By Rt Hon John Gummer

Sunday, 01 April 2012

The attention of much of the Arab world has recently been focused on the landmark Arab League summit, held between 27 and 29 March, the first to be held in Iraq since 1990. Going forwards, however, preparations are already underway for an even bigger, global conference later this year that will focus the eyes of the globe once again upon the Arab world, specifically Qatar.
When it was announced that Qatar, rather than South Korea, would host this year’s U.N. climate change conference in December, many were exasperated. Would it really be a good idea for climate change negotiations to be in the hands of a state whose economy is so dependent on selling fossil fuels and that has the highest greenhouse gas emissions per capita in the world?

My answer to this question is a resounding yes. The 18th Conference of the Parties to the U.N. Framework Convention on Climate Change (or COP18 in the jargon) is the first step in a 4-year negotiation process towards a new, legally binding international deal to take effect by 2020. The fact that these negotiations will take place in Qatar presents an opportunity to engage with a constituency – the oil-rich Gulf States – that is fundamental to the success of any long-term strategy to tackle climate change and yet, until now, has been at best largely ignored or, at worst, demonized.

Qatar, state of just 1.4 million inhabitants and with one of the world’s highest GDP per capita due to vast reserves of oil and gas, has been making a concerted effort to impress on the world stage. It has played prominent mediation roles in Western Sahara, Yemen, Ethiopia and Eritrea, Somalia and Sudan. In 2001 it initiated the “Doha round” of talks under the WTO to try to break the deadlock in these complex negotiations. And, more recently, it was announced that this state would host the 2022 FIFA World Cup. Qatar will undoubtedly be looking to make an impact on the climate negotiations.

So, how could the Qatari government make a difference on climate change? By making a game-changing investment in the development of carbon capture and storage (CCS), the technology to capture CO2 emissions from the burning of fossil fuels and storing them underground. It has the motive and the money. And the Qataris would receive huge international kudos. China, a country with the highest greenhouse gas emissions (and increasing rapidly), is the perfect partner.

Fossil fuels are likely to remain a major part of the global energy mix for decades. Without a way of reducing the impact of burning fossil fuels on our climate there is no credible scenario under which the international community can reduce emissions of greenhouse gases sufficiently to limit global average temperature rise to 2 degrees Celsius, the agreed goal under the U.N. negotiations. And yet, so far, progress to demonstrate and deploy CCS technology at scale has been painfully inadequate.

CCS technology is not yet mature and is expensive. In the long-term CCS will be viable if it is cheaper to capture and store the CO2 emissions than to release them into the atmosphere. This means there must be a sufficient cost imposed on installations that emit carbon. Estimates suggest that, once CCS technology is mature, a carbon price – the cost of emitting carbon into the atmosphere – of between $44 and $103 will be sufficient to make CCS viable. Although the current price of carbon in the EU (the world’s major carbon market) is around 9 (12), a tightening of the cap on emissions from 2013 means that a sufficient carbon price in the EU is a distinct possibility.

If one takes into account recent laws and proposals to set up carbon markets in Australia, China, Mexico, South Korea and California in the U.S., it is not too much of a leap to imagine a price of carbon high enough to make CCS viable across a range of countries. The problem is not that CCS isn’t viable in the long-term; the problem is that, in the short- to medium-term, it is going to require big capital investments to build the commercial scale demonstration projects that will help to bring down the costs to a long-term equilibrium. Until now, with a lack of regulatory certainty about the future price of carbon and the fiscal challenges to governments and businesses in the economic downturn, investments have not been forthcoming on the scale required.

This year could see the planets align.

First, on the fossil fuel supply side, Qatar and the other Gulf States have a motive. CCS is a great technology for countries that sell fossil fuels. It allows the burning of these fuels in a way that does not damage the climate, thus potentially prolonging the life of the markets for fossil fuels, even in a highly carbon constrained post-2020 world.

Second, on the demand side, China’s production of a fossil-fuelled power station a week offers the opportunity to bring down costs fast. And with coal and oil-dependent China likely to take on some form of emissions reduction target under a post-2020 climate change deal, it is now in China’s strategic interest to commercialize this technology quickly.

Finally, the regulatory outlook is more certain. Before the most recent round of U.N. negotiations in South Africa in December, many commentators thought that the legally binding nature of the UN process would dissipate when the Kyoto Protocol’s first commitment period expired in 2012. Durban changed that. The Kyoto Protocol was extended and there was agreement from all countries to begin negotiations on a legally binding agreement for the post-2020 period and to complete those negotiations by 2015. So it is now more likely that there will be stricter carbon constraints on all major countries after 2020, reducing the regulatory risk of investment in CCS.

Qatar and fellow supply countries, either through their massive Sovereign Wealth Funds or other means, should take the opportunity to commercialize a technology that is essential under any scenario that limits global average temperature rise to 2 degrees Celsius. China, with its increasing reliance on Middle Eastern oil, is keen to strengthen its relationships with key supply countries, as evidenced by Premier Wen’s visit to Saudi Arabia, UAE and Qatar in January, and will be thinking strategically about how it will power its economy whilst taking on post-2020 carbon constraints. The added bonus for both countries is that, once commercialized, CCS technology will be exportable around the world, creating jobs and wealth in a new low carbon industry.

The opportunity is clear. Qatar, as hosts of COP18, will be looking for something symbolic. This could just be it.

(Rt Hon John Gummer, Lord Deben, is President of Global Legislators Organization (GLOBE) and former UK Secretary of State for the Environment)