The Cancún Climate Agreement: Pragmatism Wins the Day – Now, Some Political Will is Needed

This year’s annual UN climate conference concluded in Cancún, Mexico, in the early hours of Saturday. It has not been a game changer in getting the ambitious action the world must take to limit the risks of climate change. Yet, it has made welcome headway in solidifying and fleshing out some of the ideas negotiated last year in Copenhagen, carved out smart pragmatic progress on transparency and institutions, and revitalized a moribund negotiation process.Going forward, the international community must (i) develop the beginnings for new institutions laid in Cancún – most of all a new Green Climate Fund and a forest financing mechanism – in a sensible manner that stresses results, not ideology; (ii) embrace the notion that to the first approximation, adaptation is synonymous with development; and it must (iii) end the tussle over what legal form action pledges by developed and developing countries take – a conflict that continues to stand in the way of increased market funding for emission reduction action, and holds hostage the only existing conduit, the Kyoto Protocol’s Clean Development Mechanism.The following summarizes points of progress and stalemate on the most important issue areas. (Numbers in parentheses refer to paragraphs in the main outcome document, unless another link is provided.)Goals: The Agreement merely “takes note” of emissions targets set by developing (49) and developed (36) countries alike, and does not enshrine them in any more meaningful fashion. It punts on the issue of whether or not to extend the Kyoto Protocol, and leaves the decision for next year (1). On the need to take more ambitious action, the language remains merely hortatory (4), but the Agreement still imagines that it will be possible to scientifically review the two degree target in five years’ time, with a view to considering whether a 1.5 degree target might not be more appropriate (6). To my mind, this is no longer a useful fiction: current pledges appear barely apt to limit warming to 3 degrees, and the IEA’s 2010 World Energy Outlook just recently warned in stark terms that without urgent action, even a 2 degree target is fast slipping from the realm of the feasible. The international community would do better to acknowledge this, and translate its concerns instead into increased urgency in pursuing real action.Funding: Since Copenhagen, developed countries appear to have more or less honored their promises of short-term funding. For the long-run, lack of agreement on a carbon market beyond the CDM remains the key obstacle: developed countries have pledged to raise up to $100bn per year by 2020, but this is conceived of as coming from carbon markets, in addition to public funds. In the absence of progress on markets, the Agreement’s language remains conspicuously vague on funding for adaptation, technology transfer, and notably forests (76-77). The Agreement calls for consideration of market mechanisms at the next climate conference (80). Progress is indeed needed, but will require that the international community work out its disagreements on the legal form of action pledges, with the attendant need of compromise, chiefly on the part of the United States and the BRICS countries.Adaptation: The Agreement calls for “a process to enable least-developed country Parties to formulate and implement national action plans,” (15) and sets up an Adaptation Committee. Both provision are to be operationalized at next year’s meeting. The text is conspicuously poor in concrete ideas on what adaptation could look like: climate insurance is the only real item in a list of ideas. (28) This speaks loudly and clearly to the need to act upon the insight that human development is by far the most obvious component of adaptation in developing countries, as David Wheeler and colleagues have powerfully argued.Forests: Countries have at last resolved to codify some of the careful thought that has gone into how to structure forest protection in developing countries. The biggest remaining question is how to transition from the current substantial voluntary start-up funding to more sustainable sources of funds. The Agreement sets out a process for developing countries to develop strategies, forest baselines, monitoring systems, and safeguards for property rights, including of indigenous peoples (71-73). Commendably, it foresees a phased transition from planning through demonstration of forest projects to full results-based activities that could be taken to the carbon market. This is a huge win for pragmatism. Interestingly, a side decision sets out extremely detailed procedures for setting forest baselines and MRV of action in developed countries. (Annex II) This could act as a benchmark for the process in developing countries in due course.Institutions: The international community continues to strike an uneasy balance between pragmatism and a craving for greater representation of developing countries. The Agreement formally establishes the Green Climate Fund foreseen in the Copenhagen Accord as “an operating entity of the financial mechanism of the Convention,” like the GEF and the Adaptation Fund (102). Developing and developed countries will have parity in Board seats, as is the case for the Climate Investment Fund. The Green Fund will “be supported by an independent secretariat” (106), and while it designates the World Bank as the trustee, it appears to limit its functions quite narrowly to financial management (104-107). What is undecided is the core question of will actually run the Green Fund (Annex III: 1c-e). Is it the future secretariat? Or the World Bank, after all? Or both, in a division of labor? – Recommendations on this to next year’s climate conference will come from a Transitional Committee with developing-country majority (109). There is little doubt that the work of this committee is a make or break issue for whether or not the Green Fund becomes a significant driver of clean investment. Unlikely though it will be to feel sympathy for the World Bank, the Committee will have to contend with the fact that, in the public sector, the Bank has been by far the most consistently innovative and effective in pushing clean investment.While the fate of the Green Fund remains to be determined, it is hard to see what to make of the creation of two new UN committees on adaptation and technology transfer, along with a Climate Technology Centre. Lending stronger support to developing countries is defining adaptation programs or boosting adoption of clean technology is a worthy goal. But the language smacks of bureaucratese, action plans are soft in the extreme, and funding sources even more so. I hope for the success of the technology Centre – I daydream of it being staffed by the best minds from IIT or the National University of Singapore – but I am not holding my breath.Transparency: More can be done, but there has been significant progress on transparency. Gratifyingly, the Agreement does away with the shell game countries have sought to play in defining their pledges relative to different base years and in conjunction with opaque assumptions on the use of offsets (38f). Already stringent reporting rules for developed countries were bolstered with the requirement to report annually on emissions levels and funding provided to developing countries (40), along with full international review (44). The language on monitoring and verification (MRV) of emissions levels and actions taken by developing countries goes through some contortions that smack of hard-fought compromise on this controversial issue. Yet, in a nutshell, developing countries – as able – are now expected to report on their emissions levels and actions taken every two years (rather than at their own discretion, as was the case so far) (60). Self-financed emissions reduction actions are subject to domestic MRV, while in a significant win for transparency, actions taken with international support are subject to “both” domestic and international MRV (61-62). Emissions estimates, along with emission reductions and the methods used in calculating the latter, are subject to a non-intrusive international technical “consultation and analysis” process (63-64). The UNFCCC will set up a registry for developing country actions that has a mandate of trying to facilitate funding. Reporting is voluntary, but UNFCCC has a mandate for outreach to collect information (50-51).Clean Development Mechanism: The CDM pushed further on with smart reforms that will be a boon in running a larger effective market mechanism, once the world is ready to move forward on this. Among other decisions, the CDM is moving to allow city-wide emissions reduction programs (4a), and set simple baselines for grid power projects (41). Carbon capture and storage is now eligible for CDM credit, a welcome acknowledgement that given the unabated pace of coal power expansion, this technology will have to be part of any effective emission reduction portfolio.