International deal-making fundamentally hinges on assessments of national self-interest by the parties involved. This seemingly obvious statement both explains the persistent failure of the global climate change negotiations and offers a pathway to success.
The United Nations Framework Convention on Climate Change — agreed in Rio in 1992 and ratified by 195 countries, including the United States — was premised from its very first words on the idea that “change in the earth’s climate and its adverse effects are a common concern of humankind.” It sought to organize global action to address a threat to the global commons — the atmosphere and climate system on which all life on earth depends. Such global action, however, depends on national governments, whose first responsibility is to their own people and well-being. For that reason, the climate negotiations have faltered. Nations could not agree on who is to blame, on how to allocate emissions, or on projections for the future. Many have argued that emissions limits are inimical to their short-term economic interests. Some depend on fossil fuel production, and others perceive fossil fuel development as the only route out of extreme poverty, even as others have begun to pursue a more sustainable future.
Meanwhile, reports about climate change science are increasingly gloomy. Vast systemic change is more apparent every year, and the latest reports from the UN’s Intergovernmental Panel on Climate Change (IPCC), as well as this month’s National Climate Assessment in the U.S., bring even more bad news.
Fortunately, environmental transformation and technological change are not waiting for this paralysis of political agreement to end. Cleaner energy sources — renewable energy, especially wind and solar, as well as the least carbon-intensive fossil fuel, natural gas — are increasing their penetration of the world’s energy markets, too slowly but with increasing momentum. Electronic sensors and controls are enabling better management of energy demand and more intelligent energy use — a catalytic change. Coal remains globally dominant, but without widespread deployment of carbon capture technologies, its days are probably numbered. Cleaner alternatives are advancing in part because of concerns about climate change, but more importantly because technological progress is making them more attractive, economically and politically.
This plan would change the psychology of climate change from one of burden to opportunity.
What once seemed a mirage is becoming a reality: The world can now glimpse the prospect of an economy largely dependent on abundant, inexhaustible, affordable clean energy. We are in the early stages of a global race to supply a set of new technologies and scalable systems — likely the largest economic opportunity of the 21st century.
These changes are becoming more clearly recognized and understood, but the current negotiating framework is not designed to encourage each nation to pursue them based on its own interests and national advantages. We think the time has come for the international community to alter its collective climate strategy, cease the search for the impossible all-encompassing top-down agreement — described unattractively as “burden sharing” — and instead encourage an approach that builds on national self-interest and spurs a “race to the top” in low-carbon energy solutions. This would change the psychology of the climate change issue from one of burden to opportunity, and change the likely outcome from one of hand-wringing about failure to excitement about tangible action to build a better world. This is the lens through which to view the prospects for a new climate agreement at international talks in Paris in 2015.
A new agreement should recognize that a simple one-formula-fits-all framework is not feasible: We don’t know how to allocate emissions among nations, the global economy makes this impossible anyway, and the early differentiation between developed and developing economies is no longer valid. Instead, a new start is needed, based in part on what has been called “pledge and review”: Nations will pledge concrete steps to reduce their carbon emissions and periodically submit their progress to the international community for review.
Rather than strive for an elusive, binding global treaty, the idea is to encourage countries to make strong national commitments in their own economic self-interest and then roll those up in the Paris agreement, which would not take the form of a treaty and thus would not need to be ratified. Countries would be motivated to take these actions in response to competition, both economic and political; international peer pressure; and the aspirations of their own people. The overarching goal is to spur national action to bend the carbon curve downward in a meaningful and measurable fashion, giving greater certainty to the private sector to innovate and invest in low-carbon technologies. This is the world’s best option for accelerating progress and averting catastrophic climate change.
In the 17 years since the signing of the Kyoto Protocol, very little movement has occurred. The U.S. Senate failed to ratify the treaty largely because of fears that emissions limits would unfairly harm certain sectors of the economy, and developed and developing countries have been at odds over historical responsibility for emissions. Globally, limits on emissions seemed to be limits on prosperity and growth, and the defenders of the status quo — powerful industry groups, concentrations of sovereign wealth, and ideological warriors — argued that climate activists were seeking to sabotage the modern industrial economy.
The shift to a low-carbon economy is occurring even without a legally binding global agreement.
Happily, technological progress is defusing that argument as the passage of time and the increased intensity of climate impacts make the need for concerted action ever more urgent. Public and private investment in research, development, and deployment of clean energy technologies is yielding results.
This shift to a low-carbon economy is occurring even without the Holy Grail of most climate negotiators — a new “legally binding” global agreement. Countries, states, cities, and companies are taking action, partly out of concern about climate change, but also because such action is in their own economic interest — either directly (through money-saving efficiency measures like LED street lights) or indirectly (by saving lives now cut short by air pollution). As the market for low-carbon technologies expands, they will improve further in performance and price and become even more competitive.
While the higher initial capital cost of clean energy technologies remains a hurdle, over time the lack of fuel costs for renewable energy (such as sunlight or wind) is the offsetting cost variable. The cost savings from energy efficiency similarly produce a predictable and attractive rate of return. Indeed, one recent survey found that investments in low-carbon solutions generate a positive return of 33 percent. On the other side of the equation, it has long been recognized that the price of fossil fuels does not reflect their many external costs, including air pollution, political and security risks, and damage from climate change.
