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GLOBAL VOICES027ensuring progress on a number of priority issues. Theseinclude addressing tropical deforestation, supportingtechnology cooperation as well as adaptation to theadverse impacts of climate change, and ensuring thatwe put the main elements of a long-term financingframework in place. Progress on these issues isimportant, but not enough. For the EU it is key that the Cancún outcome alsoaddresses mitigation by anchoring the emissionpledges made under the Copenhagen Accord into theUN process. This will provide a framework forstrengthening these pledges through internationalcooperation. To support the Cancún package and makeearly progress on the ground, some of the decisions tobe taken there should be underpinned by the launch ofspecific projects in developing countries financed byfast-start funding. The developing world understandably sees prompt, full and transparent delivery on the fast-startcommitment as a key test of the rich world'strustworthiness. The EU is well on track to deliver onits pledge of ?7.2 billion. We will provide a full reporton how we deliver in Cancún. Cancún should also address the future of theinternational carbon market. While I see no doubt thatthe Clean Development Mechanism will continue, wewant to see a strong message in support of overhaulingit to give it greater environmental integrity andintroducing new sectoral carbon market mechanismsthat can capture the considerable potential foremission savings in the major emerging economies. The EU is concerned about the lack of balancebetween the two tracks of the internationalnegotiations, which became so pronounced at theBonn session in August. This imbalance couldthreaten the success of Cancún if it persisted. The bottom line is that the United States and the majordeveloping economies have got to play their respectiveparts in a global deal if the world is to have a chance ofpreventing dangerous climate change.We could - but only on clear conditions -considersigning up to a second commitment period under the Kyoto Protocol. Kyoto in its current form will not keep global warming below 2°C - it covers less than 30 per cent of global emissions. The serious weaknesses which undermine the Protocol's environmental integrity also need to berectified before a second commitment period could be considered. We are ready. We think that the rest of the world shouldget ready - so that at the latest in South Africa we canreach the strong, comprehensive and legally bindingglobal agreement the world needs. Despite theobstacles that remain I am confident that, underMexico's leadership, Cancún can produce a balancedpackage of decisions which takes us a major stepcloser to that goal. nABOUT THE AUTHORConnie Hedegaard joined the European Commission as Commissioner for Climate Action, a new portfolio, in 2010. Her ambition is to see Europe become the most climate-friendlyregion in the world by the end of her five-yearmandate.Prior to moving to the Commission, ConnieHedegaard was Denmark's Minister for Climate andEnergy, and before that for Environment. She waselected member of the Danish parliament in 1984 at the age of 23, and from 1990 to 2004 she worked as a journalist and columnist for various TV and print media.

olicy makers around the world areconfronting the challenge of climatechange in a context of increasedeconomic uncertainty. At a time whenpolicy makers need to find a new balance betweensupporting a still fragile recovery and moving to a moresustainable fiscal path, fighting climate change shouldnot be seen as a luxury, but as part of the solution. Ambitious global action to mitigate GHG emissions isnot only necessary, but economically rational. Thepotential that exists to generate sizable fiscal revenuesfrom the use of market instruments in climate policy isespecially attractive in current times of financialhardship. Revenues from carbon taxes or auctionedpermits could be used nationally to support climatechange action, for example to finance adaptation andmitigation in developing countries. Following theeconomic crisis, revenues could also be used for fiscalconsolidation, while in emerging economies suchrevenues could finance other pressing priorities, suchas education, health care and poverty alleviation.Copenhagen was a critical milestone in theinternational climate negotiations, and represents animportant breakthrough for action to limit globalGreenhouse Gas (GHG) emissions and help to buildcleaner economies. But ambition needs to be steppedup going forward. A successful outcome in Cancúnshould be seen as an important first step afterCopenhagen and will need to include some progressforward on a balanced package of a number ofelements. On tackling climate change, policy makersneed to consider a portfolio of issues: mitigationaction, adaptation, climate finance, competitivenessimpacts, and clean technology innovation. A robustsystem for reporting and verifying mitigation actionand finance flows will also be essential to build trust. On GHG mitigation and costs, it is promising thatmany countries are willing to commit to specifictargets or actions. However, OECD analysis suggeststhat even the most ambitious targets declared byindustrialised countries would reduce their emissionscollectively by at most 18 per cent by 2020 comparedwith 1990 levels, and this falls short of the 25-40 percent reduction suggested by IPCC for a pathway tolimit global average temperature increase to 2oC.Compared to expected economic growth, the OECDestimates the costs of achieving these pledges to belimited, and substantially less than most estimates ofthe costs of inaction.Our latest analysis estimates the costs of action for theupper range of declared targets and actions to bearound 0.3 per cent of global GDP. Furthermore, thepotential for fiscal revenues are substantial; for theindustrialised (Annex I) countries they can exceed oneper cent of GDP (or US$400 billion) by 2020 ifmitigation actions are achieved wholly through carbontaxes or emission trading schemes (ETS) withauctioned allowances. OECD analysis shows thatoffsets have an important role to play in emissionstrading and can play a crucial role to keep the costs ofclimate policies low, allowing the cheapest mitigationoptions to be exploited first no matter where theyare. The use of offsets helps to reduce thecost of action, but at the same time reducesthe potential fiscal revenues a country canaccrue from the use of market basedinstruments (Chart 1).We also need to move quickly to establish an overallapproach to address adaptation to climate changeunder the UNFCCC. The negative impacts of climatechange will hit poor people and countriesdisproportionately. Broad agreement on adaptationRight:Policy makers areconfronting the challengeof climate change in anera of economicuncertaintyCANCÚN AND BEYOND:MAKING CLIMATE ACTIONWORK FOR ECONOMYTRADE & 028ECONOMIC DEVELOPMENTPANGEL GURRÍA, SECRETARY-GENERAL, ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD)