Consumerism, Climate Change and COP24

Posted on December 14, 2018 by Isabelle Blouin

COP24 is about to conclude in Katowice, Poland and the link between consumerism and climate change has received little attention. A few events have been organized during the last two weeks at the COP24 on the matter, including one side event held by the Global Climate Action on December 8, 2018 entitled Impacts for a more sustainable and responsible consumption. But there has been little discussion, overall, about the impact consumerism—our own individual choices and way of living—has on our planet.

A legitimate reflection one might have about COP24 is on its ecological footprint. Are we walking the talk? The UN reports that greenhouse gas (“GHG”) emissions due to the event will be tracked through a calculation by the organizers and it is anticipated that COP24 will have generated approximately 55,000 tons of CO2. It further specifies that in order to offset this, the Polish Government has committed to planting more than 6 million trees, capable of absorbing the equivalent of the conference’s emissions in the next 20 years. But is offsetting the sustainable, long-term solution as it concretely does not remove the trash that has been produced from this event, and the energy and resources it took to build it, among other things?

Consumerism plays a significant role in climate change. As underscored by one author, studies have shown that what we consume—from food to clothes to toiletries—is responsible for up to 60% of global GHG emissions and between 50 and 80% of total land, material, and water use.

At COP24, there has been emphasis on how political will is a fundamental element to addressing climate change. Indeed, political actions represent a big part of the solution. Additional efforts should be invested into integrating businesses and the private sector more effectively into the development and implementation of solutions to address the climate crisis.

However, we sometime like to place responsibility on others—something bigger, out of our control—but when 60-80% of the impacts on the planet come from our own individual consumption, more attention should be placed on our own habits as consumers.

As stressed by one author, if we changed our consumption habits, we could have a dramatic effect on our environmental footprint, on what businesses are producing, and on what the financial sector is funding. It is true that it is fundamental that various stakeholders are engaged in addressing the climate issue—including, particularly governments at local, national and international levels and industries. But we also need to do our fair share according to our means. Certain initiatives have been developed to sensitize citizens at a larger scale. For example, recently, in Quebec, Canada, the Pact for a transition from words to actions (the “Pacte”) was created in November 2018 to unite citizens across the province, beyond their political differences to take specific necessary actions in their day-to-day to transition towards a low-carbon future.

More similar initiatives worldwide could help to put consumerism at the forefront of the climate solutions. As indicated by the Pacte, with strength in numbers, and with deep, smart lifestyle changes, things could likely progress faster.

Ministerial Declaration on Forests Fails to Deliver on Paris Agreement Ambition

Posted on December 12, 2018 by torihellwig

A press conference was held on 12 December 2018, just one hour before the release of a Declaration written by the Polish Ministry on Forests for the Climate. The conference was led by ”Fern,” an EU organization that advocates for forests and the people whose livelihoods depend on them, supported by the Climate Land Ambition and Rights Alliance (CLARA), a collaboration of non-governmental organizations that echoes Fern’s mission with principles of social justice and agroecology. Forestry campaigners and experts brought in by Fern shared their reactions to what they believed to be a genuine sneak peek at the declaration that was to be released later that same evening.

The Katowice Press Conference Room was graced with opinions from Christoph T., forest campaigner for Greenpeace Poland; a climate coordinator at the Global Forest Coalition and REDD+ expert from New Delhi; Virginia Young from the Australian Rainforest Conservation Society; and Otto Bruun, Policy Officer for the Finnish Association for Nature Conservation. All of the speakers anticipated a lack of ambition in the Presidency’s declaration, something we cannot afford in our current climate. These speakers emphasized the need to conserve forests for the sake of biodiversity, soil health, and protection from the effects of extreme natural disasters. Forest carbon stocks were identified by Young as a complex, integrated system that encompass more than just carbon, and cannot afford to be cut down and burned in our current climate crisis (particularly primary forests).

The foreshadowed lack of ambition was realized in the release of the document. The Polish Ministry cited Article 5 of the Paris Agreement, whose plain language can be categorized as soft law at best: Parties “should take action to conserve and enhance, as appropriate, sinks and reservoirs of greenhouse gases as referred to in Article 4, paragraph 1(d), of the Convention, including forests,” and “are encouraged to take action to implement…policy incentives for activities relating to reducing emissions from deforestation and forest degradation…”

Thus, the PA does not bind Parties to any definitive action towards conserving carbon sinks in the form of forest resources. The Polish Ministry did not add much to this lack of ambition in their declaration by “encouraging” the scientific community to achieve a balance between anthropocentric emissions by sources and removals by sinks in the second half of this century, second only to a pledge that will “ensure an accelerated global contribution to forests and forest products.” This not-so-subtle dedication to industry is certain to undermine forest preservation efforts many global organizations like Fern are urging governments to uphold.

