Hon Tim Groser
Minister for Climate Change Issues

23 August 2012
Embargoed until 8.30pm
Speech
Speech to the International Dialogue on the Future Climate Change Agreement

Tēna koutou katoa. Nau mai, haere mai. Welcome to Auckland.

New Zealand is delighted to be hosting this informal dialogue on climate change. We are very pleased that you could all make the long journey to our part of the world. It's great to see some old friends around the table, and to have some fresh faces here for these discussions.

The purpose of this meeting is to engage in some new thinking about how the international community might approach this extraordinarily complex and politically demanding matter of climate change. We know we have a mandate from the Durban Platform to - and I shall use the exact words “... launch a process to develop a Protocol, another legal instrument, or an agreed outcome with legal force under the Convention applicable to all Parties.”

I am not going to try and parse those words politically. We will find out only some years later what those words actually delivered. They clearly could encompass a wide variety of outcomes. Our objective must be to aim for a high quality comprehensive agreement that actually deals with the problem of global emissions, not finds a political fix to a diplomatic problem. We hope this meeting in Auckland may play a small part in creating a clearer understanding of what will be actually required to achieve that result.

The Case for New Thinking

Normal negotiating meetings are the last place negotiators can realistically engage in new thinking; they are just not set up in that way. On the other hand, purely academic seminars, which definitely have their place, run the risk of ideas developing momentum that are so removed from mainstream political thinking that they are often of limited assistance to negotiators.

For that reason, the practice has emerged over recent decades in various theatres of international diplomacy of having discussions amongst think-tanks and institutions understood to be 'very close' to Governments. These often involve former senior officials expert in their field in the sense that they are not quite speaking 'for' the Government of the country they come from, but nor are they a million miles away from what might ultimately be acceptable if, more generally, the negotiating positions of others are also in the process of being re-calibrated. By convention, such discussions are called 'Track 2' discussions in the sense that they are taking place in a politically parallel way to the ‘Track 1’, or inter-Governmental, discussions.

Just to confuse everyone - I have long been convinced that is part of the point of diplomatic terminology - we occasionally hold 'Track 1.5' meetings where both high-level officials and highly experienced non-government experts from think tanks close to Government meet together. This is one of those occasions For this to work, we have to be prepared to take some risks.

We all know each other's formal negotiating positions. Without any real difficulty I - or any number of you in this room - could give you the default 'Climate Change 101' speech of almost every country represented here and most countries which are not represented here. By the way, in case you are not familiar with the ‘All Purpose New Zealand Speech’ it naturally starts from the principle that the entire world owes New Zealand a living. Although we hold this to be a self-evident truth, sadly no New Zealand negotiator in trade, climate change or political diplomacy has ever persuaded even a single Australian negotiator of the undoubted merits of that position.

As a small country, we have, therefore, learned to be rather more flexible and start to ask every time, not just "will this work for me?", and especially not "is this what I want?", but also "how will this work for others?" Or, "could we find a new point of balance with this approach?".

Finally, by way of introductory reflections on diplomatic practice, I am often struck by the vast gap between different peoples' perceptions about the issue of 'balance' and the reality of how negotiations actually arrived at that point. 'Balance' is a key concept of all negotiations. Some negotiators talk almost rapturously about the 'balance' of this or that negotiated outcome, as if the negotiated outcome had been delivered by sages, rationally and calmly sifting through the empirical evidence and delivering a judgement that would challenge, as we like to say in the Judeo-Christian tradition, the wisdom of Solomon.

In my experience, the endgame of every negotiation is a rather different matter. Negotiations are like the children’s game of musical chairs. You know, I would assume, the rules for this standard game for birthday parties of children from about the age of 3-8. The children dance around the table – in this case the negotiating table – but there are not sufficient chairs for everyone. Crucially, an adult is in charge of the music and no-body quite knows when the music is going to be turned off signalling a mad rush for the chairs. The more adventurous children stake out positions on the dance floor far removed from a chair. When the music suddenly stops, someone misses out.

