1. Policies to Counteract Global Warming Financial Markets can Overcome the China – US Impasse Graciela Chichilnisky UNESCO Professor and Director, Columbia Consortium for Risk Management Columbia Consortium for Risk Management Columbia University, New York UNCTAD Expert Meeting on Trade and Climate Change: Trade and Investment Opportunities under CDM Geneva, April 27 2009

2. Global Warming Signals Antartica – Melting glaciers and ice sheets Antartica – Melting glaciers and ice sheets

3. Global Warming Signals Permafrost melts - Alaska sinks Permafrost melts - Alaska sinks

4. Changing human settlements

5. Melting glaciers - Antartica

6. Melting ice sheets Antartica

7. Melting ice Antartica

8. Patagonia - Melting glaciers

9. Global Warming Signals Outbreak of malaria in Africa Outbreak of malaria in Africa

10. Global Warming Signals China’s industrial growth China’s industrial growth

11. Global Warming Signals Desertification of 25% of China land mass Desertification of 25% of China land mass

12. Global Warming Signals Australia’s longest draught on record Australia’s longest draught on record

13. Global Warming Signals Solar farm in Spain Solar farm in Spain

14. Water Warning Colorado River dries up - 2002 Colorado River dries up - 2002

15. Water Warning Lake Mead’s record low - water to Las Vegas Lake Mead’s record low - water to Las Vegas

16. Fires from drought - 2006

17. Endangered Primates

18. Endangered Sea mammals Sea mammals

19. Endangered

20. Disappearing

21. Disappearing

22. Summary The world today – the Kyoto Protocol The world today – the Kyoto Protocol Financial Markets Role: Carbon Market + Financial Markets Role: Carbon Market + Energy Limits and Future Global Needs Energy Limits and Future Global Needs China - US Impasse China - US Impasse Organizing Principles: Three Building Blocks Organizing Principles: Three Building Blocks Derivative Markets can Overcome the Impasse Derivative Markets can Overcome the Impasse Next Generation Kyoto Protocol Next Generation Kyoto Protocol

23. The world today The Kyoto Protocol created the first global agreement on energy use, 1997 The Kyoto Protocol created the first global agreement on energy use, 1997 International Law in 2005 International Law in 2005 Industrial Nations agreed to limit their CO2 emissions and reduced targets by 2012 Industrial Nations agreed to limit their CO2 emissions and reduced targets by 2012 Introducing KP Carbon Market - I helped create a $30B carbon market in 2006, $50B in 2007 Introducing KP Carbon Market - I helped create a $30B carbon market in 2006, $50B in 2007 $25-30 per ton: carbon price signal -- major economic incentives for Clean Energy $25-30 per ton: carbon price signal -- major economic incentives for Clean Energy But only a first step But only a first step

24. The Kyoto Protocol Has no limits on developing nations’ emissions Has no limits on developing nations’ emissions that represent 30% of global emissions – China is 18% that represent 30% of global emissions – China is 18% KP Clean Development Mechanism (CDM) created major financial incentives for clean energy investment in developing nations KP Clean Development Mechanism (CDM) created major financial incentives for clean energy investment in developing nations $8B in CDM project in 2006 and $15B in 2007 – 20% reduction EU emissions $8B in CDM project in 2006 and $15B in 2007 – 20% reduction EU emissions China 60% China 60% Carbon market - the largest commodity market in the world? Carbon market - the largest commodity market in the world? Market Solution with Equity Two sides of the Coin

25. The Kyoto Protocol Only a First Step KP’s provisions end in 2012 KP’s provisions end in 2012 Like Cinderella, it turns into a pumpkin Like Cinderella, it turns into a pumpkin By design By designAdditionally: As the USA does not participate KP lacks control on 31% of global emissions As the USA does not participate KP lacks control on 31% of global emissions Lacking limits on developing nations’ emissions hinders US participation Lacking limits on developing nations’ emissions hinders US participation US - China Impasse US - China Impasse

26. Progress in USA Economic incentives of Kyoto Protocol are enormous. Many in the US want part of them, Obama wishes to ratify Kyoto. Economic incentives of Kyoto Protocol are enormous. Many in the US want part of them, Obama wishes to ratify Kyoto. California wants to participate in KP emissions markets – and hundreds of cities and towns California wants to participate in KP emissions markets – and hundreds of cities and towns US Supreme Court agreed Fall 2007 that Federal government can enforce emissions limits US Supreme Court agreed Fall 2007 that Federal government can enforce emissions limits It is generally accepted that global businesses (e.g. automobile industry) may benefit from KP guidelines, and could suffer economic losses without the benefit of KP economic incentives at home It is generally accepted that global businesses (e.g. automobile industry) may benefit from KP guidelines, and could suffer economic losses without the benefit of KP economic incentives at home

27. The Future Global Needs Emissions Limits for Developing Nations? Emissions Limits for Developing Nations? USA participation in the Kyoto Protocol process USA participation in the Kyoto Protocol process A US led Climate Agreement? A US led Climate Agreement? The world needs more energy

28. To move forward in the global negotiations Must overcome China – US Impasse The interests of the industrial and developing nations are so opposed that Once again, we need a two - sided coin