If the IPCC made anything clear in its recent report, we need a rapid and just decarbonization by 2030 if we want to maintain the ambition of the PA. This will not come to fruition if we do not work with gusto to protect what Al Gore described today as the cheapest and most efficient form of carbon sequestration already on the market – forests.

Continuing business as usual precludes banking on there being plenty more where that came from.

Crypto-Climate Change: Bitcoin Emissions May Push Us Above 2C In Two Decades

Posted on November 16, 2018 by bencanellys

Created and released in 2009 by Satoshi Nakamoto, Bitcoin (BTC, XBT) embodies a very simple concept; we don’t need a centralized agency controlling our money. The Peer-to-Peer cryptocurrency uses a public ledger—a blockchain—to monitor transactions between users, thereby cutting out the central bank. Each transaction is recorded as a block and added to the blockchain. Each user keeps a copy of the ledger as a way to decentralize the system and prevent falsified transactions. As a method of transaction verification, users with the proper computer skills “mine” the blockchain. They use ASICs (Applied-Specific Integrated Circuits) to receive a blockchain and verify the transactions within. In exchange, the miner receives a small amount of BTC. This is where the issue arises.

Mining the blockchain requires a massive amount of energy. In November 2017, the BTC network consumed more energy than the Republic of Ireland. As of May 2018, Digiconomist estimated that Bitcoin usage emits 33.5 MtCO₂e annually. When combined with other cryptocurrencies, these emissions rival those of countries like Sweden and Norway. Large emissions are inherent in the mining system.

Mining is a winner-take-all game. The full reward goes to the miner who solves the puzzle first. The greater your processing power, the greater your chance of success. The more electricity you use, the faster your computer runs. As long as the reward for successfully mining covers the cost of that electricity, the practice is profitable. The Bitcoin network as a whole reinvests almost all of the BTC paid out as reward into its electricity consumption.

As I write this, a single Bitcoin (BTC) is valued at $5,651.14. The reward for successfully mining a block is 12.5 BTC (approx. $70,600.00) plus any transaction fees that occurred during the time it took to mine the block (approx. $2500). This process occurs every ten minutes. The system rewards miners for using as much electricity as is feasible and penalizes those miners that don’t.

Although it is hard to predict the rise and fall of cryptocurrencies, their use may return to popularity. On November 14, 2018, Bitsane, a trading platform, released a public announcement that it had officially listed USDT (Tether) for trade. USDT is known as the digital dollar and the first stable crypto-coin. It is backed by the US Dollar and provides an easy method for liquidating cryptocurrencies, making them more tradable and, perhaps, priming them for the wide-use that fans have hoped for.

The blockchain also has the potential to revolutionize climate change action. Groups such as the Blockchain Climate Institute have embraced this technology and have advocated for its use in climate finance and as a reporting mechanism. In a new book, Transforming Climate Finance and Green Investment with Blockchains, 40 experts explore its applications in implementing the Paris Agreement. The topics it covers include blockchain applications in renewable energy smart grids, climate finance transfers, clean technology transfers, carbon markets, and the enforcement of green finance regulations. These topics will also be discussed in various side events at COP24. As widely distributed ledgers, blockchains are “trust machines” that can scale and speed up vital climate actions in the near future.

IPCC special report leaves the world in dire straits

Posted on October 10, 2018 by torihellwig

In response to an invitation from the Parties of the Paris Agreement (PA), and pursuant to the Article 2 efforts to limit temperature increases well below 2°C, the IPCC prepared a Special Report on Global Warming of 1.5°C (SR15), released Monday, 8 October, 2018.

Climate scientists sounded the alarm yet again, painting a dire picture of the future without immediate and drastic mitigation and adaptation measures worldwide. High confidence statements made by the panel include:

Human activities have caused approximately 1°C of global warming above pre-industrial levels
Current global warming trends reach at least 1.5°C between 2030 and 2052
Staying below the 1.5°C threshold will require a 45% reduction in GHG emissions from 2010 levels by 2030, reaching net-zero by 2050
Pathways to 1.5°C with limited or no overshoot will require removal of an additional 100-1000 GtCO2

Pathways of current nationally stated mitigation ambitions submitted under the PA will not limit global warming to 1.5°C. Current pathways put us on target for 3°C by 2100, with continued warming afterwards.

The ENB Report summarizing SR15 was able to shine a light on the good that can come from responses to this special report (not to mention upholding the ambition intended with the PA). SR15 shows that most of the 1.5°C pathways to avoid overshoot also help to achieve Sustainable Development Goals in critical areas like human health or energy access. Ambitious emission reductions can also prevent meeting critical ecosystem thresholds, such as the projected loss of 70-90% of warmer water coral reefs associated with 2°C.

