This time last year Macleans asked me to write a 15-word prediction for 2015.
I wrote: It begins: cold, dark, unknown. It ends: cold, but brighter. Hope that warming can end.
The inner workings of government
Keep track of who’s doing what to get federal policy made. In The Functionary.
The Functionary
Our newsletter about the public service.
Nominated for a Digital Publishing Award.
That hope was predicated, of course, on a ‘good’ result at the UNFCC climate negotiations in Paris. So far the signs are moderately good: there appears to be an emerging consensus around five year reviews, which is key, and a new coalition of public and private investors for technology development – supporting Mission Innovation – has emerged. For the first time in years, Canada is engaged in a big way. The delegation is large: expectations are high.
Much of the commentary around the talks focuses, rightly, on government action: the magnitude of Intended Nationally Determined Contributions (INDCs) and public commitments to the $100bn per year that was ‘promised’ at Copenhagen for climate finance. What is underappreciated is the extent to which success in reducing carbon in our economies depends upon private investors. Even the $100bn will not be made up only of bilateral commitments. It will also include, amongst other things, private finance that is leveraged by public money. (There is a whole industry and raft of publications around determining exactly what qualifies under this definition.) But even if we do manage to get there, the $100bn is just the beginning: we need ‘clean trillions’ of investment to get to where we need to be.
And where we need to be is net zero. That is the under-appreciated fact about carbon emissions: because they are cumulative, only net zero can stabilize our climate. If we don’t get to net zero, temperatures will continue to rise – inexorably. Cuts of thirty percent, even eighty percent are great. We need them urgently. But the goal must remain net zero. Net zero means that there are either no carbon emissions or, more plausibly, that any residual emissions that we produce are dealt with through the employment of negative emissions technologies (carbon capture and storage, for example).
There is relatively little money going to such technologies right now – though Canada should be proud here as the world’s first large-scale power sector CCS project opened at Boundary Dam in Saskatchewan in October 2104 and just a month ago Shell officially opened its Quest project in Alberta.
Net zero is technically possible – and there are a number of campaigns launching around this goal right now. For example, Vancouver is amongst a group of forward-looking cities that have pledged to run on 100% renewable energy by 2030-50. The G7 leaders – including former PM Harper – also agreed on this goal when they met last summer (though with a timeframe of the end of the century). It is not yet clear, though, that the public and investors are as advanced in their thinking.
The inner workings of government
Keep track of who’s doing what to get federal policy made. In The Functionary.
The Functionary
Our newsletter about the public service.
Nominated for a Digital Publishing Award.
What Paris must deliver, to unleash the private investment that is so dearly needed, is a sense of inevitability about our transition to low carbon. President Obama has called for
“an agreement that gives businesses and investors the certainty that the global economy is on a firm path toward a low-carbon future”.
The financial community, by and large, remains extremely dovish on ‘green investment’ (renewables, climate resilient infrastructure, etc.), perhaps even ‘institutionally fossilist’. This means the money is not yet flowing in the right direction as a colleague and I observe in a report on climate risk published this week.
Canada’s investors lag even a slow moving pack in this area, as observed in a recent paper by the group Preventable Surprises. The London-based Asset Owners Disclosure Project (AODP) scores investors on their climate preparedness. The highest rating for any Canadian asset owner is “BBB” (there are 2). 34% have made no effort at all to recognise or address climate risk.
Initiatives aimed at changing this are springing up at almost all points along the investment value chain. The common theme is that investors must have access to the information they need for effective decision-making. This includes better forecasts of temperature rises, risks and economic costs. It also includes company-level emissions data and information about adaptive capacity: what does a company’s business model look like under a 2 degree or a 4 degree scenario? (has the CEO even considered this?) And what is the company doing to limit its emissions – in the long run to get to zero, in the short-term at least in line with its home country’s carbon reduction commitments (so called science-based targets)?
But if investors are to use all this information effectively, they need to believe that climate change is a material risk to them and/or that the green economy is a real opportunity, as the Prime Minister laid out in his Speech from the Throne. It all comes back to the sense of inevitability and direction of travel. That is arguably the most important thing that Paris can produce.
