December 12, 2011
What Happened at COP17?
by Robert Kropp
Negotiators leave Durban without a plan to stop climate change but with an agreement to pursue a
binding pact, and investors look for signs that support increased investment in climate change
mitigation and adaptation.
Twenty years after most world governments agreed to the Kyoto Protocol (the United States being a
notorious exception), the COP17
climate change conference in Durban, South Africa, concluded with yet another failure of
negotiators to come up with a binding treaty that would limit temperature increases to no more than
According to the Climate Action Tracker, a science-based assessment of emission commitments and actions
of countries, "Global-mean warming would reach about 3.5°C by 2100 with the reduction proposals
currently on the table."
Potential global-scale tipping points associated with warming
beyond 3°C, the assessment continues, include:
• the possible dieback of the Amazon
• corals reefs dissolving and being irreversibly replaced by algae and sea grass
• irreversible long-term loss of the Greenland ice sheets
• risk of release of methane
hydrates in ocean floor sediments, and
• permafrost thawing due to fast rising arctic
A sobering indicator of the challenge ahead can be found in a recently
from the Global Carbon Project
(GCP), which found that global emissions increased by 5.9% in 2010. Atmospheric concentration
of CO2 is now 39% higher than it was at the start of the Industrial Revolution, and is the highest
during at least the last 800,000 years.
And according to a recent analysis by the International Energy Agency (IEA), a
business-as-usual scenario could lead to global temperature increases of 6°C, which when it last
occurred 250 million years ago led to the extinction of 95% of the planet's species.
"Delaying action is a false economy," the IEA warns. "For every $1 of investment avoided in the
power sector before 2020 an additional $4.3 would need to be spent after 2020 to compensate for the
Expectations for a binding agreement were low for a number of
reasons, perhaps in particular due to the insistence of US negotiators that fast-growing economies
such as those of China and India agree to caps on their emissions identical to those of developed
economies. Despite surpassing the US as the world's largest emitter of greenhouse gases (GHGs)
three years ago, China is still considered a developing nation and has been exempted from such
limits under previous agreements.
However, the conference concluded with several positive
developments, although enacting them still leaves the world at risk of unacceptably large increases
in global temperatures. The Ad Hoc Working Group on the Durban
Platform for Enhanced Action was formed to develop a binding agreement that will "come into
effect and be implemented from 2020."
Developed nations also agreed to mobilize $100
billion per year by 2020 for climate adaptation and mitigation through the Green Climate Fund, which "will
promote the paradigm shift towards low-emission and climate-resilient development pathways by
providing support to developing countries to limit or reduce their greenhouse gas emissions and to
adapt to the impacts of climate change."
Of particular note to sustainable investors is
the Fund's emphasis on attracting large amounts of private capital. As Paul Clements-Hunt, Head of
the United Nations Environment Program Finance
Initiative (UNEP FI), told SocialFunds.com last year, "85% of financing for climate change
mitigation will come from private investment."
Investors have not been standing idly by
while waiting for world leaders to accept their responsibility for coming up with a binding climate
agreement. As Bloomberg New Energy
Finance reported last week, cumulative investment in clean energy technologies have now
surpassed $1 trillion since 2004.
"Annual clean energy investment has risen nearly
five-fold, from $52 billion in 2004 to $243 billion last year, a compound annual growth rate of
29%," Bloomberg New Energy Finance said.
But investors have also long insisted that
domestic and international climate change policies are critical to ramping up the level of private
investment needed to avert the disastrous effects of unchecked climate change. In a statement released in October, a
coalition of 285 global institutional investors representing more than $20 trillion in assets under
management called on policymakers to take meaningful steps in addressing climate change.
Current levels of investment in low-carbon technologies fall far short of what is needed," the
investors stated. "Private investment will only flow at the scale and pace necessary if it is
supported by clear, credible and long-term policy frameworks that incentivize investments in
low-carbon technologies rather than continuing to favor carbon-intensive energy sources."
In addition to reaching agreement on the Green Fund, negotiators in Durban also agreed to
further talks on Reduced Emissions from Deforestation and Degradation (REDD), which would allow
investors to purchase offset credits to finance reforestation projects in developing countries.
However, few details emerged from the conference, and the emergence of a REDD market is not
expected to occur earlier than 2020.
Deforestation is estimated to cause 20% of the
world's GHG emissions.