CDP executive director Nigel Topping and Dr. Steffen Boehm of the University of Essex continue their debate about the effectiveness of carbon pricing in bringing down global greenhouse gas emissions
JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore. And welcome to part two of our debate about carbon pricing.
We’re joined now by our two guests.
Steffen Boehm is the director of the Essex Sustainability Institute and professor in management and sustainability at the University of Essex in the United Kingdom, which is where he joins us via web camera.
Also joining us is Nigel Topping. He serves as the executive director of the CDP, which was formerly known as the Carbon Disclosure Project, that says it is working to transform the global economy so that it operates within environmental limits. He joins us from Geneva, Switzerland.
Thank you both for joining us, gentlemen.
Let’s turn to some news, because there was a huge deal struck between China and Russia, and essentially it’s going to be one of the largest pipelines between the two countries for natural gas. They’re supposed to deliver billions of cubic meters of gas for the next 30 years. Steffen, does this example suggest that we are in a moment, essentially, where fossil fuel extraction is actually increasing and still extremely profitable?
STEFFEN BOEHM, DIRECTOR, ESSEX SUSTAINABILITY INSTITUTE: Well, one should say that China has been driven by coal, coal-based energy and fossil fuel. So they’ve been opening a coal electricity station, you know, every other week. So to switch to gas is, on the face of it, not a bad thing.
However, I think a gas-based economy–and that’s also the basis of the argument for supporting fracking, for example, which has been expanding in the U.S., and now the U.K. government would like to do the same–you know, that’s the argument; you know, we need to move from coal to gas, and that’s a good thing, because it will buy us maybe 20 or 30 years, so that we can have more time to implement renewable energy policies and develop new green technologies.
I think that’s a dangerous road to travel on. Why? Because scientists are, climate scientists are telling us we actually need to move rapidly from coal, from gas, from oil, towards green renewable technologies, and we need to do it now. And that’s, for example, what the German government has understood. There’ve been many teething problems in what they call the energy transition, but Germany is leading the way in Europe to implement renewable energies, and they are now 25, 30 percent into that goal of having 60 or 70 percent by 2050. So it is working if there’s political will. And gas is, I think, delaying the inevitable, that you will eventually need to put money and political will behind renewable energy.
DESVARIEUX: Yeah. And I want to ask the same question to Nigel. It seems like this–it’s still extremely profitable to use gas. and with that, do you really feel like cap and trade will offset some of these carbon emissions in the long run?
NIGEL TOPPING, EXEC. DIRECTOR, CDP: So let’s unpack this a bit. First of all, what we, I think, are all agreeing is that we need to reduce emissions very significantly. The scientists say we need to reach peak emissions by 2020 and then reduce very significantly, with a goal of net zero in the second half of the century, right, and maybe 80 percent reduction by 2050. And that is the stated goal of several countries and, increasingly, a number of cities and a number of companies.
There are many ways to do that. One of the most powerful is, one way or another, to put a price on the pollutant, remember, the polluter pays principle: if something is bad for society, then the people who produce it should pay. So whether that’s a carbon tax, an effective cap and trade scheme, or clear product standards, those are all ways of making sure that the polluter pays.
In the specific question about national gas, I think Steffen’s addressed the main points. Coal is by far the worst polluter of the fossil fuels. China recently announced that it’s banning certain of the dirtiest types of coal, those with the highest sulfur and ash content. That’s bad news for people who are mining those, ’cause that effectively puts an infinite price on them as far as China is concerned. So that will have an effect, a negative effect on companies that are mining those. But it’s a good decision as far as the climate’s concerned.
China’s also said that in its next five-year plan it will see peak coal. As Steffen says, China’s the largest user of coal in the world. Over 40 percent of the world’s coal is used by China. Much of the investment in coal in the last ten years has been driven on the assumption that China will keep growing forever. Chinars just said that is going to really start going into reverse gear–again, bad news if you’re producing coal.
But the issue of oil is one which has got investors very, very interested. Gas is generally seen as a transition fuel, and replacing dirty coal and doing a job in the period between now and when we can ramp up renewable investments to the level of $1 trillion a year, which is what we need to put into renewable infrastructure to give us the reductions we need by 2050.
