Wednesday, 30 December 2009
Saturday, 19 December 2009
> One item that stood out: the final text mentions a $100 billion per annum fund by 2020 to address the needs of developing countries; more than expected. It says that the funding will "come from a variety of sources, public and private, bilateral and multilateral, including alternative sources of finance." Sounds a lot like "we'll find the money somehow, by golly".
> On Friday morning the COP15 business delegations issued a strong statement asking for a global agreement. They ended up with "Business, governments and society are intricately linked – climate change solutions will need all three to work together." Absolutely right.
> A window into negotiating tactics: in the early hours of the morning US negotiators inserted brackets at numerous places in the negotiating text for the main strand of the negotiations that includes all countries - the long term action plan. This effectively blocked discussions on this negotiating track. Some observers believe the US wanted to counter moves by developing countries to add their concerns to the text, effectively ensuring that discussions would have to be continued next year.
> COMMENT: Despite some good detail, the Copenhagen Accord is not a great agreement - nowhere near enough. Even US negotiators have admitted that the Accord won't hold global temperature rises to 2°C; http://climateinteractive.org/ has already projected the deal will, despite the assertions of the deal makers, lead to temp rises of 3.9°C. Last week the Stockholm Environment Institute was telling us that 1.5° and 350ppm are the maximum we can afford. (At least Tuvalu got this on the media agenda.)
But the Accord was never going to be enough; even if we had got a serious deal, the time lag for impacts to be felt would mean we'd miss our short window to get emissions down. Our best short-term hope is to turn mitigation into a profitable activity and hope we can raise enough private debt because of the money to be made over the long term, with a carbon price a nice bonus if and when it happens.
Whatever the Agreement, the conference marks the beginning of a new global discourse of cooperation. The extent to which nations (numbers of Heads of State) are coming together to discuss something hard and real in the full glare of galvanising global civil society activism starts us on a road. COPs will begin to be the new global forum of import, eclipsing the WTO and the G20 (which will now be seen merely as the big nations caucusing ahead of COPs). COP15 may not give us an Agreement that matters that much, but I do think it will provide the mechanism for us to work through the ghastly challenges we're going to face with environmental crisis, migration of peoples, and probably wars.
If we can construct mitigation as a profitable activity (and I believe we can) the Clean Energy race will become the next industrial boom - for those countries choosing to participate (and pity those that don't). It will, eventually, see energy prices drop substantially from where they are now, kicking off further booms. If we can use it to also push through a new generation of energy related productivity improvements, then it will prove a lasting step-up in world economic wealth (technology productivity gains being the primary driver, after cheap energy, of wealth). As long as that wealth can be enjoyed in ways that don't involve cannibalising resources and dirtying our nest, I reckon we have a good chance.
> Back to finance - I've had two exchanges this week with people setting up green fixed-interest investment funds, and two groups planning to issue green or climate bonds. Does two-by-two mean the dance is hotting up?
Thursday, 17 December 2009
> Very strong statement put out this week in Copenhagen by "Action by Business on Climate", coalition of WWF, Cambridge Leaders Group, CERES, Climate Group etc, representing 1,000 big businesses. The statement denies that big business would prefer caution and the status quo - and instead advocating a strong Copenhagen deal; and asking if businesses can do it, then why can't world leaders? They want a legally binding deal that reduces carbon pollution and accelerates clean energy innovation. They want a clear signal that allows businesses to make long term investment decisions in low carbon technologies; Provides incentives to invest heavily in low carbon R&D, and; Protects economies from dramatic impacts of climate change.
Timely contribution. Tell your friends!
> Coral prediction by Stockholm Environment Institute: they're Ok at present, with a 1°C temp rise. At 2° seaweed dominates corals (no good for snorkelling any more, apart from all the ecosystem problems). At 3° temp increases corals die.
> COP15 Trivia (thanks to RePower America)
- Countries represented: 192
- Heads of state that have announced they will attend next week: 110
- Accredited attendees: 23,000 before they stopped accepting people
- Size of Brazilian Govt delegation: 600 (what are they all doing?)
- Fraction of food served at COP15 that is organic: 66%
> "If we don't deal with climate change decisively, "what we're talking about then is extended world war." – Sir Nicholas Stern.
> The UK defence think tank the Royal United Services Institute recently reported that climate change threatens to spark conflicts of a similar magnitude of both World Wars – only this time they will be waged for centuries.
> 36% of people in CPH commute to work on a bicycle - in all weathers. And we're talking about some cold weather. A friend reminiscences about when Shanghai was bike-filled. Maybe when they become as rich as the Danish are they'll get back to bicycling?
Thanks for reading. Access to the conference has now been cut; I'm outta here, back to London!
Please pass on as you see fit.
Find past snippets at blog.seankidney.com
This is one of an occasional emailing. If you don't want to get them please let me know.
Tuesday, 15 December 2009
> Tuesday morning it starts snowing, as the flashing sign says to the thousands waiting "expect a 5 hour wait to register for the conference". A 5 hour wait outdoors that is.
> Connie Hedegaard, Danish Minister of Climate Change and Chair of the Conference, briefs NGOs, telling them to 'keep up the pressure'. She insisted that now is the time for a deal, that science and everything else is available, over 100 heads of states will be here, there will not be another chance. Postponing will not help but rather complicate so the pressure from civil society must absolutely remain firm.
> She also says "Finance is crucial, long term decisions are needed, a number of ministers are carrying out consultations on financial issues. A levy on financial transactions probably can't be designed and agreed this week but one on aviation and shipping could." Whoa, that would be big news!
> 11.37 am Monday - rumour reaches me that the African Group G77 has walked out of the "contact talks" this morning. The pace is quickening. Tuesday mormning it's India and China that are supposed to have walked out. Best place to figure out what's going on is the BBC rather than here.
> At Carbon Disclosure Project session "CDP is working with a number of govermments on mandatory disclosure proposals. We're encouraging governments to talk with each other so they can have a harmonised regulations." Indian ex-Minister Suresh Prabhu: "can't we have an integrated financial system that includes carbon disclosure? Mandated? Baselines, MRV and standards need to be fully integrated."
> One friend responded to the snippet about research into how to promote bicycle use in Mexican by suggesting Mexico consider subsidies for bike purchases by women. I will ask my contact to pass it on!
> According to Danish pumps company Grundfos, pumps consume 20% of all electrical energy generated around the world. Apparently they are in more places than you can imagine.
As Kevin Rudd prepares to fly to Copenhagen this week for the last two days of negotiations, Infrastructure Partnerships Australia, Climate Risk Ltd, Evans & Peck, Malleson Stephen Jacques and Zurich Insurance released today a report of the proceedings of their Climate Change and Infrastructure Summit.
The report says that there needs to be a recognition that climate change is real and already impacting on Australia's infrastructure. The report finds that without a new approach to specifying standards for construction and design, there is an increased chance of outages and asset failures - such as those seen during Australia's extreme weather last summer, leaving widespread economic impacts. There is also risk of legal actions.
Climate Risk CEO Dr Mallon said: "The science is moving too fast for standards to keep up, which leaves the infrastructure sector in a very difficult space. We need some new, more dynamic approaches to folding climate change into the infrastructure development process."
"The summit also revealed that sticking to standards that do not include climate change risks may provide no protection from future litigation. Climate change has to be considered from now on."
"With Melbourne predicted to have another scorching summer, the prospect of rail lines buckling again causing massive economic disruption shows that we can't assume the future will be like the past. "
"These fast-emerging climate change risks to infrastructure were the trigger for this Rapid-Response Summit by the private sector, for the private sector."
The Summit was convened by Climate Risk ltd in conjunction with the nation's peak body Infrastructure Partnerships Australia, infrastructure advisory firm Evans & Peck, law firm Mallesons Stephen Jaques and hosted by Zurich Insurance Australia - 34 private and public sector infrastructure organisations participated.
Dr Mallon says that Australia is experiencing conflicting pressures, with a massive increase in infrastructure investment at the same time that climate change policy is undergoing rapid change. Government and academic research is increasingly pointing to major changes in sea levels and extreme weather events like heatwaves, bushfires and floods, meaning that much greater consideration of the vulnerability of existing and new infrastructure is badly needed.
"The standards for infrastructure development are not keeping up with climate change science." he said. "Because the science is changing so fast,we have to build in flexibility to our infrastructure, and to the standards that guide us, so we can move with that science."
Brendan Lyon, Executive Director of IPA states, "Climate change is a reality and that demands a new approach in the way we plan and procure our next generation of infrastructure. A key consideration should be designing infrastructure that has options for adaptation, allowing major projects to be upgraded at least cost as the climate changes.
"The infrastructure sector is acutely aware of the risks and challenges posed by climate change and adaptation needs to be part of major projects. What is also required is greater certainty around the price and structure of carbon abatement, allowing industry to deliver fit for purpose
infrastructure for the long-term.
Monday, 14 December 2009
CLIMATE BONDS: FAST-TRACK SOLUTION TO LOW-CARBON ECONOMY
Copenhagen 14 Dec 2009: The global bond market could play a central role in the fight against climate change, according to an international think tank.
Today the international Network for Sustainable Financial Markets launched the Climate Bonds Initiative, designed to foster the use of long-term debt to finance a rapid, global transition to low-carbon economy. The Climate Bonds Initiative is operating as an autonomous project supported the Carbon Disclosure Project.
While the talks in Copenhagen have been holding everyone's attention, the role of private finance in what will be the biggest economic transformation in history -- estimated in one recent report to be more than three times the size of the whole industrial revolution -- is a side issue.
According to a number of recent reports a trillion dollars a year of investment has to flow into low-carbon industries if tipping points for runaway climate change are to be averted. The Initiative aims to encourage that investment.
Climate Bonds Initiative Advisory Panel members include James Cameron, Vice Chair of Climate Change Capital, Nick Robins, HSBC Climate Change Centre of Excellence, and Jeremy Leggett of Solarcentury.
Mr Robins said: "Putting the emphasis on private financing allows a different perspective. In place of always talking about the 'costs' of climate change, we can talk instead about investment opportunities."
"Bonds will be an important source of finance for action on climate change. The Climate Bonds Initiative provides a welcome platform to investigate the policy and market framework that will simultaneously raise capital for low carbon solutions and provide attractive risk adjusted returns for investors'.
Mr Cameron said: "Bonds have allowed us to finance the building of Europe's sewer systems, the growth of America's highway system, and the financing of two World Wars. We can now use Climate Bonds to finance the quick, global transition required to head off runaway climate change."
He added: "The transition to a low-carbon economy presents capital with what is likely to become the largest commercial opportunity of our time: investing in clean energy and low carbon infrastructure."
Climate Bonds Initiative convenor, Sean Kidney, said there were three work streams for the project: "We are developing policy models and advice for governments and corporations, developing agreed definitions and standards for Climate Bonds, and helping countries develop proof-of-concept projects and bond issues."
"Globally, there is no shortage of funding; for example, there is some $120 trillion being managed by institutional investors. In the wash-up of the financial crisis, fund managers the world over are re-weighting their portfolios towards fixed interest debt. But most of the bonds on offer lock institutional investors into the carbon-intensive economy."
