Who Will Pay?

Two reports released in the last 2 days start to move beyond the rhetoric into the interesting details of global climate response. In short, the reports ask 'who will pay' for the massive investments needed to transform the world's energy sector and to mitigate the effects of climate changes that will happen in the meanwhile.

First, with regard to the Paris conference itself (COP21), here's how it works: each of the 195 nations involved is supposed to have submitted a national plan (INDC) for reducing greenhouse gas emissions by 2030. Most of these plans are overdue, but some 30-odd national plans are on file, including the EU and G7 countries that account for 30% of global emissions and 40% of global GDP. So it becomes possible to evaluate--as the UNFCCC plans to do officially in the fall, before the Paris conference--just how the plans will affect the global goal of holding temperature increases at 2 degrees C. How do they look at this moment? According to the report by Climate Action Tracker, a report signed by 4 of the UN's most senior IPCC climate scientists, not so good. Metrics are complicated, but one way is to estimate at what point carbon saturation will produce temperature increases at 2C--considered the red-flag level for dangerous and irreversible climate change. Status quo projections put that moment at 2036. INDCs from the G7+EU countries so far will push that date back ... 2 years, to 2038. 'Insufficient' pledges from Russia, Canada, and the US in particular--and India and China as well--would imply temperature increases of 3-4 degrees C, a level called "catastrophic" by many climate scientists.

But that's the point of the UNFCCC process: to persuade all countries to put their cards on the table, see what they add up to, and plan from there. Clearly this first draft is unacceptable. Will 'peer pressure'--or just common sense--cause nations to tighten their proposals in advance of Paris? Or will the realization that the 2C goal is not even close to being met lead to post-Paris, post-2020 planning? As the UK's Lord Stern suggested in response to the Climate Action report, we might decide to use the Paris agreements as a "floor of ambition" on which to construct more aggressive plans. Will negotiators arrive in Paris with this intention?

Or will the whole process need to give way to something more urgent? Another IPCC author, Reto Knutti, commented that "global carbon budgets" would be a much more effective way to achieve climate security, but called it a "hard-sell"--harder than setting a 2C goal that no one thinks can be achieved. Perhaps the best use of studies like Carbon Action Tracker's is to alert us all to how much more will need to be done, once the UNFCCC makes clear how little current governments are prepared to do.

The second report is more straightforward. At the Copenhagen conference in 2009, leaders of the wealthy nations made a pledge to increase climate aid to poorer countries, a Green Climate Fund that would reach the impressive level of $100 billion per year by 2020. That funding would allow developing countries to implement clean-energy policies as well as mitigate the effects of climate change: floods, storms, drought, and so forth. Many observers believe that developing countries will sign onto the Paris agreement only if this Green Climate Fund shows promise of being fully funded.

So is it? Not really, but yesterday's report from the World Resources Institute shows how it might be achievable. Governments of developed countries will need to ramp up their contributions (from $17 billion to $31 billion), and development banks like the World Bank will also need to double their funding level to $28 billion. The remaining billions--and here's the most controversial part--would need to come from the private sector, whether in the from of co-investment or loans leveraged from the national and development bank funding. Finer minds than mine seem to feel this combination could yield as much as $137 billion per year, according to the Guardian's estimates, but under what conditions? And isn't that development bank money another form of taxpayer contribution from nations whose ratepayers have already shown a lack of enthusiasm for paying for this problem?

Envisioning the solution is a first step, and the WRI has done us a service by issuing this report. Bringing the wealthy nations of the world, their legislatures and corporations and international organizations to pay for it--that will be the next step, and at least some of that struggle will take place at the Paris conference. Or in the preparations for it--right now!--as countries prepare their negotiating positions.

Global Apollo: Can it Shoot the Moon?

