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Authors
Caio Koch-Weser*Vice Chairman,Deutsche Bank Group+44 20 7545 0494caio.koch-weser@db.com*The author would like to thankcontributors to the paper:Sabine Miltner, Mark Fulton,Adam Sieminski, Mark Dominik,Tobias Just
Editor
Tobias Just
Technical Assistant
Sabine BergerDeutsche Bank ResearchFrankfurt am MainGermany
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 Managing Director
Norbert Walter
Key Copenhagen Messages
December 4, 2009
 
Climate change has the potential to severely impact societies,economies and human wellbeing.
It is therefore crucial to reduce thelikelihood of the devastating effects of climate change. Financial instititutions canplay a key role in mitigating these effects and in adapting to climate change.
The climate change conference in Copenhagen must be seen as animportant milestone
in a round of negotiations that will establish the frameworkfor a low-carbon society. There is encouraging momentum for a politicalagreement in December.
We need a broad consensus to strongly reduce global emissions.
Inorder to achieve this goal we need a clear target of reducing emissions by at least50% by 2050 compared to 1990. Even more important is the articulation of aseries of intermediate targets between now and then within the context of low-carbon growth.
Technology plays an important role.
Centres of excellence can encourageR&D collaboration and we need strong institutions to promote technologicalprogress. Feed-in tariff systems can play an important role in achievingdeployment of clean technologies at scale since they reduce the risk for investors.
We need to establish efficient carbon markets.
Cap-and-trade systemsare promising instruments to reach both static and dynamic efficiency. Offsets helpimprove efficiency, too. Complementary policies are still important as carbonmarkets get established.
Global financial institutions are integral partners in financing thegigantic investment needs.
They can help steer scarce capital into low-carbon companies, they can provide liquidity in the carbon markets, and as capitalmarket intermediaries they can raise debt and equity capital to fund clean techprojects and can give important advice in an uncertain and complex environment.
 
Current Issues2 December 4, 2009
Deutsche Bank is determined to bepart of the solution to the climatechange challengeWe believe there is much room forinnovation that can bring down costsand propel economic growth
Key Copenhagen Messages
Climate change is one of the most important issues of the nextdecades and has the potential to severely impact societies,economies and human wellbeing. It is therefore crucial to reduce thelikelihood of the devastating effects of climate change and toalleviate its negative consequences. Financial institutions can play akey role in achieving these goals and Deutsche Bank is determinedto be a leader in this space. We believe that as one of the leadingglobal financial institutions, we need to face up to the climatechange challenge – we want to be the trusted partner for clients whotake trailblazing action to tackle the inevitable impact of climatechange on their business, and a responsible partner for ourcustomers, shareholders, employees and the global society at largein the collective effort of transitioning to low-carbon growth.To fulfil this role we have been working closely with policymakersand clients in shaping the new framework for a low-carbon future.Now, we are just a few days away from the climate change talks inCopenhagen, where critical elements of the post-2012 climatechange policy framework are likely to be agreed. The emergingfocus on a strong political agreement is in fact the right prerequisiteto the eventual technical legal agreement.In an ideal world this framework would facilitate limiting globalwarming to 2°C above pre-industrial levels. This can only beachieved with reasonable probability (>50%) if atmosphericgreenhouse gas concentrations stabilize at or below 450 ppm CO
2
ein the long term.Analysis conducted by Project Catalyst (a coalition of climatechange experts that provides support to climate change negotiators)indicates that such concentration levels require that technologies bedeployed that will reduce emissions by 14 Gt relative to thebusiness-as-usual (BAU) trajectory by 2020. This represents anearly 25% reduction.Most of this reduction can be achieved with technologies that arecommercial or near-commercial today at a marginal cost of underEUR 60/t CO
2
e. Given this, there is a great deal of room foradditional innovation in low-carbon technologies, that can bringdown costs and be a driver of future economic growth.About one-third of the abatement can be achieved in the developedworld, and about two-thirds in the developing world. Agreeing how toachieve the required abatement – and who pays for what – will becritical in the climate change negotiations.
But will leaders deliver a deal?
With the announcement on November 16 by both the Prime Ministerof Denmark and President Obama that Copenhagen will aim at apolitical agreement since achieving a firm legal agreement is notpossible in the time left, we need to have the right expectationsabout the outcome of these negotiations.
1
For starters we shouldstop thinking about Copenhagen as a “meeting” and start thinking ofit as a “round” with discussions continuing beyond the December 18closure of the event. In fact, the round is likely to last through muchof 2010.
1
See Heymann, Eric (2009). Climate Conference in Copenhagen. Deutsche BankResearch. Current Issues. Frankfurt am Main.
 
Key Copenhagen MessagesDecember 4, 2009 3
Recent national climate pledges arean encouraging signResearch by Deutsche Banksuggests that current proposals areinsufficient to reach needed climategoals
While a final legal agreement is far out of reach by year end, there ispositive momentum toward a strong political agreement. Inparticular, it is encouraging that countries around the world havebeen stepping up their commitments to address climate change: — On November 25, US President Barack Obama pledged to cutemissions by 17% by 2020 and by 83% by 2050. — The next day, China announced that it would reduce energyintensity of GDP by 40-45% by 2020. This is certainly not acoincidence. — The EU has repeatedly stated its commitment to cut greenhousegas emissions by 30% from 1990 levels within the context of aglobal deal, while our research shows that their mandatedrenewables targets may deliver even deeper cuts. — Brazil already sources more than 80% of its power fromrenewables, and has pledged to reduce deforestation by 80% by2020. — India’s National Action Plan on Climate Change pledged thecountry to 8 national missions in key areas including solar power,forestry, sustainable agriculture, and energy efficiency.Unfortunately, even with all of these and other pledged cuts, we willnot reduce emissions by as much as we need to by 2020. Recentresearch by Deutsche Bank indicates that current proposals, ifimplemented, will still deliver a shortfall of about 5-7 Gt relative to apathway that might limit global warming to 2°C.
2
 Thus, the “Copenhagen round” in 2010 will need to deliver muchmore. When judging the progress, we should be guided by theextent to which the following elements will be present in anyCommuniqué on December 18: —
Building on the consensus to limit temperature increases to2°C should be embraced
(as proposed by the Major EconomiesForum in L‘Aquila as a global target for emissions reduction of atleast 50% by 2050). —
Articulating a series of intermediate targets for 2015, 2020,and 2030
is a necessary accompaniment to the long-term goal. —
Developed country caps must be ambitious.
Emissionsreductions of 80% or more by 2050 will need to becomplemented by binding interim targets and actions. —
Copenhagen should enshrine low carbon growth plans.
 Each country, especially those in the developing world, shoulddevelop such plans and actions that describe the country‘s long-term path toward sustainable, climate resilient growth anddevelopment. This leaves open the possibility of these countriesadopting caps, voluntarily or more formally, later on. —
Technology development and sharing is critical in the fightagainst climate change.
Potential agreements could include anumber of centres of excellence to encourage R&D collaboration,specific joint technology development projects, and measures toencourage intellectual property sharing while keeping in placeincentives for innovation. —
Finance is one of the most highly charged issues in thenegotiations.
Developed country governments face severe
2
DB Climate Change Advisors, Global Climate Change Policy Tracker:An Investor’s Assessment, October 26, 2009,
http://www.dbcca.com/dbcca/EN/investment-research/investment_research_1780.jsp.
 
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