"Discussion with institutional investors such as pension funds has found a large appetite for bond investments related to climate mitigation projects – as long as they first meet accepted risk ratings and rates of return. Many of funds face pressures from their stakeholder groups - governments, public servants, etc – to both deliver solid returns over the long term and to help address climate change with their investments."
The past year has seen green bonds from the World Bank and Climate Awareness bonds from the European Investment Bank. If the Climate Bonds Initiative has its way we will see an explosive growth in what are being called "green debt capital markets".
See the Climate Bonds backgrounder':
Sunday, 13 December 2009
> HSBC's Nick Robins at last night's Carbon Disclosure Project panel: "The market for low carbon services is now around $530 billion a year. By 2020 it will be $2 trillion a year. This is a big, exciting opportunity for people to get into, now."
> Wandered around the main, vast, negotiating hall yesterday with two friends, taking pictures of the hallowed ground where an agreement to avert disaster (we hope) is being worked out. Countries sit in strictly alphabetical order; the US is way up the back, very noticeable because its sign is in white, while every other one you can see is in black. They're the odd ones out because they haven't ratified the Kyoto Protocol; nice.
> Even the tiny hilltop cafe town of San Marino has a seat, albeit observer. Look it up on Wikipedia. But of course Taiwan was nowhere to be seen.
> Bonds gossip:
- Last week's green bond issue by SEB for the World Bank sold very quickly; it was their third. Expect a fourth tranche in quick time.
- RE manager for a major London-based bank told me, in the corridor, that they were working on a green bonds issue for renewable energy, which would make it asset-backed. Couldn't provide issuer details - yet. Perhaps we're seeing the beginning of a green debt capital market?
> Stockholm Environment Institute briefing: a 2°C target only gives us a 50/50 chance of avoiding runaway climate change; target needs to be 1.5°C and no more than 350ppm. Tough stuff in the context of what the negotiators are looking at, and supports Tuvalu's proposal a few days ago. What was especially interesting about this was that the session was presented by Sweden in its capacity as EU president. Hopefully this is getting through to the EU negotiating team. See research article at http://tinyurl.com/msapes
> Interesting aside about their (SEI's) improved understanding of biodiversity inter-connectedeness: if Amazon basin forests dry out to savannah, as many models forecast for 3°+, it triggers an extra 3° warming in northern China to Mongolia, and a 2° cooling in North Africa. Buy real estate in Algiers as a hedge?
> At an meeting today of Public Finance agencies around the world working on climate, the UK Carbon Trust presented a great story about technology transfer. I'd heard the bones before, but it was pointed when explained in the milieu of slow-moving public finance agencies. Last year they were approached by China Energy Conservation Investment Corporation, who wanted to set up a joint venture. They've set up a £10 million pound venture capital fund. One of the first investments was in a small UK company that had developed a low-energy, money and emission saving air-conditioning solution for mobile phone towers. These typically rely on high-emission diesel-fuel generated air-conditioners. The company was selling into the UK market, which has 20,000 mobile phone towers. China is building 600,000 in the coming year; they now have contracts to roll out a good chunk of those. That's technology transfer!
> At that same session the Mexico Energy Ministry person told of research they'd done into how to encourage bicycle use. It showed that the main driver for Mexican men using bicycles was the number of women using bicycles. They're still trying to figure out what to do with the results.
Thursday, 10 December 2009
> You may have seen news of "leaked Danish PM text" suggesting rich nations sort out climate change via the World Bank rather than the UN and pretty well tell developing nations what to do; quite a controversy at COP, as you can imagine. Gossip here is that a Danish Cabinet Minister colleague leaked it; seems the PM has been pushing it against lots of opposition, and the opposition hasn't given up.
> Hot news: Indonesia announced it's proposing a feed-in tariff for geo-thermal energy. Apparently they have 40% of the world's hot rock resources! See http://tinyurl.com/y9pm6t6
> Russia announced it would cut emissions by 25% by 2020 (from 1990 levels) if other countries agreed to do the same; they had been saying 10-15%; the EU is saying "we convinced them". EBRD at a seminar today explained that Russia's energy intensity is incredibly bad; they have enormous potential to cut emissions from energy efficiency measures. Hopefully the high returns will entice energy efficiency investors despite political and crime risks. EBRD aims to help de-risk.
> Outlook for a "good" Copenhagen Agreement seems to be improving. Insiders are saying that having so many world leaders (more than 100) turning up, and Obama now coming for the end of the Conference, is forcing a better outcome.
> Also helping was the US EPA announcement this week to formally classify CO2 as a pollutant. That allows Obama to regulate CO2 without Congress - it dramatically increases his ability to deliver at least the cuts he's promising.
> The Saudi Arabian representative was being obstructive again this week; at one point he made a speech about the implications of the East Anglia Uni email leaks and how they raised doubts about global warming science. Apparently the speech was met with silence; no other country followed up. Would've been different under Bush.
> The Conference is quite a buzz; 15,000 people talking non-stop in the conference centre. Thousands of laptops, lots of coffee, chanting anti-REDD demonstrators in the background. The cloak room is open 18 hours a day this week; it advertises that next week, as negotiations come to then end, it will be open 24 hours a day.
> Had a talk with a couple of big EU pension funds this week to see if they'd join Danish ATP pension fund's new €1 billion 'Climate Change Action Fund for Emerging Economies', reported earlier this week. They think they tackle the issue of investing better by building in relevant criteria across all their asset classes - i.e. in the whole fund. The €1 billion, they think, puts it into a sideline rather than mainstreaming the idea.
Tuesday, 8 December 2009
1. Nick Stern in a speech a couple of nights ago talked of the stark choice we face between acting fast or sliding into disaster, and thus how important this Conference was to the future of the planet. Lord Giddens talked of the Copenhagen Conference being, with the sense of pressure for a global agreement and over 100 heads of States turning up, the first real gathering for global governance: an historic event.
2. More practically, Q-Cells, one of the world's largest photovoltaic solar companies, claims that solar cells have reached grid price parity in key markets, such as Italy and Germany. That means that solar cells are price comparable with fossil fuel energy (gas in Italy's case) coal and gas for Germany. Big news! Why would you still build coal, let alone high-emission-potency gas?
3. According to the International Energy Authority, 77% of the energy infrastructure that will exist in the world 2050 has not been built. So we have an extraordinary chance to make sure it's infrastructure for a low-carbon, not a high-carbon, economy.
4. Denmark's ATP pension fund, one of the largest in the world, announced that they're setting up
ATP will set up a € 1 billion 'Institutional Investor Climate Change Action Fund for Emerging Economies'. The aim is for the Fund to become a joint initiative involving several like-minded institutional investors. The Fund will operate on private sector conditions and only invest in projects that are expected to deliver relevant risk-adjusted rewards.
Monday, 7 December 2009
Saturday, 5 December 2009
thinking "we'll need to figure out how to do better than that". But by the end of the presentation, overwhelmed by the robustness of their research, I can see why they made that decision.
Bear in mind this is in the context of rapidly growing economies in Asia and Latin America.
To keep emissions just at 2000 levels will require:
- Cars: an enormous 60% shift of passenger traffic from cars to rail and bus. In cities 80% of remaining cars and 40% of light trucks will be electric by 2050.
- Aviation: half of all sub-1600km trips shift to high-speed rail systems, plus 20-30% fuel saving technology improvements in aviation. They do also include some shifting to technologies like
- Shipping: 30% reduction in emissions, largely through large scale engine replacement around 2020, when a disproportionate portion of the world's fleet comes up for renewal
- Bikes: for short-distance trips there'll be a substantial increase in non-vehicle transport - e.g. bicycles - helped by congestion charges and other traffic control techniques in all major cities.
- Rail: large scale electrification of railways and various substantial improvements in rail efficiency. There will be a doubling (yes!) of kms of rail lines in the world by 2050. They have also assumed that the power grid shifts largely to clean energy during this period.
The net extra investment needed above "business as usual investment" already expected is just under US$12 trillion, 54% in developing countries. And this just to keep at 2000 level emissions!
On the optimistic side, if we can ensure, with some tough government planning decisions that help ensure these investments pay a good return for pension funds, then it's a huge financing opportunity.
Tuesday, 1 December 2009
Some good news! Last year there was more global investment in renewable energy than fossil-fuel energy - first time!
Of that, $140 billion was for low carbon electricity generation.
That means, for the first time, investment flows into renewables have overtaken flows into fossil fuel power generation.
A big moment!
Sunday, 29 November 2009
"Denmark gets 22 percent of its electrical energy from wind today and we get 0.5 percent," noted Robert Thresher, director of the lab's National Wind Technology Center. "That shows you what you can do when you really want to."
Saturday, 21 November 2009
World's largest coal loading facility quietly planning to raise land height to avert being flooded by sea level rise
I've been in Australia this week, and a friend briefed me on this amusing story: Newcastle in Australia handles more coal exports than any other port in the world. A $900 million project to develop an existing coal loading facility into the world's largest facility was approved in 2007 in the face of an extended community campaign against it by climate change groups.
A few months ago the consortium developing the project quietly applied for a variation to their planning consent - to raise the height of the whole island two metres. Why? to protect it against sea level rises expected as a result of climate change.
There is a delicious irony in there.
Sunday, 15 November 2009
Thursday, 5 November 2009
Wednesday, 4 November 2009
Monday, 26 October 2009
Tuesday, 20 October 2009
The WBGU study says the United States must cut emissions 100 percent by 2020--i.e., quit carbon entirely within ten years. Germany, Italy and other industrial nations must do the same by 2025 to 2030. China only has until 2035, and the world as a whole must be carbon-free by 2050.
"I myself was terrified when I saw these numbers," Schellnhuber said. He urges governments to agree in Copenhagen to launch "a Green Apollo Project." Like John Kennedy's pledge to land a man on the moon in ten years, a global Green Apollo Project would aim to put leading economies on a trajectory of zero carbon emissions within ten years. Combined with carbon trading with low-emissions countries, Schellnhuber says, such a "wartime mobilization" might still save us from the worst impacts of climate change.
- Each country ... to produce internationally and objectively verifiable decarbonization road maps, which provide information on the planned national emissions path up to the year 2050. These road maps should be based on the national CO2 budgets as well as on the national emissions reduction potential.
- ... establish a world climate bank, which will be responsible (1) for scrutinizing national decarbonization road maps as to their plausibility and feasibility, and (2) enabling the flexible mechanisms and transfers.
Monday, 19 October 2009
The report models the global growth rates needed for low-carbon industries if we're to avoid climate tipping points. In particular it shows that we can't afford the current approach of starting with the least-cost mitigation solutions and working our way forward to higher cost solutions as a carbon price gets to a reasonable level.
The modelling suggest we are at a fork in the road: to be able to have a reasonable chance of avoiding tipping points we need the whole range of low-carbon industries to have shifted into high growth phases (25-30% p.a., averaged globally) by 2014. If we don't take this road we will be looking at run-away climate change and the severe economic (and other!) contraction that will come with that.
The timeframe to ramp up low-carbon industries is such that any carbon price improvement from and end-2010 signed Copenhagen agreement is not going to help; it will take some years for stronger price signals to have an appreciable impact on the growth of low-carbon industries, compounded by the fact that strong price signals are not likely to come out of the US for some time.
