Jotzo, F. (2016). Decarbonizing the World Economy. Solutions 7(3): 74–83. https://thesolutionsjournal.com/article/decarbonizing-the-world-economy/
Feature
Decarbonizing the World Economy by Frank Jotzo
Takver
Members of the U.S. youth group SustainUS gathered at COP21 in Paris. Individuals painted circles around one eye to signify their support for zero emissions by 2050 to limit global warming to 1.5C. The Deep Decarbonization Pathways project has revealed that significant decarbonization is possible while growing economies by the year 2050.
In Brief The world’s carbon emissions have been flat for two years. Is this the start of global decarbonization, as is needed to fulfill the promise of the Paris climate change agreement? For this to happen, much more needs to be done than countries are currently planning. But it is possible to take the carbon out of the world economy over the coming decades, and to do so with increased economic prosperity in all countries. The four pillars of ‘decarbonization’ are energy efficiency, zero emissions electricity, replacing fossil fuels with this clean electricity in transport, building and industry, and ensuring that nature’s role as a large sink of carbon emissions is recognized. Detailed country-level studies as part of the Deep Decarbonization Pathways project show that this can be done using existing technologies. Future technological progress will make the transformation easier to achieve. The solutions differ according to countries’ circumstances, but all major countries can decarbonize while growing their economy. The macroeconomic cost of ‘deep’ decarbonization is low relative to underlying economic growth and the cost of climate change impacts. The cost is falling as technologies improve, and low-carbon technologies can bring many other benefits. To ensure that the current tapering of carbon emissions continues, we need a policy environment that enables transition of carbon intensive industries, supports the development of new clean technologies, and facilitates investment in low-carbon equipment and infrastructure. Economic policy reform for low-carbon growth can be attractive for national governments. But to achieve it, governments need to lead and embrace change. 74 | Solutions | May-June 2016 | www.thesolutionsjournal.org
I
n 2014 global economic output grew by three percent, while global carbon dioxide emissions remained constant. For 2015, a fall in emissions is expected, with the global economy again growing at around the long-term average. The key factor is that emissions growth in China has slowed significantly, along with reductions across developed countries.1 Has the world managed to decouple economic growth from emissions? Is humanity on the way to sustained reductions in emissions, thus avoiding the worst of future climate change impacts? It would be surprising if it were so. The pledges that countries have made under the Paris climate agreement would have global emissions continuing to grow slowly until around 2030, and then declining only very gradually.2 Much stronger action will be needed to take the carbon out of energy and industrial systems at a rate that will limit global warming to two degrees or less. The dilemma is that the traditional model of development and industrialization has been resource and energy intensive. For every person living in a developed economy, there are more than four living in countries that are still in the process of building up their industries and infrastructure. The large majority of people in the world strive for lifestyles that are materially more intensive, aspiring to the levels of housing, travel, and general material comfort that are common in rich countries. This transformation is happening and will continue to happen, driven by the fundamental and undeniable desire for a better life, which for most people includes greater material consumption. But if future development were to take place in the old mode of industrial development, then the global carbon budget would be blown quickly and climate change would threaten future economic prosperity. For example, from 2003 to 2013, China increased its economic output two-and-a-half fold and more than
doubled its carbon dioxide emissions. If this was replicated in other developing countries, there would be no hope of limiting climate change to anywhere near safe levels. Reductions in annual emissions in developed countries would not be able to compensate for it.
