COP20: Rounding the Turn on the Road to Paris

A new and genuine, if inadequate, global climate architecture has been teed up for next year in Paris. But whether Paris serves as the foundation for steadily more ambitious climate progress or is the marker of the reality that that world will not break the back of fossil-fuel dominance is going to be determined by how the world community reacts to five new realities.
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COP20, the United Nations climate conference held here in Lima, Peru, was dramatically unlike its predecessors. It opened amid confidence that progress toward a major new agreement in Paris next year would continue -- and closed with a weak but formally adequate agreement that keeps the process rolling. Todd Stern, the U.S. Special Envoy for Climate Change, was uncharacteristically beaming. While the formal negotiating sessions rehashed old, tired arguments, mayors, business leaders and civil society rolled up their shirtsleeves and moved forward. Some dared suggest that the formal negotiations might not be the most important thing happening here.

This was first climate summit of the post-Kyoto Protocol world; a new and genuine, if inadequate, global climate architecture has been teed up for next year in Paris. But whether Paris serves as the foundation for steadily more ambitious climate progress or is the marker of the reality that that world will not break the back of fossil-fuel dominance, whatever the costs and however great the opportunities, is going to be determined by how the world community and the climate movement react to five new realities:

  1. The Kyoto-era distinction between rich Annex 1 and poor Annex 2 countries no longer dominates. The bilateral U.S.-China announcement of carbon-reduction commitments, and the subsequent U.S.-India-China agreement to eliminate HFCs as a climate threat, shattered -- correctly -- the Kyoto-era presumption that the climate crisis could be solved with the initial participation of only historically important carbon-emitting nations.

  • A fossil-fuel-based economy and a low-carbon economy are now equally plausible development models, with a clean economy the better long-term bet. Globally, the costs of renewable energy have plummeted. Turkey would pay no more for renewables than for coal electrons. Solar power in India costs less than imported coal. More-efficient cars and trucks helped drop the price of oil from $100 per barrel to $60 per barrel. Wind and solar power plants are hugely less risky and volatile than coal. Driving on electrons, not gasoline, will cost less for the rest of this century.
  • New players will dominate climate policy. Increasingly assertive businesses and cities across the globe are forcing their way into the conversation. They see climate as an opportunity and want their share of the new pie.
  • The conflict between rich and poor countries has shifted from the feared costs of clean energy -- a fading issue -- to questions of who pays for the climate disruption that's already occurring. That question -- who will pay this bill -- was the real conflict in the negotiating halls, but the world is about to find out that shifting to clean energy can also finance the losses and damages that 20 years of deadlock have left us to manage. (See below.)
  • The accelerating (if temporary) collapse in the global price of coal and oil creates a powerful crosscurrent. If countries are once again lulled into shifting their focus off speeding up the clean-energy transition away from coal and oil, on the belief that coal and oil monopolies have now found the key to providing cheap fuel for sustained global development, the climate, security and economic price will be staggering. But if we realize that now is the time to double down on our investments in clean energy, the climate and development benefits will be exhilarating.
  • We're not home free yet. Abraham Lincoln cautioned against "changing horses in mid-stream." But I pointed out to the World Climate Summit that solving the climate crisis depends on precisely such a shift: from an old, exhausted carbon economy to a new, dynamic clean-energy future.

    The most critical feature of next year's Paris agreement will be the short-term, pre-2020 clean-energy initiatives that nations, cities and businesses bring to the table, not the longer-term (and inevitably inadequate) national emission pledges that get most of the attention. What we do long-term will be determined not by national promises but by our collective actions before 2020.

    We can afford boldness. For the next several years energy importers will harvest a staggering $1.1-trillion annual windfall -- the difference between imported oil at $110 per barrel and $70 per barrel. Much will flow to the U.S. and Europe, giving us the revenues to pay our accumulated climate debt. But regardless of what we do with our share of the dividend, other major beneficiaries of that windfall include poor oil importers like India, Kenya, Pakistan, China and the Philippines. India's share alone equals 2.4 percent of its GDP.

    At the same time, collapsing fossil-fuel prices will scare off investors. Hundreds of billions of dollars that would have been invested in seeking new oil, gas and coal fields will be freed up. The temporarily oversupplied oil market is already stranding overpriced oil projects in places like the Caspian and Alberta's tar sands.

    This price slump is temporary. But we can make it permanent. The biggest factor in the price collapse is not 3.5 million barrels a day of U.S. shale oil but 7 million barrels a day in lowered global demand. About half that reduction is competition from biofuels, more-efficient vehicles and reduced reliance on driving. (Slow economic growth drained another 3.5 million barrels a day from demand.)

    Monopoly enabled producers to charge exorbitant prices. Clean energy is creating competition. More competition -- greater clean-transportation market share -- could keep oil and coal prices affordable while we phase fossil fuels down through 2050 -- but only if we foster it in the face of cheaper gasoline.

    The danger is that we -- and our leaders --- will look at cheaper oil and coal and say, "We can relax and build markets for low-carbon energy later." If we do, oil will hit $140 in a few years, and this moment of affordable energy, potential prosperity and climate hope will be only a squandered memory.

    Let's switch horses before the old one we have been riding founders.

    A veteran leader in the environmental movement, Carl Pope spent the last 18 years of his career at the Sierra Club as CEO and Chairman. He's now the principal advisor at Inside Straight Strategies, looking for the underlying economics that link sustainability and economic development. Mr. Pope is co-author -- along with Paul Rauber --of Strategic Ignorance: Why the Bush Administration Is Recklessly Destroying a Century of Environmental Progress, which The New York Review of Books called "a splendidly fierce book."