The climate negotiations are warming up as we get closer to December when a global deal has to be sealed at Copenhagen. With the deadline approaching the great and the good, attending seminars in salubrious well-catered locations, are pressing the main contenders to back down from their entrenched positions.

There are two key stumbling blocks: the adequacy of the commitments on emission reductions by USA and the Kyoto Protocol members and the provision of finance and technology to developing countries for participating in the global mitigation effort.  In both areas there are some hopeful signs of change

The US House of Representatives recently passed the Waxman-Markey Bill which mandates a cap and trade system in the USA.  The proposed goals are a 17% on 2005 emissions by 2020 and 83% by 2050.  The Bill constitutes a unilateral commitment.  Yet it asserts that the US effort must include measures to ensure global participation in the mitigation effort and includes provisions for Border Trade Adjustments (BTAs) which are most likely inconsistent with WTO provisions. However, the Senate has not accepted the Bill and postponed consideration till after the August recess, which may mean that the USA will not be ready with a firm offer at Copenhagen.

Japan has offered a 2020 target which is 8% below the 1990 level of emissions for domestic actions. This is just 2% more that its accepted Kyoto target for 2012.  An election is due before September and the principal opposition party, which is ahead in the polls, has promised a much larger reduction.  The European offer of a 30% reduction on 1990 has been around for some time.

The G-8 meeting held recently marks a small advance in that the goal of 80% reduction by 2050 by the developed countries has been endorsed.  Until now the G-8 spoke only about a global goal of 50% reduction without indicating that the bulk of the effort would have to come from the developed countries.   But there is as yet no agreement on the base level for the reduction.  The two dates generally talked about are 1990 and 2005 and the choice makes a big difference as GHG emissions between these two years rose by roughly 25%.

Nobody is expecting China, India and the other large developing countries to take on commitments in the form of emission caps in the immediate commitment period to 2020.  But they expect Nationally Appropriate Mitigation Actions (NAMAs) from them.  There is no agreement on what these could be.  Some talk of a registry of measures, others of some announced efficiency goal say in the form of how much below business-as-usual their GHG emissions would be in 2020.  The communiqué of the recent meeting of the Major Economies Forum(MEF), in which both India and China are represented, has indicated that developing countries would undertake “actions whose projected effects on emissions represent a meaningful deviation from business as usual in the mid-term.”  No prizes for guessing where the careful phrasing came from!

The national plans announced by China and India go some way towards this.  The hitch is in meeting the requirement that the NAMAs should be “measurable reportable and verifiable”.  What will be measured, to whom will performance be reported and who will verify the accuracy of the reports?  The answers to these questions could well involve multilateral oversight of the national actions undertaken by all countries.

Until recently, India and China have stoutly resisted endorsing any long term goal.  In fact there is no agreement on how this goal should be formulated: as emission reduction (say 50% by 2050 on a 1990 base), as ambient GHG concentrations (say 450 ppm) or as likely temperature increase (say 2°C).  The recent MEF meeting, attended by India and China has endorsed the temperature goal.

In seminar circles it is being argued that emission caps are needed in developing countries after 2020 because even a total elimination of emissions by the developed countries is not enough to prevent ambient carbon concentrations from rising beyond 450ppm and generating a significant risk of a temperature increase  greater than 2 degrees centigrade.  Hence the acceptance of the 2°C goal may imply a willingness China and India to consider emission caps after 2020.

The other big issue is the compensatory finance for developing countries who undertake mitigation actions.  The British PM Gordon Brown recently spoke about the need to provide $100 billion a year and accepted that this would have to be beyond the promised aid flows under the 0.7% aid commitment. This implies alternative governance arrangements which would give the Conference of Parties of the Climate Convention greater say in the policy guidance for directing these flows.  If the EU, USA and Japan endorse this view then this will be an important advance.

Compensatory finance has been a feature of welfare economics and the prospect of a living breathing version of a textbook construct is inspiring a flurry of naive creativity, almost all of it based on the assignment of emission “rights” and trade in such “rights” to generate vast flows of finance from rich to poor countries.  Apart from the questionable concept of emission ”rights”, these proposals fail to recognise the realities of global power.  Any practical compensatory financing scheme must be adequate enough to generate the required effort, fair in its distribution of the burden of financing this effort, saleable to the legislatures of the countries who will have to provide the finance and perhaps also opaque to a degree to hide the transfer of resources to countries like India and China which are seen more as a threat then as victims in need of compensation.

The G-8 and MEF outcomes and the Gordon Brown speech represent a modest advance from entrenched positions.  The challenge now is to spell out the implications for the core issue of mid-term commitments for 2020 by the developed countries and the compensatory financing arrangements.  There are of course other issues like technology transfer, adaptation funding and forestry which still await signs of hope.  But the time has come for India to move from its starting point and indicate where and how it is ready to compromise.  A proactive policy to ensure success at Copenhagen will also help in getting Indian enterprises to recognise the emerging reality of a carbon constrained world and that establishing a presence in the low carbon technology space will be a major competitive asset.