Key Concepts • The traditional model of development and industrialization is resource and energy intensive, raising carbon dioxide emissions as economies grow. • Keeping global temperature increase to below 2°C will require global net greenhouse gas emissions to decrease dramatically, eventually towards zero.
if emphasis is placed on cleaner technologies and a shift to a less materially intensive economy. China’s coal consumption has probably already peaked, thanks to declining output of heavy industries like steel and cement, continuous improvement in energy, and expansion of zero-carbon energy sources including wind, hydro, and solar power as well as nuclear energy. Some of these energy sources have their own problems for sustainability, but they are effective in cutting greenhouse gas emissions as well as air pollution. Some analysts suggest that China’s peak in carbon emissions may be just around the corner.3
Decarbonization
• It is now possible to decarbonize economic growth and to achieve deep reductions in greenhouse gas emissions while increasing economic activity and prosperity. • Decarbonization is built on four pillars: improved energy efficiency, zero emissions electricity supply, using clean electricity instead of fossil fuels wherever possible, and making the land sector a large sink of carbon emissions. • The necessary technologies already exist and are increasingly affordable. The macroeconomic costs are low relative to underlying economic growth and relative to the avoided future costs of climate change. There can also be big co-benefits, like cleaner local environments and economic modernization. • Making the low-emissions transition happen is a challenge for policy. Governments need to implement policies that are environmentally effective, cost effective, and socially acceptable.
Thankfully, a fundamental change is already underway, most evidently in China. China’s ‘new normal’ shows that some aspects of industrialization can take place without great increases in greenhouse gas emissions
Taking the carbon out of economic growth is possible, and societies may find it easier to achieve decarbonization than initially thought because of tremendous technological opportunities. Carbon-free energy technology is improving rapidly and becoming cheaper. The most spectacular case in recent times has been solar power technology, which is rapidly becoming cost competitive with the traditional fossil fuel in many circumstances. Most additions to global power producing capacity are the result of renewables , predominantly hydro and wind power, and fast growth in solar power.4 In addition, the economic productivity of energy use continues to increase rapidly, and substitutes can be found for many production processes that emit greenhouse gases directly. This is shown by the Deep Decarbonization Pathways project, a collaborative global research initiative involving 16 of the largest economies.5 Detailed analysis for each country shows pathways for transition to a low-carbon economy. It brings to bear nationally based expertise, analytical tools and data, and insights about the specific physical, economic, and social opportunities and constraints in each country. The pathways can serve
www.thesolutionsjournal.org | May-June 2016 | Solutions | 75
as blueprints for change, sector by sector and over time. The deep decarbonization pathways are “backcasts,” defining a desirable future and working backwards to identify what needs to be done to achieve the goal. What emerges is a picture of great diversity in the specifics, but a common and robust insight: decarbonization is possible while accommodating economic and population growth. GDP in the scenarios grows by 250 percent from 2010 to 2050, while carbon dioxide emissions are reduced to around two tons per person in the most ambitious scenarios, equivalent to an 87 percent reduction in the aggregate ratio of carbon dioxide to GDP (or emissions intensity of the economies) and a 62 percent reduction in per capita emissions. Decarbonization in the energy sector, the key to a low carbon transformation of the world economy, involves three pillars: • Energy efficiency: Improving the energy efficiency of products and processes, and improving the overall energy productivity by shifting to less energy intensive activities. Such changes can often pay for themselves, though barriers to implementation need to be overcome. • Decarbonizing electricity and fuels: Reducing the carbon content of all transformed energies such as electricity, heat, liquids, and gases. In the power sector, this means replacing coal, as well as gas and oil, with renewable energy (such as hydro, wind, solar, and geothermal) or nuclear power. Fossil fuels with carbon capture and storage may also have a role. Biofuels and carbon-free synthetic fuels also have an important role, especially in transport. • Electrification and fuel switching: Replacing the direct use of fossil fuels with carbon-free electric
James Moran
One example of success in carbon-free technology is solar power, which is rapidly becoming cost competitive with traditional fossil fuel alternatives in many circumstances.