The UK's special climate envoy, David King, and six other eminent British scientists, economists, and businessmen presented a report today that could offer dramatic support for efforts to reach a major climate agreement in Paris in December. They call their proposal 'Global Apollo' because it attempts to mirror the cost--$150 billion over 10years--and scope of the Apollo moon launch program--and because they hope to capture the can-do spirit of that heroic mission. The goal? To eliminate new coal-powered energy projects by making renewable energy "cheaper than coal in sunny parts of the world by 2020, and worldwide by 2025," according to analysts at The Carbon Brief . To achieve this ambitious goal the program hopes to gather government funding for new research in such areas as renewable energy storage and 'smart' grid design. From initial reports it was not clear whether the program intended to engage in implementation of enhanced sustainable technologies, or whether that enormous capital outlay would still need to come from national budgets, private capital, or the still underfunded Green Climate Fund.

Announcement of the report coincides with the Bonn Climate Change Conference, which opened yesterday under the auspices of the UNFCCC process with nearly 200 nations represented. The Bonn meeting is a technical one, streamlining documents from February's Geneva meeting in the hope of creating a workable agenda for Paris in December. Because it is easy for the massive bureaucratic process that is the UNFCCC to lose itself in details, the highly-publicized, media-friendly announcement--A Global Climate Moon-shot! the End of Big Coal!--provides a welcome surge, and gives the proposal some momentum in advance of next week's G-7 summit in Berlin, where the report will be formally presented, and funding requested. The UK, home base to the report's researchers and sponsors, has already announced financial support--intended to comprise .02% of GPD for the G-7 countries--but only if the other wealthy nations follow suit.

Still, questions remain whether this initiative can achieve all that its grandiose name and premise are promising. Deflecting new coal-based energy projects into solar and wind--by 2020!--would be a feat, especially given India's rapid exploitation of its coal resources, but even so, it fails to address the existing infrastructure for burning increasing quantities of the biggest carbon polluter for many decades to come. Carbon capture technologies are not part of Global Apollo, but perhaps they should be. Likewise the questions of how to implement rapidly at appropriate scale need to be addressed: the assumption is that Global Apollo's research will lead to price advantages for renewables, but even where this may already be true, market forces have not automatically responded with replacement renewables. Furthermore, interventions that decrease demand for coal without adjusting its price with carbon taxing may lower the price of coal and negate any price advantages for solar. By itself, Global Apollo is clearly not the whole solution, but in concert with other assistance programs and market adjustments, its research goals could certainly make an important contribution to the overall solution.

In political terms it will be really interesting to gauge the response to this proposal by the G-7 world leaders next week. The analogy to moon exploration puts an interesting light on what is a large, specific demand for climate funding. While not a panacea, this proposal--which is co-authored by Lord Stern and the Grantham Institute, one of the strongest voices in climate economics--represents exactly the kind of structural initiative that needs to be taking shape now, in advance of the Paris conference. Vague well-meaning promises need to turn into concrete, billion-dollar programs, and fast. Global Apollo is a welcome entrant into this arena.

Is Norway Divesting--or not?

Given the magnitude of the global energy sector, things are not always what they seem. Take Norway, and its sovereign wealth fund, the proceeds of its windfall oil boom, invested soberly to benefit Norwegians for generations to come. It's the largest sovereign fund in the world, amounting to a whopping 1.3% of ALL equity shares worldwide--a market-mover for sure.  In the Scandinavian tradition Norway, despite its current right-center government, stands for progressivism and a certain global responsibility, so it was not surprising when its pension fund managers announced last February, with much fanfare, that they were divesting from coal, that is, withdrawing $9-10 billion in stock holdings in some 50 large coal companies. The previous fall, Greenpeace Norway and two other environmental groups had published a carefully researched report showing that the sovereign fund was heavily invested in coal companies, and drew up a list of such public corporations it wanted the fund to withdraw from.

Alas, when the three groups looked back at the results of this 'divestment' this spring, what they saw was not what they hoped: in a follow-up report, they noted that the fund had largely reinvested in coal-related companies, many of them electric companies burning coal, instead of mining companies that produce it. The environmentalists cried foul, and on Wednesday the Norwegian parliament prepared to instruct the sovereign fund managers to try again. Once again, this new law was met with great applause in the Guardian, from Bill McKibben, and in general from a divestment movement that has accelerated rapidly since last winter. This Norwegian divestment 2.0 is seen as a major step with the possibility of drawing other large investors with it, as it pulls down the value of coal industry stocks. The change in context--the maturity of the movement which may be able to leverage this new Norwegian step in ways that weren't possible even in February--also known as a shift in 'market psychology' or 'mood,' may indeed be big news in the way Norway's first divestment effort wasn't.

