06/04/2021

Climate Change Cannot Be Mitigated Without Effective Carbon Pricing

Forbes -  Georg Kell

NASA picture of long-term global temperature increases. NASA

Author
Georg Kell is the Chairman of the Board of Arabesque, a technology company that uses AI and big data to assess sustainability performance relevant for investment analysis and decision making.
He is also Vice Chairman of the DWS ESG Advisory Board and Speaker of the Volkswagen Sustainability Council and a founding Director of the United Nations Global Compact, the world's largest corporate sustainability initiative.
More and more countries, already representing about 70% of the world economy, are setting climate neutrality targets.

Hundreds of corporations, including the largest emitters of greenhouse gases, have pledged to become “net zero” by 2050 or earlier, and over 1,000 corporations have embraced science-based targets to measure carbon reductions.

This outburst of public declarations and pledges signifies a promising new alignment of ambitions to face the climate crisis. But declarations of good intentions by themselves are not going to lead to the required timely actions.

In fact, despite the growing popularity of voluntary commitments, especially since the Paris Agreement of 2015, average carbon dioxide (CO2) levels in the atmospheres have kept growing. They exceeded 410 parts per million in 2019 and kept rising in 2020 despite the Covid-19 lockdown, reaching a new record of 416 parts per million in February 2021.

Mitigating climate change is largely about accelerating the transformation of the energy systems that power and sustain our modern lives. The burning of fossil fuels accounts for about 80% of the emissions that cause global warming. Growing the share of renewable sources of energy for producing electricity, electrifying all segments of the economy and employing low carbon technologies is possible in principle.

But despite technological breakthroughs and the growing cost competitiveness of renewables, the current pace of change is still far too slow. According to statistics on recent primary energy consumption, the share of renewable sources now stands at about 5% of primary energy. If all non-CO2-emitting sources – renewables, hydro and nuclear - were included, that share would stand at 16%.

Organizations such as the International Renewable Energy Agency (IRENA) and the World Resource Institute (WRI) estimate that the share of renewables must grow exponentially, and the share of fossil fuels decreased accordingly. The overall estimate is that the level of ambition needs to be roughly tripled to align with the 2°C limit and must be increased around fivefold to align with the 1.5°C limit. 

Such a massive systems change cannot be achieved by public sector actions alone. In the case of the European Union, for example, it is estimated that in order to achieve the 55% emission reduction target by 2030, €350 billion more need to be invested annually in the period from 2021 to 2030 than the amount invested in the period from 2011 to 2020.

Public funding can help kickstart such a massive investment, but most of it will have to come from the private sector. By using 37% of the €750 billion NextGenerationEU funds, as proposed by the EU Commission, €277 billion will be spent directly on the European Green Deal objectives, contributing about 8% to the additional investment needs for the next decade.

The situation is similar in the US. The huge infrastructure proposal by President Biden - even if fully implemented - would amount to only one eighth of the estimated required investments to stave off the worst projected dangers of a warming climate.

It is obvious that the full potential of the private sector needs to be activated in order to realize investments of such magnitude. This in turn can only be accomplished if framework conditions are adjusted and if CO2 is priced high enough to establish the business case for decarbonization. 

Establishing the business case for decarbonization is the key to bringing about the systemic change needed to unleash the resources and creativity of the private sector.

Much has been said and written about the failure to price emissions - Nick Stern called climate change “the greatest market failure the world has seen” - and in principle there is broad understanding that “we cannot solve the climate crisis without effective carbon pricing”, as Janet Yellen, US Secretary of the Treasury, said at her confirmation hearing. 

As illustrated in the report “State and Trends of Carbon Pricing 2020”, there are some 61 carbon pricing initiatives either implemented or scheduled within 46 national and 32 subnational jurisdictions. The recent results of the largest such scheme, the European Emissions Trading Systems (EU ETS), are encouraging.

Greenhouse gas emissions covered by the scheme (power and heat generation and emission-intensive industries) have decreased by 33% since 2005, with significant reductions especially in 2018 and 2019. 