According to the modelling in the report, to move at scale and at speed to become a low-carbon economy will require investment inflows of roughly a trillion dollars a year, at least for the next decade.
The report provides the macro argument for speed and for scale of action that leads into discussions of the need for larger-scale, policy-engineered solutions than have been considered to date.
Friday, 9 October 2009
Great move Norway! We need all rich countries to cut much much more than so far agreed, especially recalcitrants like the US, Canada and Australia.
But ... as Greenpeace points out, Norway itself has largely met its reduction targets to date through buying carbon credits from poor countries. Greenpeace is understandably concerned that Norway doesn't simply use its oil wealth to buy its way out of having to take local action; a fair critique we have yet to see answered.
Allowing the meeting of targets with carbon credits is an awkward sort of blessing. It does transfer capital to developing countries where the CO2 reductions are cheapest to achieve, which is great. But unfortunately it's still a wild west in carbon credit land, with too little supervision allowing too many doubtful investments. Of course Norway probably does more than anyone to make sure its credits are solid; and it also has a national carbon tax that is meant to drive
local effort, better than most countries.
But there's a bigger problem, a sort of "elephant in the room".
Norway is of course a big oil exporter; it is paying for its carbon credits by pumping out vast volumes of oil and gas that make global warming worse.
That is not the way out of our mess. Scientists point out that, from the sorry atmospheric state we're now in, there's a limited amount of tonnage of carbon we can inject into the atmosphere before we go one step too far and consign ourselves to run-away climate change and an
entirely different planet to try and live on. We have to wind down all fossil fuel emissions, and pronto.
Which makes another Norwegian anomaly all the more striking: their state-owned oil company, Statoil, is an investor in Canada's highly polluting tar sands. Perhaps they're just waiting for Copenhagen to announce that divestment?
Friday, 2 October 2009
By Juliet Eilperin, Washington Post Staff Writer
Friday, September 25, 2009
Climate researchers now predict the planet will warm by 6.3 degrees Fahrenheit by the end of the century even if the world's leaders fulfill their most ambitious climate pledges, a much faster and broader scale of change than forecast just two years ago, according to a report released Thursday by the United Nations Environment Program.
The new overview of global warming research, aimed at marshaling political support for a new international climate pact by the end of the year, highlights the extent to which recent scientific assessments have outstripped the predictions issued by the Nobel Prize-winning U.N. Intergovernmental Panel on Climate Change in 2007.
Robert Corell, who chairs the Climate Action Initiative and reviewed the UNEP report's scientific findings, said the significant global temperature rise is likely to occur even if industrialized and developed countries enact every climate policy they have proposed at this point. The increase is nearly double what scientists and world policymakers have identified as the upper limit of warming the world can afford in order to avert catastrophic climate change.
"We don't want to go there," said Corell, who collaborated with climate researchers at the Vermont-based Sustainability Institute, Massachusetts-based Ventana Systems and the Massachusetts Institute of technology to do the analysis. The team has revised its estimates since the U.N. report went to press and has posted the most recent figures at ClimateInteractive.org.
The group took the upper-range targets of nearly 200 nations' climate policies -- including U.S. cuts that would reduce domestic emissions 73 percent from 2005 levels by 2050, along with the European Union's pledge to reduce its emissions 80 percent from 1990 levels by 2050 --and found that even under that optimistic scenario, the average global temperature is likely to warm by 6.3 degrees.
World leaders at the July Group of 20 summit in L'Aquila, Italy, pledged in a joint statement that they would adopt policies to prevent global temperature from climbing more than 2 degrees Celsius, or 3.6 degrees Fahrenheit: "We recognize the broad scientific view that the increase in
global average temperature above pre-industrial levels ought not to exceed two degrees C."
Corell, who has shared these findings with the Obama administration as well as climate policymakers in China, noted that global carbon emissions are still rising. "It's accelerating," he said. "We're not going in the right direction."
Achim Steiner, UNEP's executive director, told reporters at the National Press Club on Thursday that the report aims to update the IPCC's 2007 findings to reflect both new physical evidence and a more sophisticated understanding of how Earth systems work.
"With every day that passes, the underlying trends that science has provided is . . . of such a dramatic nature that shying away from a major agreement in Copenhagen will probably be unforgivable if you look back in history at this moment," Steiner said. He noted that since 2000
alone, the average rate of melting at 30 glaciers in nine mountain ranges has doubled compared with the rate during the previous two decades.
"These are not things that are in dispute in terms of data," he said. "They are actually physically measurable."
Other findings include the fact that sea level might rise by as much as six feet by 2100 instead of 1.5 feet, as the IPCC had projected, and the Arctic may experience a sea-ice summer by 2030, rather than by the end of the century.
While the administration is pressing this week for an end to fossil-fuel subsidies as part of the current G-20 summit in Pittsburgh -- and Treasury Secretary Timothy F. Geithner told reporters Thursday that world leaders appear open to such a proposal -- activists such as 350.org director Bill McKibben said politicians worldwide are not taking aggressive enough steps to address climate change.
"Here's where we are: The political system is not producing at the moment a result which has anything to do with what the science is telling us," said McKibben, whose group aims to reduce the concentration of carbon dioxide in the atmosphere to 350 parts per million, well below
the 450 ppm target that leaders of the Group of 20 major nations have embraced.
Rep. Edward J. Markey (D-Mass.), co-sponsor of the House-passed climate bill that researchers included as part of their new temperature analysis, said, "As sobering as this report is, it is not the worst-case scenario. That would be if the world does nothing and allows heat-trapping pollution to continue to spew unchecked into the atmosphere."
Michael MacCracken, one of the scientific reviewers for the IPCC and a contributor to the UNEP report, said that if developed nations cut their emissions by half and the developing countries continued on their current path, or vice versa, the world would still experience a temperature increase of about 2 degrees Fahrenheit by 2050.
"We face a situation where basically everybody has to do everything they can," MacCracken said.
Saturday, 12 September 2009
This is useful piece of research, holding out a path to closing down all of China's coal plants. Even if you discount the wind potential you can make up the difference with geothermal and solar - especially large scale solar.
Australian readers should also look at former Qld Premier Peter Beattie's interesting piece in The Australian (http://www.theaustralian.news.com.au/story/0,25197,26027626-7583,00.html) - perhaps it's time for places like Australia to plan a shift away from their economic reliance on coal exports.
Powerful Ideas: Reducing China's Carbon Emissions a Breeze
LiveScience Sept 09
China is now the world's largest producer of carbon dioxide, the most important global warming pollutant. However, new findings suggest wind farms could potentially eliminate much if not all of China's carbon dioxide emissions from the power sector for the foreseeable future.
Demand for electricity in China is increasing at a rate of about 10 percent per year. At the same time, coal accounts for roughly 80 percent of total electricity production. This suggests that China's emissions of carbon dioxide could grow accordingly.
For example, the equivalent of 800 gigawatts of coal-fired power plants are needed to meet the rising Chinese demand for electricity anticipated by 2030. This could add as much as 3.5 billion tons of carbon dioxide emissions per year, compared to current annual Chinese emissions of 6.6 billion tons.
Wind is currently only a minor contributor to China's energy needs, with an installed capacity of 12.2 gigawatts at the end of 2008, or just 0.4 percent of its total electricity supply. However, China is now the world's fastest growing market for wind power, with an annual growth rate of more than 50 percent over the past decade.
"The world is struggling with the question of how do you make the switch from carbon-rich fuels to something carbon-free," said researcher Michael McElroy at Harvard University. "The real question for the globe is - what alternatives does China have?"
To see how much energy wind farms could generate for China, scientists at Harvard University and Tsinghua University analyzed wind data from a state-of-the-art NASA global weather and climate model that incorporated measurements worldwide from surface observations, aircraft, balloons, ships, buoys and satellites. They also looked at the Chinese government's energy bidding practices and financial restrictions to figure out regional costs for delivering wind power.
They found that onshore wind farms could profitably generate enough power to accommodate all of China's electricity demand projected for 2030, about twice its current consumption. The researchers assumed the wind energy would be produced from a set of land-based 1.5-megawatt turbines operating over non-forested, ice-free, rural areas with a slope no more than 20 percent. They also accounted for the fact that turbines often operate at as little as a fifth of their rated capacity in China, due to a combination of factors, such as lower quality of Chinese turbines, limitations of the power grid, and less-than-optimal placement of turbines to take advantage of wind resources.
"Wind farms would only need to take up land areas of 0.5 million square kilometers, or regions about three quarters of the size of Texas," said researcher Xi Lu at Harvard University. "The physical footprints of wind turbines would be even smaller, allowing the areas to remain agricultural."
A switch to wind power could prove invaluable to curbing any impact China would have on global climate, the researchers noted - as much as 1.1 billion tons of carbon dioxide could be saved per year if just 30 percent of the additional electricity China required by 2030 were produced from wind rather than coal.
"China is bringing on several coal fire power plants a week," McElroy said. "By publicizing the opportunity for a different way to go we will hope to have a positive influence."
This switch to wind power would demand a major financial investment up-front and require careful long-range planning on China's part. Still, the benefits for the Chinese economy could be substantial, as the value of damages linked with air pollution is estimated at up to $167.7 billion, or 4.3 percent of the nation's roughly $3.9 trillion gross domestic product.
"China has become a leader in the wind power industry, not just because of issues surrounding environmental protection and climate change mitigation, but potentially because of all the potential jobs it could create, the potential economic benefits it might have if China becomes a leader," said renewable energy industry researcher Joanna Lewis at Georgetown University, who did not participate in this study. "There are security benefits as well that they're thinking seriously and strategically about, from relying on renewable sources of energy and not requiring imports."
"This study really illustrates how wind can be an important part of China's climate change mitigation strategies, how it can play a much larger role in China than today," Lewis added. "But realistically, it can't be the only part, because it won't be feasible to replace all of coal power with wind power in the time scale we would need to address climate change."
In the coming months, the scientists plan to conduct a more intensive wind study in China, taking advantage of 25-year data with significantly more detailed information for north Asian regions to investigate the geographical year-to-year variations of wind. The model used for analyzing China could also be applied for assessing wind potential anywhere in the world, onshore and offshore, and could be extended to solar generated electricity, they noted.
They are also investigating how wind can be integrated into the power grid in Texas, for example, Lu told LiveScience.
Lewis added that more research needed to be done "on why wind farms have been producing less power than they should in China, and how the power structure currently supporting wind power can be modified to make sure it gets developed properly. If you're building all these farms, you want to get as much from them as you can."
McElroy, Lu and their colleagues detailed their findings in the Sept. 11 issue of the journal Science.
Monday, 7 September 2009
close four of its 15 coal-fueled power units by October 2010 and study
whether it can convert the 11 remaining units to other fuels, such as
The provincial government, which has pledged to eliminate coal-fired
power generation by the end of 2014, said the four plants slated for
closure represent about 2,000 MW of generation capacity.
Ontario is on track to be one of the first jurisdictions in the world to
eliminate coal-fired electricity generation.
They're apparently shifting to gas as a bridging fuel to clean energy.
