What “Copenhagen” means?
An energy revolution

The message from Copenhagen for the energy industry is that mitigation of climate change is an imperative and an opportunity that can no longer be ignored. There may not yet be binding targets, but climate change policy will drive what some have described as a ‘technology revolution’ and others as ‘a new industrial revolution’. As US Representative Ed markey said, ‘we will be competing as nations to be the leaders in this renewable and efficiency revolution’.

UNFCC Secretary General Yvo de Boer speaking in Copenhagen

No one who attended the Copenhagen climate talks will ever forget the experience. Not the 30,000-plus people who turned up. Not the 3,000-plus journalists who covered it. And certainly not Yvo de Boer, the UN official responsible for overseeing the negotiations.

The agreement that emerged from this incredible global gathering fell far short of what many had hoped. As De Boer commented in his final meeting with the press: ‘We now have a “Copenhagen Accord” which contains a number of very significant elements: a maximum temperature increase goal, a commitment by industrialised countries, engagement of developing countries, significant short- and long-term financial support, and new mechanisms for technology and forestry issues.’

 But, he added, it is ‘not an accord that is legally binding. Not an accord that pins down industrialised countries to individual targets. Not an accord that specifies what major developing countries will do. Not an accord that makes it clear how the $30bn [of short-term finance] that it talks about is to be divided up amongst individual contributors.’

So it was ‘half a glass’. Should we see it as half-empty? Or half-full? What does it mean for the climate? And, more specifically,  what does it mean for the energy industry? In his daily briefings to journalists, one of de Boer’s metaphors for the negotiations was that of a cable car, inexorably on its way to the summit, but with the occasional regrettable halt. He admitted in his final briefing, on Saturday afternoon, a day after the negotiations were supposed to end, that a more appropriate metaphor would have been ‘a rollercoaster’. He also summarised, in typically concise fashion, what the result means for industry: ‘If I were a business leader and investor I would want my government to give me as much clarity, as quickly as possible, on how it intended to legislate, regulate, and maybe even tax, in order to achieve those goals and what that would mean in terms of my business environment. So I expect that there is going to be a growing eagerness on the part of business to see this accord be turned into something that’s legally clear and rigorous.’

That is undoubtedly true – and many hope that this will indeed happen in 2010. But there also emerged from Copenhagen an undercurrent that may in the end be fundamentally more significant than the negotiations themselves. Businesses never tire of clamouring for less uncertainty when it comes to legislation and regulation. But the lesson of history is also that entrepreneurs tend not to wait for certainty. What they look for is the emerging trend, the movement of the tide.

What is clear from the incredible global gathering of world leaders that Copenhagen became, is that global warming is at the top of the political agenda – worldwide – in a way that could not be stated before. As world leader after world leader took turns to address the plenary hall, the real audience they were addressing consisted not of those attending the Copenhagen talks but of their people back home. At times this became the bizarre spectacle of the leader of a country addressing an audience of just a handful of people – and the all-important TV cameras – well after midnight. None of the leader speeches that I heard was a denial of the reality of global warming. So this was the biggest wake-up call in history. And that, whatever your views about the reality of global warming, is the movement of the tide.

The message from Copenhagen for businesses, at least for those who have not already heard it, is that mitigation of climate change is not only an imperative but also an opportunity that can no longer be ignored. The target of keeping global warming to within 2°C of pre-industrial levels may not yet be binding, but it will drive – or rather, continue to drive – what some have described as a ‘technology revolution’ and others as ‘a new industrial revolution’.

Moreover, it is increasingly clear that policy in many regions is racing ahead of what the international agreements envisage. As the governor of California, Arnold Schwarzenegger, said last week in Copenhagen, sub-national governments have begun taking matters into their own hands, and blazing a trail that national governments can follow.

EC President José Manuel Barroso at a press conference in Copenhagen

On a larger scale, the European Union has already taken a leading position. José Manuel Barroso, the European Commission president, reminded journalists late on Friday night that the EU is the only region or country to have already passed the legislation needed for the target it will be submitting to the list of emission reduction targets that will form part of the Copenhagen Accord. That legislation underpins a carbon market already worth some €100 billion, and growing rapidly.

Arguably more significant is what is happening in the US. In Copenhagen, Senator John Kerry, joint author of the Boxer-Kerry cap-and trade bill, insisted that next year would see the passing of legislation that would put the US on a path towards reducing carbon dioxide emissions.

‘I will tell you right now – here, 100% – we’re going to pass major energy climate legislation that will have an impact on the reduction of emissions’, said Kerry. ‘I can’t tell you the method, or the means, or the amount by which we might price carbon. We haven’t resolved that issue yet. Some people want a carbon tax, some people believe in a trading mechanism, some people believe in just arbitrarily setting a reduction target and let the economy work its way through it. There are several different proposals floating around. But I can tell you that we’re going to pass something and put America on the path to [new] jobs and a safer trajectory. Significant numbers of major businesses in America have come to the conclusion that the only way to reduce emissions and meet the goals that the science tells us we must meet is to price carbon.’

Asked to comment on pessimistic comments by other senators and Senate staffers, who believe climate legislation is unlikely to be passed next year, partly because of the pressure of other priorities, Kerry was unequivocal: If they’re the same people who still doubt the science I don’t put a lot of credibility in their predictions. The fact is that we are building a bipartisan consensus in the United States Senate. Senator Lindsey Graham from South Carolina has joined. Joe Lieberman, an independent democrat, has joined this effort. We’re talking with other Republicans and we’re talking with Democrats. When you say “what do I know that they [the doubters] don’t know?”, I would answer that with a question: What does Jeff Immelt, the chairman and CEO of GE know that they don’t know? What does Jim Rogers, the CEO of Duke Energy, and the leader of America’s Competitiveness Council know that they don’t know? What does Lew Hay, the head of Florida Power & Light, know, or Chad Holliday, the head of DuPont Corporation? All of these Fortune 500 companies, what do they know that these naysayers don’t know?’

As for Europe, major electricity generation companies are already taking into account carbon prices when making investment decisions, as EER reported last Friday – not because legislation requires them to but because they can see the movement of the tide.

In Copenhagen the message was perhaps best put by Ed Markey, co-author of the Waxman-Markey cap-and-trade bill passed by the US House of Representatives in June: ‘We believe that 2ºC is the proper goal for this moment in history. However, we also believe that we are about to unleash the greatest technological revolution that has ever been seen. And we will not only be co-operating but we will be competing as nations to be the leaders in this renewable and efficiency revolution.’