However, overall progress is slow. As of today, only about 22% of global emissions are covered by carbon pricing initiatives and less than 5% are subject to high enough levels. About half of the emissions are priced at less than US$10 per ton - with the global average price standing at US$2 per ton!

Worse, subsidies for fossil fuels, estimated at US$478 billion in 2019, are more than ten times higher than revenues from carbon pricing (US$45 billion in (2019). If the indirect costs were to be included in the “perverse subsidies” for fossil fuels, this amount would be about US$5 trillion per year, according to the International Monetary Fund (IMF).

As the world is preparing for the 2021 United Nations Climate Change Conference (COP26) in Glasgow, there is now an opportunity to get serious with climate policies. We are only one investment cycle away from 2050 and we need to get the policies right - and right now. Policy makers have it in their hands to change the framework conditions by establishing effective carbon pricing that will unlock the needed investments. 

A promising new initiative, Call on Carbon, aims to encourage policy makers to do so. The initiative was born in the Nordic countries. Carbon pricing has already been successfully introduced in these countries and has led to major shifts away from high-emitting activities toward cleaner and future-oriented technologies. Supported by business leaders and civil society actors, the Call on Carbon asks governments to:
  • Back their net-zero targets with effective, robust, reliable and fit-for-purpose carbon-pricing instruments consistent with the Paris agreement in order to establish cost-efficient paths to reach net-zero emissions.
  • Align carbon-pricing instruments to create stable and predictable investment environments.
  • Finalize the rules for international market mechanisms under Article 6 of the Paris Agreement in order to support cost-effective mitigation efforts, create a level playing field and minimize carbon leakage.
It is hoped that many more private sector actors will join the Call on Carbon and encourage policy makers to be bold on carbon pricing. Unlike the many previous carbon pricing advocacy efforts that showed limited success, this time around the chances for getting heard are better - for several reasons: 

First, capitals around the world today. Governments can no longer postpone climate action or get away with cosmetic changes. The climate crisis is already upon us. Especially young people are rightly demanding bolder actions. Moreover, crisis situations lower barriers against change. As governments are employing trillions of US dollars to recover from the Covid-19 crisis, they have an opportunity to change the framework conditions for markets.

Second, as more robust climate action is becoming inevitable, decarbonization and digitalization of economies are fast becoming pillars of competitiveness. The inevitability of carbon reduction as a currency of the future should motivate policy makers and the private sector alike. 

Third, thanks to technological progress and applications at scale, the cost of clean technology, such as solar and wind power generation, batteries, electrolyzers and the production of low carbon materials, is falling rapidly.

According to estimates by the Institute for Sustainable Development and International Relations (IDDRI), the break-even CO2 price for very low-carbon cement, primary steel and primary aluminum would be €50 to €90 per ton, with electricity costs between €40 to €50  per megawatt-hour. According to a Swedish study, this would increase the retail price of a car by only about €100 to €125.

Breakeven cost estimates of very low-carbon cement, primary steel and primary aluminum technologies. IDDRI
Fourth, some environmental advocacy groups have been reluctant to support market instruments, fearing that these instruments could be used to undo performance standards for industries or further disadvantage low-income populations.

But the evidence from existing carbon pricing schemes, such as those implemented in Nordic countries, show that both approaches can and should be employed simultaneously. Moreover, revenues from carbon pricing can be earmarked to offset any disadvantages to low-income populations. 

With the upcoming COP26, this year is a potential turning point, offering policy makers to think big and to act accordingly.

Phasing out fossil fuel subsidies and establishing an effective price for carbon is an essential and long overdue measure to mitigate climate change.

The United States, China and the European Union are well positioned to demonstrate genuine leadership.

Note: This article has been written in cooperation with Jouni Keronen, Chief Executive Officer of the Climate Leadership Coalition.

