Now that the Cancún negotiations are drawing closer, what is your view on what can be achieved there? The general perception of the state of negotiations seems rather bleak.
Given the new sense of realism post-Copenhagen and of course in the light of political changes recently and over the course of the year, both negotiators and those outside of the process are being pragmatic about what can be expected.
Probably the most important outcome is that the process demonstrates that it can still work, that there is the basis for agreement on a range of issues, if not immediately on an overarching global deal.
I think all the negotiators are committed to reaching an agreement on an overarching deal – certainly not in Cancún but possibly in South Africa next year – and to build to that, they are thinking about a balanced package of decisions that will allow progress to be made. It sets a good work plan for finalising agreement while also getting a number of the key issues underway.
It seems that there's potential there to make good progress on the financing package. Some of the commitments have been made towards that €30 billion a year fast-start finance and there can be progress if not agreement on what the Copenhagen green fund might look like.
I think there's potential for progress on adaptation, on a climate technology mechanism and on REDD+.
On the other hand, I'd be quite stunned if there was real progress on new targets under the Kyoto Protocol. The European Union has recently made clear it is supportive of the Kyoto Protocol and is looking to have an agreement, not necessarily in Cancún but beyond on a second commitment period of targets.
If you look at it in the context of 'Is it going to come up with the global deal that we were hoping to reach in Copenhagen?', I think the answer is very clearly 'not'. But does it mean that nothing is going to happen? The answer is also 'no', there are plenty of things that can happen: rebuilding trust and confidence in the process plus a number of decisions.
Another thing that is hoped for is that the voluntary targets that were included in countries' submissions after Copenhagen can be codified in some kind of COP decision so that they become more formal agreements, even if they're not commitments under the Kyoto Protocol or under the convention.
What would a second commitment period mean in practice? How would this involve the large emerging economies like China? It is also difficult to imagine the US signing up to the Kyoto Protocol.
The outcome may not be a strict Kyoto second commitment period. It may be the willingness of several countries to sign up to second commitment period of targets is enough to push the discussion forward so that we have a broader-ranging scheme that draws on Kyoto but is not exactly Kyoto.
To answer your question directly, if Europe does go out with Kyoto targets, I think it's only going to do so if those other Kyoto countries are part of it. They would look to China and other large emerging economies to see what the most appropriate role for them to be playing is.
Clearly, there is a linking through the CDM or whatever its successor versions look like, whether they're having sectoral approaches or programmmatic approaches or whatever is decided, which will involve the large emerging countries and all the developing world. This is going to be one of the key issues in the negotiations about at what point and to what extent the developing countries should take on commitments, what kind of commitments those might be and how they relate to those in other Kyoto countries.
So the overall hope is that you will get to a system that includes the US and has a process built into it that allows targets to be ratcheted up over time and for other countries that are currently outside the Annex 1 to participate in ways that are appropriate and eventually for all countries to be having targets and timetables.
It's obviously very political but will also depend on the economic circumstances of different countries.
Do you think the EU's decision not to increase its emissions reduction target before the Cancún talks will reflect negatively when trying to negotiate with developing countries?
The EU offer was always 20% unilaterally, rising to 30% in the context of an international agreement and that hasn't changed.
There's lot of internal discussion and there are many businesses who support moving directly to 30% because they believe that creates the stimulus for Europe to strengthen its leadership and have a competitive advantage in a range of technology areas while there are businesses that are quite strongly against it. At country level, there are some major countries – Britain, France, Germany and Denmark have all said they would support it – and others who are against.
I think it will be an advantage next year if Europe does decide to move beyond 20% - and let's remember it's not just 20 or 30, it can be somewhere in-between. But as important as the numbers is 'what does our ongoing European climate change programme look like?'
In terms of what that does to the international process – I think it was quite clear in Copenhagen that many countries say that it wouldn't have made a huge difference for negotiations one way or the other.
I think that it would have had an impact. But more importantly for Europe and the process as a whole is Europe laying out how it's going to move beyond the 2020 package and on into the future. That will be beneficial both for Europe and for the global process.
What impact do you think the US election results will have on the talks? Is the climate bill dead now?
On the other hand, it didn't look like [before the elections] that there was any great possibility of climate legislation even with the Democrats having majorities in both houses of the Congress. I don't think that the situation has changed dramatically.
I think it's very positive that the AB 32 legislation in California survived its challenge. It shows that there are still a number of important players in the US who believe that climate change is important and believe, more importantly still, that there are big opportunities in term of green growth from addressing climate change.
