On Twitter a couple of days ago, Greenpeace International’s executive director Kumi Naidoo penned an appeal for people to become Greenpeace members. I threw off a series of tweets in reply saying that Greenpeace was part of the problem rather than part of the solution on global climate policy and that there was no way I would ever join Greenpeace given its current position – prompting a few people (including Kumi himself) to ask what I meant, and why I was on such a downer on Greenpeace. Here’s my answer. Continue reading
Assume a robust global deal on climate and the world’s cities will have to transform their infrastructure, economies and societies in little more than a generation.
Assume uncontrolled emissions growth and they face growing impact from a less hospitable and more volatile climate.
Either way – big changes are on the way. Few cities’ leaders grasp the scale of the challenge, especially in developing countries, where towns and cities will have an additional 1.5bn residents to cope with by 2030.
This new think piece has been prepared as part of the British Council’s Climate and Cities programme. Download the pdf (which has full references) or read the full text below the jump.
(Todd) Stern has set out a fairly clear road map for US engagement in the climate process (nb. these are his personal pre-appointment views, not those of Obama or Clinton). He thinks the US should:
- Start with domestic policy – get the National Academcy of Sciences to recommend (and review on regular basis) a stablization target; legislate cap and trade, not a carbon tax; supplement with regulation on energy efficiency and tex incentives for R&D.
- Use domestic policy as a lever in the international arena – negotiating first with a core group of countries (the ‘E8’ – Brazil, China, EU, India, Japan, Russia, South Africa and the US); then building a post-Kyoto framework on the back of their agreement, with binding long-term targets for all developed and ‘as many advanced developing countries as possible,’ and a built-in mechanism to ratchet those targets up over time (and as scientific findings dictate).
Stern is fairly tough on China. The country needs to accept targets (calculated on what basis is a question he does not address), but he makes lots of positive noises. Joint action on a climate can form the basis of a new strategic partnership between the 800-pound gorillas, but only if it is elevated from “traditional place in the second tier of mutual concerns.”
Throughout, of course, he has an eye on the US Senate and ratification. Bottom up targets and sectoral agreements should be deployed if they can suck more countries into a climate deal, as this will shut up antsy Senators. Access to carbon markets should be used as another tool that creates an incentive for developing country participation.
But there needs to be a stick too, Stern believes – and that stick is trade. Unilateral tarrifs on carbon-intensive goods would be ‘profoundly alienating’ and ‘a prescription for mutual recrimination, not progress’, especially after the US has spent so many years in the climate wilderness. But:
Considered in a mutilateral context…the idea…is more interesting. Today, the carbon content of goods is not captured in their price…If the premise of a climate regime were that countries must capture those social costs by putting a price on carbon, whether by means of a cap-and-trade program, a carbon tax, or equivalent policies to cut emissions, tarrifs could then be imposed on the exported products of any country that lacked such policies.
The Europeans will welcome Stern’s appointment with open arms – the Brits in particular. John Ashton, the UK’s climate envoy, gets name checked by his new US counterpart – and it wouldn’t surprise me to see the two working hand in hand…
From the plains of North Dakota to the deep waters of Brazil, dozens of major oil and gas projects have been suspended or canceled in recent weeks as companies scramble to adjust to the collapse in energy markets.
Oil markets have had their sharpest-ever spikes and their steepest drops this year, all within a few months. Now, with a global recession at hand and oil consumption falling, the market’s extreme volatility is making it harder for energy executives to plan ahead. As a result, exploration spending, which had risen to a record this year, is being slashed.
The precipitous drop in oil prices since the summer, coming on the heels of a dizzying seven-year rise, was a reminder that the oil business, like those of most commodities, is cyclical. When demand drops and prices fall, companies curb their investments, leading to lower supplies. When demand recovers, prices rise again and companies start to invest in new production, starting another cycle.
Now for Dan Drezner, all this poses a question:
So, let me see if I have this right:
If oil prices are sky-high, the energy sector explains that it will be slow to develop new fields, because exploration requires massive fixed investments and no one knows what the price of energy will be 5-10 years from now;
If oil prices are low, the energy sector explains that it is unprofitable to develop new fields because… energy prices are low.
Well, actually that is more or less the long and the short of it; as I argued back in July, the oil price is set to continue its recent yo-yoing for as long as we continue without a clear ‘signal from the future’ about the long term demand outlook for oil. After all, if you were an investor considering ploughing money into oil fields that were only profitable above $60 or $70 a barrel, and which would take many years to recoup the capital cost, wouldn’t you apply a pretty big risk premium if you saw prices collapsing to below $50 from a high of $147 less than six months earlier, with the potential in the background for future climate policy to cause demand to plummet?