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(AU) Crooked Consulting: EY And Deloitte Spruik Climate On One Hand, The Explosion In New Coal Projects On The Other

Michael West Media - 

Australia is building a slew of new coal projects just as global demand for coal is in retreat. It’s justified by “independent expert” reports from the likes of Big Four firms Deloitte and EY. Luke Stacey and Michael West report on the flawed economics and compromised reports of the consultants.

Astrology: image by Alex Anstey
How is it that coal demand is falling globally but, in NSW alone, there are 23 new coal mine proposals on the books, almost half of which were added in 2020? 

Flawed advice from consultants has a lot to do with it says Rod Campbell, chief economist at progressive think tank The Australia Institute which has just modelled the coal markets and found “wildly optimistic forecasts”.

In discussing the report, One Step Forward, Two Steps Back with Michael West Media, Campbell highlighted the role of the usual suspects within the consultancy sector in pushing for new coal projects:

“It’s amazing [how] companies like Ernst & Young that talk about ‘the need to embrace the climate emergency’ are also prepared to knowingly inflate the economic case for new coal mines.

“Ernst & Young’s economists use methods for coal mines that result in valuations hundreds of millions higher than even other coal industry consultants. These methods have been described as ‘inflated’, ‘contrary to economic theory’ and ‘plainly wrong’ by the NSW Land and Environment Court, but EY is happy to keep using them.

 “Deloitte also goes in to bat for new coal mines while saying climate change is the ‘biggest shared challenge facing humanity’”.

 Campbell believes Deloitte’s methodology isn’t as clearly misleading as EY’s, however the firm is still prepared to model their clients on selling coal at today’s prices out to 2046.

Even the coal friendly International Energy Agency (IEA) forecasts thermal coal exports to fall.

Low standards

“Economists have no professional standards and no professional body that can discipline consultants who basically lie for their clients.

“The Australia Institute has called for a code of conduct for economic modellers, but this has never been supported by big players like EY and Deloitte. “Why would they, when they can profit from the rush to approvals as the coal industry realises the music is about to stop?”, said Campbell.

The jarring conflict of interest has been chronicled here before. Deloitte has been exposed for conflating royalties with tax in its “independent” expert reports for coal peak body the Minerals Council of Australia.

Minerals Council’s masterclass in spin and corporate lobbying

The big consultants all make hundreds of millions of dollars a year from both government contracts and the resources industry. That makes them cautious about criticising governments but also compromised when it comes to offering independent advice as they are also highly paid by their corporate clients.

The numbers just don’t stack up when it comes to adding more coal production to a falling market.

NSW coal production peaked in 2014, yet current pending approvals in the state could see over 165 million tonnes produced in 2030.  More specifically, “Coal production in NSW doubled from 130 million tonnes in 2000 to 260 million tonnes in 2014”.

During this boom, both state and federal government and lobbyists in the coal industry forecasted even greater returns throughout the 2020s and 2030s.

Predictions for coal exports laid out by the government’s official forecasters in 2012 (shown below) now stand at clear odds with present-day reality; the gap reaching 65 million tonnes in the space of five years.


The 2012 estimates have also proven overly ambitious in respect to royalty payments. The report notes that “Coal royalties were predicted to reach $2.5 billion in 2012, [however] $1.2 billion was the eventual payment in 2016”.

Another indication of the industry’s decline is that many coal mines are producing below their capacity. A prime example is BHP’s Mt Arthur mine in the Hunter Valley. In 2019, it produced 25 million tonnes, well short of its 36 million tonne capacity.

“BHP is trying to sell the Mt Arthur mine and recently revised its value down by $US1.2 billion to around $US300 million,” says Campbell. 

In Queensland, there is speculation BHP may divest a number of its thermal coal mines. BHP did not respond to questions for this story regarding the sale of its coking coal assets and whether decarbonisation of the steel sector is occurring faster than anticipated.

The NSW government however remains deaf to the reality of sinking coal exports. It has 23 new coal mine proposals on the books, almost half of which were added in 2020. 

According to TAI, this influx “likely reflects a rush by proponents to progress projects as quickly as possible before a potential major shift in the coal market due to climate action and cheaper renewable energy”.