It would be naïve of me to say that the outcome of the election is positive – it's clearly not positive and it makes it more difficult for the president to move ahead. But as I said, we haven't seen a huge amount of progress in the last year so I don't think it makes a lot of difference.
Those US companies that have seen this is an opportunity will continue to work in that space. They'll see that there are opportunities in other countries outside the US. I think the biggest loser from not taking action to reduce emissions and introduce new green technologies will be the US itself.
But the EU's hopes of linking national cap-and-trade systems to an international carbon market will certainly be affected if the US doesn't manage to put in place a federal emissions trading system. Are there alternatives?
The goal overall is to have an international trading system. We need to distinguish between the trading system as a potentially efficient mechanism for reaching targets and having a set of international goals that are consistent with what the science says we need and which would drive investment in the low-carbon economy.
Without a US cap-and-trade system it is obviously difficult for the EU to link to one but we see progress: New Zealand has its scheme, Japan looks like it's bringing one in, Australia seems to have come back and is clearly looking at how to introduce an emissions trading scheme. And we’re seeing nascent schemes being discussed in India and China, even if they’re not direct emissions trading schemes.
I don't think the overall goal of having a linked-up carbon market is in any way dead. It's going to be more difficult and it's clearly better and stronger market with far greater liquidity in it if the US is on board.
I don't think that the US is permanently out of the game. They have been going through – as many of us have – difficult economic conditions. There are obviously big political divisions in the US, but I think it's a question of time rather than a yes-no.
How do you see the reform of the Clean Development Mechanism (CDM)?
There are two parts to this. One is the specifics of the technical aspects and how the CDM could be expanded, reformed and so forth. That of course, whatever is decided is contingent on there being sufficient demand because it'll be demand that drives it and that depends on the level of commitment that countries take either under Kyoto or the other track or under some sort of new arrangement.
Without that demand, there will not be incentive through the CDM, whatever it looks like in the future. For one, it's important to make progress on trying to agree what a reformed CDM might look like. But you can't lose sight of the bigger picture, which is it becomes far less relevant if there isn't sufficient demand in the system.
There has been a lot of hype about sectoral approaches as a step forward from crediting individual projects, but there doesn't seem to be much consensus on what this means in practice.
Sectoral approaches have lots of different interpretations depending on who you talk to. Some see it as a sector participating in the CDM so it's almost like a bundling, where you treat a number of installations or companies together as part of a project and you set a baseline for the sector and then emissions reduced below that would be CDM
Others think of a similar type of approach but outside the CDM where it would be financed perhaps through the carbon market but perhaps through other sources as well, where you would set a target for a sector and beyond that target it can receive and trade credits.
But then there are other sectoral approaches, which are more about - instead of setting national targets, or as well as setting national targets – setting targets for sectors which vary from sector to sector depending on their emission reduction potential, their competitiveness impact and so on and so forth. Those could be sectors treated nationally or sectors treated globally.
Then there are others who just think of sectoral approaches just meaning setting almost voluntary or indicative targets but strengthening cooperation, technology deployment and development and so achieving reduced emissions intensity in that way.
That is slightly confusing because there are so many different approaches all considered to be sectoral.
What would the implications be if there is no progress in Cancún?
The ongoing international negotiations are clearly very important, but there are still lots of things happening despite the slow pace of the negotiations.
For example, we're having an event in Cancún, and we're going to release a report on what's happening in Chinese cities. It's quite startling the progress that’s being made both in setting up manufacturing capacity for clean technologies, for installing, using and piloting clean technologies.
We're seeing that businesses – despite the lack of progress in the international front – still continue to look at how to become more energy efficient, how to deploy renewables and other clean energy technologies.
If you look at what's happening in India or China nationally despite not having commitments, they're still being pretty ambitious in what they're doing.
Indiais talking about introducing a 'Perform, Achieve and Trade' scheme for energy efficiency. You've got the Chinese 12th five-year plan, which looks at creating a green industrial revolution. You're seeing businesses in Brazil beginning to think about this, low-carbon planning all around the world.
It is important that there is progress under the UNFCCC and that there are some good decisions made in Cancún leading to a global agreement next year or some time thereafter. If the success isn't what everybody thinks it should be, that doesn’t mean that nothing's happening or the progress will stop.
I think it's important to maintain that sort of balanced view because we came to Copenhagen saying we're going to have the greatest treaty in the history of humankind and when it didn't happen, it's all a disaster, nothing's happening.
Copenhagen wasn't good, let's not pretend, but that didn't stop things happening. If you think about what happened in the run-up to Copenhagen, you had commitments on funding, you had new voluntary targets by a large number of large developing countries and you had some industrialised countries setting out their own targets.
So progress is still being made.