WHY COPENHAGEN MUST BE THE END OF THE BEGINNING / THE FINANCIAL TIMES COMMENTARY & ANALYSIS ( HIGHLY RECOMMENDED READING )

Why Copenhagen must be the end of the beginning

By Martin Wolf
Published: December 1 2009 20:16

The Copenhagen summit on climate change is going to fall short. Does this matter? Yes and no: yes, because the case for action is so strong; no, because the likely agreement would be inadequate. Tackling climate change will be hard. It is crucial that we achieve the goal effectively and efficiently. The likely further delays should be used to achieve just that.
My view that decisive action is justified is contentious. Sceptics offer two counter-arguments: first, that the science underlying climate change is highly uncertain; second, that costs exceed benefits.
Yet it is not enough to argue that the science is uncertain. Given the risks, we have to be quite sure the science is wrong before following the sceptics. By the time we know it is not, it is likely to be too late to act effectively. We cannot repeat experiments with just one planet.
Fortunately, the evidence suggests that the costs of action should not be prohibitive. The World Bank’s latest World Development Report argues that the costs of tighter restrictions on emissions would be modest. On the benefit side, I would stress the importance of avoiding the danger of a climate catastrophe. We do not have a right to take such risks.

Nevertheless, sceptics perform an invaluable service. They remind us to keep monitoring actual climate developments. They tell us, too, that action has costs and some costs – leaving billions of people in poverty – would be intolerable. Fortunately, as the World Bank notes, poor people emit little. The reductions in emissions secured by switching the US fleet of sport utility vehicles into cars with European Union fuel economy standards would cover the emissions from providing electricity to 1.6bn people now without access.

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While action is justified and probably not prohibitively expensive, it is going to be a huge challenge. As the International Energy Agency points out in its World Energy Outlook, we would need to “decarbonise” growth to limit atmospheric concentrations of “CO2 equivalent” to 450 parts per million, the level believed consistent with a global average temperature increase of about 2°C. We would need to do everything – reduce demand, expand renewables, invest in nuclear power, develop carbon capture and storage, switch from coal to gas and protect forests – to achieve this. (See charts.)
How have we been doing? In a word, dreadfully. For all the talk, not just the stock but the flow of emissions has been rising. The recession has helped. But we cannot – and, self-evidently, should not – rely on economic armageddon. As the IEA notes, energy-related CO2 emissions have increased from 20.9 gigatonnes (Gt) in 1990 to 28.8 Gt in 2007. The IEA forecasts CO2 emissions, on its “reference scenario”, at 34.5 Gt in 2020 and 40.2 Gt in 2030 – an average rate of growth of 1.5 per cent a year over the period. Crucially, developing and emerging countries “account for all the projected growth in energy-related emissions to 2030”, with 55 per cent of the increase coming from China and 18 per cent from India.
The case for changing these trends soon is that the costs of curbing large rises in temperature would otherwise become extremely high or, at worst, prohibitive. The IEA argues that if the aim is to limit greenhouse gas concentrations to 450 parts per million, every year of delay in moving towards the required trajectory adds an extra $500bn of costs to the estimated global cost of $10,500bn. These costs result from the extremely long life of the capital assets used in power generation and the even longer life of CO2 in the atmosphere.
The alternative scenario is quite different: instead of the 40.2 Gt of energy-related emissions in 2030, we would have just 26.4 Gt. The gap is huge. A briefing paper from the European Climate Foundation shows that the pledges made in advance of Copenhagen would not close it.* Even on the most optimistic view, current offers fall short by about a third of the reductions needed by 2020 for a pathway to a ceiling of 450 parts per million of CO2 equivalent.
Copenhagen then would only be a beginning. It is likely not even to be that, since the US administration is unable to make binding commitments and developing countries are unwilling to do so. Yet Copenhagen seems the end of the beginning. Something close to agreement exists that the world should act. There is, equally, agreement that, despite the rhetoric, little useful has been achieved so far. The time for action is now – if not at Copenhagen, then soon after.
Unfortunately, this does not mean that the right sort of agreement will emerge. The policies we employ must be as effective and efficient as possible. What does that mean? I would emphasise three criteria.
First, we need prices for carbon that apply over relevant planning horizons. That price cannot be fixed forever, but must change with events. But it needs to be far more stable than in the European Union’s market for permits (see chart). A tax seems more attractive to me than “cap and trade”, for this reason.
Second, where the abatement occurs must be separated from who pays for it. Abatement needs to happen where it is most efficient. That is why emissions of developing countries must be included. But the cost should fall on the wealthy. This is as much because they can afford it as because they produced the bulk of past emissions.
Finally, we need to develop and apply innovations in all relevant technologies. A paper from the Bruegel think-tank argues, persuasively, that merely raising prices on carbon emissions would reinforce the position of established technologies. We need large-scale subsidies for innovation as well.**
Tackling the risk of climate change is the most complex collective challenge humanity has ever confronted. Success requires costly and concerted action among many countries to deal with a distant threat, on behalf of people as yet unborn, under unavoidable uncertainty about the costs of not acting. We have reached the point, however, where a broad consensus exists on the nature of the threat and the sorts of policies we need to follow to deal with it. We may not reach a deal in Copenhagen. But the time for decision has come. Either we act soon – or we finally discover whether the sceptics are right. If we fail to act, as seems likely, I hope they are. But I very much doubt it.
* “Taking stock”, 17 November 2009, www.project-catalyst.info

** “No green growth without innovation”, www.bruegel.org

Copyright The Financial Times Limited 2009