COP26: From “Blah Blah” to an “Aha!” Moment?

COP26 Net Zero

The UN Climate Change Conference, also known as COP26, which will soon commence in Glasgow, Scotland is the 26th UN Climate Change Conference. The time is getting closer to discuss the most important issue that the entire mankind on this planet is facing – “the existential risk issue”! 

According to the UN Climate Change report issued this August, the world is already certain to face further climate disruption for decades, if not centuries, to come. Our future is in jeopardy. Generation Z and Generation Alpha are very worried and demanding justice. 

The “Blah Blah Blah” Moment of Greta Thunberg

At the preparatory Youth4Climate event in Milan, Italy September 2021, Greta Thunberg (the Climate Activist of Fridays for Future) said: “They invite cherry-picked young people to meetings like this to pretend that they listen to us. But they clearly don’t listen to us. Our emissions are still rising. Science doesn’t lie.”

Throughout her speech she mocked the decision-makers absence of real actions, repeating the words: “Blah Blah Blah”. 

Generation Z represents people that are now 9-24 years old and accounts for 32% of the worldwide population. Generation Alpha is the generation born after 2010 that has a population of around 2.5 million worldwide. The problem here is that these two generations will be most impacted by climate change but are not heard because they are far from the power that is charged with delivering immediate action.

Young people can smell greenwashing 

Young people are not fools. They are objective, not subjective and they care more about facts and science than slogans.  They can smell greenwashing a mile away! 

So, let’s lay down some science and facts here. This is the reality:

  1. Fossil fuels still supply 84% of world energy
  2. Just 100 companies are responsible for 71% of global emissions 
  3. The world is set to exhaust its carbon budget in just 10 years

This bleak future is what we are currently offering to our future generations. The international scientific consensus is that, in order to prevent the worst climate damages, global net human-caused emissions of carbon dioxide (CO2) need to fall about 45% from 2010 levels by 2030.  Reaching net zero around 2050 goes into a black hole when this reality strikes

Is Net-Zero even possible?

On the face of it, there is progress. The UK and France are two examples of (a few) countries that have set legally binding targets on achieving net-zero greenhouse gas emissions (NZE). About one-fifth of the world’s 2000 largest public companies, representing sales of nearly $14 trillion, now have net-zero commitments. 

However, the reality is not so great. According to a report by the Race to Zero Campaign, the net-zero commitments vary hugely in their quality and only 20% of commitments meet the minimum set of robustness criteria, or ‘starting line’, as set out by the UN. 

The “Blah Blah” talk from Greta wasn’t the only moment from the youth COP that epitomized the lack of communication between the most powerful generations and the activists. The gap between what is real and what is promised is the real miscommunication here. 

From this communication gap, it is very clear that we need solutions for the looming climate crisis, but the  real issues here are:  

  • Activists without power 
  • Powerful decision-makers who are not active enough
  • How to prioritize the most urgent and achievable

Before we go any further, let’s state the problem correctly. 

The glass is 80% empty 

In a public conference, the International Energy Agency (IEA) presented their latest research on world energy. We can spot immediately a stark trend. Not even the pledges so far announced by 50 countries get us close to the Net Zero Emission target that we need (see the APS line below).

Net Zero 2050

Worse, the Stated Policies Scenario (STEPS) is where we are now, pre-any further announcements. Sadly, we still have no real plan of action from global stakeholders (including regulators) about how we will close any of these gaps to get us to NZE.

As Laura Cozzi, Chief Energy Modeller at the IEA stated during her presentation, “the Glasgow pledges for 2030 are covering only 20% of emission reductions gap to Net-Zero … we are actually going into the Glasgow negotiation (COP26) not with the glass-half-empty. It is actually 80% empty.”

This is why it is all Blah Blah Blah. 

Why COP26 might not be the right place

COP26 is a place where all Governments from countries of any size can talk about the Climate Crisis and its consequences. But the real polluters now are a much smaller group. The top 20 global economies (the G20) are in fact are responsible for 75% of the global CO2 emissions. (https://www.bbc.com/news/science-environment-58897805).

At a recent speech to Italian MPs, the recent Nobel Prize winner, Giorgio Parisi (awarded for his studies on complex systems) “observed again the warning that if the temperature of our planet increases by more than 2° then we enter a terra incognita in which there may also be other phenomena that we have not foreseen that can greatly worsen the situation.”

Here we are not talking about any regulatory, investment, business, or economic risk. This is pure existential risk. An existential risk is one that threatens the entire future of humanity.

More specifically, existential risks are those that threaten the extinction of Earth-originating intelligent life or drastic destruction of its potential for desirable future development.