In international negotiations, the equivalent of the adult signalling the end of the dance is an exogenous political decision that time has finally expired and something has to be decided. Matters of high complexity in trade and climate change that should, if negotiators were rational, have been decided months ago are decided in a mad rush at the final hour (in Durban, I had to chair two all night meetings in a row on the LCA texts). There are inevitably mistakes, and there are winners and losers. It will always be thus in both trade and climate change negotiations in spite of repeated painful lessons and solemn but valueless brownie oaths never to do it again faithfully recorded in ‘roadmaps’ and ‘deadlines’ for future negotiations.

May I suggest that you reflect on that the next time you hear a professional climate change negotiator refer to the ‘balance’ mysteriously achieved in this or that text? I suppose it is technically correct to refer to the 'balance' of any negotiated outcome. My point is rather that it is ludicrous to deify it. Fresh thinking is possible.

It is particularly important to recognise that negotiated outcomes reflect relative power, technologies, relationships and ideas that prevailed at the time the outcomes were being negotiated. For example, the five permanent members of the Security Council are simply those countries on top of the political food chain in 1945 and we have been arguing about it ever since.

The danger is of course that structures get frozen in time, simply because of the inertia of the diplomatic process and the immense difficulties involved in ever agreeing to another way of doing things. That is not a problem, if the existing structures are broadly fit for purpose. It is a big problem when it is obvious they are not.

The World in 1990

So, with climate change in mind, let us recall where things were in 1990 when the Framework Convention was being designed by a previous generation of negotiators.

• Tim Berners-Lee had developed the "hypertext" system and the World Wide Web debuted, but unless you were a computer scientist you would never have known this

• The Berlin Wall had fallen and the Cold War had ended, but the USSR was still holding together

• The world population (under 3 billion for much of the 20th century) hit 5 billion. It's now grown to 7 billion

• You could buy an HP inkjet printer for US $1,000, and a Steve Jobs-designed "Cube" computer (with 8MB RAM) for a whopping US$6,500.

• 2G came along in 1991. That was a great advance on the prototype Motorola mobile phone which weighed 25 Ib, had a talk-time of 30 minutes, and took 10 hours to re-charge.

• The OECD countries were clearly contributing the lion's share of greenhouse gas emissions, and China's GDP per capita was lower than sub-Saharan Africa's.

• Crude oil cost US$20 a barrel (it’s US$110 today); but the price of gas, another fossil fuel, was around $15 per million BTUs; it is $3 today and falling, radically reversing price signals even in the world of fossil fuel production.

• The world produced less than 50MW of solar power; in 2010, incidentally the comparable figure was 25,000 MW.

If we had known in 1990 how, things were going to change, what would we have chosen the same design features? I very much doubt it.

Now, after the Durban COP last December, we have another chance to design a new legal agreement for climate change, to be "applicable to all Parties". And I would suggest, if we want to get it right, we should think about how very different things are going to be in 2020, 2030 - and even 2050, because we want an agreement that will stand the test of time.

So, what are some of the forecasts for the world in 2050? There's plenty of material around which purports to identify mega-trends. Here are just a few:

• Global population is expected to exceed 9 billion (though there will still be only 2 billion children).

• More tellingly still, the global middle class, which grew by around 500 million between 1990 and 2010, is projected to grow by a staggering 3 billion in only the next 20 years.

• The trend of realignment of economic activity from West to East will continue, with China forecast to increase its current 10% share of global GDP to 25% by 2050. A recent report by the Global Institute and McKinsey has observed that the growth of India and China is happening at about 10 times the speed at which the United Kingdom - the first country to begin the Industrial Revolution - improved average incomes during that period. Even more to the point, given the population involved, this is happening on around 200 times the scale.

Appraisal of the UNFCCC System Twenty Years On

At the recent Petersberg Dialogue on Climate Change in Berlin, I very much liked an impromptu point made by one of my Ministerial colleagues. He said the 'principles' of the UNFCCC could be considered enduring, but a rational mind always needs to interpret principles in a living context.

In UNFCCC terms, we can pretty easily conclude that some things have stood the test of time and have served us well, this includes the general approach and principles reflected in the Convention, transparency, and commitment to take action, markets, common accounting.

