A Must Deal

Is the World Ready for a Binding Climate Treaty?

Jacob Werksman is a trade specialist in global climate negotiations. Educated at the University of Cambridge and King’s College of London, in the United Kingdom, and University of Michigan and Columbia, in the United States, Werksman is an experienced hand on the nexus between climate change and development. Before becoming the principal advisor to the Director General for Climate Action of the European Commission (EC), Werksman served in United Nations Development Programme (UNDP), Rockefeller Foundation and World Resource Institute. In his current position, he serves as one of the high level climate policy individuals of the EC. In this interview, conducted under the partnership of Fortune and VITA, a non-profit magazine, facilitated by GETACHEW T. ALEMU, FORTUNE’S OP-ED EDITOR, and Joshua Massarenti, head of VITA’s Brussels Office, Werksman discusses the chances for a binding agreement on climate change to be reached at the coming conference in Paris and the European Union’s (EU) readiness for it.

Jacob Werksman is a trade specialist in global climate negotiations. Educated at the University of Cambridge and King’s College of London, in the United Kingdom, and University of Michigan and Columbia, in the United States, Werksman is an experienced hand on the nexus between climate change and development. Before becoming the principal advisor to the Director General for Climate Action of the European Commission (EC), Werksman served in United Nations Development Programme (UNDP), Rockefeller Foundation and World Resource Institute. In his current position, he serves as one of the high level climate policy individuals of the EC. In this interview, conducted under the partnership of Fortune and VITA, a non-profit magazine, facilitated by GETACHEW T. ALEMU, FORTUNE’S OP-ED EDITOR, and Joshua Massarenti, head of VITA’s Brussels Office, Werksman discusses the chances for a binding agreement on climate change to be reached at the coming conference in Paris and the European Union’s (EU) readiness for it.

Fortune, Vita: As you know this is a crucial time for the global climate negotiations with a binding global agreement on emissions reduction foreseen at the upcoming Paris Conference. Is the European Union (EU) ready to push the walls for a binding global emissions reduction treaty?

Answer: Absolutely. It has been a European aspiration for 20 years to have a binding global agreement on climate change, covering emissions from all major countries and having the participation of the entire international community. We fought for that in the run up to the 1992 conference in Rio de Janeiro, Brazil, which produced a binding treaty that covers all parties, but did not have specific binding commitments.

We pushed for it from 1992 to 1997, and that produced the Kyoto Protocol, which is another binding treaty; this time it had binding commitments, applying to industrialised countries only. And then they applied to a sub-set of industrialised countries – those countries that chose to sign the Kyoto Protocol. Importantly, that did not include the United States in 1997. Increasingly important, it also did not include China, India or Brazil.

This next big push is one that we hope will capture all of the major emitters with binding commitments to reduce their emissions. It will, we hope, involve the international community, including Ethiopia, which will benefit from the cuts that other countries make, and will also make its contribution in reducing its own emissions. It will also receive support from the international community in emissions reduction and tackling the impacts of climate change.

In every way, now, it seems that the time is right. We hope that the politics is aligning in a way it has never aligned before.

Q: Under the new world order, it seems that developing countries, especially BRICS countries, are captured between priorities of development and poverty reduction, on the one hand, and emissions reduction, on the other. Where are we in the negotiation with BRICS countries?

It is more the basic group (BICS) within BRICS, when it comes to climate change, because the Russian Federation does not really align with the others, politically. Climate change has much more of a North and South split to it.

When it comes to the basic group, they have tried to retain a relatively united front, at a high level of generality. They all recognise that climate change is a global problem, and that they all have growing emissions. They also recognise that they all have to make significant contributions post-2020 to reduce emissions. However, when you begin to look beneath that level of generality, you see obviously some significant differences across the size and the shape of their economies, their dependency on fossil fuels and the extent to which they produce fossil fuels themselves. So understandably, they have very different aspirations.

