Join MaRS’ own Joanna Reynolds & her fellow panelists as they discuss how we can best fulfil the potential of impact investingRead More ›
7 Bold Strokes to Avoid Climate Destabilization
What would we expect governments to commit to at the 21st United Nations climate summit in Paris in December 2015 if they are serious about avoiding climate destabilization? In this blog post, we’ll discuss 7 bold strokes they could and should consider.
Let’s suppose they take April’s last-chance-before-it’s-too-late IPCC report seriously. Let’s suppose they act on the Pentagon’s warning that climate change is a bigger threat to national security than terrorism.
Let’s suppose governments’ sense of urgency is fuelled by the International Energy Agency’s bombshell warning that without radical cutbacks, by 2017 all CO2 emissions required to reach an atmospheric concentration of 450 parts per million will be “locked in.” At that concentration level, we will reach a 2°C rise in the average global temperature above pre-industrial temperatures, which is the tipping point at which climate scientists predict that runaway climate destabilization occurs.
Let’s suppose we take UN Secretary General Ban Ki-Moon’s warning this month seriously. Even the 2°C threshold is dangerous, but let’s use it as a base since it was endorsed by 141 countries in the December 2009 Copenhagen Accord.
Let’s suppose governments decided to heed these ominous warnings. What would they do? We’d expect them to implement policies that rallied governments, citizens, businesses, and fossil fuel companies to help with the necessary transition. We’d expect them to use bold strokes to signal that failure is not an option. Here are seven suggestions to get them started.
1. Declare War on Climate Destabilization
When national security and the well-being of society is threatened, we declare war on the menace. We have declared a War on Drugs, a War on Poverty, and a War on Terror. Governments should declare a War on Climate Destabilization and unleash their full powers and resources to ensure we win. We can declare victory if we eliminate our use of fossil fuels as an energy source quickly enough to avoid the dreaded 2°C / 450 ppm threshold. Note that it is not a “War on Fossilized Carbon.” Some oil, gas, and coal will still be used as feedstocks for petroleum-based products and carbon-based materials, at least until better substitutes are found. We just won’t burn / squander them as fossil fuels.
2. Bill fossil fuel companies for disaster relief
When severe weather disasters hit communities, they understandably ask governments for disaster relief. When governments contribute funds to help with clean-up, damage, and compensation costs after an unusually severe or unprecedentedly frequent weather event, governments should immediately flip the bill to fossil fuel companies for reimbursement. How fossil fuel companies decide to share the liability among themselves and their insurance companies is their business. It is appropriate that polluters pay, not taxpayers.
Conforming with the Polluter Pays Principle, BP was handed a multi-billion dollar bill for the damage, clean-up, legal, and compensation costs arising from the April 2010 Deepwater Horizon explosion in the Gulf of Mexico. BP was held accountable. Similarly, this month the Canadian Government announced that pipeline companies will be liable for costs and damages caused by leaks and spills irrespective of fault, and unlimited liability when at fault or negligent. The Canadian government will also order pipeline companies to reimburse the government for any cleanup costs incurred by governments, communities or individuals.
Company liability for impacts of its products’ usage is not a new idea. In the late 1960′s and early 1970′s, victims of the drug thalidomide entered into class action legal suits against companies who manufactured and/or distributed the drug. The companies were held accountable for the tragic deformities caused by their product when it was used as instructed. Similarly, producers of fossil fuels are opening themselves up to massive class action suits for causing climate destabilization when their products are used as instructed.
The new normal is that a company is accountable for impacts and footprints of its products and services over their life cycles. When used as instructed, fossil fuel companies’ products knowingly cause climate destabilization. Give them the bill for disaster relief.
3. Divert perverse subsidies to disaster relief funds
Because it may take some time for fossil fuel companies to figure out how to equitably spilt the disaster relief bill among themselves, the government needs a reserve fund from which to quickly help communities devastated by unusually severe hurricanes, floods, droughts, and landslides. In February 2013, the G20 Finance Ministers committed to phase out their multi-billion dollar annual fossil fuel subsidies, but all have dragged their feet on doing so.
Governments should immediately divert the annual $1.2 trillion by which they are subsidizing fossil fuel companies into national and international “Climate Destabilization Disaster Relief Funds.” If that is not sufficient, increase government royalties on fossil fuels to make up for the shortfall.
4. Impose a Carbon Tax on all fossil fuels
We tax cigarettes to help cover the cost of medical treatment arising from the use of that product. The higher product cost also sends a market signal that smokers should seek less expensive alternatives to satisfy their cravings or wean themselves off their addiction altogether. Similarly, governments should immediately impose a graduated carbon tax on fossil fuels to fund our rapid and smooth transition to a fossil fuel-free economy.
The 12 steps in my November 2012 blog include some good funding candidates. Plus a carbon tax would send a market signal that fossil fuel addicts should quickly seek alternative energy sources. Fortunately, the cost of wind and solar energy has dropped precipitously in the last couple of years, as shown in the figure, so replacing fossil fuels with renewable energy should cause little or no net financial hardship.
5. Mandate disclosure of fossil fuel companies’ carbon footprints
The Securities Exchange Commission (SEC) in the U.S. requires companies to disclose risks that climate change poses to their bottom lines. However 75% of publicly traded companies ignore the guidance and get away with it. Governments should require that their stock exchanges de-list any fossil fuel company that does not disclose their Scope 1, 2, and 3 emissions annually, as defined by the Greenhouse Gas Protocol and illustrated in the adjacent figure, and disclose any associated material risks.
6. Put a moratorium on further permits
If we are deliberately winding down our dependency on fossil fuels, we won’t need more reserves than we already exploit. That means no additional permits need to be issued for exploration to find new reserves, drilling, or digging in known reserves. We will not require additional pipelines to transport oil and gas since the existing infrastructure can easily handle the trickle. Since much of the extraction-transportation-refining-delivery infrastructure will have to be written off as sunk costs, why would we encourage building more?
7. Divest fossil fuel investments
Until fossil fuel companies become energy companies and provide at least half their energy from renewable sources, governments should divest all holdings in them. The divestiture movement says it is wrong to profit from wrecking the climate. It is also imprudent to invest in fossil fuel companies that are destined to be devalued when they have to write off their reserves as stranded assets. Fossil fuel company divestment by governments sends a clear signal that fossil fuel companies should be boycotted as overvalued investments until they become diversified energy companies. Diverting fossil fuel investments to the growing universe of clean tech funds would be doubly smart.
Climate destabilization is a “wicked problem.” Wicked problems have multiple interrelated forms of complexity that when combined, exacerbate one another, making the problem exponentially more difficult to solve. Motivating and orchestrating the economic and social transitions will be difficult to do without unintended consequences. Nevertheless, we have to start and government leadership is essential. These seven bold policy, regulatory, and investment strategies are designed as a package that would signal that governments are committed to curbing runaway climate destabilization. If they commit to at least four of the seven actions at the Paris conference next December, we’ll know they are serious. If they don’t, we should replace them with governments who are.
This piece was originally posted on SustainabilityAdvantage.com. It has been posted here with the author’s permission.