Bill Gates is raising the stakes at this week’s global climate conference in Paris, with an expected announcement of a multi-billion dollar fund for clean energy research and development.
According to ClimateWire, Gates and other billionaires will make the pledge as part of an effort to secure a commitment from India to carbon-reduction goals. That is a precondition for a global deal at the pivotal talks inelegantly known as COP21 (it being the 21st session of the Conference of the Parties to the United Nations Framework Convention on Climate Change).
But such pledges are at best a down payment on the level of investment experts say is needed to avert catastrophic climate change. The International Energy Agency says meeting the COP21 pledges require $13.5 trillion of energy-saving and low carbon investments over the next fifteen years.
And even $1 trillion per year is just a start. Even if countries meet the carbon-reduction goals on the table in Paris, the world is unlikely to remain below the 2-degree Celsius rise in temperature that scientists say may trigger catastrophic climate change.
Global investment in clean energy last year totaled about $270 billion, almost evenly split between developed and developing countries. A report from the Organisation for Economic Co-operation and Development shows $62 billion of climate finance flowed to developing countries last year.
The hope is that, once mobilized, private investors will put multiple trillions against the immense investment opportunity that is the global conversion to a low-carbon economy. That could power countries to far exceed their current goals.
There’s some precedent for such optimism: many U.S. states that have set renewable energy portfolio standards for their utilities have exceeded the targets ahead of schedule. Indeed, renewable energy deployment worldwide has far exceeded the best-case scenarios of only several years ago (see chart).
In a note to investors last week, the British bank Barclays advised clients to prepare for as much as $45 trillion of spending on decarbonization as part of a radical transformation of the energy sector. Mark Lewis, the author of the Barclays report said the falling cost of renewables has made possible progress that seemed impossible at the last global climate summit, in Copenhagen in 2009. He said the next big breakthrough will be in energy storage, removing the biggest obstacle to the ramp-up of renewables, the intermittent nature of sunlight and wind.
On the other side, regulatory action in the wake of a Paris agreement may make fossil fuels increasingly uneconomic. A carbon tax or an emissions trading scheme could push the cost of carbon to $140 a ton by 2040, Barclay’s said, while phasing out subsidies could cost fossil fuel companies $550 billion a year. Several new investment reports warn that the threat that oil reserves may become “stranded assets” could start a stampede out of fossil-fuel stocks, and into renewables.
Business leaders are signaling that climate action is pro-business and that they are pro-deal at this week’s conference. Chief executives of 78 companies, convened by the World Economic Forum, explicitly called for the Paris talks to set a price on carbon, “which will trigger low-carbon investment and transform current emission patterns at a significant scale.” More than 1600 companies in the U.S. have signed a Climate Declaration, circulated by Ceres, calling action on climate change one of the greatest economic opportunities of the 21st century. We Mean Business, a coalition working with businesses on climate change, is providing a nudge by giving suggested text to the drafters of the Paris agreement.
“Business is showing up at COP21,” said Edward Cameron, Managing Director of Partnership Development and Research for Business for Social Responsibility, an organization that gathers business leaders together to work on issues of sustainability. “Business is committed to action, and they want governments to know that the private sector can be an implementation partner.”
The White House has announced commitments from 81 American companies for the American Business Act on Climate Pledge, representing nine million jobs and more than $3 trillion in annual revenue. The pledges include reducing emissions by as much as 50 percent, reducing water usage by 80 percent, achieving zero waste-to-landfill, purchasing 100 percent renewable energy, and pursuing zero net deforestation in supply chains.
The business risks of inaction are increasingly well-known. The Risky Business study last year calculated billions of dollars in additional damage to U.S. coastal regions and reduced yields of up to from higher sea levels and storm surges. It also forecasts reduced crop yields of up to 70 percent in the Midwest and Southeast due to increased drought and flooding. And the U.S. is getting off easy. A recent study by Stanford University and the University of California, Berkeley, says that the worst effects of climate change will be seen in Africa, Asia, South America and the Middle East, and that overall, warming temperatures could reduce average global incomes roughly 23 percent by 2100 compared with a world without climate change.
“As a global food company, we recognize the significant impacts climate change can have on our business if left unaddressed, so we are compelled to act,” said Jerry Lynch, chief sustainability officer at General Mills. “No one company, industry or government will mitigate climate change alone; it is a shared, global challenge that is best addressed at scale. Ultimately, we’re hopeful that COP21 will spur greater collaboration across sectors, businesses and governments.”
The CEOs of General Mills and nine other global food companies, including Unilever, Kellogg and Nestlé USA, released a joint letter pledging sustainable supply chains, transparency in reporting and advocacy for enforceable targets for carbon emissions. “We are asking you (governments) to embrace the opportunity presented to you in Paris, and to come back with a sound agreement,” the letter concludes.
ImpactAlpha writers Anna Shen and Dennis Price contributed to this report.