2014 United Nations Climate Change Conference

The United Nations Climate Change Conference, COP20 or CMP10 will be held in Lima, Peru,

from December 1-12, 2014

This will be the 20th yearly session of the Conference of the Parties (COP 20) to the 1992

United Nations Framework Convention on Climate Change (UNFCCC) and

10th session of the Meeting of the Parties (CMP 10) to the 1997 Kyoto Protocol.

The overarching goal of the conference is to reduce greenhouse gas emissions (GHGs) to limit the

global temperature increase by 2030 to 2 degrees Celsius above 1850 baseline or Pre Industrial

era

Estimated cost to reach the target

The Adaptation Gap report by the UN Environment Programme said the adaptation costs can be at

least two to three times higher than the current estimates of about $70-100 billion per year by

2050 even in the best case scenario.

So what has been the progress made in Lima Summit?

The most important discussions have been focussed around INDCs, or Intended Nationally-

Determined Contributions, which is the main building block for the future climate treaty.

Each country has to report by next year (2015 Paris meet) what it intends to do to contribute to the

fight against climate change.

The main points of contention on INDCs are the following

1. Inclusion of Adaptation, finance and transfer of technology:

Developed countries are of the view that only actions that help in reducing greenhouse gas

emissions should be counted as ‘contributions’ in INDCs.

Almost every developing country, including India, however, wants adaptation measures also to

be counted.

Developing countries also want efforts by developed ones on providing money or transferring

technology to poorer nations to be included in INDCs. This will help in holding the rich

countries (biggest culprits that contributed to the increase of GHG emissions since Industrial

Revolution) accountable to their promises on ensuring financial and technology flows.

2. Commitment Period:

India, European Union, China etc. are in favour of a 10-year commitment period. The

idea is that longer commitment period would ensure better predictability of actions, better

actions, and more stability to investments being made.

The United States, however, wants five-year commitment period so that countries can

make quicker review of their actions and enhance their ambition or change their plans if

required.

3. Ex-post Review:

Since the INDCs are ‘nationally-determined’ and voluntary, the level of ambition in making

‘contributions’ is likely to be low. Some countries want an assessment of each country’s INDC to

see whether these are in line with the global 2 degree target. India and the United States

strongly resent any such provision, saying such an exercise will negate the ‘nationally-

determined’ nature of the ‘contributions’.

What is an INDC?

During previous climate negotiations, countries agreed to publicly outline what actions they intend

to take under a global agreement well before the Paris Summit 2015. These country commitments

are known as Intended Nationally Determined Contributions (INDCs).

Source: Indian Express, Wiki, Official site of UNFCCC

Green Climate Fund

UN Framework Convention on Climate Change (UNFCCC)

2009 Copenhagen climate meet

Green Climate Fund

India looks to Putin’s visit to lift sagging ties

Since July, the relationship between the two countries has been strained over India’s growing

defence procurement from the U.S. even as Russia struggles with sanctions from the West.

India is unhappy with Russia’s new defence cooperation agreement with Pakistan, which marks a

significant shift from the past.

Free trade pact

With just $10 billion in bilateral trade in 2013, India and Russia are not expected to meet their

target of $15 billion by 2015, but both sides are talking about a free trade agreement with the

Customs Union of Russia, Kazakhstan and Belarus as well as join energy exploration in Russian gas

fields.

India and Russia are like to sign nearly 15 agreements in defence, nuclear energy, customs,

banking and energy.

India to project green energy feats

The country’s total renewable power installed capacity as on October 31, 2014, has reached 33

gigawatt (GW).

Wind energy accounts for 70 per cent of the installed capacity at 22.1 GW followed by biomass

power — 4.2 per cent, small hydro power — 3.9 GW and solar power 2.8 GW.

Renewable power sources in decreasing order of installed capacity (Important for Prelims)

1. Wind

2. Biomass

3. Small Hydro

4. Solar

New Horizons probe

A NASA probe launched eight years ago to explore Pluto

woken up from its last hibernation in deep space

Launched in January 2006

travelled nearly 4.6 billion km on its way to study Pluto, its largest moon Charon and a few

smaller moons

First ‘green diesel’-powered flight

A Boeing aircraft has completed the world’s first flight using ‘green diesel’, a sustainable biofuel

made from vegetable oils, waste cooking oil and animal fats.

Green diesel is chemically distinct and a different fuel product than “biodiesel,” which also is used

in ground transportation.

