The Obama Administration has made grabbing a leading share of the green economy one of the key planks of its climate change and energy policy. But it is now conceding that it is losing the race to China — its biggest economic rival.

Energy secretary Stephen Chu this week described the clean energy race as America’s new  “Sputnik moment”, a reference to the wake-up call the country got when Russia became the first country to put an earth-orbiting satellite in space in 1957.

Chu said the US must now respond to China with a similarly rapid response it conjured up when it managed to beat Russia to be the first to put a man on the moon. “America still has the opportunity to lead the world in a new industrial revolution,” said Chu, “but I think time is running out.”

He said China and other countries were clearly moving aggressively to capture the lead in wind power, nuclear reactors and high-speed rail, and he believed that the US should play to its strengths, which he saw as affordable electric batteries with an 800-kilometre range, solar power and reducing the cost for carbon capture and storage.

China seems to be reveling in America’s anxiety. Knowing that the Obama Administration is hamstrung by domestic politics, it is keen to reinforce its position as the economy that can deliver the clean technologies to help in the transformation to a low-carbon economy.

While its key negotiators have been keeping a relatively low profile in the first two days of talks at Cancun, the Chinese government has distributed thousands of copies of a glossy 16-page document touting the country’s green credentials, from solar and wind (it erects a new turbine every hour on average), to green cities and electric vehicles, environmental protection, crop protection, biodiversity and organic farming.

More brazenly, the document touts China’s willingness to push for a global agreement on climate change, although its key criteria are funding for developing countries and access to those very clean technologies that it wishes to then produce on a grand scale. It is on this point, and that of verification, that the US and China have significant differences — and these differences will be the most challenging tasks of the next 10 days of talks.

Talks, tequila and a six-pack

With the opening plenaries complete, negotiations went on more or less behind closed doors on Tuesday into an endless series of informal meetings to try and build agreement on the so-called six-pack that will judge the success of the Cancun meeting. Negotiators were seen criss-crossing the corridors and vast expanse of the Pinata and Tequila wings of the sprawling Moon Palace. What will they do when it rains?

The Mexican hosts are hoping to prepare a series of texts that can have enough agreement — and as few brackets — as possible to present to ministers, who will arrive over the next few days and take the lead role in negotiations from the weekend in trying to produce the “balanced outcome” that many hope will be enough to take the talks towards a treaty in South Africa next year and beyond.

Negotiators and observers are also trying to make sense of the strident intervention by Japan at the close of the first day, when it said it would refuse to engage in the second stage of the Kyoto Protocol if major emitters such as China and the US failed to commit to a new pact.

Japan’s view was not unexpected, but the emphatic nature and the timing of its comments made some wonder about its motives, and its potential threat to an agreed road map to Durban. Its view is supported by Russia and Canada, in particular, who are suspected to want to wriggle out of their Kyoto commitments, which they now find onerous. The EU, on the other hand, along with Australia and others, have a more relaxed attitude, saying that they remain willing to commit to the second period of the Kyoto Protocol, regardless.

Into the woods

The tricky question of LuLuCF — land use, land use change and forestry — is raising its head again. This mechanism is important to the Australian government, and others such as Canada, Norway and New Zealand. Australia would find it a lot easier to entertain a commitment to a 15% target if there is a favourable deal on how emissions are calculated on forest management, and crop and grazing land management.

A text proposed by the head of one of the two key working groups was presented today, but a rival text is soon expected to emerge from the island state of Tuvalu, which will considerably reduce the scope of the agreement and put a cap on forest management.

The most contentious part of the proposed mechanism is the calculation of baselines. Environmental groups, and many developing countries, fear that an artificially high baseline — essentially an intention to conduct a high amount of logging — can create “bonus” credits of “emissions saved” when those countries decide to do a smaller amount.

Environmental groups in Australia and Canada today released an analysis which they said found that the “logging loophole” would substantially weaken reduction targets — by up to 66% in New Zealand, more than 8% in Norway and more than 4% in Australia.

