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CLIMATE CHANGE: Breaking the deadlock

Rich countries must lead the way in breaking the impasse with the developing world over carbon emissions, argues <b>Nicholas Stern</b>. Failure to do so threatens the economic future of our planet

December’s UN climate change conference will be the most important international gathering since the Bretton Woods meeting in July 1944, which led to the creation of the IMF and the International Bank for Reconstruction and Development.

Due to be held in Copenhagen between December 7 and 18, 2009, the meeting (formerly known as asthe 15th Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC)) should provide the climax to two years of negotiations, begun in Bali in December 2007, over a new global treaty to limit concentrations of greenhouse gases and deal with those impacts that cannot now be avoided.

Such a treaty is urgently needed. Concentrations of carbon dioxide and other greenhouse gases in the atmosphere have reached 435 parts per million (ppm) of carbon-dioxide-equivalent (CO2e), compared with about 280 ppm before industrialization in the 19th century. Emissions of greenhouse gases, primarily from the combustion of fossil fuels, are causing that atmospheric level to rise by about 2.5 ppm per year, and that rate is rising. If we continue with ‘business as usual’, concentrations could reach 750 ppm by the end of the century.

This would imply a probability of about 50% of global average temperature rising by five degrees or more compared with pre-industrial times within 100 years or so from now. It has been more than 30 million years since the temperature was that high, and the human species, which has been around for no more than 200,000 years, would have to deal with a more hostile physical environment than it has ever experienced before. Floods and droughts would be more intense, and global sea levels would be several metres higher. Many areas of the globe would be inundated, while other parts would become deserts, severely disrupting lives and livelihoods, and causing massive population movements and inevitable conflict across the world.

Six-Year Deadline

Sensible risk management means eventually stabilizing atmospheric concentrations below 450 ppm of carbon-dioxide-equivalent, which many scientists regard as the threshold beyond which temperatures are likely to rise by more than two centigrade degrees, and very major impacts of climate change would occur. But, as we are currently adding at a rate of 2.5 ppm per year, we will reach this level within about six years. We have to cut emissions to prevent concentrations from exceeding 500 ppm, which would carry even higher risks, and then eventually reduce them to 450 ppm.

So, the longer we delay in initiating strong action against climate change, the more difficult it will be to reach a safe level. What is more, such a delay would also deprive us of an early chance to enjoy the other benefits of the transition to and achievement of low-carbon growth. The costs are immense if we fail to act, and early action has not only an acceptable cost but multiple benefits beyond the climate risks avoided.

But, with the Copenhagen conference rapidly approaching, there are still many major obstacles to be overcome if a strong international agreement is to be reached. Even though some good progress was made in September in New York at the summit of world leaders, organized by the UN secretary-general, Ban Ki-moon, we are dangerously close to a stalemate on key issues that could scupper efforts.

Sticking point

The main sticking point is that rich countries have committed to emissions reductions that are unconvincing and collectively inadequate, and have also been unwilling to make the necessary financial commitments to the developing world unless they are able to approve those countries’ plans to make the transition to low-carbon economic growth. Developing countries, for their part, have been unwilling to make commitments on reductions without a clear indication of financial support from the rich countries, and do not want to have their plans for low-carbon economic development determined by, or subject to the approval of, the developed world.

Developing countries recognize and are angered by the inequity of the present situation. Current greenhouse gas concentrations in the atmosphere are largely due to industrialization in the developed world from the 19th century. Yet developing countries are the most vulnerable to the impacts of climate change, which threatens the economic growth that is necessary to overcome poverty. Climate change and poverty, the two defining challenges of this century, must be tackled together. If we fail on one, we will fail on the other.

Commitment by China

The Chinese president, Hu Jintao, made a significant commitment at the summit in September by pledging his country to cut carbon dioxide emissions per unit of gross domestic product by a “notable margin” by 2020 compared with levels in 2005. This was an important step, as an analysis of the task ahead of us shows.

Annual emissions of greenhouse gases in 1990, the baseline for the UNFCCC, were about 38 gigatonnes (Gt) CO2e. Within a couple of years from now, the annual total is likely to reach 50 Gt. If we are eventually to reduce atmospheric concentrations to a stable level below 450 ppm and avoid a temperature rise of more than two centigrade degrees, we will need to cut emissions to below 35 Gt in 2030 and less than 20 Gt by 2050. The challenge facing the world is to meet these ‘carbon constraints’ while creating the growth necessary to overcome poverty. These two objectives can be met together, as they must, only by cutting emissions per unit of output.

Any credible trajectory for annual emissions over the next few decades towards the eventual target requires the biggest emitting countries to make substantial cuts. For China, continued growth means that emissions per unit of output must reduce by at least a factor of four by 2030.