Sustainably produced green diesel reduces carbon emissions by 50 to 90 per cent compared to

fossil fuel

More about Green Diesel

It has a different molecular structure from biodiesel.

Its simply an improved biodiesel

Advantages of Green Diesel or Renewable Diesel

Green diesel or renewable diesel is a superior product with a higher cetane index than both

petrodiesel and biodiesel

Higher energy density value equivalent to petrodiesel and greater than biodiesel.

Renewable diesel can be distributed using the established petroleum pipeline system, while

biodiesel requires truck or rail transport.

Additionally, renewable diesel has no cold-flow issues and won’t thicken and clog engines in cold

weather as may happen with biodiesel.

Low carbon footprint

Notes: Biodeiesel and Green Dielsel are not the same. They are biofuels with molecular level

structural differences

Biodiesel

Biodiesel refers to a vegetable oil - or animal fat-based diesel fuel consisting of long-chain alkyl

(methyl, ethyl, or propyl) esters.

Biodiesel is typically made by chemically reacting lipids (e.g., vegetable oil, animal fat) with an

alcohol producing fatty acid esters.

Biodiesel is meant to be used in standard diesel engines and is thus distinct from the vegetable and

waste oils used to fuel converted diesel engines.

Biodiesel can be used alone, or blended with petrodiesel in any proportions.

Properties

The calorific value of biodiesel is lower than regular petrodiesel.

It has been claimed biodiesel gives better lubricity and more complete combustion thus increasing

the engine energy output

Biodiesel contains virtually no sulfur

Blends

100% biodiesel is referred to as B100

20% biodiesel, 80% petrodiesel is labeled B20

5% biodiesel, 95% petrodiesel is labeled B5

2% biodiesel, 98% petrodiesel is labeled B2

Biodiesel Compared to Petroleum Diesel

Advantages Disadvantages

Domestically produced from non-petroluem, renewable resources

Can be used in most diesel engines, especially newer ones

Less air pollutants (other than nitrogen oxides)

Less greenhouse gas emissions (e.g., B20 reduces CO2 by 15%)

Biodegradable

Non-toxic

Safer to handle

Use of blends above B5 not yet approved by many auto makers

Lower fuel economy and power (10% lower for B100, 2% for B20)

Currently more expensive

B100 generally not suitable for use in low temperatures

Concerns about B100's impact on engine durability

Slight increase in nitrogen oxide emissions possible in some circumstances

Growing China’s Influence in Indian Ocean

Softpower diplomacy by China in the Indian ocean region is a cause of concern to India

China has started a major water supply project in Sri Lanka, using “soft power” to deepen its

relationship with Colombo.

Analysts say the new venture is one of several steps that Beijing and Colombo have taken to

consolidate their relationship. China sees Sri Lanka as one of the important elements of the

Maritime Silk Road (MSR), which will connect its Fujian province with Europe.

The MSR would transit through the Indian Ocean via India, Sri Lanka, Maldives, and Nairobi in

Kenya. It would terminate in Venice after crossing into the Mediterranean via the Suez Canal.

New Delhi is carefully observing China’s growing relationship with Sri Lanka and Maldives — two

countries with which India has had a special relationship.

China is also engaged in the expansion of Hambantota Port in southern Sri Lanka

Plummeting oil Prices

After the economically crippling oil embargo of 1973, American Govt has strived hard to achieve

energy independence. (American Interference in middle east wars in 1970 led to OPEC memebrs

imposing sanctions on the west by curbing oil imports)

US oil companies began experimenting to produce oil from hard shale rocks hydraulic fracturing

— fracking — and horizontal drilling techniques that proved effective in producing natural gas

US Domestic oil production has soared more 70 percent over the last six years which helped it cut

short its import from OPEC nations by more than a half in recent years

Venezuela and Algeria contend that OPEC needed to band together to cut production and raise

prices. But Saudi Arabia remains reluctant.

This has produced more cracks in an organization in which competition between Saudi Arabia and

Iran is already fierce. (Sunni dominated Saudi Arabia and Shia dominated Iran are historical

enemies. So OPEC is struggling in arriving at a common ground to cut oil production which would

increase oil prices)

Prices are expected to fall further

American producers expect improved efficiency and output of their wells with new technology

Thus Saudi Arabia and other exporting countries are seeking to replace the American market with

Chinese and other Asian markets. Resulting in fierce competition.

Why Saudi Arabia opposing OPEC’s proposal

Saudi Arabia resisted calls for lower production mainly because the countries that were most

vociferous in calling for cuts would be the countries least able to actually cut their production since

their cash-short governments are dependent on more, not less oil revenue.