energy; for example, in space heating, electric vehicles, and industrial processes and switching to lower-emissions fuels. A fourth pillar can be very important in some countries: reducing deforestation and increasing tree plantings to sequester carbon as well as better practices in agriculture and some industrial processes.6 Putting a stop to deforestation can reduce global carbon dioxide emissions significantly in the short term. Extensive use of afforestation could help deliver netzero emissions outcomes in the longer term, as shown in the Australian deep decarbonization study.7 The national analyses show that these elements interact, and that a very low emissions outcome can be achieved in any of the major economies when
76 | Solutions | May-June 2016 | www.thesolutionsjournal.org
action under all pillars is implemented at sufficient scale. For example, energy efficiency limits electricity demand and thereby limits the required investment in carbon-free electricity. And decarbonization of electricity is a necessary precondition for electrification to be effective in avoiding emissions. The deep decarbonization pathways show that countries’ energy productivity (the ratio of GDP to energy use) improves by around three times on average from now to 2050. This is done through measures such as better vehicle fuel economy, building design and construction materials, more efficient industrial processes, machinery, and appliances, and changes in consumption patterns. Electricity becomes nearly carbon free by mid-century, with the carbon intensity of the power sector across
Bureau of IIP
Reducing deforestation and increasing tree plantings can reduce global carbon emissions significantly in the short term. Here, community members observe the initial results of an ambitious project to plant one million trees in Ethiopia.
the countries reduced by a factor of 15. Some countries move to an almost 100 percent renewable energy grid, with storage and some gas-fired peak generation, while others rely on a mix of renewable power and nuclear energy as well as fossil fuel power plants with carbon capture and storage. Across the board there is a shift away from coal and ultimately also away from gas and oil. In all country studies, decarbonization is achieved in a way that fosters continued economic growth and more sustainable modes of economic growth. For example, new investment in the energy sector can help drive growth. The aggressive pursuit of energy efficiency helps reduce energy poverty and improves energy access to all parts of society. New technologies that allow dramatic improvements in energy
efficiency are possible, including at the household level—and as a result, energy bills can fall, even if the cost of producing electricity rises on account of large investments in new lowcarbon plants. Importantly, shifting to low carbon energy and industrial systems also means less local air pollution, with benefits for health and quality of life. These very proximate benefits are a major driver, for example, for China’s efforts to cut back on coal consumption. Other co-benefits can include improved energy supply security through greater reliance on renewables, which are not dependent on fuel supply chains and do not bring the risk of fuel cost blowouts. Countries with an advanced manufacturing industry also expect major new business opportunities in the low-emissions energy systems of the future.8
Policies to Drive Change Governments have a key role in making decarbonization possible. To achieve it will require a continued effort to develop technologies further and to continue to cut their costs. It also requires incentives to deploy lowemissions technologies where they are not yet commercially competitive with high carbon alternatives. Larger investments in technology development will be needed, many of them internationally coordinated. In some cases, such investments in research and development (R&D) will be attractive to private industry if the expectation is that there is a commercial return to be made. But where private enterprise cannot capture sufficient benefits from innovation, there needs to be public investment in R&D.
Continued on Page 78
www.thesolutionsjournal.org | May-June 2016 | Solutions | 77
The Danish Climate Investment Fund by Torben Möger Pedersen In January 2014, PensionDanmark together with the Danish government, IFU (Denmark’s Investment Fund for Developing Countries), and a number of other institutional investors established the Danish Climate Investment Fund. The fund is managed by IFU and is an excellent example of a blended finance Public Private Partnership (PPP), where private sector money can be used to leverage the competencies that are already in public financial institutions (DFI’s, development banks, export credit agencies, etc.). The current total commitment to the fund is more than USD$200 million, with the public funds coming from the Danish government and IFU. The fund will be an active minority investor and only contributes part of the total project financing to the individual projects. To implement the projects, further financing is required from other public and private investors such as Danish industrial partners, local banks, and other climate focused funds. Total investments in projects with Danish Climate Fund involvement is expected to be in the range of USD$1.3 to $1.5 billion. The fund will invest in projects that contribute to reducing greenhouse gas
