War-games are old hat. Destroying a tank, a battalion, even an army, pales to insignificance compared to laying waste to an entire planet in the global heating game. Let us say, the dial to climate catastrophe is measured in parts of atmospheric carbon per million (ppm). Before the industrial era, the dial stayed at 280 ppm for millions of years. Now, however, it is at 410 ppm and rapidly increasing; the consequential atmospheric heating is already resulting in dangerous repercussions. At some point, not far past 500 ppm, the game is over. The protest group, Extinction Rebellion say the problem is a mortal threat to life on earth.
Stopping the dial by 500 ppm entails urgently replacing most of the world’s carbon-based energy ecosystem, including vehicles, power stations, refineries and much more, in the next 10-15 years. This requires a programme on the scale of the US New Deal, the US transition to a WWII economy, and the Marshall Plan for Europe, all rolled into one and applied to the entire world. Playing for radical action to avoid climate catastrophe are most of the world’s scientists and a vast tide of young people. Opposing change are some climate change-denying politicians and powerful commercial players; currently they are winning.
The heating mechanism and environmental consequences of atmospheric greenhouse gases, which are predominantly carbon based, are beyond scientific question. Carbon gases in the atmosphere trap solar energy and increase atmospheric and ocean temperatures. There are no national solutions; we must work together, or suffer the consequences together. The scientific consensus is that reaching 500 ppm will raise the atmospheric temperature by at least a cumulative two degrees (Celsius), and that thereafter the uncontrolled release of stored greenhouse gases will make the task of reducing global heating much harder, or impossible. This could lead to the world’s climate heating by a further three to five degrees before stabilising. Most scientists and economists believe that the economic and environmental dangers of this level of increase cannot be fully predicted, and are completely unacceptable.
Carbon emissions come largely from three major fuel types: coal, oil and natural gas, which, together, provided 81 per cent of energy production in 2017, and are forecast to provide 74 per cent of increased energy production in 2040. The major proportion of emissions come from by China, the United States, and India; now and for the next few decades they are forecast to account for some 50 per cent of them.
Atmospheric carbon persists; a 500 ppm limit, therefore, means there is no long-term option except replacing all carbon-based energy with renewable energy. The development of emissions-free renewable energy from solar, wind and hydro sources has been dramatic. The cost of such energy is already competitive with that of carbon-based fuels in some regions, and is still falling. Currently, however, the proportion of world energy from renewable sources by 2040 is estimated at only 15 per cent. Eventually, the full economic costs of renewable energy will drop below the costs of fossil fuels in most regions and there will be compelling market pressures to switch. Without substantial investment, this will not happen quickly enough to stay within 500 ppm.
In 2001, Professor Nicholas Stern estimated that the worst effects of global warming could be contained at an annual cost of around 1 per cent of world GDP. In 2008 he revised that upwards to 2 per cent. Now, after nearly two decades of inadequate progress, we must ask if this is still possible, and, if so, how much the cost has increased. Many studies of this have been undertaken. For example, the Stanford University Joule project demonstrates the technical feasibility of total decarbonisation, using existing technologies, by 2050, providing cost is not a constraint. Overall, such studies indicate that solutions are just about possible, and could lead to big technology breakthroughs, reduced costs, and increased employment.
Whether the world economy can actually afford to make this transition is a crucial question matched by the equally crucial question of whether it can afford not to do so. Such a project cannot be evaluated within a normal five-year business plan, or the four/five year life of a political administration. Since it would affect everyone alive today under the age of 50 and everyone born in the next 50 years, it is logical to consider a plan over 50 years, say, 2020-2070.
Some politicians are now promoting radical plans, acknowledging the scale of change required. US Senator and presidential candidate Bernie Sanders is promoting a ten-year, $16 trillion plan to cut US emissions by 70 per cent. The UK Labour party is advocating a UK reduction of 50 per cent by 2030. The Sanders plan would cost some 8 per cent of US GDP, a high figure, but one that could also have large economic benefits in much the same way as the US economic stimulus resulting from WWII.
Choosing a firm target date for zero emissions is vital. Some environmental campaigners have suggested 2030, or even 2025. Given the scale of what needs to be replaced, this seems completely impossible. 2050 appears to be a more realistic target date, giving a longer time for economic adjustment. To stay within 500 ppm, however, it will still be necessary for most of the decarbonisation of energy to occur within the first 10-15 years.
