As a kid in Milwaukee, my parents told me that Santa would leave coal in my stocking if I was naughty. As the post mortem of Copenhagen is written, was it a lump of coal in our 2009 holiday stocking — or could this global chunk of carbon actually be a diamond in the rough?
For the past three years, over half the states in the U.S., along with states/provinces in Canada, China, Mexico, Brazil, and Indonesia, have been acting like nations under the U.N.’s Kyoto Protocol for climate change policy. States like California have adopted laws and action plans, including the creation of a massive cap-and-trade carbon market (launching in 2012), that will cut carbon emissions to 1990 levels by 2020 and 80 percent below that by 2050 — in line with U.N. goals. These “sub-nationals” didn’t wait for their national governments to act.
President Obama has now taken a page from that playbook by recruiting China, India, Brazil, and South Africa to take carbon-cutting action without waiting for the U.N. and the other 187 countries. This Gang of Five has effectively broken the “you go first” stalemate, because they have committed to figure out domestically what can be done — based on what a majority of their states/provinces are doing already — and put those pledges on the table next year. If those commitments, plus the work that Europe and others are already doing, adds up the goal of preventing a rise in average global temperature of 2 degrees centigrade, that’s the defacto new global climate agreement. If the individual pledges come up short when taken together, the world will know how much more needs to be done and can look at strategies to fill that gap. Either way, the first fundamental steps will have been taken — thanks to the commitments of states and provinces.
The Gang of Five may also have done the world a favor by blowing up the U.N. process in Copenhagen, because it cleared the way for parallel international alliances to blossom. California Gov. Arnold Schwarzenegger announced the creation of the R20, a new “sub-national U.N.” (starting with 20 regions of states/provinces/cities) that will coordinate the work of these climate leadership governors and mayors, but with a major difference from the old U.N. The R20 will set high standards for cutting carbon and creating green economies, then invite others to join — if they can meet the same goals. By contrast, the U.N. has struggled because it needs every nation in the tent and can only get things done when all 192 agree — something that rarely happens unless goals are watered down to the lowest common denominator.
So what does this mean to businesses, investors, and consumers? Carbon will have a price globally by 2012. Period. Much of that cost will be offset by reductions in energy bills, because of efficiency improvements and deployment of renewables (after you pay back the cost of a solar panel, for example, electricity is free), but the price of everything will change — some going up and others going dramatically down. Copenhagen may have failed on some levels, but it succeeded in sparking the moves by the sub-nationals and the Gang of Five to ensure at least that fundamental result.
Although I was a pesky little kid, I never actually found coal in my stocking. Given the results in Denmark this month, the future uses for coal may well be limited to this kind of holiday humor — and our environment and economies will be the better for it.