Wednesday 28 January 2009

Pathway To Low-Carbon Economy - new McKinsey Report, Jan 2009

Just out. A very useful report to quote; it backs up arguments about
returns for different forms of "investment" in mitigation.


Escaping climate disaster 'affordable', says report

It is possible to maintain global warming below 2°C at an overall cost
of less than 1% of global GDP if swift action is taken across different
sectors, a study published yesterday (26 January) by consulting firm
McKinsey shows.

See full report at

There is strong political consensus that a switch to a low-carbon
economy is required both to combat climate change and for industries to
remain competitive. But the economic slowdown has prompted fresh fears
that the austere financial situation could slow down development of the
new technologies.

In October 2006, Nicholas Stern published an influential report arguing
that keeping global warming under control would cost much less than
dealing with the consequences of climate change.

McKinsey's new report provides analysis of more than 200 opportunities
for reducing emissions across 10 sectors and 21 regions.

It stresses that immediate, cross-sector action is a prerequisite for
achieving the necessary reductions, because every year of delay will
both increase emissions and lock the economy into a high-carbon path for
the future.

The report puts together a global cost curve for greenhouse gas
abatement, comparing the options for moving to a low-carbon economy at a
cost below €60 per tonne of carbon emissions. It identifies three main
sectors where emissions can be reduced most cost-effectively.

The biggest reductions, 14 gigatonnes (Gt) or some 40% of global
potential, can be achieved by designing vehicles, electrical appliances
and buildings that consume less energy, according to McKinsey.

Compared to the Stern report, which estimated the cost of inaction to be
between five and 20% of global GDP, McKinsey believe investing in the
shift to a low-carbon economy is significantly cheaper, and potentially
as low as 0.5%.

The study underlines the urgency of action in all countries and all
sectors, while participants argued that reaching a global agreement this
year is imperative.

Wednesday 21 January 2009

Marrying governments and private capital to address climate change

The global financial crisis has highlighted the risk of systemic faults
in the management of long-term investments. The failure to address those
risks is harming the sustainability of financial markets, causing
financial hardship for millions of people around the world.

Last month's UN Climate Change Conference in Poznan has highlighted the
systemic risk we face with climate change.

Without taking adequate steps to address that risk, we face the prospect
of another dire economic contraction as its effects take hold. The Stern
Report estimated the current trajectory of greenhouse gas emissions
would lead to a reduction in global consumption per head of 20%. That
would have a devastating impact on the global economy, causing a massive
reduction in returns for long-term investors and pension funds.

Unfortunately, global emissions are currently rising at 3.1% per annum,
a significant increase on the decade leading up to Kyoto ratification.
At the same time, the Chair of the International Panel on Climate Change
has said that 2015 is the last year in which "the world can afford a net
rise in greenhouse gas emissions, after which 'very sharp reductions'
are required".

A range of scientific testimony at Poznan said that the world can still
avoid "catastrophic" climate change — if it acts quickly to cut
emissions and switch to low-carbon energy.

Decisions made at Poznan to secure a firmer carbon price are important;
but implementation is going to take time. Both Poznan participants and
the parallel EU discussions on climate change acknowledged the need for
immediate major energy infrastructure investments to switch economies to
low-carbon energy. Many countries, already carrying large debt burdens
as a result of the financial crisis, will need the support of private
capital - pension funds, sovereign wealth funds, insurance company
investments, and he like - to achieve the scale of the switch required.

Those same managers of capital need and want governments to take those
quick steps, primarily to protect the value of their investments but
also to ensure that the world into which their members and shareholders
will retire is one worth living in.

The European Commission's recent floating of a European renewables
supergrid project is an example of a project that will require
significant multi-government effort to facilitate the required investment.

The investor community, representing some US$121 trillion, now needs to
be engaged to work quickly with G20 governments to take the steps
required to ward off dangerous climate change and ensure the
sustainability of our world.

Only if we take a truly international approach to marrying the needs of
capital and society, will we develop the international solutions called
for to meet the challenge of climate change with the speed required.

Monday 19 January 2009

UK Defence forces thinking missing the idea of civil society management

I've just been to a very interesting talk by the UK Army's Chief of the
General Staff, General Sir Richard Dannatt, on how the Army has had to
adapt in recent years in the face of its role in Iraq and Afghanistan.

Lots of talk of the need to be better at "stabilisation" operations, to
work closely with local populations to build their capacity (he's proud
of what he believes the British Army achieved in Basra), and to ensure
that soldiers have "sustainable" deployments.

The issues not dealt with were about the overlap between managing civil
society in the wake of a war, including civil policing. This is, of
course, the great tragedy of the US deployment in Iraq; they stuffed it
up big time. Can you in fact have a "war" without having substantial
civil capability to support the rebuilding of the society attacked. The
question not explored today was what that capability has to look like in
the future.

Mind you, Dannatt was pretty upbeat about the UK experience in Iraq. His
argument is that it's taken them 6 years to be able to build up local
capability in their territory of work, versus some 38 years in Northern
Ireland, and similarly long stints in other spheres. Whether that rosy
view of southern Iraq is correct or not seems to be debatable,
especially as the US feels the need to move in an (admittedly smaller)
Army Brigade once the Brits move out.

The Israelis would seem to be repeating this tragedy in Gaza, using
"disproportionate" force as a "deterrent" when it's the management of
the society that's the issue in terms of security - gainful employment,
welfare and health services, rule of law, etc. All of which have been
actively subverted for many years by the nature of the Israeli hot/cold
pressure on trade and the movement of labour in and out of Gaza.

Civil management of damaged society (post-conflict Iraq, civil-war torn
Afghanistan, Somalia, Congo, Gaza) is the issue of the day; we need to
have more "joined up thinking", to use a Blairism, between the likes of
policing, development and employment policies.

Thursday 1 January 2009

Climate News morsels

"Climate change is happening more rapidly than anyone though possible", the German government's expert, Hans Joachim Schellnhuber, warned in an interview.,,3907790,00.html

U.S. Geological Survey Report Forecasts Sea Level Rise to 4 feet by 2100
The new report uses studies not available to the UN's IPCC 2007 report.

The most interesting scientific paper of the holiday season:

The world needs a significant investment now to kick-start climate change mitigation, according to a new study from European researchers.

In a paper published in the Proceedings of the National Academy of Sciences called "Near-linear cost increase to reduce climate-change risk", European researchers found a carbon dioxide “sweet spot”, where limiting the density of carbon in the atmosphere by a relatively small amount gave us a significantly higher probability of meeting climate change targets.

However, subsequent investments will have a more pronounced effect. And if we invest 2 per cent of global GDP in averting climate change, we have a 90 per cent chance of keeping global temperatures at 2 per cent above 19th century levels.

Jim Hansen argues Japan is misusing CDM to increase coal use

"Hansen argues that the current emphasis on reduction targets combined with carbon trading schemes make it too easy for countries to wriggle out of their commitments. He cites the example of Japan's increasing coal use – the dirtiest fuel in terms of carbon emissions. To offset these increases in emissions Japan has bought credits from China through the clean development mechanism – an instrument set up by the Kyoto protocol – yet China's emissions have continued to increase rapidly. China has now overtaken the US as the biggest polluter in the world."

I wonder how aware the main japanese pension funds are about the long-term risks to their returns of climate change?