The Upper Hunter region in NSW accounts for 11 of the 23 new proposals – equivalent to 10 Adani coal mines – though it is already home to some of the worst air quality in the country. Over the weekend, the influence of the coal lobby over NSW politicians was on display when the Deputy Premier John Barilaro was photographed with other prominent pro-coal politicians in NSW mining lobby regalia. TAI’s report recommends the NSW Government, namely the Department of Planning Industry and Environment, “introduce a moratorium on new coal mine projects until it has undertaken a cumulative assessment of the economic, environmental and social consequences of pursuing so many new coal projects”.

It also lists six points of contention surrounding the responsibility of companies in the coal industry in their mitigation of financial and environmental risks, rehabilitation standards and obligations, plus the adequacy of oversight from the state government.

Another contradiction to coal mine expansion, especially in the Hunter, is the limitations imposed on the export terminal at the Port of Newcastle. With an annual terminal capacity of around 200 million tonnes, it is simply not capable of handling the added capacity of these new proposals against that of the existing mines in the Hunter Valley.

The tired rationale echoed by government and coal lobbyists alike is the injection to the economy and employment generated by these new projects. However, considering the reduced performance of existing mines, limited capacity of the Port of Newcastle and shortfall from the global market, employment will be significantly lower than that which is being claimed.

There is also the environmental threat to existing biodiversity which populate the regions. The problem with the NSW government’s approval process is that “each mine is evaluated separately rather than evaluated within a coherent regional framework.”

This results in a lack of transparency when considering environmental impacts such as disruption to the water table or river health and the threat to local wildlife. When assessed individually, the impacts of one project will naturally favour the cumulative consequences of 11 mines or expansions in the same region.

Questions have been put to the NSW Department of Planning Industry and Environment, and NSW Minister for Energy and Environment, Matt Kean.

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Japan Just Recorded Its Earliest Cherry Blossom Bloom In 1,200 Years. Scientists Warn It's A Symptom Of The Larger Climate Crisis

CNN - Jessie Yeung | Selina Wang | Derek Van Dam

Think of Japan in the spring, and the image that comes to mind is likely the country's famous cherry blossoms, also known as "sakura" -- white and pink flowers, bursting across cities and mountains, petals covering the ground.

The flowers, which experience a "peak bloom" that only lasts a few days, have been revered in Japan for more than a thousand years.

Crowds celebrate with viewing parties, flocking to the most popular locations to take photos and have picnics underneath the branches.

People flock to Tokyo city parks to view the blooming cherry blossoms on March 21.
But this year, cherry blossom season has come and gone in the blink of an eye, in one of the earliest blooms on record -- and scientists warn it's a symptom of the larger climate crisis threatening ecosystems everywhere.

Yasuyuki Aono, a researcher at Osaka Prefecture University, has gathered records from Kyoto back to 812 AD from historical documents and diaries. In the central city of Kyoto, cherry blossoms peaked on March 26, the earliest in more than 1,200 years, Aono said.

"As global temperatures warm, the last spring frosts are occurring earlier and flowering is occurring sooner," said Dr. Lewis Ziska from Columbia Universities Environmental Health Sciences.

 The peak bloom dates shift every year, depending on numerous factors including weather and rainfall, but have shown a general trend of moving earlier and earlier.

In Kyoto, the peak date hovered around mid-April for centuries, according to Aono's data, but began moving into early April during the 1800s. The date has only dipped into late March a handful of times in recorded history.

 "Sakura blooms are very temperature sensitive," said Aono. "Flowering and full bloom could be earlier or later depending on the temperature alone," he said. "The temperature was low in the 1820s, but it has risen by about 3.5 degrees Celsius (6.3 degrees Fahrenheit) to this day."