emissions, directly or indirectly, including: renewable energy projects, e.g. solar, hydro, and wind; alternative energy projects, e.g. biogas from animal stock; and, transport projects, e.g. urban public transportation systems. The fund´s investment period will run for four years. Thereafter projects will be operationally optimized and prepared for divestments to other local or climate finance investors, and the investors expect to receive the capital and return during a period of six years after the investment period. Returns are distributed using a waterfall model giving the private investors some downside protection, whereas the public money has an upside advantage. The size of the fund was limited by the investment appetite of the Danish Government and IFU, since institutional investors were ready to commit to a larger investment had the government and IFU decided to increase their investments. Hence, the model is very much scalable. Lake Turkana Wind Farm The fund recently made its first big investment (EUR€11.6 million) in a wind farm in Lake Turkana, Kenya. The wind farm consists of 365 turbines at a total of
310MW (plus a 430 km transmission line). When operational in 2018, the wind farm will produce the equivalent of 15 percent of Kenya’s power consumption. The total project costs are expected to be approximately EUR€679 million (the amount and the project do not include the transmission line of approximately EUR€120 million). The financing structure is 26 percent equity, 64 percent senior debt, and 10 percent mezzanine. Equity holders include the Danish Climate Investment Fund, Vestas, Google, FinnFund, and Norfund, whereas senior debt and mezzanine finance provided include AfDB and EIB. There are major investment opportunities within renewable energy and energy efficiency in developing countries. However, few projects are bankable in their initial form, since risk/return profile are typically not in line with most institutional investors’ investment criteria. Risk bearing (concessional) mechanisms financed mainly by public funds (DFI’s, development banks, etc.) in the form of grants, concessional loans, insurance, guarantees, equity/ quasi-equity infusion, etc. can make investments attractive for institutional investors. This is an example of just how this can be achieved.
Continued from Page 77
research and development investment over five years. An alliance of private investors, the “Breakthrough Energy Coalition,” fronted by Bill Gates, intends to facilitate investments in clean energy. Government action to support advanced clean technology does not have to involve subsidies. For example, Australia’s Clean Energy
Finance Corporation is a government fund with a mandate to invest in low-carbon energy options in order to catalyze private-sector investment, and it is making a financial return for the Australian government. Options to decarbonize are taken up by the market where and when the costs of the clean option falls below that of the traditional high polluting
The Paris UN climate conference saw the announcement of two initiatives that could be significant in scaling up global clean technology development. Under the label “mission innovation,” 20 governments have committed to doubling governmental or state-directed clean energy
78 | Solutions | May-June 2016 | www.thesolutionsjournal.org
Some countries still subsidize fossil fuels and thereby encourage their use. Cutting subsidies for oil, coal, and gas and replacing them with taxes is a sensible step for all of these countries. Not only does it give proper incentives to save energy, cutting subsidies also is a boon to government budgets. Other policy approaches also have important roles. Governments can use their regulatory powers to impose emissions standards for products, processes, vehicles, and plants. An example is the US Clean Power Plan, which mandates emissions intensity targets for electricity generation. Many governments support the deployment of renewable electricity installations, for example, by mandating or paying tariffs for renewable electricity above the going rate in power markets or by mandating that a certain amount of renewable power be used. Minimum energy efficiency standards for cars, appliances, and houses are another example of regulatory options. If used judiciously, these can help consumers save money in the long run. Providing information to citizens and businesses is also important, as opportunities to cut energy use are often foregone simply because people are not aware of them. Finally, governments can also use their own procurement to favor low-emissions products, setting an example and supporting emerging industries. John Picken
The Greenway parking building in Chicago, a highly energy efficient building in the downtown area that incorporates several sustainable aspects into its design, including these energy-generating wind turbines.
alternative. This has long been so in many energy-saving technologies, and it is beginning to be the case for renewable energy projects in some parts of the world. In many other cases, government policy intervention is required and will also be needed in the future in order for decarbonization to happen. Carbon pricing has a key role in a
cost-effective policy mix, as it provides a consistent incentive throughout an economy to cut emissions. Many countries already have emissions trading or carbon taxes in place, though very few of them are at levels that can effect deep change—they operate in tandem with other measures. China is preparing to put in place the largest global cap-and-trade scheme in the world.