Tuesday, 1 September 2009
Monday, 31 August 2009
Fwd: How the lessons Graham Greene outlined in ' A Quiet American' are still being avoided in the US
Bacevich is a former US Army Colonel who served in Vietnam and the Persian Gulf. He is now professor of history and international relations at Boston University. His most recent book is The Limits of Power: The End of American Exceptionalism.
Best Intentions: An Appreciation of Graham Greene
Graham Greene, The Quiet American. London: Heinemann, 1955.
In Washington, where the honorific "historic" ornaments every speech, appointment, conclave, and legislative initiative however trivial, those who earn their living purporting to explain "what it all means" have a limitless supply of material. Small wonder that the senatorial defection of an unprincipled hack from one party to the other qualifies as Big News, while the nomination of an associate justice to a seat on the Supreme Court becomes equivalent in significance to the Normandy invasion.
To suggest that this rampant narcissism induces a distorted, not to say warped, view of reality is to understate the case. Rebutting this presumption of Washington's supreme importance requires a constant effort. Students of U.S. foreign policy might feel some obligation to sample the cascade of pretentiously titled tomes produced by movers and shakers situated In the Stream of History or At the Center of the Storm who claim to have engineered or participated in or at least witnessed events of enduring significance.
Yet a steady diet of such excretions results in the need to cleanse the palate and flush the mind of accumulated toxins. To assist in that effort, Americans are fortunate in being able to draw on a rich homegrown tradition of observers who have devoted themselves to puncturing Washington's conceit and delighting in its folly, a tradition running from Mark Twain all the way down to Garry Trudeau and Jon Stewart.
For a less comic approach that stands beyond the confines of the American tradition, there is Graham Greene's prophetic novel The Quiet American. Appearing in 1955, Greene's fictional narrative became within a decade must-reading for those seeking to understand how the United States blundered so badly in Vietnam. For those today seeking to understand how the United States blundered so badly in Iraq and Afghanistan, The Quiet American remains an essential text.
Greene has little interest in Washington or in those who genuflect before the White House as the cathedral of supreme power. To locate the nub of the matter he looks elsewhere, to the grimy world where functionaries labor to translate Washington's high-sounding clichés into actual policy, with the consequences borne by ordinary people who never fly on Air Force One or appear on the Sunday morning talk shows.
In this case, the setting is Saigon, near the end of the first Indochina War. French efforts to suppress the Viet Minh insurgency and retain their empire in the Far East are failing. The United States, although nominally supporting France, is actually positioning itself to supplant its ally as the region's dominant outside power. Within a decade, of course, this effort will yield a second Indochina War and ultimately a second Western defeat.
Greene's protagonist is Thomas Fowler, a God-haunted, burned-out British journalist, who in late middle age has fled to the East in the wake of a failed love affair that had wrecked his marriage. From Saigon, he half-heartedly covers the war, mostly by passing along press releases issued by French military spokesmen. Steadfastly refusing to take sides, he stands apart and simply reports.
In Saigon, he has taken up with the beautiful and much younger Phuong. Whether Fowler loves Phuong—whether he is capable of love—is difficult to say. Yet he needs Phuong desperately, for sex and companionship, to prepare his opium pipes each evening, above all as someone whose presence keeps at bay Fowler's fear of facing alone the terrors of old age. In return Phuong wants only one thing: a guarantee of security, which implies marriage. Yet this Fowler cannot deliver: he remains formally wed and his wife, back in England, is a Catholic whose conscience will not permit her to dissolve their union.
Into this relationship comes Alden Pyle, a young American newly assigned as an economic attaché with the U.S. mission. Pyle is polite, modest, and boyish. "With his gangly legs and his crew-cut and his wide campus gaze," Greene writes, "he seemed incapable of harm."
Yet appearance and manner are deceiving. Pyle's nominal assignment is a tissue-thin cover; he is actually a CIA agent (although the agency is never identified as such). To stem the Communist tide threatening to inundate Southeast Asia, the agency wants to conjure up an indigenous democratic alternative to French colonialism. Pyle's job is to devise this Third Way. As he undertakes this task, Pyle draws inspiration from a journalist named York Harding, a sort of proto–Thomas Friedman who parachutes into various trouble spots and then in best-selling books serves up glib recipes for advancing the cause of liberty. In Pyle's estimation, the challenge he faces does not appear all that difficult. York Harding provides the answer: "you only had to find a leader and keep him safe from the old colonial powers."
"Impregnably armored by his good intentions and his ignorance," Pyle embodies all that Fowler (and Greene) can't stand about Americans: too much money, too much confidence, and too little self-awareness. Cruising the streets of Saigon in oversized Buicks, air conditioning everything in sight (to Fowler's dismay, even the U.S. legation's lavatories), passing out cigarettes as if they exist in infinite supply, and quoting York Harding, zealots like Pyle proceed on the assumption that American know-how backed by American values can make short work of even the most perplexing difficulties. Born and raised a Unitarian, Pyle takes God's existence as a given, his faith reinforcing his conviction that America's purposes necessarily reflect God's will.
As eager and as earnest as he is naive, Pyle first cultivates Fowler as a source of information, but soon falls in love with Phuong. Professing his intention to do the right thing by everyone, Pyle promises Phuong that which Fowler cannot: he will make her his bride, taking her back home to New England to live happily ever after. When Phuong accepts, Pyle compensates Fowler with apologies and assurances of his own everlasting friendship and respect.
When not conspiring to steal Fowler's girl, Pyle is conspiring to devise the Third Way, his efforts to find the right leader centering on a shadowy figure known as General Thé. As with the U.S. officials who in our own day fell under the spell of Ahmed Chalabi, Pyle has persuaded himself that General Thé's aims and America's aims align neatly. As was the case with Chalabi, this turns out to be a massive misjudgment.
Positioning General Thé as the anointed successor to the French requires first demonstrating the powerlessness of the colonial regime. This effort finds expression in a campaign of terror orchestrated by Thé, using plastic explosives covertly provided by Pyle, but to be blamed on the Communists. Pyle purports to believe that the campaign will concentrate on military targets. In fact, Thé organizes a savage attack on civilians in the center of Saigon, which Fowler and Pyle witness.
Momentarily taken aback by the bloody consequences of his handiwork—his shoes are spattered with human remains—Pyle quickly recovers and assures Fowler that the victims of the bombing had "died for democracy." Their deaths were a "pity," he tells Fowler, "but you can't always hit your target. Anyway they died in the right cause." Pyle's own sense of righteousness survives the incident intact. He knows he meant well. That knowledge obviates any need to take responsibility or to make amends. In his own mind, he remains blameless.
Fowler's own determination to avoid taking sides does not survive this episode. In his innocence, Pyle has become like "a dumb leper who has lost his bell, wandering the world, meaning no harm," even as he contaminates everything he touches. The ease with which Pyle rationalizes and then dismisses the results of his own recklessness persuades Fowler that detachment has become untenable. So the observer becomes a participant.
To prevent the American from committing further mayhem, Fowler initiates his own conspiracy, arranging for Pyle's assassination by the Viet Minh—an outcome by no means disagreeable to the French. Once Pyle has been dispatched, Phuong returns to Fowler's bed, this time to stay—in an unexpected act of generosity, Fowler's wife has decided after all to grant him a divorce. So the novel ends with a tormented Fowler reflecting that even though (or perhaps because) Pyle's death had put his own life right, "I wished there existed someone to whom I could say I was sorry."
In the twentieth-century English-speaking world, Greene ranks alongside Flannery O'Connor, Walker Percy, and Evelyn Waugh among the small number of writers addressing explicitly Catholic themes who might qualify for the accolade "great." Yet Greene's relationship with Catholicism—with God, for that matter—was profoundly ambivalent and riddled with contradictions. He cheated on his wife, cheated constantly on his several mistresses, and during his restless travels frequented prostitutes. Fealty and self-denial did not figure in his makeup. He was not a nice human being. Yet Greene's intimate familiarity with sin combined with considerable gifts as a writer to produce works of profound insight.
The Quiet American, deriving its energy from Greene's scabrous anti-Americanism, offers one example. The novel stands in relation to Cold War America as Uncle Tom's Cabin stands in relation to the antebellum South: it expresses its author's ill-disguised loathing for the subject he depicts. Yet one need not share Greene's animus toward the United States to appreciate his achievement. Indeed, Americans above all should be grateful to Greene since they—should they choose to do so—can benefit most directly from that achievement.
Is Pyle as naive as he appears? Are his professions of high ideals real or contrived? Does he take seriously the verities offered by York Harding in books like The Challenge to Democracy and The Role of the West? Or does he merely appropriate them to lend a veneer of respectability to a ruthless enterprise? When Pyle prattles on about freedom and democracy, does he mean what he says? Or is it just so much cant? Although Greene poses these questions—which by implication apply not only to Pyle but to the nation and the cause that Pyle serves—he refrains from offering explicit answers.
Indeed, Greene suggests that the answers may not really matter. "Innocence," he writes, "is a kind of insanity." When it comes to the exercise of power, the idealist intent on doing God's work is likely to wreak as much havoc as the cynic who rejects God's very existence. Those who credit themselves with acting at the behest of the purest motives are hardly less likely to perpetrate evil than those who dismiss ideals as sheer poppycock.
Only those who recognize the omnipresence of sin—recognizing first of all that they themselves number among the sinful—can possibly anticipate the moral snares inherent in the exercise of power. Righteousness induces blindness. The acknowledgment of guilt enables the blind to see. To press the point further, the statesman who assumes that "we" are good while "they" are evil—think George W. Bush in the wake of 9/11—will almost necessarily misinterpret the problem at hand and underestimate the complexity and costs entailed in trying to solve it. In this sense, an awareness of one's own failings and foibles not only contributes to moral clarity but can help guard against strategic folly.
Whether feigned or real, therefore, innocence poses a problem. Good intentions informed by the simplistic belief that the world can be fixed and things set right only succeed in killing people.
Back in Washington, those who dream up such policies somehow manage to evade accountability. Discredited policymakers depart with clear consciences, en route to a visiting chair at Georgetown or a cushy billet in some think tank. There is no blood on their hands, the dirty work having been contracted out to soldiers, whose compensation, writes Greene, "includes the guilt of murder in the pay-envelope" and who upon returning home from battle may find their sense of personal culpability more difficult to shake.
America means well: on this point the vast majority of Americans will permit no dissent. We differ from all other great powers in history. Our leaders differ as well. To those who formulate U.S. policy, ideals really do matter. As President Obama insisted in his Cairo speech, anyone depicting the United States as a "self-interested empire" is way off base.
When U.S. policy goes awry, therefore, the culprit might be bad luck, bad planning, or bad tactics, but American motives lie beyond reproach. Thus, the reassuring take on the Iraq War, now emerging as the conventional wisdom, is that—however mismanaged the war may have been early on—the "surge" engineered by General David Petraeus has redeemed the enterprise: a conclusion doubly welcome in that it obviates any need to revisit questions about the war's purpose and justification, while meshing nicely with the Obama administration's inclination simply to have done with Iraq and move on.
