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Financial Crisis Dim Hopes Of New UN Climate Treaty

Posted on: Thursday, 2 October 2008, 06:25 CDT

The global financial crisis is dampening hopes for a robust new United Nations agreement to combat global climate change, analysts say. However, it may help foster some low-cost green initiatives, such as insulating buildings to save energy.

The crisis is straining government treasuries with bank bailouts and may weaken interest in additional costly projects such as renewable energies, refining biodiesel or burying heat-trapping carbon dioxide from coal-fired power plants, analysts say.

"There will be a shift in investments" toward efficient energy, said director of E3G think-tank Nick Mabey. Saving energy provides quick returns and can facilitate job creation.   

Last year, many governments were touting the fight against global warming as the world’s top long-term challenge, after the U.N. Climate Panel said the use of fossil fuels would result in more heatwaves, floods, droughts and rising seas.

However, with the United States now caught in a financial crisis that may cost taxpayers $700 billion to address, a new U.N. treaty to fight global warming in Copenhagen in December 2009 is looking more at risk.

German Foreign Minister Frank-Walter Steinmeier said Tuesday that market realities would likely hinder an agreement on climate change.  Indeed, last week U.S. Democratic presidential candidate Senator Barack Obama said he may be forced to trim down his planned energy investments.

"It's starting to weigh on peoples' minds that the whole process could go completely wrong," Mabey told Reuters. 

In the worst case scenario, negotiations could collapse, similar to the breakdown of U.N. discussions on trade.

"The problem of climate change is going to stick with us. But the pace and the scale of ambition may be less in the near term," Elliot Diringer, a director at the Pew Center on Global Climate Change in Washington, told Reuters.

"Hopefully the crisis will make us smarter in spending our money," said Bjorn Lomborg, who authored "The Skeptical Environmentalist".  Bjorn claims that many governments, such as Britain, focus too much on costly green projects.

However, some rudimentary carbon-saving projects may benefit from the current financial environment, according to consultants McKinsey & Co., who say  emissions-cutting initiatives such as improving vehicle fuel efficiency, installing building insulation and using efficient lighting and air conditioning could end up funding themselves through lower energy bills.

On the other hand, some policies, such as refining biodiesel, burying carbon dioxide or avoiding deforestation are among the most costly ways of slowing emissions, the consultants said.

Both Obama and Republican U.S. presidential candidate John McCain have vowed to do more to combat climate change than President George W. Bush, who called the Kyoto Protocol too expensive. 

The U.N. Climate Panel predicts the costs of reducing climate change at 0.12 percent of world gross domestic product to 2030.  

According to Diringer, the next U.S. president should re-frame the fight against warming as a way to end dependence on oil imports and as a strategy to aid economic recovery, with some revenues from future carbon trading potentially going to the Treasury.

The current financial crisis, the worst since the 1930s, may also mean less aid to developing countries, such as Brazil, China, India and Indonesia, to help reduce emissions from their growing economies.

Norway, who has led efforts to secure international donors to fund work to slow the burning of tropical forests, something blamed for 20 percent of greenhouse gas emissions, said it was still committed to help.

"We believe this is not an act of charity, this is an investment," said Prime Minister Jens Stoltenberg during an interview with Reuters, adding that the plan, includes up to $1 billion to Brazil to protect the Amazon.

Investments are still the right thing to do, according to Sven Teske, renewable energy director for environmental group Greenpeace.  The wind energy market was $37 billion in 2007 and added more than 19 gigawatts to the grid.

"Money would be better spent on this,” he told Reuters.

Lomborg warned that the pendulum could swing too far against taking action on climate change.

"There is a real risk that we could end up under-worrying about climate change just as we are over-worrying today," he told Reuters.

Source: redOrbit Staff & Wire Reports

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