Would It Cost the Earth? The fact that various types of policy interventions are necessary to help bring about deep cuts in emissions indicates that the cleaner technologies are often still the more expensive way of making a product or providing a service. Typically, zero-carbon technologies and processes have higher up-front investment costs but lower operating costs. The costs of new technologies tend to fall as they are more widely adopted. In some cases the cost reductions are dramatic. For example, the cost of
www.thesolutionsjournal.org | May-June 2016 | Solutions | 79
solar photovoltaic panels has fallen to a fraction of the cost a decade ago as a result of technical improvements and scaling up of manufacturing plants. Steep learning curves and cost declines were also observed with wind turbines and many other technologies and can be expected for energy storage, electric vehicles, and many other elements of a decarbonized economy. The news gets even better: experience shows that analysts tend to be pessimistic about the extent of technological improvements and the rate of cost reductions in new, emissions saving technologies and therefore overestimate the likely costs of decarbonization.9 Even if typical economic cost estimates for the transition to a lowemissions world economy turned out correct, this would not be a large drag on future growth. The IPCC found that estimates of economic costs for cutting emissions in line with what is needed for a two degree outcome are in the range of two to six percent of GDP by 2050, which translates into a reduction in annual economic growth of just 0.06 to 0.17 percent per year.10 This means continued fast economic growth. Under typical projections, the global economy would reach a given size—much larger than today’s—in about 2051 to 2053 rather than in the year 2050 and in return forever avoid the worst risk of climate change. These numbers assume that a lower-carbon economy would be less productive than a traditional high-emissions version. Whether that assumption holds in practice is not altogether certain: it may well turn out that investment in a low-emissions system enhances economic growth. None of these cost analyses takes into account the economic advantages from avoiding the worst of climate change. The long-term economic benefits of less climate change, including the reduction in risk of truly bad outcomes, are highly likely to pay for the costs incurred in the medium term.11
Roy Kaltschmidt / Lawrence Berkeley National Lab
Then U.S. Secretary of Energy Steve Chu spoke about the future of energy research in the U.S. at the Berkeley National Lab in October 2009, where he announced USD$151 million in funding for renewable energy sources.
This is before considering noneconomic benefits from curbing climate change, or the co-benefits from a cleaner industrial system. Health benefits from lower air pollution could exceed the cost of shifting to a cleaner energy system in many regions and could avoid a large number of premature deaths.12
Charting the Transition Although it is uncertain just which technologies will prevail, the end point of a low-emissions global economy is reasonably clear. The pathways, however, are uncertain, and in many cases, the transition is challenging. Decarbonization will mean the decline or even demise of substantial subsets of existing industries, especially fossil fuels. They will be replaced with new industries that bring new investment, profit opportunities, and jobs. But it can be difficult to identify just what will take the place of a declining activity. This can create fear of change. The issues can be sharply defined in regional and temporal terms, and
80 | Solutions | May-June 2016 | www.thesolutionsjournal.org
that can mean significant political difficulty. What will take the place of a particular coal mine or fossil fuel-fired power station and how long does it take for new investments to come on line? If a conventional car plant shuts its gate because people start buying electric vehicles produced elsewhere, where will the workers find new jobs and what happens to the communities around the old plant? All economies have experienced episodes of industrial transformation. How easy or hard the transitions are depends on the speed and extent of change, the circumstances, and how the processes are handled. Governments can help achieve good transitions in several ways. First, it is important to signal that change is coming and that it will be embraced, and to do so clearly and early. This helps businesses, workers, and communities prepare. Businesses can avoid investing in old-style assets that end up stranded in a low-carbon economy and instead shift into modern alternatives. Workers can look for opportunities elsewhere well
JM Digne
The Paris Agreement has set a clear global precedent that the world will act on climate change.
