The world's attention is turning to Bali, Indonesia, for the United Nations climate-change summit on 3-14 December 2007. On the eve of the event, the prospects for an effective climate deal beyond 2012 look uncertain.

Also on openDemocracy, in partnership with E3G: a new blog - Global Deal - tracks the policy debates and arguments at the Bali climate-change conference on 3-14 December 2007.

Read and respond to David Steven's vivid daily reports and commentary here

Also in openDemocracy on the Bali conference:

Camilla Toulmin, "Bali: no time to lose" (30 November 2007)

Paul Rogers, "Climate change: a window to act " (22 November 2007)

The principal challenge for the climate diplomacy is to engage actors across energy-sector divides and ensure they support the climate process. From multilateral financial institutions, to trade bodies like the World Trade Organisation (WTO), international agencies and industries as well as national ministries of energy and infrastructure: the need to cooperate and to create mutual accountability ties is crucial.

The climate problem cannot be solved without transforming the energy sector. The climate diplomacy's success depends on having concrete proposals to build this connection; and so far there aren't many.

This is a difficult task, but also an urgent one. A new treaty needs to set the world on the path to reduce its emissions of greenhouse gases to 80% below 1990 levels by 2050, while the International Energy Agency (IEA) predicts that oil and gas imports, the use of coal and the volume of emissions are likely to increase steadily through to 2030. India will become the third-biggest emitter of greenhouse gases in 2015 and China already overtook the United States as the world's biggest emitter in 2007. By 2030 the energy use in China and India will have doubled. None of these three countries are part of a binding climate agreement.

The Bali meeting could be a milestone towards real progress on climate change. In order to help countries in the right direction, a new treaty, with a more ambitious cap on global emissions, needs to find ways to link the emission reductions to incentives for cleaner, alternative paths for growth.

Changing the global architecture of energy trade and investment seems well beyond the scope or the mandate of the United Nations framework convention on climate change (UNFCCC), and that is part of the problem.

The infrastructure, trade and energy investment communities meet in other international meetings, outside and too far away from the UNFCCC secretariat's office. The governance of energy issues is negotiated in parallel spaces, with energy-security concerns, climate considerations and energy-infrastructure investments being discussed in isolation from each other.

openDemocracy writers debate the politics of climate change:

Stephan Harrison, "Kazakhstan: glaciers and geopolitics (27 May 2005)

Simon Retallack, "Climate change: the global test" (10 November 2006)

Tom Burke, "Climate change: choosing the tools" (21 December 2006)

John Elkington & Geoff Lye, "Climate change's right and wrong fixes" (2 February 2007)

Dougald Hine, "Climate change: a question of democracy" (2 March 2007)

Andrew Dobson, "A politics of global warming: the social-science resource" (29 March 2007)

Oliver Tickell, "Live Earth's limits" (6 July 2006)

Andrew Dobson, "A climate of crisis: towards the eco-state" (19 September 2007)

Mike Hulme, "Climate change: from issue to magnifier" (19 October 2007)

David Shearman, "Democracy and climate change: a story of failure" (7 November 2007)All this makes 2008-09 a crucial period to re-engineer the global climate architecture. Decisive steps should be taken in this direction in one of two ways - changing the formal mandate of the UNFCCC secretariat through its bi-annual budgeting process and performance review, or by encouraging it to create an informal mechanism with which to broker agreements with energy stakeholders.

The diplomatic task

The diplomatic task is to make room for a large-scale transition to renewable energy.

The building of a "de-carbonised society" is a huge challenge, but early indicators show that it is not an unrealistic goal. From South Korea to Algeria, developing countries are showing practical solutions to champion renewable-energy competitiveness.

China is becoming the world's leader in renewable energy. A new report by the Worldwatch Institute suggests that it is on course to exceed the target of obtaining 15% of its energy from renewable energy in 2020, and reach up to 30% by 2050. China's leadership in technology manufacturing will have global implications, but protective trade barriers in industrialised countries are becoming an obstacle to its growth.

Alternative energy has become a big market. The United Nations Environment Programme (Unep) estimated that in 2006, $100 billion were flowing into renewable energy and efficiency technologies. The majority is being invested in Europe and the United States, but 21% has gone to developing countries and 9% to China.

