Action on climate change is sometimes presented as being in conflict with economic growth. Since growth in the industrial age has been underpinned by oil, some believe that any attempt to reduce our dependency on oil is an assault on prosperity. In fact the opposite is true. As access to conventional oil becomes harder the twin objectives of:
both depend on a managed transition of the economy to alternative sources of energy.
In 2005, Robert Hirsch, in a report prepared for the US Government, wrote as follows:
The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking ...
Mitigating the peaking of world conventional oil production presents a classic risk management problem:
• Mitigation initiated earlier than required may turn out to be premature, if peaking is long delayed.
• If peaking is imminent, failure to initiate timely mitigation could be extremely damaging.
Prudent risk management requires the planning and implementation of mitigation well before peaking. Early mitigation will almost certainly be less expensive than delayed mitigation. A unique aspect of the world oil peaking problem is that its timing is uncertain ...
It is striking how similar the argument is to the rationale for urgent action on climate change. Yet Hirsch was not concerned with climate change; he was concerned with safeguarding the global economy.
Oil is a limited natural resource. Hirsch may not have predicted the shale boom in the US, but that does not change the fundamentals of his argument. Few deny the inevitability of an energy transition in the near future.
As indicated by the graphic above (published in the Finanical Times in August 2016, and derived from sources such as the BP Statistical Review) 'peak oil' is not far away. The productivity of existing oil fields is facing an annual decline rate of 4 to 4.5 per cent, 'meaning the world must discover and bring online the equivalent of a new Saudi Arabia - or one could equally say, a new United States, complete with shale boom - very four years, or perhaps every three, in order merely to maintain current rates of production.'
(see Timothy Mitchells's Carbon Democracy, citing 'Shaping the Global Oil Peak: A review of the Evidence of Field Sizes, Reserve Growth, Decline Rates and Depletion Rates', Energy 37:1, 2012: 709-24).Without a planned transition to alternative energy sources, in Hirsch's words, 'the economic, social, and political costs will be unprecedented'.
Meanwhile the Governor of the Bank of England, Mark Carney, has warned that only a third to a fifth of existing fossil fuels can actually be burnt.
And the Attorney General of New York is investigating ExxonMobil for fraudulent misrepresentation to the Securities and Exchange Commission (i.e. for overstating the value of its assets).
Put another way, the carbon majors can only burn a fraction of what they already have; but they are spending billions looking for more in order to maintain share price (i.e. by compensating for the diminishing value of their existing reserves / assets).
The world has just two choices:
The potential for clean energy is almost unlimited: every day the sun pours out 5,000 times more energy than total human demand. Clean technologies and advances in energy efficiency are developing fast.
It appears the global economy will need to decarbonise by 2050 for there to be a good chance of limiting warming to 2 degrees Celsius (see here).
Given the technical progress that has already been made, there's no doubt that would be achievable with concerted political support and the alignment of market forces: human capacity to innovate has overcome greater obstacles.
It is easy to see why this happens: energy is base of the economy, and the fossil fuel sector provides, for many, jobs and profit. Nevertheless fossil fuel subsidies are a force in the wrong direction, inhibiting the investment in clean technology on which our future depends.
Plan B is to address these obstacles by:
Economic analysis supports the common sense assessment that 'a burning planet will not support long-term economic prosperity.'
In 2005, Gordon Brown, then the UK Chancellor, commissioned Nicholas Stern, previously chief economist at the World Bank, to prepare a report on the economics of climate change. The report concluded that unchecked climate change would entail a loss of consumption of between 5% and 20% by 2050; whereas the costs of tackling climate change would be only 1 %.
If the Stern report proved controversial, AR5 likewise concludes that the transition to clean energy will support continuing high levels of economic growth. Baseline scenarios for growth in global consumption over the century, ignoring climate change, range from 300% to 900%. Mitigation scenarios likely to limit warming to 2 degrees reduce this by only a small fraction – 3% to 11%. In other words global consumption by 2100 might have grown by 297% instead of a baseline projection of 300%; or 889% instead of a projection of 900%.
Very little is known about the economic cost of warming above 3 degrees C relative to the current temperature level.
Economics is an uncertain science: if it's difficult to predict the political consequences of warming of 3 to 4 degrees Celsius, the economic impact will be harder still.
It should be obvious, however, that limiting warming to 2 degrees Celsius in combination with growth of 297% - 889% by 2100, would be a more favourable outcome against all measures (including the economic) than a world that was warmer by 3-4 degrees (in which conventional reserves of oil will have long been exhausted in any event).
In September 2015, Mark Carney, the Governor of the Bank of England, warned that climate change will lead to financial crises and falling living standards unless the world’s leading countries do more to ensure their companies come clean about their current and future carbon emissions. In a speech to the insurance market Lloyd’s of London, Carney said insurers were heavily exposed to climate change risks and that time was running out to deal with global warming.
Decarbonisation by 2050 is:
'First, we must see this as an issue of the management of immense risks so that narrow or marginal cost-benefit analysis has only a limited contribution in the analysis. Second, the low-carbon transition is an attractive, dynamic growth story and an attempt at maintaining a high-carbon path is deeply damaging and unsustainable.'
Professor Nicholas Stern, June 2014
Professor Nicholas Stern, Policy Paper, December 2014:'In consequence, I would now emphasise two perspectives on the economics of climate change still more strongly. First, we must see this as an issue of the management of immense risks so that narrow or marginal cost-benefit analysis has only a limited contribution in the analysis. Second, the low-carbon transition is an attractive, dynamic growth story and an attempt at maintaining a high-carbon path is deeply damaging and unsustainable.'
"I do not accept that we have to choose between our future prosperity and safeguarding the future of our planet. This is not a zero sum game. As conservatives, we choose both."
Phillip Hammond, UK Chancellor.
24 May 2017: Climate Policies Could Boost Economic Growth by 5%, OECD Says (Inside Climate News)
March 2017: ASSESSING AND MITIGATING THE COST OF CLIMATE CHANGE, Nato Parliamentary Assembly, Economics and Security Committee
11 January 2017: World Economic Forum: environment dominates threats to global economy (Climate Home)
9 January 2017: Obama: Economic Case for Climate Action is Clear (Washington Post)
22 December 2016: The coming battle between economists and the Trump team over the true cost of climate change (Washington Post)
Wisdom and Lilian Ginikawan
The viability of decarbonisation by 2050
LEGAL ACTION FOR THE CLIMATE GOAL: TOWARDS EQUITY, SURVIVAL AND THE RULE OF LAW
“PRESIDENT TRUMP MAY HAVE HIS ALTERNATIVE FACTS,
BUT ALTERNATIVE FACTS DO NOT WORK IN A COURTROOM”
B Team Calls for Net-Zero Greenhouse-Gas Emissions by 2050: (Sir Richard Branson, Dr Ngozi Okonjo-Iweala, Mary Robinson, Dr Mo Ibrahim et al)
PEAKING OF WORLD OIL PRODUCTION: IMPACTS, MITIGATION, & RISK MANAGEMENT,2005, Robert Hirsch
The Global Calculator:'The Global Calculator can be used to explore the options the world has to reduce greenhouse gas emissions, and see how these options affect one another.'
24 August 2016: Governor says climate change is hurting Colorado economy