before carbon-intensive plants shut down. Cities and towns have time to attract other businesses or to manage the decline in a way that is palatable to the community if decline is inevitable. Which mix of policy instruments can best achieve this is a matter for economics and politics. In a market economy, putting a price on emissions—through a carbon tax or emissions trading scheme—will generally be the most cost-effective approach. But governments need to be able to make a credible and lasting commitment to carbon pricing. Other policies are needed to address other market failures, such as support for R&D of new technologies and regulation in areas where pricing may not be as effective, for example, agriculture or energy efficiency. Second, governments can and may need to address the effects on income distribution of the low-carbon transition. For example, higher energy prices—needed to incentivize energy savings—tend to disproportionately affect the poor. Governments can cushion the impacts, for example, by providing tax relief or extra welfare payments to low-income households or by subsidizing energy efficient appliances.
Governments will have an important role to play as some industries decline while other rise. Examples are to provide structural assistance packages to local communities, encourage and facilitate investment in new industries, and to retrain workers that leave declining ‘brown’ industries. Ultimately, governments can help provide an institutional environment that facilitates change. In some cases this may simply mean for government to not stand in the way of transition initiated by businesses and individuals. One example is streamlining regulation, another is to avoid propping up industries that are being displaced. In other cases, it may mean creating institutions that help in the transition, such as agencies that help kick-start investment in new industries.
Paris Has Set the Direction The Paris Agreement, with its strong agreed global ambition and a mechanism for ratcheting up nationally determined contributions to the global effort, has set a clear signal: the world will act on climate change. The world community will rely on the actions of each country to get to the overall goal. Progress will be incremental but likely
to accelerate given clear underlying direction and broad international consensus. The clarity of vision expressed in the Paris Agreement will reshape business investment and risk assessment, particularly in the finance and investment communities. Climate change action is already being discussed differently in board rooms. We may see practical leadership and implementation of climate change policy increasingly shift from government to business. The key is leadership. Governments at the national and subnational level are well advised to embrace the challenge and search for opportunities in the transition. There are always pressures from incumbent industries to dig in the heels, but sticking with the old model when the world is on a trajectory of change is not a good strategy in the long-term. Looking back from 2050, the transition from carbon-intensive to low-carbon systems may look like we now see the historical transitions from manual power to steam engines, from the horse-drawn carriage to cars, and from letters to email: tremendously beneficial and rather obvious.
www.thesolutionsjournal.org | May-June 2016 | Solutions | 81
References 1. Jackson, R.B. et al. Reaching peak emissions.
5. International Energy Agency. World Energy Outlook
Nature Climate Change [online] (2015) http://www. nature.com/nclimate/journal/vaop/ncurrent/full/
2015 (IEA, Paris, 2015). 6. Fay, M et al. Decarbonizing Development: Three Steps to a Zero-Carbon Future (World Bank Publications,
nclimate2892.html. 2. Synthesis report on the aggregate effect of the intended nationally determined contributions.
Washington DC, 2015). 7. Denis, A. et al. Pathways to deep decarbonisation
UNFCCC [online] (2015) http://unfccc.int/resource/
in 2050: how Australia can prosper in a low carbon
docs/2015/cop21/eng/07.pdf.
world. ClimateWorks/ANU (2014).
3. Green, F. and N. Stern. China’s changing economy:
8. Teng, F. and F. Jotzo. Reaping the economic benefits
implications for its carbon dioxide emissions.
of decarbonization for China. China & World
Climate Policy (March 2016).
Economy 22(5): 37–54.
4. Deep Decarbonization Pathways Project. Pathways
9. Jotzo, F. and L. Kemp. Australia can cut emissions
(2015) http://awsassets.wwf.org.au/downloads/ fs077_australia_can_cut_emissions_deeply_and_ the_cost_is_low_21apr15_v3.pdf. 10. Edenhofer, O. et al. in Climate change 2014: mitigation of climate change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) [online] (2014) http://mitigation2014.org/. 11. Edenhofer, O. et al. Mitigation, Working Group III to the 5th Assessment Report of the Intergovernmental Panel on Climate Change [online] (2014). 12. Fay, M. et al. Decarbonizing Development: Three Steps
to deep decarbonization 2016 report. SDSN–IDDRI
deeply and the cost is low. Centre for Climate
to a Zero-Carbon Future (World Bank Publications,
(2015).