The case of oil is very interesting. It’s the one in the gray area. What investors are understanding now is that we won’t be able to burn all of the oil that we’ve currently discovered and emit all of its CO2 unless we can find a way to invest very aggressively in what’s called carbon capture and sequestration, the technology to store the CO2 underground. So that means that there’s a growing question amongst investors as to whether or not oil companies are sitting on some assets, some oil fields which have not yet been developed, which may end up not being able to be developed, which may become what we may call stranded assets. So there’s a very active debate in the investment community examining it at an asset level, an individual oil field level, whether or not those oil fields will be profitable over the lifetime and whether that’s something which the investors should start to be worried about. So we’re starting to see investors asking companies to slow down or stop the rate of investment and start returning dividends. And it’s a very interesting form of–. And the fact that that’s driven by the expectation of, as The Economist said a few months ago, that maybe this is the end of the super oil majors, because the demand for oil can now seem to possibly be peaking as a result of fossil fuel growth as a result of energy efficiency and as a result of cap and trade schemes and carbon pricing schemes of one sort or the other, pushing the price of those fuels up and taking down the relative price of renewable [crosstalk]
BOEHM: Could I just come in there to put some–.
DESVARIEUX: Just really quickly, Steffen.
BOEHM: Yes, could I just come in and basically support what Nigel has just said there?
But I think it’s actually a much quicker way for us to address climate change if we have a large divestment strategy, divesting fossil fuels and investing, putting that money that we’re saving that goes in on a daily basis plus into new explanations in the Arctic, in deep ocean drilling, etc. etc., into fracking, etc. Yeah. We’re talking billions that are mobilized each day to go into the status quo. But actually using that, divesting from the status quo and investing into the future, we’d make much, much bigger progress than inventing a very complex system–cap and trade, CDM, and all sorts of fanciful systems that so far many people would argue have not delivered the goods.
Now, yesterday I think it was announced that the Rockefeller family are divesting from fossil fuels to a large extent. Now, that’s–.
TOPPING: They’re divesting from coal, which, as we explained, is the worst culprit and is a dying market anyway, and oil sands, which are very high cost of extraction.
TOPPING: But, I mean, I think there is a lot of pressure on these assets now, and it’s because there’s an expectation of increasing policies which will drive the price of carbon up and the relative competitiveness of fossil fuels down. So I think what’s important is that you can’t just say what we need is mass divestment. That won’t happen if it’s going to lose pensioners money. If you’re sitting on the trustee of a public pension fund responsible for making sure that the 22-year-old teacher who’s just joined your pension scheme is going to have a pension in 50 years and you irresponsibly divest their money from things which are going to earn them money for their pension, then you will rightly be out of a job. So we should be careful what we wish for. This needs to be managed in an orderly, transparent way, driving down the climate risk of pension portfolios by gradually divesting from the risky assets and investing in the ones which are the ones [crosstalk]
BOEHM: Absolutely. And there will be losers. There will be social losers. And that requires policies that take people with them rather than working against people. And that requires political leadership. And we have been lacking, as I’m sure you would admit to, been lacking that leadership. All major political parties in the U.K., the country I know best, are lacking this political leadership in the climate change policy area. Why is that? That is a real, real, real problem.
TOPPING: Well, I think one of the reasons–and I think you’ve alluded to this–is that sometimes the ear of the policymakers has been dominated by one set of voices. What we’re trying to show–and we believe that the facts show it–with this report we launched last week is that there is a large and growing majority of businesses who recognize that we need to reduce our emissions to keep within the two degree goal, and that they need long-term, clear, robust price signals to allow them to do that.
You make a really important point about some of the social dislocations that could come around as a result of poorly managed policies. California’s got a very clever way of addressing this. Twenty-five percent of the income from selling the allowances goes to disadvantaged communities. So it’s a way of taking some of the fiscal benefit of a cap and trade scheme and using it to make sure that some of the potential downsides are addressed.
DESVARIEUX: Steffen, I want to ask you about that. Can you speak to that directly? What do you make of that 25 percent going to disadvantaged communities in California?
BOEHM: Well, I mean, that’s great. That’s always been the ambition of CDM, for example. The CDM has written into its protocol that it should support sustainable development goals in the developing world. Unfortunately, very little of that has been actually happening. The money, the technology transfer, and the finance has gone into the big companies, enriching elites in places like India, which are studied quite closely in a number cases they are. So I welcome that.
But let us not forget, Nigel, companies, part of the EU ETS–and that’s the system I know best, and we shall see what’s happening in California–they have actually made billions of windfall profits in some industries from this cap and trade system. Why? Because there’ve been over-allocations of allowances. Certain industries have–.
TOPPING: This is old ground. Everybody agrees on this. These are flaws in the design. And any system/policy which doesn’t deliver a long-term, clear, robust price signal to the market will not help us address climate change, whether that’s [crosstalk] fuel-efficiency standards, a ratcheted carbon tax, or a clear declining cap with a trading mechanism. [crosstalk]
DESVARIEUX: But what about a regulatory board? Would you be for that, Nigel? Would you be for something like that, some sort of regulatory board to oversee any of this fraud or corruption?
