Global Economics

Developing Countries: 'No Money, No Deal'


Negotiators in Copenhagen from emerging markets argue they need need billions of dollars in assistance to cut climate-change emissions

By Jeremy van Loon and Kim Chipman

(Bloomberg) — Four days before 110 world leaders fly to Copenhagen to complete a deal to curb global warming, negotiators are far apart on aid to poorer countries and how to verify nations fulfill their pledges to reduce greenhouse gases.

Envoys from 192 countries discussing a climate-protection accord in the Danish capital released a draft on Dec. 11 that shows they can't agree on how to police an agreement. The document contains no subsidies to help developing nations cut carbon-dioxide emissions and adapt to climate change.

"No money, no deal," Selwin Hart, a Barbadian envoy who speaks on finance issues for 43 island and low-lying states, said in an interview. "Financing will be critical."

United Nations climate chief Yvo de Boer said developing nations need at least $100 billion a year. As obstacles built up during the first week of the talks, senior U.S. negotiator Todd Stern flew to the Danish capital earlier than planned as did his Chinese counterpart, Xie Zhenhua. Their bosses, President Barack Obama and Chinese Premier Wen Jiabao, will arrive with other world leaders before the talks end Dec. 18.

"This is probably the most intense and high-level negotiating session we've ever had on the climate issue, and I've been to all of them since the Rio Earth Summit in 1992," Alden Meyer, director of policy at the U.S.-based Union of Concerned Scientists, said in an interview.

Delegates have argued over devising a new treaty for almost two years. They've met in cities from Bonn to Bangkok to discuss how to reduce the amount of carbon dioxide that gets pumped into the atmosphere. Greenhouse gases trap heat that otherwise would radiate back toward space, raising global temperatures, disrupting weather patterns and increasing sea levels.

'Catastrophic' Climate Change

Developing countries including China and India will need as much as 100 billion euros ($145 billion) a year in climate aid from 2010 to 2020, New York-based McKinsey & Co. said in a September report. That's to help avoid "catastrophic" climate change, McKinsey said.

McKinsey estimates annual gas discharges must be lowered by 2020 to 44 billion tons from a predicted 61 billion to keep the planet's average temperature from rising more than 2 degrees Celsius (3.6 degrees Fahrenheit) from pre-industrial times.

Any Copenhagen climate deal may be ineffective, said Bjoern Lomborg, a business professor of the Copenhagen Business school.

"My problem with this conference is that we'll promise again to cut carbon, we'll make a grand document, and then actually won't live up to it," Lomborg said in an interview.

The arrival later this week of about 110 heads of state and government, including Obama and Wen, may lead to a breakthrough, the UN's de Boer said.

Iberdrola, Vestas

"As we move closer to the moment when heads of state begin to arrive, we need to focus on the bigger picture," he said. "The serious discussion on targets and finance has yet to begin."

Mobilizing of billions of dollars in climate aid from industrialized nations to pay for clean energy in developing countries would be positive for business, Iberdrola SA Chief Executive Officer Jose Ignacio Sanchez Galan said in an interview. Bilbao, Spain-based Iberdrola is the world's biggest wind-energy generator.

"We've bet on clean energy, and anything that takes the world in the direction of clean energy is going to be positive for Iberdrola," he said.

That view is echoed by Ditlev Engel, chief executive of Vestas A/S, the largest wind-turbine maker.

'New Behavior'

"The world will benefit from $100 billion in financing if approved, not just Vestas," he said in an interview. "Energy consumption will increase dramatically in the years to come, so what we need to have here is a deal that will facilitate a lot of new behavior."

The U.S. and European Union have called for $10 billion a year for developing states from Jan. 1 through 2012. The EU promised to provide about a third of that, while Canada has no pledge and the U.S. says it will pay its "fair share."

"Ten billion is not sufficient for adaptation," said Chinese negotiator Su Wei, in an interview.

Emerging economies such as China say rich nations have a long history of reneging on pledges to aid poor countries. The U.S. and many industrialized nations say it's critical that China and developing countries agree to a treaty that includes a way to measure, report and verify promised cuts in gases.

Ronald Reagan Principle

"This is like the Ronald Reagan principle," said Fred Krupp, head of the New York-based advocacy group Environmental Defense. "When he was negotiating arms controls agreement the mantra was 'trust but verify.'"

Verifying voluntary emission cuts "would be very intrusive," India's environment minister, Jairam Ramesh, said in a briefing Dec. 11. The U.S. doesn't allow other nations to inspect its biological weapons, he said.

China also refuses to have its voluntary reductions of CO2 emission per unit of economic growth verified by international bodies, said China's Vice Foreign Minister He Yafei on Dec. 11. "It's a matter of principle," he added.

Senators including John Kerry, a Massachusetts Democrat, say the verification issue with regard to China is crucial.

It's "the single most important ingredient," he said in an interview last week.

Without comparable action from China, the U.S. Senate, the only U.S. body authorized to ratify treaties, is unlikely to approve a new accord. Senators rejected the 1997 Kyoto Protocol under the Clinton administration because it didn't require China and other developing countries to reduce emissions.

China and developing nations are demanding that only rich countries have legally binding targets, while some industrialized nations are calling for enforceable reductions for poor countries.

"The key and prerequisite for a successful conference is that developed countries live up to responsibilities on financing and emissions targets," China's he said.

Countries' pledges so far will reduce annual emissions to about 49 billion tons in 2020, above the 40 billion tons maximum needed to achieve the 2-degree temperature target, PriceWaterhouseCoopers said in a report yesterday.

To contact the reporters on this story: Jeremy van Loon in Copenhagen via jvanloon@bloomberg.net; Kim Chipman in Copenhagen at KChipman@bloomberg.net; Alex Morales in Copenhagen via amorales2@bloomberg.net.


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