Economics and Policy for WWF-Australia [online]
Washington DC, 2015).
Averting Global Ecological Collapse through Equitable Development? by Roberto De Vogli Humanity is facing an unprecedented ecological crisis. Rapid climate change and unsustainable consumption of natural resources indicate that modern civilization is facing the risk of a future ecological collapse.1 On the basis of predictions made by climate scientists, policy makers proposed that the aim of humanity should be to stop average global temperatures from rising to more than 2°C above the pre-Industrial level.2 Although recent research showed that even this target is not entirely safe, the concerted effort to significantly reduce global greenhouse gas emissions has so far failed, mainly because the political, economic, and social determinants of the ecological crisis have been largely ignored. During the 2014 IARU Sustainability Science Congress, the theme session “Social Equity, Development and The Global Environment” sought to examine how inequities and the current model of economic development impair the resolution of the impending ecological crisis. It also aimed at proposing solutions for a fairer and sustainable world.
The Problems A recent study showed that, globally, a third of oil reserves, half of gas reserves, and over 80 percent of coal reserves should remain unused from 2010 to 2050 to retain a high probability of respecting the 2°C threshold.2 Not burning such a large percentage of known reserves appears unthinkable given the current socioeconomic and political circumstances. Progress toward sustainability is hampered by multiple factors including proximal causes such as excessive use of fossil fuels and the general reluctance of governments to seriously invest in renewable energies. The root causes of the ecological crisis, however, include the lack of strong international agreements to combat climate change, the current model of development that prioritizes unlimited economic growth and trade liberalization, and the power of the fossil fuel industry to prevent serious regulations and effective policies. Staggering socioeconomic inequities between and within countries are impairing cooperation between nations.
82 | Solutions | May-June 2016 | www.thesolutionsjournal.org
Widespread disagreement about what is “fair” or “equitable” between different groups of countries blocks progress toward international agreements on climate change.3 Poor nations fear limits to their efforts to grow economically and meet the needs of their own people while some rich countries refuse to cut their own excesses unless developing countries make similar efforts. At the same time, wider economic distances within countries promote status competition, consumerism, and materialistic aspirations resulting in people working longer hours and spending more of their income on luxury goods. These factors are contributing to climate change and a more rapid depletion of natural resources.4 Two even more intractable obstacles to achieving sustainability are the priorities of the current model of development and the political and economic power of transnational corporations (TNCs), particularly the fossil fuel industry. Nafeez Ahmed has argued that current approaches to addressing climate change and energy challenges fail to solve them because they are based
on the global neoliberal paradigm that emphasizes unlimited economic growth and unfettered free markets.5 This paradigm is not compatible with effective environmental regulations. In order to respect the 2°C threshold, wealthy nations need to cut their emissions by about eight to ten percent per year. However, there is no historical evidence that a “free” market society has experienced this rate of change in the past without an economic downturn or a depression.6 Current trade liberalization and deregulation policies, strongly advocated by TNCs, are incompatible with the global effort to avert the ecological crisis. During the negotiations of the Paris Climate Conference, for example, a leaked internal EU document revealed that European governments had instructed their representatives to oppose any discussion of measures to combat climate change that might be a “restriction on international trade.”7 The Solutions A rapid reduction of greenhouse gas emissions at the global level is possible. Andrew Simms has argued that phasing out the use of fossil fuels in a few years requires a Global Green New Deal, where heavy investments in renewables will not only drastically reduce the risk of ecological collapse but also produce positive externalities such as a decrease of unemployment that may reduce economic inequities within countries.8 Numerous schemes to reduce economic inequities between countries and tackle the ecological crisis have emerged in recent years. Wealthy nations must lead by example not only by drastically reducing the use of fossil fuels and adopting more sober patterns of natural resource consumption but also by helping poor countries with poverty reduction and environmental technologies. This may contribute to repairing past injustices of imperialism, colonization, and exploitation. The UN Department of Economic and Social Affairs estimated that,
