COP21: A good deal for climate and for growth
This weekend, world leaders signed on to a new climate deal that aims to limit global temperature rise to well below two degrees, continue $100 billion a year in climate finance, and ramp up action every five years.
I’ve been present at the climate negotiations since the beginning, and I will leave Paris tomorrow optimistic for the future, but not for the reasons you might expect.
While the deal itself is a big step forward, the larger leap has been the recognition, all over the world, that action on climate change and economic growth can – and should – go hand-in-hand. The Paris agreements have recognized that the substantial gaps between the costs of clean and fossil energy have collapsed, and that returns increase when we produce food by using less land better. The spread of market driven activities consistent with these realizations will provide the foundations on which the Paris commitments will deepen.
The deal this week wouldn’t have been possible if nations and businesses weren’t already moving in this direction. The plans for climate action that countries committed to ahead of Paris were already enough to cover a large portion of needed emissions reduction. And while analysts pointed out that the sum total of the plans pre-Paris wouldn’t be enough to limit warming from dangerous levels, they still show that there is significant momentum.
Businesses, too, stepped up this year. High-worth individuals, family offices, and foundations committed to financial support to help move new clean energy solutions to viability, and heads of large companies, including Richard Branson and Paul Polman, called for zero emissions by 2050.
Why have nations and businesses changed their tune?
With the world’s population and middle class increasing each year, nations and investors have focused first and foremost on economic growth. But counter to the conventional thinking of the past, this focus on growth is no longer a constraint on action on climate change. To the contrary, it is a source of more productive uses of capital that can lift us from the weak economies of recent years through resource saving investment.
Private and public investments in the low-carbon economy are delivering profits, reducing emissions, and building resilience to energy and climate shocks. Climate finance increased 18% to $391 billion last year. Notably, most of this money comes from the private sector, with government policies playing an important role in facilitating this investment.
There are more opportunities to benefit economically from climate change action.
Climate Policy Initiative has shown that the U.S. and Europe can reduce electricity costs up to 20% by adjusting utility business models to be friendlier to both renewable energy and consumers. In fact, investors often fare better by weighting their portfolios toward green investments.
In the developed world, we see that India can now meet its wind power targets with little government support – wind is already cost competitive with imported coal. And while challenges with coal still exist in China, the recent move to cap and trade shows that the nation is ready to pursue a lower-carbon path.
Indonesia, which has been struggling with peat fires that have created a huge spike in forest destruction and emissions over the last several months, now has opportunities to rethink its agriculture sector to deliver win-wins for communities, farmers, and government. Companies that rely on Indonesia’s agricultural sector are already on board.
In Brazil, policy makers have long been working to protect forests, with policies in place that have helped halve deforestation rates, reducing more emissions each year than all the renewable energy in Europe combined. Brazil is also working to rethink its agriculture sector by introducing new technologies and incentives that can raise agricultural productivity on existing land.
Overall, the transition to a low-carbon energy system can free up trillions, with the move away from fossil fuels benefiting most economies, and the move toward more productive agriculture along with forest protection can benefit both business and the environment.
Governments and businesses are recognizing these opportunities, and the actions at Paris, and far beyond, demonstrate this momentous shift. The work now can focus on realizing these opportunities.
I’ve spent the last twenty years worried about the future for my grandchildren. Today, I can say I’m incredibly pleased to see the world get to this place.
Thomas C. Heller is the Executive Director of Climate Policy Initiative (CPI), a global team of analysts and advisers who work to improve the most important energy and land-use policies in the world, with a particular focus on finance. CPI’s work helps nations grow while addressing increasingly scarce resources and climate risk.