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PwC on Durban Climate agreement.

Climate

Durban: The UN Climate Summit agreement is a victory for the process more than climate change says PwC.

Below, PwC's sustainability and Climate Change team analyse the key issues, implications and next steps for The Durban Platform for Enhanced Action.

  • A road map and an ambitious timetable, but the precise destination remains unclear
  • Overall, business will shrug its shoulders over Durban and wait for direction from national capitals.
  • Durban will be remembered as the birthplace of the Green Climate Fund
  • No surprises about countries signing up to targets under a second Kyoto period, or what those targets are

OVERVIEW

Jonathan Grant, PwC sustainability and climate change: "What we've got is a clear signal that may be another clear signal in 2015. So Durban was more of a victory for the UN process, than for the global climate. Look at the targets and follow the money. There is no more ambition here than what we saw in Cancun or even Copenhagen. Overall, business will shrug its shoulders over Durban and wait for direction from national capitals."

Richard Gledhill, partner, PwC sustainability and climate change said: "While we now have a road map and an ambitious timetable, the precise destination remains unclear. Even the length of the second commitment period under the Kyoto Protocol was parked. Many countries had wanted five years to 2017, but this would be inconvenient for the EU, with its 20% reduction target by 2020.

"There is still a 40% gap between the 2 degrees climate goal and emissions targets through to 2020. Reaching 2 degrees will require a revolution in how we produce and use energy."

THE GREEN CLIMATE FUND

The fund is one of the major distribution channels for the US$100Bn/yr by 2020 that has been pledged. Initial contributions to the setting up the fund were made, and design and governance arrangements were agreed. There will be a balanced allocation of funding between adaptation and mitigation, and a dedicated private sector facility that can directly and indirectly finance private sector adaptation and mitigation activities. A GCF Board will meet for the first time in April 2012.

Celine Herweijer, director, PwC sustainability and climate change said: "Durban will be remembered as the birthplace of the Green Climate Fund; it's a critical outcome, particularly for developing countries. It provides a structure for funding to become more ambitious, coherent, effective, transparent and accountable, all of which will be critical during a period of increasing aid austerity. It will help to mobilise new sources of funding including from private sources, and to ensure we spend wisely and can demonstrate real results with the money we have.

"Getting this right and doing so quickly is imperative, as much of the transformation we will need to limit future growth in greenhouse gas emissions must happen in developing countries, and as these are the areas on the front-line of climate impacts.

"In 2012 we will also have to really turn our focus and will onto capitalising this fund, so that it is more than an empty shell. We'll need to get early progress on new sources of finance for climate change. US$100Bn/yr is no mean feat, especially in the trying economic climate we are in today."

Richard Gledhill, added: "The COP has made good progress towards operationalising the Green Climate Fund and a number of donors have pledged start up funds. But there was little progress on the real issues — where will the money come from and where and how will it be spent. It is difficult to see Western donors writing big new cheques in the current financial crisIs.

"Moving forward, it will be critical to link the existing landscape of bilateral and multilateral initiatives, such as those in the UK and Norway, with the new Green Climate Fund, to ensure we make life simpler for developing countries, and ensure aid effectiveness."

PRIVATE FINANCE AND MARKETS

Richard Gledhill, commented: "The private sector had been concerned about the negative attitude of some countries to markets and private finance, and lobbying by NGOs in the first week raised the pressure on these issues. But after three long nights of negotiating, the Durban texts leave the door open for private finance and new market based approaches.

"If we are really going to un-lock private finance and capabilities to help tackle the climate challenge, we need the private sector involved at the heart of designing these mechanisms — feeding back on what works and what does not."

CARBON MARKETS

Jonathan Grant said: "There are no surprises about which countries signed up to targets under a second Kyoto period, or what those targets are. So we don't expect much movement in the carbon market following Durban. For the carbon markets, what happened in Brussels last week, is more important than what happened in Durban.

"The CDM can continue, but demand for credits for these projects is lacklustre.

"Thanks to Durban, the CDM will live to see another day. A lot of developers and traders have been scaling back activities over the last year, so this is good news for London. But carbon markets are expected to stay in the doldrums, because of oversupply in the EU Allowance market as a result of the recession."

REDD+

Richard Gledhill, commented: "Avoided deforestation is a critical issue for the global climate and a key economic issue for many developing nations. The private sector has been working hard to help progress the REDD+ negotiations. The Durban Platform will provide a boost to emerging private sector activity in REDD+ — results based finance can come from both public and private sources, subject to necessary environmental and social safeguards. But private funding is constrained by the small scale of the voluntary carbon market and the ineligibility of REDD credits in the EU. Public money needs to be used here to pump prime markets and to scale up private sector involvement."

AGRICULTURE

Celine Heweijer, commented: "We now have agriculture back in the text, but not quite the agreed climate and agriculture work program on adaptation and on mitigation that many, including President Zuma, were hoping for. Rather, we have a process to make recommendations on a process.

"Agriculture is the backbone of Africa, and the largest sector of the economy by GDP, number of employees and exports. So-called 'climate smart agriculture' practices can bring food security, adaptation and mitigation benefits, yet. finance and technological support is lacking to transform agricultural systems.

"A lack of recognition of agriculture in the climate negotiations hasn't helped so far, with the issue missing from the climate text before Durban. African countries have really galvanised in order to make progress at the summit this year. It's a good start."

DELIVERING ON DURBAN — KEY PLAYERS

Richard Gledhill said: "In the crucial next stage of the negotiations, to get an agreed outcome with legal force by 2015, the key players will be China, the EU, India and the US.

"After being sidelined at Copenhagen, Europe is now back in the driving seat on the climate agenda — its roadmap was the key to the deal in Durban, and its funding commitments are starting to deliver results in the developing world."

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