16Smith School of Enterprise and the EnvironmentSmith The EUThe EU has pledged a target of 20 per cent GHG emission reductions by 2020 compared with 1990 levels, which will be increased to 30 per cent if other major economies commit to significant reductions [20].The global economic recession has led to a significant fall in emissions compared with business-as-usual expectations, which has assisted the EU in meeting its objective. The EU ETS will clearly play a significant role in achieving its goals, but in addition each of the 27 nations comprising the EU will need to introduce obligations and regulations required to meet the national objectives. A considerable scaling up of the effort will be required to improve the energy intensity of the economy and the carbon intensity of the energy mix. As pointed out elsewhere [9], the objectives for 2020 should be set within an overall target for 2050, so that for each country within the EU large-scale energy infrastructure, such as coal-fired power stations, are replaced with energy efficient, low CO2 energy systems, as they come up for renewal but not before, so as to minimise the potential for an adverse impact on the economy. In the UK the opportunity is immediate, since about £200 billion worth of energy infrastructure will need to be replaced over the coming decade [21]. This infrastructure will be productive until mid-century and beyond, and will need to be fit for a defossilised economy.Due to the impact of the financial crisis upon the levels of CO2 emitted by the EU, the move to the more ambitious target of 30 per cent emissions reductions by 2020 is being considered irrespective of the actions of other countries. A recent study analysing the effects that this could have on GDP growth and employment rates produced the surprising result: increasing the ambition could have a positive effect on both of these factors. The lower 20% target is no longer strong enough to mobilise investment and innovation in the low carbon economy. If a decisive move to a 30% target was made, combined with clear policies, a positive cycle of increased low-carbon investment, job creation and innovation could be triggered. Without requiring further action from other actors on the international level, it was found that this move to a 30% target could increase the growth rate of the European economy by up to 0.6% per year, create up to 6 million additional jobs, increase European investments from 18% to 22% of GDP in 2020 and increase European GDP in 2020 by $842 bn (2004 value) [22]. Figure 3 shows a conceptual diagram of the effect of this increased ambition level upon European GDP and unemployment levels, based on the outcomes of GEM-E3 model simulations conducted by Jaeger et al. (2011).The USThe US pledged an emissions reductions target of 17 per cent by 2020 relative to 2005 levels. This amount equates to a 3 per cent decrease by 2020 compared to 1990 levels. This is less than the total 5 per cent target of the developed countries in the Kyoto agreement. The biggest downside of the US pledge, however, was that the proposal stated that it was based upon anticipated US legislation [23], which did not materialise. There is therefore great uncertainty over the future actions of the US. Of course, it would have been unwise for President Obama to commit to anything beyond this, risking the US Congress later rejecting the international agreement.The passage of climate and energy bills in the US will be key to the development of climate negotiations at the international level. While the US energy and climate policy endorses a cap and trade system and outlines a pathway of emissions reductions to 30 per cent below 2005 levels by 2025, the US targets are deemed to be demanding for its economy. Profound changes will be required, particularly regarding the energy mix [19]. The US position in the process therefore gives continued cause for concern. Chapter 3

EnvironmentSmith School of Enterprise and the Environment17Chapter 3: Copenhagen and Cancun