The 2-week long U.N. Framework Convention on Climate Change in Doha, Qatar ended on December 8. The delegates from nearly 200 nations managed to make little significant headway in meeting an international goal of limiting the ultimate warming of the planet to 3.6 degrees Fahrenheit, established 3 years ago in Copenhagen – a goal that increasingly seems unattainable.

After many heated discussions, the delegates managed to agree to extend the Kyoto Protocol, to support a previous decision to adopt a new global climate pact by 2015 that applies to both rich and poor nations and to offer promises of financing, albeit vague, to help poor countries address the effects of climate change.  The latter remains one of the most contentious and controversial issues in the climate change debate.  However, the consensus is that, despite the fact that recent data shows that global CO2 emissions keep rising, the delegates failed to deliver a meaningful deal to help us move closer to reducing carbon emissions on a global basis. Although emissions are declining in the developed countries, including the United States (in part due to increasing use of natural gas and renewables and in part because of slow economic growth), the continued rise of emissions in the developing nations, particularly China and India, far outstrips these gains.  According to scientists, global emissions rose as much as 3% in 2011 and are expected to jump 2.6% in 2012.

The Real Struggle

The widening gulf between rhetoric and reality of these climate talks has led some to suggest that we should simply ignore any further international discussions on this topic.  As Michael Jacobs argues in The Guardian, these U.N. negotiations are merely a “sideshow,” while the real struggle is “being waged in energy and finance ministries around the world, and in the boardrooms of energy companies and their bankers.”  With a few exceptions, governments around the world have shown little inclination and will – despite a formal treaty to limit global warming – to adopt the kinds of controls necessary to accomplish the goals that they have pledged.

Perhaps we can console ourselves with a few victories.  Old coal-fired power stations in the United States are being decommissioned and new ones are not being built thanks to federal regulators, environmentalists, and investors who no longer believe that “coal is cheap.” Moreover, renewables are playing an increasing role in supplying electricity, accounting for almost 15% of total installed U.S. operating generating capacity today.  The European Parliament has recently adopted a new energy efficiency directive that will impose mandatory energy-saving measures on member states at all stages of the energy chain.  Most important, the Chinese government has made a $1.7 trillion commitment to invest in clean technology, including alternative energy, smart manufacturing, alternative fuel cars, and an array of other energy efficient technologies.  China’s recent decision to curb its coal production may have more impact on the world’s carbon emissions than any multilateral talks.

French energy giant Energy Pool, majority owned since 2010 by Schneider Electric, is currently the largest aggregator of demand response (DR) in Europe, with curtailment capacity of around 1,000 megawatts (MW) and a penetration rate of close to 80% in France.  Today, Energy Pool manages curtailment capabilities at 70 sites, representing 50 customers.   By the end of 2013, its DR capacity is expected to be upgraded to 1,500 to 2,000 MW.

So far, Energy Pool’s growth has primarily come from large industrial customers that participate in the company’s emergency or interruptible load DR programs.  However, Energy Pool is increasingly aggregating load from high-energy users within the commercial sector, such as hospitals, shopping malls, and retail stores.  Participation in DR by this customer segment is expected to ramp up in the coming years.

Although Energy Pool’s customer base is primarily located in France, the company’s goal is to expand its presence abroad.  Initially, it plans to focus on the industrial sector in Belgium in 2013, soon to be followed by other countries in Europe.  The company is counting on a push for DR within the EU because of the European Union’s aggressive energy and climate change policy to reduce carbon emissions (20% from 1990 levels) and energy consumption (by 20%), while increasing the use of renewables (by 20%) by 2020, thus creating new supply-demand challenges for the grid.  Another major market driver in Europe is the expectation among business and building owners that the price of electricity, which has so far remained relatively low, will rise.  Moreover, payments by Energy Pool in exchange for load curtailment, along with lower energy consumption, and hence costs, are also strong incentives to take part in the company’s DR initiatives.  According to Energy Pool, their customers’ electricity bill could decrease by 3% to 10% in a year.

Although it can expect serious competition from EnerNOC, which has recently been establishing a foothold in the United Kingdom, and emerging aggregator KiWi Powers, which is headquartered in London with a fast-growing DR business, Energy Pool can leverage the significant resources of Schneider Electric and its long legacy as a building management systems provider.  Schneider’s long-term relationship with building owners and facility managers throughout Europe and other parts of the world gives Energy Pool access to a large number of potential DR customers.  The company has won several significant DR contracts.  (For example, Energy Pool, which declined to release specific customer examples, says it has recently signed a deal to manage the load capacity of 20 large office towers in the business district of a major city.)  Such deals reaffirm the company’s ambition to accelerate its growth in Europe and elsewhere.

In the wake of super-storm Sandy and President Obama’s re-election, the subject of climate change and even the term “global warming” are back on the table, if not fully on the political agenda.  Speculation as to whether the United States will finally adopt a national climate policy abounds in the media.  During his acceptance speech, Obama proclaimed: “We want our children to live in an America that isn’t burdened by debt, that isn’t weakened by inequality, that isn’t threatened by the destructive power of a warming planet.”