Or maybe not. The shifting field of capital investments, of conglomerates with divisions that cover all bases of the energy field, makes it hard to know what divestment is real or 'fake'--as Norway's critics accused. But the growing prominence of the movement, in advance of the Paris agreements, may indeed make coal companies less able to maintain their reckless level of exploitation. The effective loss of value may translate as diminished working capital. But I still suspect that where there is a market for coal, there will be an incentive to produce it--not with Norway's capital but with someone else's. Helping India, China, and the other big coal users to replace their consumption of coal will be the long-term solution. But the frontal attack on its production--if such a thing turns out to be possible--may indeed advance that cause.

India's Climate Conundrum

Optimistically-inclined readers may want to skip this extensive, appalling report in yesterday's Guardian on the state of energy conversion in India. India is on the verge of being the world's most populous country. It will soon surpass the United States and rival China as the largest emitter of greenhouse gases. Under its powerful nationalist BJP government it intends to reinstitute 10% per year economic growth, powered mainly by domestically-produced dirty coal. And it makes no promises or apologies to the global climate movement.

One third of India's 1.3 billion inhabitants still lack electricity. Even with projected growth rates that are staggeringly ambitious--one new coal mine per month from now till 2020, says their coal minister--India will still emit less than a third of the greenhouse gases per capita in 2030 as will the US and China, according to their 'convergence' agreement to achieve something like parity. India's position is that eliminating poverty is its overwhelming priority--wealthier nations can address the climate problem. As Prime Minister Modi insists, India has a "right to growth," and it will make no international promises that infringe on that right.

India's environmental minister has also asserted that "clean air is our birthright," though the photo of Delhi, above, might call that into question. Nonetheless there are attempts to replace the oldest, dirtiest coal-burning plants--whose environmental consequences are truly nightmarish--with more modern cleaner ones. Requirements to reforest devastated mining sites are taking hold. Carbon capture technologies may be especially important in reducing India's impact on global atmospheric carbon.

India also has enormous potential for solar--solar intensity makes panels three times more productive there than in northern Europe--and a rapid increase in solar production, from 3 GW to 100 GW in the next 7 years, is also part of its national growth plan. The perfect correlation of seasonal needs--irrigation, cooling--with dry, sunny weather adds to the potential, as does the usefulness of rooftop solar in a country whose national infrastructure is underdeveloped as India's is. Nonetheless, given India's non-negotiable growth policies, the addition of solar to coal is a both/and, not an either/or proposition.

India's current refusal to make any international commitments, given its size and growth projections, threatens to derail the whole enterprise of the Paris COP21 conference. The coal it intends to mine and burn between now and 2040 would by itself exceed the 'carbon budget' the IPCC report considers permissible for restraining temperature rise to 2C. And yet India's government understands its vulnerability to climate change and environmental depredation--Delhi already has the world's worst air quality, and the environmental immiseration of whole regions is well-documented. Clearly this contradiction won't be resolved by the Paris meetings in December, but will a mechanism be put in place for steering India--and smaller less-developed countries with similar dilemmas--towards eventual resolutions? The acceleration of solar power and carbon capture may be the only hope to keep India's growth from pushing climate change into the catastrophic zone. Technical and financial assistance, forbearance, and solidarity--the Paris conference will need these in abundance if India, with its exceptional needs and demands, is to be brought gradually into the global consensus.

Greenwashing the Paris Conference?

It is one of the many paradoxes that haunt the climate struggle: the COP21 needs to assemble 25,000 delegates from 195 nations to hash out an agreement. That assemblage costs money, maybe 170 million Euros. Who can pay? Not the host French government, already under pressure to reduce its fiscal debt. So who has that kind of cash? Big corporations. And that's who will be sponsoring the climate conference (here, in French). Which corporations?