in order “to overcome poverty, increase food production to eradicate hunger without degrading land and water resources, and avert the climate change catastrophe,” the total investment needed is about USD$1.9 trillion a year for the next 40 years.9 Revenues to fund such efforts can be found by taxing TNCs (especially the fossil fuel industry) and individuals that are responsible for the largest shares of greenhouse gas emissions. Measures may include a financial transaction tax, the abolition of tax havens, and a billionaire tax that would amount to a total of USD$2 trillion annually.10 Further revenues can be found in a progressive carbon tax, higher royalties rates on oil, gas, and coal extraction, and the elimination of fossil fuel subsidies. All measures, together with basic income and new jobs in the low-carbon sector, can result in economic redistribution and a fairer, not just safer, society. An alternative model of economic development prioritizing sustainable well-being, rather than boundless economic growth and unfettered markets, is necessary and urgent. Respecting the 2°C guardrail for managing human-caused climate change may require the temporary adoption of “selective de-growth” strategies that may include heavy taxation of luxuries to reduce wasteful consumption and the use of revenues to support low-carbon activities, mass transit, renewable energy, and local organic agriculture. Stronger regulations, the rolling back of limited liability, and the revocation of corporate charters for industries that violate environmental agreements may also be necessary. Any of these measures, however, are strongly opposed by top TNCs that have enormous economic and political power over governments and international financial institutions. TNCs can even resort to the Investor to State Dispute Settlement arbitration system in free-trade agreements to sue states anytime a government policy reduces the value of their investment. TransCanada Corporation has just launched
a USD$15 billion lawsuit against the U.S. government for rejecting Keystone XL because of its potential impact on efforts to combat climate change.7 Reducing consumption of fossil fuels and converting our energy system to renewables while reducing inequities between and within nations, and redefining the priorities of our model of economic development, requires significant civic action. Nafeez Ahmed has argued that the world is already experiencing a civilizational transition in which the crises of the fossil fuel-centered global system are resulting in civic unrest and the incitement of social movements (e.g., Arab Spring and Occupy Wall Street). Whether a massive social movement advocating for an alternative model of development will succeed in re-directing global and national economic policies toward the aim of promoting sustainable well-being is the key question of our time. References 1. Diamond, J. Collapse: How Societies Choose To Fail or Survive (Penguin Books, London, 2005). 2. McGlade, C. and P. Elkins. The geographical distribution of fossil fuels unused when limiting global warming to 2°C. Nature 517 (2015): 187–90. 3. Huntingford, C. and J. Gash. Climate equity for all. Science 309 (2005): 1789. 4. Wilkinson, R. and K. Pickett. The Spirit Level: Why Equal Societies Almost Always Do Better (Allen Lane, London, 2009). 5. Ahmed, N. A User’s Guide to the Crisis of Civilization: and How to Save It (Pluto Press, London, 2010). 6. Anderson, K. and A. Bows. Beyond dangerous climate change: emission scenarios for a new world. Philosophical Transactions of the Royal Society 369 (2011): 20–44. 7. De Vogli, R. and N. Renzetti. The potential impact of the Transatlantic Trade and Investment Partnership (TTIP) on public health. Epidemiology & Prevention 40 (2016): 2. 8. Simms, A. Canceling the Apocalypse: New Path to Prosperity (Little, Brown and Company, London, 2013). 9. United Nations. World Economic and Social Survey 2011: The Great Green Technological Transformation (United Nations, New York, 2011). 10. Lipow, G. Solving the Climate Crisis through Social Change. Public Investment for Social Prosperity to Cool a Fevered Planet (Praeger, Santa Barbara CA, 2012).
www.thesolutionsjournal.org | May-June 2016 | Solutions | 83