Consequently SA would lose valuable market it other contries failed to fulfill their commitments

Lack of Consensus among OPEC members, falling oil prices

After the oil price spikes of the 1970s, the United States and other industrialized countries raised

their strategic reserves, put into effect conservation policies and incentivized oil production.

Saudi Arabia lobbied its OPEC partners for production quota cuts, and the kingdom cut its own

production. When other OPEC members failed to comply with the new quotas, prices collapsed in

1986, and Saudi Arabia lost valuable markets for years to come.

OPEC has never completely regained the power it once had till early 2000s when oil prices spiked

again primarily because of the rapid growth in demand from China and other developing countries

and increasing unrest in several oil-producing countries like Nigeria and Venezuela.

http://www.nytimes.com/2014/11/29/business/energy-environment/free-fall-in-oil-price-underscores-shift-

away-from-opec.html?_r=1

Cheap oil and strategic reserves

Strategic reserves of oil comes handy during surging oil prices or in the times of war.

Sticky economic problems ranging from ballooning subsidies to unbridled inflation have all been

solved by the 40 per cent fall in Brent crude prices between June and now.

it is also an excellent chance to build up our strategic storage

History

India had conceived of a strategic petroleum reserve as far back as in the late 1990s

The plan was to build storage capacities in three places — Mangaluru and Padur (near

Mangaluru) on the west coast and Visakhapatnam on the east.

With a total capacity of 5 million tonnes, this storage was estimated to cover two weeks’

requirements.

A special purpose vehicle — Indian Strategic Petroleum Reserves Ltd. (ISPR) — was floated under

the Oil Industry Development Board to implement the project.

The problem started when the UPA government, which assumed office soon after, decided to review

the strategic storage plan

Present Situation

Petroleum Minister said that Vizag will be ready for filling by the end of 2014 with the other two

expected to be ready by mid-2015.

The minister alsosaid that four more strategic storages would be built in Bikaner, Rajkot, Padur

and Chandikhole in Odisha.

These will have a combined capacity of 12.5 million tonnes and take the storage to 90 days’

equivalent of consumption by 2020.

Problems associated

Only the government can conceivably fund this storage as there is unlikely to be a viable

commercial model for private developers to exploit.

So it would involve huge investments over the next one or two decades which would be a huge

burden for the government that has lot else to do.

Present options with the Govt

There have been instances in the recent past when some producers such as Iran commissioned

very large crude carriers (VLCC) to act as floating storage to ride out temporary market difficulties.

Government can strike a deal with one or more oil producers on mutually beneficial terms to offer

the newly built caverns for storage

Part of the storage capacity could be leased out to a couple of Gulf producers.

Understanding inflation targeting

Rising prices or Inflation adversely affect savings while making speculative investments more

attractive

Inflation adversely affects those who have no hedges against it, and this includes all poorer

sections of the community.

Price stability and growth

A crucial question that arises in this context is whether the pursuit of the objective of price stability

by monetary authorities undermines the ability of the economy to attain other objectives such as

growth.

In short, the question is whether there is a trade-off between inflation and growth

There is a general consensus that over the medium and the long term, there is no such trade-off

and an environment of low inflation is most conducive to faster economic growth.

By injecting greater demand and thereby generating higher inflation, higher growth may be

achieved. However, to sustain this growth, the authorities may have to generate higher and higher

inflation. This will end up as a self-defeating exercise.

What then is the tolerable level of inflation?

Chakravarty Committee regarded the acceptable rise in prices as 4 per cent.

Several studies in the Indian context have estimated that the threshold level of inflation may be

around 6 per cent.

Inflation Targeting

Inflation targeting is an economic policy in which a central bank estimates and makes public a

projected, or "target", inflation rate and then attempts to steer actual inflation towards the target

through the use of interest rate changes and other monetary tools.

Because interest rates and the inflation rate tend to be directly related, the likely moves of the

central bank to raise or lower interest rates become more transparent under the policy of inflation

targeting. Examples:

1) if inflation appears to be above the target, the bank is likely to raise interest rates. This usually

(but not always) has the effect over time of cooling the economy and bringing down inflation.

2) if inflation appears to be below the target, the bank is likely to lower interest rates. This usually

(again, not always) has the effect over time of accelerating the economy and raising inflation.

It is sometimes claimed that the financial crisis of 2008 in the United States and western Europe

sounded the death knell for inflation targeting.