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For Progress at Cancun Climate Conference, the Focus Should be Oil

December 6th 2010

Contributors / Staff - Gal Luft
Gal Luft

Last week, climate negotiators convened in Cancun, Mexico, in a renewed effort to reach an international agreement on reducing greenhouse gas emissions. Unlike environmentalists' optimism before last year’s summit in Copenhagen, the expectations from this year’s UN Climate Change Conference are remarkably low. Climate champions like President Obama, Secretary of State Hillary Clinton, House Speaker Nancy Pelosi and Chairman of the Senate Foreign Relations Committee John Kerry, all of whom rushed to icy Copenhagen last year, won’t be this year in sunny Cancun. Even the indefatigable Al Gore is staying home.

This is hardly surprising. After all, the barriers to reaching a binding treaty have only grown higher since Copenhagen: China became the world’s largest energy user and the largest auto market. Its increased need for hydrocarbons means an even stronger pushback against mandatory emissions reductions. Europe experienced a mild economic heart attack which turned attention inward, dampening the enthusiasm for a costly green revolution. And the results of the mid-term elections in the U.S. have killed any chance of a climate bill reaching President Obama’s desk. Under such conditions can Cancun deliver any meaningful accomplishment? Possibly, but only if an entirely new strategy is adopted.

The lesson from Copenhagen is that developing countries are unwilling to put their economic growth on hold until the world comes up with economically competitive alternatives to coal-fired electricity. Rich countries' attempts to push the poor to thwart the expansion of coal use only generate antagonism. What is needed to deliver results is a unified agenda that can be embraced by rich and poor countries alike.

Such commonality of interest cannot be found as long as the focus remains on coal, the main source of electricity for the world’s top three emitters – China, the U.S. and India. Coal makes 40 percent of U.S. fuel mix, 50 percent of India’s and 70 percent of China’s. All three economies, together responsible for half of the world’s carbon emissions, recognize the health costs and global warming impacts of high level coal consumption, but in times when economic calculations trump planetary concerns the three countries, all owning vast coal reserves, have no real economic interest in curtailing their coal use.

The same cannot be said about oil. The top three emitters depend on oil for more than 90 percent of their transportation energy and import more than half of their needs. For all three, oil's transportation fuel monopoly poses an economic liability while coal use for power generation does not. Consider this: the annual U.S. coal expenditure for electric generation is roughly $30 billion, and because the U.S. does not import coal most of this money remains in the U.S. economy. America's oil bill, on the other hand, is over $600 billion – twenty fold – and most of it leaves the U.S., accounting for half of U.S. trade deficit while enriching some of the world’s worst regimes. In China and India, too, the national expenditure on coal is much lower than oil.

Furthermore, oil is economically destabilizing while coal is not. Unlike the electricity sector where multiple sources of energy can contribute to the grid, in transportation, oil has a virtual monopoly. With no fuel choice at the pump and with most of the world's oil owned by OPEC, oil importing economies are subjected to increasing volatility. 

Common thinking among environmentalists is that high oil prices are desirable as they spark conservation, efficiency and innovation. This may have been true if not for the fact that oil shocks also trigger economic recessions. When oil prices soar, as they did in 2008, recession quickly follows, trade deficits swell to dangerous levels, and millions of people in the developing world slide into poverty. For climate activists this should be a most unwelcome scenario. After all, poor people are not going to make greenhouse gas reduction a high priority.

Even in the developed world in difficult economic times, public support for policies that reduce greenhouse-gas emissions and investment in renewable energy technologies fall sharply. The technological innovation and broad public support key to curbing greenhouse-gas emissions are contingent on global prosperity, but prosperity is difficult to achieve so long as our economies hemorrhage money to purchase expensive oil.
Therefore, any policy that can keep the price of oil away from the three-digit mark should be viewed as environmentally friendly.
This is why Cancun should focus on oil, not broadly carbon.
An oil-first strategy may not be the be-all-and-end-all solution to the climate challenge but it is far better than the likely stalemate that will result should the old coal-first thinking continue to dominate the climate discussion. Coal may be perceived as the dirtiest of all conventional fossil fuels, but it is not necessarily the main source of emissions. In the U.S. petroleum is responsible for 42 percent of total carbon dioxide emissions while coal accounts for 37 percent.
Alternative transportation fuels such as electricity, ethanol and methanol, are not only competitive at current oil prices but for the most part they also emit less carbon dioxide than gasoline on a well-to-wheel basis. Policies that help break oil’s monopoly over transportation such as electrification of transportation and an Open Fuel Standard ensuring new cars sold around the world are flex fuel capable would facilitate a significant reduction in greenhouse gas emissions. 
Focusing on oil dependence, the one issue on which the interests of rich and poor are fully aligned, can make Cancun more than fanfare in the sun.
The question is whether the delegates will agree to settle on a less ambitious agenda but one that could restore the trust and cooperation necessary to move the climate process forward or will they repeat the mistakes of Copenhagen and go home, again, empty handed.

Gal Luft is executive director of the Institute for the Analysis of Global Security and co-author of Turning Oil into Salt: Energy Independence through Fuel Choice. 

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