Over lunchtime, I was so surprised by the candicacy of the "behind-the-scenes" COP17 comments by Brazilian-born but German-reared politician, economist, civil servant and business executive Caio Koch-Weser (currently Vice
Chairman of the venerable Deutsche Bank) that I forgot all about lunch!
As you'll see from the link above, Mr Koch-Weser does not like to brag about his salary or the value of his estate. But looking at his CV, one could perhaps hazard a guess...
- Chair of the Global Climate Partnership Fund (a US$200 million Public Private Partnership, run by the German Ministry with equity capital to assume part economic risk
, and co-funded by Denmark and the International Monetary Fund - to help dev-nations Brazil, Chile, China, India, Indonesia, Mexico, Morocco,
South Africa,
The Philippines, Tunisia, Turkey, Ukraine and Vietnam reduce energy consumption and greenhouse emissions by at
least 20%).
- Executive Committee Chairman of the European Climate Foundation.
- Former member of UN
Secretary General Ban Ki-moon’s High Level Advisory Group on Climate Finance.
- Former Vice-Minister in the German Federal Ministry of Finance.
- Prior to that, World Bank top dog...
I'm deviating again. So let's get back to the nitty-gritty of what was discussed. The International Emissions Trading Association / IETA’s CEO and President, Henry Derwent (himself a former British Parliamentarian) pulsed Mr Koch-Weser about the potential fate of COP17 negotiations, and about the role of business in
making the $100 billion Green Climate Fund a success.
His thoughts are, we were led to believe, in line with proposals from a new
briefing “Durban Must Clear the
Path for Low-Carbon Investment” by Deutsche Bank - the world's most highly leveraged financial institution, which made a $3.3 billion profit last year, but was involved in a huge civil law suit this year for losing its customers money on a futures interest rate hedging scheme.
While Deutsche
Bank certainly stands out for the level of commitment and amount of work it's done to make climate finance work for the Bank's stakeholders, "we have a very long way to go," says Mr Koch-Weser. "Having COP as a client of the Bank's has helped us understand the level of resource
productivity we need, given the climate challenge."
While Deutsche Bank will be carbon neutral by next
year, it is not only reputation that's at stake, he says, "but moreover,
to have a business the day after tomorrow.“
“Germany has leading experience in policy for some of the largest scale projects in the world, and although
South Africa is lagging behind, the country has shown great leadership in saving the COP process, which could easily have failed after Cancun, and I commend President Jacob Zuma for that."
His framework for a successful climate change regime is based on the TLC concept of transparency,
longevity and certainty. "Governments and business must get over their suspicion of each other, and together get fit for implementing the Green
Climate Fund," he goes on to say.
The GCF will reflect at country level through NAMA’s (Nationally Appropriate Mitigation Actions that are by-country greenhouse gas emission reduction targets). "The role of business would be to contribute directly to the GCF or NAMA targets with the World
Bank’s support, to ensure the world does not endure another failing of the CDM [clean development mechanism] scenario, and banks need to put in the correct instruments and
guarantees," says Koch-Weser.
"It is the International Finance Corporation's role to assess risk and the scenarios for mezzanine, private and international financing. For developing nations, where taxpayers cannot afford to foot the bill, an interim financing net is needed."
Mr Koch-Weser, who has engaged with 16
of the world's top Finance Ministers at COP, and the likes of vocal climate change activist Nick Stern (noted for producing films such as Bugsy Malone and The Mission)
, says there has been respectables outcome so
far at COP17, especially now because the financial leaders of the worlds are fully engaged in the process.
"Instead of UN multilateral trade grants, we are bringing the private
sector in," says Koch-Weser. "The UN Chairman and Norwegians did not do enough. SA Minister in the Presidency Trevor Manuel (who co-chairs the Green Climate Fund) has picked up many ideas. There is a richness of proposals, but a lot of
process disagreement in terms of the private sector and World Bank's role at COP17, which has
made a lot of good ideas fall through."
Mr Koch-Weser continues: "Due
to the laborious UN democratic process and bottom-up coalitions, we as business globally are not waiting for governments to agree on climate change actions. We must push ahead with action. Also, the agreement on the Fund as we envisioned it, was not fully taken on board
– very disappointing."
