Businesses in energy-intensive sectors such as cement, steel and aluminium will be asked to sign up to industry-wide pacts on cutting their greenhouse gas emissions, under plans due to be agreed at an international climate change conference on Friday.
The United Nations talks in Bali have entered their final day, and are expected to continue until late on Friday. The talks are expected to produce an agreement by all countries to start two years of negotiations on an emissions reduction regime to replace the Kyoto protocol by the end of 2009, in time for countries to put it into effect before the provisions of the treaty expire in 2012.
One key disagreement remained on Thursday: the European Union has been arguing for a form of words calling for developed countries to cut their emissions by 25 to 40 per cent by 2020, in line with guidance from scientists.
The US was unlikely to agree, despite a threat from the EU to pull out of US-sponsored climate talks next year if the Bali conference failed to produce an outcome. But most observers expected the two sides to compromise because the cost of failing to produce an outcome from these talks was so high.
The negotiations on an in-ternational post-2012 framework will include a provision for global sectoral agreements aimed at industry. These will require the leading companies in certain sectors to meet and agree on targets to cut their carbon dioxide emissions.
Climate change talks have stalled for years because many countries both developed and developing have been unwilling to agree to emissions curbs unless they are universally adopted, fearing their industries would suffer competitive disadvantage against those in countries that had not agreed to cuts.
The US objected to the Kyoto protocol on these grounds, saying that it would hurt US businesses by forcing them to cut their emissions and displacing production to the developing world.
Global sectoral agreements on emissions avoid this difficulty by committing the biggest companies in a given sector to cut their emissions by similar amounts to their peers, erasing any competitive disadvantage.
Setting up such agreements is one of the least contentious items in the discussions at Bali, so is almost certain to form part of any post-2012 framework.
Many industries are in favour of such agreements, viewing them as preferable to alternatives such as a patchwork of emissions regulations across the world.
Work has begun in the paper, steel and cement industries to measure their emissions and develop a framework for cutting them.
Bjorn Stigson, president of the World Business Council for Sustainable Development, which has pioneered such agreements, said they worked best in industries concentrated in the hands of a few companies, citing car manufacturing, steel, aluminium?and cement.
He said: It s not unusual in many sectors to have 10 to 15 players responsible for more than 50 per cent of economic activity in that sector.