Groups like the World Meteorological Organization (WMO) are intensifying their adaptive scientific support through a “fully-integrated, ‘seamless’ Earth-system approach to weather, climate, and water domains,” says Professor Pavel Kabat, Chief Scientist of the WMO. This “seamless” approach allows leading climate scientists to use their advanced data assimilation and observation capabilities to deliver knowledge in support of human adaptations to regional environmental changes. By addressing extreme climate and weather events through a holistic Earth-system approach, predictive tools will help enhance early warning systems and promote well being by giving the global community a greater chance to adapt to the inevitable hazardous events related to climate change.

Success ultimately depends on international cooperation, which will hopefully be encouraged by the IPCC’s grim report and the looming PA Global Stocktake (GST) in 2023. In the wake of devastating hurricanes, typhoons, and the SR15, it’s hard to ignore both the climate and leading climate scientists urging us to take deliberate, collective action to help create a more equitable and livable future for all of Earth’s inhabitants.

In Decision 1/CP.21, paragraph 20 decides to convene a “facilitative dialogue” among the Parties in 2018, to take stock in relation to progress towards the long-term goal referred to in Article 4 of the PA. Later renamed the Talanoa Dialogue, these talks have set preparations into motion and are helping Parties gear up for the formal GST, with the aim of answering three key questions: Where are we? Where do we want to go? How will we get there?

Discussion about the implications of SR15 will be held at COP24, where round table discussions in the political phase of the dialogue will address the question, “how do we get there?”

It won’t be by continuing business as usual.

RE100 Businesses Pave the Way for Transitioning to Renewable Energy

Posted on October 5, 2018 by charliekuo

Ambition, pace, scale—these are the themes in shifting to an economy recognizing climate change. Companies pioneering this economic shift incorporated climate change as an significant factor in conducting business.

One of the leading organizations spearheading this movement is RE100. RE100 is a collaborative movement uniting over 150 well recognized companies across the world to commit to using 100% renewable energy. What is even more impressive is that these companies have acted on their own in addressing climate change, ahead of government direction. Remarkably, these corporations were able to shift to 100% renewable electricity, which garnered a competitive advantage enabling them to financially outpace their competitors.

A study by RE100 and Capgemini compared RE100 companies to non-RE100 companies by sector. It concluded that RE100 companies earn an average profit of 7.7% more than their competitors. Admittedly, the report’s analysis in no way suggests that switching to 100% renewable electricity is the sole cause of the profit difference. However, it is compelling that all RE100 companies have consistently outperformed the competition in their respective industries. Thus, it would suggest a strong correlation between switching to renewable electricity and above-average financial performance.

The switch to renewable electricity is done using multiple mechanisms simultaneously. Companies utilize a combination of energy power purchase agreements (PPA) and self-generated renewable electricity technology. Moreover, RE100 companies have developed new management structures, such as silo model, centralized model, and global model, to coordinate renewable electricity sourcing and efficient use infrastructure. The benefits of transitioning are significant.

For example, General Motors harnessed renewable energy sources from landfill gas, solar arrays, and wind farms. This combination has lowered operation costs by $80 million. The cost savings result largely from improved, cost-effective renewable technologies and government incentives. Landfill gas allows companies to lock into long-term prices that are cheaper and more stable than fluctuating natural gas prices. GM strategically built their own solar arrays and benefited from government feed-in-tariff programs. Finally, GM built wind projects in Mexico and Texas that generate over 34 MW, enough to power five manufacturing facilities.

Anheuser-Busch, another RE100 company, has procured PPAs for onshore wind projects to offset its dependence on traditional energy sources. Anheuser-Busch is in line to become the largest purchaser of renewable electricity and one of the forerunners in advertising renewable energy. The beer manufacturer uses its brand influence in its renewable electricity symbol campaign, where every pack of Budweiser will carry the symbol to celebrate its commitment to brew with 100% renewable energy.

The trend toward renewable energy is now gaining traction, and signals a tipping point to mass renewable. Since RE100’s inception, companies partnered through renewable energy purchase agreements have created 100% renewable energy demand of more than 184.6 TWh—enough energy to power Poland. Moreover, RE100 company surveys yielded that renewable energy costs have reduced significantly where it has been cost competitive against fossil fuels. Therefore the RE100 momentum would suggest that this trend is welcomed with open arms and significantly contributing to how other companies shape their tactics to address climate change.

