Coping with Climate Complexities

If today’s newborn babies reach the age of 80, they will live to see the dawn of the 22nd century. They will also probably experience a rapidly warming world with associated extreme weather.

Average global temperatures will be 2.5°C hotter than pre-industrial levels by 2100 and floods, heatwaves, droughts, and violent storms will be much more common than today. This was the finding of a new United Nations report ahead of COP27, its annual climate change conference that took place in Egypt last week. It modelled the current commitments of the 193 governments that are signatories to the Paris Agreement and found that the goal of limiting global warming to 1.5 oC above pre-industrial levels by 2100 is still out of reach. More needs to be done, and everybody knows this. The problem is agreeing to what needs to be done by whom.

Reducing the greenhouse emissions that cause global warming, particularly carbon dioxide, requires restructuring large parts of the global economy. This is already largely feasible from a technological point of view, and indeed technology continues to advance rapidly. Green sources of energy and transportation exist, as do greener ways of building. Who should pay for what is a very different question, as is who should make which sacrifices? For instance, stopping deforestation and reforesting denuded areas is mostly not a technical problem, but a socio-political one.

How now?
Answering these “how” questions have always been difficult, but the complexity has increased substantially in recent years. The world’s largest two emitters are China and the US, and climate progress requires their close cooperation. However, the relationship between the two is rapidly deteriorating. Moreover, internal US politics is also deeply divided, and while the Biden administration is committed to tackling climate change and has put real money behind the cause, the climate-sceptic Republican Party is on track to retake the House of Representatives and may well claim the White House in 2024. Other big emitters like India, Australia, Canada, and even South Africa, also have strong fossil fuel lobbies that influence national politics.

But perhaps the biggest complicating factor has been the Russian war on Ukraine, which has played havoc with energy systems. Russia is a major producer of natural gas, oil and coal, and has been chocking off gas flows to Europe, while sanctions have limited supplies of the latter two. The result has been a surge in prices, but also the realisation that underinvestment in energy security has left many economies dangerously exposed.

There has been a lot of investment in renewable energy, but it is coming off a low base and is still insufficient for the world to do without fossil fuels. For instance, the WEF estimates a record 10 million electric vehicles will be sold this year, but more than 50 million internal combustion engine cars will also be sold. Therefore, it seems likely that there will be a long transition period in which renewable energy and electric vehicles will grow market share but fossil fuels remain important. Since many banks and investors are cutting off capital to new sources of oil, we may well find that underinvestment continues leading to sustained high prices or at least volatile prices.

This is not a bad thing from a climate point of view, as high prices will lower demand and encourage alternatives. It is for this reason that economists have long argued that carbon taxes are the best way to fight climate change. However, over the past year politicians have gone to great lengths to shield consumers from higher fuel and electricity prices after the Russian invasion. It will take political courage to accept high prices and let them do their work.

The US released millions of barrels of oil from its strategic reserve, while governments in Europe have capped electricity prices. And instead of moving away from coal as many countries planned, coal demand has hit an all-time high in 2022 according to the IEA as unaffordable gas prices forced substitution, even in a country like Germany where the Green Party is part of the coalition government.

Canary in the coal mine
Most coal use is in the developing world, however, with China accounting for half of the total, while India is the number two coal consumer. While China’s economy is sputtering, impacting its electricity demand, India’s economy is growing rapidly and coal consumption is posting double digit growth, according to the IEA.

This is where the notion of a Just Transition comes in. While countries like China and India are large polluters, on a per person basis, emissions are low because energy use rises with income. A big house with air conditioners and geysers requires much more electricity and therefore generates more emissions than a shack with a paraffin stove. Therefore, justice demands that the burden of adjusting to a future of net zero carbon emissions should be shared fairly and not fall on the poor nor should it fall on workers in fossil fuel industries. At the level of countries, fairness demands that the burden of adjustment should not fall on poorer countries when rich countries used dirty energy to grow rich and are the biggest sources of per capita carbon emissions today. They can also absorb the costs of transitioning more easily, as well as the impact of extreme weather.

The chart below gives some context on carbon emissions. While China, India and Indonesia are among the biggest polluters today, their large populations mean per capita emissions are quite low. The US, Canada, Russia and Korea are high both in absolute and per person terms.

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