Klimawandel: EU erwartet von Engagement China und Indien[en] 

Artur Runge-Metzger heads international climate negotiations on behalf of the European Commission

To read a shortened version of this interview, please click here . 

Last December in Poznań, many were disappointed with the outcome of the COP 14 conference. But a roadmap was still put in place to kick-start negotiations in 2009, with the aim of ending up with a negotiating text by June. Are we on track for that? 

I did not leave Poznań with a big disappointment. I believe Poznań achieved what we expected it to achieve, particularly the timeline for 2009. You rightly mentioned that there was a mandate given to the chairs of the two AWGs [Ad hoc Working Groups under the United Nations Framework for Climate Change (UNFCC)] to produce a text by June. 

These two chairmen, as far as I know, are at the present moment preparing a kind of precursor text. We will already see something in March, which will not be a kind of legal text, but a kind of synopsis of what the people have been putting onto the table. 

So that will be presented in the last week of March to the different parties, and then we will have a first go when we meet in Bonn at the end of March and the beginning of April. 

The Council is preparing a common position that will be adopted by EU leaders in March, based on the Commission communication presented in January. But the EU has already made a few submissions to the UNFCC. How many submissions have there been so far? Are they specifically targeted at certain aspects of the negotiations? 

On each of the negotiating issues, you have a number of submissions. 

Which ones have already been addressed, and which ones would you say have made good progress? 

We have been dishing out these submissions every two or three months. There are a whole bunch of submission leaving the EU. Before Poznań, we did a set. At the beginning of March, there will be another set going out. So there are different stages. Some have already been sent out. 

Which ones has the EU already tabled? Which one is it preparing, and which issue is it focusing on in particular? 

On all issues, whether it is the targets for developing countries - which is under Article 3.9 of the Kyoto Protocol - but then also the Bali Action Plan, which talks about shared vision and adaptation and mitigation technologies and finance. 

Is there a consensus already emerging on some issues and maybe not so on others? For example, on the mid-term targets? 

That [the mid-term targets] is of course a very difficult subject and there are already a number of developed countries that have not yet made any pronouncement. 

Japan, for example, is in the middle of the struggle to set its own mid-term target of what they would want to put on the table. Australia just did it the day after Poznań. Russia, however, has not pronounced itself. The United States has not made any kind of proposal in terms of what they are willing to contribute. 

Of course, with the new administration, everybody hopes that this is going to happen in the next month, but that will depend very much on how fast the internal US policy agenda is going to run. 

Some are hopeful that the US cap-and-trade could be decided before Copenhagen. Is that at all feasible? 

That is very ambitious. I would say that is a highly debated issue. But of course, they have been working a lot on a cap-and-trade bill over the last few years. So it is not an unusual discussion for the Senate and Congress. 

And we have heard Barbara Boxer [chair of the environment committee in the US Senate] talking about principles a few days ago. Henry Waxman [chair of the energy committee in Congress] also says he wants to table proposals by the end of May. So that makes us hopeful. 

But if the US does not have a system in place, will that jeopardise talks? Some in Washington don't think it is realistic to have a deal until the US has a set of measures in place, and only expect Copenhagen to deliver a framework.

There are other people who say that if the bill is at a very advanced stage, it might be possible for the Obama administration to express themselves in Copenhagen. 

If they know where the bill and where the consensus is going, it is a very different situation in comparison to Kyoto under Clinton, where a commitment was made without having anything discussed with the Senate and Congress and then they came home with a deal. 

Now, I think it is really the other way around. I believe that Obama will involve the Senate and Congress in the debate. That is exactly what is happening right now. So he will see the limits, and we will hopefully have some room for manoeuvre ahead of Copenhagen. There are both views being held in the United States. 

I think that you will have to see what type of legislative proposals ends up on the table and then how they react to it. The tone is very different in this administration compared to the previous administration. 

US Secretary of State Hillary Clinton chose Asia for her first foreign visit. Is climate change shifting the diplomatic balance? Obama has repeatedly said he wants the US to take world leadership on climate change and he is basically looking at China instead of Europe. 

Europe I would say is looking at both of them [US and China]. Both of them have been sitting on the fence, pointing at each other. That was the situation under the Bush administration. For the US to reach out to China on climate change is a good thing. 

Of course, it is early days, and I think it will be very hard for Hillary Clinton to make a kind of offer, but to start the talks on climate change is very important. I think she even said last week that it would not only be a topic with China, but that it would tie in with other specific countries as well. So climate change is definitely part of the foreign policy agenda. 

That is a very important step forward. We know that the whole issue of technology transfers has been cold, although some do not like that expression. 