The possibilities range from extracting natural gas through hydraulic fracturing or “fracking” without causing environmental harm, to cementing the EPA’s role in regulating carbon emissions from new power plants, to stricter federal oversight of deep-water oil exploration and production, to a final decision about the Keystone XL oil pipeline, and even to a carbon tax as part of tax code reform.  Given the mounting federal deficit, the possibility of a cap and trade policy is not to be easily dismissed: a new report from the Congressional Research Service (CRS) cites one study that claims that a modest carbon tax of $20 per metric ton would generate approximately $88 billion in 2012, rising by 64% to $144 billion by 2020.

Pressure Mounts

Yet the general consensus is that carbon tax won’t be enacted, though there will most likely be a significant debate about various alternatives.  At least, the subject is no longer taboo.  The day after the election, Senate Majority Leader Harry Reid (D-NV) expressed his expectation that Congress would make progress on climate change action.  “Climate change is an extremely important issue for me and I hope we can address it reasonably,” Reid continued “… as we’ve seen with these storms that are overwhelming our country and the world, we need to do something about it.”

Despite the renewed hopes that the United States will finally take meaningful climate change action, it will undoubtedly be an uphill battle for the White House.  Opposition to any form of climate change initiative that might affect U.S. businesses has not wavered in the GOP-controlled House, and a number of Democrats from oil-producing states have joined Republicans in opposing climate legislation.  Instead, it’s more likely that lawmakers will push for less controversial proposals, such as expanding green energy and energy-efficiency programs to help reduce carbon emissions.

Although the prospect for any major change on climate policy on Capitol Hill looks slim, it’s not hopeless.  With no re-election worries, Obama should be free to tackle environmental issues in his second term. Yet, when asked about climate change at a November 14 press conference, he endorsed taking action to mitigate carbon emissions, especially if it would create more jobs, but provided no details.  Moreover, international pressure is mounting, as the second Kyoto Protocol (Kyoto 2) is under consideration.  In this new round of the Kyoto Protocol, nations are asked to commit to a target of 5% reduction of carbon emissions between 2000 and 2020.  While Australia has joined the European Union and smaller economies by announcing its commitment to this goal, the United States, together with China – the two highest emitters of greenhouse gases – have merely signed a non-binding pledge and are working toward a new agreement that will not take effect until 2020.  One wonders how many natural disasters it will take before all nations face the facts and take action.

Concerns about rising carbon emissions on a global basis have prompted many nations to implement taxes on their carbon-emitting industries.  According to a Climate Commission report, in 2013 33 nations and 18 sub-national jurisdictions will have adopted some form of national carbon tax that covers around 850 million people, about 30% of the global economy and 20% of global emissions.

Although the European Commission proposed a carbon tax in 2010 to charge companies between $5 and $39 per metric ton of CO₂, that legislation has not yet been agreed upon by its 27 member states.  However, many European countries have enacted their own carbon tax, including Denmark, Finland, Ireland, the Netherlands, Norway, Slovenia, Sweden, Switzerland, and the United Kingdom.

Finland was one of the first countries to introduce a carbon tax, in 1990 (with a 2010 price on carbon of $26 per metric ton of CO₂).  Sweden and Norway enacted carbon taxes a year later, followed by Denmark in 2002.  Today, Norway, the 8^th-largest oil exporter in the world, has one of the most aggressive carbon taxes in the world.  The Norwegian government has recently proposed to double its carbon tax on offshore oil companies to more than $71 per ton of CO₂ and to almost $9 per ton of CO₂ on its fishing industry.  In the United Kingdom many large companies pay a price for the carbon they emit through the EU’s emissions trading scheme.  Examples of carbon tax adopting nations in Asia Pacific are Australia, India, South Korea, Japan and China, which has run pilot emissions trading schemes in a number of provinces and cities to eventually implement a carbon tax on high energy-consuming companies.

What about the United States?  The United States has resisted a nationwide carbon tax policy. Indeed, the current U.S. Congress has made every effort to prevent any action to curb carbon emissions by the Environmental Protection Agency (EPA).  Most recently, on September 21, the U.S. House of Representatives voted in favor of Stop the War on Coal Act (H.R. 3409) to prevent greenhouse gas (GHG) reduction measures, including a ban on any action by the EPA to address climate change.  Given this political climate, a nationwide carbon tax is not very likely in the foreseeable future.  However, California has taken matters in its own hands by enacting its own carbon trading scheme, including a carbon tax, as part of its Global Warming Solutions Act, enacted in 2006.  To meet the state’s carbon emissions reduction goal of matching 1990 levels by 2020, California developed a cap-and-trade program that included a carbon tax on 300 companies, including several utilities, deemed to be the most serious polluters.  Today, California’s cap-and-trade program is linked to Québec’s cap-and-trad scheme, with the first auction scheduled for November 14, 2012.

To be sure, carbon taxes are not without serious challenges and criticisms.  Critics object that such taxes will inevitably be passed onto consumers, could result in industry and electricity production moving to other countries, and won’t significantly reduce carbon emissions.  Yet, countries around the world, convinced that emission trading schemes coupled with carbon taxes are the most cost-effective and efficient ways of reducing emissions, are taking steps to tackle climate change by pricing carbon.  At the same time, policymakers in these countries realize that taxes alone are not enough: broader environmental policies on a national level need to be in place to reduce carbon emissions.