"Amid much discussion about the 'technologies of tomorrow'", said Yvo de Boer, the executive secretary of the UN convention on climate change in response to the report, "the finance sector believes the existing technologies of today can and will 'decarbonise' the energy mix, provided the right policies and incentives are in place at the international level."

Scaling-up alternative energies will require a broad-range of stakeholders to share goals and build effective collaborations. Much depends on government policies: from lowering investor risks to new regulation, such as feed-in tariffs, which allow renewable energies to flourish in mainstream electricity markets. But individual governments can achieve little if the international patterns of investment in energy infrastructure, trade rules, and energy policy benchmarks are misaligned with this goal. Here the climate diplomacy can make a distinctive difference.

Achieving the right economic incentives depends on getting accountability right. For example, the vertical lines of accountability within the UN system set up for climate, and within the climate delegations and their respective governments, do not contemplate the objective of brokering clean-development "deals" with the energy-investment community in return for emissions-reduction commitments by countries.

Many of the proposals that have been made for the post-2012 climate regime point in the right direction, but none offer guidance on how to improve this governance problem. For example, the Tallberg Foundation's proposal argues that industrialised countries should offer emerging economies a package-deal in the form of a climate partnership, to help facilitate the transition to a "no-carbon economy".
Alejandro Litovsky is senior advisor at AccountAbility

Also by Alejandro Litovsky in openDemocracy:

"Europe and Russia: the accountability test" (21 May 2007)

"Energy poverty and political vision" (4 September 2007)
Tallberg's roadmap includes the co-financing of investments in renewable energy in the range of $20 billion per year, and support to stop deforestation on the basis of a global fund rather than by generating tradable carbon allowances, as it is currently envisioned. It would facilitate access to alternative technology, addressing constraints posed by intellectual property rights and trade tariffs. The proposal hits all the right buttons of what a future deal should consider, but does not mention how the partnership would sit within the current climate-governance system.
A more recent proposal by the Clean Energy Group is to create a "consultative group on climate innovation" as part of the necessary linkages of a post-2012 framework. The proposal takes further the ideas presented by the Global Leadership for Climate Action (GLCA) at the G8 Gleneagles dialogue in Berlin, in September 2007.

This group would bring together business, investors, donors and philanthropists, governments and civil society to replicate the collaborative initiatives that have addressed "global market failures" in other sectors, such as HIV treatments. It would combine the skills, interests and capabilities of stakeholders to achieve a "large-scale technology development in multiple energy sectors".

This is "an important 'bridging' strategy between developed and developing countries to commit seriously to the post-2012 climate framework", argues Lewis Milford, chief executive at the Clean Energy Group. The proposal acknowledges the need for it to be somehow "linked to the UNFCCC process". One of the ways to create the governance connection would be to house this proposed consultative group with the UNFCCC secretariat.

Building incentives for improved governance

From 2008 onwards, the UN climate system needs to achieve three outcomes.

Trade rules

The first is to gain support from trade rules and the WTO for the climate agenda. Governments wanting to adopt policies to back renewable-energy industries or regulate imports from carbon-intensive sources will soon find themselves denounced at the WTO for protective trade measures. Such was the case in a recent "threat" by the United States to initiate a trade dispute

Another example is the European commission's decision to extend anti-dumping duties on imported energy-efficient light-bulbs from China. This move to protect the European industry was made even though the EU is likely to meet only 25% of its demand for energy-saving light-bulbs through domestic production.

A review of the trade and competitiveness issues associated with climate change found that the dispute-settlement mechanisms in the Kyoto protocol do not take adequate consideration of trade-related disputes. In a post-Kyoto agreement, these considerations need to be more developed.

Policies that are agreed multilaterally in environmental forums such as the UNFCCC can be exempted from these trade rules under Gatt's Article 20 on general exemptions. The UNFCCC urgently needs to build links to the trade community, achieving commitments as binding as possible. The WTO needs to distinguish and support the development of renewable-energy markets, ensuring that its free-trade project will not lock the global economy into a carbon-intensive path. over the European Union's policy proposal to include the aviation industry in its emission-trading scheme, which includes foreign airlines flying to and from Europe.

