UN “Global temperatures at 1.1°C above the pre industrial temperature”
Winter is here, so is Christmas
Climate change is fast becoming a rolling political thriller inspired by the multitude of myriad and multidimensional actors playing havoc ranging from absolute denial to outright elevating Climate Action as the top priority among sustainable development goals. Taking The middle Road, climate change is one of the critical threats facing our civilization and clear and present danger.
Conference of the Parties: King Arthur and the knights of the round table
King Arthur’s round table is legendary for giving equal status to all the knights who sat around the table. Conference of the Parties COP has yet to achieve King Arthur’s round table legendary status but a key social enabler would be to limit the negotiating powers of outliers on either side of normalized curve based on their views on climate change with an exacting reference to independent scientific studies.
COP25, the 25th UN Climate Change Conference recently concluded in Madrid after a seesaw change in the venues. The summit hosted by Spain in a month’s notice after cancellation by Chile due to unrest brought more than 20,000 actors across the global business and social ecosystem. The global climate summit had limited success.
COP25 didn’t achieve Carbon Pricing agreement, a method of driving curbs through taxing carbon emissions or incentivizing fewer emissions. This seems to be a temporary setback due to accounting standards and should be worked out by next year. By 2020 25 percent of the emissions will be under under some carbon pricing mechanism. Carbon pricing focuses on pricing externalities associated with greenhouse emissions.
“Spain is a leader in addressing climate change, especially through social finance innovation. It’s a consistent issuer of sustainable bonds in EU and leads in the issuance of Social Bonds along with the Netherlands. Further, a block of 43 vulnerable developing countries to climate change V20 under the brilliant leadership of Ethiopia are fostering key climate action steps. ”
The 197 member countries of the Conference of the Parties tried to reinforce the Paris agreement of limiting global warming to 1.5°C above the preindustrial temperature and boosting climate finance. To achieve its goal, the greenhouse emissions need to come down by 7.6 percent from 2020 to 2030, an ambitious target looking at the divergent views of some of the biggest polluters in the world. The US the second largest polluter in the world but leading in terms of per capita carbon emissions has already pulled out of the Paris agreement. According to the UN, if the current trend persists, global temperatures are expected to rise between 3.2°C to 3.9°C this century missing the 1.5°C stabilization target. Key milestones include reducing carbon emissions by 45 percent by 2030, the recent EU concluded carbon neutral goal by 2050 and stabilizing global temperatures by 1.5°C.
EU only contributed 9 percent of global carbon emissions yet leads in climate action. Greta Thunberg, the note climate change activist was named Time magazine person of the year while at COP25.
Still, there are silver linings on the wall. About 100 leaders from the private sector assured continuing efforts to foster climate change finance. Sixteen asset managers with $4T assets under management signed the United Nations-convened Net-Zero Asset Owner Alliance to incorporate carbon-neutral investment strategy within their portfolios by 2050. Sustained investing and emergence of Green bonds and sustainable bonds are key forward-looking steps.
UN Secretary-General Guterres” planet is close to a point of no return”
“The Global Climate Risk Report 2020, estimated India’s economic losses related to extreme weather conditions were to the tune of $37.8B in 2018 and leads in report number of deaths globally in 2018. India ranked 5th following Japan, Philippines, Germany, and Madagascar as the most affected countries based on the CRI score used to analyze the countries. The countries and territories affected most in 2018 were Japan, the Philippines as well as Germany. For the period from 1999 to 2018 Puerto Rico, Myanmar and Haiti rank highest. Between 1999 and 2018 alone, about 495 000 people died worldwide with losses of US$ 3.54 trillion (in PPP) as a direct consequence of more than 12 000 extreme weather events.”
The Principles for Responsible Investing incorporating Environmental, Social and Governance factors within the investment decision framework boosted focus on sustainability although responsible investing is not focussed by both social and financial good. Rather responsible investing encourages investment decisions to make better-sustained risk management decisions as compared to impact and ethical investing which focuses on financial return with social good. With 31T under sustainable investing, slowly but steadily social good is becoming a part of investment decisions. A few countries signed to plant 11B trees and more than 70 countries and 100 cities committed to net-zero carbon emissions by 2050.
Key Policy Enablers
Taxing Carbon Emissions
A key deterrent to fossil use is to tax carbon emissions to negate the social cost. IMF estimates taxing $75 per ton of carbon dioxide will make it possible to meet the Paris agreement 2°C target. Further, $75 Tax makes many options for adopting renewable energy feasible including advanced nuclear. The cost of mitigating greenhouse emissions are divided into short term costs of transition to new technologies and long term. Short term is the easiest to calculate with upfront costs divided by the number of tons of carbon dioxide or equivalent example methane emissions reduced. The graph gives out a comparison of renewable energy technologies among the least costly relative to existing coal generation. (Carbon Calculus, Kenneth Gillingham). These are much cheaper to provide subsidies to dedicated battery electric vehicle subsidies. These findings are universal since renewable technology is globally scalable. This policy is more tuned for advanced and developed economies while developing economies will have to tax iteratively up to $75 per ton of CO2.
Another key boost is to make a standardized matrix on promoting sustained finance innovations especially sustainable bonds that target either social or environmental good or both as a part of the central bank’s strategy. Next year all the countries have to disclose their efforts through nationally determined contributions (NDCs) in mitigating climate emissions and promoting finance. A game-changing initiative would be made sustainable bonds part of the bond issuance by respective sovereigns. For example, agreeing to a 5 percent benchmark measure as a percent of central bank issuance which iteratively increases over the years. A $10T central bank issuance of debt through the bond market would include the issuance of $500B in various sustainable bonds.
As we progress towards an exponential rise of awareness for the SDGs among civic societies, a well balanced sustained outlook among major actors within the social ecosystem will go a long way in addressing pressing global development problems. The long journey has begun and a rolling stone gathers no moss.
More on sustainability coming up in a comprehensive publication. Christmas Special
Carbon Pricing Kenneth Gillingham
The Global Climate Risk Report 2020