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Paris COP21: Global Financiers Hop
Aboard the Zero-Carbon Bandwagon

By Fred Pearce

04 Dec 2015

Outside the conference hall where the Paris climate negotiations are taking place, a large crowd gathered in the bright sun on Friday morning, chanting for an end to government subsidies for fossil fuels. Yards away, a meeting of financiers and bankers got under way in which a central demand was for, well, much the same thing.

Something strange has happened here. The masters of the financial universe are out in force insisting that, though they may not be waving placards or chanting slogans, they are part of the solution. Free markets — and an end to those pesky subsidies — could deliver a zero-carbon world, they say.

At the apex of capitalism's assault on the Paris talks is the charismatic governor of the Bank of England, Mark Carney. He flew in to announce that the Financial Stability Board — a body he chairs that

Bank of England governor Mark Carney, who wants companies to reveal climate-related financial risks.
coordinates central banks and financial regulators around the world — was setting up a task force to develop a carbon-disclosure system that could force companies to reveal how heavily their businesses are invested in fossil fuels. He said he expected it would become standard business practice throughout the world — carbon footprinting for financiers.

Climate change, Carney said, was a "systemic risk" to the global financial system. The world was, he contended, destined for a "transition to a net-zero world," meaning zero greenhouse gas emissions. And his job is to make sure the process doesn’t crash capitalism.

Rather, he wants fully functioning capitalism to speed the process. And that requires investors to be able to judge which companies are likely to be winners during the transition, with plans for low-carbon energy, and which are set to be losers, stuck with "stranded assets" such as coal mines and power plants whose market value will collapse as limits on carbon emissions are introduced.

This was music to the ears of the many investors here. People like Jack Ehnes, CEO of CalSTRS, which invests the pension funds of almost 1 million Californian teachers. On Thursday, he called for "climate-competent boards, especially in the carbon-intensive industries." A proper disclosure system would leave no place for carbon-incompetent boards to hide.

Disclosure might also encourage more people like Karien van Gennip, the CEO of the Dutch bank ING, who announced here today that her bank would henceforth "stop new coal financing" and put money instead into green bonds.

It would be handy for the divestment movement, too.

Carney got a crowd bigger than Al Gore in the same slot the day before. But their messages were not so far apart. The former U.S. vice president said renewables were spreading faster even than advocates like him had predicted. The future was now certain. "Investors need to look at the pattern unfolding,” he said, “or they'll get stuck with stranded assets."

Carney brought with him Michael Bloomberg , the bombastic financier and former mayor of New York City whom he has appointed to run the task force on disclosure. The purpose was to "help make markets more efficient, and economies more stable and resilient," as Bloomberg put it.

But can market efficiency really save the world? Even financiers complain that the markets are plagued by short-term thinking. Investors looking for a profit on their computer screen in 30 seconds are unlikely to be interested in the benefits from reducing corporate carbon-risk over 30 years — even if Carney delivers good numbers to assess the issue. Carney has himself called this problem the "tragedy of horizons."

One way of factoring in long-term concerns is for governments to put a price on carbon emissions today to reflect future damage to the climate. Carbon pricing, whether through a carbon tax or cap-and-trade systems, penalizes emitters and profits non-emitters. It is catching on in North America. And French Finance Minister Michel Sapin said here he expected China to join the European Union in establishing an internal price on carbon emissions next year.

One day the world could have a global price for carbon, much as it now does for oil. But a panel of financiers called to address the question, "What levels of carbon pricing are needed to stay within two degrees," failed to even hazard an answer.

Carbon pricing makes no sense, however, while governments — even those whose ministers happily sing the praises of a low-carbon economy in sessions here — continue to subsidize fossil fuels to the tune of an estimated half-a-trillion dollars a year. "We still spend more on subsidising fossil fuels than on building the new energy future," noted Martin Skancke, of Principle for Responsible Investment, an initiative of the U.N. Environment Programme.

That aside, the crack troops of capitalism have come to Paris to fight climate change, talking up the prospect of investing trillions of dollars in a "net-zero" future. Many believe that, in this area at least, a climate agreement here is close to irrelevant. A tipping point has been crossed, they contend. The low-carbon money will flow anyway now.

But government money still matters. Especially for the poor relation of climate finance — funds for adapting impoverished and vulnerable societies to the life-threatening reality of climate change. And amid the optimism about a likely deal, this is the main cloud on the horizon for the final stages of the talks.

Mohamed Adow, of Christian Aid, one of the most active NGOs here, said that the current draft of the final conference text "doesn't include a clear commitment to provide finance to help vulnerable countries adapt to climate change. The uncertainty around that is eroding the trust that will be needed when ministers take over the negotiations on Monday." Don't write off the chances of negotiators snatching defeat from the jaws of victory.

Fred Pearce, a freelance author and journalist based in the U.K., is on assignment in Paris for Yale Environment 360 and will be reporting regularly throughout the climate conference.

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