The implications of trivializing Iraq are already evident in the debate regarding "Af--Pak": the overriding concern becomes one of finding the general best able to apply to Obama's war the "lessons" taken from Bush's war. That such an approach should find favor in Washington would not have surprised Graham Greene. Those who conceived the Iraq War, the cheerleaders who promoted it from the sidelines, and critics of that war who have now succeeded to positions of power share a common interest in wiping the slate clean, refurbishing the claim that the United States meant well because the United States always means well. No doubt mistakes were made. Yet America's benign intentions expiate sins committed along the way—or allow those in authority to assign responsibility for any sins to soldiers who in doing Washington's bidding became sources of embarrassment.
Vietnam once laid waste to Washington's claim of innocence, until Ronald Reagan helped restore that claim. Every indication suggests that American innocence will survive Iraq as well, this time with Barack Obama as chief enabler helping to sanitize or erase all that we do not wish to remember. A people famous for their self-professed religiosity won't even bother to look for someone to whom they can express contrition.
Saturday, 29 August 2009
The report itself is a little more substantial than the article would
Friday, 28 August 2009
the island of South Georgia are disappearing at remarkable speed. This
massive glacial retreat is part of an emerging climatic pattern. The
implications are momentous, says Øyvind Paasche.
Thursday, 27 August 2009
Friday, 21 August 2009
How psychology can help the planet stay cool
- 19 August 2009 by Peter Aldhous
- New Scientist Magazine
"I'M NOT convinced it's as bad as the experts make out... It's everyone else's fault... Even if I turn down my thermostat, it will make no difference." The list of reasons for not acting to combat global warming goes on and on.
This month, an American Psychological Association (APA) task force released a report highlighting these and other psychological barriers standing in the way of action. But don't despair. The report also points to strategies that could be used to convince us to play our part. Sourced from psychological experiments, we review tricks that could be deployed by companies or organisations to encourage climate-friendly behaviour. Also, on page 40 of this issue, psychologist Mark van Vugt of the Free University of Amsterdam in the Netherlands describes the elements of human nature that push us to act altruistically.
As advertisers of consumer products well know, different groups of people may have quite distinct interests and motivations, and messages that seek to change behaviour need to be tailored to take these into account. "You have to target the marketing to the demographic," says Robert Gifford of the University of Victoria in British Columbia, Canada, another of the report's authors.
Messages that seek to change behaviour need to be tailored to the interests of individual groups
The affluent young, for instance, tend to be diet conscious, and this could be used to steer them away from foods like cheeseburgers - one of the most climate-unfriendly meals around because of the energy it takes to raise cattle. So when trying to convince them to forgo that carbon-intensive beef pattie, better to stress health benefits than harp on about the global climate.
Though conservative pundits have been known to attack such efforts, characterising them as psychological manipulation or "mind control", experiments indicate that people are willing to be persuaded. "From participants in our experiments, we've never heard a negative backlash," says Wesley Schultz of California State University in San Marcos. In fact, according to John Petersen of Oberlin College, Ohio, we are used to far worse. "Compared to the barrage of advertising, it seems milder than anything I experience in my daily life," he says.
DEEP down, most of us want to fit in with the crowd, and psychologists are exploiting this urge to conform to encourage environmentally friendly behaviour.
Researchers led by Wesley Schultz at California State University in San Marcos and Jessica Nolan, now at the University of Scranton in Pennsylvania, have found that people will cut their electricity usage if told that their neighbours use less than they do.
In one experiment, the researchers left information with households in San Marcos asking them to use fans rather than air conditioners at night, turn off lights and take shorter showers. Some messages simply stressed energy conservation, some talked about future generations, while others emphasised the financial savings. But it was the flyers that implored residents to join with their neighbours in saving energy that were most effective in cutting electricity consumption (Personality and Social Psychology Bulletin, vol 34, p 913).
In another study, the researchers told households what others in their neighbourhood used on average. High users cut their consumption in response, but low users increased theirs. The problem disappeared if the messages were reinforced with sad or smiley faces. The smileys received by the residents who were already saving energy provided sufficient encouragement for them to keep doing so (Psychological Science, vol 18, p 429).
MOST people seem to conserve energy if provided with real-time feedback on how much they are using. But feedback can be too immediate.
For instance, Janet Swim has a General Motors car that shows her mileage per gallon plummeting each time she accelerates. It's just not very useful, she argues, because it's hard to place that momentary piece of feedback in the context of her overall driving behaviour and fuel efficiency.
In contrast, the Toyota Prius display shows mileage per gallon over 5-minute intervals for the previous half-hour. With that contextual information, people can experiment with different driving styles to see how they affect mileage, and even compete with themselves to improve over time. The 2010 Honda Insight goes one better, flashing up an image of a trophy to reward thrifty driving.
The benefits of feedback are not restricted to car gadgets. Studies show that devices that display domestic energy usage produce savings of between 5 and 12 per cent.
EVERY spring, selected student dormitories at Oberlin College in Ohio compete to discover which one can cut energy use by the most. Computer screens give the students detailed feedback on electricity consumption, and in one study dorms cut their electricity use by 55 per cent (International Journal of Sustainability in Higher Education, vol 8, p 16).
The researchers running the study have not yet crunched their numbers to separate out the effects of competition from the feedback on electricity consumption, but the large savings compared to other studies that lack a competitive element suggest a strong effect. "The competition, at least in this environment, is critical," says John Petersen, Oberlin's head of environmental studies.
Petersen concedes that Oberlin may attract students with green sensibilities atypical of society at large. The project is about to extend into the real world. Equipment to provide detailed feedback on electricity use will be fitted into 53 apartments and six business units in a development now under construction in the city of Oberlin. "We hope to create volunteer groups that will compete with one another," says psychologist Cindy Frantz.
Here and now
PEOPLE have to be persuaded to act on climate change even though the benefit won't be felt for decades. Research by David Hardisty and Elke Weber of Columbia University in New York suggests ways to achieve this.
Hardisty and Weber have found that people respond in exactly the same way to decisions involving future environmental gains and losses as they do when making financial decisions (Journal of Experimental Psychology: General, vol 138, p 329). This allows psychologists' knowledge of how to manipulate financial decision-making to be brought into play.
For instance, schemes that give people an upfront cash payment for insulating their home will work better than those promising long-term savings, even if the people receiving cash end up paying a little more in the long run.
And because we are generally more worried about future losses than we are impressed by future gains, messages are more effective if framed to warn people that they will lose $500 over 10 years if they don't follow a particular course of action to limit climate change than if they are told they'll be $500 better off if they do take action.
AS SOCIAL animals, we like to interact with others and take inspiration from their actions. Psychologists are working out how to exploit this to spread behaviours that will help limit climate change. "My sense is that social networks are going to be important," says Swim.
Allowing people to document successes in saving energy on their Facebook pages could drive change among their friends, and the Oberlin team is considering integrating this into its urban residence experiment.
Tawanna Dillahunt and colleagues at Carnegie Mellon University in Pittsburgh, Pennsylvania, think such opportunities presented by Facebook can be combined with our liking for furry animals. Inspired by the attachment that people can develop towards Tamagotchi virtual pets, the team is testing the persuasive power of a "virtual polar bear" standing on an ice floe that grows bigger as people adopt environmentally friendly behaviours such as taking shorter showers. Initial results suggests the polar bear has pull.
Thursday, 30 July 2009
Wednesday, 29 July 2009
First climate refugees start move to new island home
July 29, 2009
IMAGINE that your home, water and a fair whack of your food are under threat. Imagine it is only going to get worse.
Imagine that you live on the Carteret Islands, seven tiny coral atolls in the Pacific that have been described as the home of the world's first climate change refugees.
Six months ago, the 2700 islanders began what will eventually become a big evacuation to Bougainville, about 80 kilometres to the south.
The decision to relocate followed years of worsening storm surges and king tides that infected the fresh water supply and ruined the islanders' staple banana and taro crops.
Fearing worse is to come — more frequent floods are expected to be the most visible signs of rising sea levels due to global warming — the islanders secured three blocks of coastal land. Five men moved earlier this year to build houses and plant crops, the first step in the relocation of 1700 people in the next five years.
The relocation is being headed by Ursula Rakova, an islander who quit a job with Oxfam in Bougainville three years ago to set up Tulele Peisa, an organisation that raises money and campaigns for social justice on behalf of her people. ''We have a feeling of anxiety, a feeling of uncertainty because we know that we will be losing our homes. It is our identity. It is our whole culture at stake,'' she said in Melbourne yesterday.
The move has been helped by the Catholic Church, which provided the land for relocation, but not the Bougainville Government.
Ms Rakova said the $1thmillion provided by the Papua New Guinea Government in Port Moresby had been swallowed by provincial bureaucrats.
The purpose of her trip to Australia this week is two-fold — to secure a market for the organic cocoa the islanders plan to grow at their new home and to call on the Australian Government, through its AusAID program, to pressure the Bougainville Government to deliver the promised money.
Just as urgently, she wants to see Western leaders take on much deeper cuts in greenhouse gas emissions.
The Australian Government's most ambitious emissions proposal of stabilising atmospheric carbon dioxide at 450 parts per million was not enough to give the Pacific a safe future, she said.
''We are angry. Some people do not understand the science, but they know they are losing their homes and they are angry they are having to pay for what other people [in industrialised nations] have done,'' she said.
While climate scientists warn that the future for atolls like the Carterets is bleak, the extent to which climate change is responsible for their current predicament is unclear.
Campaigners believe the impact of rising sea levels may have been amplified by the gradual sinking of an extinct volcano that supports the atolls.
One of the world's leading sea level experts yesterday called for caution. John Hunter, from the University of Tasmania, said sea level rises would eventually cause ''huge problems'', and called for the building of sea walls to protect the islands' culture and ''buy a few more decades''.
Photo: Pip Star
Thursday, 23 July 2009
It is striking how many projects were roadworks or, in the UK, defence projects.
One of the things that has to happen to make the global economic transition to a low-carbon economy is a proliferation of large scale renewable energy and energy efficiency projects.
As an illustration of how small a base we're starting from, have a close look at the report: health and road dominate. Energy just doesn't figure, despite the extraordinary opportunities we know are there.
You look at the list and you think: are these govts a bit thick? Don't they see the post-climate change tipping points tsunami bearing down on them? Where are the transition investments?
We'll know we've turned the corner when lists like this are dominated by clean energy, electric transport and other low-carbon economy projects.
Below are 11 key points:
1. The Bill has been watered down so much that US industry is unlikely to be doing any real emission cuts until the mid-20s.
2. This is because the modest emission reductions required up till then can be achieved largely with the carbon offsets allowed in the scheme. (This is a good time to chop down some trees in Sri Lanka so you can plant them again in a few years and sell the carbon credits to US utilities.)
3. The Bill is likely to deliver a US carbon price of around US$16 a tonne in 2020. This also the official US EPA forecast.
4. Most analysts, including the one providing the briefing, argue that a price of at least 30 Euros a tonne is needed to drive required emission-reduction changes. They are hopeful that the EU will see €30 a tonne prices, but the disparity between the US and EU schemes means they are unlikely to be linked up for some time, further delaying a unified market for emissions trading.
5. Of course a US$16 a tonne also means that CCS won't be viable in the US; it needs a much higher carbon price than that.
