Cutting carbon emissions comes at a cost. Who will be footing the bill?
Some think it won’t produce much more than hot air, but Cop21 has already achieved tangible results. As part of measures to clear traffic for the 150+ heads of state traveling through Paris this week, large swathes of the Périphérique – the French capital’s ring road – were closed last Monday. Those stuck in the horror traffic jams blocking the boulevard on a daily basis can tell you what it did to carbon emissions. Were it not for the stream of private jets flying into the city, Paris’ contribution to climate change would have been at its lowest for several years.
It’s not being overly ambitious to say that the event could achieve more. Its Copenhagen predecessor, which took place as governments were firefighting the Financial Crisis, ended in stalemate and frustration. But a ton more evidence has since been gathered to show that climate change is real, man-made and dangerous. And as populations in developing countries increasingly realise the consequences of unsustainable growth, politicians have stronger mandates to enforce green policies. They even have a target: their aim is to limit global temperature rises by two degrees, a ceiling above which scientists reckon the planet will become a pretty inhospitable place.
So far, however, leaders have failed to table commitments that would allow them to reach this target. In fact, as Bill Gates underlined this week, nations haven’t even committed to anything that would prevent the planet from warming up by 4 degrees.
Agreeing that something needs to be done has never been the hard bit. Far trickier is deciding who should do it. In simple terms, the debate goes like this. It’s not fair, developing nations say, to ask poorer nations to stop using the coal, oil and other noxious fuels rich countries relied on to become prosperous. Fair enough, reply the latter. But unless emerging powers make an effort, they add, we just won’t manage to cool down the planet.
Rich countries have a point: even pushed to the max, their efforts alone simply aren't enough to compensate for growing emissions across billion-strong nations like India and China. Renewables and energy efficiency in the West are “not really cracking the problem”, said an expert at a conference I attended on Tuesday. Coal, the enemy number one, currently supplies 41 percent of the world’s electricity - the highest share it’s been in four decades.
So poor countries are proposing a solution: that richer ones give them about $100 billion a year by 2020 – from public and private sources – in so-called "climate finance". Most people finds this sensible. The rough terms of this plan have actually been agreed in 2010, and the OECD says at least $62 billion of such finance was provided in 2014.
But India and others are asking for this commitment to be extended beyond 2020. Wealthier nations are not keen, saying that today's governments can't be responsible for drafting something into budgets so far ahead of time. They would prefer to review progress on a five-yearly basis - something developing nations won't agree to unless there have guarantees that support will be provided over the long term.
So this is all quite chicken-and-egg, which doesn't make compromise easy to reach. And it also leaves two fundamental questions aside: how this money would be raised, and on what it would be spent.
This matters a lot, because handling both sides of the process well will determine its success. The fundraising side of the equation, for instance, can serve as a policy tool in itself. A few daring members of the rich club have started raising carbon taxes, with generally good effects. Others have tried to achieve the same thing by issuing tradable emission-permits. These latter programmes have largely failed, mostly because too many permits have been issued every time. By adding a floor price - or better, switching to carbon tax - such countries could both collect more money and implement better incentives.
More transformational still would be a carbon-trading scheme on the global scale, with tradable allowances issued according to a per-capita formula. That would be a more equitable system than what is currently being proposed, as it would press down far more heavily on developed countries than poorer ones. It would also provide a framework for wealth transfer between North and South whilst incentivising the latter club towards minimising emissions.
"Climate finance", finally, should be given a more explicit aim. It would be a mistake if a vast majority of the capital went into subsidies supporting the use of non-economical energy sources. It should instead help foster the innovation needed to make low-carbon power competitive with fossil fuels, either by lowering the cost of existing technologies of designing new ones.
This innovation is already being imposed on renewable operators in the West, where cuts to onshore wind and solar tariffs are prompting developers to come up with more cost-efficient plants or plug money into research. Auction-based mechanisms for awarding renewable contracts are pursuing similar results. Some of the savings realised through such policies - and given that the EU alone spends about €50 billion a year on direct subsidies, these savings to be vast - could be transferred to developing economies as part of the broader bargain. Same goes for the new technology being developed as a result.
It's unlikely that COP21 will come up with all of this. But getting the emphasis away from one-off targets, while promoting the idea that decarbonisation and economic development aren't necessarily opposite goals, would be a good start. Maybe then will developed and developing economies stop seeing climate talks as a zero-sum game.