• EDF, the French energy giant, heavily involved in overseas coal production (who will supply electric car recharging stations)
• Paribas, the French bank most associated with fossil-fuel investments
• AirFrance, flagship of one of the worst polluting industries
• Renault Nissan, auto manufacturer (and supplier of electric cars for the conference)
• Suez Environnement, the waste management subsidiary of utility and energy giant GDF Suez (will manage waste disposal for the conference)
• LVMH, the luxury goods conglomerate (Dior, champagne, cognac)
• ERDF, an EU-sponsored regional development firm

In sum, major players in the existing energy-and-growth economy are choosing to direct their corporate philanthropy to COP21. Change of heart? Or just a chance to fend off criticism with this largely symbolic identification with the climate movement? Is this a bad thing? Not if one imagines that serious energy transformation can occur without displacing the corporate powers that created the current (disaster-bound) regime. Otherwise, yes: the appropriation of the Paris conference by the very sectors--finance, industry, transportation, etc.--it needs to confront is not good news. Greenwashing is obfuscation. It may help pay some short-term bills, but it makes the overall task that much harder.

What Will Work?

I've been thinking about the global warming problem for many years, reading more intensively for the past year or so, and paying greater attention in the five months I've been writing this blog. Does that make me an expert on this devilishly complicated subject? Hardly. But I have learned a lot, and I want to take a few minutes to sum up how the problem looks to me right now. What are some of the many ideas out there for resolving the worsening climate change problem, and what prospects do they offer?

• Keep It In the Ground, Divestment, Government Regulation and other attempts to restrict the supply of fossil fuels. Dissuasion of petroleum giants by advocacy campaigns, divestment, shareholder motions and such has the value of publicizing the powerful role of these corporations in driving us forward to disaster. Such campaigns have no force to stop them--indeed, exploration of new reserves seems to be taking an upswing, despite everything we know. Still, the drama of divestment has great educational value, and shareholder campaigns and such at least have the value of speaking truth--in opposition to the rank disinformation of the industry and its propagandists. Nonetheless, where there is demand, supply will follow in our demand-based economy.
• Restriction of demand. Of more immediate value are regulations, such as those promulgated by Obama and the EPA, to restrict coal-burning power plants. Such regulations are unlikely to restrict natural gas consumption, and may even promote it as an alternative to coal or oil for short-term gain. Automotive restrictions (e.g. fuel efficiency) may help reduce oil consumption, as could a host of other regulatory measures: efficient home construction, for example, 'smart growth' planning, public transit, local sourcing--many traditional 'ecological' policies will have the effect of reducing the most excessive fuel consumption, or direct it to less harmful modes. Voluntary conservation has never been a winning policy strategy though, and in a political democracy regulation of consumption meets strong resistance, particularly in a climate like the US one, fraught with anti-government denialism.
• Market adjustments of energy costs. Here is where I think the greatest possibilities lie. Carbon taxes or exchanges are making their way, first because of the clear logic--such measures are simply accounting for externalized costs, which are beginning to be visible in the form of storm damage, vanishing reefs, rising sea levels, and droughts. Furthermore, these policies operate within the existing structure of 'free' markets, and are not unlike other familiar adjustments, such as taxes on gasoline or tobacco, with their considerable socialized costs. The Massachusetts legislature is considering a carbon tax proposal, such as parts of California, British Columbia, and other jurisdictions already have. This may be the simplest way to accelerate the use of renewables, particularly solar, which seems to be reaching a competitive price point but still needs to meet the challenge of vast increases in scale. Of course, subsidies and supports are another welcome form of market adjustment--the tax advantages for home installation of solar panels, with the right to sell unused energy to the grid, is an immediate example, though energy interests in Massachusetts are already trying to eliminate the state's brief experiment with this on cost grounds.
• National vs. International solutions. All attempts to adjust energy markets at the regional or national level meet with the objection of compromised competitivity. On the other hand, those are the effective jurisdictions where policy can be made and enforced. This problem has led to decades of inertia. What seems necessary is broad global agreement to enforce roughly comparable national policies, everywhere. That's the concept behind the COP21 meeting in Paris this year: to solicit national plans (INDCs), compare them for fairness (measured against each nation's capabilities, economic and political as well as logistical), and to aggregate their effects to see whether a relatively 'safe' atmospheric condition (defined as a 2 degree C temperature increase) can be achieved, or whether more drastic measures need to be taken. Whether the agreement in Paris will be achieved, whether it will be in any sense enforceable, and whether the appropriate follow-up and inevitable tightening of policies can be put in place are the big challenges of that initiative. But as former Australian Prime Minister Kevin Rudd argues in today's NY Times, such an effort remains our last best hope.
• Techo-fixes. These abound, from various proposed methods of carbon capture to saturating the atmosphere with reflective particles to reduce solar radiation to 'salting' the oceans with carbon-attractive iron. Capturing carbon emissions from coal-burning power plants--which will surely continue to operate massively in China, India, and elsewhere for decades to come--is a technology which  seems feasible but expensive, and experiments are underway in China to explore its possibilities. Market absorption of costs would not be as large a problem if carbon surcharges were universally in place. On the other hand, atmospheric and oceanic manipulations on a meaningfully large scale are terrifying, with no real way to do a controlled experiment before we perhaps destroy our environment while trying to save it. The familiar Faustian paradigm--or Frankenstein effect--would discourage me from hoping to see solutions in this quarter. More 'organic' solutions such as massive reforestation--which may be happening anyway in temperate latitudes, but needs massive support in the tropical rainforests where it offers the greatest potential, would be a more rational way to encourage carbon sinks.  
• Transfers of technology and funding. The international climate movement has foundered from the beginning on the problem of unequal responsibility (early industrializers like the UK and the US put most of the greenhouse gases out there in the first place) and unequal means of remediation (how much can Bangladesh or Mali really pony up to mitigate or adapt?). Poorer countries need help to convert their economies--and to survive the inevitable consequences of climate change. Even newly rich countries like China can legitimately claim johnny-come-lately status, and India is a special case: massively threatening as it prepares to increase its energy consumption, largely by burning coal, and poor enough that significant transformation will need to come from international sources. Add the fact of colonization--India and many others of the world's poorest GHG emitters have been masters of their fates only briefly in modern times--and the logic of the Green Climate Fund becomes completely inevitable. Funding it, however, to the tune of $100 billion per year in NEW funds (not reallocated existing ones) is an enormous political challenge--ask Senator Inhofe, or even candidate Clinton, now much the US should be contributing, and you'll see the problem.

