Green Energy

3 Reasons Why There Will Be No Carbon Deal

Time and time again business leaders say they need politicians to agree on a framework for carbon emission reductions that will allow them to invest.

Cop15 Conference in Copenhagen

But, despite the many calls, they aren't likely to get that certainty from next week's climate summit in Copenhagen, the so-called Cop15. Instead, they will get an agreement to keep talking and another round of talks that will add a lot more hot air to the atmosphere.

It is very easy to see why there will be no legally binding deal by the conference conclusion Dec 18.

First, the Cop15 process has the misfortune, like the Kyoto process in 2001, to be debated at a time when the global economy is on its knees. In 2001 the dotcom bubble had just burst. Now in 2009 we are facing even bigger problems in the wake of the credit crisis. Trying to get politicians to sign up to an expensive and ambitious plan at a time when fiscal budgets are under huge pressure already did not help the Kyoto process and will likely be a factor in probable failure in Copenhagen.

Whether a skeptic or a believer on the climate story most people feel rather detached from what is a long-term story. If you are a U.S. worker who has just been laid off and is trying to feed and house a family, reducing your carbon footprint will not be a major priority. Similarly an Indian worker living on $4 a day really has other problems that must be dealt with before being asked, via the tax system, to help fund a program that could in the short term at least hinder economic growth.

Politicians faced with millions of voters in this position will struggle to sell the idea of huge investment and spending at a time when they are already pumping billions into stimulus plans aimed at rescuing a deeply unpopular banking system.

The Carbon Challenge - A CNBC Special Report - See Complete Coverage

Second is the uncertainty surrounding the science of climate change. The majority of the scientific community believes the correlation between carbon emissions and warmer temperatures is FACT. But others have serious doubts about this conclusion. The resulting arguments between the believers and non-believers has led to a bitter row in the scientific community that has created huge amounts of uncertainty about whether climate change is really something to worry about.

As the Chairman of DuPont, Charles Holliday told CNBC’s Squawk Box taking a complicated, controversial and rather abstract subject like climate change and then convincing people to spend vast amounts of money and to change their way of life is a tough sell, whether in the U.S. or China.

DuPont Chairman on Carbon Challenge

The third point to consider is political division. The developed world is being asked to fund the developing world’s move to a lower-carbon future. China is now the world’s biggest polluter but argues that per capita it is way behind members of the G7, like America and Europe. So the developed world is being asked to not only significantly change their consumption but also being asked to fund, via billions of dollars being transferred to countries like China, India and Brazil, other countries' attempts to lower carbon levels. This does simply not sell to voters and despite lots of rhetoric there are very few major nations on earth that are ready openly discuss the implications of the deal with voters.

So for these reasons, don't expect a solid deal on carbon next week. Instead, expect an agreement to keep talking and another round of talks that will add a lot more hot air to the atmosphere.