32Smith School of Enterprise and the EnvironmentSmith in Chapter 4, given the estimated national and global populations in the future and the amount of CO2 that it is 'safe' for us to emit to stay under a temperature increase of 2 ?C. Currently this figure is 2 tonnes of CO2 per capita by 2050 (figure 4). Since many least developed countries have emissions per capita today that fall well below this amount, they could be issued with CO2 trading permits at 2 tonnes per person at initiation of the trading process, and sell off their unused share to developed countries that produce over their limit. This would mean an immediate cash flow from rich to poor countries. In addition, it would encourage the least developed countries to develop low-carbon economies in order to sustain the in-flow of money. This avoids the least developed nations emerging with carbon-intensive economies. It is considerably more attractive for these growing economies to be fully incentivised as early as possible to maintain low emissions. (Additional regulations may need to be put in place in order to discentivise population growth, and other potential negative consequences.) However, developed and emerging nations would be required to pay for CO2 emitted above their agreed trajectories, out to 2050. Whilst the authors recognise the issues that have been raised with implementing such a scheme [56] and the current lack of political will displayed in the negotiations towards this goal, it is important that solutions that tackle effectively the problems of climate mitigation and financing are aimed at. There are signs that the political acceptability of this novel approach is growing. This idea has been pressed by many analysts and has support from developing countries. President Kagame, for example, explicitly expressed his support for this solution in a speech to the UN in 2009. Implicit in the emissions targets set by the UK government in 2007 is the acceptance of the per capita approach as an equitable goal to aim for by 2050.This solution is seen by many as being equitable - an essential factor in any solution to climate change. Industrialised countries have produced the significant majority of the CO2 in the atmosphere while industrialising countries will be worst affected and will not be able to develop along traditional pathways due to emissions restrictions. Currently, industrialised countries are responsible for around 55 per cent of the stock of GHGs in the atmosphere [57]. The changing face of the global power structure has risen to the fore in recent years. In the future, emerging nations such as the BASIC countries are likely to be increasingly vocal. It is unlikely that a future deal could be reached, including this group, which does not take equity properly into consideration. This solution could be a way of bringing emerging nations such as China and India into the global climate change regime. India has in the past indicated an inclination towards this concept. In summary, this scheme would demonstrate the resolve needed to properly manage the process of defossilising the global economy by 2050 in an equitable and efficient manner, and also recognises that the least developed nations will in time join the emerging economies group and potentially become the high CO2 emitters of the future.It is clear that resolve to act on climate change needs to be strengthened if such a scheme were to be implemented. There needs to be increased action at all levels and individual political champions or figure heads setting examples for others. In order for this to happen, the best and most up to date science possible needs to be available and communicated to political decision makers and leaders. Climate related research needs to ratcheted up to fill in gaps of knowledge.Funding for Research, Development and Demonstration (RD&D)Many commentators have called for much greater public investment in energy RD&D to address the need for new low carbon technologies to cover energy production, transport, storage, conversion and usage [58]. Indeed, over the past ten years there has been a very significant increase in research activities in these areas in universities and public research institutions around the world. But government finance can in general only stimulate the first part of the full RD&D process. The turnover in the global energy sector is measured in trillions of dollars. The proportion spent on RD&D in this sector is notoriously low, and by far the largest part of that is spent to address technological issues around oil Chapter 5Chapter

EnvironmentSmith School of Enterprise and the Environment33discovery and production. What is now required from governments is a major stimulus to this cash-rich sector to encourage a significant proportion of turnover into fossil-free energy technologies and alternatives, such as carbon capture and storage (CCS). From his position in the UK Government, in 2001 Sir David King initiated an analysis of the level of energy research, public and private, in the UK. The result was stark. With the privatisation of the energy sector in the 1980s, Europe's largest gas and electricity RD&D centres, based in the UK, were broken up and shared out between the emerging utility companies, and then closed down. The level of funding in energy RD&D in the UK had therefore collapsed to a very low level [59]. A subsequent IEA analysis [27] showed that this was an international trend, with the largest decrease in the area of nuclear power RD&D. Faced with the obvious need to rejuvenate research effort into low carbon energy sources meetings were held with the CEOs of the major UK utilities, and the outcome was the establishment of a new Energy Technologies Institute (ETI) in the UK as a public-private partnership. The ETI is a £1 billion investment over 10 years, half the funds being raised from the private sector. The idea is to stimulate a much bigger and more realistic investment by the private sector into low carbon energy RD&D within each of their own organisations. Energy companies, whether in the oil, coal or gas production sectors or as utilities, will need to reconfigure and transform their operations in order to remain competitive over the coming few decades. This applies equally to oil and gas producing countries, where economic diversification will be the key to future development. The formation of the ETI embodies recognition of a way that a government can maximise funding for RD&D, by stimulating investment from the private sector. The private sector has a larger capital pool available for investment than the public sector; the energy sector is worth globally around 3 trillion US dollars pa. The private sector has to be incentivised to invest optimally in RD&D given "knowledge spillovers" that imply they cannot capture all of the returns; and governments have to demonstrate that they will benefit from increased funding for RD&D. The economic pay-off for increases in RD&D can be very high. A recent study of energy RD&D programs found that a very large proportion of them produced positive net economic gains as well as both environmental and security benefits [60]. There is, however, a tendency for companies to make short-sighted investments in order to maximise profit immediately. Government policy should act to encourage long-term planning in private sector investment decisions. Public funds should be strategically invested so as to increase spending from the private sector.There are some areas of RD&D that would be important to focus on. Globally, coal reserves are abundant and low cost; one area with a large potential for emissions reductions will therefore be in CCS for coal. A competitive source of electric power generation with lower emissions levels is also an important area for further research; options here include direct solar, hydrogen power and storage, nuclear power, solar photovoltaics and wave and tidal power. A focus of RD&D on energy efficiency gains will act to counter any increases in the cost of energy production, and so stimulate growth. This will in turn lead to more opportunities for innovation. Forestry Carbon Sequestration Recent estimates suggest that forestry could contribute an average 6.7 billion tons of emissions reductions annually, with over two-thirds of this potential coming from tropical nations. Making full use of the forest carbon sink is appealing to both the developed and the developing world. Developed nations see forest carbon sequestration as a low-cost option for mitigating climate change and meeting commitments for reduced net emissions. For the developing world, forest carbon payments could provide a sustainable source of much-needed income. At the most recent climate negotiation talks in Cancun the parties agreed on a framework on forest carbon. The lack of political opposition to an agreement on forest carbon, along with its large potential for reducing emissions, meant that it was a key area in 5Chapter 5Chapter 5: Next Steps