Not sure if COP26 is the right place with the right representation to address this existential risk. Not sure if Climate Submit needs 25,000 people and more discussions and questions on the table. We can’t save the planet by consuming more and more energy and fuel to bring these 25,000 people together. Pandemic has taught us to solve a lot of issues efficiently and virtually. Where are the lessons from the pandemic?

Additionally, the climate change problem needs grass-root involvement from all the representations from OECD to the developing world, from millennials to generation alpha, from all sectors. Do we have all the voices in the mix? 

Climate Change: What can we do?

The macro policies required are actually well known at this point in time. These include investments in energy efficiency,  electrification, renewables, and new long-term green technologies (for example green steel and cement, carbon capture, green hydrogen). 

However, to push these policies forward into reality, we need to re-define the “7 Principles of Economics” (see below) and factor climate change into each of them.  COP26 is a great opportunity to do this. Doing so will help to build a robust global solution that will mitigate the global risk.  

Here are some drafts to help get the discussion going from “Blah Blah” to an “Aha” moment

 

  • Economic Principle 1: Scarcity Forces Trade-Off

Climate is the most scarce resource we possess at this time. You just need to check facts on carbon, carbon budgets, and the current utilization of fossil fuels. We are in a phase of existential risk, facing a huge trade-off between emissions budgets for the current generation and what we leave for future generations. What youth activists are asking is very important. If we translate what they are saying into climate finance language, it is the time where instead of discounting the future to compute NPV (Net Present Value) and IRR (Internal Rate of Return) we add a premium to set the expectations right. This will do justice to the future generations that deserve the planet they crave to live in. Let’s discount the present for carbon and not for the future. 

  • Economic Principle 2: Costs versus Benefits 

Welfare analysis is integral here and it is not just about value extraction now. Value creation should be central to all business and government activities and social accounting is getting more important than ever before. Moving forward, the rule book should factor in environmental and community externalities. We need tighter rules and participation from regulators and accounting professionals to get this right. This is not just about a discussion of accounting standards but more practically it means standardization,  applications, and mandatory reporting regulations across regions and sectors.

  • Economic Principle 3: Thinking at the Margin

We need to expand the definition of the margin from profits to welfare. We must include externalities in business decision-making when determining the margin for consumption and investment. We should have carbon labels on every product we consume, every penny we invest, and every choice we make. 

  • Economic Principle 4: Incentives Matter

Now it’s time to make the carbon tax real and very expensive. We need more and more global subsidies to promote alternative fuels, carbon-negative technologies, and energy efficiency. Electric Vehicles (EV’s) and solar power are not only for the rich. Let’s bring them into all communities, regions, and lifestyles. To make this real we need support and the right tax policies from regulators across the globe. We have observed over time that pressure creates performance. For example, the good news is that Cozzi also predicted that global oil consumption will peak around 2025 because of EV adoption. We need more regulatory pressures to take the necessary action on climate and provide the future that Generation Z and Generation Alpha deserve. 

  • Economic Principle 5: Trade Makes People Better Off

We need the OECD countries to lead by example. This means accelerating the development and trading of carbon-negative technology and energy efficiency technology.  We should use the principles of comparative advantage and free trade to disperse such technologies in order to speed up global healing of the planet. After all, who will care about the balance of payments if there is no humanity? We must learn, lead and share.

  • Economic Principle 6: Markets Coordinate Trade

Trade not the carbon. Carbon credits are corrupting the system and must be dissolved. Instead of trading carbon,  companies and countries should own it and reduce it. We need markets to coordinate and trade more of the technologies that can reduce carbon.  In the equation of comparative advantage (David Ricardo’s basis of trade), we need carbon cost factored in. 

  • Economic Principle 7: Future Consequences Count

Getting our heads around the idea that we have limited resources is key today! We have to re-learn to live with limited resources as consumers. This means that carbon responsibility metrics should be added to all consumer goods. Only then can consumers  account for the true future cost of their current consumption. For every product we eat, wear, use, or consume, the opportunity cost of future environmental consequences needs to be factored in and adjusted. This also means we need to revise the Capital Asset Pricing Model  from its traditional definition to a more sustainable Carbon Adjusted Pricing Model.

Conclusion

We don’t need any more Blah Blah Blah. We need to better integrate carbon counting today with the existential climate risk of tomorrow.  Doing this will help to redefine the global economic system and gives us a real “Aha!” moment. This is what we need at COP26.

With thanks to Giorgio Burlini and Edmund Bradford for additional writing.

Pooja Khosla

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