Giant strides or fairy footsteps

How much progress can be made in tackling climate change without a global deal?
Simon Maxwell
18 November 2011

Giant strides are needed to decarbonise the world economy, and giant strides need a giant causeway - marked out on the landscape by a global deal on emissions targets, generous finance, and a high and rising international price of carbon. But what happens if the road-builders are on strike, or working to rule, as seems to be the case in the global negotiations on climate change? Are there other pathways, less suited to giant strides, but perhaps open to fairy footsteps, which might lead to the same destination?

The need for fairy footsteps is becoming acute. The climate talks hosted by the UN faltered in Copenhagen in 2009, and were barely resuscitated in Cancun in 2010. When negotiators meet in Durban in 2011, they will find themselves discussing not the global deal to replace Kyoto, nor the volume of finance needed to invest in mitigation and adaptation, nor the policies that will deliver a reasonable price of carbon, through taxation or cap and trade. Instead, the agenda will consist of technical detail and future institutional architecture, for example with respect to the Green Climate Fund: useful and necessary building blocks, but far from a breakthrough. That, experts say, will not come until after the US election, and probably not till 2015.

In the meantime, countries have two options: to sit on their hands or do what they can. Some have followed the first course. But others have followed the second. Denmark, for example, has just set the most ambitious targets in the world, with a reduction of 40% on 1990 levels of emissions by 2020, a 50% share of wind in electricity by 2020, all energy except for transport to be completely renewable by 2035, and transport by 2050. Korea has also set very ambitious goals, targeting emissions reductions of 30% below BAU by 2020, establishing a joint public and private sector Commission on Green Growth, and focusing policy interventions, regulations, and finance on key industries which will unleash green growth dynamism. Indonesia, Mexico, China and Rwanda are among the many countries in the developing world that have set stretching targets. Some large companies have followed suit. Shell, for example, has set an internal carbon price of $US 40/t, to encourage attention to mitigation in its new investments.

Examination of these cases shows that there are six features of the policy approach, six drivers of change.

First, greening the economy turns out, up to a point, to be net cost-saving, especially when energy efficiency is the prime modality. In Mexico, for example, as in many other countries, the first interventions on the marginal abatement cost curve – low energy lightbulbs, more efficient domestic appliances  - have a negative cost, meaning they save money. In many countries, better insulation for houses and office buildings is a great way to save money as well as CO2. Marks and Spencer in the UK introduced Plan A – a set of commitments to make the company greener. Budgeted to cost £200m, it turned out to be cost neutral: a successful business investment.

Second, climate-friendly investments often have benefits in other areas, and the so-called co-benefits are at least as attractive to local communities  - and voters - as the climate gains. In Toronto, for example, coal-fired power stations were phased out to reduce smog, not emissions. In Rwanda, a prime driver is energy security. In China, local environmental concerns are as weighty in decision-making as the global climate. In cities across the world, the primary contribution of bus lanes or trams is to attract people out of cars, and thereby reduce congestion: lower emissions are a side-issue.

Third, many countries are driven to act by the threat of disasters – whether floods in Pakistan or Australia, fires in Russia, or hurricanes in the Caribbean, Central America and the US. It does not take a lifetime of cost-benefit analysis to see that critical infrastructure needs to be strengthened – but nor is it difficult to see that prevention is better than cure. The 2010 floods in Pakistan, for example, are estimated to have affected 20 million people and cost over $US 10 bn.

Fourth, perhaps the most important driver, countries and companies see the economic and business benefits in being first movers in a new global economy. Korea provides an excellent example, investing heavily in green energy, electronics, bioenergy industries and other industries whose future will be bright, whether or not a global deal is agreed. Denmark is following a similar path, with investment in wind, for example. At a recent conference in Copenhagen, the most commonly used phrase was ‘disruptive innovation’ – hinting that climate change policy is as much about industrial policy and about new business models as it is about the environment.

Fifth, the policy conundrum of climate change, the careful balancing of winners and losers, can be tackled by encouraging – even co-opting - civil society. It is undeniable that action to tackle climate change can leave regions, sectors, generations and even genders stranded like beached whales, as economic opportunities change. In these circumstances, it is easy for the climate change debate to become alarmist and defensive. However, change can also become a national enthusiasm, buoyed by teaching in schools, by the optimism of new sources of growth, and by careful deployment of Government investment to re-train, re-shape and re-invigorate.

Finally, leadership is a fundamental driver of change. If leaders sit on their hands, there will be no change. If leaders paint only pessimistic pictures of the future, there will be no change. But if leaders put climate change high on the agenda and consistently stress the opportunities as well as the costs, then the public mood can begin to swing. The fall in prevalence of HIV/AIDS in Uganda, from 15% among adults at the peak, to 5% by 2001, provides an unrelated but powerful example of what high-level leadership and consistent Government policy can achieve.

All these can be thought of as fairy steps. It is important not to be naive about how much can be achieved without the essential global building blocks; nor about how hard it will be for poorer countries to keep up as a new industrial revolution begins. There is no doubt that leaders and business and ordinary members of the public will behave differently when a firm post-Kyoto regime is in place, and a global carbon price. It is also the case that it is harder for Governments to invest in R and D, subsidise new industries, or create new infrastructure when budgets are tight and, once again, recession looms. On the other hand, many used the fiscal stimulus which followed the last crisis to invest in the green sector. Perhaps, if there is another crisis, and if a coordinated stimulus is again part of the response, then an accumulation of fairy steps can stretch into giant strides.

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