By Peter Edwards, Director, Fairfield and Woods, P.C., and Contributing Editor to Colorado Energy News

According to Aesop, long ago a group of mice held a supreme council to consider how to deal with the threat posed by the local Cat. After many hours of debate they finally agreed that the best solution was to tie a bell around the Cat’s neck so they would have advance warning of its approach. Convinced that they had solved the problem, they began to return to their homes, when a wise old mouse said “I have just one question — who’s going to tie the bell on the Cat?” (A longer version of this story may be found at http://en.wikipedia.org/wiki/Bell_the_cat.)

Just before Christmas week, world leaders convened in Copenhagen for the 15th United Nations Climate Change Conference, or COP-15. (COP-15, by the way, is not short for Copenhagen-15. It means “15th Conference of the Parties.”) Hopes were high for a “binding agreement” among the attending nations. In international law, this is the top of the legal food chain - an agreement that is specific and enforceable in the World Court, not to mention the court of public opinion. But it never happened.

Not even close.

COP-15 was the Mice in Council. Anthropogenic climate change is the Cat. And lowering greenhouse gas (GHG) emissions is tying the bell around the Cat’s neck. As Aesop noted, “it is easy to propose impossible solutions.”

Here’s the problem: if you are a human, or even the entire human race, the Earth really is a big place. As quixotic as we may be, we are not going to control its climate by building a few windmills and solar farms. We need truly massive, nearly-ubiquitous changes in our habits. The International Energy Agency estimates that $1T (that’s Trillion) must be invested in clean technologies annually in order to halve GHG emissions by 2050. And less than one-tenth of this is projected to come from public coffers.

I have a good friend who attended COP-15 as an observer, representing $1B in private dollars. Try as she might, she could not get even close to the proceedings. All her meetings were off-site - the international equivalent of the “kids’ table” at holiday dinners. The “negotiators” were all policy makers from the various member nations. When they spoke of “finance” they meant private capital - although most of the negotiators have no private finance background. Try to imagine all the policy folks standing negotiating their hearts out over financial issues that they are powerless to address.

Not pretty.

America understands money. Secretary of State Clinton announced on December 17th that the U.S. would support a $100B-annually fund that would include public and private dollars.  Unfortunately one-tenth of the total, coming from the world’s richest country, is not quite enough.

What COP-15 did accomplish, short of a binding agreement, was an “Accord,” which has been described as a “proclamation to keep talking.” Three of the top finance provisions are:

→ GHG adaptation and mitigation funding for developing countries (public/private, scaling to $100B/year)
→ Establishment of the “Copenhagen Green Climate Fund” to funnel and administer new infusions of capital
→ A High Level Panel (another panel!) on Finance to examine “alternative sources of finance” (i.e., alternatives to public funding, or private investment)

While all the above are positive steps, they are baby steps indeed, particularly when considered against the backdrop of a world more concerned about climate change than ever before. Are you seeing why COP-15 has been met with negative reviews, if not outright derision?

The World Wildlife Federation did not mince words. They said COP-15’s lukewarm results would be responsible for a three-degree Celsius increase in global temperatures. I have no idea how they reached that conclusion, but given their previous statements (predicting millions of lives lost with only a two-degree rise), that’s significant.

I am not a scientist. I am a lawyer and active participant in the New Energy Economy. My interest in climate change lies in understanding how it affects the economy and business. Even with that practical, unemotional perspective, I am troubled by COP-15. We cannot, like the Council of Mice, simply declare “problem solved” and go home.

It seems certain that the United States will be at the center of climate change controversy for years to come. We are the second largest emitter of GHGs, having been overtaken by China in recent years. We did not sign the Kyoto Protocol, unlike 187 other countries, 37 of whom are the most highly developed in the world. The Kyoto Protocol, however, has been getting mixed reviews, to say the least, and as we have just seen the nations of the world are far from united when it comes to putting the bell on the Cat. In the end, what will make the U.S. a leader in the new energy world of the future is not political leadership, or lack thereof, at international conventions; rather, it will be our pivotal position in the global banking and financial communities.

COP-15 may be a harbinger of tough times ahead for those of us who are banking (literally) on a global effort to combat climate change. The leaders of the world may say “we just can’t afford it,” and resume business as usual. Anyone who knows the energy industry, however, whether it’s exploration and development, infrastructure, finance or politics, knows that this is an industry characterized by very short-term volatility and very long-term trends. All the evidence today suggests that the trends toward clean, sustainable energy and away from dependence on a single fuel may subside in the years to come but will not reverse.

If this prediction is correct (indeed, unless it is dreadfully wrong) the world will require vast, reliable sources of liquidity for revising, revitalizing and expanding our infrastructure. The money will not come from the World Wildlife Federation. It will come from major, long-term loans, guarantees and credits. (Congressional testimony for the DOE loan guarantee program stated that every dollar of loan guarantee money results in ten dollars of new projects.) We will see cross-border, multinational banking and lending activities as never before. This is the kind of credit that builds societies. Unlike consumer credit card debt, car loans, or mortgages for suburban dream homes, this credit will be low-risk, asset-backed and long-term.

It will be global in scope and effect and awesome in magnitude. In my mind’s eye I can see people getting ready to put the bell on the Cat - and they are not politicians and people who drive in big cars with diplomatic plates. They are financiers, businesspeople, and service professionals … and people who build things.