The United States, European Union and other big emitters, given their own growth ambitions, must achieve similar reductions in emissions per unit of output, and very significant cuts in emissions in absolute terms. If we consider that projections for 2050 suggest that the global population will be about 9 billion, annual emissions per capita, on average, will have to be no more than around 2 tonnes of CO2e if the global annual total is to be less than 20 Gt. Per capita annual emissions in European Union countries today are about 10–12 tonnes, while in the United States they are nearly 24 tonnes.

Noblesse oblige

While most of the developed countries have set targets of reducing their annual emissions by at least 80% by 2050 relative to the UNFCCC baseline of 1990, their current collective commitments on reductions over the next two decades are insufficient in relation to their responsibilities and wealth, and to global carbon constraints. They must show greater ambition, as well as realism about the domestic political challenges they face, in adopting and implementing demanding targets for 2020, 2030 and 2040, if they are to convince developing countries that they are on a credible route to the 2050 target.

Developing countries should receive substantial help and support from the rich nations for their plans for low-carbon economic growth and for adapting to the impacts of climate change that are now inevitable over the next few decades. Many now have ambitious investment plans. India, for instance, intends to boost solar power such that it provides 20 gigawatts of domestic electricity supply by 2020 and is competitive with the price of fossil fuels by 2030.

Based on recent estimates of the extra needs of the developing world in a changing climate, rich countries should be providing annual financial support by the early 2020s of about $100 billion for adaptation and $100 billion for mitigation1. These sums should be in addition to existing commitments on official development assistance. Without this financial support it will be very difficult to secure an agreement in Copenhagen.

About half of the funding for mitigation could come from the operation of carbon markets. Developed countries should also show strong support for measures to halt deforestation in developing countries, which can make a major contribution to reducing emissions quickly and at reasonable cost. Both China and India made strong pledges at the summit in New York on increasing reforestation.

Rich countries must demonstrate to the developing world that low-carbon growth is possible, through investments in new technologies which should also be shared with developing countries to boost their mitigation efforts. We are already seeing extraordinary innovation by the private sector which will drive the transition towards a low-carbon global economy. Ultimately, these technologies could drive growth through an economic transformation surpassing that of the introduction of electricity grids, the railways or the internet. It promises to create an era of progress and prosperity.

Investor power

In September, 181 investors, collectively responsible for the management of more than $13 trillion in assets globally, launched a statement calling for a strong international agreement to be signed at the Copenhagen meeting. Their message was echoed by chief executives of businesses at the leadership forum that ran alongside the summit for world leaders in New York. They also called for well-designed policies and regulations on climate change to provide a stable and consistent investment environment and guide the transition to the low-carbon economy. Weakness in Copenhagen would undermine the confidence of investors and the developing carbon markets.

Investments in energy efficiency and low-carbon technologies could also pull the global economy out of the slowdown over the next couple of years, and the transition to low-carbon growth would create the most dynamic and innovative period in economic history. There is no real alternative. High-carbon growth is doomed, crippled first by the high prices of fossil fuels and ultimately killed off by the hostile physical environment that climate change would create. Low-carbon growth will be more energy-secure, cleaner, quieter and more bio-diverse.

We should learn from the events of the past year that if risks are ignored and allowed to mount, the eventual consequences will be much worse. If we do not start to tackle the flow of greenhouse gas emissions now, the stock in the atmosphere will continue to grow, making future action more difficult and costly. Other public expenditure can be postponed, but delaying on climate change measures is a high-cost, high-risk option.

The framework for a strong international agreement is now clear. Emissions must be reduced from about 50 Gt CO2e today to less than 35 Gt in 2035 and below 20 Gt in 2050. Developed countries must commit to a credible and realistic path to reduce their collective emissions by at least 80% by 2050, compared with the UNFCCC baseline year of 1990. And they must provide financial support to developing countries of $100 billion for adaptation and $100 billion for mitigation by the early 2020s, over and above commitments on official development assistance. This should be clear and understood as the framework for a strong agreement in Copenhagen that is effective, efficient and equitable.

We face great challenges over the coming weeks. Creativity and determination can overcome them. There must also be political will and leadership, not just by environment ministers, but also by finance ministers and ultimately heads of government. We must be realistic about the difficulties that individual countries will find in making and implementing policy, but it should not prevent agreement on the above key elements of an international framework.

Climate change poses a profound threat to our economic future, while low-carbon growth promises decades of increased prosperity. The choice in Copenhagen will be stark and the stakes could not be higher. We know what we must do and we can do it.

Nicholas Stern is chair of the Grantham Research Institute on Climate Change and the Environment and IG Patel professor of economics and government at London School of Economics and Political Science, and a member of the UK House of Lords. He was formerly head of the UK Government Economic Service and chief economist at the World Bank

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