The Paris Agreement and the Green Economy

Posted on September 28, 2018 by charliekuo

The adverse impacts of climate change are no secret. We are constantly reminded of the gloomy consequences that will arise at our continued rate of consumption without significant intervention. It is predicted that growing wage gaps combined with climate change will cause over 100 million people to fall into poverty. Moreover, this alarming statistic could impact the well being of children in Africa and Asia, causing 120 million to suffer from malnourishment by 2030. Current projections indicate that our urban footprint will likely triple, demand for food will increase by 35%, and the world’s water needs are expected to rise by 40%.The adverse effects of climate change are not exclusive to impoverished and marginalized communities. By 2030 global economic loss is expected to reach 3.2%, indicating that even the private sector is not immune.

With the Paris Agreement, the paradigm shifted to place international focus on the transition from a traditional economy to a green economy ̶ meaning one that recognizes the relationship between environmental sustainability, economic development, and climate change. Under the Paris Agreement, countries must submit their Nationally Determined Contributions (NDCs) to mitigating global climate change while operating within their national environmental and economic objectives. These NDCs set national targets by utilizing mitigation and adaptation mechanisms. Cumulatively, the commitments established by each country aim to meet the Paris Agreement’s objective of holding the increase in global temperature to “well below 2⁰C.” The implementation of mitigation and adaptation mechanisms require funding and corporate involvement to perform the work. In this manner, the Paris Agreement has propelled the green economy forward. As United Nations Secretary-General Antonio Guterres recently stated, “Those that will be betting on the implementation of the Paris Agreement, on the green economy, will be the ones that have a leading role in the economy of the 21st century.”

The International Labor Organization (ILO) announced in its annual report, World Employment and Social Outlook 2018: Greening with Jobs, that 24 million new “green” jobs will be created globally by 2030. Likewise, within the same timeframe, the green economy is anticipated to offset predicted economic losses in traditional industries. The drastic advancements in renewable energy technology and innovation also support this assertion. For instance, more development in solar and hydroelectric energy technology reduced the demand for coal-based energy in many countries. In addition to this, industry leaders such as Microsoft and Amazon developed cloud-based computing services that enable small companies to reduce 90% of their CO₂ footprint. What is even more impressive is that the green economy’s net-worth now exceeds that of the fossil fuel sector (6% of the global stock market), according to a report by FTSE Russel. All of which lends credence to the words of ILO Deputy Director-General, Deborah Greenfield, who insisted that the green economy “can enable millions more people to overcome poverty and deliver improved livelihoods.”

Without a doubt, the green economy’s momentum shows no signs of stopping and has grown to exceed $1 trillion USD. However, this raises the question of how well-prepared are countries to handle the transition to a low-carbon economy. It is important to note even the green economy must be properly guided with the right policies. The aggregate collaboration from countries committed to the Paris Agreement is promising, and could provide the impetus for such guidance and direction for a sustainable economic shift. Only time will tell.

Adaptation for Profit: Increasing agriculture productivity without compromise?

Posted on November 13, 2017 by angelaj

Are you a capitalist?

This was the question asked of the attendees of “The Business Advantage: Scaling up Private Sector Climate Action in Agriculture” side event at COP 23. None of us admitted to being a capitalist. But then we were ask if we valued social or environmental economy. The unanimous answer was, yes. “Well..,” said Tony Simons, Director of ICRAF, “…you are a capitalist.”

The most basic notion of capitalism is to take actions to maximize something. Thus, if we choose to maximize anything, even something like social well-being or the world’s natural systems, we are capitalizing. We are capitalists. So what does this have to do with how the private sector can contribute to climate change mitigation? According to Simons and a panel of representatives from IFAD and CGIAR, joining hands with the private sector is the most feasible way to spread climate-smart agricultural (CSA) practices. But first, we must dispel the common belief that capitalism itself is an evil within a system.

If we are to realize food security, and mitigation and adaptation in the agricultural sector, the panel argued that innovations in agriculture need to be scaled up. The panel asserted that there are ways to intensify farming practices as to realize system efficiency. This would mean realizing higher yields and increased meat production while reducing the greenhouse gas emissions associated with agriculture. While, there were various techniques discussed, there was no forthright application of science offered. Nonetheless, the general consensus was that these techniques needed to be communicated to the private sector and financial institutions needed to be convinced of them. After all… scaling up of agricultural innovations costs money. But apparently, this will not happen without joining hands with the private, industrial agriculture sector.

While scaling up innovations to take climate action in the agriculture sector makes good sense, I left the event troubled by two thoughts. First, the concept of establishing global CSA practices requires bridging the gap between the small-scale and industrial farmer and providing funding to the small-scale farmer to take on these innovations. Unfortunately, lending institutions are not amiable to doling out large quantities of small loan amounts. But this is precisely what needs to happen if small-scale farmers are going to scale-up CSA. Thus, the paradox. If small farmers are going to scale up CSA, they need funding to do it. But a lending institution wants to see a “bankable” project before lending- something a small farmer cannot show without some financial assistance. It’s a catch-22.