China, for instance, has many motivations for beginning to cut its use of fossil fuels. It has been growing very rapidly, in a very dirty way, and this is affecting the lives of particularly its urban population, in a very real way. Hence, the People’s Party and the government are all motivated to begin to cut greenhouse gas emissions because of local air pollution problems. They are also concerned about their increasing reliance on imports of fossil fuels. Thus, their plan is for China to grow greener and cleaner. This has made China quite ambitious in its call for an international treaty, but also in its contribution to support that treaty.

Whereas Brazil, India and South Africa are in different situations, the fact is that this agreement needs to include all of them in order to be active. They are the growing source of emissions in the future. And at the higher level of generality, they are all supportive of a binding agreement.

Q: Does that mean China is leading?

It has been exercising a lot of leadership, together with the US and with the EU. It has been vocal in the most positive way.

Q: Africa stands at the lower rung of the global pollution contribution pyramid. Unfortunately, it is one of the most affected countries. Experts often say that the world is not doing enough to take Africa’s concerns, both environmental and political, in to account. What is your opinion?

Actually, I think Africa is a very powerful negotiating bloc. They represent over 50 countries in the negotiations. Among them are major economies already, such as South Africa, Nigeria, and others are emerging rapidly. They actually have quite a united voice too. They have got the Africa group, which is a negotiating bloc, and they also have the Least Developed Countries (LDCs), the majority of which are African. They are currently being led by Angola. Hence, they have a number of different ways in which they can express the different perspectives of Africa into all sorts of negotiations.

They are not currently a significant source of emissions, either from fossil fuels or from cutting forests, because the major forests in Africa are still largely intact. They are a potential growth source of emissions, but they are not current concern in terms of emissions. Therefore, what they are advocating mostly is on the mitigation side of the equation and on growing green, which the international donor community is more interested in helping.

We see an increasing amount of “public climate finance” being invested in Africa, to help it leapfrog over reliance on fossil fuels and into sources of renewable energy. Africa has tremendous potential in hydro, wind, and solar energy. The very good investment on the ground, therefore, is to expand the use of these energy sources and many donors are keen to make that investment.

With regard to public climate finance, Africa has an advantage as most donors are shifting their attention from middle-income countries to LDCs. But they are at a disadvantage, unfortunately, on private sector investment. Considering the hundreds of billion dollars to needed finance this transition, they need to able to tap into private sector funding. The continued weakness of governance in many African countries makes private sector investment high risk.

Q: Global climate negotiations have for long been divided into those countries promoting voluntary reduction targets and those looking for binding targets. National electoral politics have been playing its part in this divergence. Do you think EU has managed to build sufficient consensus to speak as a Union?

I guess it would be nice if climate politics had that much effect on electoral politics. I do not think that climate change is that high on the political agenda as to determine the outcome of national elections. I think climate change is one of the many issues that politicians discuss. Within Europe, I think, there has been a remarkable consistency of commitment on climate change. That was built within the system, relatively early on when the EU joined the Kyoto Protocol. It, then, more importantly built binding regulations at the regional level to reduce emissions. Beyond that, EU put in place very innovative structures, such as the emissions trading system, which has made Europe one of the few places on the planet that actually has a price on carbon – not an abstract or metaphorical price, but an actual price.

As a result, many of our industries are used to monitoring, reporting, and having their emissions verified. They are also accustomed to having offsets and allowances to their emissions. In that sense, Europe has an advantage. Climate change policy is built into the system. Politicians, industries, and consumers are used to taking that into account, which puts Europe’s domestic political systems far ahead. For example, in the US, whereas the whole notion of treating carbon dioxide as a pollutant is very much new, Europe has over a decade of experience in regulating carbon dioxide.

Where it becomes political is not so much the question of whether to regulate greenhouses gases (GHGs), but how ambitiously to regulate them and how deeply to cut emissions. That is where some concerns are being heard, especially from countries with relatively higher dependence on fossil fuels that have heavy industries operating using these resources.

Q: To which countries are you referring?

I am referring the newer economies. It is there that the politics kicks in. And this is particularly a concern in the longer term.

