Archives For COP18

SustainabilityBy Gordon Hewitt, sustainability advisor, ACCA

The COP18 climate negotiations came to a close in Doha on 8 December, a day later than scheduled and following an all-night final negotiation session.

The two-week conference resulted in nations signing the Doha Climate Gateway. This outcome document makes modest progress in addressing the risks associated with climate change, with the main points including a continuation of the Kyoto Protocol, reiteration of commitments on long-term climate finance and the inclusion of ‘loss and damage’ in a conference outcome document for the first time. The conference also saw progress on the Durban Platform (ADP) towards an agreement covering all countries by 2015.

The Kyoto Protocol, which is currently the only binding agreement under which developed countries have committed to cut their greenhouse gas emissions, has been extended for a period of eight years from 1 January 2013. Whilst the continuation does maintain some degree of forward momentum, it will not result in a major reduction in emissions, as many developed countries have not signed up to the second commitment period. Countries that have signed up include the EU, Norway and Australia; whilst those who have not include the US, Japan, Canada and Russia.

As the Protocol only covers around 15 per cent of emissions, forging an agreement that encompasses a much greater proportion of emissions will be a key focus of future negotiations. A critical challenge will be the distinction between developed and developing countries, as the world has changed enormously since the UNFCCC was negotiated in 1992, yet the classification of countries has remained the same.

Developed countries have reiterated their commitment to scale up climate finance, mobilising US$100bn per year by 2020, but practical commitments were scarce and few nations made any pledges that cover the period between 2013–2020. A number of European countries, including the UK, Germany, France and Denmark announced concrete finance pledges for the period up to 2015, totalling approximately US$6bn. The lack of further finance commitments was seen as a major disappointment from developing countries.

Much of the negotiation focused on the inclusion of ‘loss and damage’ proposals within the outcome document. This term refers to the dispersion of funds to vulnerable communities for the loss and damage caused by climate change. A particular opponent of this term was the US, who did not want any language connoting legal liability to be included in the text, as this could result in unlimited amounts of litigation. Whilst no international mechanism on loss and damage was set up in Doha, the possibility of setting one up in the future has been included in the agreement, a point that will undoubtedly be a major focus of COP19 in Poland next year.

A common criticism of UNFCCC negotiations has been the decision making process, which relies upon consensus between all parties. This has allowed nations to veto and block policies that are against national interest and resulted in many stalled negotiations and missed opportunities over the years. In order to address this issue, Mexico and Papua New Guinea have proposed to introduce majority voting to the COP process. This was not discussed officially in Doha, but will likely be included on the agenda of COP19.

Whilst some progress was made at COP18, it is widely regarded that the commitments made by governments to date are failing to address the risks posed by climate change and if emission levels are not curtailed soon, we will experience a level of warming that will have widespread negative consequences. The next two years leading up to 2015 are critical if governments are going to reach an agreement that will limit warming to 2C – the commonly agreed limit to avoid dangerous climate change.

Sustainability

By Gordon Hewitt, sustainability advisor, ACCA

UN climate talks opened in Doha this week, marking the 18th Conference of the parties (COP18) to the UN Framework Convention on Climate Change (UNFCCC). The Convention came into force in 1994 with the ultimate objective of ‘stabilising greenhouse gas (GHG) concentrations at a level that will prevent dangerous human interference with the climate system.’ Since 1995, parties to the Convention have met annually to assess progress in dealing with climate change. The meetings have made limited progress over the years and have been fraught with challenges. The most significant challenges are arguably the dynamic between developed and developing counties, and how climate change can be addressed is a manner that is equitable. This is an important point, considering that much of the CO2 that is causing global warming was emitted by developed countries over the past 150 years and that the impacts of climate change are hitting developing countries hardest. Other major challenges include getting governments to turn the reduction targets set at climate negotiations into concrete actions and streamline the fragmented approach to this global issue by national governments.

Progress towards a legally binding agreement on GHG emissions has been slow, but made a step in the right direction last year in South Africa. COP17 ended with 195 countries pledging to negotiate a new international climate treaty by 2015, known as the ‘Durban Platform’. Whilst this does put governments on track to reach a legally binding deal, some argue that the timeframe is too long and that much more urgency is needed if we are going to limit global warming to 2oC (the commonly regarded limit to avoid dangerous climate change).

This point has been demonstrated well by a recent report by the accountancy firm, Pricewaterhouse Coopers, which concluded that current governments’ ambitions to limit warming to 2oC appear highly unrealistic. The 2012 Low Carbon Economy Index has demonstrated that global carbon intensity (the average emission rate per unit of output) decreased between 2000 and 2011 by around 0.8% per year. Such a level of reduction has meant that governments need to cut carbon intensity by 5.1% every year, from now until 2050 to avoid dangerous climate change – a rate that seems unattainable considering the lack of commitment made by governments to date. The current rate of emissions cuts has put the world on track for an estimated 6oC of warming, a level that would have unthinkable implications for humanity.

The slow progress demonstrated by governments is also reflected by the corporate sector. In 2012, 81% of corporations from the Global 500 responded to the Carbon Disclosure Project (CDP) questionnaire. Their responses have provided a valuable insight into how companies are addressing the risks and opportunities associated with climate change. It is clear that some companies are aware of the need to act on climate change, but only a few leading companies are setting the necessary targets and required to ensure long term resilience against the negative impacts of climate change.

Accountants and finance professionals are very important stakeholders when looking to increase corporate action on climate change. This is due to their role within corporate risk assessment, as well as within corporate reporting. There is evidence that CFOs are becoming more aware of the need for greater action on the part of corporates. The accountancy firm, Deloitte Touche Tohmatsu, surveyed 250 CFOs of large companies (firms with annual revenues of at least $1 billion), and found that 49% saw a significant link between sustainability performance and financial performance. The greatest risks highlighted by the CFOs surveys related to energy prices, commodity prices and carbon regulations, so it is clear that climate related issues are rising up the corporate agenda. Accountants and finance professionals need to ensure that the risks posed by climate change are addressed with concrete actions.

As the effects of climate change are becoming ever more apparent, such as the increased incidence of extreme weather events, both governments and corporates need to switch on to the urgent need for action. In October this year, Hurricane Sandy swept up through the Caribbean, causing devastation across a number of island nations, before heading west into the US and Canada. The storm resulted in an estimated $71 billion worth of damage. Images of scores of people left homeless in Haiti – as well as flooded subway stations and blackouts across Lower Manhattan – show how vulnerable both rich and poor nations are to the effects of such massive storms, and provide a glimpse of the future if action is not taken soon.