So far there has been some success in combatting climate change via international cooperation and consensus; it is now clear, however, that this is in no way sufficient, given that many governments have been dilatory and some in complete denial. A radical new approach would be establishing a Climate Action Coalition of the willing, which would fund and build a new renewable energy ecosystem. This would initially entail building vast wind and solar energy farms, to create new sources of abundant low-cost renewable energy and develop technologies for centralised and local use. Early mover countries would benefit most by building new skills, developing saleable new technologies, and getting lower cost energy. Laggard countries would ultimately be left with costly legacy infrastructure!
Financing the investments would require perhaps $3 trillion-$5 trillion annually, for a decade or more. This could come from bonds, or new money from central banks, as did quantitative easing. With government bonds at historically low interest rates, low-cost finance over long periods may be available. Major development banks, like the EIB, EBRD or possibly the World Bank, could take a lead. The US might not cooperate, but would then face the threat of China increasing its participation in international finance, and taking the lion’s share of the manufacturing and building contracts. The UK might find a new role in the supply and coordination of finance.
There may be no rational way to deal with the arguments of populist, climate change deniers, such as President Trump, and their financial backers; electorates will need to decide in whom to put their trust. Other resistance has some rational basis. Fossil fuel companies have enormous existing investments in equipment, refineries, distribution networks, and reserves. They serve large markets, and have responsibilities to their shareholders. Governments and development banks could work with such companies to help them make the transition profitably. Competitive tendering for large energy supply contracts, using existing big energy players could keep these players onside and rapidly bring down infrastructure costs for centralised and local power generation. Such interventions would not be unprecedented; governments supported the major banks very strongly after the banking crisis in 2008.
A strategy of cooperation, rather than coercion could help win the support of countries depending heavily on the production of oil, gas and coal. Many of these are in regions that receive much solar energy; they, therefore, are well placed to use, and possibly sell, renewable energy as storage and transmission facilities are developed. New energy superpowers might also emerge, in areas with abundant solar, wind, or geothermal energy. The impact on employment and manufacturing output would be large and beneficial.
National governments have many ways to create infrastructure and influence the behaviour of companies and consumers. Companies can exploit emerging opportunities, as Tesla, for instance, has done in electric vehicles. A massive increase in the market for renewable energy would provide enormous opportunities for manufacturers and service providers. NGOs and environmental charities will need to keep up and possibly increase their campaigning activities to ensure that government actions match their undertakings, and consequently deliver what is needed.
A detailed plan is vital. A central body is necessary to administer the plan and report annually. The UN, or a new body, could take the role of monitoring and reporting objectively on worldwide progress.
Members of the Climate Action Coalition would have to commit to zero emissions by 2050 and to a plan to get there without breaching 500 ppm. They would need to limit and progressively ban all carbon emissions and also imports of goods with embedded carbon.
The deadly climate game can be won. This could reboot the currently languid world economy, beginning a new era of human development based on virtually unlimited, non-polluting energy. It will happen only if campaigners can change public opinion and voting preferences, empowering governments to adopt radical economic policies that go beyond market economics and narrow financial interests.
- This blog post is based on an extensive survey of published material about climate change. It was produced as part of a research project for the Industry Forum.
- The post gives the views of its authors, not the position of LSE Business Review or the London School of Economics.
- Featured image by Myriams-Fotos, under a Pixabay licence
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Klaudia Chmielowska is a third-year undergraduate reading philosophy, politics and economics (PPE) at the University of Oxford, a British Alumni Society scholar, and an HSBC scholar. In previous projects, she has used quantitative methods and market research to produce a strategic analysis for a network of women micro-entrepreneurs in securing the financing they need to deliver clean energy products to households in rural Nigeria.
Rod Dowler is one of the founders, and the chair and chief executive officer (CEO) of the Industry Forum, a London think tank that focuses on improving dialogue between public policy makers and business. A physicist by undergraduate training, he has spent many years working on the application of technology to business problems. He led KPMG’s European high technology practice and throughout his career has advised many major companies as well as governments and the European Commission. Having become aware of the size and urgency of the carbon emissions problem, he is keen to help to bring together policy-makers, companies and NGOs to find an effective way forward.