6. As a result of the US Bill, substantial reductions cannot be agreed in Copenhagen; the EU will not trigger it's proposed 34% reduction by 2020 target; nor will Australia trigger it's 15% reduction target.
7. The analyst thus believes that Copenhagen will not help to stop the world getting to 3?C warming and more.
8. They think the Copenhagen Conference will therefore be forced to spend much more time on discussing adaptation.
9. Their stock recommendations are generally "underperform" for renewable energy companies and "buy" for environmental engineers and the like who'll be dealing with holding back rising seas. That's not good news for those of us directly in the path of climate impacts.
10. Of course the problem is that, if climate scientists like Jim Hansen are right, we enter into run-away climate change that won't stabilise until 6-7?C and 20-25m sea level rises. The analyst quietly agreed that, as a result, armaments companies are probably a good investment.
11. That confirms that we have to put more energy into parallel paths to mitigation, such as improving the investibility of large-scale low carbon projects - without expecting a carbon price to be a substantial factor.
Guardian Unlimited Jul 22 2009
Energy Saving Trust and Environment Agency report estimates simple water-saving measures could save a typical household £225 per year Britons could save 30% of the carbon emissions associated with heating water at home by following simple advice such as lagging pipes and using low-flow taps, according to energy experts.
Wednesday, 15 July 2009
Wind report - "It seems global winds are easily up to the job of supplying the world's electricity needs"
Wind power could supply world's electricity
* New Scientist issue 2714. 24 June 2009
WIND patterns of the past are providing optimistic news about future energy supplies. It seems global winds are easily up to the job of supplying the world's electricity needs.
Previous projections for wind power simply rely on estimates of average annual wind speeds around the world today. Accurate predictions for future wind patterns are not available, so for more detailed information, Michael McElroy of Harvard University and colleagues turned to atmospheric models normally used by climate scientists and weather forecasters. They used these to recreate wind speeds and patterns from the past 30 years, using data from aircraft, balloons, rocket launches and surface measurements. "We have the best available wind information for the entire world, every 6 hours, with a spatial resolution of 50 by 66 kilometres," says McElroy.
This new approach has the best available wind information for the entire world
The team's model suggests that the top 10 carbon dioxide-emitting countries, except possibly Japan, could generate all of their current and projected electricity needs from onshore wind turbines that are already commercially available.
In the US, for example, this would take a network of wind farms involving just 2 or 3 turbines per square kilometre over 13 per cent of the country (Proceedings of the National Academy of Sciences, http://www.pnas.org/content/106/27/10933).
DOOM-MONGERS have got it wrong - there is enough space in the world to produce the extra food needed to feed a growing population. And contrary to expectation, most of it can be grown in Africa, say two international reports published this week.
The first, projecting 10 years into the future from last year's food crisis, which saw the price of food soar, says that there is plenty of unused, fertile land available to grow more crops.
"Some 1.6 billion hectares could be added to the current 1.4 billion hectares of crop land [in the world], and over half of the additionally available land is found in Africa and Latin America," concludes the report, compiled by the Organization for Economic Cooperation and Development and the UN Food and Agriculture Organization (FAO).
If further evidence were needed, it comes in a second report, launched jointly by the FAO and the World Bank. It concludes that 400 million hectares, straddling 25 African countries, are suitable for farming.
Models for producing new crop land already exist in Thailand, where land originally deemed agriculturally unpromising, due to irrigation problems and infertile soil, has been transformed into a cornucopia by smallholder farmers.
As in Thailand, future success will come by using agriculture to lift Africa's smallholder farmers out of poverty, aided by strong government measures to guarantee their rights to land, say both reports.
Tuesday, 7 July 2009
There's more than twice as much "tipping point" methane stored in the Arctic as previously estimated
This paper follows international modelling which identifies industrial development times as the critical constraint to avoiding dangerous climate change. The modelling suggests that an unprecedented public-private partnership may be the only solution to address this issue in the time available.
Background – Urgency
We are now 15 years on from the Rio Earth Summit. In that time, global emissions have risen beyond the IPCC’s most pessimistic emissions scenario, climate change has been persistently worse than predicted, and what seemed the then theoretical possibility of catastrophic extreme events increasingly look like certainties. World leaders have yet failed to make a meaningful deal; even if they did so now it would probably not be enough to avoid the worst effects of Climate Change, and it is highly uncertain that any targets that are set would be credible.
Current trajectories of emissions growth will lead to a collapse in the world economy
1. The climate challenge has become a choice between controlled climate change and un-controlled or ‘run-away’ climate change. The former will lead to impacts that may result in global warming of 20C, a 5-20% loss of GPD and impacts such as sea level rise of up to 2 metres. The run-away latter would lead to large temperature increases and sea level rises of 7 to 25m (ref) and a unprecedented and irreversible change in the world’s environmental, social and economic geography. Controlled climate change may be within the adaptive capacity of modern societies; run-away climate change is not.
2. Run-away climate change occurs when stabilising influences on the climate (such as oceans absorbing CO2) are outweighed by the de-stabilising effects on the climate (such as methane releases from melting tundra). A system is no longer under self-regulating control when such positive feed-backs exceed negative feed-backs. Run-away climate change means rapid, non-linear change to a new, much hotter, climate regime.
3. Run-away climate change is estimated to occur at about 2oC. Some ‘tipping-points’ may occur before that point, some after. Avoiding 2°C of warming requires avoiding more than about 1800GtCO2e being released into the atmosphere by 2100. This in turn means achieving average emission below 2tCO2e per person per annum by 2050, which compares to current average emissions of 24tCO2e per person in the USA and 4tCO2e in China.
We have a five year window to get low-carbon industries growing at 25-30% p.a.
1. To avoid 2°C global warming the world will need rapid growth of low-carbon industries, including clean energy industries for power, heat & transport, efficiency, and terrestrial carbon industries for farming and forestry.
2. Industrial modelling by Climate Risk Ltd, commissioned by the international conservation organisation WWF, shows that to achieve the 2oC emission levels, low-carbon industries will need to undergo a massive growth rate of 25-30% per annum year on year across industrialised and industrialising societies. The scale of the low-carbon re-industrialisation will be three times bigger than the industrial revolution.
3. We have a window that closes between 2010 and 2014 to get low-carbon industrialisation underway. Why? Because empirical evidence suggests that 30% annual industry growth is a real-world upper limit. Thus, though the necessary low-carbon resources and technologies already exist, they cannot be grown faster than this upper limit, so the time available, so the time to grow industries to sufficient scale to deliver this outcome has become the defining constraint to avoiding run-away climate change.
4. The Kyoto II negotiations have gone too slowly to allow sufficient development of low-carbon re-industrialisation in time using carbon trading systems alone. Even a successful global agreement will fail to achieve the scale of transformation necessary if the process of low-carbon re-industrialisation is not commenced within three years, five at the outside. A complementary industrial development measure is therefore critical.
5. There are numerous examples of such mobilisation of industry, financed by debt instruments. Whether in World War II, the post-war Marshall Plan, the rebuilding of Eastern Europe after the fall of the Berlin Wall, or even the current Chinese government Highway Program, when the world choses it is able to respond to urgent need.
6. All of these examples rely on a close working relationship between industry, finance providers and government. Therefore we conclude that this is what is needed now.
1. Investment for the transition to a low-carbon economy needs to be ramped up quickly otherwise high emission industries are locked-in, and low emission industries stay small and expensive.
2. Most of the world’s capital is locked in to the carbon economy. Although The Stern Review estimates the cost of mitigation to be only 1% GDP (based on an over-optimistic target of atmospheric CO2e concentrations the world can carry), this estimate ignores the destruction of large amounts of capital and the extreme and potentially disastrous disruption that this capital loss will bring to society, which will act as a deterrent to further mitigation efforts. Very few precedents exist - the closest being war - where the pathway of an economy is changed so rapidly and drastically
3. Governments do not by themselves have the capital resources to properly address the necessary speed of the transition. As well, capital flows will have to be cross-border, with some 60% of investments needed in the developing world, particularly so China and India and other rapidly developing economies do not get locked into high carbon industry. As fraught post-Kyoto negotiations have shown, national governments have found it difficult to agree on formulas for the scale of international transfers required.
Enable finance and industry to re-industrialise the world
1. Economies of scale from low carbon re-industrialisation will result in all renewable energy forms becoming cheaper that fossil fuel over the period 2020 to 2050. This means that a revenue stream to create a return on investment can be drawn from savings once the cost-curve for renewables drops below that of fossil fuels.
2. Climate Risk modelling calculates the required investment to makeup the cost difference between low carbon energy and fossil fuel energy, until it reaches sufficient scale to be independently viable, at US$10 trillion. This is different to the total required capital investment for infrastructure; climate risk investment is only required for the ‘clean’ component of the costs, the rest being met by the regular operations of the energy market.
3. Institutional investors have, globally, some $120 trillion of funds under management. So if the investments were spread over next 10 years it would be less than 1% of funds under management. Consequently institutional investors, potentially led by pension funds, have the resources to fully fund needed low-carbon re-industrialisation — if they can achieve secure and sustained returns.
4. A critical role exists for governments to allow investors and industry to put in funds in the short term to create viable returns in the long term. For example, steps by governments to establish pricing base-lines could reduce investor risks and provide security for returns, unlocking large-scale national and cross-border energy-related investments for long-term capital.
5. Re-industrialisation will need to focus on low-carbon energy generation and infrastructure (distributed energy, fuels and supergrids), but could also encompass energy efficiency, agriculture and forestry.
Questions to address
The key question is, while we wait for a post-Kyoto regime to be slowly implemented, is “how can we raise finance on an adequate scale and pace for the low-carbon re-industrialisation required in both developed and developing nations”.
- What financial instruments would allow this to happen?
- What practical steps are required of developed and developing world government to provide adequate security for investors? What mix of government interventions are required?
- How do we most efficiently engineer appropriate clean energy deal flows?
- What can industry players do to support the re-industrialisation required?
- What sorts of institutional support do we need, if any?
- If capital raising is successful, how can we avoid an asset bubble with large volumes of capital seeking small number of investments?
Options for Climate bonds
A range of ideas for climate bonds have been discussed in different fora. They are not necessarily refined, nor are they mutually exclusive. We present some “sketches” below for exploration.
Option A: International Climate Bond secured against feed-in tariffs
By Karl Mallon and Sean Kidney, Climate Risk Ltd
An opportunity exists for the private sector to profitably fund the core of a low-carbon re-industrialisation process by investing to create scale in the short term, leveraging long-term returns from the resulting energy cost savings. This, at a pace sufficient to avoid runaway climate change.
Economies of scale will reduce costs below business-as-usual creating savings which are more than adequate for a return on the inward investment required (based on analysis in Climate Risk’s report to WWF 2009)
An intrinsic component of an industrial transformation will be a change in the energy price regime, driven by economies of scale. Currently renewable energy technologies generally cost more than fossil fuel based energy sources, and are therefore priced out of the market. However, if driven to larger scales this situation reverses.