Technology is one of the main elements to persuade China to come up with meaningful commitments. How do you see this part of the talks moving forward, especially with a country like China? What are the problems there? And how is the EU or the US trying to help them through? 

When President Jintao visited Europe a few weeks ago, he said very clearly that China wants to take its responsibilities on climate change. They are already in the current five-year plan, in which they have a number of provisions that help on climate change, and the energy efficiency targets, which I think they take very seriously. 

The next step that China will have to make is to look at its next five-year plan from 2011 to 2015, as the current one runs until 2010. What goes into that plan will be eminently important in the fight against climate change, and I think the Chinese understand that there is a lot of potential in terms of energy savings. 

They know they have a major influence on the global market, in terms of demand for oil and coal and other fossil fuels. It is in their own interest to be as energy efficient as possible. 

Is it purely just a matter of opening their economies to European or US companies which have this technology, or do they have the technology themselves? 

It is a matter of structural change in the economy. If you look at the latest steel plant they have built, it is probably one of the cleanest steel plants in the world. Their problem is that they still have very old outdated power plants. 

They have a lot of medium-sized old steel plants and that needs to be phased [out] in one way or another. They have a plan, which they have been trying to implement over the last few years, to take out all the plants from production, and that has already helped in reducing pollution levels. That of course has a side effect in terms of employment in some regions. 

The pressure of the current economic crisis will push them to keep a number of those plants open. But ultimately it is a matter of restructuring the economy and at what pace they can do it. 

Then the other big problem is energy sources, which is dominantly coal. It is very clear that there will have to be a move towards carbon capture and storage [CCS]. Everybody knows that this is a technology that will be available within the next ten years. By 2020, if we take the necessary steps in developing large scale demonstration plans, we can really show that this technology is working. 

So these are examples of technology transfers? 

Of course: it should not be seen as a big Christmas box, which you can unwrap and find a beautiful power plant inside which is free of charge. It is about working together to improve technologies and put them into place. 

Do you believe China is putting the right incentive schemes in place speeds up the uptake of these technologies? 

In terms of the regulatory framework in China, there is a lot to be desired, and we hope they will improve their environmental legislation, which then will drive technology into other markets. The regulatory framework is a very important element. 

Developing countries attach a great deal of importance to funding. According to a McKinsey report, €90 billion will need to be invested in energy efficiency in the next twelve years. The economic crisis is harming funding opportunities. Are there creative ways of finding money? 

Let me come back to that €90 billion energy efficiency. Most of the energy efficiency investments will come with energy savings in the end. If you look at the IEA [International Energy Agency] reports, they clearly state that enormous energy savings will offset these investments over the years. 

So, it is not a matter of finding 90 billion in terms of grant money, which would come from taxpayers' money. It is about finding 90 billion euro in the capital market in order to finance it. That is the issue. 

A number of governments, in their economic stimulus programmes - and also the United States - have set aside loan guarantees and risk guarantees in order to find money in the capital market. 

You only need a small amount of public money in order to leverage that huge amount of money required to boost energy efficiency. It's not like we are waiting for a grant or a present here, but it is about how you can intelligently put together these financial packages. 

[UNFCC Executive Secretary] Yvo de Boer did call for creative ways of finding money. Some are pushing for proceeds from the carbon trade market to be used, while others advocate a 'Tobin tax'. The US Senate chair has ruled out a climate tax. Ideas are floating left and right. Which do you think is the most realistic? 

I am not sure. If you look at the way public financing is flowing at the moment, it is mainly through official development assistance. 

Most of the time, we go to the Treasury and to the finance ministers to find the money. But when it comes to the public part of it, carbon markets of course are going to play a major role, in particular if projects like the CDM [Clean Development Mechanism] are going to continue, because that is going to channel a significant amount of money into technology deployment. 

We know that the Commission is reluctant to give too much away to the CDM to preserve its own system.

That's right. This is a very strong feature in the 20% figure in the package, which is a unilateral package, where we want to see domestic benefits in particular. 

That means we want to stimulate our own industry at home to produce new technologies. We want to create employment at home to move forward and then of course, there is a strong element of energy security in that package as well, which costs you a little premium. 

This is the reason why we have 20% renewables, and that target should be used across Europe in order to improve Europe's energy security. 

But if we move to 30%? 

Then we have said that we might be a bit more open for the development of mechanism projects. 

For the extra 10% that this represents? 

I am not going to say what the figure is going to be, because that is a subject within the negotiations. 

Let us say that we have some room for manoeuvre from that side, so that gives us some playing ground for the negotiations. 