Q: The issue of competitiveness has also been in the air. Former EU Commissioner for Development used to say that, “I am pressured by companies that are saying it is ok that you are asking to care for the environment, but what about the competiveness we face from Chinese, Indian, and Brazilian companies?” It seems that it is a catch-22.

Our model shows it works to Europe’s advantage, because it has made our industries more efficient and that has also driven a lot of innovation. If you look at European companies, they are the leaders in innovation and efficiency.

Q: Is that happening now, or perceived as a goal in the medium and longer term?

It has been demonstrated to be the case so far. And Europe is moving to the high end of possible efficiency targets in emissions reduction. But it is in moving to zero emission, required to bring zero net global emissions, that the politics would be difficult without our competitors moving in the same direction.

Q: Corporations in EU countries seem to have gone far ahead (way ahead of those in North America), in innovating, incubating and manufacturing green technologies. In contrast, the absorption of these technologies in other regions, be they in Africa or Asia, is not growing as fast. Where do you think is the problem?

It is complicated. I am not sure it is not growing quite fast. We have seen the uptake of solar and wind technology has been very rapid, in China and increasingly in Africa. This is because the benefits of those technologies have widely been perceived. We have not seen any significant impediment to the transfer of those technologies and markets are moving those technologies very rapidly.

There are still cost differentials. Not every technology that is optimised to be used in Europe is going to work perfectly as you move it in Africa and the South Pacific. Many factors affect the utilisation of a technology, including weather. Hence, there is a challenge in optimising technologies to specific contexts where they are being used.

Another challenge, of course, is that the price of fossil fuel has dropped, dramatically, recently. That makes it harder for improvements in renewable technology to keep up. We expect prices to rise again, particularly if countries put in place regulations on GHG emissions.

So I think the real problems in deployment of these technologies, in Africa, has to do with accessing private sector investment, governance challenges, and the absence of well-functioning and well-regulated markets.

Q: Do you have countries in mind that have put in place proper legislation to promote these kinds of technologies?

Ethiopia is one that many people see as ahead of the curve in terms of developing good domestic policies, in the context of an overarching sustainable development plan. They have in place a green growth strategy. South Africa has been very innovative in terms of creating financial structures that enable investors, such as independent power producers, to get on to the system, such as the national grid (often a key barrier to invest in renewables).

I learned from colleagues in Africa that many countries have policies that facilitate such kinds of investment. But we need to see how this plays out in practice, given the multiple factors that ensure success in these areas.

Q: Is it a problem of human resources or leadership?

It is a problem of human resources. But it is also a governance problem, including the predictability of the legal and regulatory systems of countries. This relates to the stability of these systems to enable an investor be confident that the rules will be followed.

Q: The oil industry has for long been playing a spoiler effect in global climate negotiations. With oil prices at a historic low, it is obvious that the industry is desperately looking for ways of resurgence. There are experts saying this could play an adverse role in the upcoming climate negotiations. What is your view?

It is not as bad as it used to be, I will put it that way, in terms of the politics of the major oil and gas producing companies. They are not monolithic anymore and you may have seen in the press recently, a group of European-based major oil and gas producers called upon Paris to produce what they called a global price on carbon. At least, within that set of companies, which I think is more committed to being part of the transition towards a low carbon economy, including by diversifying their holdings, to invest not just in fossil fuels but also in replacements to fossil fuels.

You see much more encouraging signs to playing a positive role in the politics. On the other side of the Atlantic, you hear other voices, where you have also seen that they have built a business model that is around reinvestment in oil extraction, discovery, exploitation and much less diversification in anticipation of a transformation. They have placed their bets differently than some of the European-based majors.

How that gets reflected in the politics of the international negotiations?

Not so much. I have been involved in the process for twenty years; in the past, you would see lobbyists that everyone knew were hired and paid by oil companies working directly with delegates on the floor. You do not see that as much anymore.

Q: They do it behind the scenes?

I do not know whether they do or not, but I think their influence is still being felt. It is less direct and some of the influences are actually generally positive.