Furthermore, if the private sector is going to get on board, they must be able to make a profit. “Profitability should be the angle of approach,” they said. “The private sector can contribute to NDCs in terms of mitigation, but it will not do so without realizing tangible (financial) benefits.” And indeed this is so. One corporate food and agriculture representative who sat on the panel assured us that sustainable, climate-smart agriculture was in their best interest. Yet, she noted that her corporation’s first priority was yield, then resilience. Is it really possible to increase productivity without compromising the climate system…or the corporate bottom line?

What seemed conveniently left out of this equation in the end was social and environmental economy. After all, are we not all capitalists?

Agriculture’s Great Rising

Posted on November 6, 2017 by amandaq

Photo credit: “Food Sovereignty: Sustainable Urban Agriculture in Cuba”, at
https://www.globalresearch.ca/food-sovereignty-sustainable-urban-agriculture-in-cuba/5332167.

La Via Campesina, an NGO devoted to peasants’ rights and food sovereignty, hosted an event dedicated to agroecology at the opening of the COP 23. La Via Campesina takes an alternative approach to agriculture, denouncing any industrial and capitalist attitude toward food production. Under an industrial and capitalist approach, food is exported to countries continents away, and not used to feed the population of countries where it’s grown. Under the approach of La Via Campesina, peasants–a pre-industrial term that the group revives to distinguish itself from giant agriculture companies–produce food to feed people locally, and can designate where they want their produce to go. In the panel, La Via Campesina argued that the industrial food system–including not just agriculture, but transportation, packaging, and deforestation–is responsible for around 50% of global greenhouse gas emissions. The silver lining of this number means that agriculture is an area with great potential for improvement in terms of cutting emissions. But emissions aren’t the only problem: in the eyes of one member, giant agrochemical companies like Monsanto are “experimenting“ on the best land of more vulnerable states like Puerto Rico. Instead, to pave the way to food security and environmental justice, La Via Campesina–Spanish for “the peasant way”–urges everyone to take the road less travelled toward food sovereignty and agroecology.

Trusting Corporations by Weakening Antitrust?

Posted on October 3, 2017 by serena

This September, many socially conscious corporations have donated to climate change mitigation and sustainability. Ikea has devoted $44.6 million to the We Mean Business coalition, which began at a UNFCCC Business and Industry Day to provide a platform to “amplify the business voice and catalyze bold climate action.” Mars just pledged $1 billion in investments towards climate change, poverty and scarcity of resources by targeting renewable energy, food sourcing, industry coalitions, and support for farmers. Energy companies such as Pacific Gas and Electric have pledged their support for renewable energy. On a global scale, even supermarkets have collaborated to show their environmentally progressive intent for the future (although they were ultimately shut down because of antitrust and collusion issues). This current corporate support is a good sign for climate change as corporations prove their influence on climate policy.

Click on image to see full spectrum of corporate stances on environmental sustainability.

In light of all of this, legal scholar, Inara Scott, asks if U.S. antitrust law makes it “nearly impossible for corporations to collaborate on sustainability initiatives.” Scott asks whether the Sherman act (the original 1890 statute that broke up major U.S. monopolies) is actually a barrier for corporations to act sustainably because it outlaws collusion and collaboration amongst companies. Scott tells a story of Proctor & Gamble and Unilever. In the late 2000s the two companies planned to release a more efficient laundry detergent but were concerned about consumer reactions. So to avoid a price war they agreed to freeze their prices and market share. This violated antitrust laws so when regulators in Europe found out, they fined the companies more than 300 million Euro.

Two brand names tried to work together to fight climate change rather than each other.

Consumer protection was the ideal that spurred current U.S. antitrust law. Scott invokes consumer to protection to muse that companies should be able to argue that collusion and collaboration is best for long term consumer protection. Scott imagines that long term consumer protection would include sustainability goals that consider the scarcity of resources and is mindful of GHG emissions. Weakening antitrust policy would allow corporations to collaborate and respond to the problems of sustainability, resource depletion, and climate change in a market efficient manner. A particular issue with Scott’s antitrust theory is whether the American courts or legislators could trust corporations enough to allow them the power to collaborate.

Ikea displays their commitment to renewable energy in its stores.

Scott’s solution is to create a regulatory counsel to analyze cases of collusion for environmental protection. This will alleviate concerns about corporate greed and corruption. There is a lot of distrust amongst American consumers and American corporations. Capitalist ideals often push corporations to strive for the lowest cost with maximum benefit, often forsaking consumers or the environment. But “’sustainability issues are profitability issues so [Scott] think[s] the altruism is [of companies] tied up in the long-term health of these companies.” So between corporate environmental sustainability, corporate collaboration, and government regulation – climate change policy may look more and more like business.

