The 11th hour is, as often happens in negotiations, proving fruitful for the United Nations Climate Change Conference that opens Monday in Copenhagen, Denmark. The last-minute actors are President Barack Obama, who last week said he will personally deliver a pledge to reduce U.S. emissions 17 percent from 2005 levels by 2020, and Chinese Premier Wen Jiabao, who unveiled an ambitious energy-efficiency target one day later. Those moves have economists, analysts, and technology developers increasingly hopeful that the 11-day talks will secure a deal to reduce global emissions of greenhouse gases, thus extending the market for energy-efficient technologies.
The impact could be both immediate and far-reaching, according to Ethan Zindler, who directs U.S. research for the London-based consulting firm New Energy Finance. “It sends an important long-term signal to the marketplace about commitment from multiple nations. That’s something that, particularly in the U.S., there’s been a desire to see for some time,” says Zindler. At the same time, he says, Obama may have made his pledge in the hopes that Copenhagen will help secure the passage of U.S. energy and climate legislation. The climate bill offers incentives for renewable energy installations and large-scale demonstrations of carbon sequestration.
Columbia University economist Graciela Chichilnisky, who crafted the Kyoto Protocol’s carbon trading provisions, predicts that Copenhagen will produce a deal mandating emissions reductions by 2020 equal to or greater than those pledged by Obama. “That is the minimum that will happen,” says Chichilnisky.
Chichilnisky says the U.S. pledge equates to just a 3 percent cut from the Kyoto Protocol’s 1990 baseline. The Obama pledge is dwarfed by the EU’s pledged 20 percent cut from 1990 levels by 2020 and the 25 percent cut pledged by Japan. Climatologists are calling for cuts of 80 to 90 percent by 2050. As Chichilnisky says of the U.S. pledge: “It’s absurd, but it’s a beginning.”
Finn Strom Madsen, the executive in charge of R&D for Danish wind-turbine company Vestas, agrees that a deal at Copenhagen is critical for renewable-energy developers, regardless of the scale of the mandate. Madsen says real value in Copenhagen is having world leaders reach “the political consensus that we need to bring alternatives into the conventional energy mix, and that we need to do it faster than we’re doing it today.”
Vestas, in fact, already announced plans this fall to boost its R&D staff of 1,375 people by almost half in order to push ahead with several large R&D efforts simultaneously. These include: a six-megawatt turbine for offshore use that is twice as powerful as Vestas’s biggest turbine; floating foundations for deep offshore waters; and stealth turbines to minimize disruption of air traffic radar. “If it turns out that we don’t get anything [at Copenhagen] and people are throwing rocks at each other, we might reconsider some of the things we’re doing,” says Madsen. “But we certainly expect that we will have a political agreement.”
For Chichilnisky, director of Columbia University’s Consortium for Risk Management, a deal at Copenhagen is needed to further the carbon markets borne of Kyoto by providing carbon-reduction goals out to 2020. However, Chichilnisky has proposed rules changes for the markets to be considered at Copenhagen that could, if adopted, greatly expand the reach of carbon markets to the benefit of technology developers.
One such market extension is a system of “interlocking” options on the carbon markets. Under this system, the U.S. would buy options on carbon-emissions credits, giving it the right to reduce Chinese emissions, and the Chinese would buy options conveying the right to sell emissions credits to the U.S. for a minimum price. “The U.S. can force China to reduce its emissions, and the Chinese can say truthfully that it will be compensated if that happens,” says Chichilnisky. Technology developers in both countries benefit by providing the equipment that delivers the real reductions behind the credits.
Chichilnisky says Copenhagen could also broaden the mechanism by which developing countries sell verified carbon reductions from energy or forestry projects to developed countries, which use such “offsets” to meet their greenhouse-gas-reduction obligations. European companies buying these offsets to meet their obligations under the EU’s Emissions Trading Scheme helped finance the recent explosive growth of wind farms in China and India.
Her proposal would extend such financing to projects that capture more carbon dioxide than they produce, such as biomass-fired power plants that capture and sequester their emissions and air-capture devices that pull carbon dioxide out of ambient air. Chichilnisky is investing in the latter through New York-based air-capture startup Global Thermostat, which aims to use waste heat from coal-fired power plants to capture twice as much carbon dioxide as the plants emit.
A deal at Copenhagen and domestic legislation to implement it will, says Chichilnisky, provide “plenty of money and profits from building clean power plants and scrubbing the CO2 they emit.”