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Kyoto Protocol: Marrakech and Beyond

Published: Monday, 26 November 2001

By K.Ravi

COP7 eclipsed by other news stories

One of the most significant events in the fight against global warming - unfortunately eclipsed by the ongoing war on terrorism - took place earlier this month. The Conference of Parties at its seventh meeting (COP 7) in Marrakech (Morocco), under the aegis of the United Nations Framework Convention on Climate Change (UNFCCC), finalised the operational details of the Kyoto Protocol. The protocol commits the world's industrialized countries to cut their greenhouse gas emissions, particularly carbon dioxide, by an average of five percent of 1990 levels, by 2012. The rules cover issues such as the penalties that countries which fail to reach their targets will face, how they can buy and sell the right to emit greenhouse gases, and the extent to which they would have to report on the amount of emissions they produce each year. Although the exact legal nature of compliance is still unclear, only those countries that agree to the rules are likely to be allowed to take part in emissions trading.

Countries will have the flexibility to choose between three alternative emissions credit mechanisms:

Buying and selling emission credits among industrialized countries through the emissions trading mechanism
Acquiring emission reduction units by financing certain kinds of projects in other developed countries
Financing emission reduction projects in developing countries and receiving credit through the Clean Development Mechanism

Certain contentious issues, such as the withdrawal of the US from negotiations, concessions on carbon sinks to Russia, the insufficient ban on deforestation, and the failure to kick-start a large-scale global program for renewable energy development are still pertinent for the ultimate success of the Kyoto Protocol. Nevertheless, the Marrakech agreement points the way forward for the Kyoto Protocol and is likely to have remarkable implications for the energy and environment businesses, both in developing and developed countries.

Fossil Fuels

Coal is a primary CO2 emitter

Even though the burning of fossil fuels like coal has been one of the major causes of greenhouse gas emissions, no one would expect it to disappear from the energy scene, primarily because it is the source of energy security for more than half of the worlds population. Technologies for CO2 capture and disposal, to achieve 'clean fossil energy' are likely to gain ground. Several industrialised countries already run programs for the development of clean coal technologies and the Marrakech agreement would give them the opportunity to undertake projects abroad, to offset domestic emissions. (See related article: coal gasification)

Combined Cycle Gas Turbine (CCGT) power plants will continue to maintain their preferred status due to very high efficiencies and low emission levels. Although the potential for switching over to natural gas is very high for both developed and developing countries, availability of domestic resources would be the overriding factor.

Renewable Energy

Though the Kyoto Protocol does not give an elaborate blueprint, the renewable energy industry is showing strong signs of growth. With continuing economic development and growing energy needs, there is an increased realization among developed countries that energy efficiency alone will not help them meet their emission targets, and this has turned their attention toward renewable energy. The fact that renewable energy still accounts for less than one percent of all the energy produced worldwide illustrates the untapped potential of this energy source. Though factors like high initial costs, subsidies for fossil fuels (in certain countries), and lack of access to capital are the major impediments for market development, the post-Marrakech scenario would push the major participants toward arriving at an optimum energy mix, with renewable energy having a significant share. This would help in maturing renewable energy technologies, thereby bringing down capital costs. The benefits of these developments will, in due course, spread to other developing countries also.

Conclusion

Marrakech should signify a turning point for the Kyoto Protocol and, in turn, for the many industries and market sectors that are likely to be impacted by its implementation. It has helped to send an unambiguous signal to businesses, local governments, and the general public that environment-friendly products and services will be recognized and rewarded by national and international policies alike.

Footnote - US, Kyoto and New Internationalism?

The fact that some of the major polluters including the Russia, Japan, Canada, Australia, and the EU, have all vowed at Marrakech to ratify the treaty by 2002, sounds encouraging. Nevertheless, the effectiveness of the Kyoto Protocol - in the light of Americas abstinence - will continue to be debated, given the fact that the U.S is still the engine of global economy and that it is also responsible for over a quarter of all the emissions worldwide. Even though the US has recently talked about sharing common objectives with the Kyoto signatories, actual tackling of emissions will still hinge on the extent of American involvement, inside or outside Kyoto protocol. It remains to be seen how the American multinational energy and environment companies, with interests worldwide, react to the unfolding scenario.

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