Mobilizing the Private Sector to Finance Adaptation

Posted on November 17, 2016 by deej

Today at COP 22 the Japanese delegation hosted a side event at their pavilion about mobilizing the private sector to finance climate change adaptation. The panelists discussed ways to involve the private sector from regional, business, and public policy perspectives. The panelist from Bangladesh, Dr. Saleemul Huq, then present specific examples of how the private sector has helped mobilize adaptation finance in his country. The World Bank estimates that $70-100 billion will be need annually from 2010-2100 to adapt to the impacts of climate change. It also estimates that the private sector could mobilize $140-240 billion for adaptive measures annually during the same period. However, very few companies are pursuing these adaptive measures, due in large part to the lack of profitability. To mobilize the private sector, governments and international organizations must incentivize investments and enhance monitoring and reporting efforts to ensure sufficient return on investments. The private sector will only finance adaptation measures that are also good for their bottom line.

Dr. Saleemul Huq, director of the International Center for Climate Change and Development at Independent University and lead author of chapters in the IPCC’s Assessment Reports provided an example of a good adaptation measure and a bad, or maladaptation, measure. Both projects involved mobilizing private sector finance to adapt to climate change . But the latter created more problems than it solved. In the good example, a private agricultural business developed and sold salt-water resistant rice to combat the inundation of rice fields by salt water. The company turned a profit and made a vulnerable population more resilient. In the maladaptation example, a private aquaculture company bought up inundated rice fields, turned them into shrimping operations, and then leased the operations to the farmers. These shrimping operations are good for the companies, who turn massive profits, and the government, which taxes the shrimp exports. While this practice is aimed at adapting to an increasingly saline ecosystem, it is highly exploitative of the rice farmers, most of whom lost their jobs after selling their farms, and drastically altered the landscape by making it entirely salt-water based. The company turned a profit but the social and environmental impacts made a vulnerable population more vulnerable. These examples underscore the opportunities and challenges associated with mobilizing private sector finance to adapt to climate change. We have to remember that in board rooms and commercial banks, money talks and altruism takes the backseat.

It’s All About the Benjamins: Ratcheting Up Financial Support for Developing Countries

Posted on December 7, 2015 by sara

In 2009 Parties to COP15 in Copenhagen agreed to a global goal of mobilizing $100B (that’s right, billion) per year for climate finance by 2020. A recent OECD report indicated that we are well on our way to achieving that goal (with $62B committed in 2014). Unfortunately though, $100B may not even be enough to keep global temperature rise between 1.5˚C and 2˚C. For this reason, much of the discussion at COP21 has centered on the scale of climate finance. Exactly how much additional funding will be necessary? For now, the answer seems to be “more.”

In response to this need, the Global Environmental Facility (GEF), one of the entities responsible for providing climate finance under the UNFCCC, announced a new initiative today: the Climate Aggregation Platform (CAP). The GEF will seed CAP with $2M, which is expected to catalyze over $100M in co-financing from other partners, including from the Inter-American Development Bank.

CAP is just one piece of an ongoing effort by all global actors to increase access to climate financing from a variety of sources. The draft Paris Outcome places an emphasis on the use of public funds, but also acknowledges the role that private finance will play in addressing climate change. Private investors, which currently comprise about 25% of global climate investment, typically offer loans rather than grants. This means that the investors expect to make their money back over time. Therefore, to entice private

Naoko Ishii, CEO and Chairperson, Global Environment Facility

investors to promote clean energy in developing countries, there must be some indication that the project represents a sound investment. CAP aims to help facilitate these types of robust investment opportunities.

First, CAP will establish a global working group to provide key finance and industry stakeholders with transparent access to, and coordination of, climate-related projects in developing countries. CAP will also promote project standardization, with the goal of creating uniform contracts and repayment plans. Finally, CAP will develop in-country demonstration projects and provide technical support for other pilot transactions. These actions will serve to increase the number of qualified projects, creating a scalable pipeline of clean energy investments.

Establishing a streamlined framework for project development has two major benefits: It increases the penetration of clean energy technologies in the developing world, thereby serving climate change goals. It also allows investors to aggregate a large number of projects, thereby reducing the financial risk. In the same way that insurance companies profit by insuring large groups of people with a variety of health risks, climate investors will be more successful if they invest in large numbers of projects with a variety of risk profiles. As your financial planner will tell you, a diverse portfolio is generally a strong portfolio.

