Executive summary

The Cancun Climate Change Conference agreed a broad strategy to combat climate change. The strategy includes:

  • a fund to help developing nations address climate change
  • a draft deforestation treaty, and
  • an aim to establish a ‘global goal for substantially reducing global emissions by 2050’, but not binding emissions reduction targets.

Cancun’s success is modest and it remains unclear how binding emissions commitments will be made.

However, the Cancun strategy does lend support to the Federal Governments’ renewed attempts to develop both:

  1. a binding carbon price, following the failed Carbon Pollution Reduction Scheme (CPRS), and
  2. a voluntary Carbon Farming Initiative.

These developments will have significant ramifications for Australian businesses with carbon exposure. 2011 will likely be a very busy year on carbon issues.

The Cancun strategy

Emissions reductions

Key points

The strategy documentation:

  1. states the aim of establishing a ‘global goal for substantially reducing global emissions by 2050’, acknowledging ‘that deep cuts in global greenhouse gas emissions are required according to science ... with a view to reducing global greenhouse gas emissions so as to hold the increase in global average temperatures below [2oC] above pre-industrial levels’, and
  2. formally recognises that the world's GHG emissions should peak ‘as soon as possible’, but does not set a date. This will be the subject of scientific review in 2013. In the meantime, the pledges which many countries, including countries such as China, the US and Australia, made over the past year under the Copenhagen Accord are ‘officially recognised’ in the conference documentation. However, this ‘recognition’ does not make them legally binding.  

Future of the Kyoto Protocol and international way forward

There was no agreement at Cancun on the future of the Kyoto Protocol. The Protocol commits almost 40 developed nations (including Australia but not the US) to emissions targets but it expires at the end of 2012.

Japan and Russia in particular resisted pressure to commit to a second phase of emissions reductions under the Protocol. They argued that, with the rise of China, India, Brazil and others, the committed industrialised nations now account for only 27% of global greenhouse emissions, and that a new, legally binding pact obliging the US, China and other major emitters to cut greenhouse gases was therefore required.

The Cancun outcomes on these subjects allow negotiations to continue under the auspices of the UN, and preserve them from collapse, but have only deferred many hard decisions until the climate conference next year in Durban, South Africa from 28 November to 9 December 2011.

But interim resolution of the Kyoto argument made possible the remainder of the strategic package, of which the ‘recognition’ of ‘Copenhagen Accord’ pledges is probably the most important.


The agreed strategy also advances systems for monitoring the climate pledges of individual nations. Agreement was reached on an India-sponsored version of the original monitoring proposals that the Chinese at Copenhagen rejected as too intrusive.

Green Climate Fund

A new $US100 billion Green Climate Fund is to help developing nations obtain clean energy technology for emissions reduction and for adaptation.

The fund will be steered by a board of 24 members chosen evenly from developed and developing nations. For the first three years, the fund will be overseen by the World Bank. The fund will be used to disburse large sums in annual aid for ‘climate defence’ in developing nations. In the Copenhagen Accord, developed countries promised that the fund would reach $100 billion by 2020.

Australia’s Minister Combet made a number of related commitments while at Cancun.1

Some issues and concerns remain for how the fund will operate and the mobilisation of the committed funds.

Draft forest treaty

The draft forest treaty, which is known as ‘REDD+’ (Reducing Emissions from Deforestation and Degradation (plus other things such as replanting)), foresees the eventual ‘monetisation’ of the rainforests of countries such as Brazil, Congo, Indonesia and Papua New Guinea. Host nations will receive funding for preserving forests, eventually in the form of fungible carbon ‘credits’.

This potentially presents significant abatement opportunities for Australian businesses from ‘close to home’ projects.

CCS included in CDM

Cancun accepted Carbon Capture and Storage (CCS) as an offsetting mechanism under the Kyoto Protocol Clean Development Mechanism. This has the potential to increase the support for CCS. It has been welcomed by the Global Carbon Capture and Storage Institute.2

The mood at Cancun

Several factors, different from those operating at Copenhagen, appear to have combined to produce these outcomes at Cancun.

China and the US honored a ‘non-aggression pact’. Immediately prior to the conference, they had each seemed intent to ensure that the other was blamed for any failure at the conference. At the conference, both seemed to understand that the best way of avoiding blame was to avoid failure.

Also apparently influential was the appreciation among the parties of what success meant for the UN process. After Copenhagen, another ‘failure’ would have been crippling, if not fatal. The conference was able to move beyond ‘binding-or-nothing’ attitudes towards the package of incremental steps ultimately agreed.

International implications

Cancun’s success is modest. The essential elements of the Copenhagen Accord have been ‘recognised’, and some initial steps have been taken towards their implementation, but how (and even whether) binding emissions commitments will be made after 2012 remains unclear.

The next UN Climate Change Conference will be held at Durban in December 2011, when a successor to the Kyoto Protocol will be of overriding importance. Low level meetings will be held throughout the year in the lead up.

At a minimum the positive moves on REDD+ and CCS present opportunities for Australian businesses.

REDD+ has been promoted as potentially acceptable under a proposed California emissions trading scheme. Federal US carbon price legislation appears stalled following the recent Republican Party midterm election success. However, the US EPA has said it will take emissions enforcement action and the US Securities and Exchange Commission continues to watch climate change issues closely.

Australian implications

While practically there may be little real progress, the mood coming out of Cancun appears considerably more positive than from Copenhagen a year ago. It lends support to the Federal Governments’ renewed attempts to develop both:

  1. a binding carbon price, following the failed CPRS, and
  2. a voluntary Carbon Farming Initiative.  

ALP Government

Greg Combet, Minister for Climate Change, who represented Australia in Cancun, has stated:

The Gillard Government is committed to taking strong action on climate change and the most important thing the Australian Government can now do is work towards the introduction of a carbon price into our economy, which is the fastest, cheapest and fairest way to reduce carbon pollution.3

However, to introduce an Australian carbon price the minority ALP government would need to navigate a finely balanced House of Representatives and Senate, effectively requiring the support of the Greens, Andrew Wilkie, Rob Oakeshott and Tony Windsor. It may prove difficult to satisfy all parties. Further analysis of the situation is available in our previous article ‘New government for climate change, renewables and energy efficiency’.4


The Greens are looking for Australia to introduce ‘an ambitious carbon price in the second half of 2011’ and have stated:

The Australian government has no choice but to leave behind the inexcusably weak 5-25% target range and lift it to the Bali roadmap agreement of 25-40%.5  


The Federal Opposition continues to support its ‘Direct Action’ approach and opposes a carbon price. Opposition environment spokesman Greg Hunt says while he welcomes many steps taken at Cancun, the Opposition will not support a new tax.6

Voluntary Carbon Farming Initiative

The ALP Government will continue in early 2011 to progress its proposals for a voluntary Carbon Farming Initiative. The consultation paper released on 22 November 2010 is available on the Department of Climate Change and Energy Efficiency website.7 Submissions are due 21 January 2011.

We will shortly provide further details on this initiative and the implications for Australian business and can assist with submissions.

Useful documents

  1. The final press release of the Cancun conference provides a useful summary of the agreed strategy.8
  2. The relevant documentation agreed at the conference can be found on the UNFCCC website.9