement.

The division between rich and developing economies has been enshrined in the UN talks since 1992, allowing the poorest nations to escape commitments on burning coal and oil while requiring industrial nations to clean up the atmosphere. That split prompted the Senate in 1997 to pass a resolution saying it wouldn’t adopt Kyoto. No president ever made a formal proposal to bring the treaty into force in the U.S.

“You can run around and pretend that behind this firewall you are going to take 30 or 35 percent of global emissions and fix the problem. But you know what? You’re not,” Todd Stern, the U.S. envoy in Durban, said Dec. 8. “What the U.S. has been doing over the last two years has been showing the leadership necessary to try to drag this process into the 21st century.”

U.S. Skepticism

U.S. State Department officials initially rejected the EU’s push to start talks for a climate treaty to replace Kyoto, whose emissions limits expire at the end of 2012. Stern said last week he was skeptical China and India would participate on the same level as industrialized nations. He moved when developing nations gave assurances they would agree to the same sort of language industrial nations adhere to.

The agreement in Durban is a victory for the U.S. because it strengthens Obama’s effort to steer the climate talks toward voluntary pledges on emissions instead of a top-down system of targets written into the Kyoto Protocol, said Robert Stavins, director of Harvard University’s Environmental Economics Program in Cambridge, Massachusetts.

Kyoto sets a goal meant to spur emission-reducing policies and provides an international system of mechanisms such as the global carbon market to help nations comply. U.S. has pushed a “bottom-up” approach of allowing each nation to fix its own policy and from there determining how much emissions will fall. Stern won support from India and China for voluntary pledges in Copenhagen in 2009 and last year in Cancun, Mexico.

‘International Framework’

“In the Copenhagen Accord, more than 90 countries signed up to do something domestically, so now we are working with this international framework while countries are starting to do things on the ground,” European Union Climate Commissioner Connie Hedegaard said in an interview yesterday in Durban after the negotiations ended. “It’s moving, too slow, but it’s moving.”

Stavins from Harvard said the vague legal language coming from Durban helps validate the “wisdom of giving more attention to bottom-up, decentralized approaches.”

Guidance for Companies

For companies looking for guidance on how regulations will shape energy demand, the Durban framework may provide less certainty because it leaves the policy decisions to individual nations, and there’s nothing to drive policy immediately. Envoys at the talks agreed to develop a process leading to a treaty in 2015 that would come into force starting in 2020.

Renewable-energy investment rose to a record $243 billion last year as solar and wind energy subsidies increased orders at such companies as LDK Solar Co. and Vestas Wind Systems A/S., though both companies have said increasing competition will shrink margins in the coming months.

“We want a legally-binding agreement that sets long-term targets,” Jeff Moe, director of global policy at Ingersoll-Rand Plc (IR), which sells heating and ventilation equipment, said in an interview in Durban. “We want to see an enabling policy that goes global.”

By signaling their willingness to take on emissions cuts later, China and India won backing to extend Kyoto’s curbs past 2012. That supports the Clean Development Mechanism, a pillar of the global carbon market established by the treaty. Prices of CDM certificates have fallen 54 percent in the past year as the weaker economy cut demand for the offsets and concern mounted about the continuation of the program.

‘Viagra Shot’

The Durban deal “is like a Viagra shot for the flailing carbon markets” and may boost prices today, said Abyd Karmali, head of carbon markets at Bank of America in London.

Still, the Durban agreement is a fragile compromise that almost came apart just as ministers were adopting it. Just after 1 a.m. yesterday, India fought to include language calling for a “legal outcome,” a phrase rejected by the EU as too soft.

A couple hours later, with help from Brazil and the U.S., the EU and India agreed on compromise language that says “agreed outcome with legal force.” The government in Delhi has indicated it’s more comfortable with the voluntary framework than a legally-binding requirement.

“We aren’t talking about lifestyle sustainability that many of the children of more fortunate countries than ours have, we are talking about livelihood sustainability,” India’s Environment Minister Jayanthi Natarajan said in a speech to at the meeting in Durban, winning thunderous applause. “How do a give a blank check and give a legally binding agreement to sign away the rights of 1.2 billion people and many other people in the developing world? Is that equity?”

China Stance

China spoke in Durban about taking on mandatory targets only after 2020 and only if certain conditions are met. It has been more willing to take on voluntary measures and supported both the Cancun and Copenhagen accords.

“This is a new arrangement, and we all support the serious decisions made at this conference which demonstrated that a multinational mechanism is functioning to address climate change,” Chinese envoy Xie Zhenhua told reporters yesterday after the talks finished.

Among people involved in the talks, there’s a concern that neither Durban nor the Kyoto rules seem to be having much effect on global warming, said Elliot Diringer of the Center for Climate and Energy Solutions in Arlington, Virginia.

“We all believed 15 years ago that binding commitments were the answer,” he said. “They are an important piece of the answer, but it’s going to take time to get there. We keep waiting for the magic moment. There are no magic moments.”

To contact the reporters on this story: Kim Chipman in Durban, South Africa at kchipman@bloomberg.net; Alex Morales in Durban, South Africa at amorales2@bloomberg.net

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

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