Do you think the people you talk to in developing countries are very receptive to that argument? Or are they pointing at other incentives they need? 

Some have had a very good experience with the CDM, and they benefited a lot from the CDM, like China, India and Brazil. They would certainly like to keep that instrument. 

You see, everybody says 'I need more'. Of course, if there is a free lunch, why should you not ask for three or four free lunches? 

I was thinking of different aspects to be taken into account. There was a suggestion made on 16 February in the European Parliament to include deforestation credit in the ETS, I guess probably in the CDM… 

We are very critical about that. We made a proposal last year in the autumn about fighting deforestation with a separate mechanism - a forestry financing mechanism - instead of experimenting on a large scale with the CDM. 

We think we should keep forestry aside for the moment, and see how we can structure an incentive scheme, which will also give money to forest owners in developing countries. 

How does the Commission see such a scheme taking shape? 

It would be a kind of fund, a huge pot of money, which would fund or provide incentives for reducing emissions in the forest sector. 

The World Bank has launched a pilot scheme, the so-called Forest Carbon Parternship Facility, that is experimenting on how to set up such a mechanism. In the beginning, it will require a lot of capacity-building in developing countries. They need to improve their monitoring systems. 

Then we need to structure the fund itself, in a way that really pays for the reductions that are being achieved. In that respect, it is similar to the carbon market, where you also pay per ton of carbon. But we want to be assured is that this system is going to work [before implementing it]. 

Who would put money into this fund? 

Developed countries. 

As part of development aid, for example? 

I would think it would be in addition to development aid that is there at present. It is a new kind of funding stream and it is related to climate change. 

Developing countries would have to commit themselves too. If you look for instance to American legislation, there were some proposals last year which proposed to use auctioning revenues to fund such a scheme. 

We also proposed the same last year, in our energy and climate change package. Member states should use 50% of the income from auctioning for climate change. Within that, they could also use part of that money to fight deforestation 

In the end, do you see that as a major element of the global deal? 

Yes, without a deal on deforestation, there cannot be an effective and international climate change policy. 

On top of forestry, are there other sectors that could have special treatment? 

Another area where you could see this happening, as described in the communication, is on international aviation and maritime transport. Then when it comes to certain types of fluorinated gases, you could call that a sectoral approach. 

What about industry and the whole carbon leakage discussion? 

If you look at the proposal, there are two things that we are saying. One is that we would expect developing countries to come up with what we call low-carbon development strategies. 

Those strategies would particularly cover the major emitting sectors in those countries. For us, the main industries would belong to those major emitting sectors. Secondly, we propose that to address carbon leakage in some countries, one should phase out CDM projects for those industries that are exposed to international competition. 

How would that work? 

What you do through the CDM transfer is give a subsidy to your competitor in China. The idea is concentrate the CDM in those sectors where you do not have those leakage effects. 

But they happen to be the power intensive ones at the same time? 

Yes. 

Those ones are heavily emitting. So isn't there a kind of contradiction? 

No, I think that when it comes to the power sector, it would probably be a little bit of a different story, because you do not trade power as such. 

But what about other heavy-emitting sectors? If CDMs are barred from going into those particular sectors, wouldn't that actually defeat the purpose of reducing emissions? 

Maybe I have to be a bit more specific. What we say in the proposal is that the traditional CDM that we know as a project-based thing, that should phase out. What you can still do is what you call a sectoral accrediting mechanism, where you put the steel sector, and then you do a certain amount of improvements yourself. 

If you get to that point, then above that if you get better, there might be a possibility and room for a CDM accrediting mechanism as a kind of new CDM. It would require a certain amount of your own investment, your own capital, your own domestic effort to reach a certain level. 

Insurance companies have experienced huge payouts over weather-related catastrophes. Munich Re, for example, lost $200 billion in compensation in 2008, compared to $82 billion in 2007. NGOs in Poznań called for an adaptation fund of $50 billion, but nobody was able to commit to funding for adaptation. 

Yes, but adaptation is very different from compensation for losses and damages incurred. 

True. But I am looking at the two figures, and think there must be a way to come up with the right amount of money for adaptation. What's the problem there? 

I think that there are two questions here. One is what is the right fund and what should it be doing? There is an on-going discussion on the so-called adaptation fund, which has been created through the 2% levy on the CDM projects. But there is a governance issue that needs to be sorted out. 

Secondly: What is the right amount you have to spend on adaptation? Your $50 billion is an estimate. But what we really require, nobody really knows. So these estimates depend really on what you need to do in your own country. Even in Europe, we do not know exactly what we need to invest in the coming years. So again, the proposal of the Commission is that we need to go into more detail and establish adaptation strategies. 