29. Organizing Principles A way forward that involves Clean Technology Transfer Clean Technology Transfer Future Emissions Reductions by Developing Nations, China + India: Article 4 UNFCCC Future Emissions Reductions by Developing Nations, China + India: Article 4 UNFCCC CDM as a foundation of a major technology - driven financial investment 60% benefits to China CDM as a foundation of a major technology - driven financial investment 60% benefits to China

30. Two Building Blocks Modest extension of CDM – New Negative Carbon Technology - Efficient Carbon Capture + Storage Technology specifically favorable for developing nations with low emissions (Africa & LA) Nature 2008- Science 2009 Modest extension of CDM – New Negative Carbon Technology - Efficient Carbon Capture + Storage Technology specifically favorable for developing nations with low emissions (Africa & LA) Nature 2008- Science 2009 Powered by renewables (solar CSP power plants) New Financial Mechanism modest extension of carbon market can reproduce in financial terms Article 4 of UNFCC -- while providing the equivalent of limits on developing nations emissions

31. Blueprint for Sustainable Development Clean and Abundant Energy available worldwide Clean and Abundant Energy available worldwide Supporting sustainable growth in developing nations Supporting sustainable growth in developing nations Providing a global market for industrial technology Providing a global market for industrial technology Transforming fossil fuels into a clean alternative Transforming fossil fuels into a clean alternative Solar thermal sources of energy that reduce atmospheric carbon concentration Solar thermal sources of energy that reduce atmospheric carbon concentration Investment to renovate the $43 trillion power plant industry worldwide (IEA) Investment to renovate the $43 trillion power plant industry worldwide (IEA)

32. Global Energy Today 89% fossil – gas coal, oil 89% fossil – gas coal, oil 10% nuclear, geothermal and hydroelectric 10% nuclear, geothermal and hydroelectric Less than 1% solar power – photo-volteic and solar thermal. Less than 1% solar power – photo-volteic and solar thermal.

33. The Long Run Only renewable sources of energy will do Only renewable sources of energy will do Wind, Biofuels, Nuclear, Geothermal, Hydroelectric energy – all in limited supply cannot replace fossil fuels Wind, Biofuels, Nuclear, Geothermal, Hydroelectric energy – all in limited supply cannot replace fossil fuels Only solar energy can Only solar energy can Less than 1% of the solar energy we receive can be transformed into 10 times the fossil fuel energy used in the world today Less than 1% of the solar energy we receive can be transformed into 10 times the fossil fuel energy used in the world today

34. Long Run v. Short Run They require different policies They require different policies Long run strategies do not work for the short run Long run strategies do not work for the short run Yet any short term strategy must accelerate renewable energy Yet any short term strategy must accelerate renewable energy Or will defeat long run goals Or will defeat long run goals

35. Short Run: the next 10 years No time to transform the entire fossil infrastructure – it costs $43 trillion (IEA) No time to transform the entire fossil infrastructure – it costs $43 trillion (IEA) Negative Carbon: Reduce carbon in the atmosphere now Negative Carbon: Reduce carbon in the atmosphere now CSS works but does not suffice CSS works but does not suffice ‘Air capture’ and solid storage – too expensive? ‘Air capture’ and solid storage – too expensive? Combine air capture with solar thermal electricity: more electricity and reduce carbon Combine air capture with solar thermal electricity: more electricity and reduce carbon

36. Economic Incentives We need economic incentives for the Short and the Long Run We need economic incentives for the Short and the Long Run The Next Generation Kyoto Protocol post 2012 The Next Generation Kyoto Protocol post 2012 Bringing aboard US and the developing nations G77 – China and India Bringing aboard US and the developing nations G77 – China and India

37. Innovative Derivative Market A derivative market based on the Kyoto Protocol carbon market – calls and puts A derivative market based on the Kyoto Protocol carbon market – calls and puts Can overcome China – US Impasse Can overcome China – US Impasse Based on 1992 Climate Convention Article 4 Based on 1992 Climate Convention Article 4 A market solution with equity A market solution with equity The two sides of a coin The two sides of a coin

38. Blueprint for Sustainable Development Private/Government approach, based on industrial technology and financial markets’ leadership Private/Government approach, based on industrial technology and financial markets’ leadership Self - funded and highly profitable derivative markets – carbon credits is the ‘underlying’ Self - funded and highly profitable derivative markets – carbon credits is the ‘underlying’ Based on the Kyoto Protocol CDM - or successors Based on the Kyoto Protocol CDM - or successors Providing abundant Clean Energy to stave off impending Energy Crisis in developing nations Providing abundant Clean Energy to stave off impending Energy Crisis in developing nations Mutually beneficial cooperation for industrial and developing nations Mutually beneficial cooperation for industrial and developing nations The two sides of the coin

39. UNCTAD Capacity Building Meeting Modest extensions of CDM - Accreditation for Negative Carbon Technologies that make CDM investments accessible to low emissions nations – Africa & LA - cogenerate electricity & carbon capture – regional distribution of CDM Modest extensions of CDM - Accreditation for Negative Carbon Technologies that make CDM investments accessible to low emissions nations – Africa & LA - cogenerate electricity & carbon capture – regional distribution of CDM Financial Mechanism - modest extensions of carbon market that resolves Impasse on Emission Limits from Developing Nations - implementing Article 4 of the UNFCCC Financial Mechanism - modest extensions of carbon market that resolves Impasse on Emission Limits from Developing Nations - implementing Article 4 of the UNFCCC