Other things, patently, have not. And, it's worth questioning why. Sometimes, it is indeed a problem with how principles have been interpreted. The principle of "common but differentiated responsibilities and respective capabilities " is a case in point. It makes sense for this concept to reflect the relative responsibilities and economic capabilities of, say, Europe and Ethiopia. But it should also make sense to treat China differently from Chad, Brazil from Burundi. ... I would be surprised if that is controversial in either Beijing or Brasilia -it is a question of degree.

There is also, in certain quarters, a tendency to believe that the more rigid a rule is, the better it is. You can never design a water-tight international legal system. One of the great legal theorist of the multilateral trading system, Robert Hudec, argued there has never been and never will be a system of international law that can avoid what he called 'legal failure'. As far as I know, almost all or all legally binding international agreements contain an abrogation, exit or withdrawal clause - call it what you will. We have been reminded of that quite recently in the context of Kyoto.

Sometimes, the rules have been so rigid that countries haven't been comfortable applying them. And sometimes, our efforts to deal with particular circumstances in the rule-set have led to arrangements so arcane and complex only technical experts can hope to understand them (a prime example of this has to be the land use and forestry rules). I am also aware that other international legal regimes tend to evolve. We would never have been able to build what is generally regarded as the world’s most advanced form of economic international law – the binding dispute settlement process of the WTO – had it not been preceded by the looser, but still generally effective, legal framework of the GATT system around GATT (47) Articles XXII and XXIII. It takes time to build confidence in a binding system of international law.

The UNFCCC Negotiating Process

We also need to think pretty carefully about the processes we have sometimes used in the UNFCCC. My first exposure to a COP was 2008 in Poznan. Never having been involved in climate change negotiations or policy, I did not understand a word of the jargon used by you, the professional negotiators. However 30 years of involvement in other multilateral negotiations told me that this negotiation was not on track. I literally told one senior negotiator that if more reality did not prevail, my political sense was that we might be looking at a train wreck 12 months later at Copenhagen where the objective was officially to reach agreement on a fully ratifiable agreement.

When I arrived in Copenhagen a year later it was patently obvious that the expectations of a grand new treaty could never be met, although almost all negotiators were repeating the mantra of 'a full and ratifiable agreement; there is no Plan B'.

Well, fortunately we did get a 'Plan B' - the Copenhagen Accord - but it was done in such a way that it caused deep dislocation to the negotiation. In my view, it was a far superior outcome that a few top political leaders developed a text, rather than leaving the Copenhagen meeting with literally nothing. However, as you will all recall, the process of socialising the text to negotiators from the other, say, 175 countries which had been told the scenario was 'No Plan B' was a step too far.

It took a year, and some superb political leadership by our Mexican hosts, to get the UNFCCC process back on the tracks. My conclusion is simple: negotiating scenarios which are developed without any political realism behind them cause great and unhelpful friction. It reminds me of a cynical definition of an international consensus: 'an international consensus is what we agree to say collectively that none of us believe individually'. Unfortunately, once wishful thinking sets in, it is extremely difficult to argue the case for realism.

Mitigation and Participation

As we look towards the task of delivering a long-term comprehensive agreement that might actually deal with global, not regional, emissions, the first order requirement is around participation. And by 'participation' I mean mitigation - the ultimate and agreed objective of the Convention. I am convinced this can be achieved within the framework of the principle of common but differentiated responsibilities and respective capabilities.

In political language - ie, not to professional negotiators - I have often talked about the importance of 'getting people on the bus', rather than worrying about the speed limit. If we get more and more countries on the mitigation bus, doing what they can to drive towards a lower carbon future for their own country, we can later look at the speed limit, or pace of adjustment. The logic of this is straightforward: we are trying to get lower carbon economic strategies embedded administratively and politically. There is huge resistance to this, for a variety of reasons. Look at the debate over comprehensive carbon pricing proposals in any number of countries if you are in any doubt. It is still unsettled in many countries. I have today just returned from a Parliamentary debate on our own Emissions Trading Scheme and we are in a far better space politically than most countries in that the debate has now moved on to a debate about the speed with which we make the adjustment.