TOPPING: Look, any law, any fiscal system is subject to the risk of corruption, right? This is not a climate change question, right? It’s a complete red herring. You know, any system is subject to corruption. And corruption is bad, right? It needs to be rooted out. So we need appropriate oversight, we need appropriate legal redress, of course, in any system.
But what we need above all–and we must stop avoiding this question–is we need, one way or another–and 1,000 companies and investors, 73 countries, including China, and many, many cities have just signed in support of the World Bank statement saying we all want a price on carbon which is commensurate with the need to keep global warming within two degrees C. That’s what we need. There are many ways of doing it. They’re all complicated. They all involve tradeoffs. But without the political will–and that’s what businesses and cities are demanding now is that national leaders in the UNFCCC process step up. And, as Leonardo DiCaprio said in the launch event at the UN yesterday, history is either going to recognize the leadership of these national leaders or it’s going to vilify them. So the time [crosstalk] action from everybody, from businesses, from mayors, and from national governments. You’ve got to have a price on carbon one way or another.
DESVARIEUX: Alright. Steffen, I’ll let you have the final word.
BOEHM: Oh. Thank you. I would agree with what did Nigel just said. The political will is absolutely crucial. We need that.
Now, the will World Bank’s statement on carbon pricing excludes a lot of voices, and I think it’s important point to make. So if you look at the very short list of NGOs supporting that carbon pricing statement, that worries me. It basically means it’s a partisan statement and it’s not a bipartisan statement. It excludes a lot of people who over the last 20 years–.
TOPPING: But [crosstalk] agree that we need a carbon price which will deliver the investment for a two degree world.
DESVARIEUX: Nigel, before we get to that point, let me just let Steffen finish his point about these NGOs not signing up. Why aren’t they?
BOEHM: Well, why? Exactly. Why aren’t Greenpeace, why are Friends of the Earth, why are a lot of other environmental NGOs not signing up to this program? Because they are very, very worried about the doublespeak of many companies, the many profit opportunities that these carbon pricing mechanisms are bringing to the fore. And we haven’t simply seen the effective mechanism that is being promised. And it’s impacting, it’s impacting, having negative impacts, for example, in the developing world. And a lot of my work has been around showing from the ground how carbon offsetting, for example, which is a carbon-pricing mechanism, how it has affected negatively communities in the developing world. And I think that’s something that’s not a design flaw. That’s part of the design of carbon pricing. And that’s why Friends of the Earth, Greenpeace, and many other social movement based groups are not signing up to this, because they’re very, very suspicious of what the World Bank, together with companies, are putting forward here.
DESVARIEUX: Steffen, just quickly speak to that example. You say that on the ground you’ve seen it happening, where these carbon offsets aren’t producing the results that they claim to be yielding. Speak to that.
BOEHM: Well, let me give you a very, very concrete example. So in one of my books, called Upsetting the Offset, a colleague of mine, Tamra Gilbertson, has written a very good case study researched on the ground in Thailand. It’s a CDM project with finance from Japan and Europe that has invested in green electricity production, turning rice husk, which is, well, seen as a waste product, into green electricity production. Now, it all sounds good on paper, but when you actually go onto the ground, then you see that the rice husk that is being used to burn to generate so-called green energy is actually not a waste product. It’s used by local peasants as a fertilizer. Now this rice husk is now not available as a fertilizer, which means these peasants need to buy chemical fertilizers, which are, of course, fossil fuel based, creating more emissions. So we’re creating a kind of a perverse incentive system where rice husk is suddenly becoming a commodity in order to produce so-called green energy, but the people on the ground emitting more emissions, creating more problems, having less money in their pocket, because the rice husk is being taken away from them.
So it’s just a very small example that a lot of things that are, by the look of it, green are not actually green when you study them in detail. And you need to actually go into the communities in India, in Bangladesh, in Thailand, in Brazil, in China where these CDM and other carbon offsetting projects are taking place. And carbon offsetting is an essential part in carbon pricing strategies.
DESVARIEUX: Alright. We’re going to have to pause the conversation here. Steffen Boehm, as well as Nigel T‑opping, thank you very much for this informative debate.
BOEHM: Thank you, Jessica.
TOPPING: Thank you.
Thank you, Steffen. Good evening.
BOEHM: Thanks very much, Nigel.
DESVARIEUX: And thank you for joining us on The Real News Network.