Copenhagen failure could “collapse” carbon markets: Stern

UN summit in November 2009 most important meeting since WWII, says author of Stern Report.

Failure to reach a global agreement on capping greenhouse emissions at next year’s Copenhagen meeting of governments could “collapse” the market for carbon emissions trading, Sir Nicholas Stern, author of the Stern Report has warned. Speaking at the Sustainability Forum in Zurich, Switzerland, September 10, Stern said he believed Copenhagen was the most important international meeting since World War II: “We can’t afford to mess it up. We need to show that low carbon development and growth can work,” he said.
Governments are under increasing pressure to find a successor treaty to the Kyoto Protocol on greenhouse gas reductions which runs to the end of 2012, or risk spiralling CO2 levels, which scientists warn could cause serious environmental damage. In a question and answer session Lord Stern qualified the dramatic statement by softening it to say that if a meaningful agreement at the United Nations conference in Copenhagen in November 2009 isn’t reached then carbon markets would be “badly damaged” and the environmental consequences dire.
His warning was a reminder that the future price of carbon depends heavily on emissions reduction agreements reached by governments; an uncertainty which many long-term institutional investors have raised as a barrier to trading in carbon markets.
Stern, former World Bank chief economist and author of the high-profile report on global warming commissioned by the UK government, now works as a special adviserto HSBC, the banking group, on economic development and climate change. He said potential fault-lines that could hamper agreement at Copenhagen were the position of the US and Chinese administrations, but also singled out India and Brazil as key players. He said: “If the son or daughter of the Lieberman-Warner bill (proposed US climate change legislation) goes through in the first six months of 2009 then that would be a clear indication of US leadership on the issue. The next US president should go to China in the first six months of the presidency to see how the two can work together ahead of Copenhagen.” Stern said he had discussed environmental policy with both Barack Obama and John McCain’s advisory teams. Worryingly, Stern said that there had been little or no success in reducing carbon emissions since the publication of his report for the UK government. He said there were signs that so-called “feedback loops” were already being observed, whereby higher CO2 levels start to lead to even higher carbon levels as a result of environmental damage, such as in recently observed melting of frozen peat bogs in Siberia. However, he struck an upbeat note about the potential for agreement in Copenhagen: “We need to take 50bn tonnes of CO2 out of the atmosphere every year and at a CO2 price of 30-40 dollars per tonne, that would need $1.5-2 trillion in investment. World GDP by 2050 is predicted to reach $100 trillion, so that would be 1.5% to 2% of GDP, so the numbers are plausible. Unless we act now as if it will happen, it won’t.”