Unlike last year's two page Copenhagen Accord, the Cancun Accord, or to be more precise Cancun Accords, run to tens of pages and provide a good deal more detail on how the international community plans to cut emissions than previous deals.
Overall 26 agreements were reached in Cancun, ranging from the crucial outcomes from the working groups on Kyoto and Long-term Co-operative Action (LCA), to somewhat arcane reforms such as Kazakhstan's proposal to amend annex B to the Kyoto Protocol, to housekeeping measures such as the resolution thanking the people of Cancun for their hospitality.
The main areas of progress, the on-going road-blocks, and the business implications include:
- 1. Emission targets
Agreement: The emission targets and action plans put forward by both developed and developing countries in the Copenhagen Accord have been officially recognised under the UN negotiating process for the first time. In addition, countries have reiterated their intention to limit average global temperature rises to 20C. Crucially, they have also agreed to review this goal and have acknowledged that a "gigatonne gap" exists between emission targets pledged and the cuts required to stand a reasonable chance of limiting temperature increases.
Implications: This is a major step towards a treaty as it moves developing countries and the US a step closer to accepting some form of "binding" emissions targets in the future, albeit targets they put forward themselves.
For businesses it solidifies the voluntary emission targets already adopted by many governments and provides further evidence that if these targets do change they are only going to get more demanding.
As the LCA text reaffirms, the world's governments are in agreement that "climate change is one of the greatest challenges of our time" and are prepared to take action to tackle it. In other words, this is not a fad.
- 2. Monitoring, Verification and Reporting
Agreement: Developing countries will provide updates every two years on their progress against their climate change action plans. Crucially, all parties also agreed that "internationally supported mitigation actions will be measured, reported and verified domestically and will be subject to international measurement, reporting and verification in accordance with guidelines to be developed under the Convention"
Implications: A huge victory for the US. The details are yet to be finalized, but developing countries will submit to a regime of international verification for their emissions targets in return for access to climate finance. This was one of the major barriers to a deal and it looks to have been overcome after China and India appeared to accept the need for some form of monitoring.
For businesses it means they will inevitably come under more and more legal pressure to report on their greenhouse gas emissions.
- 3. Climate funding
Agreement: Countries will start a process to design a new "Green Climate Fund", with a board with "equal representation" from developed and developing countries. Crucially, it will be run by the UN and not the World Bank. The timeline for the formation of the fund remains unclear, but the agreement also reiterated the commitment to deliver $30bn of funding between 2010 and 2012 and $100bn a year from 2020. The agreement will also see the launch of a registry to record and match developing country mitigation action plans to the finance and technology support they require from industrialised countries.
Implications: A significant breakthrough and a sizable victory for developing countries which were adamant that any new fund should not be run by the World Bank.
The formation of a single fund should drastically simplify the labyrinthine world of climate financing and make it easier to avoid double counting of aid payments. It should also ensure that investment is more clearly focused on projects that work.
However, negotiators have agreed a fund, but are no closer to agreeing where the money will come from to pay in to that fund. The main issues for businesses will come when next year when governments begin to address which fund raising mechanisms should be used post-2012. It will be interesting to see if the negotiations can continue to move forward as smoothly when proposals such as levies on aviation and shipping are being discussed.
- 4. Carbon trading
Agreement: The Kyoto Protocol's Clean Development Mechanism (CDM) offsetting scheme will be strengthened and extended. In particular, Carbon Capture and Storage projects will be eligible for the scheme for the first time and registration processes will be streamlined to ensure emission reduction projects are approved quicker. There were also some indications the scheme could continue post-2012, despite on-going uncertainty over the future of the Kyoto Protocol.
Implications: A major boost for CCS projects in the developing world, but analysts in the carbon market remain concerned that the scheme is not being reformed fast enough and a number of key decisions are not now expected until next year. A lot still depends on the Kyoto negotiations. to be continued...