And confidence is high that, if we build it, they will come. Since the financial crisis of 2008, there is a significant appetite for impact investments, which are transparent investments in projects that have demonstrated social benefits. Many institutional investors, along with independently wealthy individuals, are actively seeking investments like clean energy projects in the developing world. There is approximately $46B in impact investment already under management, and that number is on the rise. Leveraging a small amount of public money has been shown to catalyze additional private investment in these types of projects. Some studies indicate that $1 of public funding can attract $20 of private funding. Just last week, Bill Gates alone pledged to contribute $1B in seed capital to potentially transformative energy systems with “near zero carbon emissions.” And he’s getting his friends to pitch in too.

Developing programs like CAP that foster a strong market for investment in climate-friendly projects is one of the most important things that come from COP21.

The Ying and the Yang of the Low Carbon Economy

Posted on November 30, 2015 by mjames

The call for a new low carbon economy is echoing through the halls of COP 21. In the opening ceremony, French President Francois Hollande, Prince Charles, and UN Secretary General Ban Ki Moon all urged the world to transition to a new low carbon economy.

Making that transition requires action on multiple fronts. First, countries must address market distorting and environmentally destructive fossil fuel subsidies. Second, countries must power their economies with renewable energy.

Two separate events today indicated that countries and industry are starting to make that transition. Friends of Fossil Fuel Subsidy Reform unveiled a communiqué calling on all countries to stop the subsidization of carbon intensive fossil fuels. Indian Prime Minister Modi and French President Hollande, launched the International Solar Alliance to help bring solar power to developing countries. Presented separately but connected by common goal, the two projects are cutting the path to a new clean energy economy.

Countries spend almost $500 billion/year on fossil fuel subsidies. They subsidize the consumption and production of fossil fuels. The subsidies unfairly tilt the market towards carbon intensive fossil by preventing clean energy technologies from competing on a level playing field. The FFFSR communiqué urged countries to take the money spent on fossil fuel subsidies and repurpose it to enhance education, health, and environmental programs. Countries have argued that subsidies are necessary to support the poor, who could not otherwise afford fuel. FFFSR research revealed that only 3 percent of subsidies are used to support the lowest income brackets.

The International Solar Alliance (ISA) is multi-country partnership to bring solar power to developing nations. The ISA is focused on increasing solar power generation in the 120 countries located between the Tropics of Cancer and Capricorn. Developing nations often have an abundance of solar potential but they lack the technology and finance to develop their resources. Germany, Italy, and Japan, the countries with the highest rates of solar penetration, are not rich in solar resources but are rich in technology and finance. The ISA will bring solar power to where it has the most economic and environmental potential.

The developing countries targeted by the ISA are areas where power usage is increasing. Adding renewable power to the grid in a developing country displaces high carbon emitting resources. For example, India is third largest consumer of coal in the world, it also has 300 million people who lack electricity. The type of electricity used to connect that group will have a huge impact on global climate change mitigation efforts. India is choosing the renewable energy pathway by setting a goal of 100 GW of installed solar power by 2020. India currently has 4 GW of installed solar power. To bridge this gap, India will need international financial and technology support.

India is investing $30 M USD in a new National Institute of Solar Technology with the goal of reducing regulatory hurdles, developing common standards to speed up production, developing innovative finance mechanisms, and supporting technology improvements. Estimates of the total investment needed to realize the solar potential of developing countries reach $1000 billion; a number that could be easily reached by re-tasking fossil fuel subsidies.

Developing nations have an untapped resource shining down on them. The ISA aims to spur transformative action in this field. Today, Prime Minister Modi started his announcement by stating that many Indians begin their day with a prayer to the sun. He ended his presentation by proclaiming that the ISA represents a “sunrise of new hope.” A sunset on fossil fuels would help the sun rise on a new low carbon economy future.

Carbon Tax – More of the Same or Energy Miracle?

Posted on October 22, 2015 by mjames

As we get closer to Paris, powerful voices are lining up to support a carbon tax. When you look closer, you see that the voices have different motives and divergent goals. In June 2015, six of the world’s largest oil companies sent a letter to the UNFCCC asking for a global carbon tax to be part of the new climate agreement. This month, in an Atlantic Monthly article, Bill Gates, argues we need a carbon tax to drive a low-carbon future.

Both parties call for a carbon tax but their preferred outcomes couldn’t be more different. They both see a world that needs more energy not less. But the source of that energy divides them. And their use of the carbon tax and the carbon tax revenues reveals the split.

The oil companies acknowledge that we need faster action to cut emissions. They call on the UNFCCC to “introduce carbon pricing systems where they do not yet exist at the national or regional levels” and to “create an international framework that could eventually connect national systems.” The companies say that they want a levelized international playing field where the same rules apply to all participants. What they don’t want is an energy revolution. What they do want is to retain the existing hierarchy. For them, a global carbon tax equals business certainty and economic stability. Everyone who can pay the price can continue to do business and their business model depends on exploiting the fossil fuel reserves they control. That is why their proposal avoids discussing how to spend the revenues.

