A SUCCESSOR TO THE KYOTO PROTOCOL

As noted in Chapter 9, in the Kyoto Protocol, thirty-seven countries with advanced economies agreed to reduce greenhouse gas (GHG) emissions to an average of 5.2% below the 1990 level during the years 2008 through 2012. Part of the emission reductions will come from offset projects located in developing countries (DCs). This distinction between the roles of advanced economies and DCs at Kyoto reflected the principle of “common but differentiated responsibilities” to respond to the climate change problem, which was included in the broader treaty – the United Nations Framework Convention on Climate Change (UNFCCC).

BUSINESS-AS-USUAL TRENDS

Anthropogenic emissions of GHGs may have affected Earth's climate as early as the invention of agriculture; in any case, they are surely a key to future climate change. A number of forecasters expect that under business-as-usual (BAU) assumptions, meaning no new mitigation policies, emissions will likely continue to grow for some time at rates similar to those observed over recent decades once the current economic recession has passed. The IPCC's measure of anthropogenic emissions of carbon dioxide (CO2)-equivalent GHG, which leaves out ozone, ozone-depleting substances, and aerosols, grew an average 1.5% per year between 1970 and 2004. Stern (2006) projected a continuation of that trend growth through 2050 under BAU policies.

OVERVIEW OF THE ENERGY SECTOR

In 2005, total anthropogenic emissions of GHGs were estimated at about 44 Gt of CO2e (CAIT, 2010). GHG is emitted with energy use, other industrial processes, deforestation, agriculture, and waste management. Approximately 55% of total emissions were from the production and use of energy. When energy is derived from nuclear, hydroelectric, or other renewable resources, no substantial GHG is emitted. Combustion of fossil fuels, however, produces about 80% of the world's energy. (Unless otherwise specified, data in this chapter are from IPCC, 2007, WG3.)

Energy use can be attributed to three broad sectors of final demand: buildings, industry, and transportation. In 2004, about 40% of the world's energy was employed for the lighting, space heating, water heating, and cooking in residential and commercial buildings (including the energy consumed in creating the electric power used). Another one-third of the world's energy was used by industry, including iron and steel, other metals, chemicals and fertilizers, petroleum refineries, cement, lime, glass and ceramics, and pulp and paper.

SEA LEVEL RISE

In the Greenhouse climates that the Earth experienced over most of its history, sea levels were much higher than today. Indeed, by IPCC (2007) estimates, the sea level would rise almost 70 meters (230 feet) if the current ice sheets on Greenland and Antarctica melted entirely (after adjustment for the replacement of ice that is below sea level with water). The level of the sea over geologic periods depended not only on the amount of water stored in ice sheets but also on the depth of ocean basins and the span of continental land masses. Over the last 2.75 million years, sea levels have varied substantially because of the ebb and flow of ice sheets over North America and Eurasia. As noted earlier, the strong northern summer radiation of our last interglacial period around 120,000 years ago evidently melted enough ice on Greenland and, with amplifying feedbacks on West Antarctica as well, to raise the ocean about 5 meters (16 feet) higher than it is today.

A study of climate history is an essential foundation for climate policy. Earth's history gives us an appreciation of the wide swings in the types of climate that are possible. It informs us of the forces that have generated those fluctuations and have stabilized the planet's temperature at very different levels for long periods of time. It provides estimates of the temperatures associated with much greater or much less planetary ice cover than we have today. And it offers case studies of episodes of climate change that bear an eerie resemblance to scenarios that could characterize our future.

A sense of the limits of our scientific knowledge is also essential. Uncertainties about the science place extra burdens on the design of policy. We cannot merely implement what “science” tells us to do, because the science itself is evolving and controversial. To make wise policy, we need to assess what is known with confidence and what remains highly speculative. Our uncertainty will condition the degree of flexibility we should build into the framework for policy.

If enacted, the international actions and reforms advocated in the previous chapter should facilitate the global financing and technology transfer necessary for the GGND. Problems will remain, though, in access to finance globally.

One difficulty is the decline in private financial investment flows compared to pre-recession levels. A major reason for this ongoing problem is the lack of confidence in the international financial system, coupled with the worldwide contraction of credit as the global economy adjusted to rid the system of overvalued and bad assets. The global financial system suffered a near-meltdown in 2008, and, although the massive bailout of the global financial system may have averted a major catastrophe in world credit and capital markets, it has proved insufficient to avoid the worst international economic crisis since the Great Depression. Not surprisingly, private financial investment flows have suffered accordingly, and this has led to demands for a new framework for the global financial system.

