Climate deal a US$16.5tn investment

CHANGE: Climate targets set this week in Paris could see financial impacts on industries such as transport and construction, as governments might push clean energy incentives

Bloomberg





The deal struck at UN climate talks requires an overhaul of historic proportions for energy policies worldwide and a huge investment in cleaning up the pollution now damaging the Earth’s atmosphere.

Targets outlined in Saturday’s agreement, involving 195 countries, would require US$16.5 trillion of spending on renewables and efficiency through 2030, the International Energy Agency (IEA) said.

To accomplish that, governments would have to offer incentives for clean energy production, scale back support for fossil fuels like oil, make emissions more costly and reduce deforestation.

Audience members and delegates applaud after the adoption of a historic global warming pact at the COP21 Climate Conference in Le Bourget, Paris, on Saturday. Photo: AFP

The changes could touch industries from transport to construction and encourage people to change their behavior.

“The strength of the agreement is that it allows a thousand policy flowers to bloom,” Paul Bledsoe, a climate aide during former US president Bill Clinton’s administration, said in an interview in Paris, where the deal was sealed.

“This sends a powerful economic signal that fossil fuels will be saddled with financial and legal premiums to remain part of the energy mix, and clean energy will enjoy subsidies,” he said.

The deal aims to limit the global temperature increase since the Industrial Revolution of the 18th and 19th centuries to 2oC, while calling on nations to “pursue efforts to limit the temperature increase to 1.5o Celsius.”

That more ambitious goal implies vast cuts to emissions from burning fossil fuels.

“Politically as well as technologically, this is no walk in the park,” said Ottmar Edenhofer, chief economist at the Potsdam Institute for Climate Impact Research Institute near Berlin, and a lead author of the UN’s most rigorous assessment of climate economics.

The target might trigger “a fundamental shift of investments towards renewables, energy efficiency, and carbon capture and storage,” he said.

Policies such as carbon pricing through markets or taxes and planting trees, while burning biomass rather than fossil fuels, would also be needed, and in a 1.5-degree scenario, they would need to be stepped up, Edenhofer said.

The IEA figures reflect the costs of nations reaching the voluntary commitments they made under the Paris program plus an estimate of what it would take to bring temperatures down to the 2-degree target.

“The 2 degree target as it stands now is very challenging to meet,” IEA director general Fatih Birol said in Paris on Wednesday.

“We need to accelerate our efforts even further to reach 1.5 degrees,” Birol said.

The new system is likely to place more rigorous requirements on the largest developing nations, such as China and India, to monitor and report their emissions and the progress made toward their targets. That is important because developing nations account for more than half of global emissions and the agreement can not succeed without them reducing their greenhouse gases.

“If people don’t know if others are delivering on their promises, it undermines trust in the whole framework and makes them reluctant to increase their cuts in the future,” said Nick Mabey, chief executive officer of the UK policy analyst E3G, who as a climate adviser to former UK Prime Minister Tony Blair.

The new deal does not take effect until 2020. Over the next five years, governments will have to complete the rules for the various mechanisms set up in the agreement on transparency and technology transfer. It will not come into force until at least 55 parties, accounting for 55 percent of global emissions, have ratified it.

Under the deal, every five years, starting in 2018, there would be a global assessment of whether combined efforts are sufficient. And from 2020, nations must update old pledges or prepare new ones, also every five years.