“These countries want to have it both ways,” said Jason Funk, from Environmental Defense Fund.  “When forests are absorbing carbon, they want to claim credits.  But when they start cutting down those forests, they want to make logging emissions go away.  It’s dishonest accounting.”

Developing countries also fear that such a mechanism could dampen international demand for credits from mechanisms such as REDD — designed mostly to ascribe value to rainforests — that are more likely to be approved at this conference.

Down to earth

Climate change minister Greg Combet might have to dump some of the domestic rhetoric when he makes his debut at the international climate change talks next week. As has been reported this morning, Combet defended the retention of the 5% emissions reduction target, saying that actions by developing and other countries had yet to be verified.

However, two of his stated justifications will not go down well in the international community. The first is that it is somehow harder for Australia to reduce emissions than it is for other countries because Australia is so reliant on coal. Other nations that have already introduced clean energy alternatives such as nuclear, hydro or gas and who face similar emission reductions targets will scoff at this notion.

Combet’s second argument was that Australia’s 5% target on a per capita basis is greater than that of other countries. This is dangerous territory. There are many nations — and economists, such as Ross Garnaut — who believe that it is inevitable that countries’ emissions targets will be based on a per capita basis. Australia, as the highest per capita emitter after the UAE by some estimates, would face even deeper cuts in such a scenario. Then it would be difficult.

Food for thought

Three years ago in Bali, the Australian delegation was overwhelmed when it made the fateful decision to include industry types, lobbyists and environmental groups in the official party, and numbers were swelled to several hundred by the proximity of the meeting, and the election of Kevin Rudd and his dramatic gesture to sign the Kyoto Protocol.

These days the official delegation keeps the so-called “stakeholders” at arm’s length, and their numbers are much reduced. Only about two dozen are in Cancun at the moment — mostly environmental NGOs and the forest industry — a vastly reduced number even from Copenhagen, although numbers will be boosted slightly by some consulting, banking and legal types for a series of “business summits” to be held elsewhere in Cancun over the weekend and into next week.

Big business is noticeably absent from these talks — the media-hungry Sir Richard Branson will be in town over the weekend to talk up the green economy. The global head of Coca-Cola, however, was in town on Monday to represent a grop of 400 consumer goods manufacturers who have promised to slash greenhouse gas emissions from deforestation and refrigeration technologies.

The group, which also includes Unilever, Tesco and French retail giant Carrefour, have promised to source products such as soya, palm oil, beef, paper and timber in a sustainable manner, and to phase out the use of HFC refrigeration technologies, which produce highly potent greenhouse gases.

Living it up at the Hotel California

According to some seasoned observers, the traditional first night reception for delegates, press, and the various NGOs (YouNGOs, BiNGOs, RiNGOs, TuNGOs and ENGOs — youth, business, research, unions and environment) hosted on Monday by the UNFCCC and Mexico was one of the best. In a giant marquee, sat between the various swimming pools on the beachfront of the vast and opulent Moon Palace, was traditional Mexican food, free drinks, and a Mariachi band. They played almost exclusively Mexican tunes, with one notable exception: Hotel California. Perhaps it was a message to the negotiators: “You can check out any time you like, but you can never leave.”

The traffic snarls have also disappeared. The Mexican authorities blamed the first day gridlock on “thousands of onlookers” wanting to attend the meeting without a pass. More likely it was the decision to close half the highway to provide an uninterrupted link between the two venues. Today, the highway was reopened and, hey presto, the traffic flowed and there appeared to be no delays. If only finding a way to unlock the climate change negotiations was so easy.

But logistical problems remain. Official delegations are finding it hard to get mobile phone and internet connections in their offices, observers and NGOs are having the same issues with wi-fi and are seen huddling in receptive corners of the Moon Palace, while the press building has been all but abandoned by the attending media. Where Copenhagen witnessed a sea of hacks in a central room, only about a dozen are scattered among the 600 places afforded them at the Nizuc wing of the Moon Palace. Apart from AP, which made such a logistical commitment to the Nizuc that it has no choice but to stay.

*This was originally published in Climate Spectator.