November 23, 2015
The world again turns its eyes toward Paris and the renewed resolve of many of the diplomats and delegates attending the COP21. The United Nations Climate Change Conference is set to go, despite the pall of the November 13 Paris attacks and subsequent mushrooming of terrorist threats across the EU. However, that sadness should not be used to slow down the growing momentum behind sealing a climate deal to heal the planet, and secure an equitable energy future for its people – while mitigating the security and human rights challenges that climate catastrophe will amplify.
These imperatives, widely understood by European leaders and citizens alike, can’t be achieved without the money, period. Based on the consensus of the scientific community, there just is no more time for delay – and that means that COP21 needs a realism in accounting that Kyoto, Copenhagen and other climate conferences failed to deliver. The days of climate finance as an abstraction are behind us now.
The bottom line, according to the International Energy Agency: An average of US $840 billion, beginning this year and every year through 2030, is needed to fund clean energy investment and reduce carbon emissions meant to limit the post-industrial global temperature rise to 2.7 Celsius. That’s above the 2C target, but it’s the most realistic assessment provided in Climate Action Tracker’s most recent forecast. In other words, it concedes unavoidable climate damage but is the last best-case scenario we now have.
Financial commitments and the emissions gap
Success is based on a lot of ifs: if countries follow through on INDCs they’ve filed, if COP21 discussions make those commitments legally binding – disputed already by U.S. Secretary of State John Kerry and President Franҫois Hollande, among others. That’s if climate sceptic lawmakers fail in their obstruction efforts and don’t handcuff their nations, as the U.S. Congress has threatened to do, by leaving countries with essentially unfunded mandates in the global community. That’s if we stop emitting carbon – we’re burning through our 30-year window for consumption – and stop subsidizing coal and other fossil fuels. According to one study, 80 percent of the world’s coal and half of its natural gas must remain in the ground and unused if we are to stop our emissions from breaking through the so-called point of no return.
But so far, the INDCs filed by some of the world’s worst offenders leave a big emissions gap. Among G20 nations, the pledges of 10 – Australia is among them – are rated by CAT as inadequate. The EU, like the United States, is rated at “medium,” which means that the EU level of contributions won’t help achieve the 2C limit unless the world relies on other countries to “make much deeper reductions and comparably greater effort.” The emissions reduction and investment commitments of Brazil, China, India and Mexico also fall into this category, creating even more ifs about fairness and the fossil-free future. That’s particularly true in light of India’s growing, coal-dependent demand for electricity, and China’s reliance on coal to continue fuelling its steel factories, aluminium smelters and manufacturing floors. This is a particularly Chinese problem – other producers, such as Russia and Iceland, have become part of the solution and now rely on hydropower to power their energy-intensive aluminium industries.
So what are the options for financing a clean-energy economy and an environmental future? First, the EU and its global partners need to acknowledge that it’s far less costly to act than to delay – and to back that up by ending subsidies for fossil fuel production. The “Empty Promises” report released this month revealed that $452 billion per year is spent by those same G20 nations to support fossil fuel projects that need to be phased out, and the continued status-quo of operations undermine these commitments. That IEA figure of $840 billion isn’t nearly so daunting when one considers the amount of government funding that’s being delivered to oil companies and coal-based energy industries, at a rate more than four times the amount given to renewables in 2013. It’s time for clarity about divesting. It makes no sense anywhere to continue, especially in the UK where, incomprehensibly, these subsidies increased just before the government announced it would phase out coal fired plants in a decade.
The feasibility of climate finance
So what must happen in Paris is perhaps more a financial pact than it is a climate agreement, and just as important is the optimism that it’s doable. There are hopeful signs from the private sector – both among investors and enterprises – that demonstrate the feasibility of funding climate action that will work. Wal van Lierop, CEO of the Chrysalix Energy VC firm, lists just a few in a recent Forbes piece: China plans a national cap-and-trade scheme in 2017. In 2016, Sweden will invest nearly $545 million in financing climate initiatives, while another $500 million per year is invested by European oil firm Total.Goldman Sachs targets $150 billion in clean energy investment by 2025, and has already reached its $40 billion milestone. At the same time, investors themselves are looking for green bonds and other sustainability investments that reflect their commitment to social responsibility as well as their smart-money options.
In light of the challenge, investment needs to hit $1 trillion per year by 2030 in order to thwart the worst climate impacts on both the environment and the economy, according to Ceres. The good news is that overall investment rose 18 percent last year, most of it invested in renewable energy – and half of it in the private sector. A solid $93 billion came from Western European nations, within the overall total of $391 billion. The Green Climate Fund, based in South Korea and created within the UN framework, itself plans $100 billion by 2020 to help developing nations manage the transition to a zero-emissions world.
It’s not enough yet, but it’s no longer an option to leave Paris without numbers to ensure that it will be.