Problem is, though, that without that new investment, we’re on track for a serious price crunch at some stage, as both the IEA and Chatham House have argued. So how to square the circle? Well, Nick Butler – who was John Browne’s chief of staff at BP and now heads the chairman of the Centre for Energy Studies at Cambridge’s Judge Business School -has a proposal in the FT yesterday. He writes:
If the energy ministers want to stabilise the market they should begin by commissioning a detailed, independent analysis of what went wrong. They should then develop the stabilising mechanisms that would limit the possibility of any repetition of 2008.
The most effective mechanism would be agreement on a broad target range for prices – say, between $50 and $75 a barrel – backed by a strategic stock holding to be augmented or deployed when prices diverged from the range. To support such an agreement trading would be limited to those with a direct physical interest in the market.
From a new base of relative stability ministers could consider the longer-term issues that will shape the energy market: the huge need for infrastructure investment ($350bn a year according to the International Energy Agency) and climate change.
This idea of a price band is clearly starting to gain ground in the energy think tank world – I heard a very similar idea mooted by an attendee at a Shell / Economist energy breakfast in London last month. But I’m not so sure. While Nick Butler’s clearly right to refer to the need to integrate energy security with climate change, why not go one step further – and use a comprehensive climate framework to provide the long term oil price stability that’s needed to bring the right amount of new investment on stream?
Think about it. Imagine a climate regime in which the emission targets are sufficiently long term (i.e. multi-decade rather than in 5-yearly increments as under Kyoto), and which is based on a quantified stabilisation target, which therefore means that all major emitters have binding caps. (You can argue about political feasibility in the current political climate, but the fact remains that a global deal on climate that actually solves the problem will have to satisfy these conditions anyway – and sooner rather than later if we’re to limit warming to two degrees C.)
What such a regime would also achieve, with no extra work needed, is to provide long term predictability on how much fossil fuel will be being consumed – for decades ahead. True, it wouldn’t tell you exactly which fossil fuels – coal versus oil, for instance – but since they’re used in different markets (oil mainly for transport, coal and gas mainly for power generation and heat), you could make a pretty good guess.
And now imagine again that you’re the potential energy investor we met earlier. All of a sudden, you can invest with much more confidence – and what’s more, knowing the level of demand will enable you to watch what other investors are doing too, so that more or less the right amount of new oil is brought on stream to meet projected demand, within the context of a global deal for climate.
Oh, and there’s one other advantage: given that a global deal on emissions is primarily an agreement between energy consumers, you can worry just a little bit less about OPEC’s congenital inability to stop itself from cheating…
Update: meanwhile, “OPEC oil ministers meet on Wednesday to remove a record 2 million barrels per day from oil markets as they race to balance supply with the world’s collapsing demand for fuel … Saudi Arabia, the world’s biggest oil exporter, has led by example — reducing supplies to customers even before a cut has been agreed to help push prices back toward the $75 level Saudi King Abdullah has identified as “fair.””
The climate talks in Poznan were never going to be a dazzling success – but, away from the nitty gritty of text, three big things need to happen for a reasonable result to be achieved.
First, the Europeans have to set out their stall (again) – but this time show that they can match aspirational targets with domestic delivery. Second, the Americans need to be begin the process of re-engaging: some sense has to emerge of what the post-Bush era should look like. And finally, we desperately need the emerging economies to begin to talk openly about where they think they fit into climate control. What does a good deal look like for them – not just between now and 2020, but over the next generation or two?
Unfortunately, the news doesn’t look good on any of these fronts. The Europeans – staggeringly, unbelievably – have allowed squabbles over their own climate package to spill over into the broader international negotiation. How’s this for showing united leadership to the rest of the world?
French President Nicolas Sarkozy failed to end deadlock with ex-communist European Union states on an EU climate package on Saturday but predicted a deal would be reached by a December 11-12 summit.
“Things are moving in a good way … I am convinced we will arrive at a positive conclusion,” Sarkozy, whose country holds the rotating EU presidency, said after meeting Polish Prime Minister Donald Tusk and eight other east European leaders.
Poland, which relies on high-polluting coal for more than 90 percent of its electricity, has threatened to veto an EU plan to cut greenhouse gas emissions by 20 percent below 1990 levels by 2020 unless Warsaw wins fossil fuel concessions.
“There is still a lot of work ahead of us” before the summit, Tusk said after the talks in the Polish port of Gdansk.
Poland argues it needs until 2020 to curb carbon emissions, for example by using more efficient boilers and carbon-scrubbing equipment and possibly building its first nuclear plant.