Those are some quick thoughts on a vast problem, which has generated a vast literature. You who are reading this probably have your own thoughts about problems and solutions--I urge you to click on the 'comment' button and share them. 

Saudi Solar

As a footnote to the Business Climate Summit that ended in Paris yesterday (see previous post):

Saudi Arabia's oil minister, Ali Al-Naimi, announced that Saudi Arabia was intensifying its investments in renewable energy, particularly solar, and hopes the kingdom will be fossil-free in its expanding consumption of energy by as early as 2040. Since 2012 at least the Saudi government has been expressing interest in developing solar for a post-petroleum economy, at the same time as its energy consumption, particularly of its own oil, rises steadily, but Al-Naimi's announcement yesterday suggested an accelerated program of solar investment. Quatar, with considerably less renewable energy in place, has announced similar though more modest plans.

Is this good news? Yes, as are all transfers from carbon-based to renewable energy. But the Saudis and Qataris have no plans to produce less oil and gas--they merely hope to export more of it, particularly as falling prices have driven down profits, motivating them to increase production for export. On some level this is a shell game (the con, not the giant oil corporation): until global markets everywhere resist the lowered oil and gas prices and expand production of renewables, gestures such as the Saudis' will have limited value. Saudi policy for leaving its vast reserves safely in the ground calls for large compensatory payments. Maybe a prosperous solar sector will reduce Saudi demands for adaptation funds, which will be needed by less wealthy nations.

In any case, yesterday's announcement suggested a shift in momentum from one of the world's major energy players--not decisive in itself, but an interesting sign.