By William Byun, Cleantech Law Partners
While that question hung over the last days of World War II,
on December 2015 the world media definitely projected a cheerful resolution for
the recent climate change negotiations there that "no", the
ballyhooed Paris Agreement inked there should provide a new pathway to avoid
such fate. Seeing the multitudes of various politicians all in good cheer
though, one could not help but be a wee bit skeptical.
The Agreement was indeed breezy on specifics and as the
skeptics noted in particular – just like the doomed Kyoto Protocol, there was
lacking an enforcement and compliance mechanism. Was that perhaps then, a too
familiar "been there-done that" being replayed?
Rewind a decade or so and we can recall the Kyoto Protocol
as a groundbreaking first major concerted global effort to counter climate
change via attempting to incorporate private sector-style mechanisms such as
tradeable emissions credits. The edifice was rather formidable looking as the
attempt was in fact one to establish from the gound up an entire market sector
in itself complete with national review committees, a UN review committee,
technical review bodies, various third-party auditors and certifiers, as well
as the ecosystem of market traders, investors, lawyers, accountants, etc. etc.,
seemingly ad nauseum.
Yet – the results were politely mixed, with such ambitious
ecosystem establishment being in practice, sideswiped by two major external
economic shocks. The first was the collapse of the former Soviet Bloc and the
resulting severe contraction of those economies. If such downturn were to be
translated into emission credits, it threatened to overwhelm the entire Kyoto
markets.
The second was the global downturn of 2008 which hit just
when negotiations on extending Kyoto were at a critical juncture and nations
worried about domestic jobs and economies, put the additional burdens from the
Kyoto framework on a back burner and by and large, the climate change debate
mostly disappeared from the radars and media screens for the duration of the
downturn.
But phoenix-like, as the global economies began to
re-emerge, the issues of climate change again rebounded as well, resulting in
the Paris Agreement. Yet, again, without an enforcement or compliance
mechanism, would any so-called agreement be a national policy equivalent of
well-intended New Years’ resolutions to lose weight, quit smoking, etc., where
Paris merely repeats the sorrowful warnings of the 18th Brumaire?
And yet, one distinction was that in this seemingly second
go-around, the general background has largely not even been a matter of debate,
and the landscape and terminology of the ecosystem had been one very quickly
acknowledged and utilised. Whereas before players groped to figure out the
rules of the game, this time they immediately delved into the game
itself.
Also too, enforcement and compliance mechanisms – while nice
to have – are not necessarily critical to the movements of markets, as any
investor or participants into emerging markets can attest to. Rather, the
empirical movement of the market itself sets its own practical rules by which
the game is played.
In that light, the speed at which the themes of the Paris
Agreement and climate change resurfaced in force (for all practical purposes
just in the past year), were discussed, and acted upon, may itself be the
strongest signal to the markets that this on this second go-around, the depth
and tempo of the climate change sector and markets would be much more robust
and fast.
Not heeding and preparing to react to such new speeds and
weights risks leaving those not prepared for such changes being overwhelmed and
swept as bystanders having prepared for the last war and not the current one.
As we saw before, last time the CER program under the Kyoto
Protocol reshaped energy markets across Asia. Everything from kickstarting
renewables programs from the biomass and VSPP program boom in Thailand to the
explosion of hundreds of MW of wind farms across Inner Mongolia and massive new
investment interest in cleantech manufacturing in China directly impacted.
Mass public and policymaker focus on shifting energy sources
development resulted too ranging from the setup of national emissions programs
impacting all power companies in Korea and China to investor reassessments on
Indonesian-listed coal producers to even new support for nuclear as being
climate-friendly.
In corporate boardrooms across Asia, gencos, utilities, and
industry participants were challenged by investors and policymakers alike to
set forth their strategic management responses to such challenges too – or saw
their share prices punished.
However, while the Kyoto system took over a decade to get
agreed to in place – the Paris system looks like its timeframe is already much
more accelerated to just a year thus far. With the renewed climate change focus
having proceeded so swiftly this time, the power sector in Asia in particular
needs to be ready to position itself "now" for that resurgence of
focus from the public, governments, and investors.
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