Kyoto cherry blossoms blooming earlier
Cherry blossoms in Kyoto, Japan, are blooming about 10 days earlier than they did 100 years ago, according to research in the International Journal of Biometeorology. The earlier bloom coincides with rising temperatures, suggesting climate change is affecting the length of growing seasons. The grey dots represent the date of peak blooms from the year 900 through 2015. The red line shows the 10-year moving average.
Source: Yasuyuki Aono and Shizuka Saito; International Journal of Biometeorology, 2010
Graphic: Curt Merrill, CNN

This year's seasons in particular influenced the blossom dates, he added. The winter was very cold, but the spring came fast and unusually warm, so "the buds are completely awake after enough rest."

Their early bloom, however, is just the tip of the iceberg of a worldwide phenomenon that could destabilize natural systems and countries' economies, said Amos Tai, assistant professor of earth science at the Chinese University of Hong Kong.

There are two sources of increased heat, which is the main factor making the flowers bloom earlier: urbanization and climate change.

With increased urbanization, cities tend to get warmer than the surrounding rural area, in what is called the heat island effect.

But a bigger reason is climate change, which has caused rising temperatures across the region and the world.

And these earlier dates aren't just a matter of tourists scrambling to catch peak bloom before the petals all fall -- it could have a lasting impact on entire ecosystems, and threaten the survival of many species.

Cherry blossoms at Kitanomaru Park in Tokyo, Japan, on March 23.
For every action there is a reaction

Plants and insects rely heavily on each other, and both use environmental cues to "regulate the timing of different stages of their life cycles," said Tai.

For instance, plants sense the temperature around them and if it's warm enough for a consistent period, they start to flower and their leaves start to emerge. Similarly, insects and other animals depend on temperature for their life cycles, meaning higher heat can cause faster growth.

"The relationship between plants and insects and other organisms have developed over many years -- thousands to millions of years," said Tai. "But in the recent century, climate change is really wrecking everything and perturbing all of these relationships."

Different plants and insects may respond to the rise in heat at different paces, throwing their life cycles out of sync.

Whereas they once timed their growth simultaneously each spring, now flowers may bloom before insects are ready, and vice versa -- meaning "the insects may not find enough food to eat from the plants, and the plants don't have enough pollinators (to reproduce)," he said.

A bird next to cherry blossoms at a park in Tokyo, Japan, on March 23.
Over the past decade, some plant and animal populations have already begun shifting to both "higher altitudes" and "higher latitudes" to escape the effects of climate change, according to a 2009 study in Biological Conservation.

But it's becoming harder for ecosystems to adapt, with climate change making the weather more and more unpredictable. Though the trend of flowering dates is generally moving earlier, unexpected and extreme weather means that there is still huge variability year-by-year.

"Ecosystems are not accustomed to these kinds of large fluctuations, it causes them a lot of stress," said Tai. "Productivity may be reduced, and ecosystems may even collapse in the future."

Not limited to cherry blossoms

 This year's change in flowering dates isn't limited to just Japan; the cherry blossoms that adorn the Tidal Basin in Washington, DC, have also bloomed early.

According to the National Park Service, the peak bloom date of the Washington cherry blossoms has advanced forward by nearly a week from April 5th to March 31.

Climate change may doom 1 in 3 species of plants and animals in the next 50 years
And the effects of climate change aren't just limited to cherry blossoms.

"Cherry blossoms catch the eye, people love to go see them, but lots of other plants are experiencing changes in their life cycle as well, and may have even stronger influence on the stability of their ecosystems," said Tai.

The same phenomenon is already happening to many crops and economically valuable plants, he said -- posing big problems for food security and farmers' livelihoods.

Food supplies in some of the most vulnerable regions in the world are being directly affected by droughts, crop failures and locust swarms.
    In some regions, farmers may be forced to change the types of crops they grow. Some climates will become too hot for what they are growing now, while other climates will see more flooding, more snow, more moisture in the air, which will also limit what can be grown.

    "(Farmers) have a much harder time predicting when they will have a good year, when they will have a bad year," Tai added. "Agriculture now is more like a gamble, because climate change is randomizing the things happening in our ecological systems."
           
    Fly above the cherry blossom bloom in Washington DC 00:45 Source: CNN

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