Brian Fallow: Cancun talks highlight climate dilemma

How impressed you are by the outcome of the Cancun climate conference depends on what you compare it with: where we were a year ago, or where we need to be.

In contrast to the train wreck at Copenhagen a year ago, progress was made on a range of issues.

But the most important and difficult ones have been kicked to touch.

It is progress that the pledges countries have made under the informal Copenhagen Accord over the past year either to cut emissions or, in the case of developing countries, to restrain the growth in emissions, are now formally incorporated in the official United Nations process.

Indeed the fact that the acrimonious shambles at Copenhagen was not repeated - people credit skilful and inclusive Mexican chairmanship for this - is seen as having salvaged the credibility of the multilateral UN process.

But we are still a long way from any treaty or legally binding agreement that would hold countries to account against those pledges.

And the pledges collectively fall well short of what would be needed to keep global warming below the 2C increase which is thought, fingers crossed, to be the threshold for dangerous climate change.

It is progress, too, that a mechanism has been agreed to set up a fund, foreshadowed at Copenhagen, to channel money from rich countries to poor ones to help them cope with the impacts of climate change.

But how much money is involved, who will pay and how it will be disbursed remain unclear.

Cancun made progress on deforestation, a major global source of emissions. It formally backed the UN's Redd scheme (reducing emissions from deforestation and degradation).

As with the climate fund, most of how it will work remains to be decided, however. It is a promissory note, with a lot of work yet to be done before anyone could bank on it.

The same could be said of progress made on the sensitive issue of transparency and international comparability in the measures countries undertake to curb emissions.

This has been a bone of contention between the United States and China in particular. The task of facilitating negotiations on this issue was given to New Zealand's Climate Change Negotiations Minister Tim Groser.

China gave ground on the issue, saying it would make its reductions "transparent" and submit them to international analysis.

The Cancun agreement includes a decision that "internationally supported mitigation actions ... will be subject to international measurement, reporting and verification in accordance with guidelines to be developed".

Agence France Presse quotes the chief US negotiator Todd Stern as saying that the agreement should satisfy US politicians who have insisted on verifiability.

But he was more cautious on whether the overall package of agreements at Cancun would turn around the mood in Washington.

"It doesn't mean, I think, you are suddenly going to get the votes to pass last year's bill," he said, referring to emissions trading legislation passed by the House of Representatives but rejected by the Senate.

"That's not going to happen right away. But I think it's generally a helpful development."

President Barack Obama, following a "shellacking" in last month's mid-term elections, has conceded that cap-and-trade legislation is a non-starter for the remainder of his first term.

So a large credibility discount has to be applied to the US pledge to cut emissions by 17 per cent (from 2005, not 1990 levels) by 2020.

The US has been overtaken by China as the largest single national emitter.

However given its emissions per capita and income per capita - two major factors in any calculation of equitable burden sharing - it both should and could be leading the global effort to combat climate change.

But it is not. It remains a much larger part of the problem than of the solution.

Among other developed countries the picture is only slightly more edifying.

Every developed country but the US is bound by commitments under the Kyoto Protocol, but its future after its first commitment period expires at the end of 2012 hangs by a thread.

Its three largest non-European members, Japan, Russia and Canada - all major emitters - have indicated they are not interested in a second commitment period for a pact that only covers a dwindling minority of global emissions and in particular does not include the US and China which between them represent more than 40 per cent of global emissions.

New Zealand does support a second commitment period for Kyoto, Climate Change Minister Nick Smith told the conference.

The future of Kyoto and the broader issue of what kind of agreement will hold countries to account post-2012 have in effect been deferred until the next annual conference in Durban, South Africa in a year's time.

But will the geopolitics be any easier then?

The Cancun agreement calls for global emissions to peak as soon as possible but in the next breath says "bearing in mind that social and economic development and poverty eradication are the first and over-riding priorities of developing countries".

That is the essential dilemma: how to lift most of the world's population out of what we would consider pretty abject poverty without cooking the planet in the process.

Kyoto recognised the value in harnessing the power of prices and markets. It recognised that shifting relative prices in a way that enabled technological solutions to be commercially viable was better than relying on regulation.

It recognised that international carbon trading could help even out the cost curve across countries and encourage them to take responsibility for more of their emissions than they might if only local mitigation options were available to them.

For all the Kyoto system's imperfections it is important that those insights are not forgotten and the regulatory infrastructure embodying them does not fall into decay.

So long as the environmental costs of emitting greenhouse gases are not reflected as a financial cost to emitters we will have a kind of subsidy flowing, perversely, from poor countries to rich ones and from future generations to the present.

Being on the bludger's end of that arrangement we are reluctant to see it end. But it must.