If you were in Beijing last week, you felt the impact in your lungs: Just 16 days into the new year, the city woke up to its first “airpocalypse” of 2014, the latest in a series of dangerously high smog days. Beijing’s mayor announced plans the same day to cut coal use by 2.6 million tons and ban heavily polluting vehicles.
That was an important local step, and we are seeing forward-thinking cities and national governments make similar moves as they develop the architecture for a cleaner, low-carbon future.
This week at the World Future Energy Summit in Abu Dhabi and then at Davos, I am talking with government and private sector leaders from around the world about the global energy and climate challenge, what it means for their people and future national prosperity, and how we can all efficiently, economically, and at a global scale clean up the energy supply to maintain a livable world. We need to muster political will to make policy and investment moves now.
The reality is that demand for energy is on a path to double by 2050. Without changes to our energy supply and how we use it, the result will be higher greenhouse gas emissions that could lead to a 2°C temperature increase in the next 20 to 30 years, with spiraling effects including more intense storms, droughts, and damage to food and water security. This will also affect energy system security.
We need pragmatic solutions that are fact-based, sensible, and effective to reverse the path that has taken us into dangerous territory.
That means addressing a root cause of climate change – energy based on high-carbon fossil fuels – and shifting to a low-carbon energy path. It’s not easy, and it will mean leaning on transition fuels like natural gas and capturing, storing and using carbon, on our way to a clean economy, but it is beginning to happen around us. How do we take emerging stories of success and bold leadership from anecdote to everyone's story?
The Sustainable Energy for All initiative, led by UN Secretary-General Ban Ki-moon and World Bank Group President Jim Kim, is leading the international charge with three goals: achieve universal access to modern energy, double the share of renewable energy, and double the rate of improvement in energy efficiency by 2030.
To make those happen and build a sustainable, clean-energy future, it’s important to get the policies right now.
First, put a price on carbon. A predictable, robust price on carbon gives companies an incentive to invest in low-carbon energy sources and technology and reduces demand for fossil fuels. That, along with fiscal and other policies to support energy efficiency and renewable energy, can help bring low-carbon technologies to scale, which lowers their cost as we have seen with solar. Thirty-six countries have or are planning to launch carbon markets in coming years; China launched five pilots for emissions trading in four cities and one province last year and has two more planned with an aggressive target for a national system. China may be the world’s largest energy consumer today, but it’s also a leader in energy savings, and it’s taking action.
A carbon price provides certainty and levels the playing field. Corporate leaders are increasingly recognizing the risks that climate change poses to their sectors, business models, supply chains, and resources. Several are already using their own shadow prices on carbon for planning, according to CDP’s latest review.
Second, create a climate that attracts investment in clean energy and resilient infrastructure. That starts with mandates, policies, incentives, and building codes that require greater energy efficiency and use of clean energy. Shifting from brown economies to green is a hard slog, but it also carries immediate payoffs in reduced energy waste and increased livability, as the energy-intense economies of Eastern Europe are discovering.
In our study on how to achieve the Sustainable Energy for All objectives by 2030, we estimate that it will take at least $800 billion more a year, above what is currently invested in access, efficiency, and renewable energy, to reach those goals. The public can’t carry this alone – the UN estimates that about 80 percent of all financing need to deal with climate change will have to come from private sources.
The money is there, though investors mention a few lingering barriers: lack of understanding of the opportunities, limited capacity to appraise risks and limited appetite for risk, lack of creditworthy energy utilities, and limited leveraging of concessional resources. How to bridge that gap is one issue being discussed this week.
Another policy to get right: phase out fossil fuel subsidies. The world spent $1.9 trillion subsidizing fossil fuels in 2011, about 8 percent of total government revenues, according to the IMF. Taxpayers end up footing the bill for companies that are emitting and polluting. It’s a strain on public funds. It discourages energy efficiency. And it’s regressive – on average, the richest 20 percent of households in low-and middle-income countries capture six times more benefit from subsidies than the poorest. Shifting from taxing what we earn to what we burn is the topic in more and more capitals around the world.
Water is one very tangible reason for driving energy efficiency. Energy generation uses water; pumping and filtering water and getting it to home faucets and farm fields requires energy; and water is limited. We’re launching a new global initiative this week called Thirsty Energy to help countries assess their water-energy challenges and work across ministries to manage the risks and develop solutions.
As you can see we have a lot of work to do, all of us, but there are opportunities in every economy, high income or low, emerging or developed, in governments, utilities, energy or water companies, banks or other investors, and civil society, to lead. And that's what we need now.
Rachel Kyte
Group Vice President and Special Envoy, Climate Change
@rkyte365
Photo: Beijing smog. Ilya Haykinson/Flickr Creative Commons
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