A manifesto for the climate summit
The year 2020 teaches us that “super shocks” do not just come and go; they transform our ways of life. The climate crisis is another super shock, which will keep hitting harder going into the future. As we close out the pandemic year, the world’s largest polluters must pledge resources towards mitigating the climate super shock. That should be the metric to judge the Climate Ambition Summit on December 12.
The United Nations (UN) Secretary-General said, recently, “Our planet is broken”. He promised that the UN’s goal for 2021 would be to build a global coalition around reducing emissions to net zero, by cutting greenhouse gas emissions or removing them from the atmosphere. He envisions a carbon price, eliminated fossil fuel subsidies, carbon taxes on polluters, and support for those already facing adverse impacts.
The December 12 summit, on the fifth anniversary of the Paris Agreement on climate, is co-hosted by the United Kingdom (UK) presidency of the conference of the parties (COP-26, now scheduled for next year), the UN and France, in partnership with Chile and Italy. World leaders are expected to make major announcements on mitigation, adaptation and support.
The prospect of more speeches hardly sounds encouraging in the backdrop of a rapidly-unfolding climate crisis. Summits serve three purposes. High-level participation allows leaders to negotiate knotty issues, building on personal rapport and the promise of grand bargains. Alternatively, leaders could set a new agenda, drawing others to their cause. This was why India and France promoted the International Solar Alliance in 2015. Further, heads of state/government could make unilateral announcements, baiting other countries to match in ambition. The 12/12 summit is primarily designed around the third objective.
To that end, four kinds of announcements are expected: Upgraded Nationally Determined Contributions (NDCs) under the Paris Agreement; long-term ambitions for net-zero emissions; commitments for more climate finance; plans and policies for adaptation.
India, the only G20 country with NDCs consistent with a 2 degree Celsius goal, could legitimately ask, “Why should we upgrade NDCs when other major emitting countries should catch up with us?” Long-term ambitions are flaky. Thirty years ago, the UN Framework Convention on Climate Change had not even been drafted. Since then, humanity has pumped out about 302.3 (±25.8) gigatonnes of carbon. With what crystal ball can the world hold countries accountable for their 2050 or 2060 net-zero targets?
Moreover, the statements on December 12 will be made against the backdrop of the pandemic. Amid talk of building back better, governments must deliver on jobs, growth and sustainability. Fiscal resources are limited. Returns on investment on restarting growth and creating new jobs would have to be quicker than waiting three decades for net-zero emissions. As the capital of global finance, the UK has a chance to connect climate ambition with sustainable recovery by triggering a real effort at sustainable finance. Here are four ideas.
First, make clean energy access a centre-piece of climate action. Energy poverty remains one of the key barriers to sustainable development. Access to distributed clean energy is also a route to energising small businesses in rural and urban settings. In India alone, there is a $50 billion market for using clean energy for productive enterprises in rural areas. In Sub-Saharan Africa, mobile money has helped to push the adoption of solar home systems. Now is the chance to bring together developing countries with a package that offers access to capital to finance such systems. With the potential to power labour-intensive businesses, this will signal that high-level summits have the interests of common people in mind.
Second, help small and medium industries become more energy-efficient. Again, lack of access to clean fuels or regular electricity supply means that often polluting (and more expensive) fuels are used. These make small industries uncompetitive, a double whammy for the economy and the environment. Energy-efficient production processes need access to cheap working capital so that businesses can pay off the higher upfront costs for efficient equipment against their lifetime savings. This is not rocket science but needs dedicated attention from the financial industry.
Third, aggregate clean energy projects across developing countries via a common risk mitigation mechanism to reduce the cost of finance. Financing costs are the largest component in the levelised cost of electricity in developing countries. Bundling non-project (macro, offtaker and political) risks and bundling projects for clean energy and sustainable transportation could increase their creditworthiness. It could also standardise investments across countries, thereby helping to scale up bond market capital flows into regions with growing energy demand.
Fourth, fund the measures that can increase resilience against climate shocks. According to Swiss Re, economic losses from natural catastrophes and man-made disasters in 2019 were $146 billion. But the insurance industry covered only $60 billion. A global risk pooling reserve fund could combine climate risks across countries to spread them and ensure a payout when climate disasters above severe thresholds strike. Plans to build resilience will be worth little if the most vulnerable countries and communities have no insurance cushion against climate-induced loss and damage.
If we could earn cents for every climate speech made, we would all be rich and resilient by now. The road to next year’s big climate talks (COP26) could be paved with the soft ground of promises or punctuated by the hard milestones of delivery. The rest, as they say, will be just words on paper.
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