Goodbye Copenhagen, Hello Mexico City

COP15 (the United Nations climate talks) in Copenhagen came to a close on December 18 after a tumultuous two weeks in which emotions and expectations rose and fell on a daily basis. In the end, COP15 produced a relatively weak political agreement that committed to keep global warming at 2°C or less and promised $30 billion in funding to battle climate change by 2012. It also created a framework for international transparency on climate actions for both developed and developing nations. The deal allows each country to attach their national actions and mechanisms for combating climate change and to then provide information on those actions. The accord is not legally binding.

While COP15 probably fell short of expectations, some of the high-minded agenda items, such as a proposal to create an international body for monitoring national commitments having the power to penalize those not meeting their targets, were always going to prove a tricky issue. As was the idea of essentially making developed countries pay ”reparations” to the developing world for their CO2 emissions to date. In reality, the deal still has to be ratified by the broader United Nations (UN) and that may not prove easy either.

So Exactly What Was Achieved and What Might it Mean?

As an observer, it seems to me that COP15 will be seen as the tipping point for this issue. The active involvement of the United States, including the central role of President Obama in reaching a deal, suggests that this U.S. administration is taking the issue seriously. Secondarily, there does seem to be a consensus among many nations to do something. The question remains, “How much and exactly what!?” COP15 essentially laid some of the basic groundwork to be followed through on during 2010 and perhaps be consolidated at the next COP meeting in Mexico City late next year.

What all of this means is actually still unclear at any level of specificity, but with the actions of the U.S. Environmental Protection Agency claiming they have the right to regulate greenhouse gas (GHG) emissions, and the apparent willingness of the Obama Administration to take a more active role, we do appear to be moving towards the possibility of regulatory certainty that will enable and require U.S. companies to act on CO2. We would anticipate that U.S. companies will need to take the CO2 issue more seriously and both monitor political and regulatory activity closely while preparing for those regulations by at least inventorying their CO2 emissions and sources.

The Other Side of COP15

The United States may also be seeking a more active role because there is a window of opportunity for the United States to provide leadership in new technologies, new industries, new jobs and wealth which otherwise may go elsewhere if the United States takes a back seat on this issue. Living outside of the United States, it is transparently obvious that this (renewable energy, energy efficiency, cap and trade market development etc.) is a major focus for investment and opportunity. The United States is in danger of being left behind—if not in substance then certainly in terms of perception. Despite that, sitting on this side of the pond it seems natural to me that the United States ought to lead such efforts and that the many of the new technologies and ideas required ought to originate there. In short, this isn't simply an environmental issue which you either agree with or not (often emotively). It is also about jobs, technology leadership and wealth creation.

Summary

I enjoyed covering COP15. While I personally am skeptical about CO2 being responsible for climate change, it has helped me to see the tremendous potential of a new paradigm in which our reliance on fossil fuels could finally be broken. As an analyst on the commodities side, I know we are already at the point of tight supply across most commodities and raw materials. We are rapidly approaching a time when access to reasonably priced raw materials will be of even greater strategic importance. COP15 was a success as it has, I think, truly began the process of focusing global attention on, not just energy efficiency, but on shifting the paradigm altogether.