James Ferguson illustration

Will the inter-governmental climate conference in Paris in December be a decisive turn in the world’s efforts to curb risks of catastrophic climate change?

At present this is highly unlikely but not inconceivable. It will certainly not be enough of itself. But a combination of new technological opportunities and new approaches to a deal opens up fresh opportunities. The conference might mark the end of the beginning, the point at which serious efforts to change our trajectory begin.

In his book Why Are We Waiting?, Nicholas Stern, author of the Stern Review on the economics of climate change, lays out the challenges and opportunities with clarity and passion.

He advances three propositions.

First, humanity’s overriding goals for the 21st century should be the elimination of mass poverty and risk of catastrophic climate change.

Second, these goals are complementary.

Third, the case for early action is overwhelming, both because greenhouse gases stay in the atmosphere for centuries and be­cause investments in energy, transport and urban infrastructure will lock in the carbon intensity of our economies.

These arguments rest on the view that climate risks are large and the costs of addressing them bearable. Doing nothing implies that risks are negligible. That position implies an absurd degree of certainty.

On the costs, we will never know if we do not try. But the evidence is ever greater that what Professor Stern calls an “energy industrial revolution” is within our grasp. If so, the long-run economic costs of addressing climate risk could be quite modest: maybe as little as the loss of one year’s growth of consumption by 2050.

Martin Wolf charts

Yet the path for emissions that is needed to deliver a 50 per cent chance of limiting the increase in temperature to 2C above pre-industrial levels is also radically different from that of the past.

Hitherto, global emissions of carbon dioxide per head have risen, not fallen — despite all the global conferences — as the rapid growth of emerging economies, notably China, has swamped feeble efforts to curb emissions elsewhere. On anything like our present path the necessary declines in emissions will not occur. Humanity will have made an irreversible gamble on the chance that sceptics are, in fact, right.

Fortunately, new technological opportunities are opening up. Potential exists for a revolution in energy generation and storage, in energy savings, in transport, and in carbon capture and storage.

Some call for the equivalent of the Apollo space programme of the 1960s, but for research and development in low-carbon energy. The opportunity is also in investment: choosing carbon-intensive technologies for energy, transport and urban infrastructure would lock in a perilous future. But to achieve the target, emissions per unit of output need to fall seven- or eightfold by 2050. The challenge is daunting.

This revolution will not happen without state support. It would be helped by eliminating subsidies for fossil fuels, estimated by the International Monetary Fund at $5.3tn for 2015 (6.5 per cent of global output), with the inclusion of spillover effects, such as air pollution. This is three orders of magnitude larger than state spending on research and development in renewable energy.

The decision has now been made to sidestep the obstacles to reaching a binding agreement that delivers a global price of carbon. This makes sense. Reaching agreement on the allocation of tradeable pollution rights across border is impossible. Agreeing on a common tax rate is almost as difficult.

Martin Wolf charts

Furthermore, if countries are asked to make binding commitments, they will limit their promises to what they know they can deliver. Instead, countries are being encouraged to put forward “nationally determined contributions”. While these fall far short of what is needed, they are moving in the right direction, particularly now that China and the US are actively engaged.

Moreover, analysts are optimistic that, with the right push from governments, a virtuous cycle of technological innovation combined with reduced local pollution and other benefits might make the rapid adoption of low-carbon technologies and ways of living beneficial to national economies, without taking account of the impact on the climate. If so, reliance on national plans would make yet more sense.

National plans are also more likely to overcome domestic vested interests if developed in parallel. But the need for rapid cross-border dissemination of innovation and for assistance to poorer countries in making investments in new energy and transport systems remains. Richer countries will have to contribute.

Martin Wolf charts

For those persuaded of the size and irreversible nature of the gamble humanity is taking with the climate, the news is both bad and good. The bad news is that the coming Paris conference will not deliver a credible path away from the potential disaster.

At best, it will slow the pace at which we approach such a point. The good news is that in the longer term the relatively pragmatic approach now being adopted, combined with the likelihood of accelerating technological change, makes movement on to a path away from disaster more likely.

Whether this will in practice be enough to turn around the supertanker of global energy-related emissions in time is uncertain. But it is possible. It will also need a great deal more effort and determination in the coming decade. That effort must at least begin with the best possible agreement in Paris.


Letters in response to this column:

Plenty of room to improve on and discuss subsidy estimates / From Vítor Gaspar

IMF’s dubious handling of fossil fuel subsidy figures / From Prof David Henderson

Rewards for taking a lower carbon approach / From Frederic Samama

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