Copenhagen Climate Conference

A truly fascinating session in the COP15 Bella Centre was staged by The Club of Madrid earlier today.

As an organisation with a small galaxy of former heads of government as members, they bring significant experience, knowledge, influence and respect to an event. They didn’t let us down today.

Broadly, their position can be summarised with the words ‘private financing as well’. As US Senator Timothy Wirth said, “The Copenhagen focus is on public money. There is almost no reference to the private sector. How can we mix the two?”

With the total cost to develop and introduce the kinds of technology required to keep temperature rises at the stated goal of 2 degrees or less, running – potentially – into the hundreds of billions of dollars, the public purse cannot be left to pay alone.

Senator Wirth continued, “The purpose of this meeting is to open the door for discussion on the subject”.

Meeting Chair, Mohamed El Ashry, explained that the hundreds of billions of dollars might actually be trillions over the years. He said that with such large numbers, “private investment must be at the front”. He feels that there is “no shortage of capital” but the real challenge is to find ways to mobilise that capital, with a focus on developing nations.

El Ashry highlighted four requirements that will be required for this mobilisation to occur. They are:

– A national framework for policy direction so that businesses and investors can make long-term decisions based on expected future policies

– A carbon price that is based on sound regulations

– Policies to make investment possible (things like property rights and transparency)

– An improvement in public funds to help incentivise private investment

The session contained a brief intervention from the President of the Club de Madrid, former Chilean President Ricardo Lagos. President Lagos explained his hopes that a voluntary agreement can become binding as a way to break the current deadlock in negotiations. He fears that any agreement from this summit could leave “middle income” nations (those that do not qualify for international aid) with no financial assistance.

As in any discussion about markets, the real meat of the session came from a banker. Tracy Wolstencroft, representing Goldman Sachs, described the “amount of capital required as likely to make this the largest emerging market to date”.

He described the fundamental requirements for any carbon market to work for participants as being the imposed cap to support price and price stability to enable corporations to hedge into the future and make decisions based on some sort of platform. To do this, carbon markets must be created by the public sector. However, as businesses will likely pass on their additional costs to the end consumer, an understanding of what costs the consumer can bear are vital.

If all this sounds gloomy so far, Mr Wolstencroft reiterated an investment tenet, that “capital wants to find a way to invest”. There might be hope after all.

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