Carbon-Reduction Strategies Likely To Create Friction In Copenhagen

The Carbon Challenge: A CNBC Special Report
The Carbon Challenge: A CNBC Special Report

One of the biggest obstacles to achieving a global climate change agreement is a fundamental difference between how developed and developing economies would set carbon-emission goals.

The big developed economies prefer absolute emissions targets while emerging markets want “carbon intensity” cuts based on the rate of a country’s GDP growth.

“Hard caps establish a known quantity for carbon emissions so can be matched against a global warming target for greenhouse gases,” says Mark Fulton, managing director at Deutsche Bank’s Climate Change Advisory group. “And they allow for cap-and-trade systems to be developed.”

Intensity cuts allow developing nations to pull their citizens out of poverty first while tackling carbon emissions as they go.

Going into the conference, the battle lines had already been drawn.

The U.S. announced it would seek an absolute reduction – a “hard cap”--in carbon emissions of 17% of 2005-emissions levels by 2020 and 83% by 2050.

China then outlined carbon-intensity cuts of 40-45% in 2005 levels by 2020 and 80% by 2050, as a per-unit-of-GDP. (India soon followed, announcing intensity cuts of 20-25% of 2005-emissions levels by 2020.)

Though the difference in approach seems clear, the impact on overall emissions amounts is not.

For one, China and the US may be the top two emitters of greenhouse gases in the world, but they emit them very differently.

The U.S. economy generates about 0.54 metric tonnes of carbon emissions per $1000 of GDP; China produces 2.85 metric tonnes of carbon for the same amount of economic output.

Fulton points out “in countries where land-use changes drive emissions, such as deforestation, intensity caps do not make a lot of sense.”

Another complicating is that emissions are not local, per se,

Carbon emissions are industry-specific but many of the largest corporations are multinational, such that a company with headquarters in one country is emitting emissions at plants in other countries.

Such circumstances don’t often allow for apples-to-apples comparisons in carbon footprints, regardless of the countries involved.

If such technical complications weren’t enough, there area also powerful domestic political considerations, such as job preservation.

Some say, a double standard is a non-starter for big developed economies.

“Hard caps for the developed world and intensity for the developing world would be a dog's breakfast at best,” Jon Naimon, managing director of Light Green Advisors, a Seattle-based asset management firm specializing in environmental sustainability investing. “It will drive heavy industry and manufacturing jobs out of the developed world for good.”

If that is indeed the case, then compromise may be necessary.

One proposal calls for the creation of intensity goals that allow sector-by-sector measurement across national boundaries, with some kind of national or international oversight for these sector goals.

National governments could also create incentive policies to achieve absolute reductions around industry-specific intensity improvements—just as long as those incentives line up globally.

“Intensity targets can be superseded by hard caps when a country reaches a certain threshold of wealth, most likely measured as GDP per capita,” says Fulton.

Any compromise between hard caps and intensity goals reached in Copenhagen will eventually need to be adopted by the various national government; as of now, the need to take action here at home - for the climate and for jobs - seems to once again be gathering momentum.

"We have a lot of exciting technologies and companies that can fill the gaps,” says Jon Sohn, a climate change expert with DC office of law firm McKenna Long & Aldridge LLP. "We can be ahead of the curve and see this coming or dig in our heels."