Financial crisis threatens climate-change momentum
Experts fear the credit crunch will discourage governments worldwide from turning to taxpayers for assistance in climate-change efforts.
As financial mayhem and recession increasingly demand the attention and resources of governments around the world, environmentalists are starting to fret: What about climate change?
Their concern is not just that the trillions devoted to rescuing the global financial system mean less cash for the climate-change agenda; they are worried a prolonged recession will deflect consumers from green habits and drain corporate and government coffers of funding for research and development into green technology.
Yvo de Boer, who heads the UN climate change secretariat, warned last week that it was “undeniable that the financial crisis will have an impact on the climate-change negotiations,” which are due to resume in Poznan, Poland, next month.
He noted that of the 190 nations seeking to conclude a new UN treaty in Copenhagen next year, few would find it easy to turn to taxpayers for funding.
“If we go to citizens under the current circumstances ... and say ‘I’m increasing your tax burden ... to pay for climate policy,’ that might not go down very well,” Mr. de Boer said at a recent conference in China.
Tom Burke, founding director of the sustainable-development group E3G, adds that the financial crisis has generated a “politics of distraction.” “People are focused on other things and [climate change] has slipped down the attention span of politicians and the media,” he says.
Professor Burke believes some businesses and governments have opportunistically used the crisis to wriggle off the climate-change hook. He notes how governments in Eastern Europe have begun to challenge EU emission-reduction targets, fearing this will hit industry at the worst time.
“It makes the prospect for getting agreement to a second phrase of the Kyoto protocol in Copenhagen next year a steeper hill to climb,” he says.
Yet optimists maintain that the situation presents an opportunity, arguing that if the world can take rapid, expensive action to save its banks, it can do the same to save its climate.
“One thing we have realized is that the authorities can take action if they want,” says Stefan Singer, head of the European Climate and Energy Unit at WWF. “We’ve been saying it will take a couple of hundred billion dollars to deal with this in the short term.
“We knew it was a massive amount of money, but in the financial crisis we have seen it is possible to mobilize lots of money as soon as governments and heads of state take things seriously,” he adds.
When heads of state meet in Washington this weekend to discuss how to resuscitate international financial architecture in the wake of the economic crisis, climate change will figure fleetingly, if at all.
Meanwhile, at government level, responses to the crisis have largely involved measures like cutting interest rates and fiscal-stimulus packages designed to get the “old economy” moving again.
Environmentalists are concerned that a big opportunity is going begging, that financial reforms should take into account the wider risk of climate change to the world. As one UN official put it, all the talk has been about Wall Street and Main Street, but what about places with no streets?
A slowing in economic activity might look like an environmental blessing. Slowing demand generally means lower energy usage. Car sales and gasoline demand have been falling sharply. Projections for flights out of Europe’s busiest airport, Heathrow, show a 2 percent decline – equivalent to around 10,000 fewer flights a year.
But the green lobby warns this is just a momentary blip. A few quarters of slowdown may bear down temporarily on the growth in greenhouse gas emissions, but will not shift the world onto a low-carbon path. Scientists are calling for an 80 percent cut in carbon emissions by 2050.
“It will only take us back toward the trend line,” says Burke. “Anyone who thinks this will rescue us or buy more time has misunderstood where we are.”
Green technology has benefited enormously from the sky-high cost of crude in recent years, which has made renewable energy like wind, wave, solar, tidal, and biomass power generation cheaper by comparison. The collapse in crude prices to $60 a barrel represents a threat to the renewables industry, and already there are signs of go-slow in the sector.
Last week, the Danish group Vestas, the world’s biggest wind-turbine maker, indicated it would be slowing operations “until we see how the financial problems affect the wider picture.” A leading British scientist, speaking off the record at an informal recent event, says R&D for green technology will take a hit. British energy giants BP and Shell have signaled a pullback from renewable projects in Britain.
Such projects are highly capital intensive, and raising cash now is challenging. “All big investment projects are increasingly uncertain in this environment,” says Julian Lee, a senior energy analyst at the Centre for Global Energy Studies. “People are holding off from investment decisions in oil and gas projects, and I’m sure the same reasoning will apply to big renewable projects like wind farms.”
Some optimists argue that the renewable-energy sector could help power the world out of recession. President-elect Barack Obama has spoken of creating millions of “green-collar” jobs through a massive investment in renewable projects. “If you look at renewable technology, it’s very employment intensive,” says Andrew Simms, at the new economics foundation, a London-based think tank. “The game of
massive environmental transformation of economies is the way we can tackle recession.”
One silver lining of the financial crisis is that investment decisions may not be as short-term as they have been. A UN climate-change official, speaking on condition of anonymity, argues that this will mean the investment community will have to factor in the climate-change risk. “As soon as you start lengthening the period of risk that you take into consideration and you take in account what will happen in 10 to 15 years, then climate change is on the table,” says the UN official. “People who really do control large amounts of assets and money are starting to think like this.”
Dr. Singer agrees. At a recent meeting of bankers he attended, representatives of financial institutions were actually considering clean technology investments as an attractive, long-term, less risky proposition. After all, he says, few people expect oil prices to stay low for a long time. And against that backdrop, green investment starts to look like a good hedge against future energy shocks.