The financial sector

The second outcome is to gain support from the private financial sector to the emissions commitments made within the UNFCCC. The good news is the effort to engage with the private financial sector is already happening within the UN system. The not-so-good news is that coordination with the climate system is still lacking. The UNEP's finance initiative (Unep-FI) is a case in point.

This is a global partnership with the private financial sector that includes 160 financial institutions. Unep-FI works with leaders in financial services: from banking, to insurance, asset management and pension funds, to develop new financial approaches to sustainability. Within Unep-FI, the sustainable energy finance initiative (Sefi) provides financiers with the tools, support, and global network needed to conceive and manage investments in the rapidly changing marketplace for clean-energy technologies. Sefi's mission is to pave the way for a global scale-up of investment in energy efficiency and renewable energy.

Commercial banks are also getting involved. HSBC has launched its own "HSBC climate partnership", a five-year programme with four international NGOs and a donation of $100 million for them to address aspects of climate change. If only HSBC could have been part of an agenda for greater connectivity with the climate deal, the "world's local bank" would have made a more robust contribution through its partnership - lowering investor risks in developing countries where it operates, increasing high-risk finance for renewable-energy projects, and strengthening the clean-energy market as a strategic move for its business advantage.

Another initiative, the investor network on climate risk (INCR) in the United States brings together more than fifty institutional investors managing around $4 trillion of assets; it aims to promote a better understanding of the financial risks and opportunities posed by climate change.

These voluntary initiatives are worthy of praise, but how do they help realise commitments to reduce emissions in the countries where they operate? A coordinated approach is needed with private investors so that "stronger commitments" to finance renewable energy can strengthen "country commitments" to reduce their emissions of greenhouse gases.

The multilateral factor

The third outcome is to achieve stronger commitments from multilateral agencies to address emission reductions. Such commitments to climate change are in vogue with multilaterals. In its 2007 fiscal year, the World Bank Group's (WBG) support for renewable energy and energy efficiency reached $1.4 billion. While this is impressive, a review by a coalition of NGOs of the WBG's "investment framework for clean energy and development" concluded that these investments are not fully aligned with combatting climate change.

The main argument of the review is that the "clean coal and natural gas technologies that the Bank intends to promote will reinforce the carbon-emitting fossil-fuel path that developing countries are on today. New coal plants and natural gas pipelines have high sunk costs and long lifetimes that will deter investment in alternative energy sources and delay a move to a truly clean, renewable energy path for the developing world."

Multilaterals should help decrease the dependency of developing countries on carbon-based technologies, not lock them into a technology path-dependency. For example, the WBG should phase-off finance to carbon-based energy projects and only support renewable and energy-efficiency projects. This focus could well happen within an UNFCCC-sponsored multi-stakeholder forum, where agreements can be reached between clean-energy investment packages and emission-reduction plans on a regional or country-by-country basis.

The immediate task

We will fail our targets for 2050 unless we act now. "The next ten years will be crucial for all countries including China and India", says Nobuo Tanaka, executive director of the IEA, "because of the rapid expansion of energy-supply infrastructure. We need to act now to bring about a radical shift in investment in favour of cleaner, more efficient and more secure energy technologies."

Progress on a binding climate agreement beyond 2012 will be slow if stakeholders responsible for shaping energy markets are not part of the long-term solution. The climate diplomacy needs to increase coordination and mutual accountability agreements with these stakeholders, to help countries see emission reductions in a different light.

2008 is a critical year for the UNFCCC secretariat's budgeting process and performance review, which is meant to ensure that it responds to the changing needs of climate governance. These processes offer two concrete entry-points to contemplate creating the mechanisms that are needed at the heart of the climate diplomacy.

Under the UN climate convention, the secretariat is formally accountable to the conference of the parties (COP). Its mandate includes the coordination of the Kyoto protocol, the Intergovernmental Panel on Climate Change (IPCC), and "other relevant international bodies", which today are limited in scope to the Global Environment Facility (GEF).
The institutional alternatives to improve the collaborative governance of climate change need to be discussed at the Bali meeting. Whether the UNFCCC secretariat and the future climate deal expand a formal mandate across the international system, or whether they create an informal forum for horizontal brokering of commitments and regulation, should remain open to debate. This debate needs to happen; and at least one of these two options should be pursued if the climate diplomacy is to succeed in the long term.