He says a comparable
concord between World Bank and G20 countries is in doubt as there is an impossible range of issues (not
just climate) being tabled at G20 discussions (including agriculture and food security) but the financial crisis sweeping through Europe and the US may hamper any progress.
Mr Koch-Weser described the "power that be" thus:
Maximum
legitimacy: governments and the UN with its democratic processes
versus
Maximum efficiency: financial institutions or the
G20 – slated to become the G8.
"The G20
lifted to HEPS level becomes more PR than effect," he exclaimed. "The coalition was composed to serve
markets, but is now right to tackle the climate issue with force."
How
to eliminate suspicion of the private sector for funding?
Mr Koch-Weser is of the opinion that the Global Climate Fund can easily become overly
bureaucratic, rendering it ineffective. He says Minister Manuel, who was on the discussion group, is not overly optimistic
of the GCF's success - hence the case for other finance instruments.
As many have said during COP17, he reiterated that a
lot of good single case studies of climate mitigation and adaptation success stories were brought forward, but nothing close to scaling up solutions for a global solution, mainly because countries and legislation differ so.
"Banks want project developers to
deal with this challenge," says Koch-Weser. "A lot of other discussions on climate funding are in
the $7-12bn range, so GCF's $1bn is very conservative. Unfortunately
it looks as if the Chinese are walking away due to the complication of issues among
countries."
How
can we create prices and incentives to boost change?
"An agreement on carbon price and tax are
central, which will then shuttle down to NAMAs (nationally appropriate mitigation actions) and feed-in tariffs at country level. People spending
their time promising short-term (3-4 year) stability are wasting their time," says Koch-Weser.
"Energy
efficiency in our dirty processes seems like a low-hanging fruit - it is a negative cost
if you fix your processes but that is an agent issue. Demand must be driven by
policy and incentives."
Why
so suspicious of markets?
"More countries now have that internal debate.
Consumer product and business is now pretty clearly broadly defined - and that is where the change should be driven. Business should be going to its
regulator and demanding policy to satisfy its needs," he says.
"Climate-smart solutions for
super grids can be driven by business, with a full plan and budget self-sufficiently ready. In consumer
goods, energy, transport - the same rules apply. Don’t go to report to the UN, but to launch your
own solutions!"
"Haven't you noticed that the side-show
at COP is private sector and civil society? Because at COP nothing is happening.
I know there are many political obstacles but where is most energy and
innovation?" - Koch-Weser
"The bottom-up
emphasis in science and research shows it works better, especially in the developing
world. Business leaders are saying forget global frameworks: a carbon footprint of 450 CO2 ppm or 2
degrees lower will not be reached in this way," he continues.
"Frankly, it is a much bigger discussion - migration to water and food security and governments are not on top of
these issues. Procedural democracy (voting instead of debate) is done by
government officials who mostly have never seen real life. I would start with
the cement industry, consumer goods which are closer to consumer behavioural
change, and drive business backing from there on."
Rio+20
is like an answer looking for a question
"We as business could use the upcoming Rio+20 conference as a new message transfer for bottom-up approach to business coalitions,
provincial and cross-country coalitions," he says. "There is still very
little framework on responding on climate issues in a unified way in the UN."
Suggestion
to Chinese private sector on how to make demands heard to huge government who
run everything?
China has developed an excellent bottom-up solution to climate change: a social plan, involving local governments, seven Cap and Trade regimes and energy efficiency standards.
"China has a great government structure
and vast experience," says Koch-Weser. "The next generation of China will have a very different mind-set and
the party has the wisdom to bring in the new highly trained modern thinkers and
allow more participation by community members."
Where
will COP17 get by Friday?
"The outlook is more optimistic than I expected - it certainly was better than Cancun where the UNFCCC democratic process nearly
failed completely," he concludes.
These are Koch-Weser's salient take-outs from COP17:
1.For the EU
to go ahead with the Kyoto Convention, amid so many countries leaving, is quite
remarkable
2.
I think China will achieve their own targets and is considering its own
commitment targets for 2020.
3.
Brazil is in a renewable-friendly space with hydro, ethanol, solar, but negligent on
forestry.
4.
India is the big puzzle: emitting only 3-4 tonnes per person per year, why should they have
binding commitments? It doesn’t make sense for India to do it the wrong way, though.
5.
South Africa: Zuma and his Ministers play a critical role in pushing BASIC countries
in the right direction, and for that I commend them!