Since the fuels for renewable technologies (i.e. biomass, wind, sun, tides, geothermal, etc.) are obtained at zero or low cost, the core cost stems from building plant to extract that energy. Empirical evidence provides a reliable guide to future cost declines. On the other hand, fossil fuel costs are likely to increase due to fuel extraction costs, reductions in supply and the cost of managing greenhouse gas pollution. In Climate Risk’s modelling the crossover at which the first renewable energy industries start to create net savings is 2027; by 2050 all of the major renewable resources are able to provide energy at costs at, or below, those projected for business-as-usual.
In energy efficiency industries this return is already available.
This presents a reasonably plausible long-term investment picture in which short-term price support to achieve economies-of-scale is repaid with long-term returns from the cost savings.
This could provide investment scenarios similar to those found in energy performance contracting, whereby capital to carry out energy efficiency upgrades is provided by a third party company, which is repaid through savings from reduced energy expenditure. This picture also has parallels to the development of major infrastructure projects such as bridges and roads.
1. International Climate Bond Authority (‘the Authority’) established by institutional investors as the administrator and compliance enforcer of Climate Bond market. Authority defines compliance regime required to minimise risk for investors; licences auditing agencies to vet and verify bond issuance and funded projects.. It could be like the IASB, a private association that has rapidly established IFRS as the international financial reporting standard. It may need to negotiate bilateral “treaties” with energy authorities and governments, but might avoid multilateral negotiation problems. It would possibly, for credibility, need the backing of an entity like the World Bank.
2. Bonds can be issued by Governments, large companies, or international institutions, subject to agreement and compliance with regulatory conditions.
3. To issue Climate Bonds, organisations will have to be registered with the Authority, and contract to abide by international operating rules and standards, including standards for low carbon re-industrialisation.
4. Bond issues are registered with the Authority, who also appoints verification and auditing agent for each issue or project. Auditing fees (agreed schedule of charges) are paid by bond issuer or projects.
5. Private or public sector entities (‘the Investors’) invest in Climate Bonds creating a capital base for the Authority.
6. Project Development companies (‘Developers’) will be able to register to develop compliant renewable energy projects (‘Projects’) under the Climate Bond Scheme.
7. A participating country government (the Government) enters into long term agreement with the Authority which specifies three key elements:
a. The Authority and the Government agree a long term projection for business-as-usual (BAU) energy costs to 2050.
b. The Authority will allow Climate Bonds to be used create a feed-in tariff (which covers the cost difference between conventional energy and renewable energy in that country) . This can operate alone, or in parallel with existing country schemes. This investment is recorded and disclosed by the Authority.
c. The participating Governments agree that the Authority will be paid the cost difference between energy from future Projects and the agreed BAU energy price, until such time as the pre-agreed return on bond has been achieved (e.g. via a ‘Feed-Out Tariff’).
8. The scheme is competitive with annual installed capacity targets across a range of renewable and energy efficiency resources to ensure prices closely follow costs. Typically renewable energy costs decrease by 20% for every doubling of installed capacity. Under the climate risk modelling renewable energy industries would be doubling their annual install capacity every 3 years.
9. The time limit for Project operations under the scheme is to 2050. If any net investment is outstanding against the bonds, the Government agrees to make good the investment at an agreed reduced rate of return.
10. The Authority will be responsible for:
o Developing supervisory mechanisms to ensure project compliance.
o The licencing of independent parties to act as accreditation providers for individual projects.
o Internationally setting of and certification of compliance with agreed standards for being low-carbon – provides investors with confidence in carbon reduction outcomes.
11. Developed and Developing Countries Equivalence: The Climate Bond does not need to differentiate between developing and developed countries, working equally in both. Country risk would be reflected in required returns. At least 60% of global investment in these areas needs to be in developing economies. The scheme would be pro-development – investment raised would be returned as developing countries prosper.
What Does this Achieve?
The objectives of the Climate Bond Framework are:
1. To allow investors to be able to achieve a low-risk return on investment at rates consistent with government bonds.
2. To allow multiple companies to develop multiple projects in multiple countries using the same mechanisms with minimal transactional barriers,
3. To allow development to occur in any country regardless or state of development or domestic carbon or energy policy context.
4. To avoid any cost penalty to tax-payers or energy users compared to BAU.
5. To allow projects to be developed at all states of commercial technology development (and therefore place on the cost curve).
Option B: A proposal for national index-linked bonds
The greatest risk embedded in carbon credits isn’t that governments won’t agree on long-term reduction targets, but that they won’t have the backbone to enforce those targets once agreed on. Now two founding members of the London Accord have proposed a hedging instrument that forces government to put their money where their mouths are.
By Professor Michael Mainelli, Z/Yen Group and Jan-Peter Onstwedder, The London Accord
Potential climate change investors have one big doubt: are governments committed to de-carbonizing the economy?
Developers of low carbon projects (such as wind farms or solar companies) face two major problems turning ideas into reality. The first is showing attractive returns. The second is raising capital. Most low carbon projects will provide attractive returns only if government policies lead to lower emissions, higher fossil fuel prices and higher carbon prices. Uncertainty about government commitments creates risks which developers, and their investors, are not keen to bear.
Governments claim they are committed, but history raises doubts. Lack of confidence in government commitment impairs investment. Lack of confidence also leads to low prices for carbon. For example, the EU ETS market Phase 1 (2005 to 2007) carbon price crashed in 2007 when it became apparent that EU governments had jointly issued far too many permits to emit, i.e. clearly they weren’t committed to reductions. Despite numerous white papers, there is little confidence that the UK government will meet its carbon emission reduction targets. Further, the worsening economic environment leads governments to talk about ‘temporary’ easing of carbon reduction commitments at the same time as easing demand lowers carbon prices.
The uncertainty about government commitment manifests itself in three specific risks – government carbon emission targets being missed, fossil fuel prices remaining low, and carbon (emissions) prices remaining low. Missed targets, low fossil fuel prices and low carbon prices reduce the profitability of clean energy, or cause losses. How can these risks be hedged?
One traditional hedging mechanism is to issue index-linked bonds. Index-linked bonds are not uncommon. Indices such as inflation and commodity prices have been used by governments and by corporations to set the amount of interest on debt. An attractive option would be for project developers to issue bonds indexed to the three key risks – government performance against targets, fossil fuel prices against a break-even level, and carbon prices against a break-even level? Such an index-linked bond would reduce the cost of capital for a developer exactly in those situations where the profitability of clean energy is threatened by government action, or inaction.
Bonds indexed to emissions, fossil fuel prices or carbon prices would transfer the risk from the developer to the investor. But we know that investors are not keen to bear those risks, either, from their reluctance to fund many clean energy projects.
Investors cannot easily hedge those risks, but that is exactly where government can help – by issuing debt with the opposite risk profile. Index-linked government carbon bonds would provide greater returns if government falls short of achieving its targets, if fossil fuel prices remain low, or if carbon prices remain low. That kind of index-linked gilt could easily be issued, and it would provide a natural hedge against our project developers’ government risk. An investor would invest in a low-carbon project (either equity or debt), and simultaneously buy a proportion of index-linked government carbon bonds.
As an example, take an investor looking at investing in a 2010 wind farm that is competitive at £55/megawatt-hour. Say that the price of fossil fuel derived power is £50/megawatt-hour in 2010, with a government target of £75/megawatt hour in 2015. The index-linked gilt to provide a hedge would pay a margin over normal gilts (a type of bond issued by the Bank of England), with the margin a function of the fossil-fuel derived power price.
For example, for every £1 below £75, the interest rate could go up by 1%, with a suitable cap at say 20%. For every £1 that the fossil-fuel derived power price is above £75, the interest would reduce by 1% with a minimum of zero. An investor in such gilts would be able to offset the price risk of his or her investment in the wind farm.
Other structures are possible, too, linking the principal repayment to fossil fuel prices, or either interest rate or principal to actual emissions in, say, 2020.
The UK government claims it is serious about meeting its carbon emission targets, serious about moving to a low carbon economy. The UK government is likely to issue a large number of gilts over the next few years due to the credit crunch. By issuing carbon bonds linked to independent, auditable index metrics such as emission targets, the price of fossil fuel and the future carbon price, the UK government would remove private investors’ objections that their biggest uncertainty is government commitment. Likewise, given that failure to perform will cost, government would have a real incentive to meet its emission targets.
So come on, UK government. Put your money where your mouth is and make a real commitment, issue index-linked gilts and remove the biggest risk stymieing low-carbon project developers, you.
Option C: A proposal for long dated zero-coupon bonds
By Nick Silver
Pension funds invest now to pay future pensions, with a typical time frame of 20 years, but which could be up to 30-40 years. There currently exists no investment vehicle to match these liabilities, which are typically linked to future salary growth and/or inflation. Company pension schemes face large volatility of their funding often with destabilising effects on the parent company. Pension funds’ investment performance is also often criticised for its short-termism.
Pension funds are locked-in to the carbon economy – a large proportion of the stock market is made up of energy companies or companies whose business depends on the exploitation of fossil fuel energies (e.g. airlines, car manufacturers and even retail). This is at odds with the required movement to a low carbon economy over their investment time frame and therefore represents a serious risk to fund’s performance
Who will issue the bond?
The bonds have to be guaranteed by an entity which is likely to be creditworthy when the bond matures, otherwise the counterparty risk will be too great.
- National, State or even Municipal governments.
- Government-backed institutions, e.g. energy infrastructure authorities or government-owned banks.
- Regional organisations, such as the EU.
- Multi-lateral institutions (MLIs) such as the World Bank or EBRD.
How would the bond work?
The bond will pay nothing before maturity (zero-coupon). On maturity it will pay the initial nominal value increased by the greater of inflation plus GDP growth or the return on the underlying fund. Maturity dates will be 30 – 50 years.
Where will the money go?
A special purpose vehicle will be set up. This will be an investment fund, run on a commercial basis, the purpose of which will be to develop low carbon technologies and other mitigation measures (including, for example, forestry).
A variation could be a series of vehicles designed to have specialist sectoral expertise, such as in renewables, energy efficiency and agricultural development.
1. Attractive investment for pension funds
The fund pays out at least nominal GDP growth over a long time period, which makes it a very attractive investment for pension funds. There is also upside potential, which gives pension funds diversification exposure and reduces the concentration of risk they currently carry from being overexposed to companies which are large emitters of greenhouse gasses.
This could be especially important given possible declining levels of oil and gas production in the future. Government underwriting minimizes counter-party risk. The advantage over existing ‘green’ investment funds are the guarantee, possible lower administration costs and a longer-term investment horizon.
2. Attractive financing method for Governments
The long-term nature of these bonds links the challenges of climate change to the problems of low savings and the aging population, which could be an added lever for government buy-in. For example:
• As the assets are a good match for pension fund liabilities, volatility in funding will be reduced by comparison with conventional investments, reducing the risk of final salary schemes for parent companies, and reducing the risk of funds from parent company bankruptcies.
• Many countries, in particular the UK, have unfunded public sector defined benefit pension schemes. Possibly the only viable reform to make them fiscally sustainable would be to move towards partial funding. The carbon bonds would be an ideal investment, killing “two birds with one stone.”