At the April 2009 London summit, the G20 suggested a number of proposals to shore up confidence in the international financial system and to reduce the risk of further financial turmoil of the type that precipitated the current recession. These proposals include the following.

• Strengthening financial supervision and regulation to include hedge funds and credit rating agencies, and eliciting more information on tax havens.

• Extending the mandate of the Financial Stability Board (formerly the Financial Stability Forum), which has the responsibility of overseeing global financial stability and risk.

• Tripling the lending capacity of the International Monetary Fund, and endorsing the IMF's recent lending initiatives to make substantial amounts of finance available quickly to emerging market economies during a crisis.

• […]

As stated in part I, the premise of this book is that the current global economic crisis has spurred governments to instigate a worldwide recovery. This provides a unique opportunity to address other important global economic and environmental challenges as well. The Global Green New Deal outlined in this book is aimed at achieving both objectives.

In sum, the GGND is not just about creating a greener world economy. It is about ensuring that the correct mix of economic policies, investments and incentives is adopted in order to reduce the carbon dependency of the world economy, protect vulnerable ecosystems and alleviate poverty while also fostering economic recovery and creating jobs.

Implicit in this is the recognition that the looming global problems of climate change, water scarcity and extreme global poverty mean that the world should not rely solely on massive fiscal stimulus packages for reviving the economy and creating jobs. Instead, what is called for is a balanced combination of policies and measures in a Global Green New Deal that has been carefully calibrated to meet the multiple economic and environmental challenges.

Reviving the world economy remains a necessity, however. That is why this book has included as part of the proposed GGND actions that can be implemented over the next several years and that will have an immediate and effective impact on the main objectives of the strategy.

A report by the Pew Charitable Trusts compares the job growth and investments in the clean energy sector of the US economy to the rest of the economy for the ten years leading up to the current recession, 1998 to 2007.

The Pew study defines the US clean economy as the sector that “generates jobs, businesses and investments while expanding clean energy production, increasing energy efficiency, reducing greenhouse gas emissions, waste and pollution, and conserving water and other natural resources.” The five economic activities comprising the clean economy are as follows.

• Clean energy production: jobs, businesses and investments that produce, transmit and store renewable energy from solar, wind, low-impact hydropower, hydrogen fuel cells, marine and tidal, geothermal and small-scale biopower energy sources.

• Energy efficiency: jobs, businesses and investments that reduce the amount of energy used in the economy.

• Environmentally friendly production: jobs, businesses and investments that mitigate the harmful environmental impacts of existing products and develop and supply alternatives that require less energy and emit fewer greenhouse gases.

• Conservation and pollution mitigation: jobs, businesses and investments that manage water and other finite natural resources more effectively, mitigating emissions of greenhouse gases and other pollutants that result from the continued use of fossil fuels.

• Training and support: jobs, businesses and investments that provide specialized services to the other four areas of the clean energy economy.

The Pew report finds that, between 1998 and 2007, jobs in these five clean energy areas grew more rapidly than overall job growth in the United States.

Parts II and III outlined the national and international actions that should take place under a Global Green New Deal. In developing such a strategy, this book has focused on measures that fit within the two major aims of the GGND – reducing carbon dependency and ecological scarcity – and policies, investments and reforms that current evidence suggests that governments can enact fairly swiftly – i.e. in the next several years. Before proceeding to discuss the effectiveness of a GGND, and how it could foster progress towards a future green world economy, it is useful first to review the key proposals for national and international actions. The following is a summary of the main recommendations suggested in parts II and III.

NATIONAL ACTIONS PROPOSED FOR THE GLOBAL GREEN NEW DEAL

1. (1) The United States, the European Union and other high-income OECD economies should spend, over the next few years, an amount equivalent to at least 1 percent of their GDP on the national actions proposed for reducing carbon dependency, including removing subsidies and other perverse incentives and adopting complementary carbon pricing policies.

2. (2) The remaining middle- and high-income economies of the Group of 20 countries should also aim, as far as possible, to spend over the next several years at least 1 percent of their GDP on the national actions proposed for reducing carbon dependency.

3. (3) Developing economies should also implement the national actions proposed for reducing carbon dependency. Under the current economic conditions, though, it is difficult to determine how much each economy should spend on these activities.

4. […]

The various proposed actions for reducing carbon dependency and ecological scarcity discussed in the previous two chapters pose a number of difficulties for low- and middle-income economies. This chapter reviews the main constraints.