The interesting thing is you have the same kind of phenomenon as you have on the mitigation side. A lot of the actions that you are going to take, you should take anyway. Water will be a major issue, for instance, in the Mediterranean. Still, we know today that water is used very inefficiently. So, by improving the efficiency of water use, doing that alone, you can save money already. 

At the same time, you make your economy more resilient for the future, and I think water is probably the essential part of the adaptation equation, because you will either have too little or too much of it. That is what needs to be addressed. Still, how much money we are going to need, I am not quite sure. Hopefully, it will help to reduce the bills of the reinsurance and insurance companies. 

Do you see water becoming part of the negotiations at international level? Al Gore spoke before Congress about the problem of water scarcity in Asia. 

That is true. Many of the governments in Asia see this issue as important, which prompts them to think and act on climate change, as they foresee that the bill on adaptation and on damages will be enormous. 

Indeed, we estimate that it will be much higher than we think. In terms of how this will be taken on, I do not know if in Copenhagen we will go into individual projects. We need to create is the kind of mechanism that will allow us to address all those issues. But you are not going to say, 'okay, we need a project in India and another project in China in order to address the reduced water availability from the Himalayas'. 

What type of mechanisms would be needed? 

On the adaptation side, at the moment, we are still discussing and experimenting with this adaptation fund to see if we can move it forward. 

On the other hand, we know that we will have to integrate climate change issues into all kinds of budgetary aspects, because it is not wise to continue to spend money in the same way as we did in the past. One needs to take adaptation into account and ask oneself 'what do I do differently when I spend my public money on water, on health and education to make the difference in the end and to make the economy more resilient?' So there is certainly no easy answer to adaptation. 

Mitigation is much easier, where you can invest in a clean power plant. With adaptation, I need to figure out whether I need to put my house uphill in order to be safe from floods. That is a very different decision. One costs a lot of money, the other does not necessarily cost a lot of money but needs anticipation and good planning exercises. 

In terms of water again, but this time within Europe: the use of water in agriculture. We know that the Commission wants to have pricing policies as of 2010 to encourage savings. Obviously we will see the results of these policies. But do you expect resistance? 

What is important for the Commission is that resources are priced at their social value, which means that you need to take into account the question: 'What are you going to do with the water?' As I said before, there is a huge potential in terms of improving water-use efficiency, and I particularly think also in agriculture.

A lot of progress has been made over the last 25 years on developing technologies for dry areas and improving irrigation systems. I think water pricing would push the adoption of new technologies which will boost water-use efficiency. 

But it also tends to push up the cost of food, which is already under some pressure. Could that be the straw that breaks the camel's back? What is the alternative? 

The alternative is that your region gets drier and drier. And with the little water that you have, you produce little, which then has an even larger effect on food prices.

So I do not think that this is the scenario that you want to go into. Instead, I would prefer to make the wisest use of each litre of water and then produce as much food as you can with that litre of water. 

That is looking long term, but let us look at the short term. 

This is something that is going to have to happen. It is something that we are going to have to build in gradually. 

The G20 in April will eye the creation of a low-carbon economy. Do you expect a real breakthrough in terms of climate change? 

No. What we would hope for is that recovery plans aims to make economies more efficient, particularly energy efficient. That will have positive impacts on climate change. 

Energy efficiency has been in Obama's plan as part of smart grids and metering. We have not seen much of those in the EU plans.  There is this proposal to use this unspent €5 billion, but that is for larger projects. Is energy efficiency being overlooked here, do you think? 

As a man who stands for the environment, I have to say that we can do more on energy efficiency. We have made a relatively strong plea from the Commission side to use a significant amount of money for energy efficiency, renewable energy and clean technologies. But we will have to see what governments are going to come up with. 

Have the right priorities been chosen? 

I think that it is very early days. Of course, what makes the headlines are the subsidies for the car industries in different countries, but that of course is only a fraction of the package. Still, it makes the largest headlines. 

But even there, I think that there is still some effort to try to steer the money into new technologies for the car sector that would make cars more energy efficient and stop producing the old ones, or like in Germany, the replacement of the old vehicles with the more efficient new ones. 

But there is clearly less effort being made by the EU on the energy efficiency side, at least on the regulatory aspects, than there is on the mitigation…. 

We just passed some new legislation last autumn when it comes to the efficiency of buildings. At the moment, there is a discussion in the Parliament about labelling. So there is a lot of stuff happening. For example, our energy efficiency action plan, we stick to it and make sure it gets implemented.