• There is a move away from Pay-as-you-go (PAYGO) pension systems to individual personal accounts; i.e. in the past state pensions systems worked by pensioners being funded via the tax system by current workers. This system breaks down with an aging population – the pool of workers decrease relative to the number of pensioners rendering the system unsustainable. Governments are attempting to replace PAYGO systems with individual accounts – people are compelled (either by law or by default) to invest in personal accounts. One of the problems with personal accounts is a suitable investment vehicle, many people are wary of or do not understand conventional investments such as equity. The carbon bond would be a perfect investment vehicle – government guaranteed, “real”, etc.
3. Inter-generational equity
Due to the long dating of the bond, future generations are effectively funding climate-change mitigation, which is equitable as they are the beneficiaries. Governments will not therefore have to reduce current expenditure.
Other Climate Bond initiatives
This is not an authoritative list; there will be more, especially at national levels
RePowerUK Green Bond proposals to UK Government, April 2009
RePowerUK is a group lobbying for green infrastructure investment by the UK Government. Participants include the Renewable Energy Association, Greenpeace, Friends of the Earth, The European Climate Foundation, E3G, Climate Change Capital, Green Alliance, and NSFM.
An April 2009 submission to the UK Government about green infrastructure financing as part of the government’s economic stimulus package was prepared on behalf of the group by Ingrid Holmes of Climate Change Capital and Nick Mabey of E3G.
The paper proposed the creation of a Green Treasury Gilt, essentially a government bond hypothecated to green infrastructure investment. The idea of the proposal was to quickly raise funds to leverage private investment in low carbon infrastructure, delivering a green fiscal stimulus in the short term and growth opportunities in the longer term.
Because of the shorter-term stimulus rationale, the paper argued that the proposed Green bonds should be made very easy for investors to understand, i.e. in as conventional format as possible. Non-standardised structures would require significant up-front investments in time and money for investors to fully understand the risk profile of the new product; that would lead to delays and suboptimal prices and levels in investment.
The proposed bond would carry the following characteristics:
o Fixed maturity date - reflecting policy design requirements for capital and likely to be long-dated (15+ years);
o Two semi-annual payments on fixed dates 6 months apart with return of the ‘principal’ (capital) on the maturity date.
Entities with projects could then apply for funds to invest in low carbon projects. The debt could be securitised against the probability of a refinancing when credit market conditions improve and revenue streams accruing from policy mechanisms like an energy efficiency household levy.
A retail offering of fixed-income products was also suggested, perhaps as 5-year ‘notes’ (short-term gilts) with an attractive yield, perhaps 4% compared to <1%>
It was also proposed that the Government create a UK “Green Investment Bank” with the capacity to catalyse (rather than crowd-out) private sector investment through the use public finance to implement low carbon infrastructure investment, using a variety of public/private finance approaches. The new Bank would manage bond offerings.
“Environment” bonds from Climate Change Capital
Separate to the UK Government submissions, James Cameron of Climate Change Capital has been arguing in speeches and articles for the creation by governments of “environment bonds” similar to bonds created to fund efforts to fight World War II. He believes this would be a straightforward way to raise money to develop clean technology and build low-carbon economies.
The bonds would be designed to support the introduction of new technologies and infrastructure over long time horizons, unlike investments that demand quick shareholder returns. “Returns do come right away — it is a bond with fixed returns — but they will not make you rich quick,” he said.
Because the bonds would offer secure returns, they should appeal to citizens and investors disillusioned by the implosion of the banking sector and worried by the grim economic outlook, according to Mr. Cameron. Additionally, the bonds could tap a vein of renewed idealism among investors who are seeking to use financial system for good causes.
“I sense that there is now will for people to put their money to productive use,” Mr. Cameron said. “There is something powerful in the idea that, ‘My money built that and it works and I use it.’ Building things for a purpose that binds investor, worker, user – and society – is a noble cause.”
Developing country-issued bond with carbon credit repayments, from UNFCCC
Proposed by UNFCCC’s Yvo de Boer. Developing countries would issue bonds to capital markets. Investors receive returns in the form of carbon emissions when bonds mature (under whatever scheme emerges after 2012). Bonds are guaranteed by issuing governments. Developing governments have an incentive to develop national emission targets (for example, to 2020) to guide investors on the volume of carbon emissions expected. It would depend on a future carbon market and international agreement, which is not secure and could be regarded as high risk.
Similar to future-flow securitization which has been proposed in Sub-Saharan Africa. Borrower typically pledges future foreign-currency receivables such as oil, remittances, credit card receivables, etc (Ketkar and Ratha 2005).
This proposal hasn’t been priced as of yet.
Independent agent issued bonds with donor country repayments , from EU
Proposed by European Commission, for climate change related projects in the form of the EU Global Climate Financing Facility.
An independent finance facility would issue bonds to the international capital markets against legally binding pledges for future repayment of overseas development aid from donor (developed) countries.
It is envisaged payback guarantees would also include revenue generated through the carbon market, airlines taxes etc. This is described as front-loaded financing because capital is delivered up front and repaid over time.
The UK proposed the International Finance Facility in 2003 to meet the Millennium Development Goals by 2015. It would seek annual commitments of US$15-16billion such that it would issue bonds in its own name and seek repayments from donor countries to 2030.
The EU?s Global Climate Financing Facility could raise between EUR500 million and EUR1 billion annually.
This concept has been used in the recent International Finance Facility for Immunisation. IFFI has anticipated raising USD4 billion over the next 20 years.
Multilateral Climate Change Fund and a Venture Capital Fund
These were proposed by various member states at the second session of the AWG-LCA.
These funds would be administered as new subsidiary bodies under the Conference of Parties to the UNFCCC.
Amongst the specific priorities of these institutions, China and India have emphasised the importance of venture capital to target new and promising technologies which have not been taken to market.
Parties have also argued in favour of fast-tracking the development of certain renewable energy technologies (UNFCCC, 2007).
Brazilian Government-led trillion-dollar Climate Mitigation Investment Fund.
Marc Weiss of the Global Urban Development Network (and regular Tomorrow’s Company guest speaker) reports that a multi-country group has begun work on a “Global Climate Prosperity Agreement” proposal, a variation of the Multilateral Climate Change Fund. A planning meeting is planned for late July in Brazil. Awaiting further details.
The aim is for a group of national government leaders and private sector investment executives will announce this voluntary, market-oriented, public-private investment and development strategy in Copenhagen in December 2009 as part of the United
United Nations Framework Convention on Climate Change.
It will involve consortium of public and private pension funds and other private financing institutions committing to invest one trillion dollars in developing countries over the next decade to build a renewable energy infrastructure, including support for plug-in electric vehicles and a “smart” electric grid. Governments will be expected to provide additional funds, tax incentives, and regulatory policy support.
Innovation diffusion centres proposal, from UK Carbon Trust
The UK Carbon Trust advocates a new international institutional arrangement involving five centres coordinated under a single umbrella organisation. These centres would focus, among other things, on incubating and accelerating new technologies which are yet to be commercialised by testing their commercial and technical viability.
Emphasis would be placed on providing business development skills to new business start-ups in developing countries, and investing more funding in applied R&D. The expected funding required for these five centres is between USD 1 billion to USD 2.5 billion in total over the next five years. This model is based on the Carbon Trust‘s current operations within the UK.
A similar model for so-called ‘distributed innovation centres’ has been proposed by the Clean Energy Group, where the umbrella organisation would be an international institution like the World Bank or a UN agency.
The World Bank‘s proposed Clean Energy Financing Vehicle
The World Bank has proposed the need for a Clean Energy Financing Vehicle to fill the gap in financing of nearly USD 10-15 billion annually.
The Vehicle would envisage receiving funding from G8 and G+5 countries and would be an independent entity managed under an existing MDB.
Amongst the Vehicle‘s priorities would be finance and support for commercialisation of new technologies, and to mitigate technology risk faced by private sector financiers.
London, 30 April, Environmental Finance:
A third World Bank climate bond issue is in the wings from the Swedish bank that has placed the previous two issues. And European investors are planning to buy further bonds once the currently high costs of swapping dollars with euros have fallen, according to Christopher Flensborg, a coordinator in SEB’s capital markets team.
On Friday, Swedish bank SEB announced that California had bought $300 million of the three-year bonds, the proceeds of which will be hypothecated for projects in developing countries that tackle climate change. This follows a first placement in November last year, of $300 million of Swedish krona denominated bonds with Scandinavian institutional investors, also managed by SEB.
SEB will be back in the market with a third bond in four to six weeks, which will also be dollar denominated. It’s expected that this issue will go to 15-17 investors, and be of a similar size to the California placement.
Flensborg added that “a number of large European institutions” are interested in participating. However, because the World Bank issues its debt in dollars, the proceeds typically need to be swapped into euros for European investors – and current swap market conditions make this unattractive. He declined to comment on the yield paid by the California bond, as it was a private placement. The first bond paid 0.25% above Swedish government bonds.
These climate bonds are the first time that the World Bank has ringfenced part of the proceeds of its fundraising for a specific purpose. The programme was developed in response to investor demand, including – but not exclusively from – socially responsible investors, the bank said.
- OECD Discussion Paper: “What Role for Public Finance in International Climate Change Mitigation”, by Richard Doornbosch and Eric Knight. Prepared 2009 for the OECD Round Table on Sustainable Development. http://www.oecd.org/dataoecd/20/26/41564226.pdf
- “Global Development Bonds”, by Michael Eckhart and John E. Mullen, October 2004. International Working Group of the Energy Future Coalition. http://www.wbcsd.org/web/projects/sl/gdb.pdf
- “Forest-Backed Bonds Proof of Concept Study”, July 2007. Prepared by Forum for the Future and EnviroMarket for IFC and DfID.
- Proposal for Canadian Green Bonds, http://www.greenbonds.ca/index2.html
Developing requirements of effective Climate Bonds proposals?
What criteria should we use to assess whether different non-government financing proposals will address the necessary scale and speed of global re-industrialisation?
• Be able to leverage a wide variety of projects, from municipal to multi-national scale.
• Be able to operate over multiple-decades.
• Provide a high level of security for investors.
• Independent project compliance verification/auditing.
• Work with different timeframes for returns (short for energy efficiency (EE), long for renewables).
• Have international application.
• Support international liquidity for investors.
• Support investments in developing countries as well as developed.
Areas of further discussion?
1. Financial instruments — A range of options exist for financing instruments. The finance community could play a central role in developing clarity around preferred investment instruments that meet the combined needs of investor security and the scalability required.
2. Government enablement: reducing transaction costs and risk factors. — Virtually all large-scale projects will have a need for enabling support by governments, as distinct from direct support. In some of the proposals below governments would be called on to guarantee feed-in tariffs, or to fully or selectively provide guarantees for projects.
Richer nations might be called on to fund, as per existing World Bank schemes, part guarantees for riskier developing nation projects.
A range of other roles will be just as critical, from streamlining approvals processes and cutting red tape generally to removing distortionary policies (such as hidden fossil fuel subsidies) that work against new projects and strategically using public procurement (as the US Defence Department has for many years).
Finally, international institutions are likely to be called on to support systems for investor-credible verification and validation, especially for developing country projects.
3. Industry mobilisation, in particular project packaging and development — As ABP’s Rob Lake has commented, there’s a lack of packaging for appropriate scale and due diligence requirements.
To find out more about further discussions, contact NSFM Climate Change Working Group co-chair, Sean Kidney, email@example.com