I know the counter-argument. It starts by taking the most extreme of the IPCC scenarios of future climate change and arguing that 'nothing less' than immediate and drastic action will suffice. Many of these people of course prefer to have nothing agreed, than something agreed which they regard as inadequate.

What I know is that there is a range of scientific views about the time dimension of the risk and which scenario is the more probable. But the one thing that will absolutely guarantee failure to develop a meaningful response to this global challenge is if we do not get most of the large emitters, plus a large number of small emitters like New Zealand who are absolutely prepared to join in genuine collective action, on board the mitigation bus. It is a global problem; only global action or something close to it, can work.

Further, at this stage in the evolution of a global response, you are more likely to persuade countries, where climate change policies are very immature, to get on board the bus if they can persuade their political masters that the commitments are realistic and doable. Later, when lower carbon strategies are more deeply embedded, then we need to return to the matter to the pace of adjustment and the development of a global carbon price. Extremists or negotiators who calculate that their countries will never in practice be asked to persuade their political leaders to undertake these commitments do not like this argument. I understand that, but it will never change my view on the only politically plausible way ahead towards a comprehensive agreement. I cannot recall where I first heard it, but I think there is great wisdom to the saying that ‘no International Treaty is stronger than the domestic political foundations on which it rests’. An objective assessment of the relatively immature stage of domestic climate change legislation and measures, and continuing strong resistance to such measures in certain quarters, leads unavoidably to the conclusion that the domestic political foundations are not yet that solid.

For the new legal agreement, our over-riding objective must be to get more people (and the right people) on the mitigation bus. So, I don't think that designing something that attempts to replicate the Kyoto Protocol (which now covers at best 15% of global emissions) but on a global scale, and expecting it to be "applicable to all", will work. I do believe that much of the Kyoto ‘aquis’ has been valuable and will deeply influence any long term agreement, but it will not be anything as simple as a ‘cut and paste’ job into any broader agreement applicable to all parties.

Blue Skies thinking is about expecting the unexpected. It's about designing something that will be fit for the future even when the circumstances differ from those we have predicted. At the same time, though, it's not about approaching a problem from the point of view of an ideologue or a "perfectioneer". We will need to go beyond what economic rationality might suggest we should do, and instead take account of political reality. What is feasible, and what will do the job well?

The same approach applies to technology. We clearly need innovation and technology uptake to have a fighting chance of tackling climate change, but we shouldn't second guess what that technology is. I think that NZ has stepped up to the mark here. The Global Research Alliance on Agriculture Emissions is doing exactly that. Emissions from producing food are between 11% and 14% of total global emissions, depending on how you define 'agriculture'.

For blue skies thinking to work, we need to think well past our likely careers in climate change negotiations and beyond current constraints. We need to be thinking about pathways, and how the multilateral process, governments, and businesses can create them.

I just want to inject a few questions in here, before you turn your minds to possible design elements and the architecture of a post-2020 climate change agreement. I’d like you to consider these, in light of the fact that there are several aspects of the KP approach that will not fit neatly into a new legal agreement that is intended to be applicable to all Parties.

• Metrics: under the Kyoto Protocol we agreed an approach to establish equivalence between gases so we could price carbon in a way that was fungible. We know the GWP or 'Global Warming Potential' ¬method we are using isn't perfect but is an alternative that would better reflect the atmospheric impact of different greenhouse gases, and create appropriate incentives for national policy-makers? Can we develop approaches that take better account of the food production cycle, short-lived versus long-term pollutants and are more tightly focussed on where we need to direct our efforts to effectively tackle the core climate change problem, which is unquestionably C02?

• Credit for carbon offsetting: market mechanisms like the CDM (Clean Development Mechanism) are designed to create a practical solution to the emissions reduction problem. Fine. Why wouldn’t we want to maximise global mitigation by paying for it to be done where it’s easiest and cheapest? That it is indeed already the underlying principle behind CDM markets. The problem arises because the accounting systems we use internationally (understandably) do not allow double counting. This creates at least a perception problem in developing countries that the ‘credit’ for the project goes to developed countries. The developing countries admittedly get the economic benefits of the CDM project but no political recognition on their side of the emissions ledger. This in turn creates some resistance to the CDM. Is there something we can devise under the new instrument that gives full political credit for efforts like hosting CDM projects, while ensuring that carbon credits aren’t double counted? How could we use existing ideas around NAMAs, registries and MRV to highlight all the efforts a country makes, even if the carbon reduction is counted against someone else’s total?