China’s recent history exemplifies both the historic tension between development and climate and a pathway to reconcile them. Coal fueled the country’s remarkable economic growth but also produced unhealthy air and intolerable environmental damage. In response, China’s leaders are engineering a serious shift toward wind and solar energy, greater energy efficiency, and development of shale gas, based on political and economic self-interest. This reversal may lead to greater alignment on climate policy among China, the United States, and the European Union and also influence other developing countries.
Through these examples and many others, a new path is emerging toward accelerated progress on climate change, based on a theme of opportunity as the shift to renewables and increased efficiency produces new businesses, more jobs, cleaner air and water, and better public health. The political reality is that countries increasingly will see that this path is in their own self-interest. They should be encouraged to compete for advantage in a race to the top, rather than bicker over emissions limits.
The Paris climate conference, scheduled for December 2015, is the setting for action on a new long-term global agreement. Central to success will be four principal elements.
The first is an affirmation of global objectives. Nations should reassert the world’s commitment — first stated in the 1992 Framework Convention — to “prevent dangerous anthropogenic interference with the climate system,” as well as the agreement in the 2009 Copenhagen Accord to limit the increase in global temperatures to 2 degrees C. They should link this vision to specific and measurable national commitments that will signal a global turn from words to action and a new can-do attitude for addressing climate change.
The second is making those national commitments to emissions reductions. As an interim step, heads of state at the Climate Summit in September 2014 in New York City should discuss and affirm this new approach as the central direction for the Paris negotiators. They should be encouraged to outdo each other with new and stronger commitments to specific actions in each of the four “building block” areas agreed in the 2007 Bali Action Plan — mitigation, adaptation, technology, and finance. In that way, they can position themselves as investing in the emerging clean energy economy, as protecting their farmers and others who depend on a predictable climate, and as caretakers of future generations — consistent with their own national self-interest. By the time of the Paris conference in 2015, all countries should have clearly stated five-year commitments for 2020 and long-term goals — with reviewable interim milestones — for the period beyond 2020.
A coordinated global price on carbon should be considered after 2020 if progress is inadequate.
This building block strategy is building momentum. The United States has been advocating a bottom-up approach since Copenhagen, and at talks in Warsaw last November countries were invited to communicate their intended contributions to emissions reduction by the first quarter of 2015. The largest immediate impact will come from reducing powerful but relatively short-lived pollutants, like black carbon (especially soot from cooking fires), methane, and HFCs (hydrofluorocarbons, used in cooling equipment), and by stabilizing the world’s forest cover. Such steps can be taken relatively inexpensively through partnerships that can include coalitions of companies as well as governments.
As a third element of the package, leaders in Paris must agree to a systemic review of their emissions reductions pledges. It is unlikely that the Paris commitments by themselves will immediately put the world on a trajectory consistent with the 2 degrees C target. For that reason, negotiators must set up a review process through which an international body like the IPCC would monitor progress and report back at three-year intervals. There is no appetite yet in the international community for a mechanism to force action by countries that offer weak pledges or none at all. Both carrots and sticks — participation in a global carbon trading system, for example, or the imposition of border tax penalties based on carbon pricing — are options that could be considered in the future. A coordinated global price on carbon — the most economically efficient path to reduce emissions — should be considered after 2020 if progress is deemed inadequate. Considerable political obstacles remain, but leading companies — from Google to ExxonMobil — are preparing for this eventuality by adopting internal carbon prices for use in making investment decisions.
Finance is the final key to a global deal. At Copenhagen in 2009, the United States memorably pledged that developed countries would mobilize $100 billion a year in climate change assistance for the rest of the world by 2020.
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At a time of fiscal retrenchment in the West, the chance of that pledge being met in the form of additional development assistance is approximately zero. The pledge is eminently achievable, however, in the context of global energy investment, which has an annual flow a dozen times as large as the amount pledged in Copenhagen.
The capital needed for a global shift to low-carbon energy systems can be mobilized from highly liquid but risk-averse institutional investors, such as pension funds, insurance companies, and sovereign wealth funds, which have assets of more than $80 trillion. The way to attract these funds is to engage public finance entities as partners to reduce investment risk, particularly in developing countries, and ensure safe, predictable returns.
Whether driven by a price on carbon, a reduction in fossil fuel subsidies, or continuing technological innovation, national action and large-scale investment to transform the world’s energy systems can initiate a more optimistic era of concrete progress on climate change. Combined with a compelling global vision, public-private collaboration, and a pledge to return to the negotiating table at regular intervals until success is achieved, this is a strong and forward-looking package that could be agreed in Paris in 2015. It would deliver what, more than anything else, the world needs — a decision to act, not just negotiate. It might even be led by the world’s two largest emitters of CO2 — the United States and China. It is already consistent with the U.S. position, China appears ready to bring forward new commitments, and the two countries are actively collaborating on climate and energy in a number of ways.
Whether such steps will be enough to avert climate catastrophe remains unclear. Even if the major industrialized economies were able to reduce their emissions completely, the prognosis for the earth’s atmosphere would still be grim if resource-rich developing countries do not change course. What Paris can do is help accelerate the pace of technological adoption and change, toward the day when the cleanest energy sources are also the cheapest and thus become dominant. The payoff will be improved public health and increased economic well-being. Most importantly, the global climate will be prevented from going off the rails.