Big political summits are often ceremonies of showmanship, where public relations is more important than content. So any euphoria about the upcoming U.N. global climate change conference in Paris would be ill-advised.
U.S. Secretary of State John Kerry has already warned over-optimistic observers not to expect a binding agreement. That’s not what the United States wants. It never even ratified the 1997 Kyoto Protocol, which expired in 2012, and since then there has only been a certain vacuum regarding climate policy.
A look behind the scenes before the big show in Paris reveals it really won’t be that much about politics. Vilified companies, and even more vilified financial investors, have apparently made more progress than national governments as they bargain about allowable toxic emissions. Today the global trend is toward “green money” — or investing in ecologically advantageous technology. Industries that damage the environment are out of the game.
Today the global trend is toward “green money” — or investing in ecologically advantageous technology. Industries that damage the environment are out of the game.
After years of ignoring how they affect the world around them, some businesses are suddenly becoming part of the solution. They are beginning to understand the cost of uninhibited growth in terms of water pollution, smog hanging over cities and climate warming. One day, it could all come back to haunt the balance sheets of those that caused it. Even in the United States, the fact that Miami Beach regularly floods is starting to make stubborn climate change skeptics think again.
Capital is both smarter and quicker than political administrations. For example, the Norwegian state fund – one of the wealthiest investors in the world – has decided to stop putting its money in coal and oil. The fund has a total of nearly $750 billion (€700 billion) at its disposal.
It is just one more sign that fossil fuels are out of fashion with those who have major money to invest. Others that have stopped investing in the sector include the French insurance giant AXA, the Rockefellers and the Church of England.
In Germany, investment giant Munich Re is still considering if it should add its name to the list of those opting out. The Munich-based reinsurance company conducts intensive research into climate risks, because it has to pay clients for damage caused by extreme weather conditions.
So it is exactly the opposite of best-selling author Naomi Klein’s capitalism vs. climate protection thesis. For her, the economic system is to blame for all ecological problems and should therefore be abolished.
But such a radical view fails to recognize the learning aptitude of businesses in a market economy. When a riverside factory harms fishermen downstream, and has to pay compensation, it is a classic case of economic science, according to economist Arthur Cecil Pigou.
Nobody knows exactly what is in store for the carbon transgressors. In the future, will they have to purchase pollution rights worldwide, like they can buy in Europe today?
Or will there be a climate protection levy, as favored until recently by Germany’s economics minister, Sigmar Gabriel of the center-left Social Democrats? Mr. Gabriel proposed such a tax, but then had to withdraw it under pressure from the coal industry.
Even oil giants are unhappy with the status quo these days. “We call on governments to introduce price systems for carbon emissions,” said officials from Total, Shell, BP and three other European oil and gas companies in a letter to the United Nations a few weeks ago.
There is a general adjustment to the realities of a low-carbon economy, a farewell to coal — announced at the G7 summit in Germany last summer as a realistic prospect by the end of the century.
Energy companies hope for financial support for clean gas-powered plants. But, in fact, energy generated by wind, sun and water has become increasingly affordable. These energy forms are the winners of modern times. That’s what makes them attractive as an investment, independent of what world leaders might decide at the Paris climate conference.
The market is a source of hope. Prices for solar panels have fallen more than 70 percent since 2009. Mass production made it possible, and the industry is now, for all intents and purposes, a purely Chinese affair.
China, which is responsible for half of the world’s entire coal combustion, has announced it wants to reduce carbon emissions beginning in 2030. Like the United States, the “market communists” are focusing on more technical progress in renewable energy, especially with wind parks.
Meantime, even oil nation number one, Saudi Arabia, is pushing ahead with solar electricity.
Economic flywheels like these are driving the fight against global warming. Only they can turn the promises of state and government leaders into reality. Back at the 1992 climate summit in Rio de Janeiro, 130 world leaders promised to take decisive steps against global warming. But since then, climate meetings have come and gone — while the average global temperature continues to rise.
If nothing changes, an increase of 5 degrees Celsius is possible within a century. Globalization is about the free flow of products, labor and capital, but it also means shared concern about melting glaciers and polar ice caps, cyclones and tsunamis, extreme droughts and floods.
The consequences of such extreme weather risks also include new refugee flows, as whole regions become uninhabitable.
The current diagnosis is harsh: 2015 will go down in climate history as the warmest year since records began. The chances of a change in tack are poor, according to the International Energy Agency. A few years ago, the climate economist Nicolas Stern warned that one-fifth of the world’s GDP — or a few trillion dollars — could be wiped out annually.
In all probability, the only way to bring about real change is with “green money” from private sources. Affluent northern countries, for instance, only want to pay a small part of the promised $100 billion to the U.N. Green Climate Fund for poor southern-hemisphere countries. So far, industrial nations have committed only $10 billion, and even that is uncertain.
Here too, private investors will have to step up to the plate. Politics is a short-term business, dictated by the next elections. Capital has to think longer term.
That’s why companies are increasing the pressure. More than a dozen U.S. businesses recently promised U.S. president Barack Obama that they would take whatever steps they could to reduce greenhouse gas emissions by 50 percent.
Apple, General Motors, Coca-Cola, Microsoft, Goldman Sachs and big investor Warren Buffett, with his Berkshire Hathaway Energy Fund, are some of the big players trying to make Mr. Obama’s green power policy a success. They plan to invest a total of €140 billion in a clean environment.
Yes, their public relations departments are also involved in this story. Anyone trying to save the world will be well thought of by consumers. But at the end of the day, the only thing that counts is the bottom line – measured in money or degrees.
In Paris, a new climate agreement will almost certainly be signed. There have been assurances from more than 60 countries, and experts estimate that global temperatures will rise only three degrees because of it.
But can you call that success? Surely not. These are not the “courageous actions” called for by entrepreneurs and managers at the Paris business and climate summit in May. Green capitalism wants more action.
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