Q: As you might know, Ethiopia, under the leadership of its late Prime Minister Meles Zenawi, had been playing a crucial role in global climate negotiations. It is also a pioneer in crafting a climate resilient green growth strategy. Yet Ethiopian policy makers often complain about inadequate support for the implementation of the strategy. Do you think that EU, a strategic partner of Ethiopia, is doing enough in supporting the nation in its leadership, adaptation and mitigation efforts?

We are doing everything that we can and we are prepared to do more. And these negotiations are not just about the richer countries committing to reduce their emissions, they are also about a recommitment by the rich countries to help the poor countries reduce their emissions. Countries that have shown themselves to be good developing partners and equally committed to solving these global challenges, like Ethiopia, I think, are very well-positioned to receive more assistance from donor countries. I know that EU has been working with Ethiopia and with other donors to support a lot of the planning that they have done so far, but also, we will be there to help them with the implementation as well. I think Ethiopia can count on that.

Is it enough? That is always a question.

Q: It is never enough.

It may never be enough but we hope it is enough to help Ethiopia to remain committed to these issues, as domestic priorities, so that it can continue to invest its own resources, because they see it as good for their people and good for their country. I am pretty confident that it will be enough to build a partnership with Ethiopia.

I do not think it will be enough to cover all the costs that Ethiopia will incur, but I am not sure if that is what Ethiopia is asking for, because it does seem to be built into their own development strategy and therefore able to track their own revenues and resources.

Q: Addis Abeba will be hosting the Financing Development Conference in July and climate change financing is one of the topics to be discussed. What do you hope to see come out from the conference?

The conference will probably provide an organising framework for how development assistance is provided in the coming decade. So what Addis has to decide is how the conference can provide an opportunity for recommitment by the donor countries that support developing countries in sustainable development.

The fact that climate finance has been mainstreamed into the sustainable development goals (SDGs) in a significant way makes that link between development finance and climate finance. We think that link is related to, but separate from, the kinds of commitments made in Paris, which is specifically going to be made about implementing the 2015 agreement that was agreed there. But the politics are related.

What we would like to see emerge from Addis is a recommitment by the traditional donors, hopefully some signal from emerging donors, including in the form of South-South cooperation, to support development finance and to include within that all the lessons that we have learnt about the need to put in place enabling environments, good governance structures within developing countries to receive and invest that money wisely, and the importance of predictability and stability coming from donors as well. We therefore want a broad general commitment. As you may know, one important signal is a recommitment to the 0.7pc of gross domestic product (GDP) as ODA [Official Development Assistance].

Q: Even if it is not so clear?

It has never in history been clear in terms of which donors take it seriously. But I think that European donors have a very good track record of taking it seriously and in some circumstances exceeding the 0.7pc commitment. But what I would expect from Addis is a broad recommitment.

We also expect there to be a growing understanding that good development finance includes good climate finance. In making investments under the SDGs, in energy, for example, we would want to encourage renewable and sustainable forms of energy in the form of climate finance. Investing in the realm health and public health concerns under the SDGs, you would want to ensure that you are taking into account the predicted impacts of climate change. In planning for food security under the SDGs, you would want to make sure that you are investing in climate resilient crops.

There needs to be an acknowledgement that moving forward, sustainable development is about building, as Ethiopia has signalled, low carbon resilient development. That conceptual integration, I think, needs to be acknowledged in some way in Addis; and in Paris, we will make commitments that are specific to the implementation of the 2015 agreement. They will be more time-bound and more focused, specifically in helping countries who fulfil their commitments.

Q: Are you hopeful that a consensual agreement will be reached at the upcoming Paris conference?

Yes, that is my hope and that is my belief, because the Kyoto Protocol has become politically unsustainable to have an agreement extending beyond 2020 that only contains commitments for industrialised countries and then within the industrialised countries, a sub-set of industrialised countries. That equation just does not work anymore. We need something to replace the Kyoto Protocol post-2020, and the Paris Agreement gives that chance.

Published on Jun 28,2015 [ Vol 16 ,No 791]



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