Developing economies in particular face a number of important challenges in their efforts to move quickly to a low-carbon economic growth path, such as a lack of finance, a technology and skills gap, and uncertainty over a future global carbon market.

Access to financing is a major constraint if developing countries are expected to invest in clean and low-carbon energy alternatives. The large-scale adoption of low-carbon and clean energy technologies by rapidly developing low- and middle-income economies will be necessary over the coming decades in order to reduce their greenhouse gas emissions and improve energy security. This will require, in turn, a massive injection of capital investment. For example, for all Asian economies to reach a target of having 20 percent of their total energy supply from clean energy sources by 2020 would require capital financing of almost US$1 trillion, of which nearly US$50 billion a year would be needed until 2020. Similarly, if all developing countries honor their commitment to the International Action Programme (IAP) agreed at the 2004 International Conference for Renewable Energies in Bonn, this would mean an additional 80 gigawatts of renewable energy capacity by 2015, requiring about US$10 billion per year in investments.

The various national actions proposed in part II are necessary components of the Global Green New Deal; but they are not sufficient.

To overcome the challenges facing developing economies will require additional actions by the international community. International cooperation and policy coordination across countries will also assist the effectiveness of the national actions described in part II. The purpose of part III is to suggest how the international community can facilitate the adoption of a GGND strategy by national governments and enhance the benefits gained from such policies in terms of stimulating economic recovery, generating jobs, reducing poverty and sustaining economic development.

Chapter 4, in part II, identifies a number of challenges facing developing countries in implementing the GGND. For example, there is a serious “capital gap” preventing developing economies from implementing the proposed national actions over the next one to two years. Equally constraining is the “skills and technology gap”; most developing economies, with the possible exceptions of Brazil, China, India, Russia and other large emerging market economies, do not have the research and development capacity or the skilled workforce to import and adapt the new skills and technology for many of the proposed investments. Both these gaps can be overcome by increased financing, but during the current global economic crisis new financial flows are in short supply. Potential aid flows from donors are likely to be reduced rather than increased. The crisis has unquestionably reduced private investment flows, especially to more risky investments with longer-term returns.

2008 will be remembered as the year of multiple global crises. It began with a looming fuel crisis, as well as continued rises in food and commodity prices. Towards the end of the year the world was confronted with a major financial crash, which quickly turned into the worst international economic recession since the Great Depression. By mid-2009 there were signs that the economic recession was easing, but any ensuing recovery has been projected to be long, protracted and vulnerable to further disruption. Global unemployment and poverty are still on the rise, and some economic sectors continue to contract. There is also concern that, as the world economy recovers, it remains vulnerable to the problems posed by other global challenges, such as climate change, energy insecurity, growing freshwater scarcity, deteriorating ecosystems and widespread poverty in developing economies.

These crises have serious implications for human welfare and well-being worldwide, especially in terms of unemployment, poverty and environmental impacts. They may also provide a unique opportunity, however, for governments to come together to promote sustainable economic development at the global level. This book outlines one possible strategy for creating such an “opportunity from crisis.”

Faced with the social and economic consequences of a deepening world recession, or – at best – a weak, unstable and protracted recovery, it may seem something of a luxury to consider at this time policies that aim to reduce carbon dependency and environmental degradation. Such a conclusion is both false and misleading, however.

The previous chapter looked in detail at measures aimed towards creating low-carbon economies as part of an overall Global Green New Deal that can stimulate economic recovery and create employment over the next one to two years while putting the world on a more economically and environmentally sustainable development path. Such a strategy should be a priority for all countries – high-income OECD economies, large emerging market economies and low-income economies.

Although a low-carbon strategy is important to a GGND, this chapter addresses another critical area: the reduction of ecological scarcity, which is crucial to the aim of eliminating poverty worldwide. Such an objective is essential. A GGND cannot be truly global in scope unless it addresses all the pressing needs of the world economy. As emphasized in part I, the issue of extreme world poverty is an ongoing problem that needs to be urgently addressed.

Accordingly, a principal objective of a GGND is that it must also contribute to achieving the Millennium Development Goals for developing countries, so that by 2025 the goal of ending extreme global poverty is attainable. This chapter establishes the link between ecological scarcity and the livelihoods of the poor. It then outlines several ways in which national actions can improve these livelihoods while making progress towards reducing ecological damage, improving natural resource management and managing global water scarcity.