As the lead up to the Climate Summit in Paris in December we will focus some posts on a number of encouraging signs of progress. After years of dismissal and indifference, it seems that climate issues have been raised to an extent that the science has been affirmed by real experience and that leaders from the major industrial economies have realized that it is good policy, good economics, and good politics to pay attention at last. In the past few weeks, the US, China, and India -- the three greatest contributors to greenhouse gas emissions -- have announced meaningful goals and plans to be presented in Paris, along with similar projections by the European Union, other Asian nations, and small island states. All this seems like a strong step in the right direction, although even if entirely successful the progress made will only be a first step forward toward mitigation of existing conditions, not by any means a final solution.
We have often made the point that sustainability ought to be good business. When the world's economy has been based on unrestricted consumption and growth driven by fossil fuels suddenly understands that that supply is finite, that the old technologies are no longer efficient or beneficial, that strategies to extend the supply through fracking have been revealed to have deleterious environmental consequences, some decision-makers seem to have suddenly understood that a new approach is in order. The price of oil has dropped to the point that old approaches and operations -- such as Arctic drilling and controversial pipelines -- make no sense and are obsolescent in the face to new competitive investment in alternatives. That Royal Dutch Shell invested some $5 billion in shareholder value in an Arctic project that was marginal in the short-term and revealed real operational incompetence and risk suggests that the energy sector leadership was ignoring the evidence and opting for maximized profits in the short-term with no real vision for the future.
More importantly, governments have collaborated in this by providing astonishing public subsidies to the oil and gas companies, estimated by the International Monetary Fund to amount to US$5.3 trillion, or six and one half percent of global Gross Domestic Product in 2015 alone. In an excellent piece in The New Yorker, "The New Economics of Climate Change", Katy Lederer quotes an IMF analysis of such subsidies "as regressive in nature, with the wealthiest twenty percent of the population receiving forth-three percent of the benefit." The public surely has never been fully aware of this astonishing support and transfer of taxpayer equity to the private sector to enable its continuing exploitation and corruption of a publicly owned natural resource.
Finally, the smart money is coming to the realization that ownership in these companies is a bad investment. The Climate Group, an organization devoted to creating a rapid-scale up of low carbon energy and technology, has promoted a "clean revolution," working, according to their website, www.theclimategroup.org, "with corporate and government partners to develop climate finance mechanisms, business models which promote innovation and supportive policy frameworks by convening leaders and investors to share evidence of successful low carbon growth and pilot practical solutions..." "Climate change is an opportunity," they declaim, "...that will create a low carbon world and a more prosperous life for everyone."
But who are the revolutionaries in this clean revolution? Katy Lederer describes a recent New York "climate week" organized by The Climate Group, in which "a coalition of environmental and financial groups announced that more than two thousand individuals, four hundred institutions, and Leonardo DiCaprio had agreed to divest their financial holdings, which total US$2.6 trillion, from fossil fuels." In the meeting there was much discussion of putting a price on carbon and streamlining the tax code, as if such changes have not already been tried, and failed, in the U.S. at least because of opposition by many of these same companies who appear now to have signed the agreement.
One wonders how and when all this divestment will occur, and who will buy the stocks at what price when the premise is that climate impact represents a future corporate liability, not an asset? One wonders how fast the corporations, investors, and underwriters will pursue the alternatives of solar, wind, geothermal, and the like, when they have had ample opportunity in the past to make such investments at a lesser price? One wonders if the energy lobbyists will suddenly all stand down and the subsidies can be re-directed and the tax code stripped of its exemptions and special arrangements? One wonders if this "clean revolution" is more than public relations and might indeed constitute a fundamental, truly revolutionary change to a new economic concept and organizing principle of growth through sustainability and social justice? Leonardo Dicaprio, for one, has put his money where his mouth is as a major contributor to ocean conservation and research. One hopes all the others in the room will follow.