• The land/agriculture/forestry cluster: We've written a complex set of rules to deal with a variety of national circumstances (including New Zealand's), and have tied ourselves in knots in doing so. Let me assure you from my own recent experience passing-through some of these rules into our ETS that agreeing the rules internationally isn’t even half the battle. Which leaves me to consider the following questions in terms of designing the new framework:

• Would these rules encourage developing countries, where agriculture and forestry are a much more dominant feature of GHG profiles, or would they scare them off?

• Can we develop approaches that take better account of the food production cycle and the need to ensure food security?

• Can we work towards a common accounting approach that nevertheless has the flexibility to address different national circumstances?

• Is there an opportunity to look for wider applicability of the reference level approaches developed for LULUCF in CP2 and for REDD+?

• Schedules/negative list approach: Top-down versus pledge and review is the polarizing issue at the heart of the negotiations. So far, those advocating the “top down” approach haven’t been able to convince everyone else how this will secure broad participation in a legal agreement. It perpetuates negative and ultimately unresolvable debates over the meaning of “equity” as we try to carve up the global “burden”. On the other hand, those arguing for “pledge and review” have yet to satisfy concerns that this will simply entrench low ambition. Can we find a way of recording and systematising a truly global effort, agreeing some ground-rules, and a process for carefully defined opt outs? How could we then structure successive negotiations or processes to encourage opting in to higher ambition and the full rule-set?

The post-2020 agreement cannot be an either/or. We will have to find middle ground if we want to achieve broad participation and high ambition. Getting more people on the mitigation bus, and making sure it can then go faster.

This meeting is not going to be able to answer even these questions – not to mention a host of other blue-skies questions I imagine you may have in your mind. What the dialogue can do is to start us thinking about the universe of possibilities out there so that, as the negotiations move through the initial conceptual phase, we don't reject ideas too early, or put ourselves in unnecessary straitjackets.

The Importance of ‘The Transition’, 2013-2020

The last thought I want to leave you with is not to forget about the Transition. It is simply not feasible for us to jump from where we are today to the long-term regime in a single step. Frankly my biggest single concern is that an attitude may set in that we had the first Kyoto Protocol commitment period, what we need now is to negotiate the comprehensive long-term agreement to come into effect in 2020, and in the meantime the next 8 years sees little or nothing done on the ground.

Well, my strong view is that 'the transition' is not a vacuum, and the way that we all shape our actions, the way we report them, and the way we are held accountable for them - now and over the next few years - will be critical to whether we can succeed in building a new global agreement.

If just Europe and a few others pursue comprehensive climate change policies over the next 8 years, I am far from convinced that the wonderful day for this envisaged 'long-term comprehensive agreement' will ever arrive. Continuation down the adjustment path is crucial. This is as much about adjusting thinking politically as it is for adjusting domestic administrative frameworks for climate change policies.

There is a strong analogy here in trade policy with the 'Bogor Goals'. In a city near Jakarta in 1994 leaders at the highest level of political power in the Asia Pacific region agreed that come 2010 we would have established free trade amongst the developed countries and come 2020 for the developing countries of the region. Critically, having put forward such a dazzling vision for the future, nobody set out a programme (or 'modalities', as professional trade negotiators call them) for action.

Well, ladies and gentlemen, 2010 has long come and gone and I can assure you that there are still very high tariff peaks in certain developed countries and that very little adjustment has taken place on these highly protected sectors since the long-term vision was established. If there is not effective - we don't need perfect - action by more countries to set up a suite of effective climate change policies, nobody will be jumping from where we are now to some wonderful new world in 2020. The only species that I know that leaps over cliffs are lemmings. So what we do now, during the ‘Transition’ will deeply influence the art of the possible in 2020.

I wish you all the very best for a fruitful day of discussions tomorrow.

Tēna koutou, tēna koutou, tēna koutou katoa.

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