The Paris climate conference largely succeeded on its first day in global participation, low carbon innovation and carbon pricing, writes Professor Michael Grubb.
Michael Grubb is professor of international energy and climate change policy at University College London and editor-in-chief of the Climate Policy journal.
A core task of the UN process has been to globalise the effort on climate change. The past six months have witnessed a remarkable surge of ‘Intended Nationally Determined Contributions’ – over 180 countries have now set out their broad proposed goals, covering almost all global emissions. Together, if delivered, those goals would already be a big step to curtail projected climate change.
Those plans did not come out of thin air. All the major emerging economies now accept that whilst they have not caused the problem, they inextricably have to be part of the solution. They are seeing more opportunities for, and potential benefits from, doing so. There is moreover clear international recognition of the need for regular review and strengthening of what is now on the table.
A global agreement covering national emission goals is, however, only part of what is needed. At the heart of the challenge for most of the major economies is the transformation of their energy systems. That requires specific actions in at least two broad areas, and the opening day of the Paris conference presented major initiatives on both of these.
One need is to accelerate the full chain of low carbon innovation, from R&D through to international dissemination. Twenty of the world’s biggest economies committed to double clean energy R&D expenditure, within five years, from $10 billion to $20 billion a year, under the Mission: Innovation programme.
They linked this directly with the private sector Breakthrough Energy Coalition. 28 of the world’s richest investors, from Bill Gates to Mark Zuckerberg, and Richard Branson to Jack Ma, committed to forming “a different kind of private investor with a long term commitment to new technologies, willing to put truly patient flexible risk capital to work. Motivated partly by the possibility of making big returns over the long-term, but also by the criticality of an energy transition.”
In parallel, Indian Prime Minister Modi led an international solar energy alliance spanning 120 countries, to “reduce the cost of finance and cost of technology for immediate deployment of competitive solar generation assets in all our countries and to pave the way for future solar generation, storage and good technologies adapted to our countries’ individual needs”.
Technology is half the answer; the other is to establish markets that work to support the growth and diffusion of such technologies by reflecting the full cost of climate risks. Thus – in addition to the widely-covered statement on reforming fossil fuel subsidies – the grand launch day in Paris also gave birth to the Carbon Pricing Leadership Coalition.
World Bank Group President Jim Yong Kim and the IMF’s Christine Lagarde had in October set up a high-level panel, spanning from Angela Merkel and François Hollande to President Enrique Nieto of Mexico and Governor Jerry Brown of California. All committed to “carbon pricing policies to redirect investment commensurate with the scale of the climate challenge.”
History teaches us that technology and proper pricing must go hand in hand. The Kyoto Protocol struggled to establish credible cap-and-trade carbon pricing. The US Bush administration spearheaded the Asia Pacific Partnership on Clean Technology as an alternative, which delivered little and was ignominiously closed in 2011.We must not repeat the same dichotomy.
Big technology needs stable funding; carbon pricing offers an obvious source. The UK Chancellor’s shock cancellation of a $1 billion investment in carbon capture and storage shows the fragility of public technology programmes depending solely on tax revenues; more stable linked sources are needed. In the UK, carbon pricing already brings in twice that amount every year.
Clean energy technologies must traverse the historical ‘valley of death’ from public R&D to fully private funding. This requires credible and strategically growing markets. Technology policy without proper pricing risks leaves clean technologies chasing the tail of innovation in high carbon technologies, which have demonstrated their own capacity for cost reduction when under pressure. The missing link is to entwine the forces of innovation and markets with proper pricing, to ensure that the cost of fossil carbon will rise.
The UK was instrumental in fostering the Mission:Innovation coalition, but so far has been notable by its absence from the carbon pricing coalition. The UK government has continually stressed its commitment to markets-based solutions as a central tenet of Conservative philosophy. Within just the last month the Foreign Secretary pressed the case in Washington, and Energy and Climate Secretary Amber Rudd made cooperation to strengthen carbon pricing the central intellectual pillar of her famous ‘Reset’ speech.
In a striking symbol of the new world that emerged in Paris, on Saturday (12 December) the governor of Quebec, which has established a cap-and-trade system along with California and successfully auctioned emission allowances, announced that it would contribute to international climate funds. Fortunately for the planet, it seems that the coalitions already launched at this conference are getting on with the job, with or without the UK, and whatever happens in the minutiae of the UN negotiations.