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Climate Change pact reached in Durban

A Climate Change “pact” was agreed upon by over 190 countries, in the last minutes of the talks at Durban. The pact will be somewhat legally binding, which is a first for China, India and the US, although actual targets are yet to be agreed upon. Other decisions from the talks include an extension of the Kyoto Protocol, a potential Green Fund to start in 2012 and plans to set targets by 2015.

UN Secretary-General Ban Ki-moon, President of South Africa Jacob Zuma,
President of the Conference Maite Nkoana-Mashabane
and UNFCC Deputy Executive Secretary Richard Kinley. Picture via Flickr.

The pact and extension of Kyoto

After a tense discussion over wording, an agreement was made on Sunday December 11th, including over 190 countries to be formalised in 2015 and come into action in 2020. This has been seen as a success by many, including Chris Huhne, as India, China and the US had made it known that they wouldn’t sign an agreement unless other large emitters did also, so it was impressive that they have all agreed to this. As targets have not yet been set, there is also potential for them to be quite strict, something that the EU and the Association of Small Island States (AOSIS) have been pushing for.

The extension of the Kyoto Protocol, which was previously set to end in 2012, means that some countries will still have legal obligations up to 2017. This includes the UK and over 30 other industrialised nations, but countries such as the US, who never signed the Kyoto Protocol, are not included, and others such as Japan and Russia who originally signed, have declined to sign this extension.

Criticisms of the Climate Change Pact

The pact still has to be fully formalised, which is set to happen in 2015. This means that up to 2020, when the pact will come into force, many countries only have voluntary, not legal targets, this includes large emitters such as India, China and the US. Some, such as the Head of Climate Change at WWF-UK, claim that the agreement could leave us with 4C average global warming, which “would be catastrophic for people and the natural world.” There is also much that could change between now and 2015, the global economy, national politics, and in particular the US election could all greatly affect the mood of the talks in years to come.

Others have also been critical of the time taken over the wording of the agreement compared with the lack of time spent forming concrete targets. Alden Meyer from the Union of Concerned Scientists in particular has said “While governments avoided disaster in Durban, they by no means responded adequately to the mounting threat of climate change.”

Criticism has also come from developing countries, who argue that as their economic growth is still pulling people out of poverty, the burden of climate change mitigation should fall less heavily on them in the short run. Others warn that the pact may not be strong enough to prevent catastrophic global warming, which would disproportionately impact on poorer countries.

The Green Climate Fund

One way that countries are aiming to combat this disparity between effects of climate change on rich and poor countries is the Green Climate Fund.

Previously discussed in climate talks at Cancun in 2010, the funds official objective is to “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, taking into account the needs of those developing countries particularly vulnerable to the adverse effects of climate change.”

However, it has not yet been agreed who will contribute to this fund and how it will get to the proposed sum of $100bn annually. This is rather a big hole in the planning given that most developed countries are already running unsustainable budget deficits and are pushing through austerity measures.

Considerations for Green Investment

While a global agreement on terms similar to Kyoto has not be agreed, politicians around the world are moving slowly towards increased cooperation. It is not happening in the timescale many would like, but it is moving and the sentiment at the very least is supportive of environmental companies and carbon markets.

In the short term a possible recession, a credit squeeze and government austerity measures are likely to have a far greater impact on investments in the environmental sphere, but politicians across the globe seem to recognise the importance of industrial change for the world economy in the future.

In the longer term legally binding targets, which will outlive existing governments, are likely to bolster investment. The talks at Durban were a step towards this, but Durban is unlikely to change investor mindsets in the near term given the lack of concrete proposals to date.

Fund context:

For access to carbon markets directly, there are funds such as ETFS Carbon Securities which tracks the price of carbon permits.

There are funds that try and limit “carbon risk” such as DB S&P US Carbon Efficient and IFSL Carbon Footprint UK350 Equity Index Tracker, which track indices weighted by carbon efficiency.

Other funds have a direct link to renewable energy and energy efficiency, such as Pictet Clean Energy or others in the Clean Energy Theme. Access to these themes can also be found through Environmental funds or Multi-Thematic funds, such as Cheviot Climate Assets, Schroder Global Climate Change and Pictet Environmental Megatrend Selection.

Useful links:

Worldwise Investor: Environmental Theme

The Guardian: Durban Climate Deal - the verdict

The Guardian: Durban Climate Deal struck after tense all-night session

The Telegraph: Durban Climate Change – the agreement explained

BBC: Durban – Winners and losers

The FT: Climate Deal Boost for Carbon Markets

Huffington Post: Global Climate Talks In Durban Avert Failure, If Not Global Warming

UN: Durban Climate Change Conference

Comments (1)

  1. On Monday Canada pulled out of the Kyoto Protocol! No real surprises there though. The Canadians are on a mission to make as much money as possible from their Tar Sands which will increase Canada's CO2 emissions fast and is totally inconsistent with any pretence at a climate change, or environmental stance. With this move Canada has thrown off its cuddly image, but at least it is an honest approach. The only way the international community can make Canada live up to its international responsibility is to not buy their oil, by imposing a carbon test to the oil that is used. This might have an impact in local markets, but rather relies on the advance of technology and unity amongst the rest of the world to truly impact, which clearly is not there. It will be interesting to see how this develops. It is not a good day for the environment though.

    By Mark Hoskin on Dec 13, 2011 at 09:04 AM

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Louise Fallonall articles

Louise Fallon starting working for Worldwise Investor as an intern over the summer and has written a number of articles during that time.

Louise is studying for a degree in Mathematics and Economics BSc at London School of Economics and Political Science, and graduates next summer.

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