Tough going at Katowice summit
The news flow on the important summit of the UN Framework Convention on Climate Change (UNFCCC) COP24 has been all but drowned out amidst the Brexit drama, the OPEC meeting and political news from the US and Middle East.
If we backtrack three years, it was the COP21 summit in Paris that saw a breakthrough in global consensus and cooperation on climate change. A total of
196 countries signed on the dotted line to agree to keep man-made global warming to less than 2 degrees Celsius and commissioned a study that was released in late October.
There were rumbles when four nations, including the US, refused to agree to the conference “welcoming” the report that they had helped commission. Instead they only wanted to “take note” of it. Observers are now doubtful as to whether the 200 countries can agree on a communique by Friday, when the conference ends.
This goes to show that a lot has changed since 2015. A new US administration, with a different outlook on climate change, has made all the difference. Thought leadership on the topic is moving away from the US, and China is eager to pick up the mantle.
In the meantime, it is not just governments that lead on the subject; investors are becoming increasingly active. There are the activist groups that managed, for instance, to change Shell’s stance on the matter. As of 2020, the oil major will no longer just have an eye on its own carbon footprint, but also that of its customers.
Pension funds, insurance companies and other institutional investors increasingly demand of industry that they measure and mitigate against their carbon emissions.
The investment firm Schroders estimates that there could be roughly $23 trillion of losses a year if we are not able to keep global warming below the 1.5 C level. It is easy to see how investors, especially insurers, can reach these conclusions when looking at the damage caused by hurricanes, flooding and wildfires. The planet seems to be raging.
Like with all things, a balanced approach is required. We need to take care of the planet for future generations because it is the only planet we have. Averting the costs and displacements global warming will bring about is important too. In the meantime, we need to be realistic about what costs we will incur while we strive to achieve those worthwhile goals. We will not go from where we are now to zero emissions overnight. We also need to ensure that the policy measures make sense.
It will not be easy for governments to calibrate their policies to have the desired effect. Investors and industry will help us get there because they have their eye on the bottom line. COP24 is important in that context because 200 governments are taking part, as are non-governmental organizations and businesses on the margins. This UNFCCC framework may not be optimal, but it is the best forum we have got.