Turning Paris climate agreement’s bold ambition into reality
There’s been barely enough time for the ink to dry on the Paris climate deal — but we must begin charting a path forward if we’re going to meet COP21’s bold ambition in the years ahead.
Around the world, policy makers, companies, and investors are demonstrating that they agree: There is no time to waste.
In the United States in recent days, we’ve seen American Electric Power unveil plans for 900 megawatts of wind and solar power in Ohio and a $160 billion pension fund take steps to drop its coal holdings. Meanwhile, Congress approved a five-year extension of wind and solar federal tax credits — a step that Bloomberg New Energy Finance estimates will spur an additional $73 billion in investments and nearly 40,000 megawatts of new wind and solar projects by 2020.
The post-Paris signals from the rest of the world have also been strong. Take, for example, the Chinese company that began construction this week on a 1,000-megawatt solar PV power plant in Henan Province. Meanwhile, a Japanese bank got the nod to build India’s first major solar project and Morocco is about to turn on the switch to Africa’s largest concentrated solar power plant — a linchpin of the country’s goal of getting half of its power from renewables by 2030. All of these projects are being abetted by tumbling renewable energy production costs that are making them increasingly cost competitive.
To be sure, these trends are encouraging, but realizing COP21’s binding long-term commitment to net zero carbon emissions and no more than 2 degrees Celsius of global temperature rise will require infinitely stronger, and long-sustaining, signals from all corners of the globe.
The numbers don’t lie: For all of the unprecedented government promises and spending commitments in recent months, global clean-energy investments are still only a fraction of what is needed to move the carbon pollution needle downward. Bloomberg New Energy Finance’s 2015 year-end figures, which will be formally released in January, are expected to be roughly the same as they were in 2014 — just over $300 billion, which is much less than the additional $1 trillion of investments we need every year if we’re to avoid catastrophic global warming.
So what will it take to turn billions into trillions for clean energy — and relatively soon?
Here are a few of the keys:
· Pension funds and insurance companies must scale up their investments: Scaling clean energy globally will require massive levels of public and private investment. One of the biggest untapped resources to date is the nearly $100 trillion controlled by pension funds, insurance companies, and other institutional investors in 20 developed countries that are part of the Organization for Economic Cooperation and Development. At last count, less than .5 percent of their assets were going to clean energy infrastructure projects, virtually all of it to projects in Europe and the United States. Knocking down roadblocks and barriers so that these risk-averse investors can join the World Bank and development banks in financing these projects in developed and developing countries alike is critical.
· Policy makers must support long-lasting policies: The 188 countries that made carbon-reducing pledges as part of COP21 must follow up by establishing supportive regulations and policies that will catalyze projects. In fact, achieving these goals will require an estimated $16.5 trillion of investment over the next 15 years, according to the International Energy Agency. Countries such as Morocco and Mexico, which are phasing out fossil fuel subsidies while offering incentives for renewable energy, are providing roadmaps for other developing countries to follow. It is also critical that countries avoid policy backtracking, such as the UK government’s recent cuts to renewable energy subsidies, which sends a damaging signal to the private sector.
· Businesses must continue to demonstrate leadership: Wide-ranging business and investor support for a strong climate agreement was one of the most remarkable stories throughout the two weeks of negotiations in Paris. The fact that more than 500 companies and investors committed last week to accelerate action in the wake of the agreement — dozens of them have committed to 100 percent renewable energy, for example — is also encouraging. It’s especially important, however, that businesses not just green their US and European operations, but broaden these efforts to their entire supply chains, no matter the location.
· Sunset on fossil fuels: The role of Big Oil and fossil fuel companies in the future global economy needs a dramatic overhaul. The Paris agreement makes clear that the global oil demand is reaching its zenith and that oil and gas companies need to transform themselves to become diverse energy providers instead of fossil fuel-only providers. European oil companies such as Total and Statoil are already shifting more capital to solar and offshore wind, but we’re not seeing the same from US oil firms like Exxon and Chevron. These companies can expect growing pressure from investors to evaluate their long-term business strategies against a world that is pushing harder than ever to wean itself from fossil fuels.
With 2015 coming to a close, it is clear we have reached a historic moment in pivoting to a new low-carbon global economic future. While there is much to celebrate, we must resolve to work even harder to hasten this transition so that COP21 is not just about ambition, but also about on-the-ground transformation.
Mindy Lubber is president of Boston-based Ceres, a nonprofit that is host of the Investor Summit on Climate Risk January 27 at the United Nations.