Ardent enthusiasts for a global attack on CO2 output will be disappointed by the outcome of Copenhagen. There was no new set of Kyoto targets, no strong review mechanism, no agreed global standard for reporting results, no sanctions for countries failing to make their contribution. Optimistic greens say that nonetheless the USA, India and China are now in the process, and that following the summit there will be individual country targets registered with the UN. Pessimists say the clock is ticking faster than global political agreements can be reached.
We are not surprised by the results of Copenhagen. The truth is it was never likely that the all the world, including the USA, China and India, would sign up to very tough targets to cut CO2, and go away happily sharing data and accepting international pressure to hit them. China and India take the view that they need to grow quickly. That will entail more CO2 output, just as it did for the rich countries of the world in their comparable growth phase. The US President may be willing, but he knows there are tight political constraints on what he can sell to a worried and sceptical Congress. Australia has just had a political warning about the limits to acceptability of global warming inspired policies, with the change of Opposition leadership in protest at carbon trading plans.
We do not think it has many investment implications. It shows the world leaderships are mainly preoccupied by getting growth going again in the west, and rebuilding super growth in the east. We explained recently why we did not buy into the Clean Energy ETF as our Copenhagen stock of the year. The outcome of the conference makes us doubly glad we took that view. The future of markets for the time being is going to be determined by what these leaders do on monetary and debt policy, not by their attitudes towards the climate.