Tusk said Sarkozy and the EU Commission agreed to extend a period limiting mandatory purchases of greenhouse gas emissions permits for east European coal plants, in an offer which would need the backing of all EU leaders.
And Tusk hinted at a willingness to compromise at the summit. “At the very end, maybe at the very last minute, we may decide this is a solution we may accept,” Tusk said.
As I’m sure the Obama Administration transition team is aware, Poznan, Poland is currently hosting a very important UN-sponsored climate change conference. At stake is nothing less than the next round of emissions reduction commitments (a Kyoto successor) — which Barack Obama has said he wants the U.S. to participate in.
If they haven’t already, the Obama folks need to make contact with the U.S. delegation in Poznan immediately. One would think that the U.S. Del. would take the initiative itself, but I’m getting word that they feel that the ball is in Obama’s court.
Apparently, current U.S. delegation members — mostly career people with honorable intentions and a willingness to continue to serve (with some notable exceptions) — are waiting for the call. This is no time to fight about protocol, or who is supposed to call who. It’s time to start turning the ship around.
Things are going to slow down for the weekend and then pick up again on Tuesday. The framework that comes out of this week can still be quite ambitious and, at the same time, workable in the U.S. and in the Senate. The Obama people have from now until Tuesday to make their goals for Poznan clear, but the sooner, the better.
Finally, as I posted a few days ago, developing countries seem resistant to even talking about the long-term – even though they have the most to lose through lots of itsy bitsy short term deals…
What’s striking about the climate talks in Poznan is that (some) developed countries want a long-term goal, while (most) developing countries are only prepared to talk about the next few years. Here’s Xinhua:
The developed countries are seeking to set up a shared vision on long-term goal for emission cuts, saying that such a goal will set the direction for future actions.
Some industrialized countries believe that a 50-percent cut of emissions against the 1990 level by 2050 is necessary for the goal of preventing rising temperatures.
The developing nations, however, rejected such a global goal at this stage, arguing that such a vision is not feasible since there are no concrete plans for providing finance and technology required by the developing countries.
But really, it should be the other way round. Given that:
- A limited emissions ‘cake’ is available between now and, say, 2050 (assuming an eventual attempt to stablize atmospheric GHG concentrations).
- And that rich countries are consuming disportionate shares of that cake on every year.
- Then poor countries are likely to receive a smaller slice the longer it takes to start negotiating a comprehensive allocation.
Short term deals (Kyoto, Kyoto 2, Kyoto 3 etc) suit developed countries. A full-term deal would allow developing countries to understand then try and protect their long-term interests…
Next week sees the publication of the International Energy Agency’s latest flagship World Energy Outlook, which has been heavily leaked to the Financial Times. The report makes the same point that I’ve been arguing since prices started to slide from their peak of $147 over the summer (to around $60 today): oil prices are going to go back up. A lot. As Javier Blas and Carola Hoyos summarise in the FT,
The world economy will witness a $2,000bn shift in wealth and power from oil-consuming countries to members of the Organisation of the Petroleum Exporting Countries as oil prices rise to $200 a barrel by 2030.
The IEA says that Opec oil reserves are big and cheap enough to increase production and cap oil prices, but it warns: “Investment by these countries is assumed to be constrained by several factors, including conservative depletion policies and geopolitics. “There remains a real risk that underinvestment [bet-ween now and 2015] will cause an oil supply crunch” the report states…
In its report, the IEA sees oil prices reaching $200 by 2030, almost doubling last year’s forecast of $108 by the same year. The report suggests that current oil prices – below $70 a barrel and less than half their peak summer level – are a temporary effect of the economic crisis.
The $200 a barrel figure is the same one mooted by a Chatham House report on oil published in August, which shared the IEA’s concern that the investment needed to bring new production on stream just wasn’t happening fast enough. The IEA was already worried about that point when it published last year’s Outlook, remember – the fact that prices have crashes to less than half their peak level since then will hardly have helped to bring new investment on stream.
Exactly as with food prices, then, it’s the recent fall in prices that represents the blip – and the recent highs that represent the start of a long term trend. The IEA’s report is just the latest in a series of very good reasons why policymakers need to get their act together quickly on agreeing collective approaches to resource scarcity issues while the political heat on them is – for a little while – off.
But to repeat what I said in July, massive investment in new oil production just can’t be squared with what needs to happen on climate change. The global deal that we really need for managing energy security and competition for oil resources is a global framework for climate policy that manages the problem over the full term of its lifecycle – not just the next few years, as with Kyoto, as this is far too short term to give real investment certainty – and that has targets for all countries, not just developed ones.
That, of course, takes us straight back to David’s recent question on developing country participation. More on that in another post shortly…