Bill Gates doesn’t see the same profitable future for fossil fuel companies. He wants an energy miracle built on new energy technologies and he wants a carbon tax to fund that miracle. He argues that current proposed market solutions will struggle to achieve a 30% emissions reduction by 2030 and they will fail to produce an 80% emissions reduction by 2050.

Gates identifies a lack of research spending as the culprit. The U.S. government funds health research at approximately $30 billion per year while federal energy research only gets $6 billion dollars per year. Gates wants carbon tax revenues to fund massive investments in energy research and development (R&D).

Taxes require collection and spending. While both proposals discuss collecting the carbon tax, only Gates talks about where to spend the money. Feeding a starving energy R&D sector could kick start an energy miracle. A carbon tax that maintains the status quo will lock us into a fossil fueled future. As Paris gets closer, there will be more calls for carbon taxes. Will tax proponents want more of the same or will they want a new energy future? The answer lays in the how they spend the revenues.

Riding the Wave of Divestment

Posted on October 7, 2015 by sara

Divestment is essentially the opposite of investment. The climate action group gofossilfree.org describes it as “getting rid of stocks, bonds, or investment funds that are unethical or morally ambiguous.” Generally speaking, institutions divest when they stop financially supporting specific entities because of the means by which those entities generate revenue. Divestment has been used as an advocacy device for many years, as a means of tackling the tobacco industry, sweat shops, and even apartheid in South Africa.

Divestment of fossil fuels began in 2012 with Bill McKibben’s climate change movement 350.org. Since launching this campaign against traditional fossil fuels, hundreds of organizations – beginning with universities and faith-based organizations, and expanding to municipalities, pension funds, and foundations – have committed to divesting from fossil fuels. In the last month the movement has reached a landmark $2.6 trillion divested. According to one study, 436 institutions and 2,040 individuals across 43 countries, together representing $2.6 trillion in assets, have committed to divest from fossil fuel companies.

Many types of investors have embraced fossil fuel divestment, both on the institutional and the individual level. High profile individuals have been particularly active in the divestment from fossil fuels. Specifically, actors like Leonardo DiCaprio and Mark Ruffalo have led the movement to cease investments in traditional fossil fuel companies. Their announcements have served as a means to show legislatures and CEOs alike that United States citizens are taking climate change seriously.

Rather than these red carpet personalities, universities have traditionally been at the forefront of divestiture movements. We continue this trend in Vermont, with many colleges and universities (including VLS) committing resources to exploring divestment opportunities. This has been an important method of expressing students’ and citizens’ dissatisfaction with traditional energy investments. It has also lent support to Vermont’s support of broader energy and climate change goals.

Some studies show that divestiture is not actually effective as an economic driver because it does not force major fossil fuel companies out of business or necessarily compel them to change their practices. Nevertheless, divestment may, in fact, be a smart financial decision, since other recent reports have warned of the negative financial consequences of holding large portfolios of fossil fuels. Additionally, it can have an important impact in terms of shaping national discourse. By bringing climate change issues into the media spotlight, the divestment movement helps to put pressure on the negotiating parties at COP21 in December.

A new climate change narrative

Posted on January 22, 2015 by tbach

To provide perspective on the quotidien of the climate change debate regularly chronicled in this blog, watch this Ted Talk by Naomi Klein, read her latest book, This Changes Everything, and consider these recent quotes:

“There are no non-radical options left … If we stay on the road we are on, then our leading scientists as well as some of our most conservative institutions like The World Bank, the International Energy Agency, PriceWaterhouseCooper tell us that we are headed directly towards four to six degrees Celsius of warming from pre-industrial levels – and at that level, all bets are off … “

“The idea was there was only one way to run the world – free markets, free trade, privatisation, deregulation, low taxes, investor rights, the cult of consumerism, the cheapest possible everything. But tackling climate change demands the reverse – collective solutions, more regulation, restrained consumption, carbon taxes, and so on.”

“Climate change detonates the ideological scaffolding on which contemporary conservatism rests. A belief system that vilifies collective action and declares war on all corporate regulation simply cannot be reconciled with a problem that demands collective action on an unprecedented scale and a dramatic reining in of the market forces that are largely responsible for creating and deepening the crisis.”

“Over 400,000 people came together to march for climate in New York under a banner of ‘Change everything – we need everyone’. Only a broad-based movement can take on the fossil fuel lobby and win. Our problem is that we have been treating this as a carbon problem when the truth is, it’s a capitalism problem.”

“I wrote my book on the premise that what we are doing is failing – and a broad, justice-based agenda represents our best way of winning. A good chance? I don’t know. But we have a chance. What matters to me is that there is any kind of chance, however slight.”